MINUTES OF THE meeting of the

joint SubCommittee on general government

of the

senate committee on finance

and the

assembly committee on ways and means

 

Seventy-First Session

February 23, 2001

 

 

The Joint Subcommittee on General Government of the Senate Committee on Finance and the Assembly committee on Ways and Meanswas called to order by Chairwoman Vonne S. Chowning at 8:06 a.m., on Friday, February 23, 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.

 

SENATE COMMITTEE MEMBERS PRESENT:

 

Senator William R. O’Donnell, Chairman

Senator Lawrence E. Jacobsen

Senator Joseph M. Neal Jr.

 

ASSEMBLY COMMITTEE MEMBERS PRESENT:

 

Mrs. Vonne S. Chowning, Chairwoman

Mr. Bob Beers

Ms. Christina R. Giunchigliani

Mr. Lynn C. Hettrick

Ms. Sheila Leslie

Mr. David R. Parks

 

STAFF MEMBERS PRESENT:

 

Bob Guernsey, Principal Deputy Fiscal Analyst

Steven J. Abba, Principal Fiscal Analyst

Mindy Braun, Education Program Analyst

Rick Combs, Program Analyst

Jim Rodriquez, Program Analyst

Debra Petrelli, Committee Secretary

 

OTHERS PRESENT:

 

Stacy M. Jennings, Executive Director, State Dairy Commission, Department of Business and Industry

Robert R. Barengo, Chairman, State Dairy Commission, Department of Business and Industry

Roger F. Ligtenberg, Nevada Representative, Dairy Farmers of America Board

Dave Coon, Vice President, Sales, Anderson Dairy, Las Vegas

Dennis Hellwinkel, President, Nevada Farm Bureau

Jim Breslin, General Manager, Model Dairy, Reno

Charles W. Fulkerson, Executive Director, Office of Executive Director for                  Veterans’ Services, Office of Veterans’ Services

Jonathan Sias, Director, Nevada State Veterans’ Nursing Home, Office of Veterans’ Services

Chuck Abbott, Management Analyst, Office of Executive Director for Veterans’             Services, Office of Veterans’ Services

Larry Barry, Administrative Services Officer, Nevada State Veterans’ Nursing Home, Office of Veterans’ Services

Ed Gobel, Lobbyist, Council of Nevada Veterans Organizations

Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of             Business and Industry

John R. Orr, Deputy Commissioner, Division of Insurance, Department of Business             and Industry

Kathalie Koche, Management Analyst III, Budget Division, Department of             Administration

Eloise Koenig, Self-Insurance Coordinator, Self-Insured Workers’ Compensation Section, Division of Insurance, Department of Business and Industry

 

DEPARTMENT OF BUSINESS AND INDUSTRY

 

B&I, Dairy Commission – Budget Page B&I-69 (Volume 2)

Budget Account 233-4470

 

Stacy M. Jennings, Executive Director, State Dairy Commission, Department of Business and Industry, referenced her presentation (Exhibit C).  She said the commission has finished the renewal process for calendar year 2001 and currently has 183 licensees.  She added that business has been brisk this fiscal year.  She explained that 40 license amendments were originally projected this year and currently they have 60 license amendments with four meetings left this fiscal year.  She projected 80 license amendments for the current year.

 

Ms. Jennings discussed performance indicators including a history and projection for their audits and investigations.  She said these are some of their major regulatory functions. 

 

Ms. Jennings referred to an information brochure (Exhibit D), outlining a survey conducted in 1999 that will be done again this year.  She said that as of calendar year 1999, there were 3,000 Nevadans directly employed by the dairy industry in this state.  She mentioned this included an annual payroll of $78.1 million.  She said the estimated retail value of regulated dairy products sold in Nevada in 1999 was $1.1 billion.  She added that the estimated economic impact generated by the presence of the dairy industry in this state is $268.2 million.

 

Ms. Jennings called attention to page two of her handout (Exhibit C), which charts the raw milk production history in the state.  She outlined that in 2000, the dairy farmers in the state produced 520 million pounds of raw milk.  She said this is up 49 percent since 1993.  She added that, of that 520 million pounds of milk, two instate processing plants used 277 million pounds.   She said 53.4 percent of the milk produced in this state stayed in the state and was manufactured into dairy products.  She stated 242 million pounds of milk were exported, mainly to California. 

 

Ms. Jennings said 54 percent of the milk sold in Nevada retail outlets is produced instate.  She added that 45 percent is imported from other states.  She pointed out that page 4 of Exhibit C outlines the western Nevada marketing area for retail prices of milk in Reno, Carson City, Sparks, and the southern Nevada marketing area of Las Vegas.  She explained this chart shows the highest and lowest prices paid during the 2000 calendar year.

 

Ms. Jennings said a brief summary of the major activities of the dairy commission during the last biennium is outlined on page 5 of Exhibit C.  She added that in the 1999 Legislative Session the dairy commission gave back three full-time employee positions.  She said this brought their full-time employee count to 14 positions.

 

Ms. Jennings said the agency was restructured in 1999, and the commission wrote a strategic plan and revised and added performance measures.  She explained they also updated and revised their audit and investigations manuals.  She said they completely re-wrote their internal controls and subsequently passed an audit by the State Division of Internal Audits with few negatives.

 

Ms. Jennings said in late 1999 the State Dairy Commission assumed the responsibility for setting the minimum price for raw milk in the southern part of the state.  She noted that previously the commission had done this in the western part of the state, but the southern part was, at that time, under federal control.  She said that during that time, federal regulations were coming in that would have been devastating to the dairy business in the southern part of the state.  She pointed out that Congress passed amending legislation, exempting Clark County from the federal program.  Therefore, she said, the State Dairy Commission assumed this authority.  She noted this program has been going well for the past 18 months.

 

Additionally, Ms. Jennings said, the State Dairy Commission continues to perform annual quota audits for dairy farmers in northern Nevada and reviews “Nevada producer milk payroll” to ensure dairy farmers are being paid accurately.  She added the commission publishes a quarterly newsletter and funds were approved at the last legislative session for the purchase of new computers.  She remarked they started automation efforts and recently went on-line with the state’s Advantage System for payroll and vouchering.

 

Ms. Jennings said the commission has been attempting to provide more information to consumers through its website.  She explained that each month they post their monthly retail milk price survey.  She said this includes raw milk price minimums and notices of public meetings.  She mentioned they are trying to add a full and complete agenda to the website each month.

 

Continuing, Ms. Jennings said her agency is funded from two sources, including license and amendment fees and assessments on regulated dairy products.  She noted they presently levy assessments on butter, ice cream, sherbet, cottage cheese, and yogurt.  She pointed out they have the ability by statute to levy an assessment on fluid milk and fluid cream.  She said this was suspended in 1994 because the money was not needed and the commission felt that milk is a necessity.  She remarked they are funding their agency through other sources at this time.

 

Ms. Jennings said in their base budget for FY 2002 there are two replacement jeep requests for the northern Nevada office.  She said the two current jeeps were manufactured in 1990 and 1993 with 110,000 and 118,000 miles on them.  She pointed out that they would likely be developing maintenance problems. 

 

E-170 Replacement Equipment – Page B&I-72

Ms. Jennings said replacement laptop computers are requested.  She explained the same request “fell through the cracks” at the last legislative session.  She said the current laptop computers are on Microsoft Windows 3.2 and use old software.  This creates compatibility issues when creating files with other computers, she added.  She noted that these laptop computers are used by the field staff out of the Las Vegas and Reno offices.

 

Mrs. Chowning commented, “I think upgrades are being requested for 16 computers and so that’s 14 PCs (personal computers) and two laptops, but if two laptops are requested to be replaced, then why would the software upgrades be necessary?”

 

Ms. Jennings explained they requested software upgrades for 16 computers in the event they hit an “off year” and the latest upgrades are not available.  They could then upgrade in the next fiscal year, she noted.  If the software the commission purchases in FY 2002 is the same generation as the upgrade anticipated in FY 2003, then the 2 laptops would not be upgraded, she added.  Mrs. Chowning said this could be worked on.  Ms. Jennings agreed. 

 

Ms. Jennings said out-of-state travel designated for the International Association of Milk Control Agencies (IAMCA) has been especially helpful to this agency.  The IAMCA is an association of 15 states and numerous providences in Canada of milk regulators that meet annually.  She commented that two of their three commissioners have been on the commission for two years or less and it is very helpful for them to attend these annual conferences.  She noted they learn of industry trends, federal regulations and reorganization of regulations.

 

Ms. Jennings said high amounts are recommended for the second year of the biennium because the IAMCA alternates inside and outside of the country.  She mentioned the annual meeting is in Montana this year and possibly in Alberta, Canada next year.  She said when commissioners attend this seminar they must submit a request for all expenses in advance through the Director’s Office of the Department of Business and Industry.  She explained the expenses are estimated high because the location of the seminar is not known in advance. 

 

Mrs. Chowning said it seems that a 350 percent increase is extravagant and asked whether it is necessary that two commissioners attend this conference every year.  Mr. Jennings said it is found to be valuable for the technical information and presentations.  Mrs. Chowning asked how many total commissioners are in the department.  Ms. Jennings said there are three.

 

Mrs. Chowning suggested the committee look closely at this item because of the large increase requested.

 

Ms. Jennings said that in a letter to the Governor, the State Dairy Commission had requested the Governor consider a raise for the Executive Director of the agency.  She added that since 1993 there have been three Executive Directors and this is a high turnover rate. 

 

Ms. Jennings said the State Dairy Commission believes it is important to raise this salary to attract and keep people in that position.  She noted that a 25-year salary survey was done, and outside of the COLA (cost of living adjustment) during the decade of the 90s, this position did not get any substantive salary increases.  She said this request was made even though the Governor had presented the state employee salary package.

 

Senator O’Donnell asked whether two commissioners had left the agency just after returning from an IAMCA seminar.  Ms. Jennings said that none had.  She added that one commissioner was appointed in March 1999, and he attended that conference.  She said the commissioner that left in June 2000, did not attend the conference, and the most recently appointed commissioner did not attend because of short notice.

 

Senator O’Donnell said it should be policy that dairy commissioners not quit the State Dairy Commission immediately following attendance at this annual conference.

 

Senator O’Donnell inquired about Bill Draft Request (BDR) 51-401 authorizing dairy inspection program duties, which include inspection of dairy farms, processing plants, and milk haulers, under the auspices of the State Dairy Commission.  He noted that these duties are currently based in the State Health Division, Department of Human Resources.

 

BILL DRAFT REQUEST 51-401:  Transfers all duties and regulation of Dairy Inspection Program to the State Dairy Commission. (Later introduced as Senate Bill [S.B.] 505).

 

Ms. Jennings said she provided a summary on the last page of Exhibit C outlining their request.   She testified that she spoke with the Legislative Counsel Bureau (LCB) and BDR 51-401 should be ready soon.  Senator O’Donnell asked how many staff positions were needed for this program.  Ms. Jennings said the agency has estimated it would need three employees, two dairy farm and plant inspectors and one federal rating and survey officer.  She explained that because of the program structure, there must be inspectors that actually do the health and safety inspections on the dairy farms and plants.  She explained there also must be a supervisor who certifies the inspectors work.

 

Senator O’Donnell asked how many people are currently in the Health Division, Department of Human Resources, doing the same job.  Ms. Jennings responded it was hard to answer, but she understands from the Health Division that they have inspectors cross-trained in dairy and other areas.  She said this way they don’t have full-time employees dedicated to only dairy inspection duties.  She pointed out that dairy inspection requires a separate level of education.

 

Ms. Jennings remarked that the Health Division is presently receiving $5,000 in revenues for licensing fees each year.  She said the program is costing them approximately $60,000 to $100,000 per year to administer.  She commented that the Health Division has indicated that if they had the ability to run this program correctly, it would cost $300,000 to $500,000.

 

Ms. Jennings noted that the State Dairy Commission estimated costs of about $250,000 the first year and after that, just over $200,000 annually for this program.  She mentioned this would be from the Dairy Commission Fund rather than the General Fund.

 

Ms. Jennings pointed out that on the front page of her handout (Exhibit C) she provides rationale for this program.  She mentioned that the commission could devote its full-time assets, both human resources and money.  She stated they would work with the industry to provide compliance training.

 

Ms. Jennings said the State Dairy Commission had worked closely with the Director’s Office of the Department of Human Resources and the Health Division in drafting BDR 51-401.  She remarked that the Health Division did have concerns about public health.  She stated that provisions were written into BDR 51-401 requiring the State Dairy Commission to “pass their rules by the State Board of Health for approval in case of crisis or outbreak of public health and safety.”  She added that as a safeguard they would consult the State Health Officer on how this could be handled.

 

Ms. Jennings pointed out that the Director of the Department of Human Resources conveyed to the State Dairy Commission, that she supports the Dairy Commission’s taking over this program.

 

Mrs. Chowning said she has concern with the industries position regarding the State Dairy Commission’s taking over the inspection program.  She asked whether this estimate of $224,000 is within the amount that will be generated from the assessments on fluid milk and fluid cream that were suspended in 1994, and whether the assessments need to be reinstated.

 

Ms. Jennings answered there has been great growth in dairy products in the state.  She explained that the State Dairy Commission is “capped” by the Nevada Revised Statutes (NRS) as to how much it can assess.  She explained that the commission tries to adjust revenue up and down according to how much money is needed to operate the agency.  This is done, she added, to not build up a huge cash surplus.

 

Mrs. Chowning asked whether the three positions being requested would overlap the one and a half positions in the Health Division. 

 

Robert R. Barengo, Chairman, State Dairy Commission, Department of Business and Industry, explained he has tried to make the State Dairy Commission an agency that meets the goals set forth by the Legislature.  He said that by taking over this dairy inspection program, the commission does not anticipate having to increase assessments because the commission currently has ending fund balances of approximately $200,000.  He said the commission would only spend money already collected.  He added they could provide a better service by working with and training dairy farmers. 

 

Mr. Barengo said the State Dairy Commission would like to inspect refrigerated trucks of individuals who transport milk, prior to their licensing.  He explained by taking over this program it would allow the commission to complete the regulatory functions that have been given to them.

 

Senator O’Donnell asked whether there will be a conflict of interest because the industry is paying for the inspectors.  Mr. Barengo said he does not believe there is a conflict of interest.  He added the commission is a regulatory agency and it should act as such.  He mentioned, however, the agency desires to be a “user friendly” agency and help the entities they regulate to avoid problems.

 

Mrs. Giunchigliani asked whether this change would “help with the pricing” of a gallon of milk.  Mr. Barengo said they are going to post the prices of milk from every store the commission surveys on the website.  He said within the next month, the commission will also have its agendas for meetings on the website.  He explained they are continuing to look into the differences in milk costs.  He said milk in California is fortified (vitamins added), and when this milk is imported to Nevada, producers say the price increases.  He added that producers are starting to bring unfortified milk in-state, hoping the prices decrease. 

 

Mr. Hettrick stated that, if this transfer occurs, more than just the dairies would be inspected.  He said milk producers like to be inspected and like to have records showing that what they produce and ship to market is wholesome. 

 

Senator Jacobsen commented that many years ago “outsiders” ran the State Dairy Commission and it failed.  He noted he was the chairman of the committee that, in 1955, created the State Dairy Commission and decided some of the parameters.  He said because this is a “stand-alone” agency, if there is any fault, it lies with them.  He said government is made up of checks and balances.  He added that he believes the Health Division is the proper place to handle these inspections.  He said he sees no justification in transferring this duty.

 

Senator Jacobsen called attention to Exhibit D and suggested the commission provide information on the location and number of dairies in the state.  He commented that he is concerned about the decrease in dairy farms in Nevada because it leaves the state dependant on outside sources.  He added this in a self‑funded agency and General Fund money is not contributed. 

 

Roger F. Ligtenberg, Nevada Representative, Dairy Farmers of America Board, said the Health Division went through a transition period that created problems for dairy farmers in October 1999.  He explained that dairy farmers are looking for assistance for the Health Division from the State Dairy Commission.  He said the problems arose when the Health Division was in transition and, through a federal audit, discovered it was not doing an adequate job of bookkeeping.  He pointed out that the federal government monitors each state every other year.

 

Mr. Ligtenberg said the federal government warned the Health Division of the inadequacies, and upon a second audit, nothing had changed to the satisfaction of the federal government.  He added that the dairymen, “out of a score of 90 percent, ended up with a 94 percent.”  He said the Health Division received a score of 81 percent. 

 

Mr. Ligtenberg said this caused the federal government to “de-list” the state of Nevada, meaning it could not send any milk across state lines.  He pointed out that this included the processors, Model Dairy and Anderson Dairy, and all southern dairymen.  He added that the dairymen and processors through many “I owe yous” were able to convince the federal government to change the “de-listing” because it was the Health Divisions problem, not the dairymen. 

 

Mr. Ligtenberg said it would have cost dairymen $1,000 per week had they moved milk to Corona, an unlisted cheese plant.  He said this scared dairymen enough that they went to the State Dairy Commission and asked whether it would assume some responsibility to prevent this from happening again.

 

Dave Coon, Vice President, Sales, Anderson Dairy, Las Vegas, said he is representing Anderson Dairy and its 215 employees and families along with their dairy farmers cooperative.  He read from a letter (Exhibit E), addressed to the committee from Anderson Dairy.  He stated that Anderson Dairy, as a member of the dairy industry, is grateful for the State Dairy Commission.  He went on to say Anderson Dairy endorses the Governor’s proposal for the State Dairy Commission.  He said Anderson Dairy is in favor of the State Dairy Commission’s being able to hire and retain qualified leadership in the Executive Director’s position.  He added that Anderson Dairy recommends and encourages the Senate and the Assembly to consider BDR 51-401.

 

Mr. Coon said in another letter (Exhibit F), addressed to the committee from the Security Milk Producers Association, they also are wholeheartedly in favor of the points represented in Exhibit E.

 

Dennis Hellwinkel, President, Nevada Farm Bureau, reiterated the fact that the Nevada Farm Bureau’s policy supports the State Dairy Commission in its present activities.  He added they wholeheartedly support the addition of the dairy inspection program under the auspices of the State Dairy Commission.  He said as a dairyman from Fallon, he is impressed that the commission responds quickly to consumer questions and concerns as well as those from the dairy industry. 

 

Mr. Hellwinkel said that, as a foster parent, he deals with the Department of Human Resources, and has realized the scope of that department.  He added that the dairy inspection program, in the relation to the size of that department, is very small.  He pointed out that by placing this program under the State Dairy Commission, dairy farmers would still pay for their permits and inspection program.

 

Mr. Hellwinkel said, as president of the Nevada Farm Bureau, his counterparts across the country are envious of the fact that Nevada is not in a federal milk marketing order.  He noted that Nevada dairymen strive to avoid this and the State Dairy Commission creates the ability to stay out of a federal milk marketing order.

 

Senator Jacobsen indicated that Mr. Hellwinkel is very dedicated and is greatly involved in the community.

 

Jim Breslin, General Manager, Model Dairy, on behalf of their 200 employees, said he agrees with and supports all of the points outlined in the both letters in Exhibit E and Exhibit F.

 

As an aside, Mrs. Chowning thanked Mr. Hellwinkel for the wonderful show of animals that he brings to southern Nevada for thousands of children to see.  She said if not for this show many children would never get a change to see them.

 

OFFICE OF VETERANS’ SERVICES

 

Commissioner for Veterans Affairs – Budget Page VETERAN-1 (Volume 3)

Budget Account 101-2560

 

Charles W. Fulkerson, Executive Director, Office of Veterans’ Services, began with an oversight of the agency outlined in a memorandum (Exhibit G).  He explained the duties of the Executive Director and Deputy Director.

 

Mr. Fulkerson said the Nevada State Veterans’ Nursing Home is under construction in Boulder City and presently is scheduled for completion in June of this year.  He mentioned the home is designed to provide skilled nursing home care for 180 veterans.  He added that the home would provide needed care to aging veterans of Southern Nevada.

 

Mr. Fulkerson commented on the Northern Nevada Veterans Memorial Cemetery in Fernley.  He noted that the total cemetery site is 40 acres.  He added that the Southern Nevada Veterans Memorial Cemetery in Boulder City has had over 10,000 burials since April 1990.  He stated this cemetery site covers 80 acres.

 

Mr. Fulkerson said the Veterans’ Guardianship Program provides financial guardianship to as many as 36 veterans at one time. 

 

Mr. Fulkerson said funding for this agency comes from the General Fund, burial reimbursement fees from the federal government, a fee of five percent charged to guardianship clients, and from a daily per diem allowance paid to veterans’ home patients by the federal government.

 

Mr. Fulkerson pointed out performance indicators on page 2 of Exhibit G.  He outlined that in FY 2000, compensation awards totaled $9,660,345, 1044 claims were filed, there were 1577 burials, they had 40 acres under irrigation at burial grounds, and 36 veterans or dependants were guardianship clients.

 

M-200 Demographics/Caseload Changes - Page Veteran-3 

 

Senator O’Donnell inquired whether the temporary Grounds Equipment Operator position needs to be continued through FY 2001 – 2003 since burials seem to be declining.  Mr. Fulkerson said the position is to be continued because the agency will have additional grounds to care for.  He commented that until the year 2008, annual deaths among the World War II veteran population will increase.  He said they expect growth in the cemeteries through 2008.  He noted that, according to demographics, that population base should start dropping and peak again with the Korean War veterans.

 

Senator O’Donnell asked whether there is currently a contract for janitorial services at the chapel in Boulder City.  Mr. Fulkerson said there is not.  Senator O’Donnell asked how that service is provided.  Mr. Fulkerson said the grounds keepers take care of the janitorial duties. 

 

Mrs. Chowning inquired as to how many additional acres of burial space the Capital Improvement Project (CIP) will provide.  Mr. Fulkerson said it would provide three additional acres of space in Fernley.  He explained that a master plan was never made for the entire 40 acres in Fernley.  He said this project will provide a master plan for the full 40 acres and more importantly will provide a perimeter fence around the cemetery. 

 

Mrs. Chowning asked whether there would be sufficient Grounds Equipment Operator positions if the positions recommended in The Executive Budget are approved.  Mr. Fulkerson said they did ask for an additional position but it was not recommended.  Mrs. Chowning pointed out that this is a dilemma.  Mr. Fulkerson commented that it would have been easier if the positions had been approved, but it should not “break” the agency.

Mrs. Chowning inquired about the conservation camp crews.  Mr. Fulkerson said there is an agreement to provide inmate work crews to help with grounds keeping at the Southern Nevada Veterans’ Cemetery.    

 

E-710 Replacement Equipment – Page Veteran-4

 

Mrs. Chowning commented on the E-710 decision unit and asked about the request for dump trucks costing approximately $40,000 each.  She asked how old the existing trucks are and how long these trucks are expected to last.  Mr. Fulkerson said in northern Nevada, the two trucks are 1986 and 1987 models, and both have over 150,000 miles.  He said in southern Nevada, there are three trucks, 1984, 1988, and 1989 models, with the oldest having over 200,000 miles and the newest having over 100,000 miles.  He emphasized that these vehicles came into the possession of the agency after they had met their useful life with the Nevada Department of Transportation (NDOT).

 

Mr. Fulkerson added the dump truck is a critical part of the burial process and the agency must have trucks in good operating condition.  Mrs. Chowning asked whether he expects the trucks to last at least ten years.  Mr. Fulkerson said he does expect at least ten years of life in these trucks. 

 

E-720 New Equipment – Page Veteran-4

 

Mrs. Chowning said there is a request in this decision unit for equipment, including a headstone trimmer.  She asked whether the new position requests are still needed, since this equipment will provide efficiency through automation.  Mr. Fulkerson said they are still requested because the agency currently cannot keep up with the trimming and the new positions will be expected to operate the new equipment.

 

Senator O’Donnell asked whether the agency intends to buy two brand new dump trucks.  Mr. Fulkerson responded that it does, one for each location.  Senator O’Donnell inquired why they need new trucks for a cemetery and not “newer” used trucks from NDOT.  Mr. Fulkerson responded he doesn’t think NDOT would give up a good, useful truck to another agency.  He said with the trucks the agency currently has in Fernley, the agency has had to replace major power components.  He added that the repair shop in Fernley is not equipped to do these types of repairs.  He said if the committee suggests, his agency would shop around for a used truck with useful life left in it.

 

Senator O’Donnell commented the use of these trucks for driving such short distances is questionable.  He asked how many miles are put on the truck in Fernley per year.  Mr. Fulkerson was unable to say exactly, but said he does appreciate the concern of buying a brand new truck.  Senator O’Donnell said he thinks it is more prudent to call NDOT and ask whether they have a good used truck available. 

 

Senator Jacobsen pointed out that he has a conflict of interest because he serves as Chairman of the Nevada Veterans’ Services Commission and has served on the Advisory Committee for a Veterans’ Cemetery in northern Nevada since its beginning.  He commented that backhoes were received from NDOT years ago that created many problems with the operation of the cemetery.  He said during the last legislative session the department purchased a brand-new backhoe for the North and one for the South.  He said possibly an arrangement could be worked out with NDOT, permitting that units acquired from NDOT needing repairs, be repaired by NDOT.  He added that this has been done with the fire departments. 

 

Senator Jacobsen commented that the commission has learned that time is sometimes lost because grounds keepers are not always adequately prepared to operate the cemeteries’ heavy equipment.  He added that this could also create liability issues.

 

Senator O’Donnell asked Senator Jacobsen to contact NDOT to determine whether something can be worked out regarding these issues.

 

Mr. Beers asked whether the seven computers requested over the biennium are networked.  Mr. Fulkerson said the agency has a plan to network, which would provide better service from their service officers in processing claims and providing compensation to veterans.  He explained there is a $1,000 software program the agency is looking at that includes all of the federal Department of Veterans’ Affairs forms.  He said they would like to have these forms available throughout both agency offices using one software program.  Presently, he said, they “pencil in” all of these forms and that is very time-consuming.  He explained this request would help the agency make up for an additional service officer position that was not recommended.

 

Mr. Beers inquired whether the budget includes networking.  Chuck Abbott, Management Analyst, Office of Executive Director for Veterans’ Services, Office of Veterans’ Services, explained that during the last budget cycle, a server was purchased to enable networking.  This budget, he added, recommends $500 to purchase a hub that is necessary to make the server work.  He noted he is counting on the help of a “tech-person” employed at the Nevada State Veterans’ Nursing Home who specializes in computers and data processing. 

 

Mr. Beers asked whether the agency has consulted with the Department of Information Technology (DoIT), because more than a hub would be needed. A network card, he added, would be needed in each machine.  Mr. Abbott replied his agency has not consulted with DoIT.  Mr. Beers informed the agency it should not purchase any networking computer equipment unless it has a definitive working plan, and without networking cards, it does not have a plan that will work.

 

Mr. Abbott said the agency had submitted a plan through DoIT, prior to including the request in the submitted budget.  Mr. Beers asked whether the committee staff had received a breakout of the budget containing the computer request.  Mr. Abbott said it was his understanding DoIT had approved the computer proposal.  He added he would contact DoIT to clarify the situation. 

 

Mr. Beers asked whether the agency had bought the server during the last biennium.  Mr. Abbott said the server was purchased “during the last cycle” and it included ten software seats.  Mr. Beers requested information from the committee staff concerning these issues.

 

Veterans Home Account – Budget Page VETERAN-7 (Volume 3)

Budget Account 101-2561

 

Mrs. Chowning asked whether the nursing home, previously approved at 115,500 square feet by the committee, is still going to be this size.  She also inquired about the previously-approved 180 beds, with 24 being for patients with dementia.  She added that the committee would need to be updated on the number of patients per bath and how the entire project is progressing. 

 

Jonathan Sias, Director, Nevada State Veterans’ Nursing Home, Office of Veterans’ Services, testified he does not believe the facility can be opened on April 1, 2001.  He said the current projected completion date is March 31, 2001, and there has been discussion this will move to the end of April 2001.  He explained if the completion date is April 1, 2001, then he would expect the first regular residents to be admitted approximately July 1, 2001.  He commented the original plan of this building was for approximately 115,000 square feet, and the current plan is for 82,000 square feet. He noted the number of beds has remained at 180, with 24 beds for patients with dementia.  He added that those 24 beds would be in a secured nursing neighborhood (area of the nursing home).

 

Mr. Sias pointed out there would be 60 residents for each of the three general nursing neighborhoods, one of which would include the 24-bed Alzheimer’s patient unit, and 36 other residents.  Mrs. Chowning said the original plan had two patients per bathroom.  Mr. Sias said currently there are two connecting rooms for four people sharing one bathroom.

 

Mrs. Chowning said this is disappointing because that was twice as many residents per bathroom than the committee had been told previously. 

 

Senator O’Donnell asked whether the completion date would be May 1, 2001, for this project.  Mr. Sias acknowledged that it should be.  Senator O’Donnell inquired whether the nursing home will be charged the same fee per bathroom by the Clark County Sanitation District.   Mr. Sias said he has no idea.  Senator O’Donnell pointed out the Sanitation District charges $720 per toilet drain in Clark County and it can cost as much as $1,500 to build a bathroom.  Perhaps the state is exempt, he noted.

 

Mr. Sias commented that the original plan prepared by the Public Works Board was 115,000 square feet for a “180-bed hospital.”  He added that the plans were then taken to the architect who suggested 110,000 square feet.  Then, he said, at the budget approval stage, it was dictated that the home could be built using 82,000 square feet.

 

Mr. Sias said the change in bathroom space was also dictated by the budget process.  He added this was not the decision of any one person from his agency or the State Public Works Board.  He said if the funds had been available, they would have continued the plan to provide a bathroom for every two veterans. 

 

Senator O’ Donnell asked what the setup of the rooms would be and how much more it would cost to put a bathroom in for every two patients.  Mr. Sias said the current plan provides for two bedrooms with two beds in each and one adjoining bathroom between the rooms.  He added that the State Public Works Board might have more answers.

 

Mr. Abbott explained he was never aware of the plan for one bathroom for every two patients.  He said the design of the home was based on visits to veterans’ homes throughout the country, and four patients to one bathroom is the standard. 

 

Senator O’Donnell said this is the first time the committee has heard that this project started out to be 115,000 square feet and is now only 82,000 square feet.  He asked whether there had been any public meetings to discuss this downsizing.  Mr. Abbott said their original request went before the State Public Works Board and when the State Public Works Board began researching, their recommendation was approximately 110,000 square feet.  He said this was the amount of square feet submitted on the State Public Works Board worksheets.  He pointed out that when his agency sat down with the architects, they advised the agency that they were looking at approximately 90,000 square feet.

 

Mr. Abbott said the proposal was then sent to the cost estimators and they advised that the CIP didn’t include enough money and recommended 82,000 square feet.  He noted that there were no public meetings regarding these changes.  He explained that the plans were reviewed through the usual State Public Works Board process.

 

Senator O’Donnell asked whether the veterans’ organizations had been notified of these changes.  Mr. Abbott said they were advised.  He added that the Office of Veterans’ Services had a committee that worked very closely with the architects and the planning committee.

 

Senator O’Donnell said this change is news to this committee, which predicated the CIP budget on 115,000 square feet.  Mr. Abbott said the original square footage was only an estimate made by the State Public Works Board.  He added that their main request was for 180 beds with certain features, including a dementia unit, a chapel, and a barbershop.

 

Rick Combs, Program Analyst, explained that the State Public Works Board presents a project cost estimate.  He added that square footage is usually provided as a ballpark figure.  He said it is not inappropriate for a few square feet to be changed, but this is a reduction of more than a third.  He said this would normally require a request from the State Public Works Board to the Interim Finance Committee (IFC) to request authority to change the scope of the project.  He noted when the State Public Works Board comes before the Capital Improvement Program (CIP) Subcommittee this will need to be addressed.

 

Mr. Fulkerson said he was told the original cost estimate per square foot was $135.  He noted that it is now about $165 per square foot. 

 

Mrs. Chowning asked Mr. Sias whether he could tell the committee about himself and his background and possibly enlighten the committee on the standards for veterans’ homes in other states.  Mr. Sias said his experience in nursing home management is from the New England area.  He stated that the setting is usually much like a hospital setting, with two patients to one bathroom.  Mr. Sias said he doesn’t believe it is uncommon to have more residents or a double room to a bathroom.  He said it is certainly not the first choice.  He added that, as Mr. Fulkerson and Mr. Abbott indicated, these changes were driven by a budgetary issue, outside the control of the Office of Veterans’ Services.

 

Mrs. Chowning asked which state, outside of Nevada, was Mr. Sias involved with veterans’ nursing homes.  Mr. Sias remarked in the state of Maine. 

 

Senator O’Donnell said two years ago there was discussion regarding the privatization of veterans’ nursing homes.  He added that he hopes this is not the beginning of the prophecy we are not going to have as good a service, or as good a quality of care for our veterans if we have a state-run veterans’ home.  He added it is starting to look this way.  Mr. Sias suggested that, based on empirical data, any veterans’ home that experienced privatization suffered in quality of care.  He pointed out that many state homes have implemented privatization only to go back to being state run or operated with state employees.

 

Senator O’Donnell clarified that four men would share one shower, one toilet, and one sink in this proposed plan. 

 

Senator O’Donnell said he questioned whether or not the funding levels in the budget, versus the number of co-payment dollars per bed, is sufficient.  He added that the budget assumes for FY 2003, co-payment of $51.38 multiplied by 165.6 residents multiplied by 365 days.  He asked whether the home can make it on this amount.  Mr. Sias said they would receive $51.38 per veteran from the Department of Veterans’ Affairs.  He added they would receive that per diem for every veteran except a veteran on Medicaid.  He mentioned that payments from Medicaid and the Department of Veterans Affairs (VA) are not concurrent payments.

 

Mr. Sias said if the nursing home gets the VA per diem and the veteran co‑payment, the first year of operation would result in a state participation of approximately $4 million.  He remarked that this is based on 144 residents in the first year. 

 

Senator O’Donnell asked whether the agency expects to have 144 the first year.  Mr. Sias said they do, providing they can get the staffing.  He noted that staffing is the biggest problem they face, with a nursing shortage of 600 positions in Clark County.  He said this nursing home would be adding 100 positions to this shortage amount. 

 

Senator O’Donnell said it is necessary that these problems be analyzed.  He asked whether the agency would be able to make it financially if they do not open the facility for 144 beds due to a nursing shortage.  Mr. Sias said they would, because if the beds are not open, they don’t have the concurrent staffing cost, which is a significant portion of their budget.

 

Senator O’Donnell queried whether the nursing home would have vacancy savings if they reduced staff and did not hire.  Mr. Sias said they would, because their staffing pattern and residency pattern is “joined at the hip.”  He explained they hire staff to take care of the residents currently housed.  Conversely, he said, if you reverse that and don’t have the staff, then residents cannot be admitted.

 

Senator O’Donnell asked whether there would still be fixed costs involved in the building, such as utilities, and whether the agency is planning to buy all equipment out-right.  Mr. Sias said they have a sufficient budget in the current fiscal year to cover all opening cost needs. 

 

Senator O’Donnell informed the agency that the committee staff has projected there will be a $1.4 million deficit in this budget in the next biennium.  He said he thinks the agency may be over ambitious in its revenue projections.

 

Larry Barry, Administrative Services Officer, Nevada State Veterans’ Nursing Home, Office of Veterans’ Services, asked for an explanation from the legislative committee.  He said his concern is that an 80 percent occupancy rate and 92 percent occupancy rate have been predicted for the first two years and he believes the committee is anticipating this to be the average occupancy rate.  He pointed out the number or residents multiplied by $51.38, with the expectation of a matching contribution from the residents, is a source of revenue.   He said the budget is built on the assumption every resident will make a co-payment.  He noted there is $700,000 built in for each year of the biennium in Medicaid revenue.  He added that a person would not be Medicaid eligible if that person could pay the $51.38 per day from his or her own funds.  He said revenues are coming from many sources.

 

Mr. Barry said Medicaid patients wouldn’t be able to make the resident co-payment out of their own funds, but both sources of revenue are built into the budget.  He mentioned that Medicaid revenues received for these patients average about $103.67, combined with the revenues of the VA of $51.38, that is about the amount needed to fund that patient.

 

Senator O’Donnell asked whether it would be $160 per day instead of $51.38 for every patient.  Mr. Barry explained it would for Medicaid patients at skilled nursing level 1.  He said he estimates about one-half of their population will be Medicaid recipients.

 

Senator O’Donnell asked the staff to go back, predicated on Mr. Barry’s statement and testimony that one-half will receive Medicaid, and find out how many dollars are anticipated to be received at the 80 percent occupancy level.  He pointed out that his worry is the veterans are being short-changed.  He said he believes that down the road this agency will encounter a catastrophic decision, sometime in December or January of next fiscal year, discover there are insufficient funds to run this veterans’ home, and will be looking to the Interim Finance Committee (IFC) for emergency funding.

 

Senator Jacobsen said the Joint Subcommittee should trust the Nevada Veterans’ Service Commission on its recommendations.  He commented the commission has been dedicated to the progress of the site.  He pointed out that they are where they are with this project today because of that dedication.  He added that no one anticipated being short 600 nurses when this project was started.  He mentioned that he and Chuck Abbott met with the State Public Works Board on a regular basis to try to keep current on these types of issues.

 

Senator Jacobsen said he believes the commission has the capability of addressing the problems as they come along.  He said, “something is better than nothing for the veterans.”  He pointed out that when this facility opens, it would be serviceable.  He said that in the past it has been decided that privatization of the veterans nursing home would not work in Nevada.  He added that volunteer services have always been sought and he agrees with that.  He noted that veterans should get behind this program and promote it.

 

Senator O’Donnell stated, “we cannot set up the veterans’ home to fail.”  He pointed out that if an agency’s numbers are incorrect, projections are not on target, or if staffing is not there, the committee is setting the agency up to fail.  He added that his contention is that this is not a balanced, realistic, or pragmatic budget. 

 

Senator O’Donnell pointed out that the committee needs more information regarding funding and whether or not a budget shortfall is expected.  He explained that if the agency expects to fall short, the committee should be advised during the legislative session.

 

Mr. Fulkerson said, analysts from his agency and from the Legislative Counsel Bureau (LCB), need to go back through the numbers.  He noted that Mr. Barry has recently obtained useful information from veterans’ nursing homes in Arizona.  Possibly, he added, between him and LCB staff, they can arrive at a budget everyone can agree with.

 

Senator O’Donnell said hopefully the nursing home will be able to get the nursing staff that is needed.  Mr. Fulkerson noted that by working with the Department of Personnel, the levels of nursing have been upgraded to allow the nursing home to compete with the private sector.  He added that, in Las Vegas, the private sector is offering $4,000 sign-up bonuses.  He said, “If a federal employee nurse recommends a nurse that goes into the private sector, they offer a $3,000 referral fee.”  He noted that these are some of the issues they are fighting against.

 

Mr. Fulkerson said he believes they are getting the level of upgrades, which will make them successful.  Senator O’Donnell asked whether the upgrades for these nursing positions are included in the budget.  Mr. Sias said the upgrades are for registered nurses (RN) only and there are 16 of those positions at approximately $30,000, and the funding is not included in the budget.

 

Senator O’Donnell said this is where the problem lies.  He added that agency staff and LCB staff should get together on these issues. 

 

Mr. Fulkerson said this agency could not operate without the support of the committee and he, therefore, will do everything he can to “get to the same point down the road.”

 

Senator O’Donnell stated this budget would be heard again after some “good” numbers are put together on the Veterans’ Home Account.  Mr. Fulkerson agreed and said they would do this as soon as possible.

 

Mrs. Chowning said she appreciates all of the work that has been put into this budget request.  She expects that the hard work will reflect in a quality facility, which is deserved by all veterans.  She noted that there are three areas requested that staff work on, which includes overtime and holiday pay, the level of care for patients based on the industry standards, and a written plan of how start-up costs will be expended. 

 

E-475 Effectiveness of Family Service – Page VETERAN-9

 

Mr. Beers asked whether funding for the Internet connection is found in this budget.  He added that he could not come up with any reason to justify a T-1 line hookup for this facility.  He noted that this is a huge, expensive data pipe.  He asked whether the purpose of this T-1 line is to allow residents to access the Internet.   Mr. Sias responded that a T-1 line hookup is necessary due to electronic filings that will be required with agencies of the federal government.  He said this includes filings with agencies within the state.  He mentioned this is a part of the Integrated Financial System (IFS). 

 

Mr. Sias noted the hook-up cost was part of the construction phase, and the operations budget for the veterans’ nursing home is only required to facilitate ongoing charges with the Department of Information Technology (DoIT).  He said that was part of the original construction plan to put in a T-1 line.  He explained that it is being driven by the need for electronic filings that will need to be done.

 

Mr. Beers asked how many residents plan to be in this facility.  Mr. Sias responded that 180 are anticipated.  Mr. Beers said unless constant live streams of Magnetic Resonance Imaginings (MRI’s) are being done, there is no need for a T-1 line for filings for 120 people.  He asked that the agency return to the committee with support for this costly request.  Mr. Sias agreed to get the information for the committee.

 

Senator O’Donnell asked how comfortable the agency is with the level of staffing and levels of care that will be given to the veterans.  He added that certain types of injuries would require additional care that may increase staffing levels. 

 

Mr. Sias said he is comfortable with these levels.  He explained that seven residents to each certified nursing assistant is a ratio that is currently being used.  He said the industry standard is approximately 12 residents to one certified nursing assistant.  He added they would have approximately four nursing hours per resident per day.

 

Mr. Sias commented that in the nursing home in Maine, where he previously worked, this ratio was about 3.8 hours nursing hours per resident per day.  He said if they can fully attract all of the staff that is needed, he is confident they will be able to provide a high level of care to every resident of the nursing home.

 

Senator O’Donnell asked whether the agency feels there is sufficient money in their budget to pay for utilities, or whether a special agreement has been arranged with the power company in Boulder City for the nursing home.  Mr. Sias answered that they are unable to forecast electricity charges for next February.  Senator O’Donnell commented there are concerns with utility costs in this budget.

 

Mr. Sias suggested that the committee staff put together a “shopping list” of the areas of concern and his office would be more than willing to work with them.

 

Senator O’Donnell pointed out that his staff takes copious notes regarding these hearings and every question asked has been noted and that should include all of the questions the agency will need to answer.

 

Ed Gobel, Lobbyist, Council of Nevada Veterans Organizations, said he represents approximately 60 different veterans organizations.  He said they operate a hot-line that receives approximately 2,700 calls per month.  He added that many veterans who call often require the care of a skilled nursing home, but don’t know whether they will be alive long enough to see it.  He added this is a major concern of the organizations he represents.

Mr. Gobel explained the organizations he represents have deep and abiding concerns about this budget.  He commented that the testimony heard today regarding Medicaid, is not contained in the budget recommended by the Governor. 

 

Mr. Gobel referred to Mrs. Chowning’s question about qualifications and experience of the Director of the Nevada State Veterans’ Nursing Home, and stated, “We never really got that answer as to whether that person had managed a home.”  He said he has deep concerns on this matter.  He pointed out that he was told the nursing home will be at an 80 percent capacity or have 144 beds filled starting on day one. He said he has data that this prediction will never happen.  He remarked that this information comes from privatized nursing homes across the country.

 

Mr. Gobel spoke of a facility in Georgia that went from being state run to being operated by a non-governmental entity.  He said that facility went on to be rather successful.  He commented that veterans have been deceived.  He talked about a slide presentation from about a year ago that described this nursing home facility, and that it was to be 115,600 square feet.

 

Mr. Gobel pointed out that there has been no public meeting.  He added there were meetings regarding appointment of a committee that were held in violation of Nevada Revised Statute (NRS) 241, the open meeting law.  He said that although he pleaded with that committee to involve the veterans, the veterans have not been included. 

 

Mr. Gobel remarked that if the utility expenses, budgeted for this facility, are broken down there is no expense for sewer in Clark County.  He added that this is an expensive proposition, and regarding any waiver with the sanitation department, nobody seems to know anything.  He stressed that many different answers were given to the legislative committee today including the size of the proposed veterans’ nursing home.  He said today he was told the building is going to be 82,000 square feet, and last week he was told it would be 88,000 square feet.  He noted that it was said there is a waiting list of 75 people for this nursing home and he knows of 12 people on that list who have died.  He added that the facts are misleading regarding capacity planning.

 

Mr. Gobel remarked that solutions have been offered, such as requests to allow him and the organizations that he represents to work along side the agency.  He said he also requested that an investigation take place regarding the qualifications of people within the state Office of Veterans’ Services, who are making decisions about this budget.  He remarked that this should include the people who are slated to run the nursing home.

 

Mr. Gobel reiterated there has been a nursing shortage for quite some time in Clark County.  He concluded by stating that he is not addressing the care of veterans, but rather that the veterans be included.

 

Senator O’Donnell explained that the committee has asked many of the same questions.  He added the committee does not want to see the veterans’ nursing home fail. 

 

Mr. Gobel remarked that a key to the solution is to have accountability for actions.  He claimed that the veterans are not being involved and there should be some accountability. 

Senator Jacobsen indicated that he objects to the testimony of Ed Gobel.

 

Mr. Gobel responded that he respects Senator Jacobsen.  However, he said, these are not errors in fact but rather a repeat of the testimony received two years ago.  He added that he does have constructive recommendations to a solution and is not trying to accuse Mr. Sias.  He said that based on testimony heard at this meeting he does not believe that qualifications for a reliable person running a veterans’ nursing home have been met.  He stressed that his only concern is who will take care of our veterans.

 

Senator O’Donnell told Mr. Gobel that his remarks and comments here this morning have been acknowledged.

 

Assemblywoman Giunchigliani pointed out that on behalf of Senator Jacobsen and herself, the debate or discussion to privatize the veterans’ nursing home was not ignored.  She said it was a call of judgment for a state run facility.  She added that the current problem is that staffing was not adequately budgeted for in the first place.  She said that the State Public Works Board initially created many problems involving the building design.  She concluded that the obligation now lies with the committee to come up with a budget that will allow veterans to live in dignity.

 

Mr. Beers commented that he has forwarded to staff, the website address for forms of the Department of Veterans Affairs that are available on-line.  He added this is in reference to the discussion of the purchase of a software package.  He said it appears that these forms may be available at no charge.

 

BUSINESS AND INDUSTRY

 

B&I, Insurance Regulation – Budget Page B&I-33 (Volume 2)

Budget Account 101-3813

 

Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry, introduced her staff to the Committee.  She said the mission of the Division of Insurance is to protect the rights of Nevada consumers in their dealings with the insurance industry.  She added that part of that mission is to educate and provide information about insurance to consumers.  She brought attention to several guides that her department produces for consumers, including Nevada Health Insurance Guide (Exhibit H. Original is on file in the Research Library.), Consumer’s Guide to Auto Insurance (Exhibit I. Original is on file in the Research Library.), A Consumer’s Guide to Getting and Keeping Health Insurance in Nevada (Exhibit J. Original is on file in the Research Library.), and the Medicare Supplement Insurance Premium Comparison Guide. (Exhibit K. Original is on file in the Research Library.) 

 

Ms. Molasky-Arman said the department produces additional guides, which include Consumers Guide to Homeowners Insurance and the Spanish translation of Consumer’s Guide to Auto Insurance.  She noted that the division’s responsibilities encompass the oversight of insurance companies and other licensees.  She said they oversee and authorized the activities of insurance companies that consisted, in FY 2000, of 1908 companies.  She pointed out that those companies produced $129,328,441 in premium taxes in FY 2000. 

 

Ms. Molasky-Arman explained the division licenses and oversees the activities of agents and brokers.  She pointed out that 32,936 individual licensees exist in Nevada.  She added there are 4,552 agencies or corporations licensed as agents and brokers.

 

Ms. Molasky-Arman said the division also reviews the rates and form filings of insurers.  She mentioned that life and health filings in FY 2000 consisted of 12,894, and property and casualty filings in the same year were 20,323.  She noted one of the division’s primary responsibilities is to answer consumer inquiries and resolve consumer complaints. She mentioned they are also advocates for consumers’ rights.  She pointed out the division had 61,683 inquires from the public in FY 2000.  They handled 2,730 formal complaints in FY 2000, she added.

 

Ms. Molasky-Arman indicated that the division recovered approximately $1.6 million in benefits for consumers.  She said other activities of the department include investigation of alleged violations, enforcement of statutes and regulations, and imposing appropriate discipline.  She noted that the division opened 199 formal investigations in FY 2000 and conducted 66 administrative hearings.

  

Senator O’Donnell asked whether the 199 investigations were in the performance indicators of their budget.  Ms. Molasky-Arman said they were not.

 

Ms. Molasky-Arman explained that the number 199 for investigations might be a bit deceiving.  She said she is aware of approximately 400 cases opened last year against insurance companies who failed to make appropriate filings.  She said she believes that these 400 cases were not counted because they may have been absorbed within one of their investigation numbers.

 

Ms. Molasky-Arman explained that, as a result of these investigations, the division has recovered approximately $2.6 million in the last year in restitution for consumers, who were in effect defrauded by members of the insurance industry.  She noted that $2 million of that amount arises out of one current case in Yerington, which was the result of embezzlement by a title insurance agent.

 

Ms. Molasky-Arman commented that Budget Account 101-3813 (Insurance Regulation) is the primary operating budget for the division.  She said it funds 58 full-time positions in the Property and Casualty Section, Life and Health Section, Health Insurance Portability and Accountability Act (HIPAA) Section, commissioner’s office, Accounting Section, the Corporate and Financial Affairs Section, Legal Section, Enforcement Section, and Consumer Services Section.

 

Ms. Molasky-Arman mentioned NRS 679B.380 provides that the division shall be funded by a legislative appropriation from the General Fund.  She said the Governor has recommended (in the base budget) $2,429,311 in FY 2002, and $2,467,441 in FY 2003.  She said their revenue includes a balance forward in unexpended registration fees deriving from a program that certifies service contracts.  She added that revenues also include registration fees consisting of $1,000 for an initial application, $500 for each renewal, and a $25 filing fee for each service contract.

 

Ms. Molasky-Arman said revenue for the division’s operations is also derived from medical/legal screening panels, for which there is a $350 filing fee for each complaint and answer.  She pointed out another source of revenue comes from Assessment Systems Incorporated, which is the vendor for licensing tests for agent and broker licensees.  She explained the contract with them calls for $35,004 to help defray the cost of maintaining the licensee database.  She added that the current contract will expire on August 31, 2001, and will be renewed on the same terms. 

 

Ms. Molasky-Arman remarked that special services in each year of the biennium total $12,076 for collections of charges for copies and general printouts.  She mentioned they also have a transfer from the Division of Industrial Relations, which is an allocation from the fund for workers compensation safety in the amount of $164,446 for each year of the biennium.  She explained this covers the costs of the program to review and approve proposed workers compensation rates.

 

Ms. Molasky-Arman said there is an intra-agency administrative cost allocation, which consists of transfers from other non-General Fund budgets.  She explained that the division’s share of insurance fraud assessment is received from another budget under the authority of the Attorney General (AG).  She said this helps to offset the division’s costs in maintaining that assessment and for the purpose of funding the commissioner’s program to enforce compliance with the Unfair Trade Practices Act.  

 

Senator O’Donnell asked about the Insurance Fraud Control Unit in the AG’s office that is funded by insurance companies through the Insurance Division and in turn paid to the AG’s office.  He asked whether two or three positions within the Insurance Division do the same function. 

 

Ms. Molasky-Arman replied that activities in investigating fraud are different between the agencies.  She added that investigations conducted by the fraud unit in the AG’s office are enforcement actions and investigations are conducted when fraud is committed against insurers.   She said the Insurance Division investigates fraud and mischief by members of the industry who are licensed.  She explained that many of the Insurance Divisions’ investigations consist of investigating unauthorized companies and agents.

 

Senator O’Donnell asked why fraud investigation is not all in one department.  He questioned whether funds go from the insurance company to the Department of Insurance then to the AG with a portion being sent back to the department. 

 

Ms. Molasky-Arman replied that the Insurance Division provides the annual notices of assessment and they impose fines and penalties against insurers who do not pay or who pay delinquently.  She said their payments are received by the Division of Insurance, but are deposited into the budget account maintained under the AG’s office.  She explained this budget at one time was under the office of the Commissioner of the Insurance Division.  She further explained there was a transfer of the revenue from that account back into the Division of Insurances Budget Account 101–3813.

 

Senator O’Donnell asked:

 

Why can’t we put that either back into insurance or take the three or four positions that you have in insurance doing fraud and put them over in the Attorney General’s office, and have all the money either go there or all the money go back to the Insurance Division? 

 

Ms. Molasky-Arman said the investigators in the Insurance Division, which are in‑house attorneys or insurance counsel, perform activities other than the investigation of agents and brokers.  She added that not all cases are fraud, some of their investigations involve solvency of insurers.  She noted they also handle simple licensing violations, instances of failure to be appointed, and misrepresentation.

 

Ms. Molasky-Arman pointed out that the division’s investigators work very closely with their program experts in life, health, and property casualty.  She remarked that the General Fund primarily funds these positions.  She said $65,000 received from the fraud assessment only partially offsets those activities.  She added that these activities also encompass the consumer services officers.

 

Senator O’Donnell recessed at 10:29 a.m. for members of the committee to attend the Senate Floor Session and the meeting reconvened at 11:07 a.m.

 

Senator O’Donnell called attention to the same issue of whether the fraud unit should be put back into the Insurance Division or whether it should be in the Attorney General’s office, and asked for a recommendation.

 

Ms. Molasky-Arman said:

 

I think it is important to preserve the commissioner’s authority, particularly in the area that we are currently handling.  We conduct disciplinary actions, which may or may not arise to a criminal offense.  When they do arise to a criminal activity, we do report those investigations once we have completed them.

 

Senator O’Donnell asked whether the Division of Insurance had this authority in the past.  Ms. Molasky-Arman said the authority to establish the fraud unit still remains under the commissioner.  She explained the fraud unit was established in the Office of the Attorney General.  Senator O’Donnell asked whether that had taken place in 1995.  Ms. Molasky-Arman said, “That was when the budget account was changed under the Attorney General.” 

 

Senator O’Donnell asked whether the certification process, funded several years ago for the National Association of Insurance Commissioners (NAIC), had been completed.  Ms. Molasky-Arman responded it had not because NAIC continually adds new criteria to the process.  She explained the division does have its procedures and laws in place but has not met the requirements for financial analysis of domestic insurers.  She said a primary reason for that is a continual changeover in positions within the division. 

 

Senator O’Donnell inquired whether these positions move within the state or go into private enterprise.  Ms. Molasky-Arman answered that they move into private enterprise for increases in salary.  She said the division does have difficulty training and maintaining positions.  She added that they recently had significant changes in their Corporate and Financial Affairs Section.  She noted she has a new chief examiner starting next week, the management analyst has moved to the position of assistant chief examiner, and his position was filled with a qualified, local person who is a certified property and casualty underwriter.

 

Senator O’Donnell asked whether a salary increase is requested for these individuals.  Ms. Molasky-Arman replied that salary increases were not requested.  Senator O’Donnell stated that this area might need to be looked at.

 

Senator O’Donnell asked whether it is costing Nevada money not being an accredited state.  Ms. Molasky-Arman replied that not being an accredited state does not cost the state money, but it does hamper the department.  Ms. Molasky-Arman stated that as a nonaccredited state, we are unable to perform financial examinations under the leadership of the commissioner’s office for other states domestic insurers.

 

Ms. Molasky-Arman said this affects the choice of the NAIC in selecting examiners for multi-state examinations.  She remarked it also affects our domestic insurance companies’ ability to do business in other states. 

 

Senator O’Donnell asked whether this impacts the state financially.  Ms. Molasky‑Arman said it does affect the domestic insurers financially.  She said other states want to make certain that the domestic states have firm, sound principals in determining the financial condition of these insurers, and because Nevada is not accredited, there remains uncertainty.

 

Ms. Molasky-Arman said the NAIC examination team is coming to her office in April 2001 to conduct a review.  She said she believes this review will have better results despite the fact the technical staff has changed in that section.  She said they have confidence in the steps they have taken internally resulting from the Legislative Counsel Bureau (LCB) audit of their Market Conduct Examination Program.  She added that LCB recommendations were similar to the NAIC’s.

 

Senator O’Donnell asked that it be goal for the department, before the end of the year, to either become certified or at least take the necessary steps.  Ms. Molasky‑Arman stressed she would like to see the department receive accreditation in March 2002. 

 

Senator O’Donnell asked what specifically would need to be done to accomplish this.  Ms. Molasky-Arman replied there are several layers of programs that must be completed.  She pointed out that accreditation training is necessary, which is professional and technical development of staff. 

 

Senator O’Donnell asked how much reserve is in this budget account.  John R. Orr, Deputy Commissioner, Division of Insurance, Department of Business and Industry, stated that Budget Account 101-3813, in the past, has not had any reserve.  He added that the $7,704 reserve identified in the base budget is unspent registration fees, collected from service contractors.  This reserve, he added, was created through a work program presented by the department to the IFC in September 2000.

 

Senator O’Donnell suggested if there are extra funds within this budget, they could be put towards the certification process.  Mr. Orr pointed out that two of the enhancement requests are directly related to accreditation.  He said the largest deficiency in the division found by the NAIC was in examinations, which are conducted by the Corporate and Financial Affairs Section.  He explained they are asking for two new positions in that section.  He said the purpose of one position is to conduct examinations and the purpose of the other is to conduct domestic oversight and financial analysis.  Mr. Orr commented that if these positions were approved, it would help in satisfying these deficiencies.    

 

Senator O’Donnell called attention to the agency’s request for an additional $178,624 in General Fund over the biennium to fund a Chief Insurance Examiner position, which is federally mandated by the Health Insurance Portability and Accountability Act (HIPAA).

 

Ms. Molasky-Arman said this is a position they have had ever since the state enacted HIPAA, which was during the 1997 Legislative Session.  She noted that the Nevada Executive Budget System (NEBS) payroll report failed to recognize this position and failed to insert the appropriate payroll amounts in the budget.

 

Senator O’Donnell asked whether that position is accounted for on the payroll.  Ms. Molasky-Arman noted that it is.  Senator O’Donnell asked whether the $178,624 is still needed.  Ms. Molasky-Arman said, “absolutely.” 

 

Mr. Orr commented that there are “gremlins” in the NEBS system.  He added that in the payroll detail reports that were published out of NEBS, all the way through the budget development process, position control number 0080 was in the reports fully funded at a grade 42, step 8.  He explained that on January 8, when the final NEBS ran, it came out as a grade 42, step 0, which essentially means it didn’t exist.  He said this was overlooked on January 8, but upon discovering it, he contacted his budget analyst and the committee’s fiscal analyst.

 

Kathalie Koche, Management Analyst III, Budget Division, Department of Administration, said when this error was discovered it was brought to the attention of the director who is in the process of meeting with the Governor to find a solution.  She added that one idea is to look at vacancy savings in the budget.  She said she is in touch with the committee’s staff.

 

Senator O’Donnell requested that, based on the information being received by the Committee’s staff, the problem be brought up at the meetings of the full Senate Committee on Finance and the full Assembly Committee on Ways and Means.

 

Mrs. Chowning asked what the division is doing to become compliant with the Federal Financial Modernization Act, and when the deadline is for Nevada to become fully compliant.  Ms. Molasky‑Arman said the deadline for compliance is November 12, 2002.  She noted that the Federal Financial Modernization Act was enacted in November 1999.  She explained the act liberalized the ability of various financial institutions to transact business.  She said it enables banks to sell, but not underwrite insurance.  Ms. Molasky-Arman added there are several provisions that directly affect the Division of Insurance within this act.  She said the division’s omnibus bill draft request (BDR) is centered on many requirements of the GLBA (Gramm-Leach Bliley Act of 1999) also known as the Financial Modernization Act of 1999.

 

Ms. Molasky-Arman said a significant provision in the GLBA provides that all states must establish uniform or reciprocal laws regarding licensing of agents and brokers.  She added if states do not adopt uniform and reciprocal laws by November 12, 2002, then a National Association of Registered Agents and Brokers (NARAB) will be formed.  She said this would enable agents and brokers to become licensed nationally without the necessity of becoming licensed in various states.  She noted this would seriously impact revenues from licensing fees as well as deter the preservation of the insurance industry by the state. 

 

Ms. Molasky-Arman explained that the department’s requested bill draft does encompass these issues. She noted that it would replace NRS 683A, their agent and broker chapter, with the National Association of Insurance Commissioners Single Producer Model Act.  She noted that the NAIC developed that model act in response to the federal Financial Modernization Act.  She said almost every state across the nation is pursuing this legislation to prevent NARAB.

 

Ms. Molasky-Arman said there are other areas in the department’s requested bill draft that are within the federal Financial Modernization Act.  She noted that one has to do with the re-domestication of mutual companies.  She further explained:

 

The federal act enables a mutual company to re-domesticate to another state without permission of the domestic state if the domestic state does not have the same kinds of enabling provisions as the state where the insurer wishes to re-domesticate. 

 

Ms. Molasky-Arman added that there are also provisions regarding privacy. Mrs. Chowning reiterated the question whether the division would be able to meet that deadline.  Ms. Molasky-Arman said that they would.

 

B&I, Insurance Examiners – Budget Page B&I-41 (Volume 2)

Budget Account 223-3817

 

Ms. Molasky-Arman said this budget is used to fund the cost of conducting, supervising, and administering examinations.  She said it is funded by reimbursement of the examination expenses, which is paid by the examined entity.  She added the examinee also pays an administrative fee equal to 50 percent of the examiners salary costs associated with the examinations. 

 

Ms. Molasky-Arman explained that the account retains a reserve balance, required to capitalize contract costs for 45 to 75 days, pending receipt of reimbursement.  She testified that based upon the base year of contractor costs, this reserve should be $457,500.  She said the Governor’s budget recommends a year-end balance in FY 2003 of $424,143.

 

Ms. Molasky-Arman said they had projected 70 financial examinations for FY 2000 and the actual number was 44.  She noted that the number of actual market conduct examinations was eight fewer than projected.  She said she would like the committee to consider letting the division change the performance indicators to only include domestic examinations.  She stated the reason for this is that the National Association of Insurance Commissioners has changed the standards of participation of the states in national exams. She added they are primarily responsible for the examination of their domestic companies.  She said all states on a zone basis participate in the national exams of large companies.

 

Ms. Molasky-Arman said for a state to participate, it must have not less than $25 million in premiums in that particular company.  She added that the domestic examinations are required by the NRS.

 

Senator O’Donnell stated the performance indicators should stay as they are because the division needs to get certified.  He added, “If you can’t do these examinations because you are not certified, you need to get certified.”  He remarked a plan should be put into place to allow the division to become certified. He asked that committee staff work with the Division of Insurance in this regard.

 

B & I, Insurance Education and Research – Budget Page B&I-49 (Volume 2)

Budget Account 101-3824

 

Ms. Molasky-Arman said this account is funded from transfers out of budget Account 101-3821 (Insurance Recovery) in amounts over $40,000.  She stated the budget is predicated on an annual transfer of $253,710.  She stated, “Our year‑to‑date collections of recovery fees through January 31, 2001, of this year, have been $163,030, which projects to annual collections, and therefore, transfers to this account of $279,480.”

 

Ms. Molasky-Arman remarked there are a number of purposes for this budget account.  She said one is to train staff, insurers, consumers, licensees and legislators in the concept of insurance along with actuarial studies.  She said another is to review and approve continuing education courses for licensees.  She added that another is to support the continuing accreditation training for professional staff.  She pointed out they also publish pamphlets, guides, reports, and a newsletter under this budget account.  She concluded that this budget is used to support the divisions data collection and information management system, called COSMOS.

 

E-350 Service At Level Closest To People – Page B&I-52

 

Senator O’Donnell asked about the Public Service Internship Program and why the division is still pursuing it when it is so difficult to recruit candidates. 

 

Ms. Molasky-Arman said they did successfully obtain two interns for their Las Vegas office.  She noted they learned a great deal, graduated, and the division was unable to replace them.  She said they are unable to determine why the university or community college systems have not been able to assist in this program.  She said they are currently discussing an internship with the Boyd School of Law in Las Vegas. 

 

Senator O’Donnell inquired whether the division absolutely needs this program.  Ms. Molasky-Arman said, she would consider it a personal failure, but it is not an absolute necessity.  Senator O’Donnell noted there seems to be no interest in the program.  He asked whether this is a General Fund account.  Ms. Molasky-Arman said it is not; it is funded by the licensees and ultimately from the public.

 

Mrs. Chowning pointed out that maybe the scope of duties for the interns have not been clearly defined.  She added that working with the Boyd School of Law is an excellent strategy.  She noted that the intern salary of $15,000 is a possible problem.  She said this program should be properly outlined in order for it to remain viable.  Ms. Molasky-Arman added that in the past, duties other than just clerical were given to the interns.

 

 

Ms. Molasky-Arman said another project within this budget is $20,000 for the biennium to support a series of seminars for the public, and agents and brokers.  She noted in the past these seminars have been conducted by the Nevada Independent Insurance Agents.  She said the Professional Insurance Agents Association (PIA) also request that some of these seminars include ethics for licensees. 

 

Mr. Hettrick asked about the reserve in this budget.  Mr. Orr stated that the budget reflects a negative reserve in the second year but will be cured in a very short time.  He explained that a work program would be submitted to the Interim Finance Committee.  He said funding comes from Budget Account 101-3821, (B & I, Insurance Recovery).  He noted that any amounts in Budget Account 101-3821, in excess of $40,000, transfer to this budget.  He explained the collection of insurance recovery fees out-distance proposed projections this year.

 

Mr. Orr said a work program would be submitted to increase the authority to collect fees in Budget Account 101-3821, and ultimately give the authority to transfer fees into this account. 

 

Mr. Hettrick asked whether the department anticipates the increase in fees will continue yearly.  Mr. Orr commented, “We are not certain how our bill draft is going to be finalized, if it is enacted as presented, then there will be a minor affect on the number of payers of the insurance recovery fee.”  Mr. Orr concluded they would like to wait for the bill to pass and see what happens to the population of payers before instituting a change at this point.

 

Senator O’Donnell requested the division work with committee staff and find solutions to any reserve category problems.

 

B & I, Self Insured – Workers Compensation – Budget Page B&I-64

Budget Account 210-4684

 

Eloise Koenig, Self-Insurance Coordinator, Self-Insured Workers’ Compensation Section, Division of Insurance, Department of Business and Industry, stated this account was established to oversee, monitor, and regulate all self-insured employers, both individual and associations.  She explained the funding for this budget account comes from an assessment levied against self-insured employers and associations of self-insured employers by the Division of Industrial Relations.  She said this budget also receives application fees and audit fees. 

 

Ms. Koenig said the only major changes in this budget are the relinquishment of two positions.  She commented the program has lost some self-insured employers and currently provide for 229 individual self-insured employers.  She added that in anticipation of this declining number, one of these positions has been vacant for at least one and a half years.  She said they also gave up a contingent position that had been there since 1995.

 

Ms. Koenig remarked they are requesting the replacement of five computer workstations, which are all over five years old, and a laser-jet printer.

 

Senator O’Donnell commented on the decline in the number of self-insured employers and asked whether the division anticipates a further decline.  Ms. Koenig said they lost several of the self-insured employers as a result of the 3-Way (a program allowing self-insured employers the choice of either being self-insured, privately insured, or obtaining insurance through the residual market.)  She expects they will lose several more.  She noted that the activity in the self-insured area is a reflection of rates, which may change.  She concluded it is difficult to predict what will happen.

 

Senator O’Donnell asked whether the division is comfortable with the anticipated vacancy savings.  Ms. Koenig said they were and there is a possibility for more.       

 

Senator O’Donnell adjourned the meeting at 11:48 a.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

 

Debra Petrelli

Committee Secretary

 

 

APPROVED BY:

 

 

 

                        __

Senator William R. O’Donnell, Chairman

 

 

DATE:                        __

 

 

 

_______________________________________________

Assemblywoman Vonne Chowning, Chairwoman

 

 

DATE: ________________________________________