MINUTES OF THE
SENATE Committee on Finance
Seventy-First Session
February 14, 2001
The Senate Committee on Financewas called to order by Chairman William J. Raggio at 8:10 a.m., on Wednesday, February 14, 2001, in Room 2134 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator William J. Raggio, Chairman
Senator Raymond D. Rawson, Vice Chairman
Senator Lawrence E. Jacobsen
Senator William R. O’Donnell
Senator Joseph M. Neal Jr.
Senator Bob Coffin
Senator Bernice Mathews
STAFF MEMBERS PRESENT:
Gary L. Ghiggeri, Fiscal Analyst
Bob Guernsey, Principal Deputy Fiscal Analyst
Russell J. Guindon, Deputy Fiscal Analyst
Lu Chen, Education Research Statistician
Carla Watson, Program Analyst
Debra Petrelli, Committee Secretary
OTHERS PRESENT:
Lorraine T. Hunt, Lieutenant Governor
Nancy A. Dunn, Interim Executive Director and Business Manager, Commission on Tourism
Kathy Augustine, State Controller
Mark Winebarger, Chief Deputy Controller, Office of the State Controller
Jeannine Coward, Assistant State Controller, Office of the State Controller
Steven D. McDonald, Administrator, Division of Unclaimed Property, Department of Business and Industry
Jim Wells, Chief Accountant, Integrated Financial System, Office of the State Controller
Dean Heller, Secretary of State
Brian K. Krolicki, State Treasurer
David Clapsaddle, Executive Director, Nevada Prepaid College Tuition Program, Office of the State Treasurer
Susan Moore, Executive Director, Millennium Scholarship Program, Office of the State Treasurer
Senator Raggio referred to Exhibit C, Bill Draft Request (BDR) introductions.
BILL DRAFT REQUEST 34-169: Revised provisions governing apportionments of money by state to school districts and charter schools. (Later introduced as Senate Bill [S.B.] 145). (see Exhibit C)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BILL DRAFT REQUEST (BDR) 34-169.
SENATOR COFFIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
BILL DRAFT REQUEST 18-120: Revise provisions governing staffing of the Office of the Lieutenant Governor. (Later introduced as S.B. 146.) (see Exhibit C)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BDR 18-120.
SENATOR MATHEWS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
BILL DRAFT REQUEST S-457: Authorize and support programs to extend and increase educational opportunities for Washoe County secondary school students. (Later introduced as S.B. 147.) (see Exhibit C)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BDR S-457.
SENATOR MATHEWS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
BILL DRAFT REQUEST S-178: Makes appropriation for continuation of program of treatment for abuse of alcohol and drugs in Clark and Washoe Counties. (Later introduced as S.B. 143.) (see Exhibit C)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BDR S-148.
SENATOR NEAL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
BILL DRAFT REQUEST 18-391: Change the specific amount authorized for transition costs to an amount approved by the legislature. (Later introduced as S.B. 144.) (see Exhibit C)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BDR 18-391.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
BILL DRAFT REQUEST 42-404: Combines budget accounts of the State Fire Marshal Division. (Later introduced as S.B. 141.) (see Exhibit C)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BDR 42-404.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
BILL DRAFT REQUEST S-456: Creates and funds a pilot kindergarten program for Washoe County. (Later introduced as S.B. 142.) (see Exhibit C)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BDR S-456.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
BILL DRAFT REQUEST 14-515: Makes changes concerning distribution of administrative assessments. (Later introduced at S.B. 139.) (see Exhibit C)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BDR 14-515.
SENATOR NEAL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Senator Raggio said that BDR 48-530 would be placed on hold because fiscal staff have been unable to locate the appropriation.
*****
BILL DRAFT REQUEST 1-521: Increases the number of Family Court Judges in the Second Judicial District. (Later introduced as S.B. 137.) (see Exhibit C)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BDR 1-521.
SENATOR NEAL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
BILL DRAFT REQUEST 31-344: Exempt the Colorado River Commission from the State Budget Act. (Later Introduced as S.B. 138.)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BDR 31-344.
SENATOR O’DONNELL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
BILL DRAFT REQUEST 34-347: Creates program and makes appropriation to attract and retain qualified staff for public schools. (Later introduced as S.B. 140.) (see Exhibit C)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BDR 34-347.
SENATOR COFFIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
BILL DRAFT REQUEST 34-219: Makes various changes regarding educational personnel. (Later introduced as S.B. 148.)
SENATOR RAWSON MOVED FOR INTRODUCTION OF BDR 34-219.
SENATOR COFFIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Senator Raggio informed the committee these bills will be submitted for committee introduction. He further stated the introduction of bills by the committee does not necessarily mean that the committee is in favor of the bill until final decision is made by the committee.
Senator Jacobsen requested three memorial resolutions. The first for former Senator Archie Pozzi. Senator Raggio informed him that resolution had already been requested. Senator Jacobsen then requested a memorial for Brooks Parks, whom he described as a prominent person in Douglas County, and a memorial for William G. Van Patten, whom he described as an optometrist in Carson City who is very active in community affairs.
Senator Raggio asked whether there were any objections from the committee. There were no objections. He also requested that Senator Jacobsen provide this information to Jan K. Needham, Principal Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau (LCB) on those requests.
Gary L. Ghiggeri, Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, referring to the LCB Fiscal Division chart regarding the 2 percent Sales and Gaming Percentage Fees (Exhibit D), indicated revenue collections for gaming were down for three consecutive months last year. He said this fiscal year to date these revenues are down one percent. He pointed out the second page of Exhibit D provides information indicating what would happen if gaming fees were to grow one percent this year, identifying the impact on the General Fund for FY 2001, FY 2002 and FY 2003.
Mr. Ghiggeri said the FY 2002 and FY 2003 revenues are based on the same growth factor used by the economic forum. He said they are applied to a reduced base in this fiscal year. He stated that the 1 percent growth this fiscal year would result in a reduction of approximately $27.4 million this year, $28.7 million next year, and $29.8 million in FY 2003.
Continuing, Mr. Ghiggeri said at 3 percent growth, the reduction would be approximately $16.2 million this year, approximately $17 million in FY 2002, and approximately $17.6 million in FY 2003. He stated the “gaming win” is up; it is the collections that are down. He said this fiscal year to date, gaming win is up approximately 3.1 percent.
Senator Raggio asked whether there is any indication on sales tax. Mr. Ghiggeri replied the latest sales tax information is displayed in Exhibit D. He said he does not currently have the collections for December activity, but should have those numbers later in the week or early the next week. The Economic Forum projected a 5.9 percent growth and, through December, collections are at 4.8 percent.
Senator Raggio asked whether collections are below projections. Mr. Ghiggeri responded that they are.
Senator Raggio said if this trend continues, with gaming and sales tax at or just under projections, the possible difference in the amount of revenue available would be between $24 million and $30 million. He said the committee needs to watch these numbers until they are final in May.
Senator Neal inquired whether this committee had received the same information as the Senate Committee on Taxation had received. Senator Raggio replied that he believes so. Senator Neal said information he had previously received indicated gaming was up 6.4 percent. Senator Raggio pointed out that the win is up, but collections are down.
Senator Raggio referenced a handout (Exhibit E) that compares salaries of LCB attorneys and attorneys in the office of the Attorney General. He said it corrects what was presented earlier related to the difference between employee and employer paid retirement.
ELECTED OFFICIALS
Lieutenant Governor - Budget Page ELECTED-22 (Volume 1)
Budget Account 101-1020
Lorraine T. Hunt, Lieutenant Governor, provided opening comments regarding her presentation (Exhibit F) of the budget for the Office of the Lieutenant Governor. She explained her duties and provided a mission statement for her office. She talked about new industry, gaming, and tourism in Nevada. Ms. Hunt commented on marketing efforts for economic development. She spoke of the recent energy crisis in California and what Nevada can do to avoid that situation.
Ms. Hunt spoke of Nevada’s leadership in national and international travel markets, including international tourism. She referred to the state’s mission to target companies suitable and compatible for the Nevada business environment. She said she believes Nevada’s leadership plays a critical role in keeping fiscal responsibility for all citizens of our state.
Ms. Hunt explained that in the 1999 Legislative Session, she, along with the Nevada Commission on Economic Development, sponsored a gathering of science, engineering and technology experts to help Nevada further develop high-tech industries within Nevada. She spoke of the many multimedia effects on the state’s economy. She said that in the last year revenues generated by movie productions in Nevada have risen to $123.5 million.
Ms. Hunt said in order to maintain our status as a premier convention and tourist destination Nevada must remain competitive. The state’s national marketing efforts must remain a priority. She said she believes Nevada’s rural effort is a key component. She also remarked on a public service announcement encouraging Nevadan’s to visit Nevada.
Ms. Hunt spoke of the recent accident in Tonopah involving a bus carrying visitors from Great Britain. She pointed out the quick response of her office with appropriate officials to expedite the return trip home for these people.
Senator Raggio referred to an article in the Reno Gazette Journal describing the area around Reno as very inviting for technology. He also pointed out Nevada needs to be alert to the threat of competitive gaming in nearby jurisdictions.
Ms. Hunt said she believes Nevada has a unique opportunity with its vast energy resources to provide stable and reliable energy.
Ms. Hunt continued by referring to her office budget. She said the base budget continues funding for the Lieutenant Governor and six full-time unclassified positions and operating support expenses. She said salary and travel categories have been increased in the second year of the biennium to reflect increased costs related to the legislative session.
Ms. Hunt talked about an inflationary increase in postage and insurance. She stated there are adjustments to cover fringe benefits and changes in positions from unclassified to non-classified. She said there is a proposal for salary adjustment and for the purchase of software.
M-200 Demographics/Caseload Changes – Page ELECTED-23
Senator Raggio asked whether this adjustment would increase the agency’s newsletter production and what the circulation of the newsletter is. Ms. Hunt responded it would and the circulation is about 1000, mainly to economic development agencies, chambers of commerce, and Nevada companies.
Ms. Hunt pointed out that M-200 adjustments are agency generated line item changes requesting a reduction in costs in certain line items in exchange for others.
M-300 Fringe Benefit Changes – Page ELECTED-23
Ms. Hunt explained the M-300 adjustments are budget office calculations to cover fringe benefit changes.
E-275 Working Environment & Wage – Page ELECTED-24
Ms. Hunt, referring to E-275, remarked this is a request for a change in status for employees of the Lieutenant Governor’s office from unclassified to non-classified. Senator Raggio inquired:
What’s the necessity for that? We did that for special reason in the Governor’s Office last time and if we do that, will your agency and then other constitutional officers, or others want that same flexibility? We would ultimately have no control over salaries that are payable. We would then have a “whipsaw” situation where everybody comes in and says, … here’s a position in the Lieutenant Governor’s office and he or she makes this and ours is similar, or works more and making less. If we start doing this we are going to be opening up “a can of worms.”
Senator Raggio inquired whether there is an inequity in the pay situation that cannot be addressed. He added there are only 7 positions, including the position of Lieutenant Governor, in this office. Therefore, why should we make these changes?
Ms. Hunt stated that coming into the position of Lieutenant Governor, she had determined a reorganization of the office was mandatory for her agency to be effective. Senator Raggio asked whether this could be accommodated without changing the positions from unclassified to non-classified. Ms. Hunt responded she had not thoroughly studied the classifications.
Senator Raggio suggested Ms. Hunt work with committee staff in finding another route without extending this trend beyond being manageable.
Ms. Hunt stated that no new positions had been requested and she is asking for the same dollars but reallocated to the positions she has created. Senator Raggio requested that she develop a proposal as to what changes she would like to make. Ms. Hunt responded she would.
Senator Neal, referring to chapter 224 of Nevada Revised Statutes (NRS), asked whether this would authorize the Lieutenant Governor’s office to be an authoritative position in making these determinations.
Nancy A. Dunn, Interim Executive Director and Business Manager, Commission on Tourism, responded:
I do believe that Chapter 244 of NRS recognizes the Lieutenant Governor as a sitting member of that particular audit committee… I do not have the statute here in front of me, but it does assign the membership of that committee and the Lieutenant Governor is part of that membership.
Senator Neal stated he wanted to make sure this action would not add authority that is not already approved by law.
Senator Jacobsen asked whether the office space is adequate, both in northern and southern Nevada. Ms. Hunt replied it is functional.
Controller’s Office - Budget Page ELECTED-76 (Volume 1)
Budget Account 101-1130
Kathy Augustine, State Controller, responded to Senator Neal saying the Executive Branch Audit Committee was created last session and every constitutional officer is a member of the Executive Branch Audit Committee.
Ms. Augustine referred to her budget presentation (Exhibit G). She began with an overview of what was accomplished in her office over the last biennium. She said the office eliminated the issuance of manual hand-typed checks except in special circumstances. They have eliminated special end of the year paychecks for constitutional officers, Supreme Court judges and District Court judges.
Ms. Augustine said the office of the Controller sponsored two Internal Revenue Service (IRS) and Social Security (SS) workshops for state agencies. The office sponsored governmental accounting standards for training for state and local governmental entities, she added. She referred to her agency’s latest report (Exhibit H) outlining Assembly Bill (A.B.) 638, mandating that all state agencies record their receivables with the state Controller’s office on a quarterly basis.
ASSEMBLY BILL 638 OF THE SEVENTIETH SESSION: Makes changes concerning accounting of revenue receivable by state agency. (BDR 31-661)
Ms. Augustine explained that monies due to the State of Nevada continue to rise and now exceed $182 million. She stated Controller’s offices working with the Purchasing Division to issue a request for proposals (RFP) for debt collection agency contracts.
Ms. Augustine said three debt collection training seminars were held regarding collection procedure. She stated with no centralized efforts, receivables continue to rise. She commented that the request to centralize debt collection presented at the last legislative session was denied.
Ms. Augustine pointed out the office is requesting a Management Assistant I position to be dedicated to debt collection. She stated this position was inadvertently omitted from the budget. Senator Raggio asked whether Ms. Augustine is making a request that is not in the budget. Ms. Augustine responded that it is in the initial budget request. Senator Raggio pointed out that it is not in the Governor’s budget.
Senator Raggio inquired what the cost of this position would be. Ms. Augustine stated it was $22,813 without the Governor’s recommended 4% raise for state employees.
Mark Winebarger, Chief Deputy Controller, Office of the State Controller, stated that the amount of $22,813 annually for this position is for a ten-month period. The second year of the biennium this salary with fringe would be $31,169.
Ms. Augustine said this request appears in their M-200 Demographic/Caseload changes request. Mr. Ghiggeri, stated that this was probably in the initial request from the Controller’s office, but when the Budget Division did not recommend it, it rolled to decision unit E-999 (unfunded decision units).
Senator Raggio clarified that they are requesting something that is not in the budget and therefore the committee must view it as an additional request. He stated that because this is not in the budget, the Controller’s office must furnish information to the committee with all the costs and a narrative regarding this position.
Ms. Augustine explained that the state has continued to pay counties for collection of privilege taxes even though the state may not have the money deposited. She referred the committee to the state Controller’s office “payroll overpay status” (Exhibit I).
Senator Raggio asked whether Exhibit H reflects all non-collected receivables as of the end of the calendar year and whether the requested position would be addressing those receivables. Ms. Augustine answered that it would. She said this position would assist the Assistant Controller in processing these debts.
Senator Raggio asked why there is a 60-day overdue amount of more than $84 million in the Department of Taxation. Ms. Augustine replied that they have a pilot program in place. Senator Raggio asked the reason for this and why this position would be helpful. Ms. Augustine answered that large revenue collection agencies are able to go after their own debt, which is why the office of the Controller provided training in conjunction with the office of the Attorney General. She said it had not been as effective as her office had hoped. She stated that when the office of the Controller debt collection agencies are in place, many of the debts outlined in Exhibit H would be referred to these collection agencies.
Ms. Augustine said most of the debts are the result of out-of-state property taxes. Senator Raggio inquired about the item for employment, training, and rehabilitation benefits overpayments listed in the amount of $15 million.
Jeannine Coward, Assistant State Controller, Office of the State Controller, commented that only the numbers are reported to the Controller’s office, not the reasons the amounts are so high. She said that hopefully as the office of the Controller begins contracting with debt collection agencies, they will receive more information.
Senator Raggio inquired whether contracting with debt collection agencies would be a duty of the new position. Ms. Coward said one thing the position will do is to keep quarterly records on the receivables and maintain a data base of individuals and vendors who owe money to the state, so there will be better records.
Senator Raggio asked whether the state would retain the debt collectors. Ms. Coward said that the state would. The way Senate Bill (S.B.) 500 was written, the state could have a public/private partnership with a debt collection agency. She said the Purchasing Division and the Controllers office have been working on the RFP.
SENATE BILL 500 OF THE SEVENTIETH SESSION: Provides procedures for collections of certain debts owed to state agencies. (BDR 31-293)
Senator Raggio asked whether the state has more “clout” than a debt collector. Ms. Coward said she doesn’t think the Controller’s office ever had the personnel to go after all these debtors. Senator Raggio, referring to the item regarding the Department of Motor Vehicles and Public Safety (DMV&PS) on Exhibit H, said that department has almost $3 million identified as returned checks. Ms. Coward pointed out DMV&PS takes in about 500 checks a week. Senator Raggio inquired whether these debts are collectable. Ms. Coward said DMV&PS is working on it.
Ms. Coward indicated DMV&PS have three people assigned to their bad check division. She said DMV&PS are in the process of reorganizing new procedures. She stated the Executive Branch Audit Committee worked with DMV&PS and recommended new procedures. Senator Raggio expressed concern regarding how one new Management Assistant position would help this situation.
Ms. Augustine stated that the issue is not only on the debt collection and receivables, but also on the payroll overpayments (Exhibit I). She said that because of the amount of paperwork that is necessary, she feels a clerical position would provide assistance. Senator Raggio asked whether hiring this person would address the problem? Ms. Augustine said not as far as that clerk’s actually going after debts. She stated that during the last legislative session, the enormity of this problem was not recognized.
Senator Raggio asked whether it is the responsibility of the agencies that have these outstanding obligations collect these debts. Ms. Augustine said there are about five agencies with the authority within Nevada Revised Statutes to collect on their own. She pointed out that agencies have not been actively attempting to collect the debts, resulting in these debts becoming the responsibility of the Controller’s office.
Senator Raggio asked which agencies are unable to collect their own debts. Ms. Augustine responded that those agencies are the Department of Taxation, DMV&PS, Department of Employment, Training and Rehabilitation (DETR), and gaming.
Ms. Coward added that the major revenue collection agencies can collect their own debt. She said one purpose of S.B. 500 of the Seventieth Session, was to provide authority for each agency to levy bank accounts, file summary judgments, and deal directly with collection agencies.
Ms. Coward stated that the Controller’s office chose to work with the Purchasing Division to negotiate one RFP for a debt collection agency under contract with payment based on percentage of collections. Each individual agency could work with the debt collection company, she added.
Ms. Coward said when an agency decides a debt is not collectable, it could work with the collection agency or turn receivables over to the Controller’s office. She stated that the RFP is written so the debt collection agency would be paid a percentage of the collection. She added that would not cost the state more money except for that percentage.
Ms. Coward commented on a proposed bill for the 2001 Legislative Session that would allow for the cost of collection to be added on to the amount of the debt.
Senator Neal recalled in a past experience when he purchased a senatorial license plate and wrote a check from his campaign fund for $12, and the account was subsequently closed. He said the bank later notified him his check had bounced and he immediately sent a new check to DMV&PS. He said they, in return, sent him a notice for $35 for a bad check. He referred to this incident to bring up the point that DMV&PS does have a means through which they try to collect unpaid debts.
Senator Coffin said the legislative auditor had provided him the reports of the audits for the Controller’s office. He stated that certain principal findings of the audit staff would need to be analyzed. He noted the first finding is that the Controller’s office has poor control over payments received. He referred to a transaction of $100 million in checks, half of which were not recorded on the office log. He said another point from the auditor was that checks are not always deposited within the time required by state law. He mentioned that the office could not document the date of receipt for 13 checks.
Senator Coffin pointed out another finding that indicated the Controller’s office did not always document travel expenditures incurred in the transaction of state business. He added that 16 trips lacked adequate documentation to show that the trips related to state business. He referred to the fourth point from the auditor regarding a law passed in 1997 to reduce the number of checks issued by the state. As of the audit date, he pointed out, this law had yet to be implemented by the Office of the State Controller. Because of this, he added, the state had missed the opportunity to add these requirements into the new accounting system.
Senator Coffin referred to the last item pointed out by the auditors that the Office of the State Controller did not always take action to collect money owed to the state from payroll overpayments. Senator Coffin said these audit reports are a “stark snapshot” of what is going on.
Ms. Augustine replied that the audit was conducted during the first 6 months she had taken office. She noted that many of these referenced items were not in place when she took office. She stated that, even before she had received the preliminary audit report, all of these items had been corrected and rectified. She testified that when she took office there was no separation of duties for logging checks and depositing checks. She added that these things have been rectified and her office has accepted all the recommendations of the auditors.
Ms. Augustine pointed out that during the first 6 months of her tenure, she did not have an office in Las Vegas. She said she was required to travel to conduct all the business there was in Las Vegas. She added that they now have a ten-foot by ten-foot office in the Grant Sawyer State Office Building to conduct business in Las Vegas.
Regarding the legislation passed in 1997, Ms. Augustine pointed out that the Department of Administration and the Office of the State Controller were building a contract with American Management Systems (AMS) for a system that had not taken this law into account. She added that the federal government mandates the issuance of all checks for child support and welfare, regardless of the amount.
Ms. Augustine informed the committee that there will be a general accounting bill this legislative session that would eliminate this requirement. She noted that it is unfortunate the prior administration did not take this into account when developing the system with AMS. At this time, she added, it would be cost prohibitive to make such changes in the system.
Senator Coffin said 8 recommendations had been made by the auditor. Ms. Augustine agreed and said they had all been accepted and rectified by her office. She testified they had all been corrected within the first 6 months of her taking office. Senator Coffin asked whether the committee should have the auditor revisit these issues. Ms. Augustine said the Nevada Revised Statutes require that a follow-up be conducted and that has already been done. Ms. Augustine said she or the Legislative Counsel Bureau would be happy to provide a copy of that follow-up audit report to the committee.
Ms. Augustine said she believes her office now has tighter standards in place than required by the NRS. She said the NRS only requires deposits be made when $10,000 has been accumulated and she has mandated that her office make deposits on a daily basis, regardless of the amount.
Senator Jacobsen said he is the chairman of the Audit Subcommittee and he looks forward to hearing from her office again.
Senator O’Donnell commended Ms. Augustine on identifying and correcting these problems within the first 6 months of her tenure. Senator Raggio agreed and said more problems are created when agencies don’t respond or do not rectify the audit findings.
Ms. Coward commented that the Office of the State Controller, along with the Department of Taxation, have implemented a pilot program allowing the state to not pay vendors who already owe money to the state. Regarding the new position she is requesting, she said the duties of that position would include the manual input of money due from and paid by vendors. Senator Raggio requested this information be put in the position request and asked that it be submitted to the committee staff.
Senator Neal pointed out that in Exhibit H, Accounts Receivable for the Office of the State Controller, $961,278.72 is due from incarcerated inmates.
Ms. Augustine, referring to the State Controller’s Office Payroll Overpay Status report (Exhibit I), said that when the state payroll system was converted to the Integrated Financial System (IFS) in March 1999, state employees were paid an additional week of pay in the amount of $7.2 million. Consequently, she pointed out, there has been an extraordinary number of “anti-weeks” the state is attempting to collect when the employee leaves state employment. She said this “anti-week” is supposed to be deducted by the agency’s accounting or payroll unit staff.
Ms. Augustine informed the committee that this is not being done effectively and the payroll section sends them to the Controller’s office for follow-up. She mentioned that there is a bill sponsored by Assemblywomen Berman to move the payroll function back into the Controller’s office to have direct oversight over these overpayments and other payroll problems. She noted that, as outlined on Exhibit I, there is almost $200,000 in overpayments.
Ms. Augustine referred to a schedule of outside bank reconciliations as of November 30, 2000 (Exhibit J). She said these accounts are outside the direct scope of the Controller’s office and is money that cannot be invested by the Office of the State Treasurer. She remarked that she and the Governor are requesting every custodian of these accounts provide a monthly report of how much is in these bank accounts.
Ms. Augustine said that, as of November 30, 2000, $4.8 million was held by the agencies listed in Exhibit J in accounts outside the General Fund. She explained that the university’s sweep account was omitted from this report because of a $5 million overdraw that occurred on November 30 when the university system miscalculated payroll expenses. She said they were charged one day’s interest by the bank and the money was requested on December 1, 2000.
Senator Raggio requested that she talk about the outside bank accounts. He asked whether, in her opinion, all the accounts listed on Exhibit J should be invested? Ms. Augustine replied the state Treasurer’s office does investments and that office would better answer that question. Senator Raggio remarked that there must be a reason these agency’s accounts had not been consolidated. Ms. Augustine remarked that if agencies are going to open an outside bank account, they must come before the State Board of Finance, chaired by the Governor.
Senator Raggio asked whether, in all the cases listed on Exhibit J, agencies have all had the proper authority to invest these accounts? Ms. Augustine explained that they have, but they are all non-interest-bearing accounts. Senator Raggio asked whether that includes the unclaimed property account totaling over $2 million and why it could not be in an interest-bearing account.
Steven D. McDonald, Administrator, Division of Unclaimed Property, Department of Business and Industry, said this is a brokerage account, not a bank account. He stated, “It is one of the forms that the Controller has mandated that we fill out, so what we do is transfer our Dean Whittier statement. It’s mainly just a stock portfolio. It’s all the unclaimed property stock and the value of the stock.” Senator Raggio asked whether it is realizing some investment value. Mr. McDonald replied that it is.
Senator Raggio asked what the point is of having this form (Exhibit J). Ms. Augustine replied that they wanted the committee to know how much is currently in outside bank accounts. Senator Raggio asked whether these accounts should be handled otherwise. Ms. Augustine said she would like to see some of them in interest bearing accounts. Senator Raggio inquired whether all these accounts are approved as outside bank accounts. Ms. Augustine responded that they are and the Controller’s office collects this report on a monthly basis from these agencies. She said this form was originally prepared at the request of the Governor so there would be a record of outside bank accounts.
Ms. Augustine commented on the “Rainy Day Fund.” She said if the controller uses the strict interpretation of the NRS regarding the “Rainy Day Fund,” there will not be enough money for the Governor’s requested “one-shot” in the budget. She commented that, in the past, less money has been transferred into the “Rainy Day Fund.” She stated she requested the Director of the Budget Division to “tighten the language” in the statutes as it relates to the “Rainy Day Fund” so there will be no question in the future as to how much money should be transferred. She added that he has agreed.
M-201 Demographics Caseload Changes – Page ELECTED-77
Senator Raggio asked whether there are five positions funded by a “one-shot” appropriation. Mr. Winebarger replied that was not quite correct. He commented there are two permanent positions, one Accountant III and one Data Base Manager III, which were approved at the Interim Finance Committee (IFC) April 13 meeting. He noted that these two positions are in this decision unit because they are not included in the base budget.
Senator Raggio, referring to the narrative in M-201 of the Controller’s Office Budget, said “This will continue the funding for five full-time equivalent (FTE) positions that heretofore have been funded by a one-time appropriation for the rollout and implementation of the Integrated Financial-Management System (IFS).”
Senator Raggio asked whether this is correct or incorrect. Mr. Winebarger commented that, of the five positions being requested, three of them are temporary. Senator Raggio replied he understands this. However, he said they are funded by a “one-shot” appropriation. Mr. Winebarger said this is not what his office wrote in their request. Senator Raggio said it should be corrected to three positions funded by a “one-shot” and two approved by IFC.
Mr. Winebarger said it should actually read that three temporary positions are being requested and are included in this budget because they are not in the base this year. He added that these positions have already been hired and are part of the rollout team.
Mr. Winebarger said this is to continue the rollout which should be completed by the end of the biennium. He pointed out that the first two positions were approved by the IFC and they will be permanent positions.
Senator Raggio asked how many of these five positions will still be needed after the rollout is completed? Mr. Winebarger remarked that this will need to be analyzed, but he expects one or two. Senator Raggio requested that this be outlined before the end of the session. Mr. Winebarger said they will prepare an outline for the committee.
Senator Raggio inquired whether this could be done with a one time appropriation. Mr. Winebarger said he is not sure but will supply updated information on this issue.
Mr. Winebarger said decision unit M-201 also recommends additional funding for paid overtime as outlined in Exhibit K. He pointed out that, since this time last year, the accumulated compensatory-time balances have increased by 667 hours. He stated the accountants are required to work overtime to help insure the state’s Comprehensive Annual Financial Report (CAFR) is published timely. He said employees in the information technology section work overtime to keep the accounting system and data warehouse up and running. He added that these are essential functions and the work cannot be postponed.
Mr. Winebarger said staff in the operations section are also asked to work overtime when necessary. He remarked that if they are not able to pay overtime, the accumulated “comp-time” will continue to grow and will eventually affect their ability to provide mandated services.
Mr. Winebarger pointed out that employees receive one and one-half hours of “comp-time” leave for every overtime hour worked. He said when employees take “comptime” off it adds to the problem because they are not taking their allotted annual leave. He stated this results in accumulated annual leave hours in excess of the maximum 240 hours.
E-806 Unclassified Pay Changes – Page ELECTED-79
Senator Raggio said that according to The Executive Budget this is a recommendation to convert six positions from classified to unclassified and there is a Bill Draft Request (BDR) on this. He asked what the justification for this would be.
BILL DRAFT REQUEST 18-663: Changes from classified to unclassified service certain positions within the office of the controller. (splitout from #170) (Later introduced as S.B. 228).
Ms. Augustine answered that many constitutional officers have opted to go non-classified. However, she said, the Controller’s office did not want to go non-classified. She said she desires the flexibility to make her top management positions unclassified. She added that it includes five management staff and her personal assistant. This will allow her department to build in raises for the chief accountants. Senator Raggio pointed out the request will have to go through the unclassified pay bill. Ms. Augustine agreed.
Senator Coffin, referring to the IFS, asked why the system had been upgraded to a 1995-98 Microsoft Windows Program and on the web-page there is a warning indicating that it does not support Windows 2000. He said his concern is that the system may be “behind the times” with the 1995-98 version. He asked whether the state should be looking at the 2000 version instead.
Jim Wells, Chief Accountant, Integrated Financial System, Office of the State Controller, stated the vendor that supplies the software for IFS has not guaranteed this program will work on a Windows 2000 version. He said the Nevada Department of Transportation does run IFS on Windows 2000 software and have yet to encounter any problems. He added that the vendor will not certify this software for exclusive use until all testing and certification have been completed.
Senator Coffin remarked that IFS displays a note that indicates if a user is buying a new personal computer (PC) IFS does not support Windows 2000 software. He questioned whether that is for protection and whether it should be re-phrased to read that a test should be conducted.
Senator Coffin expressed concern that a lot of serious buying decisions will be made very soon and the committee doesn’t want to see old software purchased just to meet this concern. Mr. Wells stated he believes the certification of the use of this software is relatively close. At that point, he said, he will remove all warnings regarding Windows 2000. He pointed out he does not want people to buy a computer just for the IFS project and then develop problems that he cannot address.
E-710 Replacement Equipment – Page ELECTED-78
Senator Raggio inquired whether the persons who purchase computer software, as in E-710, would update this project. Mr. Wells explained that this recommendation is part of the Advantage Business Systems, which is funded through the Department of Administration, and it is for separate and unrelated PC software.
Senator Coffin indicated that any new information on this software issue would be appreciated by the committee. Ms. Augustine added that the contract with the vendor has been negotiated and signed by the budget director from the Department of Administration.
Senator Raggio asked about the progress of the renovation of the Capitol Annex and how the Office of the State Controller will be housed during the renovation. Ms. Augustine said it is her understanding the office will be moved to the Employees Insurance Company of Nevada (EICON) building, which the Governor has recommended the state purchase for $14 million. She said the Governor is moving the Controller’s office out of the capitol complex. She pointed out her office was not informed directly by the Governor, but the Public Works Board advised her of the plan. She said the Governor has requested the renovation of the annex for a conference room for the budget director and staff.
Ms. Augustine said she is not sure what the “master plan” is at this time. She pointed out that the fiber-optic cable for the IFS project does not run to the EICON building. She stated this would require an additional expense. She added that separating the Treasurer’s office and the Controller’s office poses a logistics problem regarding security and nightly transportation of checks from the Controller to the Treasurer.
Senator Raggio asked whether these concerns had been brought to the attention of the Governor’s office. Ms. Augustine said she is not sure. Senator Raggio suggested that these matters be addressed to the Governor’s office, not this committee.
Mr. Wells commented on a memo regarding the IFS project rollout schedule (Exhibit L). He said this proposed schedule outlines phase one of the financial portion of the statewide IFS. He indicated there are 80 agencies identified and broken down into 34 groups. He said twelve agencies are using the system. One has received internal controls approval and is ready for user identifications, and five have been trained and are waiting for review and approval of their internal controls.
Mr. Wells remarked that phases two and three will consist of more advanced features in the system. He said phase one is for paying bills and making deposits.
Secretary of State – Budget Page ELECTED-81 (Volume 1)
Budget Account 101-1050
Dean Heller, Secretary of State, addressed the committee and referred to his presentation. (Exhibit M. Original is on file in the Research Library.) He said his office has continual growth and revenues are up 12 percent overall. Senator Raggio asked whether the Secretary of State is projecting more than $50 million by the end of 2003. Mr. Heller said he does anticipate this growth from all sources including securities, notaries, and elections.
Senator Raggio said, “So you’re presently at $38 million. Is that what you’re saying?” Mr. Heller responded that this is correct. He said revenue per full-time employee is an indicator of what technology is doing in this office. He commented that in 2000 his office is producing over $350,000 per employee, a significant increase from $100,000 per employee in 1987.
Senator Raggio questioned whether revenues will go up $3.5 million if 10 positions are added. Mr. Heller replied that it is true.
Mr. Heller referred to Exhibit M and explained that activity in their website has grown significantly in 22 months because of interest in elections, securities, and commercial recordings. He said there were 2.8 million “hits” on their website for the month of November 2000. He stated that individuals that actually download and look for general information show a growth rate as well.
Mr. Heller said the significance of having the website is that it limits phone calls. He stated that these statistics equate to over 100,000 phone calls per month that are avoided and are answered by using the website.
Mr. Heller referred to a graph in Exhibit M indicating the number of people who use the department’s website to download forms of all types. He said it saves his office from having to answer the call, get the form, and mail it. He stated this saves his office about $1 per form.
Senator Raggio asked whether all of their forms are available through the Internet. Mr. Heller responded that they are. He said his office saved $80,000 in postage and paper costs last month. He noted that, by comparison with other state offices, the Office of the Secretary of State is very active and progressive in website technology.
Senator O’Donnell pointed out that with 2.8 million “hits” on the website Mr. Heller should consider advertising on the web. He said this could generate a lot of money. Mr. Heller said there is an interim committee that the Governor has set up to discuss E-Commerce, and one issue the committee will be discussing is advertising on websites. He stated that economic development is strongly enhanced through the Office of the Secretary of State by individuals looking at what Nevada is doing.
Senator O’Donnell commented there are a lot of things that could be done with this to augment the state’s tourism industry. He suggested airline or hotel advertisements. Mr. Heller said it is an issue, but he is not sure where the Governor’s staff wants to go with this. He added he is in favor of this type of advertising.
Senator Rawson asked how the website is administered. Mr. Heller responded that there is a Webmaster, Janice Webb, who is a full-time employee. He said there are four people on staff to insure that system is running. He noted their failures are very low, about one quarter of what the industry standard is for a website. He pointed out that they cannot afford to have this system go down.
Mr. Heller said his office now has a service with which a person can file a corporate name online. He added that 2 additional positions are recommended in their Information Technology (IT) offices.
Senator Rawson explained that a number of agencies are now asking for a partial or full-time position to handle the web. He asked whether Mr. Heller is in a position to market some of those services to other state agencies. Mr. Heller responded that his office did produce the Lieutenant Governor’s website. He added his office has provided access to information. He said, because of the success with his office’s website, they get a number of phone calls asking for advice on how to enhance other websites.
Senator Raggio asked how the Office of the Secretary of State collects filing fees when they use the web. Mr. Heller remarked they accept credit cards and charge accounts can be set up.
Continuing, Mr. Heller said the Commercial Recordings Division is managed by Scott Anderson, Deputy Secretary of State. He said Mr. Anderson, who is a Certified Public Accountant (CPA), is very aggressive in upgrading procedures in the area of administering corporations.
Mr. Heller explained for Uniform Commercial Code (UCC) filings, the Commercial Recordings Division is asking for five additional positions. He said on July 1,2001, a major revision becomes effective to Article 9 of the UCC, requiring county filings go to the state. He explained there are currently about 40,000 filings in the UCC division each year and with this revision those filings will double.
Mr. Heller remarked in the Commercial Recordings Division, the annual number of new filings is anticipated to continue to grow. He said there were over 52,000 new business entities that filed with the state for FY 2000. He added that the Secretary of State’s office is the hub for business in this state, because all businesses must go through this office for licensing prior to doing business. He stressed that this division needs to have the technology to make this process as streamlined as possible.
Senator O’Donnell asked whether the growth curve for filings is increasing. Mr. Heller stated that the growth curve is positive and they see the number has only increased over the last five years. He said there could be several reasons this number may decrease, which would include a solid economic downturn, bad service, bad legislation, or changes in our laws. Senator O’Donnell commented that filings in the Commercial Recordings Division are increasing at an increasing rate.
Mr. Heller said the reason this growth continues is that once corporations file, they come back every year and that is on top of current businesses. He added that this growth is what constitutes the request for new positions.
Senator Raggio asked what the confidential address program does for victims of domestic violence. Mr. Heller said it is a program that was established about four years ago and provides persons who have been involved in domestic violence, a way to protect their names and identities. Senator Raggio asked what the necessity of this program is. Mr. Heller said these individuals use the address and phone number of the Office of the Secretary of State for all of their mailings and phone calls. Therefore, it does protect their identity, he added.
Mr. Heller commented there had been about a 70 percent voter turnout. He said it appears that voter registration is decreasing, but it is actually increasing. He explained that clerk’s and registrar’s now take inactive voters off their voting lists. By doing this, he pointed out, it appears the voter turnout is going down, but if the inactive voters were added back in, the numbers would actually increase.
Senator Raggio asked how people who have died or moved get purged from the voter list. Mr. Heller replied that voters cannot be purged simply because they did not participate in the last election. He said that people who do not vote will stay on the list for two election cycles. He added that his office then sends notification to the voters by certified mail that they will be purged. He explained that his office can purge them if they do not respond.
Mr. Heller commented on the goals for the Elections Division indicating they are outlined in Exhibit M. He said it is not in the budget but he has requested it from the Governor, who is not opposed to it.
Senator Raggio asked what statewide voter registration is. Mr. Heller said it is a program that involves a single database. He explained it links all 17 counties giving all clerks and registrars one single voter database. He said the purpose is to clean up problems in the voter list which are due to people moving in and out of Nevada counties. He added that one of the arguments in favor of this system is that a person could theoretically register to vote in all 17 counties, and there is currently no way to police this. He said to vote more than once is illegal. He noted that a statewide voter database would place registration of voters in a single unit and avoid this type of fraud as well as provide a “clean” list for candidates and public information. Mr. Heller said this program has a price tag between $1.5 million and $2 million.
Mr. Heller commented on the rewrite of the election statutes, which is covered in their “one-shot” appropriation for the next biennium. He said that rewrite of election laws has been the theme of national associations and Secretaries of State conferences. He said every state needs to look at its election law. He added by having over 140 years of election laws, many laws have vague areas with many contradictions, and may require a re-write.
Mr. Heller said his office is also looking at an Internet voting pilot program for the military. He noted there was a lot of concern during the last election cycle regarding whether men and women who were stationed overseas had an opportunity to participate in this last election. Senator Raggio asked what the cut-off date in Nevada is for counting military ballots. Mr. Heller replied that these ballots must be received within 15 days of the election date and that is a federal law.
Mr. Heller said he believes that a democracy fund, previously discussed with the committee, is an issue pertinent to this legislative session. He pointed out that this fund would be for upgrading the technology in Nevada’s voting machines. He said eight counties still use the “punch-card” system. He suggested that it would behoove Nevadans as a whole to do away with all “punch-card” systems. He noted that Clark County has the “direct-record” system, but still uses “punch-cards” for their absentee voting. He said he would like to see that replaced.
Senator Neal asked what could be done with the absentee ballots that are mailed out, if they are not the “punch-card” type. Mr. Heller replied Nevada could use the “optical-scanning” system, similar to the method used in Washoe County, which is essentially “fill in the oval.” Mr. Hiller remarked he has heard testimony from the registrar in Clark County that their system is imperfect only because of “punch-cards.”
Senator Raggio asked where “punch-cards” are being used in Nevada. Mr. Heller responded they are using them in Carson City, Douglas County, and five other counties. Mr. Heller noted only one county uses “direct-record” and eight use “optical scanning” and “punch card” type methods for voting.
Mr. Heller said one last goal for the Elections Division is additional positions. He said the Elections Division currently has one full-time position and one half-time position. He noted that city elections are presently underway with only this many on staff, which requires working Saturdays and Sundays.
Senator Raggio asked whether the budget for the Office of the Secretary of State reflects this request. Mr. Heller said it does not. Senator Raggio requested a full justification and all costs associated with any new positions.
Mr. Heller moved on to the Securities Division and indicated there had been an increase in branch offices and Nevada-based investment/advisor firms. He commented that over 80,000 sales representatives are licensed in Nevada. He said five years ago there were just over 40,000 sales representatives and the Securities Division has received no new positions in that time. He stated that in this budget there are four new positions recommended. He said there would be two the first year of the biennium and two the second year.
Mr. Heller advised that he requires the Securities Division to do performance audits on every branch office, every other year. He indicated that with the markets being “flatter” than in the past, complaints have risen 6 percent this last year from the prior year.
Senator Raggio asked in what module is the request for these additional employees. Mr. Heller said that would be in decision unit M-200. He added that the goals for the Securities Division are outlined in his handout (Exhibit M). He added that his office requires routine audits on brokers and this division performs many educational programs to help people avoid investment and securities fraud. He pointed out that the “number one complaint” his office receives is based on unauthorized transactions from brokers in securities accounts.
Mr. Heller said customer service statistics show that his office receives about 15,000 telephone calls per month. He remarked that about one percent of the phone calls are complaints. Senator Mathews said one complaint with state government is that you cannot get through by telephone. Mr. Heller said the Secretary of State’s office is one of the few state agencies in which a citizen can talk to a person and not a machine. He commented that his office has ten full-time people answering telephones.
Mr. Heller said many positions within his agency have upgraded without the salaries reflecting the level of professionalism that are now in the office. He referred to a chart in Exhibit M that compares salaries of the chief deputy positions in the Secretary of State, Treasurer, and Controller offices. He said it reflects that some unclassified positions in his office are underpaid. He added that in his office the Deputy Elections Officer has historically been paid under $50,000 per year. He said there are now incredibly important matters in this area and he feels this position should be a person with a law degree.
Senator Raggio added that it is hard to hire someone at $52,000 per year. It is also very hard to promise a person will be elevated by this process in amounts of $15,000 to $20,000 a year. Mr. Heller said he understands this. Senator Raggio asked whether these positions are all unclassified. Mr. Heller said that they are. Senator Raggio requested a separate request on unclassified salaries, and reminded Mr. Heller they need to be concise. Mr. Heller said he will provide that to the committee.
Mr. Heller said he has two goals: one to raise unclassified salaries to be consistent with similar positions in other constitutional offices and one to unclassify an Administrative Services Officer position in the office.
Senator Raggio asked what the reason is for the requested increase in travel for each year in the amounts of $15,900 for out-of-state travel and $20,000 for in-state travel. Mr. Heller said this request is technology driven. He said by the following next week his office will have a new vendor who will provide a new accounting system in their office. He added there is an office in Las Vegas, an office in Reno, and an office in Carson City. He said a tremendous amount of travel is required for the information technology (IT) staff to link this new system together. He said out-of-state travel includes travel by his staff involved in organizations such as International Association of Corporate Administrators (IACA), National Association Securities Administrators (NASA), and the Technology Division for the IACA.
Mr. Heller stressed the importance of meeting with other secretaries of state across the country. He stated that other states want to know what Nevada is doing because we are currently on the “cutting-edge.” He said travel reflects on the technology of his department.
Senator Raggio asked where the agency is with the Business Process Reengineering (BPR) program, since they were one of the first to embark upon it. Mr. Heller said this technology is the beginning of the third phase. He said his office has gone through all of the processes to complete phase two and are going into phase three. Senator Raggio asked whether M-200 recommends funding for contract maintenance. Mr. Heller said that it does and it puts his office right in between phase one and phase two. He said the office of the Secretary of State is finishing phase two by going through with this contract, which is the technology necessary to move them into phase three. Senator Raggio asked how many phases are in the BPR. Mr. Heller said there are three phases in the BPR.
E-806 Unclassified Pay Changes
Senator Raggio asked whether Mr. Heller is changing a classified Administrative Services Officer to an unclassified Deputy Secretary of State for Operations, and how does this assist them. Mr. Heller explained his current operations manager is being moved to unclassified and his is a function very close to the secretary. He stressed that with audits from time to time, he needs a very reliable and qualified person in this position.
Senator Raggio asked how becoming unclassified furthers the goals of this office. Mr. Heller said because of the flexibility this creates, he can give that person other duties to perform and rely on his expertise in other areas as well.
E-225 Reward More Efficient Operation – Page ELECTED-84
E-901 Trans From BA 1365 – Page ELECTED-85
E-910 Trans From BA 1386 – Page ELECTED-86
Senator Raggio said within these three decision units, there is contemplation of transferring three positions from the Department of Information Technology (DoIT) to the Office of the Secretary of State. He said The Executive Budget notes that these transfers will result in General Fund savings of over $200,000 and a Secretary of State Special Fund savings of $95,000. He asked why this is going to happen. Mr. Heller said this is supported by the Governor’s budget division and by DoIT. He commented they are actually transferring four positions. He said his office currently pays DoIT for the positions, even though these positions are housed in the office of the Secretary of State and have been for the last three years. He explained they use the Secretary of State’s computers and desks and his office pays for all training. He remarked that keeping them in house and leasing them from DoIT costs the department twice as much. He reiterated that his office could save over $250,000 a year by bringing these positions into his budget.
Senator Raggio asked whether extra funding would be needed for equipment, office space, or training for these positions. Mr. Heller said it would not. Senator Raggio said if the committee approves this, would there still be a need for the two positions in decision unit M-200. Mr. Heller said there would be because his office needs to maintain its competitive edge. He said the technology is getting very broad which will change the way his office currently does accounting, requiring these positions.
Senator Raggio asked about the $1.4 million “one-shot” recommended by the Governor, which includes costs to rewrite election law. Mr. Heller said the one‑time appropriation also includes technology and equipment. Senator Raggio said the information the Committee received indicates that the election law re-write is contemplated at $250,000. He asked whether this would be contracted out. Mr. Heller said it would be and it would be similar to the way the office conducted the corporate re-write.
Senator Raggio inquired as to the Internet-based election project and asked whether that is another $200,000. Mr. Heller said this is correct and it is part of the $1.4 million “one-shot.” Senator Raggio asked whether this project would be contracted out. Mr. Heller said he had not decided yet. Senator Raggio requested that Mr. Heller inform the Committee as soon as it is decided.
Senator Raggio said in a meeting of the Senate Committee on Government Affairs the Secretary of State proposed authorization to increase the fee for expedited service from a maximum of $100 to a maximum of $500. Mr. Heller explained that this is to incorporate an expedited two-hour service and the $500 fee would only be changed for this type of service.
Senator Raggio asked what the amount of additional revenue this fee increase would raise. Mr. Heller said his office is currently trying to calculate this. He explained he is somewhat concerned because he does not want everybody to expect to move from 24-hour service to 2-hour service. He said there is a lot of energy coming from the business community, resident agents, and the Nevada bar to provide this two-hour service. He added he doesn’t think his office could handle everybody moving from the regular 24-hour filing to an expedited two-hour service, so he may want to discourage it.
Senator Raggio asked, if the budget submitted by the Governor with additional requests is approved, whether there would there be sufficient funding to “sweep” everything in addition to the $2 million special fund. Mr. Heller said the expedited service now raises about $300,000 per month. He said with these new requests, half of the new positions come out of the General Fund and half of them come out of the “expedited account.” Senator Raggio pointed out that Mr. Heller’s office should get some numbers together for the committee since he had also made a request to augment this so the state would only “sweep above $3 million.”
Mr. Heller said with some of these new changes and the increase of the “expedited account” he could see a substantial increase in fees collected. Senator Raggio commented that if there is some way Mr. Heller could raise an additional $20 million or if he has any suggestions, he should advise the committee in the next few weeks.
Senator Jacobsen inquired as to where the department is housed, how many square feet their office space is and whether it is adequate. Mr. Heller said the Corporations Division has been moved to the old Meyers Hardware building. He said they have received tremendous support from the business community due to the easy access. He said the Governor is trying to relocate offices currently housed in the Capitol Building so it can be maintained more as a museum. He added this is why the Corporations Division was moved across the street. He said this is adequate space and there is additional space in the Capitol Building that is currently being renovated.
Senator Jacobsen asked whether there is any need for more space, possibly a floor in the old courthouse or firehouse. Mr. Heller said:
Actually, it is a good question… we are moving in Las Vegas. We have been requested because we are on the second floor of the office building in Las Vegas, and that’s the same floor Gaming is on and Gaming wants our space. So I think that’s going to end up moving them up to our Corporations Division up to the fourth floor, but also the League of Cities which is right next to our space near the Meyers Hardware Building, they’re talking about moving out in 2 or 3 weeks. We did leave one area of our Corporations Division out of the Meyers Hardware Building and that’s our records, our 4R, so it may make some sense to come back to you a little bit later and say can we have that additional 1,200 square feet, so that we can have all of the corporations across the street, instead of half there and a portion of it in the Capitol Building.
State Treasurer – Budget Page ELECTED-88 (Volume 1)
Budget Account 101-1080
Brian K. Krolicki, State Treasurer, said on this budget he fully agrees with the Governor except for one position that was left out. He noted that this position would be an Assistant Treasurer. He said it is a higher-end position needed to accomplish many of the tasks needing to be fulfilled. Senator Raggio asked what this position would be for. Mr. Krolicki said that the Chief Deputy Treasurer is currently consumed with the operations of the office, which has turned into numerous trouble-shooting events. He added that this new position, among other things, would help to organize cash management committees, analyze items from the State Board of Finance, and address the financing of the monorail system in Las Vegas.
Mr. Krolicki said the core team of the Office of the Treasurer has been in place for quite some time and has stayed the same size. He said his office has grown in education programs. He commented that this department needs programs that find money. He said this position would require someone who could implement these types of projects. He added that the Governor supports this request and a complete justification and additional descriptions will be provided to the committee.
Senator Raggio asked whether one new position had been requested in the budget. Mr. Krolicki said outside of the Assistant Treasurer position there are two non‑General Fund positions related to the Millennium Scholarship Program. He added that this is financed by the 2 percent overhead of the tobacco money received by the state. Senator Raggio inquired whether that is in a separate budget. Mr. Krolicki said this is in the Allodial Title program.
475 Effectiveness of Family Service – Page ELECTED-90
Mr. Krolicki said under this decision unit he is requesting funding for the Allodial Title program. He added that his department has been assigned this task and has issued an RFP for actuarial services and he believes the program will be rolled out. He said this program requires one full-time position. Senator Raggio explained that because this request is not in The Executive Budget, Mr. Krolicki will need to provide to the committee a complete justification for this position.
Senator Rawson asked whether Mr. Krolicki is requesting non-classified status for these employees. Mr. Krolicki said he is and believes it is critical for this office. He added that the existing unclassified employees are capped. He said he has lost two key people in the last nine months because he couldn’t match salaries from either inside the state or elsewhere. He said with the flexibility of $5,000, he could have possibly kept one or both of these employees.
Mr. Krolicki said he would request that current employees of the State Treasurer’s office receive a “grandfather clause” giving them the option of not becoming non-classified. He added that if the position becomes vacant, it would be non-classified. He said another suggestion is to cap the number of people who can receive this option.
Senator Rawson said that, as an elected official, Mr. Krolicki should be able to run his own office and that he understands the need for this flexibility. He asked whether the issues concerning the Allodial Title program had been cleared up. Mr. Krolicki answered the concerns are in the procedural area, mainly legal issues. He said this includes “the assessment of a tax rate going forward,” and the issue of transfer of a title to a family member in the next generation for a $10 fee without triggering a re-actualization of that title. He said he believes these issues have been clarified through correspondence with the office of the Attorney General.
Mr. Krolicki said the challenge is currently in the Request for Proposal (RFP) for actuarial services. He expressed concern whether he determine “an appropriate amount and a table to charge that would satisfy any liability going forward.”
Senator Rawson commented that there are people who do not like the idea of the Allodial Title program. However, he said, it is policy that has been passed and in the opinion of the Legislature, it should continue to go forward. He added that he would like to facilitate any concerns while the Legislature is in session.
Mr. Krolicki said he appreciates such a unique project. He added that there have been some Internal Revenue Service (IRS) issues and bankruptcy issues that have been very consuming. He said he will continue to do all he can through his department to accomplish getting this program in place.
Treasurer Higher Education Tuition Administration – Budget Page ELECTED-93 (Volume 1) Budget Account 101-1081
Mr. Krolicki said the goal this year was to sell 2,000 contracts for the Prepaid Tuition Program, and currently there are 2,030 contracts in place. He said this brings their total to almost 8,000 contracts. He added he expects to see another 15 to 20 percent increase in the number of contracts. He said the Prepaid Tuition Program has been well received by the citizens of Nevada. He noted that the program is self-sustaining at about a $40 million in asset amount, and the program currently has almost $20 million in asset amount.
Senator Raggio noted that for the 1997 – 99 biennium $1.4 million had been appropriated to the Prepaid Tuition Program and for the current biennium the General Fund has contributed $1.5 million. He added that this department is asking for $1.1 million in FY 2002 and another $1.1 million in FY 2003. He asked when the General Fund will start seeing reimbursement. Mr. Krolicki said in FY 2003; there is a ten-year amortization schedule that would pay back this debt. He added the actuaries have this information. He said he believes this is the last biennium to ask for General Fund money and in two years he anticipates $45 million to be “under management.” He noted this will be a ten-year payback schedule.
Senator Raggio asked whether the contract sales for prepaid tuition is at the projected amount. Mr. Krolicki replied they are far beyond. Senator Raggio commented that it appears the number is going down. Mr. Krolicki said the number of contracts sold in the last two years is structured in a way that will totally pay for costs related to the program. He explained as long as these contracts are maintained, they are self-sufficient.
Senator Raggio noted that an actuarial valuation was done in June 2000. He said it was found that this program is actuarially sound with a 71 percent probability of being adequate to satisfy all program obligations. He said the actuarial valuation did not include the program’s administrative costs that were funded by the state General Fund. He commented that if the program had been assessed those costs, then it probably would not have been actuarially sound.
Mr. Krolicki explained the actuary (one who calculates insurance and annuity premiums) has looked at this and is aware of the liability. By adding this liability, the soundness of the program goes down to a 68 percent level of being adequate to satisfy the program obligations, he added.
Mr. Krolicki said the contract costs in this program are re-evaluated every year to prevent an unfunded liability.
Senator Raggio asked whether the Millennium Scholarship Program is going to discourage the participation in the Prepaid Tuition Program. Mr. Krolicki said he does not believe so. He added the difference is that the Prepaid Tuition program is a program to prepay tuition, room and board, and other incidental costs related to college. He said that Nevada residents need both of the programs to cover the costs associated with higher education.
Senator Raggio asked whether two and one half positions were currently vacant out of the five and one half positions in this office. Mr. Krolicki said that IFC did approve these positions and they are needed.
Dave Clapsaddle, Executive Director, Nevada Prepaid College Tuition Program, Office of the State Treasurer, said there is a vacant Accounting Technician position and a half-time Database Management Specialist II position funded half by his department and half by the Millennium Scholarship Administration. He said they also have a vacant Management Assistance IV position.
Senator Coffin asked whether tuition increases are being looked at in advance. Mr. Krolicki responded his office relies on the university systems for projections on future rates of academic tuition increases for five years into the future.
Senator Raggio called a recess for the committee at 10:45 a.m. until immediately following the Senate Floor Session. The meeting was reconvened at 11:48 a.m.
Millennium Scholarship Administration – Budget Page ELECTED-97 (Volume 1)
Budget Account 260-1088
Mr. Krolicki said he agrees with the Governor’s recommendations on this budget. He pointed out this is funded by tobacco settlement money. He said up to two percent of this money is allowed for administrative overhead. He noted the two positions requested will be paid out of this assessment and will help facilitate this program as it goes forward. He said there was a successful deployment of this program.
Mr. Krolicki said there are 4,200 millennium scholars currently enrolled and utilizing the Millennium Scholarships in Nevada.
Susan Moore, Executive Director, Millennium Scholarship Program, Office of the State Treasurer, said this has been a tremendous year for this program. Senator Raggio asked whether it is correct that, in 1999, 47 percent of recent Nevada high school graduates were enrolled in the University and Community College System of Nevada (UCCSN). Ms. Moore said according to UCCSN, this is true. Senator Raggio asked how this correlates to past numbers of about 30 percent of high school students going on to the college level. He also asked whether it is because of the Millennium Scholarship Program.
Ms. Moore said she does not believe it is due to the program. She said the program has two performance indicators. She explained one is the percentage of recent high school graduates who enrolled in the UCCSN, which was 47 percent in 1999. She added that the other performance indicator is the percentage of Nevada high school graduates who enroll in any college as “degree-seeking” freshmen within 12 months of high school graduation, which was 37 percent in 1998.
Senator Raggio asked why these percentages are so low in Nevada, when in the eastern states these numbers are as high as 67 and 69 percent of high school graduates going on to the college or university level. Ms. Moore said with the incentive of this program and the outreach of all educational parties in Nevada, we will see an increase this percentage. She added that 60 percent of students who are eligible, did enroll in the Millennium Scholarship Program.
Mr. Krolicki commented that to compound that troubling number of 37 percent of students going on to college, we have had the highest rate of dropout’s in high school even before this percentage. Senator Raggio said, “Of those that graduate, historically, we have been the lowest in the country for high school students to go on to higher education.” He added that the hope is that programs like the Millennium Scholarship will eventually improve these statistics.
Senator Coffin asked:
Could you elaborate a little bit on what I was reading about a few months ago about your potential or consideration of a sale of the revenue stream and whether it still makes sense and how much principle would be needed to maintain the rough number of participants we would expect to have?
Mr. Krolicki responded that he has met with Gary Ghiggeri, Senate Fiscal Analyst, and Mark Stevens, Assembly Fiscal Analyst, on preliminary information, but will come before the commission at a later time. Senator Raggio asked whether this would be using funding from the tobacco settlement funds as security. Mr. Krolicki remarked it would be.
Mr. Krolicki said he will be presenting six options to the Legislature regarding proceeding with securitization. He explained it preserves funds in a superior way and it enhances programs such as the Millennium Scholarship Program. He said he would rather manage money than manage the risk of the tobacco company and all of its potential litigations.
Senator Raggio said time will be made available for a special presentation on this issue.
Senator Mathews asked what is the number of students still attending this semester under the Millennium Scholarship Program. Mr. Krolicki said there are approximately 4,200 students who are utilizing the Millennium Scholarship Program with approximately 24 percent failing to sustain eligibility. He added that of that 24 percent, about one-half have re-enrolled for this semester.
Mr. Krolicki said that a millennium scholar who is no longer eligible, there is an opportunity to become re-eligible by paying for the following semester on their own and maintaining a grade point average needed to sustain enrollment. He said that after that semester, a freshman, for instance, would have three more years of millennium scholarship forthcoming.
Senator Mathews asked whether, in the total system, only 24 percent of these students have dropped out. Ms. Moore said it is actually 22 percent.
Senator Rawson commended the office on how well it is run and said many compliments have been received by his office. He added that many families have engaged the Millennium Scholarship Program into their plans and he believes there will be far more impact in the future then we realize.
Senator Neal said he receives information from his community that many students of means are taking advantage of this program, rather than individuals who are less “well-off.” Mr. Krolicki said we are deploying and obtaining the Millennium Scholarship Program. He noted that the policies come from the legislative body, the board of regents, and the Governor. He remarked that this is not a needs-based program, but a program to reward hard-working young people in Nevada who want to go to college. He added that it is available to anyone who has academic eligibility.
Senator Neal asked whether this program is for wealthy kids. Mr. Krolicki said it is for all young people in Nevada who work hard in high school and want to go to college. Senator Neal asked what type of application information is sought when people apply for this scholarship. Mr. Krolicki said there is not an application procedure. He added that all school districts present a list of students in their district who qualify under the rules established by statute and the Board of Regent policy. Senator Neal asked, if the student is eligible, does the student then go to a Nevada University, apply for the scholarship, and receive it? Mr. Krolicki said the scholarships are available when they enroll as a member of the college. He added that not all students who qualify for this scholarship end up going to college, and some go to out-of-state universities.
Mr. Krolicki explained that because a student chooses to go to college out of state, he may still be considered a millennium scholar. He said these students have an eight-year window to access this scholarship.
Senator Neal asked whether the initial process of the program begins with a list developed by each school district. Mr. Krolicki said this is correct.
Senator Raggio asked what is the eligibility for the scholarship. Mr. Krolicki said that the student would have to maintain a 3.0 grade point average (GPA) in high school and to retain it in college they would have to maintain a 2.0 GPA with a minimum course load of 12 credits. Senator Raggio said one of the primary reasons for this program is to provide an incentive to students to do better in high school and have parents take more interest, because of the money savings. He added another reason is to prevent high-performing students from going on to college in other states.
Senator Raggio inquired about the two new positions requested. Ms. Moore said she anticipates that each year the program will not only serve the students from the class of 2000, but also an additional 7,000 to 8,000 students each year. She said she is requesting an Administrative Aid position to help with public inquiries on the Internet, telephone, and fax. She noted program staff are working closely with the university system and need to have the personnel to answer their inquiries, along with the school districts’ inquires.
Ms. Moore said she has also requested a Program Assistant III. She said the responsibilities of this position would include keeping track of students losing eligibility and wishing to regain it. She noted there is a process when students lose eligibility and wish to return for a subsequent semester. She said students must pay for the subsequent semester themselves and provide paperwork to the department. She said the program needs a person dedicated to these types of matters.
Senator Raggio stated that 2 percent is the limit of the fund that can be used for administration. He asked whether this amount will accommodate these positions. Ms. Moore said it would.
Senator Raggio asked whether any long-range (10-year) projections had been done regarding increases, costs, and expenses of this program. Mr. Krolicki said that was done when the program was first being discussed and established. He said his office provide an updated program to the staff.
E-475 Effectiveness of Family Service – Page ELECTED-99
Senator Raggio, referring to The Executive Budget, asked about the continuation of funding for the Ambassador Program that allows for one honorarium for each school district for an individual to act as the point person for the program.
Mr. Krolicki said the ability to influence our young peoples lives in high school to achieve the millennium scholarship is not necessarily as obvious as we think. He said he believes an outreach program to students is important and so is reaching out to parents to become more involved in their high-school-age students. He added that a family with three children could potentially have a $30,000 after-tax benefit. He said he believes this will certainly engage parents to become more involved in their children’s academic performance.
Mr. Krolicki said this program is designed to reach out to communities through individuals who can get into junior high schools and high schools, connect with the students, and hopefully affect them. Senator Raggio asked whether every school district needs one. Mr. Krolicki said they do not.
Senator Raggio asked whether five paraprofessionals would be able to get the message to the students and parents about the scholarships program. Mr. Krolicki said that they would. Senator Raggio asked whether the Ambassador Program has been effective. Ms. Moore said they have worked closely with the K-12 (Kindergarten through twelfth grade) community and to this point have not actually implemented the program. She said program staff have been going into the schools themselves. She added that going into the early grades can give an early alert that there is an opportunity for them.
Mr. Krolicki said he would like to reserve some flexibility and they hope not to spend some of these funds. He noted that the program has reached out to corporate citizens in Nevada and funds have been secured. He said the UNR (University of Nevada, Reno) Foundation office is also pursuing plans.
Senator Jacobsen requested that a portfolio or notebook be prepared on this subject matter, as this is history in the making.
Senator Neal asked what the racial make-up is of the students currently enrolled in the Millennium Scholarship Program. Ms. Moore said her office does not collect that data. However, she added, the University and Community College System of Nevada does. She said these systems have put together some information on this subject and she will provide that to the committee. Senator Neal requested that she also provide information on the 24 percent of students that lost eligibility for this program.
Mr. Krolicki noted it is actually 22 percent that lost eligibility. Senator Neal asked how soon he could get this information. Ms. Moore said it would be provided immediately, possibly within ten days.
Unclaimed Property - Budget Page ELECTED-102 (Volume 1)
Budget Account 101-3815
Mr. Krolicki said there have been three attempts to move the Division of Unclaimed Property, which is currently in the Department of Business and Industry, into the State Treasurer’s office. He noted that at the last legislative session, it was unanimously approved by this body to move the division. However, the assembly did not concur, he noted. He explained that in past testimony several things were identified that could be accomplished by this transfer. He said “$10 million of funds could be ‘one-shoted’ by changing some of the uniform code acts and they have accomplished a plan to do that.” He added that with the Bill Draft Request (BDR) being submitted for transfer of the Unclaimed Property budget into the Treasurer’s office they hope to provide a $10 million one-time “windfall.”
Mr. Krolicki explained that his office entered into a Memorandum of Understanding (MOU) after discussing issues with the leadership. He said he was told if he could make these things happen then he should demonstrate it. He said the fundamental review committee has also examined and supports the transfer of the Unclaimed Property budget to the Treasurer’s office. He said because the Governor concurs with this transfer, this program is in The Executive Budget under the Office of the State Treasurer.
Mr. Krolicki said if this transfer were to occur, but the unclassification issue is not resolved, leaving no flexibility, there would be no parity.
Steven D. McDonald, Administrator, Division of Unclaimed Property, explained he was the administrator of this division from 1995 to 1997 and then left for two years, returning in 1999. He said when he came back he made an assessment of the division. He explained that some of the issues he encountered were vacancies, a back-log in unclaimed property claims, underpayments and overpayments of claims, reports not getting entered into the system, owner accounts not reconciled and audit findings not resolved. He assured the committee that these matters have now been resolved.
Mr. McDonald said this budget is lean. He noted revenues are about 14 to15 percent higher than expenditures. He said the major items deleted from this budget are the “one-shots” as directed by the Governor. He explained the $30,000 in information services was for replacement of the computer system. He explained that in April 2000, the Interim Finance Committee (IFC) granted approval to replace the system, which was three generations behind. Therefore, he said, it can be taken out of the budget request.
Mr. McDonald pointed out another item in their budget request is that they be completely funded by the Trust Fund, with no General Fund appropriation. He said this would mainly be for accounting reasons. Senator Raggio added he doesn’t believe this would make any difference to the General Fund.
Mr. McDonald commented on an experiment with the MOU between the Treasurer and the Governor as having some positives. He said their information technology staff has worked on the Division of Unclaimed Property’s website and programmed their Internet database.
Mr. McDonald added that if they are transferred to the Treasurers office they would be moved to the Grant Sawyer State Office Building in Las Vegas and there is no moving cost included in the budget for that. Senator Raggio requested that the staff make note of this and requested Mr. McDonald submit to the committee staff a proposal of what is required for moving.
E-806 Unclassified Pay Changes – Page ELECTED-105
Senator Raggio noted that this unit recognizes the administrator of the division as having a salary less than the highest classified employee that he supervises. Mr. McDonald said this is correct and the upgrade is requested for that reason.
Senator Raggio added there were some audit findings that can be left up to the subcommittee to address. He asked whether the audit findings had been addressed. Mr. McDonald acknowledged they had been and the department has submitted a follow-up report. He added that all findings have been implemented and their request for proposal (RFP) for the securities contract is on the Internet and being advertised.
Senator Raggio asked whether there are any concerns regarding the proposed transfer to the Treasurers office. Mr. McDonald said they were in complete agreement with the Governor’s recommendation. Senator Raggio inquired whether this is a cost efficient transfer. Mr. McDonald replied that it is.
Senator Rawson asked whether there are incentives set up making it difficult for people to reclaim their property. Mr. McDonald replied that there are policies and procedures set up in his office that often interfere with or slow down the process. He mentioned this is especially true of very old property. He said he has been very reasonable when it comes to the lack of availability of records when claims are under $500. He said he uses an affidavit that promises, if the document is found, it will be turned over to the department.
Senator Neal said the purpose of this program is to see that people regain their property. He said before this was implanted, if you had a bank account and didn’t claim it, the bank could keep it. He said this program was set up so this type of thing would not occur. He added that if you have a stale claim it doesn’t automatically get returned to the named person, but rather that person must seek it.
Mr. McDonald replied he agrees with this and much of what his office does is public education to let the public know this program is here and available. He said they are not here to make it hard for people to reclaim their own money.
Municipal Bond Bank Revenue – Budget Page ELECTED-111 (Volume 1)
Budget Account 745-1086
Mr. Krolicki said Nevada Revised Statutes (NRS) currently authorize the state to assist local jurisdictions to issue natural-resource-related debt up to $1.8 billion. He commented that currently there is approximately $1.1 billion outstanding. He said in these budgets the revenue and expense side are essentially the “payment and appropriate debt service on these liabilities.”
Senator Raggio asked whether the amount of interest transferred to the Treasurer’s office could be increased. He noted the department is budgeting for $225,000 to transfer to the Treasurer and with an increase it would reduce the General Fund money that is necessary for the maintenance of the Treasurer’s office. Mr. Krolicki said he would look into this matter and get back to the committee.
Mr. Krolicki advised the committee of a “test-suit” his office is pursuing regarding the lease-purchase of real property as a state in Nevada, and will be beneficial if it is successful. He said his office has entered into a test case with Employees Insurance Company of Nevada (EICON) and the Department of Natural Resources. The Board of Examiners has refused to appropriate on Constitutional grounds and an old “Hancock Ruling.” He pointed out that EICON agreed to litigate this matter in the State Supreme Court.
Senator Raggio said this issue has been discussed briefly as to whether or not long-term contracts need to be charged against the state debt. Mr. Krolicki said if there is a favorable ruling, the abilities for flexibility in the Capital Improvements Program (CIP) are significant. Senator Raggio added that the Legislative Counsel Bureau is participating in this project.
Senator Raggio adjourned the meeting at 12:25 p.m.
Debra Petrelli
Committee Secretary
APPROVED BY:
Senator William J. Raggio, Chairman
DATE: