MINUTES OF THE meeting

of the

ASSEMBLY Committee on Ways and Means

 

Seventy-First Session

February 14, 2001

 

 

The Committee on Ways and Meanswas called to order at 7:40 a.m., on Wednesday, February 14, 2001.  Chairman Morse Arberry Jr. presided in Room 3137 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

 

COMMITTEE MEMBERS PRESENT:

 

Mr.    Morse Arberry Jr., Chairman

Ms.   Chris Giunchigliani, Vice Chairwoman

Mr.    Bob Beers

Mrs.  Barbara Cegavske

Mrs.  Vonne Chowning

Mrs.  Marcia de Braga

Mr.    Joseph Dini, Jr.

Mr.    David Goldwater

Mr.    Lynn Hettrick

Ms.   Sheila Leslie

Mr.    John Marvel

Mr.    David Parks

Ms.   Sandra Tiffany

 

COMMITTEE MEMBERS ABSENT:

 

Mr.    Richard D. Perkins, Excused

 

STAFF MEMBERS PRESENT:

 

Mark Stevens, Fiscal Analyst

Steve Abba, Principal Deputy Fiscal Analyst

Rick Combs, Program Analyst

Lila Clark, Committee Secretary

 

Chairman Arberry asked Frankie Sue Del Papa, Attorney General, to present the budgets for the Attorney General’s Office.

 

ATTORNEY GENERAL’S OFFICE

BUDGET PAGE ELECTED 26 –72 – VOLUME I

 

Attorney General (AG) Frankie Sue Del Papa introduced the members of her staff that had accompanied her to present testimony and answer questions on budgets.  Staff members present were:  Paul Hewen, Chief Financial Officer; Kim Maxson Rushton, Chief of the Las Vegas office and head of the legislative team; Marilyn Skibinski with the Bureau of Consumer Protection; Mike Pennington, Ms. Del Papa’s assistant; Kevin Higgins, Chief Deputy Attorney General and head of the Workers’ Compensation Fraud Unit; Tim Terry, Senior Deputy Attorney General and Chief of the Medicaid Fraud Control Unit; Jeanette Supera, computer forensic expert; Deputy Attorney General Edward Cousineau; John Albrecht, Senior Deputy Attorney General representing the Tobacco Enforcement Unit; Dr. Tara Shepperson, Executive Director of the High Tech Crime Unit; Rose Bilyeu, member of the Investigations Unit; June Gill, office manager of the Reno office; Patty Peterman of the Reno office; Beverly Saucedo, Extradition Officer; Kelly Osborne, Domestic Violence Grants Program; and David Young, Ernie Capiral and Chuck Moltz, computer information systems program. 

 

Ms. Del Papa stated that she would start with a brief overview of the budget and explanation of what had been included in Exhibit C.  She said that she had tried to anticipate the committee’s questions and included information in Exhibit C that might answer most of the questions.  She said she would describe the major challenges the office had faced and continued to face.  The Attorney General’s office provided services for most state agencies and the boards and commissions.  As the state had grown the office had grown; however, the last two years had been the toughest years in her three terms as Attorney General due to the high staff turnover.  In calendar year 1999, 49 positions were turned over and in calendar year 2000, 100 positions were turned over.  It was common knowledge that when you had experienced a turnover rate that high, there was an impact.  Ms. Del Papa said that according to recent articles in the newspaper, the annual turnover in all U.S. industries was approximately 15 percent and the numbers that had turned over in the AG’s office, particularly the last year, averaged two people per week.  She said the turnover had an extraordinary impact on the office and had impacted virtually every section of the office.  That factor alone had impacted productivity, morale and the ability to deliver legal services.  Her office was working with the Governor’s Office and the Department of Personnel to look into that issue.  There was no formula developed for the actual costs attributed to the turnover but it had been a major challenge for the office. 

 

Ms. Del Papa informed the committee what had been included in Exhibit C.  She described pages 1 and 2 as charts showing the office’s performance indicators, pages 3 through 25 as the office’s organizational charts, and pages 26 through 30 as detail regarding the tobacco settlement funds and the tobacco enforcement program.  She said she would be happy to provide a more detailed briefing on the tobacco program and what was happening with the money.  She said that according to the federal Synar amendment there were certain state funds in jeopardy if the state did not have an aggressive program.  Ms. Del Papa said Assemblywoman Cegavske had participated in press conferences with the AG’s staff and the subject had been of particular interest to her.  She continued by referring to pages 31 and 32 that showed information on the transfer of child welfare matters to Washoe and Clark Counties.  That was a phased-in program with no impact on the AG’s office in the upcoming biennium because her office had been requested to maintain its staffing to help with the phase-in and the monitoring.  The impact to the AG’s office would need to be looked at in the next biennium.  Pages 33 and 34 showed the justification for a new Deputy Attorney General position that was being requested for the Department of Human Resources.  There were only three positions that had been recommended.  One was a Division of Child and Family Services position needed primarily due to the increase in the number of parental terminations that had skyrocketed in the state.  Page 35 of Exhibit C showed a salary comparison of public attorney pay scales.  The chart showed the Attorney General’s varying pay scales along with pay scales of other public attorneys.  The chart was included in the exhibit to show that the main competition in retaining attorneys was no longer the private sector but other public entities.  The footnotes showed some of the benefits offered by other entities.  For instance, in North Las Vegas, not only did people start at a higher level, got higher raises, had their pension paid but also worked only four days a week.  In the City of Reno their employees were matched dollar for dollar in deferred compensation. 

 

Ms. Del Papa continued describing Exhibit C.  The pie chart on page 36 showed the sources of revenue for all the Attorney General’s budget accounts.  She stated that 34 percent of the funding was received from the General Fund, 21 percent came from fees and premiums, 2 percent from boards and commissions, 12 percent from grants, 20 percent from the AG’s cost allocation plan, 8 percent from transfers, and 3 percent from recoveries.  The second pie chart broke out the funding in terms of the total AG budget.  The administration account (1030) was approximately 55 percent of the total budget; the Other category was 22 percent and included the tort claims fund, which was administered for all tort claims.  All state agencies had access to the Tort Claims Fund and Ms. Del Papa said there would be a Bill Draft Request (BDR) that would deal with that fund.  The Private Investigator’s Board was also included in the Other category as well as the Council for Prosecuting Attorneys, the Extradition Coordinator, the Domestic Violence Programs, and the Missing Children’s Clearinghouse.  The Bureau of Consumer Protection was 9 percent of the total budget, and the Insurance Fraud Unit was approximately 2 percent of the total.  There was no General Fund support for the Insurance Fraud Unit and she explained that BDR 331 (A. B. 134) would propose changing the fee structure from a flat $500 fee to a graduated scale up to $2,000 depending upon the amount of business done in the state.  She said the budget was built on the presumption that the bill would pass.  Continuing, she said the Workers’ Compensation Fraud Unit made up 7 percent of the total budget, while the Medicaid Fraud Unit made up 5 percent of the budget.  The pie chart on page 38 showed the personnel costs for the Attorney General’s office by budget.  The chart on page 39 showed the AG’s office staffing.  There were a total of 331 positions in the office with 69 percent (224 positions) included in the administration account (1030).  The Other category had 15 positions, the Bureau of Consumer Protection had 28 positions, Insurance Fraud had 18 positions, Workers' Compensation Fraud had 28 positions, and Medicaid Fraud had 18 positions.  She said that 44 percent of the office staff was attorney positions, while investigator’s made up 12 percent and all other staff made up the remaining percentage. 

 

The chart on page 40 of Exhibit C showed the staffing in the AG’s administration account (1030).  The largest division was the civil division; 14 positions were assigned to Conservation and Natural Resources matters; 16 positions were assigned to boards and commissions; 8 were assigned to government affairs issues; 11 positions were assigned to commerce agencies; and 9 positions were assigned to tax matters.  Over the years the office had moved away from positions that were specifically dedicated to particular agencies; however, some positions were still dedicated to particular subjects and a “bifurcated system existed that was program oriented.”  If someone in the office had an expertise they attempted to share that expertise.  The experience was shared between divisions.  The Criminal Division had 15 positions and the Nevada Division of Transportation (NDOT) had 21 positions that focused on condemnations and right-of-way battles.  One of the three new positions requested was a Management Assistant III position in the NDOT area.  The next category was Gaming with a total of 13 positions.  Human Resources had 36 positions, or 16 percent of the total staffing; the Department of Human Resources received over 24 percent of the state General Fund.  Human Resources required a tremendous amount of legal services on such things as Medicaid reimbursements and the Welfare Reform Act and that was the reason for requesting a new full-time deputy.  The Litigation Division had 29 positions, and had a new solicitor general as the office had gone through three solicitor generals in the past two years.  The new solicitor general, Retired Adjutant General Tony Clark, took his position January 20, 2001.  Ms. Del Papa went on to say that the most difficult and complex cases worked on by the AG’s office wound up in litigation.  The Investigations Division consisted of 11 positions and the Administration Division had 15 positions.  The Administrative Division had responsibility for the overall financial operations plus the administration of other budgets, settlement accounts and other work.  The Fiscal Division consisted of 8 positions, Information Services consisted of 5 positions, and the Grants Administration Division had 2 positions. 

 

Continuing with the description of the contents of Exhibit C, Ms. Del Papa described page 41 as containing the requested adjustments for Budget Account 1030.  Pages 42 through 48 contained a discussion of the Medicaid Fraud Unit.  She said the office had asked for additional funding for that unit due to some federal law changes.  Pages 49 and 50 described the Workers’ Compensation Fraud adjustments and the remainder of the exhibit was information that referenced domestic violence.  She said she had a total overview of the domestic violence programs that had not been made available to the committee but could be provided later. 

 

Chairman Arberry asked Ms. Del Papa to continue her presentation with a discussion of Budget Account 1030.

 

Attorney General Administration Fund (101-1030)

Elected 26 – Volume I

 

Ms. Del Papa referred the committee to page 32 of Volume I, which was the summary chart for Budget Account 1030, and page 41 of Exhibit C.  This account was the administration account for the AG’s office and reflected a total of three new positions.  One was the NDOT Management Assistant III, a deputy attorney general for the Human Resources Division and one position comprised of a half-time deputy for the environmental area and a half-time deputy for housing.  She said she had the agencies’ support and these positions had been requested by the agencies in answer to a need for additional legal support.  She said she had requested three support staff positions that were not included in The Executive Budget. 

 

She went on to say that her main concern in Budget Account 1030 was the revenue budgeted for Boards and Commissions charges.  The actual amount collected in 1999-00 was $396,500.  The office requested that that amount be carried forward as collections that would be received for 2001-02 and 2002-03.  The Executive Budget showed $645,294 and Ms. Del Papa believed this should be considered a discussion point for the committee.  She said she had met with Mr. Don Hataway and Mr. Perry Comeaux of the Budget office to discuss this issue.  She said she had discussed with them challenges the office had and that her office would make every effort to make up the shortfall if that was possible.  She said she was in the process of attempting to sort this out because there was concern with how the money was expected to be generated given the fact that certain agencies may have been counted twice in terms of providing revenue for the account.  She said she wanted to put the committee on notice that there were unresolved issues regarding this area of the budget and her office would continue to attempt to work it out with the Budget office. 

 

The second priority Ms. Del Papa discussed concerned information services.  The estimated cost of replacement computers was short.  The budget instructions provided $2,064 for each computer, The Executive Budget provided $1,606, and the current model the office purchased to meet its specific needs cost $2,107 each.  She said she wanted to put the shortfall on record.

 

The third priority Ms. Del Papa mentioned as being important was making the executive director of the High Tech Crime Advisory Board a full-time position and to restore some operating expenses.  She said she believed so strongly in this area that during the last biennium, she used the in-house fees from the settlement of the tobacco litigation to pay for the High Tech Crime Advisory Board.  Ms. Del Papa said that with all of the challenges facing the state because we lived in the age of the Internet, she believed it was very important that this board be created.  She said the board had not begun its work until approximately a year ago because of a delay in the gubernatorial appointment process.  Others on the board included the head of the Federal Bureau of Investigation (FBI), the head of Wells Fargo Bank in the state of Nevada, and a representative of Nevada Bell.  Assemblyman Anderson and Senator Wiener were the legislative representatives on the board.  It had been a dynamic, exciting opportunity that should be a priority for the future.  Dr. Tara Shepperson had received her Ph.D. and the agency was lucky to employ her on a part-time status.  The office would continue to pursue grants and she considered this a priority.

 

The fourth priority was to include in the budget a data entry position.  There were three positions requested that were not included in The Executive Budget.  She believed that the data entry person for the Integrated Financial System (IFS) payroll for Las Vegas should be restored.  She said that it was her understanding that the Department of Administration had hoped that IFS would be further along than it was and due to the timing of that, the data entry person would be necessary for the next biennium to input the information.  With a payroll as large as that of the AG’s office and the work that went with it, this position was a priority.

 

The fifth and last priority was to increase a half-time Computer Network Specialist I to a full-time specialist position.  She said she wanted to demonstrate to the committee why this position was important.  She stated that her computer information services personnel had to run a wide-area network from Reno to Carson City, Las Vegas and Ely.  They also serviced 11 file servers and 300 computer users in six geographic locations as well as a fiber-optic backbone.  If the additional half-time Web position was authorized, the office would be able to better serve the public and better able to accept complaints online.  Ms. Del Papa introduced David Young, Computer Network Specialist I with the AG’s office.

 

Mr. Young stated that in addition to his regular duties, during the prior year he had also taken on the duties of rebuilding the Web site for the AG’s office.  He referred to Exhibit D and explained that the definition and purpose of their e‑Government initiative was to better offer the AG’s services to the public.  In general, he had found that the e-Government revolution had fallen short of its potential and as reported in a study by Darrell M. West of Brown University, e‑Government officials needed to work to improve citizen access to online information and services.  That led to the question, “Why e-Government?”  Answers included: 

• services could be offered 24 hours seven days a week,
• the schematic and dynamic of the public was changing from brick and mortar,
• the Governor mandated it on January 12, 2000,
• progress could not be stopped and response time would be speedier
• expectations of the public had changed  

 

The e-Government initiative would result in cost effectiveness.  The consequences of not moving forward included that the longer the wait, the more expensive it would become.  He presented as an example the City of Des Moines home page.  Using an online automated process Des Moines had targeted the information their users had requested.  Under the section called quickLINKS, they had a selection for residents, for visitors, and for businesses.  By doing that, they had been able to provide information they knew was usually requested.  Another example was taken from the Nebraska Attorney General’s office.  Because they provided online database connectivity with their office, someone could have gone to this page, submitted a complaint and been assigned a case number.  The case number automatically would go to a deputy attorney general and the public would feel more comfortable that the complaint would be handled appropriately.  He referred to the next example in Exhibit D, the Nevada legislature’s homepage, as an excellent example of in-state e‑Government services.  He closed his presentation with statistics.  Only 5 percent of sites showed some form of security and privacy policies, only 22 percent of e-Government sites offered an online service, only 4 percent offered foreign language translation, and states varied enormously in their overall ranking with Rhode Island, Delaware and Nevada doing poorly in a study performed by Darrell M. West of Brown University. 

 

Chairman Arberry asked if Mr. Young would be involved with the project if the position was approved.  Mr. Young answered that he was currently involved and would be in the future.  The position was designed to provide the interim labor it would take to move to e-Government.  Chairman Arberry also asked whether the program would be user-friendly.  Mr. Young replied, “Definitely, that is what we are trying to achieve.” 

 

Ms. Tiffany said that she had served on the Governor’s Select e-Commerce Committee.  The AG’s office had had a representative there, and the committee had worked very well with the AG’s representative in crafting the language so that the state could move into e-Government easily.  She asked what exactly the office wanted to provide online.  Mr. Young answered opinions, contracts, research and reference databases could all be provided online.  He said it would be government-to-government and government-to-citizens.  She asked if the government-to-citizens portion would be the online complaint system.  Mr. Young answered that it would include all transactions online such as complaints, testing for licensing, and research.  Ms. Tiffany asked Mr. Young what was planned for the first two years.  He answered that they would develop an online complaint system with database tracking.  Ms. Tiffany then asked how the office would pay for that.  Ms. Del Papa answered that if the office could get the one-half time position they would expect that the Bureau of Consumer Protection, the Insurance Fraud Division, the Workers’ Compensation Fraud Division and the Medicaid Fraud Division would go online.  She said the Governor had said that in building the budgets there were to be no new expenditures so the budget had been frugally built.  If the office could get the position she believed she could meet the rest of the needs by pulling from staff within the office. 

 

Ms. Tiffany asked if this would be from personnel savings and Ms. Del Papa said partly by personnel savings.  She said the problem with personnel savings was that everything saved tended to get eaten up by growth.  She said an example might be in the Medicaid Fraud Unit.  The unit had obtained significant recoveries and she believed that would be an example where an e-Government complaint form would be justified.  She said the service was needed and the expenses would not be that great.  There would be initial start-up costs but the most important thing to get would be the position, and that was what the office had asked for.  Ms. Tiffany asked if the person hired would be technical.  Mr. Young answered that the half-time position would be used in the development and programming of the Web site.  The employee’s experience was in database background, and the AG’s office had provided and maintained a website for four years with no connectivity to any type of database.  Ms. Tiffany said she thought the proposal was great and that as much as could be done paperless should be done paperless.  She also said she did not support optical scanning because the AG’s office should move forward to a paperless office.  She wanted to confirm that the persons hired to work on the project would be able to create and maintain the interactive Web site.  Mr. Young said that was where it would become cost effective and the office would start saving dollars because much of the work would be relieved from other staff in the office.  Ms. Tiffany asked if government-to-government would be done first or government-to-citizens.  Mr. Young said that the original goal was government-to-citizens first and as they developed, government-to-government would just become a part of the final goal. 

 

Crime Prevention Fund (101-1036)

Elected 56 – Volume I

 

Ms. Giunchigliani asked Ms. Del Papa to discuss the Office of Technological Crimes.  She asked if the AG’s office actually prosecuted those crimes or if the local governments would do it.  Mr. Kevin Higgins, Chief Deputy Attorney General, said he would answer the question.  S. B. 485 of the Seventieth Session of the Nevada legislature authorized the creation of the High Tech Crime Advisory Board.  The role of the board was to create two task forces, one in the north and one in the south, to be able to respond to high tech crimes and provide training.  The task forces had been created and they were cooperating with the FBI and various federal jurisdictions.  They had done training and worked in the schools to make sure that the program got started.  S. B. 485 of the Seventieth Session said there would be $85,000 allocated to the personnel expenses and the board would determine how the funds were to be expended.  He said there had been a fiscal note prepared by someone in the Attorney General’s office that said an executive director could be hired full-time for $35,000 yearly.  Mr. Higgins said that obviously the type of expertise needed for the position could not be obtained for $35,000 per year.  The board then made the decision to put the director in place on a half-time basis with the hopes of increasing the salary later in order to fund the position full-time. 

 

Ms. Giunchigliani asked whether the committee had been appointed to decide whether or not technological crimes should be prosecuted or to establish procedures.  If the committee was to establish procedures, Ms. Giunchigliani believed that should have occurred over the two-year period and the advisory committee could be disbanded and the local governments would actually prosecute the crimes. 

 

Ms. Del Papa said that the AG’s office had involved a law enforcement cooperative effort and included outreach to the public.  She said the average bank robbery in our country today netted $2,500 and the average high tech crime netted $50,000.  This had a tremendous impact on doing business in the state and there needed to be some type of group responsible from a coordinating basis to include law enforcement efforts and outreach to business entities.  They had received a great deal of cooperation from the FBI and Nevada was ahead of the curve on high tech crime.  She said Attorney General Janet Reno had made high tech crime a priority and she believed there would be some federal money that would come with reference to the fighting of high tech crime.  Ms. Giunchigliani asked for a clarification regarding who was prosecuting the crimes.  She thought it was the local governments.  Ms. Del Papa said it was a cooperative effort.  At the federal level, the Justice Department had put into place a system that would allow each of the states to have access to their database at all times.  Ms. Giunchigliani asked if the Justice Department was going to pay for the program.  Ms. Del Papa said she believed there would be some federal money. 

 

Ms. Giunchigliani said she understood that technological crime existed but she was not necessarily convinced that the best way to handle the crime was through advisory committees and an executive director at the state level.  She thought that perhaps the advisory committee should have established procedures and regulations and then gone away and the local governments would handle the prosecution of the crimes based upon what had been put together by the advisory committee.  Ms. Del Papa said that was one perspective but that based on her experience as attorney general for the prior 11 years, she did not think that would work in a state such as Nevada.  Ms. Giunchigliani asked who would finance the program.  Were the local governments going to finance it since that was where the prosecution actually occurred?  Ms. Del Papa said that in a county such as Clark County that had 70 percent of the population, Metro had a very good high tech crime department and Washoe County was in the process of developing a department.  The rural counties were at more of a disadvantage because they did not have the same type of resources available to them.  The purpose of the High Tech Advisory Board was to act as a coordinating unit with oversight responsibilities.  The Justice Department was not going to want to interface with a rural county such as Lincoln County.  They would first want to interface with the state of Nevada and go out from that level.  Ms. Del Papa asked Dr. Shepperson to explain the path the AG’s office had taken to try to develop the northern and the southern units.  The units had only been in existence one year and the AG’s office was still in the beginning stages of getting the units up and running.

 

Ms. Giunchigliani said she wanted to review some of the testimony regarding the original bill to determine if this was to have been a self-supporting office and if so, whether it was to have been funded by initiatives, grants, or other revenue sources.  She wanted to be told what efforts had been made and what dollars had been brought in.  Dr. Tara Shepperson, Executive Director, said she understood Ms. Giunchigliani to have asked two questions, the first regarding the jurisdictional issues concerning prosecution and the second concerning who would pay for the program.  Dr. Shepperson said that jurisdictionally the prosecution issues became very difficult because unlike traditional crimes, Internet or computer crimes never fit neatly into any one jurisdiction.  The question would become at what point did the federal authorities come into the picture and who would prosecute.  There had been, as part of this effort, a lot of sharing in terms of prosecution and investigation of these crimes.  Unfortunately, most of the federal offices were booked with cases that ended up falling in their jurisdiction after coming from local agencies simply because there were not enough forensic experts and investigators to handle them.  The AG’s office had been working in a cooperative manner with district attorneys and the U.S. Attorney’s office and others to come up with a system to fast track and move these prosecutions along. 

 

Regarding the second question on who was paying for the prosecution of these crimes, she said almost everyone was paying.  Her initial goal in her job was to get all agencies together and sharing their resources.  There was not a reluctance to do that but the reality of daily operations in law enforcement often made it difficult.  So far, she had worked to bring together what was referred to as an “inner core” which was computer forensic experts, many of whom were police officers and many of whom were not.  The concept involved having a commander in the north and one in the south to help expedite those complaints and cases and get them referred to the most appropriate person.  The other issue was that not all cases could be investigated well by any forensic person.  Often, someone might be a real expert at NT network systems or really good at Windows but that would not mean that they were a Linux expert or have any capacity to deal with old Apple computer systems.  The technology moved so quickly that it was impossible for someone to be an expert in all things.  The commanders would know what everyone’s expertise was since they had helped develop the expertise, and the expertise could be shared.  The expertise might come from Las Vegas METRO, the Clark County DA’s office, the AG’s office, or the Washoe County Sheriff’s Department.  Another concern had been that often in the local jurisdictions there were no experts and it would be very hard to pay the costs of having a forensic computer expert in many of the rural counties.  The program had been the way the AG’s office was able to create some expertise and offer training.  The rural counties, particularly, would not need to feel that they had been left out or would not have help.  Another issue had been that the citizens of Nevada did not know how to make a complaint and who to talk to about it.  Also, many law enforcement agencies did not know how to investigate complaints.  The unit had worked with the Internet Fraud Complaint Center that had collected complaints on a national level and used their expertise, time and dollars.  In the next couple of months, the office would have a database that would automatically transfer complaints received nationally back to Nevada so they could be routed almost automatically to the appropriate agency.

 

Ms. Giunchigliani asked who had funded the commanders north and south.  Dr. Shepperson said that everyone that was part of the task force had participated.  Ms. Giunchigliani asked if there were actual revenue streams that could be tracked in a budget that showed someone had paid for those individuals.  Dr. Shepperson replied, “Yes, not in our budget, it is in their budgets.”  Ms. Giunchigliani said that the state had budgeted General Fund dollars for this Technological Crime Advisory Committee and for the executive director and she did not see any revenue stream from grants, other initiatives, local government user costs or assessments.  She did not see anything other than General Fund.  Dr. Shepperson said that in the current budget that was all you would see.  Ms. Giunchigliani asked what she should be seeing brought into this budget this year based on testimony last session to fund the office with other than General Funds.  Dr. Shepperson said there was other money, some of it being brand new.  Guidelines had not been developed as the funds were from grants coming from the Department of Justice and other areas that were just now going through Congress.  Ms. Giunchigliani asked for clarification on whether those grants had been received yet and Dr. Shepperson said they had not.  Ms. Giunchigliani said the committee needed to see what the office was counting on or contemplating counting on because she was unsure that General Funds should be expended for those purposes.  She also was concerned about duplication of effort although she understood the assistance to the rural counties.  She went on to say that maybe this should be more of a clearinghouse so that if you had a certain type of crime you could be told who to contact rather than having people getting together for a meeting just for the sake of a meeting. 

 

Chairman Arberry said that in reviewing the executive portion of the budget he had noticed that there was a shortfall in the boards’ and commissions’ charges collected in FY2000 and asked Ms. Del Papa whether this would be a continued shortfall.  Ms. Del Papa said that the office would try to make every effort to figure out how to bridge the shortfall.  She said she had not been able to get a final resolution with the Budget office and she would be meeting with the Budget office in the future to determine exactly what the AG’s office could and could not bill for.  There would definitely need to be an increase to the billable hourly rate.  The problem was that it was a bifurcated system within the budget because they were on a cost allocation system in one instance and on the boards’ and commissions’ billing in another instance. It was further complicated by the fact that of the $396,000 billed, $100,000 of that was from the Board of Nursing and she did not believe there was any way to increase the billing from the Board of Nursing.  They were billing for what they should be billing for in terms of the services.  It was very complicated because the cost allocation system interfaced with the billing process.  Ms. Del Papa restated that her office would make every effort to resolve the problem but she wanted the committee to be on notice that there was a shortfall as far as this revenue was concerned.  She believed that there might have been some time calculated which would result in double billing.  She said that after she had conferred with the Budget office she would report back to the committee just as soon as she could. 

 

Chairman Arberry asked Ms. Del Papa to discuss decision unit M-100 dealing with office space.  He asked which of the staff would be located in the new office space that would be created by the remodel of the old Carson City Courthouse.  Ms. Del Papa said there had been some press accounts with reference to the courthouse that had been inaccurate.  She said the Carson City courthouse had been constructed in 1920 and had always been designed to be part of the plan for the AG’s office.  That building was purchased, the asbestos removal had been completed on the building but the bids came in over what had been anticipated to finish the project.  The AG’s office went back and worked with the architect and the state Public Works Board and the Governor had built into The Executive Budget $1.7 million to complete the project.  The facility would account for 14,985 square feet and could house a maximum of 65 individuals.  At the beginning of the move into the facility it was contemplated that the Medicaid Fraud Unit, the Private Investigator’s Licensing Board, the Bureau of Consumer Protection, the Department of Motor Vehicles Public Safety Division, and the Gaming Division in the north, among others, would move into the facility.  Chairman Arberry asked if there would be any reduction in the non-state office space that had been rented.  Ms. Del Papa said that had been reviewed and she believed there would be some reduction but the problem was that the Budget office collected rent from the agency no matter where it was housed.  She did not have a figure on the exact savings because she had asked the staff to take a look at it but even after they had moved into the building there would be rent that would be charged.  She said the budget had been shorted in one area for the Workers’ Compensation Fraud Unit for the rent for that unit. 

 

Mr. Hataway, of the State Budget Division, said that because of the uncertainty of the funding for the completion of the project as well as the time to move in and who specifically would move in, the Budget office did not make an attempt to address the rent issue.  If Medicaid Fraud, for example, moved into the facility there would be non-state billing rent they would no longer be responsible for but the timing of being released from leases made it too complex to calculate for the proposed budget.  If the building were to be funded, completed and occupied, the Budget office would address where the savings would be and go from there. 

 

Chairman Arberry asked Ms. Del Papa to discuss what had happened with the tobacco settlement.  Ms. Del Papa referred the committee to pages 26 through 30 of Exhibit C and said she would discuss the tobacco settlement.  In 1998, Nevada, along with 45 other states and 6 territories, signed what was called the Master Settlement Agreement (MSA) with the major tobacco manufacturers in the United States.  That MSA resulted in a ban on the marketing of cigarettes to children with payments to the states supposedly in perpetuity that equaled approximately $206 billion with Nevada’s share equaling $1.2 billion for the first 25 years.  There was work that went along with the ongoing monitoring of the MSA.  At every meeting of the National Association of Attorneys General and at least monthly there had been conversations pertaining to the agreement.  The National Association of Attorneys General had hired a major bankruptcy firm at a cost of $1 million per year because one of the concerns was that one of the big four tobacco companies might go bankrupt.  Nevada had been very aggressive and at the forefront of continuing to work with the MSA.  Nevada was one of two states that had actually brought lawsuits against non‑participating manufacturers.  The MSA agreement required the states to police the industry if there were non-participating manufacturers and the states would have to bring suit to collect payments from those manufacturers. 

 

A secondary part of what the AG’s office did was the enforcement of the Synar amendment in Nevada.  There was a federal law that required each state to aggressively attempt to reduce teenage smoking.  When the state started the undercover sting operations in our state the over-the-counter sale rate was approximately 66 percent, meaning 66 percent of the time children could actually buy cigarettes.  Through a very aggressive partnership with the retailers in Nevada using things such as the “We Card Program,” Nevada had been able to get the over-the-counter sale rate down to around 20 percent and that was where Nevada should be so that the federal funding would not be jeopardized.  Some states had had their federal payments reduced and Nevada had not experienced a reduction.  Ms. Del Papa pointed out that included in Exhibit C was a recent letter that had come to all the states from the head of the National Governor’s Association expressing concern over the challenges that faced the states.

 

Ms. Del Papa introduced John Albrecht who had been responsible for monitoring the Master Settlement Agreement.  Mr. Albrecht said that part of his job was to protect the integrity of the flow of the funds that came in from the tobacco settlement.  The tobacco companies that signed the agreement agreed to pay $4.5 billion in the year 2001 and Nevada’s share worked out to approximately $30 - $40 million per year.  There could be three adjustments to the amount, one of which Nevada had control over and it was called the non-participating manufacturer’s (NPM) adjustment.  The adjustment required companies that sold cigarettes that did not sign the agreement to deposit one penny into an escrow account for every cigarette or every “stick,” as cigarettes are referred to in the cigarette business, that was sold.  The escrow account contained the amount the state could later sue that company for regarding smoking-related health care costs.  He said that the office was now trying to force those companies to set up the accounts.  It was important because if the market share declined more than 2 percent for all of the national companies, the amount of the decline was multiplied by three and then a factor would be applied to decrease the entire settlement.  A state could avoid that decrease if it diligently enforced the model statute, which meant suing the small cigarette companies that had not signed the agreement and forcing them to put the penny per cigarette into the escrow account.  There were costs in paying the money that the participating manufacturers had to pay so the penny per cigarette was what had been factored as the cost to increase the cost of a pack of cigarettes.  Mr. Albrecht said he had enforced the law by filing three civil actions to date.  Nationally, there had been only nine lawsuits.  Nevada was the second state to file and the first state to obtain a judgment against any of the cigarette companies.  Last year, 19 states suffered an NPM loss and Nevada was not one of them. 

 

Mrs. Cegavske thanked Ms. Del Papa and John Albrecht because she had witnessed the great service they had done in Clark County and she had been kept updated on all the facts, as she had requested.  She said she believed the storeowners had been in compliance and tried to work with the program and that the AG’s effort regarding the prohibition of the sale of alcohol to minors was also very good.  There was a continuing problem with alcohol sales to minors because there were not only clerks who would sell alcohol but there were also third parties that would sell to minors.  She said she appreciated all the effort to help kids stay off alcohol and tobacco products.

 

Mrs. de Braga asked what impact possible bankruptcy filings would have on the fund.  Mr. Albrecht said he did not think that was a concern for a couple of years.  Everyone he had talked to with the National Association of Attorneys General, and others, thought that was not an immediate concern.  Ms. Del Papa said that although it was not an immediate concern, it was on the horizon to the point where the National Association of Attorneys General had committed $1 million of funds each year to hire the best bankruptcy counsel in the country.  If one of the big four companies was to go bankrupt, it would have a tremendous impact on the revenue stream.  She described it as a challenge that should be watched carefully and Nevada should be prepared to address that challenge if a bankruptcy occurred. 

 

Mrs. Chowning said that it was possible that Congress might challenge states because they were using the tobacco settlement funds for other than health-related uses and Nevada was one of these states.  Nevada was using 40 percent of the funds for non-health-related issues.  She also believed that if a model statute had been passed and enforcement was ongoing, Nevada would be in a stronger position.  She asked if the model statute had been passed and whether Nevada was in a fairly strong position not to be challenged.  Mr. Albrecht said, “Yes, it has been codified in NRS 370A and that was part of what I do is enforce it.”  He said he had filed three lawsuits and he had one more company to sue, plus those who had established escrow accounts, and that would equal 97 percent of the NPM market enforced against.  There were about 50 to 55 million sticks sold by NPMs in 1999 and he would have sued or gotten escrow accounts from 97 percent of them.  He believed that Nevada was one of the best states in enforcement. 

 

Mrs. Chowning asked if Nevada was standing stronger than other states in the threat from Congress.  Mr. Albrecht clarified that the congressional possibility was different from the NPM statute.  He said that the letter from the National Governor’s Association (Exhibit C) actually covered two rather unrelated topics.  One was that Congress might act because the states had not spent enough of the settlement on public health-related issues.  The second issue in the letter was that regardless of whether Congress acted, the participating manufacturers might reduce the settlement payments based upon the state’s independent actions to enforce the model statute.  Both issues were involved in the settlement but they were two independent issues.  Mrs. Chowning said that Nevada was spending 60 percent on health-related issues and it appeared to her that some states were only spending 10 percent on health-related issues.  She asked whether that put Nevada in a stronger position than other states all the way around.  Mr. Albrecht answered by saying he did not know how Senator McCain defined public health.  Mrs. Chowning thanked Mr. Albrecht for all of his efforts.

 

Ms. Giunchigliani asked where the escrow account was, how much was in it, and how the funding in the account was being spent.  Mr. Albrecht said the escrow accounts belonged to the companies, not to Nevada.  The company could establish the account in any financial institution that met the requirements of the model statute.  Ms. Giunchigliani asked if any of the money had been spent out of those accounts.  Mr. Albrecht referred to those accounts as savings accounts that could be used when the companies were sued by the Attorney General’s office for health-related costs.  In the meantime, the money would stay in the escrow account for 25 years and after 25 years it would go back to the company.  He said when he enforced the law, he attempted to have the companies sign the master settlement and then the company would pay the money into the master settlement account and the state would then actually receive the money.  Ms. Giunchigliani asked how much money had been received by the state and deposited into the master settlement account.  Mr. Albrecht said that one company, Landmark in Las Vegas, had signed an agreement and eight companies had set up escrow accounts.  Ms. Giunchigliani commented that it was easier for the company to set up an escrow account and not sign the master agreement since they might be able to wait out the 25 years and have the escrow funds returned.  Mr. Albrecht said that the companies did not feel that way; they did not want to set up the escrow accounts because there were more costs in setting up the accounts.  Since they sold cigarettes in 50 states they either must set up 46 escrow accounts or they would have to set up 1 account with 46 sub-accounts for the states and 6 sub‑accounts for the jurisdictions, the territories and Washington, D.C.  He referred to the ban passed by the last legislature on gray-market cigarettes and said those cigarettes were a significant part of the 50 million sticks sold in Nevada as non-participating manufacturer’s cigarettes.  Ms. Giunchigliani asked if the tobacco money could be tracked into various state budgets and Mr. Albrecht said that he did not do that tracking but that it was done by the state Treasurer. 

 

Mr. Hettrick asked for comments from Ms. Del Papa on a proposal to “securitize,” which was essentially to sell at a discount, the potential $1.2 billion.  He asked what the AG’s feelings were about the proposal and whether there were any potential buyers.  Ms. Del Papa answered that the State Treasurer’s office had taken the primary responsibility of looking at the proposal.  Her office had not seen any proposals nor had her office taken a position.  Mr. Hettrick said that although he understood the Treasurer’s desire to review the proposal, he felt that the committee would need to have input from the AG’s office in order to make a decision.  He said that the AG’s office was in a better position to judge whether or not the tobacco companies would go bankrupt and what the chances were of collecting the money.  Mr. Hettrick said it would be very difficult for the committee to make a decision unless the AG’s office would advise the committee before a decision was made on the proposal of the state Treasurer. Mr. Hettrick said that to securitize a $1.2 billion potential was not wise if the AG’s office believed the money could be collected.  Further, he believed that anyone that might buy the debt would believe they could collect the money or they would not buy the debt.  Mr. Hettrick said he had real concerns in this area and ultimately would need information from Ms. Del Papa before making a decision.  Ms. Del Papa said that ultimately she would be happy to offer input, although during the last session of the legislature the advice of the AG’s office was not taken with reference to the distribution of the tobacco money.  She said her office had spent a great deal of time monitoring the situation and she had only seen general concepts.  According to Ms. Del Papa, the National Association of Attorneys General had proven to be invaluable in terms of the oversight and monitoring that had gone on at the national level and Mr. Albrecht had spent a great deal of time monitoring the issue.  Ms. Del Papa said that on two occasions she had gone to the Fund for a Healthy Nevada with requests for funding and she had been refused.  She believed that was shocking when the work her office had done was reviewed.  The AG’s staff spent an extraordinary amount of time on matters relating to the tobacco settlement and when the AG’s office approached the Fund for a Healthy Nevada with requests to help fund the required enforcement program they were denied funding.  Ms. Del Papa asserted that there were challenges present on many fronts in this area.  Mr. Hettrick said that the expenditures did not relate directly to whether or not the AG’s office believed that ultimately the money could be collected and that was the area he would need her advice on.  Mr. Hettrick said he understood that the AG’s office would only be able to offer its advice on the probability of collecting the funds.

 

Ms. Giunchigliani asked a question on the district court assessments.  She said that it appeared that they had not been raised since 1996 and she wondered whether they were not being properly allocated or was there a decrease in felonies and gross misdemeanors.  Ms. Del Papa said that her office had tracked the assessments for several years and the felony court assessments ran anywhere from $75,000 to $79,000 yearly.  During FY2000, the office was expected to collect $220,000.  She said she euphemistically referred to that money as “phantom money.”  She said there were challenges regarding the court assessments and collections because there were different ways they were handled in different areas, or even within one area different judges would collect in different ways.  She said that this was something that the Administrative Office of the Courts was reviewing and she had personally met with Associate Justice Bob Rose and Karen Kavanau, Court Administrator, to discuss the issue.  Her office had nothing to do with setting the standards, that was done at the court level.  The challenge was that there were many felons who were not in a position to pay the assessment; it was like trying to squeeze blood out of a turnip.  The amount that could realistically be expected was approximately $79,000.  Ms. Del Papa said she had explained to the Associate Justice and the Administrative Office of the Court (AOC) that this revenue stream was in part a contributing factor to some of the budgetary problems that the AG’s office experienced at the end of the last fiscal year.  Ms. Del Papa had worked closely with the Budget office and the Legislative Counsel Bureau’s Fiscal Division and she felt that her office had faced a financial crisis partly due to revenue that was basically non-existent.  Ms. Giunchigliani asked if the AOC had come up with a standardized, uniform plan so that the court assessments could be collected properly.  Ms. Del Papa said that Karen Kavanau had done a tremendous job and was working on the problem but she did not believe that the revenues would increase in the next biennium. 

 

Ms. Giunchigliani asked when the committee would receive the cost allocation plan.  She said that if it was received later than March, staff would not be able to complete the budget closings.  Ms. Del Papa said this was so confusing to her staff that they had actually diagrammed the cost allocation process.  Ms. Giunchigliani said that the process should be kept simple.  Ms. Del Papa said the process was sort of a “pay-after-the-fact” method.  It involved charging people now for work that was done two years ago and she found it to be very confusing.  She had concerns regarding the plan.  For example, her office was not budgeted to do work for the Public Works Board, but that board was requiring a great deal of work from her office on a number of problems.  Her office had to do the work now that she would not get paid for until two years from now.  Mr. Don Hataway, from the Budget office, said that the state had been mandated by Circular 887 of the federal government to construct the cost allocation plans in a certain prescribed manner, not only for the AG’s office, but the statewide cost allocation plan and the DoIT plan.  It was based upon estimates of what the budget allocated to actually spend and then two years later they would take what was actually spent and roll forward credits and debits.  That was part of the process and if it was not done, it would place into jeopardy the ability of federally funded agencies to pay their cost allocation.  Mr. Hataway said that his office was targeting the completion of the cost allocation plans by mid-March so that the Budget office could work with the committee’s staff on budget closings.  Mr. Hataway said that MAXIMUS did the cost allocation plans and had done the statewide and the AG’s plan since the early 1990s.  Ms. Giunchigliani asked if MAXIMUS had done the DoIT plan and Mr. Hataway responded that MAXIMUS had done it in the past, however, the agency had allowed it to fall through the cracks and that was the reason why it had to be redone.  Ms. Giunchigliani asked if there would be some standard to make the agency implement the plan once it had been completed and Mr. Hataway said the committee would be provided a master schedule of what was in the budget now, what should be in the budget, and where to balance it at closing.  Ms. Giunchigliani asked Mr. Hataway to clarify when the plans would be ready and he said mid-to-late March. 

 

Chairman Arberry asked Ms. Del Papa to discuss decision unit M-201 and its relation to A. B. 64 of the Seventieth Session of the legislature which was an act relating to financial transactions.  He said the Interim Finance Committee had approved a full-time deputy attorney general position in February 2000 and he wondered what had been done with the position.  Mr. Hataway answered that the position was for the Division of Financial Institutions and the condition the Interim Finance Committee put upon the approval of the position was that it be brought back before the legislature as an enhancement or maintenance issue for re-justification.  Chairman Arberry asked if the position was still needed and Mr. Hataway said that his office had recommended that it be funded but that it would be up to the agency to justify the position.  Chairman Arberry asked how much time the position had been spending on A. B. 64 of the Seventieth Session.  Ms. Del Papa said that she would like to prepare a separate chart for the committee with reference to this position.  She said the approval of the position was based partly on the challenges that financial institutions had experienced over the years and she wanted to present information on the topic separately.  Chairman Arberry said the committee would like to know what the position had been doing and what it planned to do so the committee could make a determination of whether the position was still needed.  She said the position was still needed but she believed it would be more appropriate for her office to submit a complete report from start to finish. 

 

Chairman Arberry asked Ms. Del Papa to discuss the budget request for a half‑time deputy attorney general position to provide legal services for the Housing Division.  Ms. Del Papa said that her understanding was that her office had requested a full-time position for the Housing Division and a full-time position for the Division of Environmental Protection.  There had been a great deal of additional work in those areas and they both happened to be in the Civil Division.  The Executive Budget instead included a one-half time position in each area.  The plan was to combine those two halves into a whole deputy that would go into the Civil Division pool.  Chairman Arberry asked how many attorneys were currently assigned to the Civil Division and Ms. Del Papa referred him to the chart in Exhibit C that delineated the positions in the Civil Division.  There were 14 positions in Conservation and Natural Resources.  Ms. Del Papa said her office no longer did the specific one-on-one assignments because a number of positions contributed to the work of the office. 

 

Chairman Arberry then asked Ms. Del Papa to discuss the services her office provided to the Division of Child and Family Services.  Ms. Del Papa referred the committee to Exhibit C for material that related to the transfer of child welfare matters.  She said her office would need to keep the current staffing level through the next biennium because the transfer was a phased-in process and her staff would be part of the monitoring process.  Exhibit C also contained a justification for one position that was included in The Executive Budget.  Over 24 percent of the General Fund of Nevada went to the Department of Human Resources and the AG’s unit had to care for the legal needs of that department.  The issues confronted in the Department of Human Resources were complex, large, and varied.  There were currently two positions representing the Division of Child and Family Services in the Las Vegas office and those positions had been in place since the creation of the division in 1991.  Those deputies represented the division in juvenile court and also pursued the termination of parental rights in addition to representing the division in administrative or personnel matters.  Ms. Del Papa said that since 1991, when the division was created, the caseloads had absolutely exploded.  Part of that was due to the implementation of the Adoption and Safe Families Act during the last biennium.  Exhibit C included a chart that showed the number of cases from 1990-92 to the current time.  Since July 1990 there had been a 42.3 percent increase in the caseload in juvenile court.  Since July 1994, when records became available for Las Vegas, the increase in the caseload had been 29 percent compared to a 24 percent overall increase during that time period.  Since July 1, 1990, there had been a 213.4 percent increase in caseload.  In Las Vegas the increase had been 110 percent just between the last two bienniums.  She believed that those figures dramatically illustrated the need for another deputy in that area. 

 

Mrs. Chowning asked whether the AG’s office would need another position for the Child Support Enforcement Program.  Ms. Del Papa said that the position included in the budget was for the Division of Child and Family Services (DCFS), not for child support enforcement.  Mrs. Chowning asked for clarification on whether a position would be needed if the responsibilities for child support enforcement were to be handled by the counties.  Mr. Hataway said he believed there was confusion on the position requested.  The original agency request was for an additional attorney for the Child Support Enforcement Program and that was the way the budget was built.  Later, it was decided that the position would be requested for the DCFS and that would include a different revenue mix than the child enforcement position.  Mr. Hataway did not recall any official request by the AG’s office to change the original agency request from child support enforcement to DCFS.  Ms. Del Papa said that her understanding was that before the budget was finalized, her staff would have had an opportunity to go over the budget with the Budget office to make those types of clarifications and that did not occur this year.  She assured the committee that there was only one position included and it was for DCFS due to the overwhelming increase in caseloads, not child support enforcement.  Ms. Del Papa apologized for any confusion on the request for the position.

 

Ms. Giunchigliani asked what was happening with the grants investigation and where were investigations for public officers funded from.  Ms. Del Papa said the grants investigation was a pass-through account.  When a request for an investigation came into the office, it would go into the General Investigations Unit and was part of the 1030 account.  When a request for investigation came into the office, the Chief of Investigations would determine what resources were available at that particular time.  It would be basically handled as a portion of Budget Account 1030 but there could be crossover into other accounts.  An investigator could be doing an investigation on a consumer issue but would also check for Workers’ Compensation fraud at the same time.  Ms. Del Papa referred the committee to the chart included in Exhibit C that showed that general investigations in Budget Account 1030 allowed for 11 positions which was 5 percent of the overall budget for BA 1030.

 

Office of Consumer Protection (330-1038)

Elected 50 – Volume I

 

Ms. Del Papa said this was a unit that had always been a very active unit but had become more active with deregulation and other major issues.  The committee was given Exhibit E.  Ms. Del Papa reintroduced Consumer Advocate Tim Hay, as someone she had known for a long time and respected very much.  Mr. Hay was completing the balance of a term that had been vacated and it was Ms. Del Papa’s intention to offer him another four-year term when the current term expired in June. 

 

Mr. Hay, Chief Deputy Attorney General of the Bureau of Consumer Protection and Consumer Advocate, introduced himself.  The bureau was responsible for protecting Nevada’s consumers, businesses, and individuals from those who engaged in anti-competitive behavior or perpetrated various types of fraud.  In Fiscal Year 2000, the bureau collected more than $1 million in fines, penalties, and judgments on behalf of the state and won more than $800,000 in restitution from consumers.  So far in FY2001 the bureau had collected approximately $500,000 in fines, penalties, and judgments and $750,000 more was anticipated from an anti-trust settlement prior to the end of the fiscal year.  Of the collections, approximately $1 million would go into the state General Fund and additionally, in the utility consumer advocacy role, the office had achieved savings for Nevada ratepayers in excess of $200 million.  The budget request was basically static with one item that he drew the committee’s attention to.  One position was reclassified from a deputy attorney general to a senior deputy by the IFC and that change was not reflected in the budget but would need to be adjusted when the budget was closed. 

 

Ms. Giunchigliani said that it appeared that the AG’s office had done an about face on divestiture.  She asked if the bureau had worked on the merger agreement to allow divestiture.  Mr. Hay stated that when the Sierra Pacific Power merger was proposed in 1998 he was a member of the Public Utilities Commission, although he left the commission before the merger was actually approved or finalized.  The companies, when they proposed the merger, offered to divest their plants as a condition of the transaction.  The thinking at that time was that if they had remained separate companies, Nevada Power and Sierra Pacific would potentially be competitors in each other’s service territory promoting the state goal of competition.  As a merged entity that would not occur and that was the reason the companies perceived that they needed to divest their assets and ultimately, the Public Service Commission as well as the Federal Energy Regulatory Commission, adopted the divestiture as part of the orders approving the transactions. 

 

According to Mr. Hay, since he became Consumer Advocate in April 2000, the office had become increasingly concerned with the dysfunctional wholesale market, particularly in the west, and everyone had heard the horror stories coming out of California relative to supply shortages and rolling blackouts.  It was the bureau’s opinion that divestiture was no longer in the public interest of the state.  He said his office in mid-January filed a petition with the Public Utilities Commission in order to re-evaluate that issue.  Subsequently, the California legislature passed a statute that prohibited divestiture in late January.  It could have some legal implications for Nevada in that Sierra Pacific was a regulated California utility as well as being a Nevada utility, and one of the asset divestitures in southern Nevada also was held up by regulatory actions in California, including the action of the Nevada legislature.  Ms. Giunchigliani asked if the Public Utilities Commission had made any type of ruling on Mr. Hay’s request as Consumer Advocate to not do the divestiture.  Mr. Hay responded that his understanding was that the petition would be heard at a special agenda of the commission on February 25, 2001. 

 

Ms. Giunchigliani asked if there was any review of the purchase of the Oregon utility included in the merger.  Her understanding was that because the Oregon utility was so poorly funded and financed and had internal financial problems, that basically when the merger occurred and Nevada picked up the Oregon group, Nevada would be basically bailing out Oregon’s costs.  Mr. Hay said that was not quite accurate.  After the Sierra Pacific and Nevada Power merger was approved in early 1999, at a subsequent point the merged company announced its intention to acquire Portland General Electric.  That transaction was still pending.  The Nevada Public Utilities Commission did not assert jurisdiction over it so there was not a venue for the AG’s office to be involved in a regulatory proceeding in Nevada.  His understanding was that the Oregon Commission had approved the acquisition, as had the Federal Energy Regulatory Commission and the Securities and Exchange Commission, and the company anticipated consummating the merger sometime in the second quarter of 2001.  The issues raised in the divestiture question and the potential acquisition of Portland General were related probably in an accounting and financial sense. 

 

Ms. Giunchigliani then asked about how the Consumer Advocate’s office was involved in the deal that was completed after the legislature adjourned last session.  Mr. Hay answered that he assumed Ms. Giunchigliani was referring to the global settlement that was achieved in July 2000.  Last May and June, due to unusual weather circumstances and other factors, it became apparent to the Consumer Advocate’s staff, as well as to the staff of the Public Utilities Commission, that there were some financial problems on the horizon for Nevada utilities, particularly in regard to the southern Nevada service territory.  The utility company approached the Consumer Advocate’s office about trying to negotiate a solution to what was perceived to be upcoming problems and the Consumer Advocate’s office thought the responsible course of action was to try to nip the concerns in the bud.  During the summer energy peak load, particularly in southern Nevada, approximately 50 percent of the required power was imported.  Due to the extreme disfunctionality of the California marketplace, Nevada was somewhat affected and experienced unforeseen purchase power and fuel cost increases.  He believed that approaching the issue forthrightly on the front end would help avoid getting into the sort of situation the California utilities were now facing with potential bankruptcy.  With the energy-dependent nature of the southern Nevada economy, in particular, it appeared to be a crisis on the horizon.  There were extensive negotiations that lasted for approximately 45 days.  Ultimately a comprehensive agreement was achieved that allowed for 28 incremental rate increases driven by a formula that had been essentially negotiated between the Consumer Advocate’s staff, the Public Utility Commission’s staff, and other parties to the agreement.  The Consumer Advocate’s office believed at that time that the formula would adequately compensate the company on a going forward basis to ensure that it could still access the power markets and buy power for the remainder of this year and the upcoming two summer peaks.  Since the agreement was approved in July and August 2000, the adjustment mechanism had worked fairly effectively, in the Consumer Advocate’s opinion.  The company had now decided to file a rate increase on top of that which was pending before the Public Utilities Commission and the Consumer Advocate’s office was disputing whether or not any further rate increase above that that was negotiated in the global settlement was justified.  He said his office anticipated making some filings before the Public Utilities Commission in the near future to address the proposed rate increases.  Besides the short-term financial condition of the parties, the global settlement resolved six court cases, including the company foregoing a claim for approximately $112 million of revenue out of the last deferred case that was allowed under S. B. 438 of the Seventieth Session which was an act relating to utilities.  Mr. Hay described it as a comprehensive settlement of a number of issues that was not accurately portrayed or understood by media accounts. 

 

Chairman Arberry asked the committee to adopt the “Assembly Ways and Means Committee - Committee Rules – 2001 Session.” (Exhibit F)

 

• ASSEMBLYWOMAN CEGAVSKE MOVED TO APPROVE THE ASSEMBLY WAYS AND MEANS COMMITTEE - COMMITTEE RULES – 2001 SESSION.

 

• ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION.

 

• THE MOTION CARRIED UNANIMOUSLY.

 

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Chairman Arberry asked committee members to take action to introduce the following Bill Draft Requests:

 

• BDR 23-1065 - Relating to public employees; clarifying the formula for determining the amount payable by the State of Nevada toward the cost of insurance for certain retired employees; and providing other matters properly relating thereto.  (A.B. 138)

 

            ASSEMBLYWOMAN CHOWNING MOVED COMMITTEE INTRODUCTION       OF BDR 23-1065.

 

            ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION.

 

            THE MOTION CARRIED UNANIMOUSLY.

 

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• BDR 32-1069 - Relating to taxation; providing an exception to the statutory limitation on the total ad valorem tax levy; and providing other matters properly relating thereto.  (A. B. 137)

 

            ASSEMBLYMAN MARVEL MOVED COMMITTEE INTRODUCTION OF BDR   32-1069.

 

            ASSEMBLYWOMAN CHOWNING SECONDED THE MOTION.

 

            THE MOTION CARRIED UNANIMOUSLY.

 

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Special Fund (101-1031)

Elected 34 – Volume I

 

Ms. Del Papa described this as the AG’s special litigation account, an account that was used to pay expenses related to investigation, preparation, and prosecution of cases unknown at the time of budget approval.  The total budget amount requested was $102,192, which was comparable to what the office actually spent during FY2002.  She said this account was very straightforward.

 

Chairman Arberry asked Ms. Del Papa for an update regarding the activities of her office on the nuclear waste repository.  According to Ms. Del Papa, there had been expenditures with reference to nuclear waste litigation and she expected those expenditures to continue.  A team had been put together from the AG’s office to monitor the situation and she said they were currently at a plateau waiting for the next area of concern.  There might be prospective litigation with reference to the Department of Energy’s (DOE) siting guidelines or there could be litigation with reference to the U.S. Environmental Protection Agency’s (EPA) radiation standard.  There also might be prospective litigation with reference to the Nuclear Regulation Commission’s (NRC) licensing regulations possibly with reference to Yucca Mountain’s environmental impact statement with the actual Yucca Mountain site recommendation.  This was an area watched very closely by the AG’s office and Ms. Del Papa anticipated increased activity in the next 18 months.  She said she supported the Governor’s plan to go forward with reference to the transportation issues that were involved and the mayor of Las Vegas had gotten very involved recently and intended to go forward with the Conference of Mayors.  There was also a very active citizens group in Las Vegas that had recently picked up its pace.  There was a lot of activity in this area and a small portion of the expenditures in this budget account would go toward nuclear waste litigation. 

 

Mr. Marvel asked if the AG’s office would be the beneficiary of any portion of the $5 million that the Governor was setting aside for nuclear waste issues.  He said the committee had not seen any type of detail on how the money would be spent.  Mr. Hataway said that the budgets for both the AG’s special fund and the nuclear project’s office were just basic budgets to handle the ongoing activities.  He went on, “If we do have a federal final decision, then obviously it is going to get bigger and better in terms of whether it is litigation, whether it is transportation issues and so forth, and so I did confirm that the $5 million that the Governor is recommending for the trust fund to protect Nevadans on nuclear waste would not only be for transportation issues, but litigation issues, activities of the nuclear project’s office and so forth.”  Mr. Marvel asked Mr. Hataway if he had  any type of preliminary breakdown of how the money should be spent.  Mr. Hataway responded, “No, sir, I don’t.  We’ll try to have something to you before the bill comes up on the appropriation but that is almost an emerging issue in terms of what the AG will ultimately feel they need to do versus the transportation issues and so forth.  I just wanted to confirm that you’re looking at baseline budgets here and that the $5 million would be to supplement that.”  Mr. Marvel asked Mr. Hataway when the bill would be available and Mr. Hataway said all the bills had been submitted to the Legislative Counsel Bureau Legal Division. Mr. Hataway continued by saying there were bills that needed to be expedited although this was not one of them and that they would be made available so they could be set for hearings as soon as possible. 

 

Mrs. de Braga announced that she wanted to put on the record that Mr. Hay was doing a great job for the consumers and that his was a hard job.  She believed that he should hear that he was doing a good job every day.  Ms. Del Papa said that Mr. Hay’s unit had worked extremely hard and put in a lot of time and that it was nice to hear Mrs. de Braga’s compliments.

 

Insurance Fraud (101-3806)

Elected 35 – Volume I

 

Ms. Del Papa said that this budget had been built upon the fact that Assemblyman Dini had proposed a measure that would change the funding from the current flat $500 per insurance company to a graduated scale up to $2,000.  It had been estimated that the average American household, according to the National Insurance Crime Bureau, paid an additional $300 per year in insurance premiums to pay for various related insurance crimes in our country.  This unit had been very proactive and aggressive on a number of different fronts.  One of the bills that could be expected to come forward from the AG’s office in this session was a bill that would combine the Insurance Fraud Unit with the Workers’ Compensation Unit and both of those budgets were relatively flat and had not requested additional staff.  The budgets were designed assuming the increases in fees would be adopted and the AG’s office would be able to do a good job by combining the units and the resources.  She described Budget Account 3806 as being a straightforward budget.  Ms. Del Papa added that her understanding was that the funds would be split 85 percent to the AG’s office and 15 percent to the Insurance Commissioner’s office. 

 

Medicaid Fraud (101-1037)

Elected 40 – Volume I

 

Ms. Del Papa introduced Tim Terry, Senior Deputy Attorney General and director of the Medicaid Fraud Control Unit, who had done an outstanding job during his tenure in the AG’s office.  She said that in the Seventieth Session the Medicaid Fraud Control Unit had requested two new investigator positions in anticipation of a federal law that was pending.  That law had now been enacted which expanded the jurisdiction of the Medicaid Fraud Control Unit to enhance their investigative capabilities with reference to patient abuse and neglect in adult home and care facilities and also related to Medicare.  Ms. Del Papa said Mr. Terry would discuss additional personnel requests and the recoveries made by the unit.  Recoveries annually exceeded the state’s share of the program budget; the total recoveries exceeded $7.5 million to date from the inception of this program in October 1991. 

 

Mr. Tim Terry, Senior Deputy Attorney General and director of the Medicaid Fraud Control Unit, introduced himself.  Mr. Terry said that the unit received 75 percent of its operating expenses from the federal government as part of a federal grant and the state was obligated to pay the remaining 25 percent.  Mr. Terry referred the committee to Exhibit G.  He said the chart showed what the state’s share of the federal grant had been over the years.  The chart also showed the recoveries through the years.  For each year since the inception of the program in 1991, the recoveries had exceeded the state’s share of the grant.  Mr. Terry said that he had come to the 1999 legislature requesting two new positions in anticipation of the jurisdiction being expanded.  The federal legislation did not pass during the 1999 Legislative Session and the AG’s office was requested to come back when and if that legislation was enacted.  The federal law had since been passed and was tacked onto an unusual law, the Ticket to Work and the Work Incentives Improvement Act of 1999.  This law authorized Medicaid Fraud Control Units to investigate allegations of patient abuse or neglect in adult board and care facilities.  Prior to the expansion of the law, the AG’s office was only authorized to investigate allegations of neglect in facilities that actually received Medicaid funding.  For the AG’s purposes, that was primarily nursing homes.  Under the old law, there were approximately 15 nursing homes throughout the state under the unit’s jurisdiction but with the expansion of jurisdiction there were over 400 facilities in the state of Nevada that the unit would have jurisdiction over if there was an allegation of patient abuse or neglect in that facility.  In addition to the expansion of the patient abuse and neglect jurisdiction, the unit was now authorized to investigate allegations of Medicare and other federally funded health program frauds.  Before the expansion, only Medicaid fraud was investigated.  The unit had experienced quite a bit of jurisdictional expansion and the unit was asking for two positions and an upgrade of one deputy attorney general position to a senior deputy attorney general position. 

 

Mr. Terry went on to say that another part of the unit’s work was to realize a gain, or savings, for the Medicaid Program.  The unit had been involved in an ongoing investigation of pharmaceutical manufacturers across the country with respect to drug pricing and allegations of fraud and dishonesty.  Mr. Terry referred the committee to Exhibit G for a chart that showed the prices the Medicaid Program paid for drugs before some of the unit’s corrective actions had been taken.  As a result of the unit’s efforts, the Medicaid Program experienced savings sometimes in hundreds of percentage points if not thousands of percentage points. 

 

Ms. Giunchigliani asked Mr. Terry to comment on the reserve and the decreasing state General Fund support regarding the Title XIX funds.  Mr. Terry said that the Medicaid Fraud Control Unit received its funding through a federal grant which was operated through the Department of Health and Human Services Office of the Inspector General.  It was a draw down account so whatever the budget was, the unit could draw down 75 percent from the grant on a quarterly basis and match it with recoveries.  The grant was a permanent grant and for the first three years of the unit’s existence, it received 90 percent federal funding and it was written into federal law that every state had to have a Medicaid Fraud Control Unit.  As part of the federal mandate 75 percent federal funding was included.  The real beauty, in addition to the 75 percent federal funding, was that typically if the unit recovered investigative costs and costs of enforcement, the federal government would ask for reimbursement of those sums for 75 percent but they had allowed Nevada to keep 100 percent of the investigative costs on the condition that they were used for the state’s share of the grant.  Ms. Giunchigliani asked whether Nevada could count on the 75 percent and Mr. Terry said the 75 percent was an absolute given the federal mandate. 

 

Ms. Giunchigliani asked how much of the amount paid to Nevada Medicaid to reimburse the program was for fraudulent claims.  Mr. Terry asked whether Ms. Giunchigliani was referring to the restitution recoveries.  He said that the figures were reported in a quarterly report to the Interim Finance Committee and he offered to send a copy of that report to Ms. Giunchigliani.  He said the quarterly reports submitted to IFC categorized restitution, investigative costs, and penalties recovered.  She asked if part of the recoveries went to the federal government and Mr. Terry said the restitution amount, the amount that was actually stolen in program monies, was returned to the federal government according to the percentage that they participated in the Medicaid Program, which was roughly 50 percent state dollars and 50 percent federal dollars.  The federal government received a split of the restitution.  Ms. Giunchigliani asked Mr. Terry to provide the quarterly report to her.

 

Mrs. Cegavske asked Mr. Terry to clarify Exhibit G.  She asked if the exhibit showed the error in the amounts certain companies had charged for drugs.  Mr. Terry said the list of the drugs and the drug companies was a reflection of ongoing pharmaceutical manufacturer investigative work.  The unit had investigated allegations that the manufacturers had misrepresented the prices of their drugs.  The reimbursement methodology for Nevada Medicaid and most programs required that reimbursement for drugs be made according to average wholesale price (AWP).  Doctors or pharmacies that supplied the drugs were paid the AWP of that drug.  What had happened was that manufacturers had misrepresented the AWP of the drugs, thereby causing reimbursement rates to be artificially inflated.  As a result of the unit’s investigative work, the AWP of Albuterol, for example, had been reduced from 36 cents per unit to 11 cents per unit.  There were actually over 400 drugs that had been remedied so far and the investigation would continue on for a few more years. 

 

Mrs. Cegavske asked if the AG’s office had grant writers on staff.  Ms. Del Papa responded that she wished her office had grant writers but it did not.  She had, instead, a team of people in her office who wore many different hats and had pursued a number of grants.  An example she gave was the Senior Nevadans on Guard (SNAG) Project.  That was a grant her office had pursued in cooperation with the Division of Aging Services.  The grant provided funds for training retired senior professionals to help identify health care fraud.  It was a three-year grant that the AG’s office was participating in.  Ms. Del Papa said that the Governor was very interested in looking at a grant writing position from a statewide standpoint and she had done an internal review of the grant writing mechanism within the state.  She said she would send the committee a copy of that report.  Ms. Del Papa said the state was woefully disadvantaged in this area; there needed to be greater training and there needed to be an emphasis and some help in this area.  It had been a very uncoordinated process and she believed the state would do better if there was greater concentration on grant writing.  She believed there had been lost opportunities because there had not been the staffing and training needed to go forward.  Mrs. Cegavske said the need for a grants writer position had been discussed for special education grants and she thought there were other areas in the state where the state had lacked the expertise to go after the available funds.  Mrs. Cegavske said that the state did not like all of the federal ties that went with the grants but there was also foundation money and other possibilities.  Ms. Del Papa said that along with the grant money came overhead that the federal government imposed and that required a commitment from the state.  Mrs. Cegavske said that she thought it was time the state started to coordinate a grants writing effort.

 

Ms. Giunchigliani asked for a breakout of the Nevada Medicaid portion of the IFC report.  Mr. Terry responded that he would confer with Ms. Giunchigliani and point out the Nevada figures in the report.

 

Workers’ Compensation Fraud (101-1033)

Elected 45 – Volume I

 

Ms. Del Papa said that Mr. Kevin Higgins would explain this budget and she referred the committee to Exhibit C for a list of five priorities for this budget.  Mr. Higgins, Chief Deputy Attorney General and director of the Workers’ Compensation Fraud Unit, explained that the unit was founded in 1993 as part of the significant reorganization of the State Industrial Insurance System.  The unit was responsible for prosecuting any fraud that occurred either by claimants, employers, or medical providers in the provision of industrial insurance.  The unit had been very active and Mr. Higgins had noted many changes since the inception of the unit.  At first, there were nearly 1,000 pending cases from district attorneys’ offices that had not been prosecuted that were for the most part, claimant cases.  In the last several years the caseload had been approximately one-half claimant cases and one-half employer cases.  With the change in the State Industrial Insurance System (SIIS) and Employers Insurance Company of Nevada (EICON) in 1999, the cases had tended to become more employer cases in recent years.  Generally, he said that it was fair to say that with the change of SIIS to EICON and the introduction of private insurers into the system, just as self-insureds had done for many years, they had run a much tighter claims system.  Cases in the past that would have been referred to the unit from SIIS for claims abuse, for the most part were caught earlier in the system by insurance companies and self-insured employers. 

 

The AG’s office had seen a trend toward more employer cases that they had pursued aggressively.  The office had instituted a ticketing program and they would write a citation for uninsured employers for a first offense.  This made it much easier for the courts to process and was easier for the employer to accept.  The citation program was used only in the smallest of cases, such as someone that had been out of compliance for a few months, owed a few thousand dollars to an insurance company, and had not had a workplace injury.  If there had been an uninsured workplace injury, the office used the standard complaint route and followed normal procedures.  Mr. Higgins said that certain items had not been included in the budget and the office was requesting that those items be added back into the budget.  A list of those items could be found in Exhibit C.  He said the Workers’ Compensation Fraud Unit was entirely non-General Fund.  The unit was paid for out of the administrative assessment that the Department of Industrial Relations (DIR) administered through the premium process.  Every Nevada employer with an insurance policy paid an administrative assessment that funded the unit, the Nevada attorney for injured workers, and the administrative appeals process. 

 

Mr. Higgins went on to say that the first priority was for the space the unit occupied in the Las Vegas office.  For an unknown reason in the base budget year the office had not been billed for that rent.  After the base budget year closed the unit noticed the rent had not been paid so it paid the rent out of non‑base budget year funds.  Since the funds had not actually been expended in the base budget year the rent funds did not make it into the base budget in The Executive Budget.  Mr. Higgins said the rent would need to be paid on the space occupied by the office and, therefore, he requested that the state-owned building rent category be augmented by $12,960 for both years of the biennium.  Mr. Higgins said that the unit would also be experiencing a Consumer Price Index (CPI) increase in the rent in the Reno office in FY2002-03 of approximately $2,000 and he requested that also be added into the budget.

 

Mr. Higgins went on to discuss the unit’s second priority that concerned the funds paid for the cars rented from the State Motor Pool.  The State Motor Pool had a rate increase that went into effect after the close of the last legislative session and everyone had budgeted using the rates in effect prior to the increase.  For the unit, there was a flat rate of a few hundred dollars per month and if mileage exceeded a certain amount, there was a per-mile charge.  Motor Pool changed the rate structure back to a flat per-mile basis and that increased the unit’s obligation so Mr. Higgins requested that that budget be augmented to include the additional $3,826 in each year of the biennium. 

 

The third priority, according to Mr. Higgins, related to litigation expenses.  The office previously had a $25,000 litigation fund that was used to pay for travel for out-of-state witnesses, sending investigators out of state, and expert witness fees.  The unit had been successful in sending investigators out of state to check on pensioners.  That was something that the insurance companies in the past had been unable to do.  In 1993, the office staff went to Oregon to look at their system and was told that one of the key areas of enforcement was to check on the pensioners and Oregon had gone from funding 500 – 600 full disability pensions yearly to a few dozen.  The AG’s office staff had been successful in going all across the country and the trips were always combined so the investigator would see two or three cases of people who were on full disability pensions.  The investigators had found them running their own businesses and conducting their lives normally without any noticeable disability and they had settled those cases.  The litigation funds would enable the office to continue the travel and Mr. Higgins further stated that the office could not project what the expenses would be.  He said the office never knew, for example, if it would have a case that required a $5,000 expert witness fee two years from now.  Mr. Higgins asked the committee to restore Category 09, litigation expense, to the prior funding levels.

 

Mr. Higgins continued with a request to increase Category 30, training.  He said the office had not spent all of the funds in the base year and he requested the funding be restored to prior levels.  Mr. Higgins said that it was a struggle not to spend to the last dime but to make sure enough was spent in the base year to assure funding for the next biennium.  He said there had been instances when someone had been scheduled for an expensive training class in April or May, the class had been cancelled and the office ended up not spending the training funds. 

 

The last priority Mr. Higgins mentioned was a request to increase Category 05, equipment.  The office asked to replace some camcorders used to videotape people, flashlights, binoculars and two body wires.  The body wire question caused consternation in Senate Finance, according to Mr. Higgins.  He said that it was difficult to enforce cases against employers that had never had insurance and there were many insurers in that group.  Some did not have insurance, did not pay their unemployment taxes, did not have a business license, but were employers never the less.  It was not possible to do an audit of their payroll because there was no payroll to audit.  For example, the office would send an investigator to a construction site; he would introduce himself and say that he was a drywaller looking for work.  The owner of the company might say that he did have work and would pay under the table once a week although the wages could not be reported, as the employer did not pay taxes or workers’ compensation.  The investigator would be able to record such a conversation with the requested recording equipment.  Mr. Higgins said that the office was currently using $35 pocket micro-cassette recorders that did not always work.  He said that it was not always possible to have someone talk into your front pocket. 

 

Chairman Arberry said that he believed Nevada was a one-party consent state and he wondered if the actions of the unit were legal.  Mr. Higgins answered that one-party consent applied to telephone communications and there had been questions in the criminal justice system whether it should be legal.  He said it was legal now and anyone could wear a body wire at any time and record anything anyone said.  Wearing body wires would increase officer safety because when someone was sent into a situation the conversation could be monitored and another employee waiting in the car could assist if the situation warranted it.  He described the requested equipment as basic investigative equipment. 

 

Chairman Arberry said that decision unit M-200 requested funding for a new supervisory legal secretary and he wondered how many staff positions were in the Reno office.  Mr. Higgins responded that there were 48 or 49 total positions in Reno, only half of which were in the Workers’ Compensation Fraud Unit.  He said that the position was needed to supervise the legal secretaries, the two Management Assistant II positions, the Management Assistant I position, and the auditor position.  Further, there would be other legal secretaries in other budgets that the requested position could supervise. 

 

Ms. Giunchigliani asked why, since EICON had been privatized, did this unit need to be continued.  She said that if the private sector wanted this type of service, it could handle it through the private sector.  She wondered why employers were still assessed to fund the unit when the state had little authority over EICON.  Mr. Higgins said the unit’s primary concern was for uninsured employers.  Insurance companies did not care who did not have a policy; they only cared who had policies.  If they had 1,000 policies they would go out and conduct audits and if they discovered a policyholder had been untruthful about the type of work they did, they would cancel the policy.  The uninsured employer would never be caught by the insurance companies.  Ms. Giunchigliani asked how the unit identified the uninsured employers.  Mr. Higgins said identification occurred in many ways such as by citizen complaints, periodic spot checks, or referrals from angry insurance companies.  Ms. Giunchigliani asked if the unit’s performance indicators broke out the number of uninsured companies located and prosecuted. Mr. Higgins said that information was not shown in the performance indicators but he could research the figures.  Ms. Giunchigliani said it would be helpful to have that information.  Mr. Higgins said that all the uninsured employees were covered by the uninsured employer fund in Nevada so even if a person was an uninsured high-rise window washer and fell off the building, he would be picked up by the uninsured pool and the uninsured pool was paid for by all the other companies.  The larger the uninsured pool, according to Mr. Higgins, the higher the costs everyone else would pay, the more the insurance rates would go up, and there was a direct impact on every business in Nevada. 

 

Mr. Higgins said that the Workers’ Compensation Fraud Unit was no different than the Insurance Fraud Unit in that respect.  Ms. Giunchigliani asked if the Workers’ Compensation Fraud Unit could be combined with the Insurance Fraud Unit, reduced in scope, and therefore in costs that would be assessed.  Mr. Higgins said there was a Bill Draft Request pending to combine the Workers’ Compensation Fraud Unit with the Insurance Fraud Unit.  The challenge to that proposal was the completely divergent funding sources and there were constituencies that were opposed to the merger because they did not want to share paying for the other unit.  Mr. Higgins said that he had observed a great reduction in the overall fraud committed in workers’ compensation because there was someone enforcing the law.  For the 10 years prior to 1993, there had only been 10 or 11 prosecutions for workers’ compensation fraud in the entire state.  The unit had done thousands of investigations and hundreds of prosecutions since then.  He continued that district attorneys’ offices would not do the prosecutions because they were paperwork intensive, they were a semi-arcane area of the law and every DA in the state had to prioritize rapes, robberies and murders.  Ms. Giunchigliani said that was true but since they were private she thought that should be part of their private insurance responsibility.  It would not be the state’s problem any longer.  Mr. Higgins said that was a philosophical question of whether the AG’s office should be enforcing laws that benefited individual businesses.  Ms. Giunchigliani said she believed the committee should take a close look at this.

 

Mr. Goldwater said that he hated to see the state’s resources used to chase down supposedly fraudulent claimants when the state recovered very little money and the real fraud that occurred was usually on the insured’s side.  Mr. Goldwater said it appeared that the unit had turned the corner and that it was now focusing on where the true, big dollar fraud occurred.  He said that he thought the committee would be more comfortable if they had performance indicators that reflected the employer fraud that occurred.  He said the uninsured employer problem was where the big dollars were, not the employee faking a carpel tunnel injury.  He went on to say that he believed the performance indicators should be changed in order to achieve more efficiency from the Workers’ Compensation Fraud Unit.  He also said the office did a good job and had turned the corner on doing the correct thing with the state’s resources.  Mr. Higgins said that he felt an obligation to remind the committee that the unit was funded with non-General Fund dollars.  It was paid directly by the people who benefited from it.  The less insurance fraud there was, the cheaper it was for the employers in the state of Nevada.  Mr. Higgins confirmed that the largest dollar numbers were from employers but the claimants that nickel and dime the system could push employers into higher cost categories and that was a problem for individual employers.  Mr. Goldwater said that the appeals and hearings office in Las Vegas was weeding out fraud by denying most appeals and making claimants appeal.  That process had weeded out most of the claimant fraud by making it difficult to get a claim accepted.  He believed that the employer fraud area was wide open and he was thankful that the unit was concentrating in that area.

 

Crime Prevention (101-1036)

Elected 56 – Volume I

 

Ms. Del Papa said this budget was the Nevada Missing Children Clearinghouse and Crime Prevention Unit that dealt with runaways and parental abductions.  During the last biennium this unit was involved in 608 cases of family or parental abductions, 7 runaways, 45 lost, injured or missing, and 12 non-family abduction cases.  During the last biennium the unit received 381 referrals requesting assistance from different sources including law enforcement agencies, family courts, attorneys, and the Division of Child and Protective Services.  Of that number, 467 had been recovered.  This was a very active unit based primarily in Las Vegas with outreach to other parts of the state.  The resources were limited but the unit had done a great job, in Ms. Del Papa’s opinion.  The unit interfaced with the National Missing Children Clearinghouse and had been online and had received recognition for the work it had done.  Ms. Del Papa said the budget was straightforward.

 

Chairman Arberry said that decision unit E-475 recommended $2,000 for a quarterly newsletter and he wondered how many copies of the newsletter could be printed each year for the $2,000.  Ms. Del Papa answered that there was continuing communication needed with sheriffs, chiefs, and other entities.  Approval of the budget request would allow the office to reach the rural areas and the northern part of the state in a greater capacity than it had in the past.  Ms. Del Papa said that personnel was limited and based in Las Vegas and she thought the newsletters would provide better coverage for the other parts of the state where the office was not directly based.  The offset for the requested funding would come from the special license plate for the support of missing or exploited children.  Chairman Arberry said that the income from the license plates would equal approximately $5,000 and Ms. Del Papa said her office was grateful for every dollar.  Ms. Del Papa said this was a very good program that had done an extraordinary job. 

 

Extradition Coordinator (101- 1002)

Elected 64 – Volume I

 

Ms. Del Papa introduced Beverly Saucedo, Extradition Officer.  She said she commended her for her work in keeping the extradition costs from escalating unnecessarily.  Ms. Saucedo said in addition to being the extradition officer, she also served as the agreement administrator under the Interstate Agreement on Detainers for the Governor.  When Attorney General Del Papa took office she made it quite clear that Ms. Saucedo was to do everything possible to cut down on the costs of returning fugitives to Nevada.  When Ms. Saucedo took the job, Nevada was paying over $800,000 per year to local and state law enforcement agencies for the return of fugitives.  The office had encouraged the use of private transportation companies and had been able to reduce the costs to $500,000 annually.  Private transportation companies could not always be used due to security problems, escape risks, high priority cases, or high profile cases.  The state of Nevada recently contracted with Transcore and anticipated saving more on costs.  For example, Transcore brought back a fugitive from Florida for approximately $1,400 and the prison system sent two officers to Florida to bring back a fugitive and the cost was $4,500.  Last year five more fugitives were returned than were returned the year before but the costs went down $15,000.

 

Chairman Arberry asked whether Ms. Saucedo was confident that the projected amount of recoveries included in the performance indicators could be collected and should the recovery revenue included in The Executive Budget be increased.  Ms. Saucedo said that her priority for the biennium would be to go after the money.  The Parole and Probation Department had a new computer system for accounting and they were not getting the money to her.  She said Parole and Probation was working very diligently but the money was not being sent to the office like it should be.  She planned to meet with someone from Parole and Probation to correct the situation.  Also, the courts and the Department of Prisons had started sending her office some money.  She said the problem was restitution was at the bottom of the list for payment, falling below child support, medical bills, and other obligations. 

 

Ms. Giunchigliani said that she was happy to hear that money was being received from the courts and she wanted to know how much the office had requested from the statutory contingency fund.  Ms. Saucedo said her recollection was that it was approximately $2,000 last year and her office turned back $33,000 to the General Fund that had not been spent. After the end of the fiscal year some agencies sent bills and they had to be referred to stale claims.  Ms. Giunchigliani asked if it would not be better to set the office’s budget up so that it would not need to go to the contingency fund.  Ms. Saucedo said in the past the budget had not been set up appropriately but now that the office was using Transcore the budgetary problems would not occur.  Ms. Saucedo said, for instance, she had a bill from Gaming for over $5,000 for two agents that went to North Carolina to pick someone up.  If she continued to get bills such as that one, she would have difficulty in budgeting appropriately and might have to go to the Interim Finance Committee.  Ms. Giunchigliani said she was pleased that the office did not have to go to the Interim Finance Committee last year and if the budget should be increased by $5,000 to $10,000 to assure the office did not have to go back requesting more funds that would be the appropriate thing to do. 

 

Chairman Arberry said that a class of youngsters had entered the room and he suggested that Ms. Saucedo should give a brief highlight of who she was and what she did.  Ms. Saucedo explained that she was the state’s extradition officer and described the duties that she performed. 

 

Tort Claim Fund (715 – 1348)

Elected 60 – Volume I

 

Ms. Del Papa introduced Mr. Stan Miller, Tort Claims Manager.  He said there would be a Bill Draft Request addressing the fact that the office had no way to collect a premium for the Tort Claims Fund from certain state employees that were paid by the counties.  Chairman Arberry asked Mr. Miller to describe the factors that led to the determination that an insurance policy should be purchased.  Mr. Miller said the increased cost was for an excess liability coverage policy.  The policy was currently in place but the premium had been paid by Risk Management and it actually covered excess liability so it should have come from the Tort Claims Fund.  If there was a claim in excess of $1 million the policy would go into effect and pay the claim up to a cap of $10 million. 

 

Council for Prosecuting Attorneys (101 – 1041)

Elected 68 – Volume I

 

Ms. Del Papa said this entity was housed in the AG’s office, however, the council’s membership was provided by various appointing jurisdictions.  This unit interfaced with all law enforcement in the state.  The Prosecuting Advisory Council interfaced with the District Attorney’s Association, the city attorneys and also the sheriffs and chiefs.  The source of funding was the justice court fees.  Ms. Del Papa asked Mr. Higgins to address the committee regarding this budget.

 

Chairman Arberry asked about the number of training courses conducted in FY2000.  Mr. Higgins said that there had been 12 training sessions in the last two years and he was unsure of the number of classes conducted in FY2000 although he would supply that information to the committee. 

 

Ms. Giunchigliani wanted to know whether the training was for the AG’s staff or local governments’ staff.  Mr. Higgins said they were training prosecutors statewide so they could be city attorneys, district attorneys, or prosecutors in the Attorney General’s office.  Ms. Giunchigliani asked if that was the justification for the unit to begin to use court assessments and if so, were other units that could have benefited from the court assessments being restricted because of this program. 

 

Mr. Hataway answered that his office had looked at the 49 percent share that the executive branch received from the assessment.  Heretofore, it had primarily gone to the victims of crimes and the Department of Motor Vehicles (DMV) Peace Officers Standards and Training (POST) type functions.  The Budget office felt that there was sufficient cash flow from what the judicial branch had estimated the collections to be for the next biennium to do this and the Budget office also felt that there was no better use for the funds than to train prosecutors to go into the courtroom to prosecute people that the fees are then paid against.  Mr. Hataway said the committee would see a boost in the budget for the victims of crime and there was sufficient cash flow in the court assessments to fund the program and for the first time put it on a reasonably firm financial basis instead of arguing over appropriations.  Ms. Giunchigliani asked if there was any type of billing outside of court assessments for local governments when the state did this type of work for them.  Mr. Hataway said there were a certain amount of funds built into registration fees for certain types of programs.  He continued by saying that the answer was, “Yes, there is some for special type programs that they put on.  But the argument in the past which we have raised, never successfully, is that just the general operation of the office should be a state responsibility instead of dues out to respective local governments.”  Ms. Giunchigliani asked if there was enough revenue generated that General Fund dollars could be eliminated.  Mr. Hataway said that had been an oversight on his part in the budget as he thought he had zeroed out all of the appropriation but he had not.  He said the appropriation should be eliminated. 

 

 

Victims of Domestic Violence (101-1042)

Elected 72 – Volume I

 

Ms. Del Papa stated that every nine seconds in our country someone was battered and she believed that the problem was a law enforcement issue.  It had been estimated that up to one-third of the homicides that occurred are either directly or indirectly related to domestic violence.  The largest amount of funds for the budget came from the “Stop Violence Against Women” (STOP) formula grant program.  Several years ago in the Omnibus Crime Bill, Congress added a category where each state, pursuant to developing an action plan to address domestic violence, would receive those grants.  The charts included in Exhibit C showed the amount of money received over the years.  Starting in FY1995 the amount was $426,000.  Over the last several years the amount had been approximately $1 million per year.  One of the things Ms. Del Papa was concerned about was that the peak received in FY1999 was $1,178,000.  The FY2000 grant was $1,156,000.  Ms. Del Papa had been advised that the FY2001 STOP grant, for which the application was pending with the federal government, would be in the amount of $1,118,000.  Ms. Del Papa continued that there were other grants that came through her office such as the grants to encourage arrest policies, the Rural and Domestic Violence and Child Victimization Enforcement Grant and the Domestic Violence Victims Civil Legal Assistance Grant.  Ms. Del Papa said there was a 30-member statewide council that existed and Assemblywoman Leslie had recently been appointed to serve on the council.  The work that had been done was incredible and in the past, of the STOP grants money received 25 percent went to prosecution, 25 percent went to law enforcement, 25 percent went to advocacy groups and 25 percent was discretionary.  That formula had been changed somewhat for the FY2001 year; the discretionary account would receive a higher percentage of the funds and 5 percent would be allocated for the court system.  Ms. Del Papa had advised the Administrative Office of the Courts of the pending change so that the offices could work together to get some comprehensive programs established.  Ms. Del Papa said that on page 52 of Exhibit C the line item descriptions for Ombudsman and Committee should be reversed as it read in The Executive Budget  (Base, M-100, E-225 and Summary) and the Training Programs and Training categories should be corrected to eliminate Training as a line item description and add the agency request of $10,000 to Training Programs for each year of the biennium. 

 

Chairman Arberry asked what type of training would be provided.  Ms. Del Papa said her office provided a lot of training throughout the state.  There had been a cooperative effort with the ombudsman and the one-half time deputy that worked in the area.  The program interfaced with the volunteer groups that existed in almost every county.  There was also training in the actual administration of the grants.  There was training on the federal requirements that accompanied the grants and also, in a separate category, there was training for law enforcement officers and attorneys concerning domestic violence issues. 

 

Ms. Giunchigliani said that there had been a proposal to combine domestic violence grants from the Department of Human Resources and she wanted to know if Ms. Del Papa was aware of the proposal and the impact on her office.  Mr. Hataway responded, “No.” 

 

Mr. Goldwater congratulated Ms. Del Papa and her staff for doing a great job in this area.  The program had received national recognition and he had dealt with the problem regarding someone in his business office and he thought the help had been “wonderful.” 

 

Ms. Leslie apologized that she had missed part of the earlier testimony and she asked about a proposal for $100,000 funding to develop a strategic plan for domestic violence that had been discussed in a prior hearing on the Department of Human Resources’ budget.  She said she had stated that the plan must not have been working because the number of referrals from domestic violence had been growing.  She asked Ms. Del Papa to comment.  Ms. Del Papa said that many things had happened over the last several years in the domestic violence area.  Twenty years ago, law enforcement personnel and others would say that it was a personal, family matter that was not a law enforcement matter.  Ms. Del Papa said that in reality it was a matter that had impacted each and everyone’s life.  She said she would be surprised if everyone on the committee did not know someone whose life had been touched by a domestic violence incident.  Because of the heightened awareness and the work that had been done, more people that needed services were taking advantage and coming forward.  Ms. Del Papa said she had not looked at what Human Resources had asked for, however, she believed that this was a program that should receive any available General Fund dollars.  She said that the existing programs had managed to “patch quilt” this together over the years and that when the committee looked at the action plan and the leadership, she asked the committee to first look at what her office had done.  She expressed that she was not taking anything away from anyone else but she knew that some of the money for the programs funded by Human Resources came from the tax on marriage licenses so it went to a different category.  She said that she believed the staff in her office had made significant strides and that their work was not completed.  As the population continued to grow and people changed, the program would have to be ever vigilant to continue to do the needed work.  Her office had placed heavy emphasis on law enforcement training and setting up victims’ advocacy programs.  She believed the priorities now were underserved population, immigrant women with education difficulties, and other challenges. 

 

Mrs. Cegavske echoed her colleagues in congratulating Ms. Del Papa and her staff for a job well done.  She said it was nice to see the statistics indicating improvement.  The education that had taken place had helped with domestic violence problems, and the results were attributable to the AG’s office.

 

Ms. Del Papa thanked the committee for its courtesy and said that she would expeditiously provide any information the committee had requested. 

 

With there being no further business, Chairman Arberry adjourned the meeting at 10:56 a.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

                

Lila Clark

Committee Secretary

 

 

APPROVED BY:

 

 

                                                                                         

Assemblyman Morse Arberry Jr., Chairman

 

DATE: