MINUTES OF THE meeting
Of the
SENATE FINANCE/ASSEMBLY WAYS AND MEANS
JOINT SUBCOMMITTEE ON GENERAL GOVERNMENT
Seventy-First Session
February 28, 2001
The Joint Subcommittee on General Governmentwas called to order at 8:11 a.m. on Wednesday, February 28, 2001. Senator Jacobsen, Acting Chairman, and Senator O’Donnell, Chairman presided in Room 2134 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.
SENATE COMMITTEE MEMBERS PRESENT:
Senator William R. O’Donnell, Chairman
Senator Lawrence E. Jacobsen
Senator Joseph M. Neal, Jr.
ASSEMBLY COMMITTEE MEMBERS PRESENT:
Mr. Bob Beers
Mrs. Vonne Chowning
Ms. Chris Giunchigliani
Mr. Lynn Hettrick
Ms. Sheila Leslie
Mr. David Parks
STAFF MEMBERS PRESENT:
Mark Stevens, Fiscal Analyst (Assembly)
Bob Guernsey, Principal Deputy Fiscal Analyst
Mike Chapman, Program Analyst
Georgia Rohrs, Program Analyst
Carol Thomsen, Committee Secretary
Senator Jacobsen announced he would serve as acting Chairman pending the arrival of Senator O’Donnell, Chairman of the subcommittee. The first item to come before the subcommittee would be Budget Account 1354, Motor Pool, and Senator Jacobsen invited Frank Revell, Chief, to present his budget overview.
MOTOR POOL – BUDGET PAGE ADMIN-39
Mr. Revell indicated the State Motor Pool serviced and maintained approximately 762 vehicles for use by state employees on official business. The primary objective of the Motor Pool was to provide a safe, reliable means of transportation in an easily accessible, professional, and economic manner. Mr. Revell reported the budget requested no increases in personnel or other major expenditures, and the only new item would be in conjunction with The Governor’s Steering Committee to Conduct a Fundamental Review of State Government, which recommended funding for a study to investigate the feasibility of privatizing the Motor Pool operations in Las Vegas and Reno. Mr. Revell stated the budget included a $50,000 appropriation for that study, which would reveal whether the private sector could perform the same job as the Motor Pool at a reduced cost to the state. There were no other major changes or additions to the Motor Pool budget.
Senator Jacobsen asked Mr. Revell to provide information regarding the location of the various Motor Pool facilities, and the number of vehicles assigned to each. Mr. Revell explained that 84 vehicles were located at the Las Vegas Motor Pool, 52 were located at the Reno Motor Pool, and 31 were located at the Carson City Motor Pool. Overall, the Motor Pool had approximately 283 vehicles in Las Vegas and surrounding areas, 107 vehicles in the Reno/Washoe County area, and the balance of the vehicles were interspersed within the Carson City and rural areas. Mr. Revell indicated he would provide additional information regarding the exact count of the Motor Pool vehicles to the subcommittee.
Senator Jacobsen asked, other than the three aforementioned locations, how the Motor Pool handled the rural areas. Mr. Revell explained that the Motor Pool basically sent cars to the agencies in rural areas, and also contracted with vendors in those areas to provide the needed services. At times, the Motor Pool staff actually performed whatever service was needed on the vehicles. Mr. Revell noted that such things as accidents and breakdowns were generally handled through a main Motor Pool location.
Regarding the issue of staff overtime, Senator Jacobsen asked why overtime was necessary, considering the additional positions approved by the 1999 legislature. According to Mr. Revell, the additional positions approved by the 1999 legislature were to replace an inmate position and a student position in the Carson City Motor Pool, and did not actually provide additional staff. Another was a chauffeur position in Las Vegas that basically handled transportation to and from the airport. Mr. Revell pointed out that the Motor Pool only had 14.5 unclassified employee positions, along with his position, and the need for overtime arose to cover such things as vacations and sick time. The overtime hours had declined over the past two years because of the approved positions, however, Mr. Revell reiterated that there was often a need to cover an employee’s shift in the event of illness, et cetera. The Motor Pool was a public service agency and, as such, had to be properly staffed during working hours.
Mrs. Chowning asked for clarification regarding the percentage of agency requests for vehicles handled by the Motor Pool, versus those handled via outside rentals, which appeared to be lower than projected. Mrs. Chowning also requested clarification regarding the repayment for the existing Las Vegas Motor Pool facility, and whether that repayment would continue for the new facility. Mr. Revell explained in May 2002, the Motor Pool’s lease with the Airport Authority in Clark County would expire; the Airport Authority would not renew the lease, however, had granted a six-month extension to allow for completion of the new facility. According to Mr. Revell, the new facility would be a joint venture between the Motor Pool and the University of Nevada, Las Vegas (UNLV), and was located on UNLV property. Regarding the repayment on the old facility, which was approximately $8,800 per year to the General Fund and the Highway Fund, Mr. Revell stated he was in the process of examining the lease to ascertain whether there would be any recourse against the Airport Authority, since it would not renew the lease. Mr. Revell revealed that it appeared the Motor Pool would be required to continue the repayment to both funds through FY2009-10. Regarding the new facility, Mr. Revell stated he was unaware of the financial details regarding possible repayment.
Mrs. Chowning suggested Budget Division staff work with both Legislative Counsel Bureau (LCB) staff and Mr. Revell to ascertain whether the repayment would be continued. The allocation for repayment was part of the Motor Pool budget, and its use would be questionable should the repayment allocation be eliminated. Mrs. Chowning felt that issue should be addressed, and the repayment allocation either eliminated or carried forward as repayment on the new facility. Mrs. Chowning asked whether the new facility at UNLV would be ready for occupancy by November 2002. Mr. Revell indicated the Motor Pool hoped it would be ready by that date, and explained the Public Works Board had decided to design the facility in-house; the design was very complimentary to the immediate area. Mr. Revell commented that he had been involved in the building of the last two Motor Pool facilities, and he felt the proposed facility would enhance the method of conducting work within the Motor Pool; he stated he was very pleased with the design.
Regarding rental vehicles, Mr. Revell explained that the Motor Pool fleet had recently suffered losses due to attrition, and those vehicles had not been replaced. He further explained that there was a “gray” area from the time a vehicle was turned in for auction and the replacement vehicle was received, where accidents and damage beyond repair to any of the remaining vehicles would create a situation where rental of additional vehicles would be required. Mr. Revell noted the Motor Pool also experienced peak times, which could occur when demands on the Motor Pool coincided with such a “gray” area. According to Mr. Revell, in FY2000, the Motor Pool was at 88.6 percent of agency requests filled, and approximately 98 percent of those requests were made to the Las Vegas facility. Mr. Revell indicated the Motor Pool had taken steps to mitigate the problem by securing additional vehicles on a long-term rental basis. The cost to the user agency for those rental vehicles would be the same as the cost for a Motor Pool vehicle. Mr. Revell predicted the percentage of requests filled would be over 90 percent during FY2001.
Mrs. Chowning noted that problems during peak times would also occur if the Motor Pool were privatized. Mr. Revell concurred, and cited the example of the upcoming week, which was NASCAR weekend, which would severely hamper Motor Pool efforts to rent outside vehicles. In such instances, Mr. Revell stated the Motor Pool simply had to “make due” with the vehicles on hand.
Ms. Giunchigliani referenced the Motor Pool policy regarding the estimated useful life of a vehicle, which had increased from six to eight years, and asked what circumstances drove that increase. Mr. Revell replied that the Motor Pool had been attempting to return to the six-year estimation, and had not really changed its policy, per se. It simply was not feasible at the present time to utilize the six-year estimation. Ms. Giunchigliani asked why it was not feasible. Mr. Revell explained that the Motor Pool had not actually used the six-year estimation. The original estimation was for a ten-year time frame as the useful life of a vehicle, which had been reduced to eight years. Mr. Revell indicated the Motor Pool had experienced an inordinate number of accidents and premature mechanical failures, particularly in the Las Vegas area. Vehicles were being driven longer than anticipated, and Mr. Revell stated his goal would be to use a six-year estimated useful life for a vehicle.
Ms. Giunchigliani asked, based on the total number of vehicles, how many were assigned to agencies. Mr. Revell stated in Las Vegas, 283 vehicles were assigned to specific agencies, with 84 vehicles assigned to the Motor Pool fleet. Of the 283 vehicles assigned to agencies, between one and three per week were involved in accidents, and at least two vehicles per month were totaled in vehicular accidents. Ms. Giunchigliani remarked that perhaps privatization made a great deal of sense. Mr. Revell noted that the proposed study would provide valuable information regarding privatization. Ms. Giunchigliani requested clarification regarding the proposed study. Mr. Revel explained there were consultants available that would study the pros and cons of privatization of the Motor Pool operation. Every aspect of the Motor Pool operation would be reviewed, i.e., the method used to rent vehicles to agencies, how vehicles were maintained, et cetera.
Mr. Revell emphasized that at the current time, privatization of the daily Motor Pool operation would only address the 84 vehicles in its fleet, and would have no bearing on the 283 vehicles assigned to specific agencies. Ms. Giunchigliani felt the rental agreements for agency vehicles should also be reviewed in the event privatization occurred. Mr. Revell noted that The Governor’s Steering Committee to Conduct a Fundamental Review of State Government recommended funding for a study to review only vehicles assigned to the Motor Pool fleet. Ms. Giunchigliani felt the study should address every aspect of the Motor Pool, as it would be nonsensical to review only the small fleet housed at the Motor Pool facility. Mr. Revell stated since the state owned the vehicles and leased them to agencies on a monthly basis, the cost would remain the same even if a private agency supplied the vehicles.
Historically, noted Mr. Revell, the costs to a governmental entity to privatize an entire Motor Pool operation, i.e., the leasing of 283 vehicles, would result in a significantly higher costs. Other states had investigated the possibility of privatizing all motor pool operations, however, had not done so because of the significant higher costs. Ms. Giunchigliani asked why bother privatizing only a portion of the Motor Pool operation, and why waste the $50,000 on the cost of a study, if it were already known that the cost increase would be significant. Mr. Revell stated there were basically two different methods of privatization. The Motor Pool could privatize the airport operation by simply turning it over to a rental car agency so that state employees arriving at the airport would simply rent a vehicle. The privatization of the leased vehicles would involve a major capital corporation. Mr. Revell remarked that rental car agencies would not lease vehicles on a month-to-month basis. A major capital company could bring in its own vehicles to replace the Motor Pool fleet, and could also provide the maintenance. Ms. Giunchigliani advised that she felt the subcommittee should ponder the privatization issue in greater depth, as it did not appear to be a well‑thought-out plan.
Ms. Giunchigliani asked Mr. Revell to address the lack of reserves in the Motor Pool budget. Electing to respond was Jim Manning, Budget Analyst, Budget Division, who stated The Governor’s Steering Committee to Conduct a Fundamental Review of State Government recommended that a study be performed regarding privatizing in the urban areas, and once that report was completed, the state would determine how to proceed in the future regarding the Motor Pool. Mr. Manning recognized that should plans be changed, the anticipated Motor Pool facility might not be built. Ms. Giunchigliani commented that The Governor’s Steering Committee to Conduct a Fundamental Review of State Government was just that, a review, and many recommendations came about because of that review. Ms. Giunchigliani inquired whether assessments would need to be increased in the agency budgets to cover the Motor Pool costs. Mr. Manning reported that there was a possibility of an increase, and a final decision would be forthcoming from the Department of Administration. Ms. Giunchigliani instructed Mr. Manning to request a determination regarding the Motor Pool costs and provide that information to the subcommittee within one week.
Senator Jacobsen asked for the address of the new Motor Pool location in Las Vegas. Mr. Revell replied that the new location would be on Swenson Street in the UNLV parking lot by the Thomas and Mack Building. Senator Jacobsen inquired whether the shuttle service to and from the airport would remain the same. Mr. Revell assured Senator Jacobsen that the service would be the same.
Senator Jacobsen inquired about the criteria used to estimate the useful life of vehicles, i.e., mileage, or age of vehicle. Mr. Revell stated the Motor Pool had formulated a policy for replacement of 8 years or 100,000 miles on trucks, and 6 years or 80,000 miles on sedans as the target replacement criteria. At the current time, Mr. Revell noted that the Motor Pool had not been able to attain that goal, and used 8 years, 80,000 miles for cars and 10 years, 100,000 miles for trucks. Senator Jacobsen asked how vehicles, which met the age or mileage requirements, were disposed of. Mr. Revell explained that those vehicles were auctioned at public auction twice a year in both southern and northern Nevada. Senator Jacobsen then asked whether the current facility was adequate for the Motor Pool needs; Mr. Revell replied in the affirmative.
Mr. Beers referenced decision unit E-710, which provided the detail on the computer hardware/software purchase, and asked for clarification regarding the system reporting capabilities. Mr. Revell stated it was originally anticipated that it would take substantial time to implement the system and input the necessary data. Mr. Revell reported that the Motor Pool was beginning to retrieve very valuable data from the system, and explained that originally, the software would only accommodate data input for 1,000 vehicles. The Motor Pool fleet consisted of 750 vehicles, with 350 agency vehicles under its repair, and it was anticipated that the size of the software and hardware capabilities would be increased to accommodate 2,000 vehicles. Mr. Revell noted the data input needs had been scaled back to 1,500 vehicles, in order to maintain a reserve, and to utilize current hardware and software programs, which would create a substantial reduction in cost.
Mr. Beers noted that the subcommittee did not have much detail regarding what the $140,000 allocation in FY2001-02, and the $250,000 allocation in FY2002-03, constituted. Mr. Manning stated those figures were based on subsequent conversations with the Motor Pool staff, when it was determined that the existing file server could be updated for less cost than originally budgeted, and the cost was reduced on the fleet management software program. Mr. Beers asked for a listing of the hardware and software included in the decision unit, i.e., whether there were separate servers in the north and south, a separate system in each office, or was it one integrated system. Mr. Manning stated it was one integrated system with a central server in the Carson City Motor Pool that was accessible from all three locations. Mr. Beers inquired whether the system had an ODBC interface, or a similar program for retrieval of reports. Mr. Revell remarked that he would contact The Department of Information Technology (DoIT) regarding the system, and would provide the requested information. Mr. Beers inquired whether the implementation of the system was better at the current time, and was it still not complete. Mr. Revell stated the system was complete, however, was at capacity at the present time, which was the cause of the problem. The amount of information required for 1,000 vehicles created more data than originally anticipated in the areas of fuel interface, number of trips, repairs, and gallons of fuel. Mr. Revell commented that the system had reached its capacity before the fuel downloads were implemented. Mr. Beers requested a more definitive description of the limitations of the system and what capacity had been reached, i.e., hard drive storage, or a built-in limitation in the database, as there were many things that could cause a capacity ceiling. Mr. Revell stated he would provide the requested information, but he explained the problem occurred because of the hardware and software capacity. He did not feel there was a problem with the database, per se, other than the size.
Senator Jacobsen asked whether it was apparent that the system would produce the required information. Mr. Revell replied in the affirmative, and added that he felt the system had the capability to provide the necessary data, and the Motor Pool was pleasantly surprised at the information available. Senator Jacobsen noted that at peak times, vehicles were often not available, and inquired about permanent contracts with rental car companies. Mr. Revell indicated the Motor Pool had a state rental car contract in effect for both in‑state and out-of-state rentals, and Motor Pool fleet overflow. Senator Jacobsen asked Mr. Revell to explain what he would perceive as the Motor Pool’s major problem area at the current time. Mr. Revell stated the major problem was logistics, simply getting people in and out of the rental car companies. The biggest complaint was that if a Motor Pool vehicle was not available, it took approximately 45 minutes to secure a rental car, which could entail a bus trip to the rental car agency and waiting in line for the vehicle.
Ms. Giunchigliani referenced the “allowance” for rental car agencies regarding the privilege tax, and asked whether the “allowance” was a factor in the Motor Pool budget. Mr. Revell stated he was unaware of such a provision. Ms. Giunchigliani felt if privatization was considered, the privilege tax issue should be reviewed.
Senator Jacobsen indicated the subcommittee would review the Motor Pool Vehicle Purchase account as its next order of business.
MOTOR POOL VEHICLE PURCHASE – BUDGET PAGE ADMIN-45
Mr. Revell explained that Budget Account 1356 addressed the regular Motor Pool vehicle purchase, where depreciation funds, along with surplus property sales and accident recovery funds, were transferred into the account to fund the purchase of replacement vehicles. Over the upcoming biennium, the Motor Pool would purchase 59 vehicles in FY2002, and 47 vehicles in FY2003, for a total of 106 vehicles as replacements. Mr. Revell indicated the budget also contained a one-shot appropriation for the purchase of 102 additional vehicles for lease to various agencies; those were agency-requested vehicles.
Mrs. Chowning asked for a brief explanation regarding how the Motor Pool arrived at the decision to replace vehicles. Mr. Revell explained that vehicles with higher mileage were identified via the computer program. The vehicles were sorted by year of acquisition and mileage, and the Motor Pool then anticipated replacing as many of those identified vehicles as possible. According to Mr. Revell, also taken into account were vehicles that had been involved in major accidents, which did not fit into the routine replacement methodology. The Motor Pool could not anticipate the replacement of such vehicles, yet it was often uneconomical to repair wrecked vehicles. The Motor Pool considered replacement of vehicles involved in accidents, or those that had suffered catastrophic mechanical failure, before vehicles scheduled for routine replacement. Mr. Revell remarked that the Motor Pool then commenced with replacement of vehicles according to available funding. Mrs. Chowning commented that the current methodology for replacement of a vehicle appeared to be 8 years or 80,000 miles. Mr. Revell explained that was the parameter used, however, noted that during the past fiscal year, there had been approximately 60 vehicles with over 100,000 miles, and the Motor Pool had been able to replace most of those vehicles. Mr. Revell stated it generally worked out to the neighborhood of 8 years or 80,000 miles, which was the point where major repair costs would surpass the value of the vehicle.
Mrs. Chowning asked Mr. Revell to provide LCB staff with the methodology used in decision unit E-710, which recommended the purchase of 59 vehicles in FY2001-02 and 47 vehicles in FY2002-03. Mrs. Chowning also asked for information regarding the purchase of alternative fuel vehicles, i.e., 10 compact sedans in FY2001-02, 2 passenger vans and 20 compact sedans in FY2002-03. Mr. Revell advised that the Motor Pool was operating under a 90 percent mandate for non-emergency vehicles regarding replacement vehicles for Las Vegas or Reno, as delineated in the Nevada Administrative Code (NAC) Chapter 486A. The alternative fuel vehicles included in the budget were chosen primarily because of availability. Mrs. Chowning inquired whether purchase of the aforementioned alternative fuel vehicles would meet the 90 percent requirement. Mr. Revell answered in the affirmative.
Ms. Giunchigliani asked whether Mr. Revell felt the 90 percent mandate was good or bad. Mr. Revell commented that it was highly restrictive. Ms. Giunchigliani stated the NAC was written by state agencies, and asked why the regulation was not reviewed and amended. Mr. Revell explained Chapter 486A of the NAC was written by the Division of Environmental Protection, and implemented by the 1991 legislature.
Senator Neal referenced the replacement methodology, and inquired whether there was a built-in obsolescence factor that was considered by the Motor Pool. Mr. Revell emphasized that the vehicles in the Motor Pool fleet were the most dependable in history, and there was no limitation placed on the vehicles; quite often, the drivers of the vehicles were the cause of replacement.
Mr. Parks stated the budget included an entry for insurance recoveries, however, there was no budget allocation for the upcoming biennium, and asked Mr. Revell to clarify the accounting perspective. Mr. Revell commented that the Motor Pool self-insured through the Risk Management Division. When vehicles were involved in accidents, the insurance recovery money realized from the other driver’s insurance company was returned to Budget Account 1354; Mr. Revell stated he was unsure of exactly how the accounting worked. Those funds were an unknown factor, and insurance recoveries were routinely received, however, exact amounts were unknown.
Senator Jacobsen advised the subcommittee that the next order of business would be the Printing Office budget.
PRINTING OFFICE – BUDGET PAGE ADMIN-30
Senator Jacobsen asked Donald L. Bailey, Sr., Chief, State Printing Division, to provide an overview of the budget, and also requested a tour of the facility for subcommittee members. Mr. Bailey introduced Rod Corbit, Deputy State Printer, who would actually present the Printing Office budget overview, and assured Senator Jacobsen that he would be happy to conduct a tour for the subcommittee.
Mr. Corbit explained the Nevada State Printing Division was responsible for providing printing and reproduction services to all state agencies and entities. Products included bulletins, reports, circulars, forms, stationery, et cetera. The Printing Office also operated a copy center in Elko, as well as providing technical oversight for the purchase of copiers by state agencies. Mr. Corbit testified that via a total quality environment, the Printing Office strived to meet its goal of producing a high quality product in a time frame and at a cost that was effective for state agencies and the citizens of Nevada.
Continuing, Mr. Corbit stated the Printing Office staff was continually educated in new printing technology and equipment, in order to meet the goal of providing better service to its customers and the state. The Printing Office operated under Nevada Revised Statutes (NRS), Chapter 344, and measured its performance via performance indicators contained in The Executive Budget. Mr. Corbit stated the Printing Office projections for FY2001, as depicted by performance indicators, were as follows:
10. Percent of customer satisfaction with time frame, 94 percent.
11. Percent of customer satisfaction with cost, 96 percent.
Senator Neal referenced the average job turnaround time of 16 to 20 days, asking what type of volume that time frame was based upon. He felt it was a high turnaround time, and noted the actual turnaround time for FY2000 was 14 to 17 days. Mr. Corbit explained the Printing Office was currently operating in the range of a 10 to 12 day turnaround, which involved between 300 and 400 job shipments per month; the percentage was computed based on all printing jobs received. Senator Neal asked whether the projection would be an average of all orders received. Mr. Corbit replied in the affirmative, and explained the Printing Office performed a full “mix” of jobs, noting that business cards, letterhead stationery, and envelopes might require five to seven days, and larger productions might take two to three weeks. Senator Neal asked about the number of quick print orders, and what such jobs would entail. Mr. Corbit explained quick print orders were basically copy/reproduction orders, generally small runs of booklets, or flyers. According to Mr. Corbit, if an agency needed 20 or 30 reports copied in a black-and-white format, that was done as a quick print order, in order to keep prices down. Mr. Corbit commented that the turnaround time for a quick print order was much shorter, generally between one to four days, depending upon the project.
Mrs. Chowning noted that the Printing Office had hoped to realize a larger amount of sales due to the opening of the office in Las Vegas, which had not come about because of problems with the vendor. Mrs. Chowning stated there had been approximately $250,000 per year appropriated for that operation over the last biennium, and she wondered how that allocation had been used. The Executive Budget for the upcoming biennium contained an appropriation of approximately $150,000 for that operation, and Mrs. Chowning inquired when the Las Vegas office would become operational. Mr. Corbit commented that the original appropriation was not spent, and the difficulties encountered with the copy center in Las Vegas stemmed from the method of performing the copying, i.e., the digital transfer of files between Las Vegas and Carson City. The Printing Office also wanted to ensure that digital transfers were properly handled, to ensure that the finished product would look the same as that viewed by the customer. Mr. Corbit explained the Printing Office encountered some problems and concerns with that procedure with the vendor, and worked through those problems, primarily via testing. That particular vendor did finally devise a solution, however, it was approximately $80,000 over the amount budgeted for equipment, which the Printing Office did not feel would be prudent to pursue. Mr. Corbit indicated the project had been put on hold while the Printing Office continued to research the copy center, and three vendors had been located that could produce the results the Printing Office felt would be required in the Las Vegas area. The current plans were to open the satellite office in August 2001.
Mrs. Chowning remarked that with the original appropriation of $250,000 in each year of the past biennium still available, a budget amendment would be in order. Mr. Corbit stated that the only additional funds needed would be the requested $150,000 allocation contained in The Executive Budget.
Mr. Beers asked whether the proposed copy center in Las Vegas would be run via a vendor. Mr. Corbit noted the vendor would be the provider of purchased or leased equipment, i.e., Xerox. The Printing Office would lease equipment from the company, and a Printing Office employee would operate the quick print center, run the equipment, and handle customer service. Mr. Beers referenced decision unit E-710 regarding a state agency’s ability to e-mail a Quark software express file, or another type of file, and asked whether that system was in place, and what the digital transfer issue encompassed. Mr. Corbit explained there were technical problems with Xerox equipment, and while the content would be available, there could be font substitutions, which would not allow the copy to look exactly the same as the original document. Mr. Corbit remarked there had been upgrades of the equipment offered by several vendors, which had not been available two years ago. Mr. Corbit indicated the Printing Office did have the ability to facilitate the output of Quark express, Word, and various other applications.
According to Mr. Corbit, the Printing Office currently received many e-mail files that required downloading, which appeared to be working well. The Printing Office would like to make the procedure “seamless” for all agencies, to facilitate the transfer of files directly into a digital or copying device without requiring translation by the Printing Office. Mr. Beers asked whether the process was currently in place; Mr. Corbit stated the process was partially in place in the Carson City Printing Office, and the satellite office in Las Vegas should be operational in August. An added feature would be acceptance of orders for printing in Las Vegas, which could then be transmitted to the Printing Office in Carson City.
Senator Neal referenced the performance indicators that addressed the percent of customer satisfaction with time frame at 89 percent in FY2000, and 87 percent of customer satisfaction with cost. He asked whether the Bill Draft Request (BDR) recommended by The Governor’s Steering Committee to Conduct a Fundamental Review of State Government, which would require the Printing Office to be one of three bidders for state agency printing jobs, would result in an improvement of those percentages. Mr. Corbit stated he did not feel that would add any time to the turnaround, however, he had not actually reviewed the BDR, but understood the Printing Office would be one of the bidders for a state agency’s product, with at least two private sector bidders also involved in the process. Mr. Corbit indicated that process would be handled via the Purchasing Department, with some of the smaller orders being handled directly by the agencies. Mr. Corbit stated he could not account for private industry in the area of deliveries.
Senator Neal stated if the Printing Office wanted to be competitive with private industry in terms of bidding for state agency projects, it should be aware of the competition. Mr. Corbit noted that current studies revealed the Printing Office compared very well with private industry, with many jobs having a turnaround time of three to five days. At times, private industry could produce a shorter turnaround time, mainly because of the workload of the Printing Office. Senator Neal then asked whether the Printing Office had any fear of engaging in the new bidding process. Mr. Corbit assured Senator Neal that the Printing Office did not have any fear of the process and, in fact, felt it would help the Printing Office become even more competitive with turnaround times. It would also give state agencies an opportunity to weigh the Printing Office against the private sector.
Mr. Beers inquired whether there was an opportunity for the Printing Office to expand its market to include other private sector agencies. It was his impression that the Printing Office was more expensive, however, produced higher quality work. Mr. Bailey indicated the Printing Office had provided the subcommittee with a business plan which included a marketing package, Exhibit C, and stated the Printing Office would be very competitive in the market, soliciting printing jobs from the University and Community College System of Nevada (UCCSN), along with other municipalities. The Printing Office was very cognizant of private industry, and would not attempt to infringe on that “turf.” Mr. Bailey reiterated that the Printing Office felt it could be very competitive with the private sector. Exhibit C contained a survey just recently completed, which indicated the Printing Office was highly respected among its customers. According to Mr. Bailey, it would be a new adventure for the Printing Office, and noted that perhaps it was time for a “boot” to become more competitive.
Senator Jacobsen sensed there was a great deal of interest in the quick print procedure, and asked Mr. Bailey to cover the capability within the Carson City area, along with the need. Senator Jacobsen also asked for input regarding the Elko operation. Mr. Bailey indicated the Elko operation consisted of two machines, housed within a state office. In exchange for housing, the Printing Office allowed unlimited use of the equipment by the host agency. Charges were assessed to other agencies in the Elko area at the regular quick print prices. Mr. Bailey indicated the quick print operation in Carson City consisted of a high-volume copier, which printed approximately 135 copies per minute in a black and white format, and could produce two-sided copies, and insert tabs. The Printing Office also had color copying capabilities, along with the ability to perform laminating, folding, and binding within the Carson City office. Mr. Bailey noted that the planned Las Vegas office would primarily consist of one high-speed copier, which could produce reports, flyers, and various other items. It would be a complete copy center, and the Printing Office felt there would be a savings in copying costs to agencies in Las Vegas for projects that were completed in the Carson City office, because the information could be electronically transmitted.
Senator O’Donnell referenced the electrical requirements of the Printing Office, noting that the agency would demand a great deal of power, and inquired whether the budget included adequate reserves to compensate for an increase in power costs. Mr. Bailey explained the budget included the figures provided by the Budget Division for increased utility rates and, since the extent of rate hikes was unknown, exact figures could not be submitted. Mr. Bailey concurred that the Printing Office was definitely a user of electricity. Senator O’Donnell asked about the current monthly electrical costs for the Printing Office. Mr. Bailey stated it was approximately $8,000.
Mr. Hettrick stated since the Printing Office bid most of its jobs, it could raise prices to cover rate increases in the electrical industry, should that prove necessary, and noted the private sector would also be required to increase prices. Mr. Hettrick indicated the Printing Office could then approach the Interim Finance Committee (IFC) and request the authority to accept the additional money generated by the raise in its prices. Mr. Corbit remarked that the Printing Office would review the hourly rates charged for particular jobs, and should costs rise because of an increase in electricity rates, the hourly rates could be adjusted.
Senator O’Donnell stated the Printing Office would lose the entire bid if costs were higher than that of a competitive firm, and state agencies that had to absorb higher printing costs would also deplete their budgets. Mr. Corbit felt sufficient increases had been built into The Executive Budget regarding utility costs, and noted the Printing Office had adequate reserves in the event costs were higher than anticipated. As far as a raise in printing rates because of a rate increase in the power industry, Mr. Corbit felt that would put everyone in the same position, whether it was private vendors or state agencies.
Mr. Bailey encouraged the subcommittee to tour the Printing Office, because he felt it was a tremendous facility. Mr. Corbit stated the Printing Office was very proud of its accomplishments (Exhibit D) over the past two years in the field of electronics, having installed a computer system that aided in the printing of bills during the legislative session. He echoed Mr. Bailey’s invitation to the subcommittee to tour the Printing Office.
Senator Jacobsen formally relinquished his status as acting Chairman to Senator O’Donnell, Chairman, and explained the next budget for subcommittee review would be Purchasing.
PURCHASING – BUDGET PAGE ADMIN-48
William (Bill) Moell, Chief, Purchasing Division, explained the division was responsible for providing the best value-priced goods and services to customers as expeditiously as possible, while maintaining the equal access principles of public purchasing. According to Mr. Moell, the Purchasing Division received a 7.8 rating out of a possible 10, on The Governor’s Steering Committee to Conduct a Fundamental Review of State Government survey regarding satisfaction with service agencies. That was the highest rating of all service agencies, which would challenge the division because its customers would expect improvement on the survey results in the future.
Mr. Moell indicated he would focus on three areas of Budget Account 1358, pointing the way to increased customer satisfaction. The Purchasing Division participated in the base budget review process last spring, and each of the areas was discussed in detail at the time. According to Mr. Moell, the division was instructed to move forward via the budget and legislative process to implement the changes.
The first area was one the division hoped to complete via the IFC, and it had introduced a work program that would merge Budget Account 1367, Federal Surplus Property, into Budget Account 1358, Purchasing. Mr. Moell noted the functionality of the two accounts had steadily merged for years, and consolidation would garner a net savings of a .50 full-time equivalent (FTE) position. He noted the work program had been withdrawn because of a minor conflict in the NRS. That conflict, which required the account to be in the General Fund, would be removed via BDR 27-528.
The second area was the purchasing assessment, and Mr. Moell testified that the current biennium had been one of significant transition regarding the manner in which the Purchasing Division was funded:
· The revenue was budgeted for Purchasing, but not specifically budgeted to its customers;
· Services procurement was changed during the legislative process back to a fee-for-service, but the division had no history to predict costs or revenues;
· An amendment to the local purchasing statute, 332.195, allowed local government entities to enjoin on state contracts without going through the state. That had been very positive for the taxpayers, however, had a negative impact on the Purchasing Division’s revenue;
· To compensate for that loss, the division instituted a more comprehensive vendor rebate program.
Mr. Moell stated the result was a severe inconsistency in budgeted versus actual revenue. The Governor had recommended a revenue plan that would take into account the experiences of the Purchasing Division over the current biennium, including completion of the transition from a reactive transaction- based operation to a proactive action-based operation.
According to Mr. Moell, the Purchasing Division’s revenues reflected a purchasing assessment based upon more than a single year, and included both services and commodity purchases, and the expense that had been budgeted by its customers. The dollar utilization of contracts put in place as a result of the Purchasing Division’s action was the basis of the assessment.
Mr. Moell announced that the third area of impact was the project that had been under discussion for the past two years. The Nevada Mall was an electronic procurement system, a model of the Integrated Financial System, which encouraged customers to buy direct from vendors under contract with the Purchasing Division via the Internet. Mr. Moell emphasized that the project was not identified in The Executive Budget, and the division proposed that the subscription cost of the service be paid from a targeted reduction of the legislatively established Purchasing Fund. BDR 1315 had been submitted as part of the Governor’s budget bill package, and would reduce the fund by no more than $150,000 per year for E-commerce projects.
Mr. Moell reported that should the bill be passed, and with the concurrence of the appropriate committees, the Nevada Mall purchasing service system would expedite customer access to low dollar volume/high transaction count acquisitions. The Nevada Mall system would allow the Purchasing Division to increase the quality of service to its customers by being contract managers, rather than transaction processors, and to concentrate its purchasing expertise on the more complex, high dollar procurements.
Senator Neal referenced performance indicator number one, “Acquisition cost of goods purchased on behalf of our customers,” which depicted $101.4 million as the actual for FY2000, and requested clarification of the projected figures for the upcoming biennium in The Executive Budget. Mr. Moell stated the Purchasing Division proposed a “flat” budget for the next biennium, and the $101.4 million depicted a decrease in the amount of goods and services purchased by local government entities. The Purchasing Division no longer accounted for those goods and services, and the $90 million projected for FY2003 would more accurately reflect only state purchases, not including local government purchases. Per Mr. Moell, as the division moved into the Nevada Mall project, and also moved forward with some of its open-term contracts, a growth in local government purchases was anticipated, however, that information would not be reflected in the division’s budget. Senator Neal asked why that information would not be included; Mr. Moell explained that local government purchases would be direct via contracts put into place by the Purchasing Division.
Mr. Beers noted the Purchasing Division was budgeted to replace 23 computers and 21 laser printers for 27 positions over the next biennium, and requested clarification. Mr. Moell stated the division attempted to conduct a replacement of equipment approximately every four years, and decision unit E-710 reflected routine replacement needs. Since the division had purchased its original equipment at the same time, the replacement needs often appeared excessive. Mr. Beers assumed the Purchasing Division was networked within its office, and asked whether it would be more efficient to purchase a few large volume printers that staff could share, as opposed to the requested purchase of 21 small, individual printers. Mr. Moell explained that the division had researched that possibility, but had found it extremely useful to provide individual printers, particularly when staff was working with customers and making changes in orders. The copy machine in the division was digital and linked with the internal network, and Mr. Moell stated many large jobs were printed on that machine. The small printers were a convenience for staff when working with customers. Mr. Beers then referenced the request for 30 copies of “Office 2000” software, and asked for clarification. Mr. Moell noted that the Purchasing Division had anticipated receipt of additional staff from the Department of Information Technology (DoIT) when it prepared its original budget. That situation had changed, and the request could be reduced to 27 copies. Mr. Moell emphasized that the division had to maintain software at a level compatible to its customers.
Senator Jacobsen requested information regarding surplus property, and noted that the rural areas more or less survived by purchase of surplus goods. Mr. Moell assured Senator Jacobsen that the proposed consolidation of accounts would not affect the sale of surplus or state excess property to the division’s rural customers. The Purchasing Division had one staff member who was the singular point of contact for rural customers regarding federal and state excess property, and Mr. Moell pointed out that it had been a very successful program.
Senator Neal referenced performance indicator number three, “Average percent of discounts received by our customers on the central procurement of services,” and asked for information regarding the reduction in the percentage projected for FY2001. Mr. Moell replied that the division felt the 35 percent projection was a fairly good across-the-board discount on wholesale items, and it would depend largely on the volume of commodities purchased. For example, Mr. Moell explained, large furniture orders would relate to a greater discount than smaller commodity purchases. That fact would have a tendency to skew the overall percentage. Mr. Moell reported that the Purchasing Division had done well with the actual 41 percent discount rate in FY2000, however, it was not felt that figure would prevail throughout the upcoming biennium. Senator Neal questioned whether that percentage was for central procurement of services. Mr. Moell replied in the affirmative, and noted the term “central procurement” was simply terminology that described the procedure, and noted the division held direct purchase authority for various agencies. Central procurement services consisted of items that were purchased via the Purchasing Division.
Senator O’Donnell stated he would like to address the contractual arrangements between the state and Southwest Airlines, and noted that state agencies were limited by the number of carriers with routes from Reno to Las Vegas, from Reno to San Francisco, or from Reno to Los Angeles, et cetera. That limitation impinged upon Nevada’s tourist trade quite drastically, and Senator O’Donnell raised the question of whether a single contractual agreement with one carrier would produce an adverse reaction and/or condition for Nevada’s tourism base. Senator O’Donnell inquired whether an analysis had been conducted regarding what impact that would have on tourism. Mr. Moell stated there had been no analysis done, and he also felt it would have a negative impact on tourism. The Purchasing Division had garnered a 13 percent discount with American Airlines, however, that airline was decreasing its presence in the Reno market. When the Purchasing Division renegotiated the contract with Southwest Airlines, it was basically dealing with the only “player” in town, and had no leverage. Senator O’Donnell commented that the reason there was only one carrier was because the state contracted with only one carrier, and the remaining carriers could not compete on a profitable basis. Mr. Moell felt Senator O’Donnell was overestimating the state’s influence in the market, and did not feel the contractual agreement influenced the buy out of Reno Airlines by American Airlines, or impacted the airline’s decision to pull out of the Las Vegas market. Senator O’Donnell commented that the state could have negotiated a contract that mandated the airline’s continued routes between Las Vegas and Reno. Mr. Moell testified that Governor Guinn had attempted to contract with American Airlines when he was first elected, however, that effort had been unsuccessful.
Senator O’Donnell felt the airline was dictating the economy of the state, and Mr. Moell advised that the Purchasing Division had attempted to negotiate a secondary price agreement with two other airlines, in an effort to assist cities, counties, and school districts, and also as a backup for the state’s Southwest Airline’s contract, however, that attempt had been unsuccessful, and he noted both airlines were currently involved in bankruptcy proceedings. According to Mr. Moell, the only other airline flying between Reno and Las Vegas was America West Airlines, with only one flight a day. Senator O’Donnell commented that he had nothing against Southwest Airline, but felt the state had “shot itself in the foot” when it came to the tourism base, by signing a contract with only one airline. He suggested that in the future, the state should look at not creating exclusivity in terms of contracts with airlines, because it actually seemed to be harmful to the state’s tourism. Mr. Moell reiterated that the Purchasing Division had attempted to secure additional airline contracts, however, there were no carriers available.
Senator Neal also voiced his disgust regarding airline accommodations, explaining his itinerary for a recent trip to Washington, D.C. Ultimately, Senator Neal stated, he paid an additional fare to reroute his return flight to Reno rather than Las Vegas. He felt that prices were becoming ridiculous. Mr. Moell stated he fully understood the frustration, and realized that persons flying from Reno did not have the luxury offered at the Las Vegas airport. Senator O’Donnell stated tourists also felt the “pinch” when flying into Reno. Per Senator O’Donnell, the term, “government investment spending,” was an economic term for determining where dollars should be spent in terms of the industry that the government was trying to nurture and make successful. He felt Nevada needed to review its investment spending and also where dollars were being spent. Nevada could be saving $5 per ticket on its contract, while alleviating an entire airline carrier that could not route between Reno and Las Vegas because it would not be cost-effective. Mr. Moell agreed, and felt a joint project between the Commission on Economic Development and the Commission on Tourism, along with the convention and visitors authorities in Reno and Las Vegas, would be productive for all involved. Senator O’Donnell also suggested that the Purchasing Division contact the Economic Forum, as it was that organization which determined the fiscal figures for the state, to solicit advice regarding that particular venue.
Ms. Giunchigliani felt that it would be a good idea to review the statistics regarding how many state employees were being transported back and forth between Reno and Las Vegas, simply because they were housed in the north, versus the potential for relocation. She would be curious to see those figures. Mr. Moell stated that during the past fiscal year, there were approximately 70,000 flights scheduled between Reno and Las Vegas.
With no further questions or testimony forthcoming on the Purchasing Division budget account, Senator O’Donnell closed the hearing, and opened the hearing on the Risk Management account.
INSURANCE AND LOSS PREVENTION – BUDGET PAGE ADMIN-16
Sue Dunt, Risk Manager, Risk Management Division, Department of Administration, stated she would present an overview of Budget Account 1352, Insurance and Loss Prevention. As a special note, Ms. Dunt explained that Budget Account 1329, the State Employees Workers’ Compensation budget, was consolidated into Budget Account 1352, effective July 1, 2000.
According to Ms. Dunt, the mission of the agency was to establish and promote a comprehensive and cost-effective risk management and insurance program for the state of Nevada, and to assist agencies in preventing, minimizing, and controlling risks, losses, injuries, and insurance costs. The major functions performed through the division included the negotiation for, and purchase of, commercial insurances to protect the state’s assets from catastrophic losses. Ms. Dunt noted there were several different policies in the property insurance area; she explained the division self-funded the first $100,000 of all losses, and anything over that amount was commercially insured. Ms. Dunt reported that an excess liability policy had been purchased, via savings realized through consolidation of a number of miscellaneous property policies from previous years. Ms. Dunt stated the policy contained a $1 million deductible for the excess liability and the intent of that policy was to help protect the state’s Tort Claim Fund, in the event it suffered a catastrophic claim, or a claim that was not protected by the Tort Claim cap.
Continuing, Ms. Dunt explained there was also an employee dishonesty policy, which carried a $100,000 deductible. The division administered self-funded programs for automobile physical damage claims, and also property claims under $100,000. Ms. Dunt stated the division was responsible for coordination and oversight of the implementation of the Statewide Safety and Early Return to Work Program. According to Ms. Dunt the division was also responsible to develop and provide oversight for the Workers’ Compensation Program, and adopted and promoted various loss prevention programs to decrease areas of risk to the state. The division contained a section that reviewed Request for Proposals (RFPs) and contracts for insurance coverage and indemnification clauses, to ensure that the division was not taking unnecessary risks to the state via its contracting process. Ms. Dunt commented that the division was responsible for negotiation and procurement of a statewide occupational health services contract that would provide annual physical examinations to police and firefighters. It was also responsible for other occupational health services such as hepatitis-B vaccinations and other Occupational Safety and Health Administration (OSHA) related examinations.
Ms. Dunt indicated the Risk Management Division did not have any new programs, per se, for the upcoming biennium, however, did adopt a new insurance policy for workers’ compensation, which began on January 1, 2001. Basically, the division transitioned from a retrospective rating plan to a large deductible plan. Ms. Dunt called the subcommittee’s attention to Exhibit E, a booklet containing an overview of the performance indicators for the Insurance and Loss Prevention budget, and pointed out that the exhibit contained a chart which depicted the success the division had enjoyed regarding the retrospective rating plan that had been in effect since 1994.
Senator O’Donnell asked Ms. Dunt to explain the difference between a retrospective rating plan and an actual plan. According to Ms. Dunt, an actual plan would be somewhat similar to a person’s automobile insurance, where the premium was paid based upon a projection derived from the prior three to five years’ losses, i.e., the premium was developed based on past losses. It was a set premium and no matter what the degree of loss, for that one-year period, the premium based upon the past losses would be the amount paid. Ms. Dunt explained that under a retrospective rating plan, especially in the area of workers’ compensation, the state could represent to the insurer that it would do better than past history indicated. The insurer would then advise the state that it would take on a greater risk and, should the state do better in the area of losses, the insurer would provide a refund consisting of the difference between the proposed charge and the actual losses incurred. Ms. Dunt referenced Exhibit E, and explained the chart that depicted the retrospective plan.
According to Ms. Dunt, as the division had negotiated insurance plans with the Employers’ Insurance Company of Nevada (EICON) over the years, trading large sums of money back and forth, EICON had agreed to meet the division in the middle, and no longer requested that the state pay all costs up front. However, the state would be liable should the claims costs meet or exceed the established amount. Ms. Dunt explained that what the state owed, and possibly could still owe because of its open retrospective plan years, was identified in the exhibit. According to Ms. Dunt, currently via EICON the division only had open plans for calendar policy years 1998, 1999, and 2000.
Senator O’Donnell commented that it appeared the Risk Management Division would save the state some money. Ms. Dunt concurred, and asked members to turn to the chart contained in Exhibit E which depicted costs that would be incurred under the new plan. She explained the state would only pay the actual costs of the claims, and would not be responsible for payment of the reserves. Under the retrospective plan, the state would have been required to pay the entire cost of the claim, along with anticipated reserves during the first year. Ms. Dunt stated that caused a substantial effect on costs in police and firefighter coronary claims, because a person suffering a heart attack might only incur $200,000 in actual costs for the year, but because of the reserves that would be established on the claim, i.e., for possible death benefits or added medical expenses, the state would be required to pay an average of $500,000 per claim. Under the new plan, the state would only pay the costs as incurred, however, the state would not be required to pay reserve funds to the insurance company until costs were actually incurred. According to Ms. Dunt, that was the method whereby the state would enjoy the cash flow savings under the new plan. Ms. Dunt stated the exhibit also included a projected five-year cash flow savings chart, prepared at the request of the Governor. Ms. Dunt advised that the Risk Management Division had asked its actuarial contractor to prepare that projection, which depicted an average over the next five years, providing claim trends remained the same, and no new legislation was passed that would open up new or different claim liability to the division.
Senator O’Donnell noted that the projection was to save $6 million over the next three to five years, and asked about decision units M-101 and M-200, which indicated an increase in insurance premiums. Ms. Dunt stated she believed the increases were related to property insurance, rather than the workers’ compensation insurance, and noted the division did expect some slight increases in property insurance. The projections received from the property broker indicated that expected rates would increase by approximately 20 percent at the next renewal date of July 1, 2001, and thereafter, possibly another 10 percent increase for the second year of the biennium. That was due mainly to earthquake and flood coverage. Senator O’Donnell asked why the premiums were so high, and noted that decision unit E-225 contained approximately 70 percent and 36 percent increases when compared to the adjusted base budget. Per Ms. Dunt, the costs were spread over several categories within the Insurance and Loss Prevention budget, mainly in the area of contract services. Ms. Dunt explained that over the past biennium, the division was budgeted for that cost under Budget Account 1329, and the funds were not used because the liability anticipated for possible mold contamination had not materialized. The cost increases were designated to address indoor air quality issues, in the event the services of an outside firm or industrial hygienist were required to search out possible contamination.
Senator O’Donnell inquired about the mold issue in state buildings. Ms. Dunt stated the Grant Sawyer Building in Las Vegas had been a constant source of investigation over the past several years. Ms. Dunt reported that the potential mold issues had been identified, and the division was awaiting a final report from an environmental group regarding the Sawyer Building. It was anticipated the report would stipulate that hidden and obvious sources of mold growth had been identified. Ms. Dunt explained there were also several other pending investigations.
Mr. Hettrick applauded the division’s efforts regarding the cash flow in the workers’ compensation area, however, felt the subcommittee should ensure that it understood exactly how that would work. Essentially, Mr. Hettrick explained, cash flow would represent a savings, but those amounts were actually in reserve, and the only real profit would be realized via interest earned through investment of the money. Ms. Dunt commented that the actual savings the division expected to achieve through the new workers’ compensation plan would be approximately $1 million per year. That figure was based on the negotiated discounts on the fee schedule provided by the new managed care company, and the division would also pay less per claim for actual administration, so the realized savings would be approximately $1 million.
Ms. Dunt explained there was a difference in the reserves, because as the division finalized its EICON plans and no longer suffered that liability, the reserve levels could be more specifically projected, based on actual incurred claim costs that could be identified, versus an allusive liability cap, such as that created by a police or firefighter coronary claim. Mr. Hettrick asked about the liability under the new plan, as the division moved away from EICON, and noted if the division was not reserving funds, or did not have a stop loss in place, it could incur expenses that would need to be further addressed via its budget. Ms. Dunt felt one benefit would be the additional time to prepare for that eventuality, because those costs would actually be paid in small increments each year versus one big payment at the beginning of the year in which the claim was filed. To date, Ms. Dunt explained, the division had not received a claim from a retired policeman or firefighter, but should such a claim be filed during an open year, the division could reserve for that claim over the biennium.
Mr. Hettrick stated his point was that, ultimately, under the new plan, the money for claims would still be spent, and it simply became a matter of when it would be spent. The only real savings would occur because the division would retain control of the funds, rather than paying EICON, and would earn the investment from the reserves. Other than that, Mr. Hettrick noted there was no real savings, and it simply amounted to cash flow. Mr. Hettrick pointed out that when the division paid EICON, it also alleviated the state’s liability, while under the new plan, a greater liability might be incurred than the division reserved for. Mr. Hettrick indicated that, while the state might save $1 million, it had also assumed the risk. He did not want the subcommittee misled into thinking that the state had walked away from $6 million in liability, when it really amounted to cash flow savings. Ms. Dunt concurred, and indicated that was the reason it was identified as cash flow savings.
Senator O’Donnell commented that neither he nor Mr. Hettrick appeared to be familiar with the nomenclature, but according to accounting standards, one thing was clear, i.e., if the state assumed all the risk, it would be more likely to ensure that the risk was mitigated. Senator O’Donnell commented that some savings might eventually be realized, however, he felt Mr. Hettrick made a valid point.
Mrs. Chowning asked for clarification regarding the two sources of training, decision units E-225 and E-850, and referenced the significant variation in the allocations for the two decision units. Ms. Dunt explained there were actually three categories in the budget that addressed training. The first was for training for division staff, i.e., professional development training and enhancement training in areas of expertise, category 30. The budget showed an increase in that category of approximately $3,100. Mrs. Chowning stated her figures indicated the increase was from $14,000 to $39,000. According to Ms. Dunt, the category for special projects included the $31,000 originally allocated under Budget Account 1352 for loss control training regarding property and other miscellaneous insurance training. That would include such things as loss funding for the Tort Claim Fund to prevent tort claims, the purchase of sexual harassment prevention manuals for the Attorney General’s (AGs) Office, and could be used to send targeted agency representatives to property loss conservation training programs. Ms. Dunt stated the funds were also used for special projects, i.e., development of a Risk Management Division User’s Manual.
According to Ms. Dunt, the division had consolidated Budget Account 1329, Special Equipment Fund, into the special projects category. The Risk Management Division made that fund available for agencies that conveyed an immediate need for equipment for employees in danger of incurring injuries. That could be used to purchase such items as headsets, or replacement of broken chairs with ergonomic chairs, et cetera. Identified safety needs were grouped into that special projects category.
Mrs. Chowning noted that the legislature appreciated the need for prevention of injury, and asked Ms. Dunt to provide additional detail on funding spent or projected to be spent in that category. Ms. Dunt stated she would provide the requested information. Senator O’Donnell asked that the information include the cost of assimilating the requested information, i.e., how many hours it took for staff to research and prepare the information.
Senator Neal referenced the base budget, which requested allocation for two different insurance premiums, and asked for clarification. Ms. Dunt explained one allocation was for workers’ compensation premium costs, and the second allocation was for all other insurance premiums, i.e., excess property insurance, excess liability insurance, and aviation liability, et cetera. Senator Neal referenced the insurance premium listing under the expenditures category in The Executive Budget, noting the figure was $1,325,711 and requested clarification. Ms. Dunt noted that allocation was to cover the premiums on the aforementioned miscellaneous insurance policies, and the division had purchased a number of policies at a lower cost than originally projected via consolidation efforts.
With no further questions regarding Insurance and Loss Prevention, the budget hearing was closed, and Senator O’Donnell indicated the next item for committee consideration would be the Public Employees Benefits Program.
PUBLIC EMPLOYEES’ BENEFITS PROGRAM – BUDGET PAGE PEBP-1
Jan Marie Reed, Executive Officer, Board of the Public Employees’ Benefits Program, apologized for the lateness of the new information. Senator O’Donnell asked when the new information had been provided to LCB staff. Ms. Reed stated the new information had been given to staff at approximately 12:30 a.m. on February 28, 2001. Ms. Reed stated that the new or revised information could be provided because the open enrollment period was now closed, and actual data was available regarding the number of persons enrolled in each plan. Therefore, stated Ms. Reed, actual projections regarding expenses and vendors could be tabulated.
Senator O’Donnell explained that legislators did not serve on a full-time basis and, therefore, depended upon LCB staff to review budgets and provide an analysis of budget requests. Changes in Budget Account 1338 were presented to staff at such a late date that it placed members of the subcommittee at a loss, because staff had not had an opportunity to prepare the analysis of the budget. Senator O’Donnell advised he would recess the hearing in order to accommodate a meeting between LCB staff and staff of the Public Employees’ Benefits Program, to ascertain whether or not the hearing could proceed.
Ms. Giunchigliani echoed the concerns expressed by Senator O’Donnell and, should the hearing be postponed until a later date, requested breakouts of how many actual active employees, both state and non-state, were participating in the program. The subcommittee needed specific information regarding the actual number of persons enrolled in each plan. Ms. Giunchigliani also felt that the actuaries of the program should meet with LCB staff.
Mr. Hettrick indicated he would submit the following disclosure for the record:
This is a disclosure regarding the public employment of two of my family members. My son is a local government employee, employed by the Douglas County Sheriff’s Office. My son-in-law works full-time as a state employee for the Nevada Department of Transportation. In addition, he is on temporary leave of absence from that position and is currently working for the Assembly as an attaché during this legislative session. While I have no personal or pecuniary interest in their employment, they are members of my family and I recognize that, as such, I may be perceived as having a commitment in a private capacity to their interests. Therefore, I will be watchful for bills, resolutions, amendments that relate to such topics as public employees’ salaries, legislative employees’ salaries, county government, PERS, NDOT, and so on, which may raise a potential conflict of interest. I am now making the prerequisite oral disclosure, and will file this statement in writing with Lorne Malkiewich, as is provided for in Nevada law, and I will not disclose again, but I will recluse myself or abstain if necessary.
Senator O’Donnell called the committee back to order and announced that LCB staff needed timely and accurate numbers, and the subcommittee could not go forward unless it had those numbers. Senator O’Donnell asked Ms. Reed whether it was possible to receive those correct numbers, and also asked her to explain why the information had not been received in a timely manner.
Ms. Reed stated the figures the agency had been working with for the past ten years were averages, and those were numbers that had been created from the Benefit Information System of Nevada (BISON) computer system. According to Ms. Reed, she would also like to be able to secure “real” numbers rather than projected numbers, however, that had not been possible because of the BISON computer data base. With the current open enrollment, the agency was able to switch to software that would provide the information necessary to run the agency. Ms. Reed advised that the open enrollment period did not actually close until February 2001, in order to allow participants to make changes, therefore, the actual numbers had only recently become available. The new actuary had expressed dissatisfaction with the data provided by the BISON computer system. Currently, explained Ms. Reed, the agency was collecting data in a meaningful manner, which would assist both the agency and the legislature in making sound budget decisions. Ms. Reed emphasized that her staff had been working night and day for the past two weeks, in order to create spreadsheets that provided the necessary information. According to Ms. Reed, she had hoped to deliver the pertinent information to LCB staff by Friday, February 23, 2001, however, had been unable to meet that deadline.
Senator O’Donnell announced that the hearing for Budget Account 1338, Public Employees’ Benefits Program, and Budget Account 138, Retired Employees’ Group Insurance, would be held in abeyance until LCB staff advised him to reschedule the hearing on those accounts. Senator O’Donnell stated LCB staff would be available to the agency’s actuary at any time; he reiterated that the subcommittee needed true and accurate answers. Ms. Reed concurred.
Ms. Giunchigliani requested that the agency also supply information relative to the surcharge assessed to Health Maintenance Organizations (HMOs), which caused them to remove themselves from the provider list in northern Nevada, thereby creating a lack of access to various contraceptives for female state employees.
Senator O’Donnell inquired whether there was any further testimony to come before the subcommittee, and hearing none, adjourned the hearing at 10:18 a.m.
RESPECTFULLY SUBMITTED:
Carol Thomsen
Committee Secretary
APPROVED BY:
Senator Lawrence E. Jacobsen, Acting Chairman
_____________________________________________
Senator William O’Donnell, Chairman
DATE: