MINUTES OF THE meeting
of the
ASSEMBLY Committee on Ways and Means
Seventy-First Session
February 26, 2001
The Committee on Ways and Meanswas called to order at 7:52 a.m. on Monday, February 26, 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
Mr. Richard D. Perkins
Ms. Sandra Tiffany
STAFF MEMBERS PRESENT:
Mark Stevens, Fiscal Analyst
Carol Thomsen, Committee Secretary
Chairman Arberry announced the committee would commence with testimony regarding A.B. 9.
Assembly Bill No. 9: Authorizes use of arbitration for adjustment of certain grievances of state employees. (BDR 23-439)
Assemblywoman Bonnie Parnell, District 40, Carson City, explained that at the current time, the final administrative level for a grievance was consideration by the Employee Management Committee (EMC), which consisted of six members, three state employees and three officials appointed by the Governor. A.B. 9 would provide an alternative to that procedure, whereby an employee who filed a grievance could elect to have that grievance heard by an outside professional arbitrator. Ms. Parnell indicated there were approximately 15,000 state employees and one EMC. Ms. Parnell revealed that she had received calls from individuals who had to continue working for as long as one year, quite often in a hostile work environment, while awaiting the resolution and/or hearing of a grievance, which created a negative situation for all parties concerned. The current committee structure would not allow a three to three tie decision, and such action would result in an automatic loss for the employee.
Ms. Parnell noted A.B. 9 included a provision which stipulated the losing party would be assessed the costs for the arbitrator. She further explained that at the present time, the Department of Personnel bore the entire cost of the EMC procedure. Ms. Parnell commented that by choosing arbitration, agencies would be responsible for individual grievances and would, hopefully, encourage resolution before further action became necessary. Cases before the EMC or an arbitrator did not, and would not, include grievances filed because of dismissal, suspension, or demotion. Ms. Parnell explained the EMC or an arbitrator would represent reprimands, working conditions, prejudices, and equity issues.
In conclusion, Ms. Parnell stated that, considering the tone set by Governor Guinn in reference to state employees, she would urge the committee to consider not only the issue of pay, but also the issues of working conditions and workplace morale within state agencies. Ms. Parnell revealed that she was the sponsor of the bill for a second time, first having sponsored it as A.B. 371 of the Seventieth Session, at the request of the State of Nevada Employees Association (SNEA).
Testifying next regarding A.B. 9 was Robert Gagnier, Executive Director, SNEA, who explained the bill contained what was perceived as an evolutionary process. The grievance procedure that existed in state government today had its origins in the early 1970s, when adopted by the Personnel Commission. Mr. Gagnier stated the agreement was that the procedure would utilize an existing group, the EMC, as the final arbitrator in the grievance process. Over the years, the grievance procedure was modified when several agencies determined that use of the EMC in the grievance procedure was not stipulated by Nevada Revised Statutes (NRS), and refused to abide by the decisions it rendered. Per Mr. Gagnier, legislation was enacted which placed the grievance procedure into statute, NRS 284.384, and stipulated that the decisions of the EMC were final and binding pursuant to NRS 233B, “Nevada Administrative Procedure Act.”
Mr. Gagnier noted the EMC was theoretically composed of three employee members and three management members, however, over the years, that composition had become somewhat blurred. The types of grievances heard by the EMC basically regarded work conditions, rather than major grievances, i.e., suspension, demotion, dismissal, and involuntary transfer, which were, by law, under the sole jurisdiction of a state hearing officer. Mr. Gagnier explained that hearing officers were attorneys appointed by the Personnel Commission, who worked on an hourly rate and heard specific cases under a very strict set of guidelines. According to Mr. Gagnier, A.B. 9 encompassed those grievances that would be heard by the EMC. It was important to note that should a tie vote be the result of an EMC hearing, the employee would automatically lose the case, and Mr. Gagnier felt that presented an immediate advantage for management in the grievance procedure. The SNEA found that the EMC did not always follow its own rules and there was a great deal of inconsistency in decisions handed down for similar cases, which caused additional grievances to be filed. Mr. Gagnier indicated when a person knew how a ruling would be handed down, based upon a certain set of circumstances, he would also know whether to proceed with the grievance.
Mr. Gagnier conveyed that when the SNEA became aware of a decision rendered by a hearing officer in a particular case, given a certain set of circumstances, should an employee who ran afoul of the system contact the SNEA with the same set of circumstances, that employee would be advised of the ruling handed down by the hearing officer in the similar case. According to Mr. Gagnier, such action actually reduced the number of cases, because when a hearing officer ruled against an employee, it was often a waste of time to submit a similar grievance. The inconsistency that existed within the EMC actually led to more grievances, explained Mr. Gagnier, and the SNEA had actually represented cases where the EMC had rendered opposite decisions in similar cases, which caused the SNEA to accept additional cases because of the inconsistency.
Mr. Gagnier reported in recent years it had been noted that the EMC was not required to follow the same rules as the employee, and the EMC received the benefit of the doubt in many instances, which the SNEA felt was inequitable. Under A.B. 9, the losing party would be required to pay the costs for arbitration, which Mr. Gagnier felt was a critical point. Under the current system, the Department of Personnel paid all costs with the exception of the cost for the time of the six management and employee members, which was paid by the respective agencies of the members. Ms. Gagnier indicated the SNEA felt a system whereby the losing party was ordered to pay the expenses would produce more accountability on both sides. The SNEA would be reluctant to accept cases which the SNEA knew it would not win, and in which the SNEA would be required to pay the cost of arbitration. Quite frankly, Mr. Gagnier stated, the SNEA would like to see all grievances go to arbitration, but the reason the bill was changed to provide an option was because it was felt a single employee could not sustain the entire cost for arbitration.
Mr. Gagnier declared that the “meat” of the bill was contained on page 1, lines 10 and 11, while page 2 contained the technicality of the process. Section 6 of A.B. 9 discussed how the Personnel Commission would select the panel of arbitrators. The idea was that three arbitrators would be selected to serve for one year, and should an employee present a grievance to be arbitrated, the employee and employer would each strike a name from the panel with the remaining person selected as the arbitrator for that grievance.
Mr. Gagnier remarked that the bill had been referred to the Committee on Ways and Means due to the fiscal note attached, and he disclosed that the fiscal note was basically the same as that attached to A.B. 185 of the Sixty-Ninth Session, which would have authorized use of arbitration in adjustment of certain grievances of state employees. Mr. Gagnier felt that, from a budget standpoint, the only item that could be placed in a budget would be the cost of $557 to the Department of Personnel for extending one Personnel Commission meeting once a year to select an arbitration panel. The remaining costs associated with the arbitration would be the actual costs of the arbitrator. Mr. Gagnier stated in those instances, the bill provided that the losing party would normally pay the costs; there was a provision included that would allow the arbitrator to award the costs in a different manner. The reason for that stipulation was because there was not always an apparent loser in arbitration, and Mr. Gagnier explained that an employee could win or lose part of the grievance. In such a case, the arbitrator might assess one-half of the costs to each party; that decision would be solely at the discretion of the arbitrator.
Mrs. Chowning noted the current cost for arbitration was approximately $150 to $175 per hour, and asked whether the SNEA envisioned most cases would take only one hour to arbitrate. In reviewing the fiscal note, Mrs. Chowning asked how many cases could be decided with the approximately $13,000 allocation for FY2001-02. Mr. Gagnier reported that the SNEA did not prepare the fiscal note attached to A.B. 9; it had been prepared by the Department of Personnel. The $13,000 allocation was based upon the assumption that the bill would not take effect until October 2001, and the allocation of $18,234 requested for FY2002-03 would represent the normal cost. Mr. Gagnier stated he could not attest to the accuracy of the figures. The Department of Personnel had estimated that 8 grievances per year would be submitted to professional arbitration, out of a total of approximately 40 cases filed. Mr. Gagnier felt that was a realistic estimation, and the actual costs could not be determined until the exact number of cases referred to professional arbitration was known.
According to Mr. Gagnier, there was a wide swing in costs associated with arbitration between estimates from the American Arbitration Association, as opposed to the Federal Mediation Conciliation Service. A.B. 9 indicated that should an agreement fail to be reached over which organization would be used, the default organization was the Federal Mediation Conciliation Service. Mr. Gagnier explained that costs for that service were considerably less. The cost per hour also differed with every arbitrator; those charges were published, and there could be a wide gap in cost, from approximately $500 per day up to $1,500 per day.
Ms. Giunchigliani inquired about the training requirements for members of the EMC. Mr. Gagnier replied that he was unaware of the training requirements. Ms. Giunchigliani felt the training aspect should be included as part of the requirements for members, because that aspect probably contributed to the inconsistency of the rulings. The whole point of the hearings was to create some uniformity surrounding state regulations regarding grievance proceedings, and rulings should be based on those regulations. Ms. Giunchigliani inquired about Mr. Gagnier’s comment that management did not follow the same rules as did employees, and asked for clarification. Mr. Gagnier explained that occasionally certain demands would be made of the employee and the employee’s representatives that were not required of management. It was a rather complex process, and ten days prior to the hearing, both sides were required to submit ten copies of the completed case. Mr. Gagnier remarked that no further information should be allowed after that point, however, there had been cases where management brought in additional information after the fact. Ms. Giunchigliani felt the committee should delve more deeply into the grievance issue, because of the cost to taxpayers, and the fear of retribution by both employees and management.
Ms. Giunchigliani disclosed that, in her experience with the school district for which she was employed, costs had been ratcheted up to the point that grievances which should have been resolved early in the proceedings, instead progressed to the hearing level, with legal representation provided for the district. That forced an increase in the overall costs, which Ms. Giunchigliani felt was a waste of dollars. The point was to attempt to resolve the matter before it reached the hearing level; Ms. Giunchigliani voiced her support for some type of arbitration, especially by an arbitrator with proper training. Mr. Gagnier stated the SNEA had found that in the vast majority of cases, management was represented at hearings by the Attorney General’s Office.
Walter Tarantino testified that he was legal counsel for the Nevada Highway Patrol Association and the Nevada Corrections Association, which both supported A.B. 9. Mr. Tarantino applauded the efforts of Ms. Parnell and Mr. Gagnier in sponsorship of the bill once again. Mr. Tarantino indicated he would endorse the comments regarding concerns made by Mr. Gagnier.
Mr. Tarantino stated he would briefly provide the prospective of an advocate before the EMC, and why he felt the adoption of A.B. 9 would be extremely constructive for both the state and its employees. As recently as January 30, 2001, Mr. Tarantino had three grievances before the EMC, and on that day, there were four grievances scheduled for consideration. He had the luxury of having approximately one and one-half hours allotted per grievance for presentation of the case. Mr. Tarantino explained there had been other occasions when as many as six grievances were scheduled for consideration on the same day, which limited the presentation to one hour. According to Mr. Tarantino, the EMC did not operate via a time clock, would not “yank” a person out of the seat when one hour had elapsed, and would do everything in its power to provide adequate time for presentation of a grievance. Nonetheless, Mr. Tarantino implied there was a great deal of pressure on all participants to present a case within the allotted time frame.
According to Mr. Tarantino, it was important to note that A.B. 9 would supplement rather than supplant the EMC, and cases such as the ones he recently represented, would probably still be heard by the EMC. Mr. Tarantino stated he was not in a position to refute the prediction that out of 40 grievances, 8 would go to arbitration.
Another frustration Mr. Tarantino encountered as an advocate was the fact that the EMC did not have subpoena power, which left him at the mercy of witnesses appearing on a voluntary basis. Favorable witnesses were often reluctant to come forward because it was difficult to present adverse testimony regarding the state agency where the witness was employed. Mr. Tarantino explained that management witnesses were also voluntary, with testimony at the discretion of the manager or director of the agency, and the EMC could not compel witnesses to appear. Mr. Tarantino felt the situations that would result in referral to arbitration would be complex issues such as performance evaluation cases, which could include as many as eight witnesses, or complex issues that would require several hours for presentation to an arbitrator rather than the EMC.
Mr. Tarantino stated he also favored the aspect of A.B. 9 that would require the losing party to pay the costs, with the understanding that the arbitrator would have the discretion to apportion the fees rather than assign a loser, per se, in the case. That was important because, considering the risk, both sides would tend to be more realistic and many cases that might be scheduled for arbitration would be resolved prior to reaching that level. Mr. Tarantino explained it would be a similar procedure to that of the court system, where many cases were settled prior to trial, because of the risk benefit analysis. The secondary effect of A.B. 9 would be the benefit to labor relations statewide, when agencies, employer organizations, and/or employees, with or without representation, would frequently converse with one another in an attempt to resolve issues prior to reaching the level of arbitration or consideration by the EMC. Mr. Tarantino felt with passage of the bill, and the specter of an arbitration forum, both sides would converse regularly in an attempt to resolve issues, which could only benefit labor relations within the state.
With no further testimony forthcoming regarding A.B. 9, Chairman Arberry closed the hearing, and opened the hearing on A.B. 115.
Assembly Bill No. 115: Revises provisions relating to certain accounts of state department of agriculture. (BDR 50-620)
Rick Gimlin, Administrator, Division of Administrative Services, Department of Agriculture, explained the purpose of A.B. 115 was to change the plant industry program to an account, and to repeal Sections 1 through 3 of NRS 561.365, which referenced the apiary inspection account. Mr. Gimlin stated the action was part of the department’s reorganization plan that would eliminate budget accounts solely utilized for the purpose of accounting. The reason the department contemplated the action was because most of the regulatory authority over the apiary account was eliminated by the 1999 legislature, because the department had determined the cost of regulation was outweighing the benefits to both beekeepers and the state. Basically, Mr. Gimlin explained, beekeepers that did not provide proper care for their bees would lose them.
According to Mr. Gimlin, the department would retain the ability to inspect upon request, and noted there had been no inspections requested since the beginning of FY2000. Mr. Gimlin reported there was approximately $23,000 remaining in the apiary inspection account, and upon passage of the bill, the funds would be placed in a separate category in the plant industry account, and tracked with an appropriate job code. The funds would be used primarily for invasive species, including prevention, survey, and control, and Mr. Gimlin stated the pests which afflicted bees were considered invasive species.
Mr. Marvel inquired how many beekeepers were in Nevada. Mr. Gimlin replied that there were approximately 67 beekeepers within the state, with out-of-state beekeepers numbering approximately 15,000. There were only approximately 600 resident colonies within the state. Mr. Marvel asked whether the apiary tax at the ad valorem rate was still in existence, similar to the livestock inspection fee. Mr. Gimlin believed that tax had been repealed. He explained should a beekeeper request an inspection the costs, assessed from the time the inspector left the office until return, were paid by the beekeeper; there was no General Fund support for the program whatsoever.
With no further testimony forthcoming on A.B. 115, Chairman Arberry declared the hearing closed, and announced the next order of business would be committee introductions of Bill Draft Requests (BDRs).
· BDR S-1256 – Makes supplemental appropriation to District Judges’ Salaries and Judicial Pensions Fund for shortfall in money budgeted for retirement benefits and pensions for District Judges and widows. (A.B. 237)
MR. HETTRICK MOVED COMMITTEE INTRODUCTION OF BDR S-1256.
MR. PARKS SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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· BDR S-1306 – Makes appropriation to Department of Motor Vehicles and Public Safety for funding of shortfalls resulting from 1998 reclassification of personnel. (A.B. 236)
MRS. CHOWNING MOVED COMMITTEE INTRODUCTION OF BDR S-1306.
MR. MARVEL SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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· BDR S-1259 – Makes supplemental appropriation to Department of Business and Industry for unanticipated shortfall in money budgeted for salaries for personnel in Nevada Athletic Commission’s Amateur Boxing Program. (A.B. 235)
MR. MARVEL MOVED COMMITTEE INTRODUCTION OF BDR S-1259.
MR. PARKS SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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· BDR S-1258 – Makes supplemental appropriations to the Department of Motor Vehicles and Public Safety for shortfalls in the Division of Parole and Probation and Central Services, Management Services and Field Services. (A.B. 234)
MR. MARVEL MOVED COMMITTEE INTRODUCTION OF BDR S-1258.
MS. GIUNCHIGLIANI SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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· BDR S-1254 – Makes supplemental appropriation to Department of Administration for estimated shortfall in Integrated Financial System resulting from required accounting changes. (A.B. 233)
MR. MARVEL MOVED COMMITTEE INTRODUCTION OF BDR S-1254.
MRS. CHOWNING SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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· BDR 1-208 – Establishes judicial retirement system for certain justices of the supreme court and district court judges. (A.B. 232)
MR. HETTRICK MOVED COMMITTEE INTRODUCTION OF BDR
1-208.
MS. GIUNCHIGLIANI SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY
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Chairman Arberry announced that Mark Stevens, Fiscal Analyst, Legislative Counsel Bureau (LCB) Fiscal Division, would explain the process and deadlines for committee requests to draft BDRs.
Mr. Stevens explained that February 26, 2001, was the last day for the committee to request drafting of BDRs, and there were several issues that members had voiced an interest in. The first request would amend the law related to the Civil Air Patrol and the amount of fuel tax monies provided to the patrol for operational activities.
Ms. Giunchigliani noted it was originally thought the issue could be dealt with via the budget presentation. However, because it was statutorily regulated, the request would be to build a cost of living stipulation into the statute, in order to alleviate the need to address the fuel tax allocation at each session of the legislature.
MR. MARVEL MOVED COMMITTEE REQUEST TO DRAFT BDR RELATIVE TO THE FUEL TAX ALLOTMENT FOR THE CIVIL AIR PATROL.
MR. DINI SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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Mr. Stevens stated the next committee request to draft a BDR would be for a $1 million appropriation to assist with the ongoing investigation relative to the leukemia cases in the Fallon area. Mrs. de Braga explained that the $1 million would be placed in a fund for use by the Health Department to conduct testing on individual patients, along with increased testing efforts on the ground and water sources in the area where patients actually resided. Mrs. de Braga reported that additional funding might be necessary, however, there was a possibility of securing additional federal funds to assist in the investigative effort.
MS. GIUNCHIGLIANI MOVED FOR COMMITTEE REQUEST TO DRAFT BDR RELATIVE TO THE $1 MILLION APPROPRIATION FOR INVESTIGATION OF THE LEUKEMIA CASES IN THE FALLON AREA. (Later introduced as A.B. 359).
MRS. de BRAGA SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
********
Mr. Stevens stated the next request was relative to organic foods, and support for the Advisory Council for Organic Agricultural Products, which set regulations to determine what constituted an organic food. Mr. Dini indicated the original request was to include funding in the budget of the Department of Agriculture, however, that funding had been removed from The Executive Budget.
MS. GIUNCHIGLIANI MOVED FOR COMMITTEE REQUEST TO DRAFT BDR FOR FUNDING FOR THE DIVISION OF AGRICULTURE FOR THE REGULATION OF ORGANIC FOOD. (Later introduced as A.B. 593).
MR. MARVEL SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
********
The next request would be an approximately $250,000 appropriation to provide funding for the Virginia City cemeteries, and Mr. Stevens indicated that would be relative to security fencing and other improvements; the funds would provide a match to anticipated federal grant funds. Mr. Dini explained that there had been a problem with vandalism at the Virginia City cemeteries, and the need existed to protect the history of the area. The appropriation would provide the match for federal grant funds.
MR. DINI MOVED FOR COMMITTEE REQUEST TO DRAFT BDR FOR AN APPROXIMATELY $250,000 APPROPRIATION TO PROVIDE FUNDING FOR THE VIRGINIA CITY CEMETERIES, AND TO SECURE FEDERAL MATCHING FUNDS. (Later introduced as A.B. 610).
MRS. de BRAGA SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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Per Mr. Stevens, the next request was relative to an increase in longevity payments for state employees.
MRS. CHOWNING MOVED FOR COMMITTEE REQUEST TO DRAFT BDR FOR AN INCREASE IN LONGEVITY PAYMENTS FOR STATE EMPLOYEES. (Later introduced as A.B. 614).
MS. GIUNCHIGLIANI SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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Mrs. de Braga stated she would also support the request for a $250,000 appropriation for the Western Nevada Community College, to begin the initial process of changing the focus of its students and relocating the college to a different location.
MRS. de BRAGA MOVED FOR COMMITTEE REQUEST TO DRAFT BDR FOR A $250,000 APPROPRIATION FOR THE WESTERN NEVADA COMMUNITY COLLEGE. (Later introduced as A.B. 591).
MR. DINI SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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Ms. Tiffany indicated she had worked on legislation regarding the homeless, and noted the seven agencies that provided multiple services and housing for the homeless did not have an integrated system. Such a system would provide information regarding available beds, at which agency, and whether it was for families or single persons. Ms. Tiffany stated there was a federal grant that could be accessed, which would create the integrated system, and would also provide an additional 25 percent in block grant funds. Ms. Tiffany requested a BDR be drafted that instructed the Department of Human Resources (DHR), to secure the federal grant funds for an integrated system, and funnel those funds to the appropriate local agencies.
MS. TIFFANY MOVED FOR COMMITTEE REQUEST TO DRAFT BDR RELATIVE TO FEDERAL GRANT FUNDS TO BE USED FOR AN INTEGRATED SYSTEM FOR LOCAL AGENCIES WHICH SERVED THE HOMELESS. (Later introduced as A.B. 346).
MRS. CEGAVSKE SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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Mr. Arberry announced the next order of business to come before the committee would be review of A.B. 183.
Assembly Bill No. 183: Makes appropriation to legislative fund for reproduction of older volumes of Nevada Reports and Statutes of Nevada. (BDR S-731)
Lorne Malkiewich, Director, LCB, testified that A.B. 183 was requested on behalf of the LCB via its Budget Review Committee. Mr. Malkiewich explained the LCB sold Nevada Reports on behalf of the Supreme Court, as well as Statutes of Nevada. The procedure worked very well via use of the LCB Publications Office, and Mr. Malkiewich explained Nevada Reports was a compilation of all cases heard by the Supreme Court. Upon occasion the report went out of print and required reprinting. Mr. Malkiewich stated that every two years, the LCB requested an appropriation to cover the cost of the reprint, and the appropriation request for the current session was $73,100. The LCB would also request funds to reprint out-of-print volumes of Statutes of Nevada, which was a compilation of bills passed by the legislature.
Chairman Arberry inquired whether there were any questions regarding A.B. 183. Hearing none, the hearing was closed. The next bill for consideration by the committee was A.B. 187.
Assembly Bill No. 187: Makes appropriation to legislative fund for equipment and software for information systems for Legislative Counsel Bureau and Nevada Legislature. (BDR S-732)
Mr. Malkiewich indicated that A.B. 187 referenced information technology projects as delineated in Exhibit C. The exhibit was produced by the LCB Information Technology Subcommittee, and approved by the Budget Subcommittee of the Legislative Commission. Generally, explained Mr. Malkiewich, the technology area changed so quickly that only approximately 80 to 90 percent of the requested funds were spent as planned, and the LCB would appear before the Budget Subcommittee to request appropriate modifications throughout the biennium. Mr. Malkiewich indicated the change in spending was sometimes caused by a reduction in budgeted items as the price of technology went down, and funds were shifted to other areas as needed. According to Mr. Malkiewich, the $760,000 appropriation was approximately $114,000 less than requested over the last biennium.
Chairman Arberry asked for questions from the committee regarding A.B. 187; hearing none, he declared the hearing closed, and announced the committee would consider A.B. 189 as the next order of business.
Assembly Bill No. 189: Makes appropriation to legislative fund for certain maintenance and rehabilitation projects on legislative building.
(BDR S-730)
Mr. Malkiewich commented that A.B. 189 requested an allocation of $817,740; the requests were first reviewed by the Committee to Consult With the Director, which took over the duties of the Building Subcommittee during the interim, and also by the Budget Subcommittee. Five projects were approved for submittal:
Mr. Malkiewich reiterated that the total amount of the allocation was $818,740; rather than delineating specific costs for each project, the LCB was requesting a single “lump sum” appropriation, which would provide flexibility should projects run under or over budget.
Chairman Arberry called for questions from the committee regarding A.B. 189. Hearing none, Chairman Arberry inquired whether anyone in the audience wanted to present testimony regarding A.B. 183, A.B. 187, or A.B. 189. With no further testimony forthcoming, the hearing on all aforementioned bills was closed.
The next bill for committee review was A.B. 26, and Chairman Arberry invited Mr. Perkins to address the committee.
Assembly Bill No. 26: Requires legislative auditor to conduct audit of University and Community College System of Nevada and Board of Regents of University of Nevada. (BDR S-370)
Richard Perkins, Assemblyman, Assembly District 23, stated the last time an audit of the University and Community College System of Nevada (UCCSN) had occurred was in 1996. By way of background, Mr. Perkins explained that the 1996 Legislative Audit Report of the UCCSN included an examination of the methods used by the Board of Regents and the UCCSN to control the budgets and expenditures. The report covered budgetary activities in effect since FY1992. Mr. Perkins stated the report contained ten recommendations to improve the methods used by the UCCSN and the Board of Regents to control both budgets and expenditures.
According to Mr. Perkins, the UCCSN, in its response to the audit report, fully accepted only four recommendations, partially accepted three, and rejected three recommendations. The 1996 audit report found that although the Nevada Constitution required the Board of Regents to control and manage the financial affairs of the UCCSN, most of that responsibility had been delegated to the seven institutions. Because that responsibility had been delegated, the institutions had developed seven different methods to manage and control the expenditure of funds. Mr. Perkins indicated that, according to the audit report, those methods included a number of inconsistent procedures and practices, many of which were ineffective.
Mr. Perkins reported that the lack of strong system-wide management controls also diminished the Board of Regents’ oversight and accountability, and required the use of additional resources. The Board of Regents had a constitutional responsibility to properly manage the public funds that had been entrusted to it; therefore, according to the audit report, the establishment of strong, system-wide management controls should be a priority. Mr. Perkins indicated there was a great deal of information important to the auditors that had been withheld by the UCCSN and its institutions, information needed to properly oversee the financial operations of the system. In many cases, basic financial and budgetary information provided to the auditors during the 1996 audit was incomplete and inaccurate.
Per Mr. Perkins, another important finding revealed by the 1996 audit was the fact that when the Board of Regents approved the operating and self-supporting budgets, it was reviewing and approving only approximately 80 percent of the UCCSN revenues and related expenditures. NRS 396.380 required the Board of Regents to control the expenditures of all money for the support and maintenance of the UCCSN, and all money received from any other source. Mr. Perkins stated that all-in-all, his recollection of the events involving the 1996 audit, confirmed by the report, made it clear that there were times the UCCSN did not want the legislature to either have access to particular information, or impose accountability measures.
Mr. Perkins explained that the total funding for the UCCSN for the 1995-97 biennium, when the audit was conducted, was $604.2 million; the total Governor-recommended FY2001-03 budget for the UCCSN now exceeded $1 billion. Mr. Perkins pointed out that the university system budget continued to grow and those figures represented a 74.6 percent increase in funding, a huge amount of money which needed to be accountable to the taxpayers. Mr. Perkins stated the UCCSN had a new chancellor, who had expressed the commitment to work with the legislature to improve the UCCSN’s accountability. Mr. Perkins felt the new chancellor needed the information, as much as the legislature, that an audit would provide.
The UCCSN was in the process of long-term strategic planning, and Mr. Perkins stated the plan would include, among other things, financing and fee structure reforms, many of which would benefit from the proposed audit. According to Mr. Perkins, there were concerns raised recently regarding potential inefficiencies within the UCCSN, and much discussion had been conducted among elected board members pertaining to the budget for the UCCSN. Several regents noted that the presidents of Nevada’s publicly funded colleges and universities needed to discover ways to operate more efficiently prior to requesting additional funding from the legislature. Mr. Perkins indicated that statements such as “…we throw around a million here and a million there…,” which implied that was not a large sum of money, and other countless examples, reflected that inappropriate expenditures had been utilized by at least one member of the Board of Regents. Mr. Perkins indicated when the issue of inventory control was discovered to be problematic, one regent commented that there appeared to have been a total failure in the area of inventory control at the community college level.
In conclusion, Mr. Perkins indicated that the reasons previously stated, along with the following, would define the need for A.B. 26:
· When the audit report was conducted in 1996, some recommendations were accepted and some were not;
· The UCCSN budget had increased since 1996, and it was facing many pressing issues;
· The UCCSN had a new chancellor and would proceed with its strategic planning;
· Various Board of Regent members had expressed concerns regarding the way funds were handled within the UCCSN; and,
· Nevada had one of the fastest growing high school graduate populations, which placed a huge burden on the UCCSN to be as efficient as possible.
Mr. Beers stated the term “audit” meant a very specific function in the world of Certified Public Accountants (CPAs), and he did not feel it fit the planned application. Mr. Beers realized it was systemic use of the word, and did not know whether there was another word that could be used in its place. He opined that the term “audit” added to the confusion on the part of the public regarding what an audit entailed. An audit performed by a CPA firm would attest that financial statements were accurate, and Mr. Beers felt there was a misconception when the term was used in government.
Gary Crews, CPA, Legislative Auditor, indicated that Mr. Beers referred to an audit of financial statements; the audit as proposed by A.B. 26 would not be an audit of the UCCSN’s financial statement. The audit would be a performance audit, conducted in accordance with performance audit standards. Mr. Crews indicated the LCB did not view the language, which identified the process as an audit, as problematic. NRS 218 required LCB to follow certain performance audit standards developed by the U.S. General Accounting Office, rather than financial standards.
Mr. Perkins stated he did not want to imply that there were issues within the UCCSN that were being hidden from the public and/or the legislature, or that there was an aura of suspicion. The 1996 audit revealed some concerns, and Mr. Perkins was unsure whether all of those concerns had been taken into account; there had been a number of changes in personnel, which caused inconsistencies since the 1996 audit. Mr. Perkins indicated he had worked with UCCSN personnel, who had been most accommodating, in an attempt to resolve the issues. The UCCSN appeared to view the audit favorably, in order to ensure that the system had a “clean slate.” There were public relations issues that the UCCSN also had to deal with, and the audit was one way to accommodate those issues. Mr. Perkins emphasized that he did not want to imply that the UCCSN was doing something underhanded, which was not the case.
Ms. Giunchigliani inquired about the terminology, asking for clarification of a performance audit versus a financial audit. Mr. Crews explained that a financial audit was completed in accordance with standards developed by the American Institute of Certified Public Accounts, and the basic thrust of such an audit would be to ascertain whether financial statements were fairly stated, with all revenues and expenditures properly stated, and with all assets recorded properly on the balance sheet. Mr. Crews reported that performance audit standards were developed by the U.S. General Accounting Office, and basically covered economy, efficiency, and effectiveness. The standards were somewhat broad in nature, and Mr. Crews noted that an audit could be described in any number of ways under performance audit standards, i.e., a compilation of information. The end result was to attest to the accuracy of information, for example, the issue dealing with attendance records, where an audit would not involve financial matters, but would involve consistency of application within each institution.
Ms. Giunchigliani stated it appeared to be a combination of both performance and financial. Mr. Crews indicated the audit would include financial information, but it would also deal with information other than financial matters. Ms. Giunchigliani pointed out that the legislature needed to devise a better method to ensure that agencies and departments adhered to audit recommendations, perhaps by adding stipulations to the NRS regarding agencies found out of compliance with audit recommendations. Ms. Giunchigliani felt the legislature should review language within the statutes, and provide the ability to penalize agencies that would not implement audit recommendations as agreed upon.
Mr. Dini asked whether the term “legislative intent” would be required in the statement contained in Section 2 of the bill. Mr. Crews did not feel that the terminology would necessarily be needed in the language of the bill, however, legislative intent could be read into the record of proceedings regarding the bill. One of the issues reviewed during the 1996 audit was, not only legislative intent, but also the intent of the Board of Regents, which directed the UCCSN. Legislative intent was definitely considered when an audit was performed.
Mr. Crews reported that in analyzing A.B. 26, LCB had arrived at a dollar amount for the audit of approximately $90,000, which was contingent upon the level of cooperation from the UCCSN in performance of the audit. Should there be a high degree of cooperation and assistance, the audit could be performed within the requested amount. Mr. Crews indicated LCB did anticipate a high degree of cooperation and assistance from the UCCSN.
Dr. Jane Nichols, Chancellor, UCCSN, testified she would speak on behalf of A.B. 26. The tenor set by Mr. Perkins was correct, and the UCCSN was anxious to cooperate in the audit procedure. Dr. Nichols noted the system was audited in 1996 and the system had reviewed the findings of the 1996 audit to ensure it had complied with the recommendations. According to Dr. Nichols, the Interim Vice Chancellor for Finance and Administration, Daniel Miles, would be the point person in the audit endeavor, should the bill pass. Dr. Nichols assured the committee that the state would have the full cooperation of the UCCSN.
Dr. Nichols noted that it was normal procedure to include the terminology, “without limitation,” in language pertaining to audit procedures, but with four instances where that terminology was used in A.B. 26, it began to feel that the audit could become an investigation or “fishing expedition.” Dr. Nichols emphasized that the UCCSN did not disagree with any of the language generally as it appeared in A.B. 26, but wanted to ascertain that the performance audit would not cover more than described by the bill. Because of the resources and time involved in the performance of an audit, Dr. Nichols felt it would be in everyone’s best interest to clearly define those areas which the audit would address, and the UCCSN would work with the auditors in review of those areas. Dr. Nichols felt the language included in the bill which stated, “The generation and distribution of investment income…,” might attempt to delve into the foundation of the institutions, including the identity of donors and amounts of money given. According to Dr. Nichols, the UCCSN felt it had sound ground on which to stand regarding donors, and explained an opinion had been issued from the LCB during the 1996 audit, which indicated donor and foundation information was not appropriate for inclusion. Dr. Nichols stated, for the record, as the audit was undertaken, it was her understanding that the foundations of the universities and community colleges would not be included.
Dr. Nichols offered the full cooperation of the UCCSN, and noted that the level of cooperation previously referred to as inadequate, was partially due to the amount of time, effort, and resources required by the 1996 audit. Since the audit was initiated by the state, Dr. Nichols indicated the system felt it would be appropriate that the state finance the $90,000 appropriation for the audit. Given the current state of the UCCSN’s investments, which would be the source of the funding, the money might not be available. Should the money not be available from investments, the UCCSN would be forced to request assistance from its campuses. Dr. Nichols reiterated that the UCCSN would request the audit be financed by the state.
Mr. Perkins asked whether there would be any difficulty in protecting the identity of donors by disclosure of the final disposition of the money within the UCCSN. Dr. Nichols replied that there would be no problem with identification of the manner in which the money was expended.
James Richardson, representing the Nevada Faculty Alliance, advised that the alliance had always supported audits, and felt the legislature did have a right to know how the money that came to the UCCSN was used, as much of it came from the state. Mr. Richardson agreed with Mr. Beers, in that the audit should be identified as a performance audit, and also shared concerns regarding the implications of language within the bill that stated, “…without limitation….” Mr. Richardson concurred that the General Fund should cover all, or at least part, of the audit cost. Passage of A.B. 26 would put members of the alliance on call when information was requested, because failure to provide requested information often resulted in an accusation that staff was not cooperating. According to Mr. Richardson, the UCCSN was understaffed because of rapid growth, and he urged the committee to seriously consider making the $90,000 allocation a General Fund expenditure.
Mr. Richardson referenced the reactions to the 1996 audit and noted the UCCSN did eventually comply with virtually all of the recommendations, however, there was some initial hesitation. The Faculty Alliance noted that the major thrust of the audit was toward a much greater centralization of the UCCSN than it felt was necessary. Mr. Richardson indicated the alliance felt that would violate the autonomy of the individual campuses, which was something that was highly valued in the UCCSN. The “one size fits all” philosophy, and the notion that the UCCSN should be defined or thought of as just another state agency which was centralized completely from the top down was, in actuality, a very inefficient model and would limit the experimentation required in response to the growth.
According to Mr. Richardson, he simply wanted to remind the body that such a discussion regarding centralization had taken place during the 1997 session, as somewhat of a philosophical policy level discussion, rather than a matter of authority. The chancellor did ultimately agree with all but one of the recommendations that resulted from the 1996 audit, however, the alliance felt there was a loss in the area of institutional autonomy, and the system was not necessarily made better by adhering to some of the recommendations. Mr. Richardson indicated members of the Nevada Faculty Alliance would be watching the audit process with great interest and would certainly cooperate and urge cooperation with the auditors. However, he advised another discussion might ensue regarding the definition of the UCCSN, i.e., whether it should be a totally centralized organization.
Mr. Perkins commented that he felt there was a need to define areas of centralization and also decentralization. The institutions needed to be sovereign in many ways, and retain their own culture, otherwise there would virtually be no choice for students within the system. Mr. Perkins stated difficulties encountered, such as the different methods used to count enrollments and number courses at each institution, et cetera, were what beckoned for some type of centralization. There was a great deal of information which the auditors would have benefited from that was not provided during the 1996 audit, i.e., performance evaluations for the presidents, which Mr. Perkins noted raised “red flags” for many persons. Review of those evaluations would have provided information regarding whether the president was evaluated based upon the internal controls for the institution, et cetera. Mr. Perkins stated there had been a degree of resistance, otherwise there would have been no argument over separation of powers. Whenever the legislature allocated taxpayers’ dollars, it was important that everyone understood how efficiently those dollars were being used. Mr. Perkins felt all parties should work together in performance of the audit, and emphasized that the citizens in Nevada were “hungering” for some closure to the issue, and assurance that the money allocated to the UCCSN was being put to the best use.
Mr. Richardson felt Mr. Perkins’ comments were well taken, and he certainly would not suggest, from the Faculty Alliance’s point of view, that everything went smoothly in the 1996 audit. It was recognized that there were some major issues, such as enrollment, which needed to be addressed, and Mr. Richardson stated there was a new regime within the system, which promised to be much more cooperative and open. The Nevada Faculty Alliance had joined with many legislators over the years in an effort to maintain some degree of privacy in terms of personnel evaluations, as the legislature dealt with open records laws. Mr. Richardson felt the alliance would continue to do that, even though the point of view was that there should be some protections available to top level administrators regarding personnel evaluations; there was no question, however, that administrators should be evaluated on how funds were administered within their institutions.
With no further testimony forthcoming regarding A.B. 26, Chairman Arberry declared the hearing closed, and opened the hearing on A.B. 170.
Assembly Bill No. 170: Makes appropriation to City of Las Vegas for California- Nevada Super Speed Ground Transportation Commission. (BDR S-79)
Senator Dina Titus, Clark County Senatorial District Seven, indicated that as a member of the California-Nevada Super Speed Train Commission, she would ask the committee for support and continued state funding for the projected line between Las Vegas, Nevada, and Orange County, California. Senator Titus explained that the situation had changed somewhat, which precipitated further appearances before the legislature. The commission had recently been awarded $1 million in federal funding for FY2000-01, and $3.5 million from the Clark County Regional Transportation Committee (RTC); Senator Titus stated the commission now needed matching funding from the state. The matching money would serve two basic purposes:
Senator Titus noted that taken together, those two factors would greatly enhance the commission’s chances of obtaining construction funding from the federal government, under the TEA-21’s Magnetic Levitation Transportation Technology (Maglev) Deployment Program. The California-Nevada Super Speed Train Commission was more optimistic about receipt of that funding than it had been in the past, because of recently announced support for the project from the new chairman of the U.S. House Transportation Committee, U.S. Representative Don Young, (R-Alaska). Senator Titus indicated that Mr. Young was familiar with Nevada, had visited Las Vegas a number of times, and had made it very clear in his press release that he was looking for a western project, (Exhibit D).
Senator Titus referenced the booklets entitled, “Resolutions of Support for the Las Vegas to Anaheim Maglev Project,” Exhibit E, and, “The Impact of the Maglev Train on the Economy of Clark County and the State of Nevada,” Exhibit F. The Executive Summary on page five of Exhibit F reflected the positive economic impact of the project. Senator Titus emphasized it was a “win-win” project, and was an excellent example of partnership, not only among the different levels of government, but also between the public and private sectors. The Maglev train would have a tremendous economic impact, i.e., the creation of 13,000 new jobs in the state, an increase in the gross state product by $20.2 billion, tax income would rise by $13.2 billion, and many more positive economic benefits (Exhibit F). Senator Titus indicated that as gaming proliferated around the country, the Maglev train would be a tremendous draw for continued tourist trade in Nevada, because of the available transportation between southern California and Nevada.
In conclusion, Senator Titus commented that with the energy crisis, it should be noted that the Maglev train would not cause further problems in the environment, as Nevada was facing problems not only with power, but also with increased gasoline costs and air pollution. For all of those reasons, Senator Titus felt it was an excellent project and the commission would appreciate the state’s support.
Ms. Giunchigliani asked about the federal allocation, and the requested amount for the state match. Senator Titus indicated the latest allocation from the federal government was $1 million, along with a $3.5 million allocation from the RTC. According to Senator Titus, the $1 million fiscal note attached to A.B. 170 would constitute the state match for completion of the EIS study.
Mr. Perkins inquired how much of a setback the project suffered when the federal government recently chose not to allocate additional funds to Nevada’s project. Senator Titus indicated it was a disappointment to the commission. A recent decision was made to give a portion of the remaining study money to the Pennsylvania project and a portion to the Baltimore-Washington, D.C. project, to conduct further studies such as the EIS, and traffic studies, which would bring those projects up to the current level of the California-Nevada project. Senator Titus commented that it would have been nice if Nevada had received additional study funds, however, that was a different funding source than the construction fund, from which the commission was attempting to secure additional funds. Senator Titus felt the California-Nevada project was “still in the game,” especially after Mr. Young’s comments.
With no further questions and/or testimony forthcoming regarding A.B. 170, Chairman Arberry declared the hearing closed. Chairman Arberry informed the committee that Mr. Malkiewich failed to note in his testimony that the funding for A.B. 183, A.B. 187, and A.B. 189, were already built into the LCB budget.
With no further business to come before the committee, the meeting was adjourned at 9:59 a.m.
RESPECTFULLY SUBMITTED:
Carol Thomsen
Committee Secretary
APPROVED BY:
Assemblyman Morse Arberry Jr., Chairman
DATE: