MINUTES OF THE meeting
of the
ASSEMBLY Committee on Ways and Means
Seventy-First Session
March 19, 2001
The Committee on Ways and Meanswas called to order at 7:41 a.m., on Monday, March 19, 2001. Vice Chairwoman Chris Giunchigliani 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:
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
COMMITTEE MEMBERS ABSENT:
Mr. Morse Arberry Jr., Chairman (Excused)
STAFF MEMBERS PRESENT:
Mark Stevens, Fiscal Analyst
Steve Abba, Principal Deputy Fiscal Analyst
Kathryn Fosnaugh, Committee Secretary
Vice Chairwoman Giunchigliani referred to a list that had been passed out to the committee, consisting of 32 Bill Draft Requests (BDR), that dealt with the Governor's one-shot allocations requested in The Executive Budget. She asked the committee to review the list for introduction.
Mark W. Stevens, Assembly Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, explained the BDR's as one-shot appropriations that were recommended in The Executive Budget, using surplus dollars.
Mr. Marvel asked if there would be any surplus dollars, and Mr. Stevens said there would be some, but not as much as had been expected.
The following list of BDR's was presented for one motion, for introduction:
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ASSEMBLYMAN DINI MOVED FOR INTRODUCTION OF THE ABOVE MENTIONED BDR'S EN MASSE.
ASSEMBLYMAN MARVEL SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT.
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SPECIAL PURPOSE AGENCIES, PUBLIC EMPLOYEES' RETIREMENT SYSTEM – BUDGET PAGE P.E.R.S.-1
Vice Chairwoman Giunchigliani disclosed that she was a Public Employees' Retirement System (PERS) contributor. She said that Mr. Parks, Mr. Perkins, and Chairwoman Arberry were also contributors to the PERS as well. Mr. Parks disclosed that he was currently receiving monthly benefits from the PERS.
George Pyne, Executive Officer, Public Employees' Retirement Board, introduced himself, and then introduced the following individuals: Dana Bilyeu, Operations Officer, Ann Schleich, Chief Accountant, Joyce Woodhouse, Las Vegas, Chairwoman, and Charles Silvestri, Las Vegas. He also introduced Laura Wallace, Investment Officer, and Kim Lambert, Investment Analyst.
Dana Bilyeu introduced herself and said she would highlight the agency's budget request, with a focus on major initiatives. She referred the committee to page 3 in the program narrative and said the agency's performance indicators reflected their continued growth in membership, benefit recipients and payroll. The indicators also showed the number of informational programs, counseling sessions, and the response times for answering inquiries. She said the administrative costs, market value of the portfolio, and the funded health of the system were highlighted in terms of the ratio of assets to liability.
Ms. Bilyeu pointed out page one of The Executive Budget and said for FY2002 the operating expenses were listed as $1.323 million, but she requested that the amount be reduced by $300,000. She said the $300,000 had been budgeted for FY2001, for litigation expenses for a class action suit against the PERS. The PERS had been successful in defending itself, and therefore the budget could be reduced by the same amount. Vice Chairwoman Giunchigliani asked if the corrected amount would then be $1,230,877 and Ms. Bilyeu said yes. Ms. Bilyeu said she also wanted to point out that on page one of the base budget, it showed 52 positions, but in actuality, the agency was authorized only 51 positions. She explained that during the process of putting the budget together, her position had been counted twice.
Ms. Bilyeu said the budget over the next biennium was "trending downward" due to the anticipated completion of the agency's technology renovation projects in the current biennium. She said that C*A*R*S*O*N, the new computer system, was virtually completed. A new financial accounting system, a new local area network, a new membership system had been installed. A new benefits system was anticipated within the next two months, or less. When the benefits system has been installed, the agency would be able to "move to out year support with their vendor." The last major technology effort for the agency was contained within the FY2002 budget under decision unit E-300. Ms. Bilyeu said the proposed funding was at $1 million for the completion of the imaging project. Ms. Bilyeu explained that the agency had been in the process of completing stage two of the imaging project, which would include the imaging of 10 percent of the file room. Ms. Bilyeu said if the legislature approved the third stage, included in the budget, which would be for the final 90 percent of the file room, all member files would then be electronically stored. Decision unit E-275 would provide for an increased system presence in Las Vegas, to address the needs of members and beneficiaries located in the area, and would support the request of two new positions for the Las Vegas area, during the second year of the biennium. Each step had been requested in accordance with the system's strategic plan.
Ms. Bilyeu requested testimony regarding personnel issues from Joyce Woodhouse, Las Vegas, Chairwoman, Public Employees' Retirement Board, and Charles Silvestri, Las Vegas, Public Employees Retirement Board.
Ms. Woodhouse indicated she had been on the retirement board since 1985, and along with the board, appreciated the opportunity to address the committee in regard to issues related to the compensation of the executive staff, including the pay for the proposed position of an assistant investment officer. She introduced Marvin Leavitt, Vice Chairman, Las Vegas, Public Employees' Retirement Board. Ms. Woodhouse informed the committee that Chief Earl Green, Las Vegas, Public Employees' Retirement Board, would be sending a letter in support of the budget and Steve Cozine, Las Vegas, Public Employees' Retirement Board, was unable to travel to the hearing, but endorsed the position of the board regarding executive compensation.
Ms. Woodhouse continued, explaining the PERS revised its approach to executive pay during the Sixty-Ninth Legislative Session. That had been the first time the Executive Officer, Operations Officer, and Investment Officer were paid according to a scale, which included five pay range steps. That was the first move toward providing the PERS some flexibility in addressing compensation for the executive staff. In July of 2000, the board reviewed executive pay and assigned a subcommittee to make a recommendation for changes to be made during the biennium. Ms. Woodhouse informed the committee that Charles Silvestri chaired that subcommittee. The subcommittee made the following recommendations, which were subsequently adopted by the full board.
Ms. Woodhouse said some key performance indicators included:
Ms. Woodhouse concluded her testimony saying the successful administration of the PERS would be essential to the future of its approximately 80,000 active members and 23,000 retirees. Management of the system and the assets of the members and retirees required a committed staff, capable of making complex, multi-faceted fiduciary decisions that affected all state employees. She said the retirement board had been united in its desire to maintain a superior staff and to compensate them accordingly, ensuring retention of employees and effective recruitment of future employees. The proposal for executive pay would accomplish both of the goals in a fiscally responsible manner.
Charles Silvestri introduced himself and indicated that he, too, had been a recipient of the PERS, and looked forward to representing any of the committee who would be receiving the PERS benefits in the future. He said he had been a member of the retirement board for 18 months. He said it was the best-run agency he had seen in the public sector, and that had been one reason why he accepted the assignment to review executive pay.
Mr. Silvestri said the PERS had significant responsibility and the board members, as trustees, had great accountability for the administration of the system. He said the board took their job very seriously. The staff had to have the knowledge and experience to perform their duties. He continued and explained that due to the highly competitive nature of the investment world, the proposal provided an attractive package for the recruitment of the new position of an Assistant Investment Officer. It also gave the retirement board the ability to recognize the significant contribution the officers made to the financial well being and security of the PERS. The addition of the sixth step in the pay range would help in regard to this issue.
Vice Chairwoman Giunchigliani asked if the recommendation was for the Executive Officer and the Investment Officer to be compensated at step six for FY2002, and Ms. Woodhouse said that was correct. Ms. Woodhouse also confirmed the Operations Officer would be compensated at step four in FY2002 and then move to step five in FY2003. Vice Chairwoman Giunchigliani asked at what step the Assistant Investment Officer would start, and Ms. Woodhouse said that it was a new position and it would depend on the employee that was recruited to fill the position. Vice Chairwoman Giunchigliani asked if the salary recommendations would be within the budget and Ms. Bilyeu said yes.
Vice Chairwoman Giunchigliani asked how the Governor's recommended salary increase fit within the scale. Ms. Bilyeu said the scale, attached to the back of correspondence previously sent to the committee, included the step pay increases that the Governor had recommended for unclassified staff, and the PERS scale had been adjusted based on the 9 percent for FY2002 and the 4 percent for FY2003.
Ms. Bilyeu continued her testimony in regard to the new positions. She explained that currently the PERS was authorized 45 classified employees and 6 unclassified employees. She said the PERS was seeking the addition of two membership technicians and two benefit examiner positions, under decision unit M-200, and an assistant investment officer position in FY2002, reflected under decision unit E-275. She said the membership technicians requested would be hired to support the enhanced employer reporting requirements. The positions would provide the manpower needed to provide additional assistance to employers and also to work on the detailed reports required by the employers. The reports had included approximately 130,000 entries per month. In the benefits division two benefit examiners were requested to help keep up with caseload indicators. She reminded the committee that the PERS was a customer service organization, and due to several court decisions, were also held to a standard where they were "insurers" of the advice provided to their beneficiaries. Ms. Bilyeu referred to the budget narratives and said decision unit M-200 had some of the increases in counseling and telephone response duties, in the benefit division. Ms. Bilyeu said during the period from July 1999 through August 2000, the benefits division provided 6,600 retirement estimates, counseled 5,226 people and handled 53,842 telephone calls, while continuing timely and accurate service. The two positions requested would keep the division abreast of the increasing caseload during the next biennium.
Ms. Bilyeu said the last position requested was an Assistant Investment Officer. She said the position would be responsible to the Investment Officer and would perform duties at the "middle portfolio management level." She said currently they had two investment staff, the Investment Officer who served under the Executive Officer, and an Administrative Analyst who was responsible to the Investment Officer. The Assistant Investment Officer would have the authority to make multi-million dollar investment decisions that were required daily. The investment program had experienced significant growth in activity recently, and the activity was expected to continue. The portfolio had been expected to grow to over $19 billion, and would be managed by 30 external managers, over the next five years. Ms. Bilyeu explained that all matters related to portfolio management, which included placement of funds, and draw down of funds, had to be approved by the investment division. The retirement board was requesting that the Assistant Investment Officer position be filled July 1, 2001, rather than in October 2001, due to the nature of the responsibilities of the position.
Ms. Bilyeu explained that the agency had requested two benefit counselor positions, under decision unit E-275. The positions would support the need for counselors in the Las Vegas office. Approximately 60 percent of the agency's membership was located in the Las Vegas area. Adding the two new positions would begin an increased focus in southern Nevada, which would be made possible by the electronic availability of members' files in that office. Ms. Bilyeu said the final position being requested was an Information Technology Specialist II for FY2003. This position would be placed to help with maintenance of their website, thus keeping the website fresh and updated.
Ms. Bilyeu said, in keeping with the Governor's proposed salary increases, the budget reflected similar increases for classified and unclassified positions, and merit increases for staff.
Ms. Bilyeu discussed the overtime category. She said the category was not reduced from its base expenditure, in the base year. She said the decision to not reduce it had been due to increased caseload the agency had been bearing, because of the technology projects. She said it was believed that during the biennium, they would experience a more normalized workload, as the technology projects were completed.
Ms. Bilyeu said out-of-state travel for the system consisted of one trip for each of the seven board members, three of the police and fire committee members, and also some staff. The increase over the base year was because three of the board members had been unable to travel in the base year. The trips had been put back in, to enable the three board members to attend a pension-related conference, an invaluable source of information for the members, so that they would be able to upgrade their knowledge and experience related to the administration of the plan, and their fiduciary obligations. Ms. Bilyeu explained they were asking for an additional trip for a manager to attend a professional conference related to pension counseling, which would provide for interaction, at the professional level, for counseling level positions. This information had not been available in Nevada because of the unique nature of the pension system, as the PERS was the only public pension system in the state.
Ms. Bilyeu informed the committee that in-state travel was directly related to customer service. She said the increases over base were for additional police/fire membership interviews, committee nomination interviews, an additional Las Vegas police/fire committee meeting, and staff travel to Las Vegas for board meetings, the state's Government Finance Officers Association (GFOA) conference, liaison officer/payroll clerk training, computer training classes, and rural, local, and Clark County employer audits. She explained that they were also adding additional rural counseling swings and pre-retirement education programs under decision unit E-350.
Ms. Bilyeu continued and explained the operating category. She said that other than the proposed back file imaging project, located under decision unit E-300, the operating budget had only a few minor adjustments. The adjustments included costs for part-time summary plan description printing, biennial video production, independent audit contract increases, and actuarial service increases. She said enhancements included liaison officer and payroll clerk training manuals, to better serve the employers, tax consulting services, and manuals for internal audit. She stated that decision unit E-226 included changes to the computer system to allow support for the new judges' retirement system, if passed during the current legislative session.
Also being requested was a supplement to provide for system enhancements to accommodate the retirement board's proposed fiscal legislation. Ms. Bilyeu said they were proposing five benefit modifications, at $88,000.
Ms. Bilyeu said the equipment category reflected the equipment necessary to house new staff, as well as some replacement furniture for existing staff. She said the agency had continued to make use of modular offices to increase the usable space within their building.
Ms. Bilyeu discussed the information technology budget next. She explained that this section was where there were budget reductions, due to the completion of the technology replacement project. Under the ongoing technology budget, the department was requesting approximately $1.6 million in FY2002, and $1.031 million in FY2003. She said the costs were for replacement of computer equipment in order to keep the system maintainable, and for new equipment for new positions, training, travel for training, and for maintenance of the Las Vegas office. She said they were also seeking upgrades for their communication lines to increase line speed, as more images would be traveling between the Las Vegas office and the Carson City office. Ms. Bilyeu explained that the PERS was also starting a pilot project for video counseling and they would need a new ISDN line for that purpose. She said the technique would be implemented on a beta basis with the Las Vegas office, where they would be setting up a computer terminal, allowing individuals to be counseled from the north when there was not a counselor available in the Las Vegas office.
Ms. Tiffany asked, in regard to the optical images listed under E-300, if the equipment was to be purchased or if they would be using a service bureau or state agency. Ms. Bilyeu said the optical imaging project had begun in 1993, and the equipment was on-site. She said the major initiative, currently in progress, would be done with a provider, and that the PERS would not be doing the imaging itself, rather the imaging had been contracted out to an imaging vendor. The vendor would come in and do the imaging in bulk. The optical images would be stored on-site, but there would be a backup off-site. Ms. Tiffany asked if this was a unique process or had they used the process previously. Ms. Bilyeu answered that they had used the same vendor for the first two stages of the project. Ms. Tiffany asked, if PERS had used a scanner since 1993, why the plan was to only convert 10 percent of the files. Ms. Bilyeu answered that beginning in 1993, all new files had been processed only as an optical file. The current project was the conversion of the older files. They had done the first 10 percent of those files to make sure it was done properly, and they were hoping to do the bulk of the imaging during the next biennium. Ms. Tiffany asked if applications would be moved to the website, and Ms. Bilyeu said, over time, certain information would be offered on the website, but because they were basically an insurer, all files would require an audit before people could review their own personal benefit structure, so it wasn't certain if the actual files would be available on the website. Ms. Tiffany clarified that her question was, would an individual be able to apply on the website, and Ms. Bilyeu said yes.
Vice Chairwoman Giunchigliani asked if the C*A*R*S*O*N system was up and running. Ms. Bilyeu answered yes. Vice Chairwoman Giunchigliani asked if the PERS paid and maintained insurance benefits for the retirees, with state notification. Ms. Bilyeu said the PERS did payroll deductions, acting as a payroll center, similar to other state agencies, for the state's insurance program and other local government insurance programs. Vice Chairwoman Giunchigliani referred to the open enrollment that the state had offered six months earlier, for its insurance program, and said she had heard from constituents that the PERS had not been notified of the open enrollment changes, so proper deductions had not been withdrawn from the retirement checks. Ms. Bilyeu said what had occurred was the Public Employees' Benefits Program had done a computer conversion at the same time as the open enrollment, which had been required in order to get the information electronically stored as needed. She said what was generated out of that, for the January check run, was a tape that came to the PERS for input into their system. When the information was put into the system, several errors had been on the tape, so there were many times when deductions were not taken out, or too much was taken out. Ms. Bilyeu said the PERS was working closely with the Public Employees' Benefits Program to get the errors corrected. Vice Chairwoman Giunchigliani asked if the Public Employees' Benefits Program was the agency that individuals would need to contact if there continued to be problems, and Ms. Bilyeu said yes, but that the PERS was happy to help where they could. Vice Chairwoman Giunchigliani said that the PERS had been helpful with the circumstance she had mentioned, but was afraid there were many more constituents "out there" with the same problems that had not contacted their legislators. Ms. Bilyeu said the PERS had done a computer run to try and identify certain groups with problems, but with changes made during the open enrollment, all groups could not be identified; where they were able to identify problems the agency had been proactive in fixing them.
Vice Chairwoman Giunchigliani asked if there were currently around 23,000 retirees in the system and Ms. Bilyeu said that was correct. Vice Chairwoman Giunchigliani then asked if there were projections of how many retirees there would be in approximately five years, so that the PERS would know the impact that would be on the system. Ms. Bilyeu said they looked at their statistics and trended them based on the information that had been on file. George Pyne said the anticipation was for the amount of retirees to grow at approximately 6 to 6.5 percent a year. The payroll growth would be around 13 percent each year. He said membership had been growing about 4.5 percent over the last 10 years, which was a reflection of Nevada's growth, although in 2000 growth had slowed down some. He said the PERS continued to grow in membership, at about 3 to 4 percent a year and benefit recipient growth was around 6 percent.
Vice Chairwoman Giunchigliani asked for an explanation of a bill currently introduced in the Senate, in regard to the PERS. Mr. Pyne said he would be happy to do that, and explained the bill was Senate Bill 349 which would make various changes regarding the Public Employees’ Retirement System (BDR 23-752). He said there was a similar bill introduced in the Assembly, Assembly Bill 356 which also would make various changes regarding the Public Employees’ Retirement System (BDR 23-1249), and was scheduled to be heard by the Government Affairs Committee on Thursday, March 22nd. Vice Chairwoman Giunchigliani asked if there had been another bill from the last session. Ms. Bilyeu answered there had been a bill, A.B. 74 of the Seventieth Session which provided temporarily that retired public employees might accept certain employment with University and Community College System of Nevada without affecting their retirement benefits and required the public employees’ retirement board to conduct a study of the effect on the Public Employees’ Retirement System on employment of retired public employees by public employers participating in the system (BDR S-1342). She added that the results of the study, completed as a result of A.B. 74, would be contained in a technical bill, not in the fiscal legislation.
Mr. Pyne said the PERS board was excited about its legislation that was to be introduced during the current session. He said the board had put together a comprehensive package of enhanced plan design amendments that would ensure the long-term viability of the system, maintaining the PERS uniform benefit structure, while enhancing benefits preservation for all members of the system. He said the fiscally modest nature of the legislation meant that all of the plan could be accomplished without raising contribution rates effective July 1, 2001.
Mr. Pyne referred to the handout, Exhibit C, titled "Employer Pay Contribution Plan," page one, and discussed how the contribution rate mechanism worked according to the Retirement Act. He said, basically, the rate mechanism consisted of a range by which contribution rates had been determined, so as not to cause an increase in the contribution rate. He said the existing statutory contribution rate for regular members had been 18.75 percent and for policemen and firemen it had been 28.5 percent. He explained that the PERS actually had two different contribution plans; the Employer Pay Contribution Plan, consisting of approximately 80 percent of the members, and the Employee/Employer Pay Contribution Plan, which was listed on page two of the handout, (Exhibit C). For the purpose of Mr. Pyne's illustration in regard to current legislation, he said the "story" was pretty much the same for both plans. He referred back to page one and said that the only time the existing statutory rates would move was when the actuarial evaluation, in an even year, showed what percentage of the payroll contribution rate was needed to fund the program, so that the PERS could become fully self-funded in the year 2024. The actuarial rate for 2000 came in lower than the actual contribution rates that were being paid according to statute. Referring to page one, he said the actuarial rate for regular members was 18.29 percent and the rate for police and fire members was 27.14 percent. Mr. Pyne explained that the statute also said the statutory rate, to be paid into the plan, would not move unless the actuarial rate came in plus, or minus, .5 percent from the existing rate. Currently, the statutory rate was within the .5 percent of the actuarial rate, for regular members. He said that if nothing that impacted the contribution plan for the PERS was passed in the current session, the contribution rate would remain at 18.75 percent for regular members. He pointed out that for the police and fire members the existing statutory rate was 28.5 percent and the actuarial rate was 27.14 percent, which was outside the .5 percent range. Therefore, if nothing was passed during the current session which impacted the contribution plan for the PERS, the rate would change to 27.25 percent, which included rounding off the figures as required by statute.
Mr. Pyne continued, explaining the PERS had asked the Governor to build into The Executive Budget the allowance to maintain the current contribution rates, the 18.75 percent and the 28.5 percent, thus allowing the PERS to make some plan design changes. He said when all the design plan changes were added up, they would still be able to remain within the .5 percent range, and therefore not have to increase contribution rates.
Mr. Pyne said the PERS was recommending the following changes to the Public Employees' Retirement Act:
The total cost, with the changed benefits, shown on page one of Exhibit C, was 19.14 percent for regular members, and 28.79 for police and fire members, both being within the trigger point of the .5 percent, and it would be possible to activate all the requested changes and not change the contribution rate.
Mr. Marvel asked if the unfunded liability was up to the year 2024, even with the increase. Mr. Pyne said the amortization period at which they would become fully funded remained at the year of 2024, as it had since January of 1984.
Mr. Parks asked how the recommended changes compared to other public employees' retirement systems, and also asked if the program helped people who did not have five years vested before they left the program, would they be rolled into the program or was there an effective date for the program to start. Mr. Parks also asked Mr. Pyne to repeat the bill number that reflected the changes. Mr. Pyne said, in comparison to other systems, the average vesting plans were five years, some still had ten-year vesting, but the trend was leaning toward a three-year vesting plan, and it was his belief that most systems would have that plan within the next ten years. Mr. Pyne said that the pre-retirement death benefits of other systems across the country were different, but also the same, depending on the culture of a given area. He said he was not able to give statistics, but it was not uncommon to provide the benefit, and that possibly Nevada was behind on that issue. He said as far as indexing of the deferred vested benefits to hedge against inflation, a few states had that system including South Dakota, North Dakota, and Minnesota. Mr. Pyne added that what system was used depended on what the contribution rate structure and mechanism was. He said that the board felt the plan was a good start to hedge against inflation, and over time an increase may be necessary, but at this time, it was a new direction for the plan and the 1 percent would be all that was needed. The 1 percent would apply to everyone who was already a deferred, vested member of the plan, even if they had left the system after being vested. If a member had already retired, they would not be affected by the 1 percent. Mr. Pyne added that the bill number was S.B. 349.
Ms. Leslie mentioned e-mail that she had received from constituents who had been paying into the system for a long time and were concerned that, with the changes, new people coming into the system would be paying into the system at a lower rate, and would be receiving more benefits. The constituents felt that the changes would be unfair. Mr. Pyne said the contribution rate would not be reduced, and with the requested changes, virtually every member of the system would be covered positively, one way or the other. Ms. Leslie asked if the statutory rate would be going from 28.5 to 27.25 percent. Mr. Pyne said no, the board had recommended leaving the statutory rates as they were so they could provide the enhancements without changing the rates. He said if the current legislature did not make any changes, then the police and fire members' contribution could possibly go down to 27.25 percent, but the recommendation of the board, in lieu of lowering the police and fire members' contribution rate, was to provide the enhancements and maintain the current rate of contribution.
Mr. Goldwater complimented the agency. He then asked if the board was confident in their actuarial predictions. Mr. Pyne said they had been using the same process to enhance the plan design for several years and it had worked very well. He said that what an actuary tried to do was to predict uncertain future events, which was a tough thing to do. He said the PERS actuary had been with them for many years and had shown excellent credibility. He said, even with their confidence, they could not look out into the future and know all the variables that could impact the cost of the plan, negatively or positively. He said investment markets, pay increases state employees received, etc., could make an impact on the outcome of the evaluation.
LEGISLATIVE –JUDICIAL, LEGISLATIVE COUNSEL BUREAU – BUDGET PAGE LCB-1
Lorne J. Malkiewich, Director, Legislative Counsel Bureau, introduced himself, and then discussed Budget Account 327-2631. He said the detail in the budget book was not extensive, so he had presented the committee with a 35-page handout (Exhibit D). He said he would be presenting an overview of the budget, the Legislative Commission's budget, and would then discuss the Administrative Division's budget, and then representatives of the other divisions would be presenting their budgets in turn.
Mr. Malkiewich referred to page one of Exhibit D. He said it included reconciliation with the budget document. He said it was a bit confusing, but he would try to explain it from two different directions. He said the top of the page had "Amounts Per Executive Budget" showing how the committee would get from what was in The Executive Budget to what was in the document handout. He said the shaded numbers were the amounts appropriated to the Legislative Counsel Bureau in The Executive Budget; for FY2002, $18,504,725; for FY2003, $18,169,658. He said the next line, the $861,585 for the biennium, was a one-shot appropriation. He said it included E-710, E-720, and E-730 budget enhancements that the Legislative Counsel Bureau had submitted that had been pulled out, and put in a one-shot appropriation. He said that since they had submitted the requests as part of their budget, they would continue to present them as part of their budget.
Mr. Malkiewich said there were a few things that had been left out of The Executive Budget, one being the cost-of-living adjustment, which was a significant addition to the budget. He said that all the other budgets for the state had included a cost-of-living adjustment, but the Legislative Counsel Bureau's budget had not. He said the amount for the cost-of-living adjustment was $1,007,132 in FY2002, and in FY2003 it was $1,605,945. He explained that the cost-of-living adjustment represented over half of the increase of their budget. He said, inadvertently, the occupational studies upgrade, which had amounted to $344,397, had been left out of the budget as well, and would need to be added back in. He said the Budget Office was aware of the oversight and knew that it would need to be added back in. Mr. Malkiewich said the rest of page one, (Exhibit D), showed the same information coming from the other direction, what the Legislative Counsel Bureau had submitted to the Executive Branch, the base, the M-303 occupational studies, that had inadvertently been left out, and the E-710, E-720, and E-730 decision units that had been turned into a one-shot appropriation. Mr. Malkiewich said that the Governor had added some things to the budget after it had been submitted, which included E-475, which was for the Effectiveness of Family Services, in the amount of $35,000, to fund a statutory juvenile justice committee. Mr. Malkiewich said he was going to recommend that be taken out of the budget, because it could cause confusion in regard to the future of a bill. If the bill passed, the funding should be included in the bill. He said the Governor had also added to the budget the amount of $46,400 for the dues for the Education Commission of the States. This had been moved from the Department of Education's budget to the Legislative Counsel Bureau's budget. Mr. Malkiewich said that when all the figures were added they should match the figures in the middle of page one of Exhibit D.
Mr. Malkiewich said page two of Exhibit D was the overall Legislative Counsel Bureau's budget, rolled together. He said page three was the summary of demographic caseload changes. He said it included new positions that were being requested. The request had been for eight positions in FY2002 and ten positions in FY2003. He said most of the positions were for the areas where the bureau had been experiencing the most growth, Information Systems and the Research Division. He said they were also adding a position in Las Vegas, a position in Audit, and a position in the Media Services unit.
Mr. Malkiewich directed the committee to page four of Exhibit D, under occupational studies. He said the amount was for 40 upgrades out of the 215 positions in the Legislative Counsel Bureau, mostly one grade. He explained, even though it was only $340,000 out of a $4.7 million increase to the budget, it was an area that the committee usually wanted to look at closely.
Mr. Malkiewich said page 7 of Exhibit D showed the summary of the amounts requested. He said the total amount for resources for the prior biennium had been about $18 million and for the next biennium it would be approximately $20 million. He said the increase was about 12.2 percent over the biennium. He added that if you took out the cost-of-living adjustment it would come to about 5.0 percent.
Mr. Malkiewich said that concluded his overview of the budget and then moved to the Legislative Commission budget.
Mr. Malkiewich referred to page nine of the handout (Exhibit D). He said the budget for the Legislative Commission had been flat when it was submitted to the Executive Branch, but this budget was the budget that had the additions mentioned previously. He said that page ten showed the amounts paid for dues of various organizations. He said they had also put the budget for the Legislative Committee on Education into the Legislative Commission's budget, which was down from the last biennium. He said page 11 listed the two items added to the budget, the support of the eight-member legislative committee on juvenile justice, and the transfer for the participation of the Education Commission of the States. This was to pay dues owed and Mr. Malkiewich had no problem with moving the function to the Legislative Commission's budget. Page 12 was the summary of the commission's budget, and even with the two increases for the two decision units that were added, the increase had been nominal; only about $90,000 for FY2002 and went down to about $12,000 for FY2003.
Mr. Malkiewich then discussed the Administrative Division budget. He said a description of this budget started on page 13 of Exhibit D. He explained that as Director of the Legislative Counsel Bureau, he was also the Chief of the Administrative Division. He then referred to Exhibit E, which listed the performance indicators for the Administrative Division. He said they did two types of performance indicators. One was customer satisfaction and the second was volume and overall indicators. He said the volume indicators customarily did not increase very much from year to year, as a general rule, but with the additions, some increased substantially. One indicator that increased was the information systems volume. The Help Desk requests had "sky rocketed." He said he was very happy with the customer satisfaction indicators. The customer service indicators were based on a survey done with the legislators every two years. He said they had excellent participation even though the survey was 16 pages long, with 31 legislators who responded. The averages shown in Exhibit E under the customer satisfaction indicators, under the middle column, were the grade point average that each unit received, based on the responses. He commended the Legislative Police, which received, out of 31 surveys, nothing lower than an "A," with a grade point average of 4.0.
Mr. Malkiewich said the budget of the Administrative Division increased about $1.6 million over the biennium. Of the $1.6 million, about $1.3 million was attributable to two different things; one was the cost-of-living adjustment and the second was in new positions. They requested the addition of six positions, which accounted for about $600,000. He said page 14 of Exhibit D listed where the new positions would be placed. Four positions would be placed in Information Systems, one of which would be a part-time position in Las Vegas. Currently, one of the Carson City Information System employees was sent to Las Vegas every couple of weeks to do personal computer maintenance and other work. He said the intention was to have a new part-time employee in Las Vegas to make it more convenient for the Las Vegas legislators. He said another position was for a secretary in Las Vegas, but said this would not require much of an increase as they had been using a part-time worker there almost full time, Bonnie Hoffecker. They were also adding a technician to the Media Services unit.
Mr. Malkiewich referred to page 15 of Exhibit D which listed 6 upgrades, mostly in Information Systems. The upgrades only amounted to $50,000 over the biennium. The E-710, E-720, and E-730 decision units were not included in the budget, but were included in the one-shot appropriations. He said they were purchasing a parking garage sweeper and cleaner, some sound and video equipment. He explained that E-730 was an unusual category because although shown as an enhancement, it basically was funding at the same level as the last biennium, but budget instructions had them put maintenance of buildings and grounds as an enhancement. The total increase of the Administrative Division's budget was shown on page 17 of Exhibit D. In summary, Mr. Malkiewich said they went from about $11,344,000 the last biennium to about $13 million for the current biennium, with the majority coming from the cost-of-living adjustment and the new positions.
Vice Chairwoman Giunchigliani asked Mr. Malkiewich what was the projection of the cost impact to adding seats to the legislature. Mr. Malkiewich answered that the cost was entirely up to the committee. He explained that as far as construction went, if four or fewer seats were added to the Assembly, and two or fewer were added to the Senate, there would be no construction required in chambers. If they added four seats in the Assembly, the question would be what would they do with committees. Were they going to go with four morning committees or stay with three? If they stayed with three, they may need to do something with some of the daises, which would cost something. He said the big question was what to do with staff. He said if they kept the same staffing levels, then they estimated that if they added six or seven legislators, keeping the same staffing levels would drive an increase of about $2 million a year. Mr. Malkiewich said the problem, in reviewing the current budget, was three research analysts would already be added, due to the increased workload. He said it would be hard to determine whether more staff would be needed due to an increase in legislators or an increase in workload. He added that in a tight budget cycle, the extra staff would not have to be added, and the Legislative Counsel Bureau could just provide fewer services and stretch themselves a little thinner. He said the amount of most of the increase would be subjective and would be something the committee would have to determine. Mr. Malkiewich reiterated that based on current staffing ratios the increase would be approximately $2 million to add seven legislators, for the biennium. Vice Chairwoman Giunchigliani said she asked because Mr. Malkiewich had said there was a request for six positions, costing $600,000, and that the positions were to handle additional workload.
Mr. Hettrick said he was a proponent of adding seats to the legislature. He pointed out that from 1991 until 2001, when no new legislators had been added, there was a significant amount of staff added, due to growth. He said he believed there would be new staff whether there were new legislators or not. He said charging the staff to legislators just because they were added was inappropriate, because new staff was already being added, in the current budget, with no additional legislators. Mr. Hettrick said it was not fair to say that growth in staff would be driven by growth in legislators.
Vice Chairwoman Giunchigliani said she had not been one to push the funding, rather she had pushed representation, but said it was an issue to be debated by the elections committee.
Mr. Malkiewich reiterated that it was up to the Ways and Means Committee and the Senate Finance Committee to make a determination on how much staff the Legislative Counsel Bureau added, based on the staffing ratios. He said that whatever the decision, it would not affect the current budget because it would be a decision regarding legislators that would be added in 2002. The first budget that would be affected by the addition would be the session budget for 2003. Vice Chairwoman Giunchigliani agreed.
Mr. Parks asked if there would be adequate space for offices for an additional six legislators, or would there have to be some modifications. Mr. Malkiewich answered that the Legislative Building had been built for 75 legislators. What had been done was to fill the space with other things. They had taken "Chairwoman suites" or double offices, and put one person where two were designed to go. It would mean moving some people around and shifting some temporary LCB offices elsewhere, but there was room in the building. He added there might be some interim construction needed as well. Mr. Malkiewich said the LCB would wait to see what the legislature determined regarding new legislators before making any construction decisions. He said he believed that with seven or fewer legislators added, there would only be minor construction.
Vice Chairwoman Giunchigliani asked to move on to the next budget.
Mr. Malkiewich said the next budget was out of the Audit Division, which began on page 18 of the handout (Exhibit D).
Gary Crews, CPA, Legislative Auditor, Legislative Counsel Bureau, introduced himself. He said that before the budget had been adjusted, they had a 5.9 percent increase, but with the 4 percent adjustment of the cost-of-living being added for each year, and adding a ninth step to the pay scale, they were currently up to about a 13.8 percent increase. Mr. Crews said, in general, the budget remained fairly flat. He pointed out that on page 19 of Exhibit D, there was a proposal to eliminate one secretarial position and convert it to an auditor position, specializing in Information Technology (IT) audits. He said in the second year of the biennium the division had proposed adding a second Information Technology Auditor. Currently, they had one IT auditor on staff, and he was spread too thin. He explained that there was an increasing need for regular assessments of state agencies that were using different systems. Mr. Crews explained there were potential threats to the security of the information that was stored in computer systems. Many agencies maintained sensitive information, for example, the Department of Motor Vehicles and Public Safety, the Department of Personnel, the Controller's Office, and the Department of Human Resources. He said the trend was for the LCB to decentralize, which would create more flexibility, and might benefit the other agencies, but at the same time, it created a vulnerability to the systems within the agencies. One reason for the increased vulnerability was due to the addition of Internet capabilities.
Mr. Crews said, under the operating section of the budget, the Audit Division was also proposing a $50,000 consulting contract with an IT specialist who specialized in information security systems and would work alongside of staff, training them to undertake the projects on their own.
Mr. Crews said the other area where there were proposed increases was shown on page 20 (Exhibit D) under E-303 Occupational Studies. The increase was to upgrade some audit supervisors to a 1.5 percent increase, and also some senior deputy auditors to a 1.5 percent increase. He said the auditor supervisors had only had one 5 percent upgrade since 1979 and he felt that the increase was warranted.
Mr. Crews said the last category was a request to replace some equipment. He said they wanted to replace some of the laptop computers used during audits. He said they needed to get the laptops upgraded so that they were compatible with current software. He said, in summary, they were looking at a 13.8 percent increase in their budget, 8 percent from the cost-of-living increases. He advised the committee they had been given a list of performance indicators (Exhibit F).
Vice Chairwoman Giunchigliani said that the committee felt that the LCB and the Audit Division did a good job. She said she was going to pursue giving the division "more teeth" in statute, so that the same agencies did not have to keep coming up over and over again.
Mr. Malkiewich introduced the next budget, the Fiscal Analysis Division.
Mark Stevens, Assembly Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, introduced himself. He said the Fiscal Analysis Division's budget began on page 22, and was summarized on page 26 of Exhibit D. He said the summary on page 26 represented a 9.8 percent increase of the budget in the upcoming biennium, compared to the current biennium. He said that without the Governor's recommended pay raises in The Executive Budget, the Fiscal Analysis Division's budget was at .6 percent for the biennium. Currently they had 25 authorized positions, and were not asking for any new positions. Mr. Stevens referred to page 23 of Exhibit D, explaining that there was a maintenance unit, M-200, which was for additional items, including training or contract services for an education evaluation unit. He said there were a number of contracts that the division entered into during the interim period, which he could outline, if the committee desired. He said that M-301 was the Governor's recommended cost-of-living increases for state employees during the upcoming biennium. He said the rest of the budget was for equipment and one enhancement unit, E-845, which would provide for additional training for staff. He said the division had a great amount of turnover during the last interim period and he thought it was important that the office had additional training funds so that the new staff could be trained. Mr. Stevens advised the committee that they had lost six or seven analysts since the last session, which made it difficult to keep going at a high level performance. The training would assist them in the next interim period, so that they would be ready for the Seventy-Second Legislative Session.
Vice Chairwoman Giunchigliani asked if the training money requested would be adequate and Mr. Stevens said yes. Vice Chairwoman Giunchigliani said she understood that the training was needed.
Mr. Malkiewich introduced the next budget to be discussed, the Legal Division.
Brenda Erdoes, Legislative Counsel, Legal Division, Legislative Counsel Bureau, said the budget for the Legal Division started on page 27 of Exhibit D. She said the budget had been a little less than flat going in, but with the cost-of-living increases and the additional ninth step, that would no longer be the case. She said in 1999 the division had over $1 million of authorized expenditures. The revenue received from publication sales covered most of the expenditures. She explained that publication sales was an area that had been changing because people were going from printed brochures to electronic media. Ms. Erdoes said the division was trying to accommodate that issue with a new CD, which was doing very well. She said the division was in an awkward position because they were still printing, as well as providing the CD service, which was less expensive to provide, but also brought in less revenue. She pointed out that the division was not adding any new positions. They had requested 14 upgrades, half of which were to fill positions where there had been a deficit. She explained the deficit had been in the technical service unit, and out of the 13 employees in that unit, they had only retained four. She said they had hired eight new employees for the technical service unit and that had put the division in an awkward position for the session. She explained that the people in the technical service unit had to work on very complex computer programs, which involved taking the amendments that the legislators passed, fitting them into a bill, integrating all the details, and then producing the printed copy to go to the printing office. Ms. Erdoes said the employees in that unit were currently underpaid, if compared across the board, and a good sign that they were underpaid was as soon as the division trained them in computer skills, they immediately left for other positions. She said that they were losing the employees to other state agencies. The other half of the upgrades requested were for two attorney positions to be upgraded, to expanding the senior positions, upgrading the computer programmer, the receptionist, the conflict specialist, one of the publication clerks, and the assistant manager.
Ms. Erdoes referred to the performance indicator handout, (Exhibit G) and said that although it appeared that in 1993 through 1999, the total number of bills and resolutions had decreased, which was true, but during that period, the bill drafting limitations had come in, and although it showed a decrease in the number of bills, in actuality, there had been an increase in the number of pages of material, which was what counted for the Legal Division. She said the chart on the back two pages of Exhibit G showed that in 1995 through 1999, the number of pages in the Nevada Revised Statutes had grown significantly. She said that was an indicator of their workload, although it did not contain all the pages that had to be completed. She said her point was that although there were fewer bills and amendments, it did not mean there was less work for the Legal Division. She said they had worked hard to improve and felt the performance indicators reflected as much. She referred to the middle column of page one of Exhibit G, under Client Benefits, the numbers had all increased and they were pleased. She said on the second page of Exhibit G the numbers did not increase and some had decreased. Ms. Erdoes pointed out the administrative regulations' portion and said they had not done as well as they had hoped in that category. She said the past interim had been a tough one as they had a lot of administrative regulations. She reminded the committee that immediately after session was over, on July 1, as soon as the reprint was finished, the administrative agencies were allowed to submit their administrative regulations. That was the division's workload during the interim, and she said they had not gotten them back as timely as they would have liked. They would be working on that issue during the upcoming interim.
Mr. Perkins asked what kind of vacancies the division had been averaging. He pointed out that they were not asking for any new positions, and asked if the division was able to keep its positions filled. Ms. Erdoes said no, and explained the reason they had not asked for any new positions, was because they had been asked to make a flat budget. She said they had plenty of workload, both during the interim and the session. She said they had one attorney position vacant, at the current time, and one person was on catastrophic leave, so they had two holes in the division, as well as some positions that were only half-time positions.
Mr. Malkiewich said the final budget for the LCB was the Research Division. He said he wanted to clarify that although most of the people testifying for the LCB mentioned that a large percentage of their budget increases had been due to cost-of-living increases, they were not requesting the cost-of-living increases be deleted, but were just pointing out that the increase was a large percentage of their budget.
Robert E. Erickson, Research Director, Research Division, Legislative Counsel Bureau, introduced himself. He said the budget increases requested, not including the cost-of-living and the step nine increase, was at 7 percent. He said when added to the cost-of-living and the step nine increase, it would be at approximately 14.6 percent. He said only 7 percent of the increase was for additional staff. He said almost the entire growth of the budget was due to adding three positions. He referred to the expanded narrative program (Exhibit H) that had been handed out to the committee. He said in addition to a program statement, the document included performance indicators. He said the most recent survey of the legislators indicated that the Research Division was doing a good job in most areas. He said improvement was necessary in the areas of consistency in the quality of research and timeliness of responses and they would be working on those issues. He said increasing their staff would help with those matters. He said the division's overall workload had increased approximately 30 percent over the last biennium.
Mr. Erickson referred the committee to page 32 of Exhibit D. He said the major new items for the Research Division's budget request was to add three additional personnel. Two would be senior research analysts, to be added in the first year of the biennium, and one additional senior research analyst, to be added in the second year of the biennium. Of the two positions requested for the first year, one would be assigned to work primarily in the division's constituent services unit. The second position would be assigned to work primarily in health and human service matters, as well as constituent inquiries. He explained that the additional personnel would help to handle constituent requests that were coming more frequently, thus relieving the mainline staff, who worked with committees, of spending much of their day helping with constituents.
Mr. Erickson said the overall increase in legislative requests for both fiscal years of the biennium was expected to be well over 30 percent, when compared to the previous biennium. He reiterated that much of the growth had been in the area of constituent services. He said that there was also an increased demand on the interim study load. A good number of the associated subcommittees, technical advisories committees, and task forces had been used more frequently, stretching the staff thinner. He explained that the senior research analyst position requested for the second year would split time between research projects for legislators and also information requests for legislative constituents.
In summary, Mr. Erickson said the Research Division's budget request reflected the need for additional staff resources to handle a significant increase in research requests, primarily from legislators on behalf of constituents. Other factors that affected the need of additional staff included an increase in the complexity of the types of research that needed to be completed and the expansion of interim study activities. The division had also proposed the reclassification upgrade of eight staff positions. They had given six employees new supervisory responsibilities and the other two positions had been given increased responsibilities for training new staff. The upgrade was reflected on page 33 of Exhibit D.
Vice Chairwoman Giunchigliani asked if the Research Division had been having the same problems with turnover that other divisions within the LCB were having. Mr. Erickson said they had a significant turnover during the past five years. In the last year they had only lost one analyst, but in the previous two or three years they had lost several key staff members. It was the hope of the division that a little more of a "career ladder" structure in the organization would help, and that the requests in the budget would help with the structure.
Mrs. Cegavske thanked Mr. Erickson and his staff for the hours the Research Division had put in researching for staff issues and answering correspondence. She said they had been responsive and very good.
Senate Bill 199: Makes appropriations for purchase and light renovation by Legislative Counsel Bureau of Capitol Apartments as described in land description verified pursuant to NRS 218.255. (BDR S-733)
Vice Chairwoman Giunchigliani asked Mr. Malkiewich if he had any concluding statements and Mr. Malkiewich introduced S.B. 199 for discussion.
Mr. Malkiewich said the Capitol Apartments were across Fifth Street. He said currently the LCB owned the Sedway Building, the parking lot to the west of it, and the parking lot to the south of it. The three parcels formed an "L" and with the purchase of the Capitol Apartments would complete the "L," making it a square. He said the reason he mentioned the square was because many of the committee members were in real estate, and would understand that location was a critical component of the purchase. He said it was an area that the LCB would grow into in the future. He said the property was for sale, through bankruptcy, and would be able to be purchased at the appraised cost. He said S.B. 199 was a reprint, lowering the appropriation from $1.2 million for purchase to $1.025 million, the appraised value. The appropriation was included in The Executive Budget, but at the higher amount, so the amount was actually $175,000 less than what had been included in the budget. He added that the purchase would be contingent upon approval by the bankruptcy court, but assuming it was approved the LCB would purchase it. He said the plan was not to do a major renovation, but to just fix it up and use it for whatever purpose was needed. He said they could place other agencies in it, or if the LCB needed it for future expansion they might eventually want to tear it down and build a larger structure on the property. He said that the location of the apartments was where the LCB would be growing, it was available for a good price, and if the purchase was postponed the property might deteriorate to the point that it would be an impractical purchase, or be purchased by someone else who might not be a willing seller. He said there was not a plan for a specific intended use, except for possible storage, which would accommodate growth by getting some files, etc., out of the Legislative Building.
Vice Chairwoman Giunchigliani asked if there was further testimony on S.B. 199. Being none, the discussion on S.B. 199 was closed.
NEVADA LEGISLATIVE INTERIM, LEGISLATIVE – JUDICIAL – BUDGET PAGE LCB-4
Jacqueline Sneddon, Chief Clerk of the Assembly, introduced herself and Claire Jesse Clift, Secretary of the Senate. She then discussed Budget Account 327-2626. She explained that the occupational study of their budget had been omitted and did not include the 4 percent cost-of-living or the ninth level step grade recommended by the Governor. She referred to handout Exhibit I, and said that it should reconcile the figures back into the budget. She said prior to the cost-of-living and step increase, they had been under 5 percent in their requests for the biennium. She said the base included the six full-time positions, out-of-state travel for both the Chief Clerk and the Secretary to attend the National Conference of State Legislatures (NCSL) conferences, and for staff to attend the American Society of Legislative Clerks and Secretaries (ASLCS) and National Legislative Services and Security Association (NLSSA) for training purposes, on an annual basis, and periodic workshops for permanent staff, during the year.
Ms. Sneddon said under maintenance, they were requesting funding for intermittent employee pay. She said they would also like to be able to provide memberships to ASLCS for the technical assistants and to allow them to attend the annual training seminar.
Ms. Sneddon said under the occupational studies category they were requesting an upgrade for their executive assistants, due to their increased office management duties and customer service responsibilities, as well as the amount of responsibility that had been placed on them. This would bring the positions in line with like positions in other LCB divisions. She said another upgrade they were requesting was for the technical assistants. She explained that with the increase in technology, the technical assistants were relied on more and more to maintain consistency and to keep things current with the technical needs of both houses of the legislature, and to be able to work with the Information Systems' staff in developing changes for the Session Manager.
Vice Chairwoman Giunchigliani welcomed Ms. Clift and said she had heard that Ms. Clift was doing a good job and things were going well for the Senate. She asked her if she had any comments. Ms. Clift thanked Vice Chairwoman Giunchigliani and said she had no further comments.
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Vice Chairwoman Giunchigliani asked for the introduction of BDR 34-1004.
ASSEMBLYMAN GOLDWATER MOVED FOR INTRODUCTION OF BDR 34- 1004.
ASSEMBLYWOMAN CHOWNING SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT.
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Being no further business, Vice Chairwoman Giunchigliani adjourned the meeting at 9:15 a.m.
Kathryn Fosnaugh
Committee Secretary
APPROVED BY:
Vice Chairman Chris Giunchigliani
DATE: