SENATE COMMITTEE ON FINANCE

MINUTES OF THE

BUDGET SUBCommittee

oF THE LEGISLATIVE COMMISSION

February 2, 2001

The Budget Subcommittee of the Legislative Commissionwas called to order by Chairman William J. Raggio at 8:45 a.m., on Friday, February 2, 2001, in Room 4100 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 SUBCOMMITTEE MEMBERS PRESENT:

Senator William J. Raggio, Chairman

Senator Lawrence E. Jacobsen

Senator Joseph M. Neal Jr.

Senator Bob Coffin

Senator Bernice Mathews

SENATE SUBCOMMITTEE MEMBERS ABSENT:

Senator Raymond D. Rawson, Vice Chairman (Excused)

Senator William R. O’Donnell (Excused)

ASSEMBLY SUBCOMMITTEE MEMBERS PRESENT:

Mr. Morse Arberry Jr.

Ms. Christina R. Giunchigliani

Mr. Bob Beers

Mrs. Barbara K. Cegavske

Mrs. Marcia de Braga

Mr. Joseph E. Dini, Jr.

Mr. David E. Goldwater

Mr. Lynn C. Hettrick

Ms. Sheila Leslie

Mr. John W. Marvel

Mr. David R. Parks

Mr. Richard D. Perkins

Ms. Sandra J. Tiffany

ASSEMBLY SUBCOMMITTEE MEMBERS ABSENT:

Mrs. Vonne S. Chowning (Excused)

STAFF MEMBERS PRESENT:

Gary L. Ghiggeri, Senate Fiscal Analyst

Mark W. Stevens, Assembly Fiscal Analyst

Steven J. Abba, Principal Deputy Fiscal Analyst

Georgia J. Rohrs, Program Analyst

Jim Rodriguez, Program Analyst

Jennifer Ruedy, Committee Secretary

OTHERS PRESENT:

Jan Marie Reed, Executive Officer, Public Employees’ Benefits Program

James Manning, Budget Analyst, Budget Division, Department of Administration

Myla C. Florence, Director, Department of Employment, Training and Rehabilitation

BUDGET OVERVIEWS

PUBLIC EMPLOYEES’ BENEFITS PROGRAM

Public Employees’ Benefits Program – Budget Page PEBP-1 (Volume 3)

Budget Account 625-1338

Jan Marie Reed, Executive Officer, Public Employees’ Benefits Program, presented the budget overview. Ms. Reed provided a Memorandum (Exhibit C) detailing her prepared comments including Attachments A through H of Exhibit C. (Originals are on file in the Research Library.) The Public Employees’ Benefits Program (PEBP) is responsible for the healthcare program for all participating public employees, retirees and dependents.

Ms. Reed addressed the five major goals for 2000 as set forth by the executive staff for the program (Exhibit C). She said the first goal is to “provide the best delivery systems and plan designs to ensure a financially sound program.” The second goal is to “develop a rate and contribution structure appropriately based on cost of benefits.” She indicated PEBP improved benefits as follows: improved wellness benefit to $300, lower deductibles ($250 annually and $500 for a family), and lower out-of-pocket costs ($2,250 maximum).

Ms. Reed explained that program cost savings are attributed to the request for proposal (RFP) process, plan design, and rate structure. She said the Program ended fiscal year (FY) 2000 with a surplus over projections of approximately $2 million and fully funded the incurred, but not reported, (IBNR) reserves. Through the RFP process and rate structure, she added, the PEBP projects an operating gain of $13.8 million for FY 2001. Through plan design that discourages out-of-network expenses, the PEBP projects a gain of $1.5 million. She pointed out the annual savings is projected at $15.3 million. All of these, she noted, are one-time gains.

Ms. Reed stated there is a risk adjustment for age and sex within the health maintenance organization (HMO) rate structure. She said when costs for the HMO exceed the self-funded plan cost, the additional costs are borne by the employee. She noted the rate restructure allowed for a reduced retiree premium from actual retiree cost by expanding the subsidy beyond their “years-of-service subsidy.” Ms. Reed said the Memorandum she furnished (Exhibit C) thoroughly addresses each of the five goals. Open enrollment was delayed, she explained, because of complications with the process of rate contributions. Results of the analysis of future retiree costs are expected during late February 2001, she added.

Returning to the five major goals, Ms. Reed said the third goal of PEBP was to install new technology to interface electronically with vendors and paycenters, thereby eliminating the outsource vendor in March 2001. The fourth goal was to improve communication with and education of program participants. A new summary plan description, Attachment A of Exhibit C, was written for release to persons enrolled in the self-funded plan in the year 2001. She added that the fifth goal was to operate in an efficient, law-abiding manner.

Ms. Reed noted the 2001 goals and objectives are outlined in Attachment B of Exhibit C. Although the PEBP is a state program, she said it is important to remember the plan contracts with many private vendors that contribute more than $120 million a year to Nevada’s economy. She noted the Budget Recap Sheet (Attachment C of Exhibit C), November 2000 Financial Statements (Attachment D of Exhibit C) and Audited Financials for FY 2000 (Attachment E of Exhibit C) provide further detail. Ms. Reed said UICI Administrators has provided current and consistent claims administration. Ms. Reed said she provided the UICI Administrators’ most recent quarterly report for the committee’s perusal. (Attachment F of Exhibit C.) She indicated the Kafoury Armstrong claims audit is also provided, Attachment G of Exhibit C.

Ms. Reed stated the Segal Company is the actuarial consultant to the program. She said they have recommended conservative reserves based on the understanding that the program relies on state funds if the projections prove to be inadequate. She noted that medical inflation trends range from 10 to 14 percent, and the PEBP assumed 11 percent.

E-225 Reward More Efficient Operation – Page PEBP-4

Ms. Reed pointed out the PEBP is requesting authorization for a study of compliance with federal regulations, as provided by subparagraph (2) of paragraph (g) of subsection 2 of NRS 287.043. The cost of the study will be $70,000 and is further detailed on page four of Exhibit C.

Ms. Reed said the second enhancement requested in E-225 is a retiree health study to explore solutions for future retiree health care coverage. She noted this study is designed in three phases with the first phase to be completed in February 2001. Phase One addresses measurement of current and future exposure. Phase Two addresses a myriad of topics such as types of appropriate coverage, eligibility provisions, funding sources, “participation in prefunding,” feasibility of “prefunding,” and vehicles for “prefunding.” She said if Phase Two determines “prefunding” is appropriate, then Phase Three will address “prefunding” design and implementation. The cost of the final two phases will be $60,000 over the biennium, she added.

Ms. Reed stated the third enhancement requested in E-225 is audit software and a shredder.

E-710 Replacement Equipment – Page PEBP-5

Ms. Reed said another enhancement is the replacement of computers and printers.

E-900 Transfer to PEBP from REGI, BA 1368 – Page PEBP-6

The PEBP seeks to consolidate the Retired Employee Group Insurance Budget Account 101-1368 into Budget Account 625-1338 to streamline administration. There is no financial impact from this consolidation.

Ms. Reed explained that Attachment H of Exhibit C is an estimated comparison of costs, reserves, and subsidies over a five-year projection.

Senator Raggio asked Ms. Reed to explain “prefunding” as referenced in the retiree health study request. Ms. Reed responded that “prefunding” would be a means of setting aside designated funds in the current biennium to create funds for the future. She pointed out there are a large number of anticipated retirees in the near future as evidenced by the average age of our workforce being 46. She said this is anticipated nationally because of the baby boom. The program is looking at methods to prepare for the sharp increase of retirees in the future. The Retiree Health Study will help the PEBP determine what portion of subsidies could be set aside for future use, she added.

Senator Raggio asked Ms. Reed to explain the existing situation of some groups leaving the program. Senator Raggio further inquired whether active members of the groups were leaving while retirees remained within the program.

Ms. Reed clarified that the 1999 Legislative Session created a mechanism for groups of not less than 300 participants to leave the PEBP and obtain life, health or accident insurance from another source (NRS 287.0479). She pointed out there is no requirement for the retired members of the departing group to leave the PEBP with the active members; therefore, the PEBP must extend coverage to those members. Senator Raggio suggested this topic should be revisited to determine the impact on the vitality of the system, and he asked Ms. Reed to share her opinion regarding the matter. Ms. Reed responded that the effect is “catastrophic” to allow actives to leave without a proportionate number of retirees, and to simultaneously allow retirees to enter the program. The result is the PEBP is left without a sufficient pool of participants to minimize their risk, thereby defeating the entire concept of a group plan.

Senator Raggio asked Ms. Reed to prepare information detailing the specific groups for which the PEBP covers only the retirees while the active members do not participate in the system. Ms. Reed agreed to provide this information.

Senator Raggio noted The Segal Company had recommended three separate distinct reserve components should be established: IBNR reserves (for claims that have been incurred, but not yet reported, and claims that have been reported, but not yet paid), claims fluctuation reserves, and a contingency reserve. He noted The Segal Company provides actuarial services to the PEBP. Senator Raggio questioned whether The Executive Budget reflected only the IBNR reserve.

Ms. Reed responded that the IBNR reserve is the only reserve reflected in The Executive Budget. She stated the PEBP would rely on the Legislature for funding if their reserve projections were inadequate. The PEBP is confident the 11 percent assumption for medical inflation trends is adequate (Exhibit C). The IBNR reserve is inflated to be comparable to the medical inflation trend.

Senator Raggio asked Ms. Reed to explain how to calculate the amount of the IBNR reserve. She explained that the calculation is based on the percentage increase in inflation, past trends in this specific plan, a slight increase for medical and a slight decrease for pharmacy because of the quick turnaround. Senator Raggio asked, “What percentages have you built into this reserve of those particular components?” Ms. Reed responded that PEBP uses the annually paid claims as a base then inflates medical by 16.7 percent, pharmacy by 5 percent and vision by 16 percent.

Senator Coffin asked Ms. Reed to clarify the actual number of days or months of the annual expected claims included in the IBNR Reserve. Ms. Reed said the PEBP includes over two months worth of reserves.

Senator Raggio explained, prior to financial information received at today’s meeting, the last financial information the committee had received was in July 2000. Senator Raggio questioned the time frame covered by the new financial information. Ms. Reed responded that the provided information was current through November 2000 and it included audited financial statements.

Mark W. Stevens, Assembly Fiscal Analyst, requested detailed information on how the PEBP budget numbers were calculated. He said the fiscal division needs expenditure numbers to follow the calculations from actual numbers to the work program figures to each year of the Governor’s recommendation. Mr. Stevens said he had just learned today the medical trend rate was 11 percent. There is a great deal of work for the fiscal division to complete on receipt of the detailed calculations. He pointed out the fiscal division is unable to begin its work without information from the agency detailing how the calculations were derived. Senator Raggio asked Ms. Reed to comply with Mr. Stevens request for information. She assured Senator Raggio she would.

Senator Raggio questioned what percentage of participants are in each of the different coverage plans. Ms. Reed replied that she had actual numbers in lieu of percentage statistics. Out of approximately 29,000 employees 26,000 are enrolled in the self-funded plan, and the remainder are in one of the three HMO plans offered.

Senator Raggio asked Ms. Reed to confirm that participants who had not returned their enrollment forms had been retained in the same plan in which they had been previously enrolled. Ms. Reed affirmed this was the case with the exception of those participants who were enrolled in an HMO in northern Nevada that chose to discontinue its HMO. She said those participants were allowed to stay within that network, but were moved to the self-funded plan. She indicated those participants were also informed the deadline for enrollment had been extended until mid‑February to change from the defaulted selection.

Senator Raggio asked for the recommended monthly contribution rate for active employees. Ms. Reed referred the question to James Manning, Budget Analyst, Budget Division, Department of Administration. Mr. Manning explained that PEBP projected a monthly contribution rate of $357.50 for active employees for the first year and $384.50 in the second year. Currently, he said, the monthly contribution rate is $368.75, so the rate will initially decrease. Mr. Manning explained that the rates were calculated based on the state funded premium amounts required, $122,414,259 for the first year and $135,761,863 for the second year. He said this required premium amount was divided by 12 months then divided by the total number of participants, 29,346, to calculate the recommended monthly contribution rate.

Senator Raggio asked whether there are any decreases in benefits anticipated during the new biennium. Ms. Reed replied there were none. She provided further explanation of the current benefits at the request of Senator Raggio. There is a $2,000,000 lifetime benefit, a $250 deductible within the preferred provider organization (PPO), an additional $250 deductible for services obtained outside the PPO, and a $500 aggregate family deductible. She pointed out that the out-of-pocket maximum expense was lowered to $2,000, which means the participant receives benefits at 100 percent after spending $2,250. The family limit is $4,000 before receiving benefits at 100 percent. Hospital services pay 80 percent of the contracted rate. She indicated a national PPO has been added for the convenience of participants who live or travel outside of the state. This national PPO allows participants to take advantage of lower deductibles and network discounts, which benefits the plan and the participants. Outpatient services, skilled nursing and physician services are paid 80 percent.

Ms. Reed stated that, in response to the town hall meetings, the PEBP has included more co-payments to benefit participants who seldom visit doctors and previously struggled to reach their deductibles. She said additional co-payments include specialty physician at $20, urgent care at $30, and emergency room facilities at $75. The balance of those charges is paid by the plan. In lieu of the previous deductible for chiropractic services, there is now a co-payment of $20 for the first ten visits and $30 each visit thereafter.

Ms. Reed pointed out there are many other improvements to benefits. Mental health has been added to the medical coverage. Preventative care has been improved. In response to town hall meetings, the vision plan has been replaced with a point-of-purchase discount plan to provide plan participants with more retail choices. According to Ms. Reed, this has worked very well in the rural areas. She said there is a $140 benefit every two years for the vision hardware, $40 a year for the vision exam, and $200 toward corrective eye surgery.

Ms. Reed explained that pharmacy costs are the highest cost factor in the plan, replacing hospitalization as the highest cost factor. She pointed out national averages indicate plans should pay approximately 60 percent of pharmacy costs. Previously, she noted, there was significant discrepancy in payment amounts between the mail order and retail plans. This has now been adjusted for comparable payments at approximately 63 percent for both services.

Ms. Reed indicated negotiation continues to improve the pharmacy plan. This year the plan removed the $25 deductible, but co-payments did increase slightly. Inflation factors are now over 21 percent for pharmacy. To further enhance the pharmacy benefits, she said, the number of drugs that required pre-authorization was reduced this year from 75 to 20. There is an increased emphasis to encourage generic drug substitution, she added.

In response to Senator Raggio’s question, Ms. Reed stated the PEBP contributes approximately 50 percent of the dependents’ coverage costs. She said the employee pays the difference on a monthly basis.

E-900 Transfer to PEBP from REGI, BA 1368 – Page PEBP-6

Senator Raggio asked Ms. Reed to discuss the benefits of the consolidation of the Public Employees Benefit Program and the Retired Employee Group Insurance budgets. Ms. Reed replied that it is a request to consolidate budget account 101-1368, Retired Employee Group Insurance, into budget account 625‑1338. She assured the committee that each individual agency would still receive an assessment based on whether the participant is an active or retired employee. Senator Raggio asked Ms. Reed to explain how the assessment is prepared when a retiree has previously worked for several agencies. Ms. Reed responded she was not sure how the assessment would be composed in that case, but she assured Senator Raggio she would get the information to him.

Ms. Giunchigliani stated that a law passed last session required coverage for contraceptives for women, but the women in northern Nevada have been denied this coverage through the sole HMO provider in that region. Ms. Reed said Saint Mary’s was exempted from providing contraceptive coverage for women. She said Saint Mary’s Health Network made it very clear their services would not include coverage contraceptives, and participants could choose the self-funded PPO instead of Saint Mary’s HMO. Ms. Giunchigliani reiterated her concern for the large group of state employees who are denied contraceptive coverage if they choose an HMO in northern Nevada because there is not another HMO option for them. Ms. Reed indicated a consultant has been asked to look into other solutions to this problem for the PEBP.

Ms. Leslie voiced concern on behalf of herself and Senator Mathews on the contraceptive coverage issue. Ms. Leslie further stated that she and Ms. Parnell receive numerous constituent complaints regarding errors in claims processing. Ms. Leslie asked Ms. Reed to explain why the contract provision rates are lower than the industry standards. Ms. Reed said the staff turnover rate in claims processing has been over 50 percent, but she is optimistic they have honed their staff. Ms. Reed also said that incorrect pharmacy cards were mailed out in January and, as a result, her office was inundated with calls. She assured the committee the pharmacy supplier has been working diligently to correct the problem. In response to Ms. Leslie’s concerns, Ms. Reed stated she remains confident of her staff, and she believes they are streamlining the process.

Ms. Leslie asked if the retiree and active rates are blended. Ms. Reed said that the rates are blended, and this is one of the issues being addressed in the retiree health study. She said the plan subsidizes retirees to a greater degree than just their state subsidy for years of service. She explained that, out of the subsidy received for active employees and their dependents, a portion is used to reduce the cost to retirees. Increases are the same for both retirees and active employees, based on the experience. If the retiree premium goes up more, it is to equalize what is happening across the whole plan. Ms. Leslie stated retiree benefits are of great concern to her constituents, and Ms. Reed agreed the retiree issue must be carefully studied for the longevity of the plan.

Mrs. de Braga asked whether the wellness benefit applies to the deductible. Ms. Reed said none of the wellness benefit applies to the deductible and it is paid up to the $300 limit. Mrs. de Braga stated she has received complaints from her constituents regarding obtaining coverage information from UICI Administrators. Mrs. de Braga specifically cited mammogram coverage as an area of concern voiced by her constituents. Ms. Reed acknowledged that mammograms have been a difficult issue because they are a part of the wellness benefit, but they are no longer a wellness benefit when there is a diagnosis.

Mr. Parks asked Ms. Reed whether there is a breakdown of the “Contracted HMO/Administrative Costs” from AttachmentH of Exhibit C. Ms. Reed responded that the breakdown is included in the detail of the budget, but she did not provide that information to the committee members today.

Mr. Dini expressed concerned about the prescription co-payment amounts, and indicated he believes a discrepancy exists within the prescription drug program. He explained that many generic drugs, such as digitalis, used to be very inexpensive over the counter. Now, a 90-day supply of the same drug is $50 co-payment, but with a regular prescription for a 30-day supply it does not add up to the $50. Ms. Reed replied that 6 percent of the total prescription drugs filled would be less expensive than they are with the co-payment. Ms. Reed encourages participants to buy those 6 percent of prescriptions outside the plan.

Ms. Reed said she encourages participants to ask their pharmacist the actual cost per pill. She cited an example of a woman who knew that her pills had cost 40 cents each three years ago, but she discovered they now cost $1.48 each. Despite having been on the market for many years, the prescription drug this woman used still experienced a sharp increase in price. Mr. Dini commented this is of special concern for retirees because many of them are taking multiple prescriptions over the long term. Ms. Reed said increased longevity, increased prices, and the increased aged population with a growing dependence on pharmaceuticals are a growing area of concern. Ms. Reed stated this concern relates to the issue of risk and how to properly distribute it among participants.

Senator Coffin complimented Ms. Reed on her work at the agency over the past two years. He suggested the pharmaceutical inflation figure of 5 percent might be a little optimistic. Ms. Reed clarified that the pharmacy inflation figure is about 20 percent, but the pharmacy inflation figure in the IBNR Reserve is 5 percent because of the reduced turnaround time.

Senator Raggio also complimented Ms. Reed on her work over the past two years. Furthermore, he clarified Ms. Leslie’s question regarding the contracted error rate. PEBP entered a contract with UICI Administrators that provided for a claims processing error rate below the industry standard in three of the four performance standard areas. Ms. Reed said those figures are three years old, and the PEBP will bring the contract error rates up to the industry standards in their current bidding.

BUDGET OVERVIEWS

DEPARTMENT OF EMPLOYMENT, TRAINING AND REHABILITATION

Myla C. Florence, Director, Department of Employment, Training and Rehabilitation (DETR) presented the budgets for her agency. She began her presentation from prepared remarks (Exhibit D). Ms. Florence provided an overview of the department’s budgets (ExhibitE. Original is on file in the Research Library.)

Ms. Florence commented that the departure of state employees for the private sector has been a recurring problem among various state agencies. In an effort to retain employees, many of DETR’s budgets reflect increased compensation and increased investments in training and technological support.

Ms. Florence informed the committee she has been with the department only seven months, but is optimistic for the agency’s future. She said three major components affecting workforce issues are welfare reform, education reform, and labor reform. She noted that labor reform is further addressed under the Workforce Investment Act of 1998 (WIA). She said both employers and job seekers are customers of this agency. She indicated it is important to strive for not just full, but better employment, so employers receive well-trained, skilled workers. The safety net of a solvent unemployment insurance program must always be maintained, she added.

Ms. Florence stated the department has accomplished many goals during her tenure. The Workforce Investment Act was implemented in June 2000. The department partnered the opening of comprehensive one-stop centers in Reno and Las Vegas. Nevada was one of three states to be awarded two United States (U.S.) Department of Labor grants, one for the development of the northern Nevada telephone initial claims, and one for development of an Internet claim filing center. The Nevada Equal Rights Commission operations were restored within two days of a fire. Ms. Florence stated, “Bureau of Disability Adjudication received a commendation for being ranked fourth in productivity and ranked sixth in the nation for accuracy.” The Bureau of Service to the Blind and Visually Impaired received the tourism development award for the year 2000; she explained this was a result of their assistance in developing the new vending facilities at Hoover Dam.

Ms. Florence called attention to the resource information included in the budget overview and said it may be useful in assisting constituents (Exhibit E.)

Ms. Florence stated the mission of the Department is “to promote economic self-sufficiency and independence by providing quality and timely employment, training, and rehabilitation services to Nevada’s citizens in the most economical and equitable manner” (Exhibit E.) She said the department consists of DETR Administrative Services, four divisions and thirty-seven offices statewide. She identified the four divisions as: Employment Security Division, Nevada Equal Rights Commission, Rehabilitation Division, and Division of Information Development and Processing. She said the department currently has 826.5 positions. She stated the department is requesting five new positions, while eliminating nineteen positions. Ms Florence informed the committee the department has thirty intermittent part-time positions, authorized by the U.S. Department of Labor, to staff the telephone claim center during periods of increased demand.

Ms. Florence stated the department’s budget represents 4.3 percent of the General Fund, or $218,453,145. She pointed out these figures can be found on page one of Exhibit E.

Ms. Florence indicated she would attempt to alleviate some confusion regarding comprehensive one-stop centers. She said the department received a one-stop implementation grant to create electronic employment service sites statewide. She noted that different types of services are available throughout Nevada. A requirement of the Workforce Investment Act of 1998 (WIA) is to create a comprehensive one-stop employment service system incorporating each of the local workforce investment areas of the state. Ms. Florence stated that two newly created comprehensive one-stop centers are located in Reno and Las Vegas. She indicated the full range of DETR’s services offered in Nevada are identified on the first tab of Exhibit E.

Ms. Tiffany said the WIA board in Las Vegas has seventy members comprised of area employers, but the large membership is limiting effectiveness. Ms. Tiffany expressed concern over many departing board members, and she asked Ms. Florence to consider restructuring the board.

Ms. Florence responded that this is a national phenomenon wrought by stringent national requirements for board membership. She said the local boards report to local elected officials, not to DETR. The Southern Nevada Workforce Investment Board staff is attempting to reinvigorate their meetings without losing any businessperson’s expertise. Ms. Florence recommended Ms. Tiffany contact Mr. Robert Brewer, board chairperson, Mr. Richard Blue, board member, and local elected officials to discuss this issue.

Ms. Tiffany said she would like to review any existing written document that grants authority over the Southern Nevada Workforce Investment Board to the local elected officials because she does not believe they are acting as an executive board. Ms. Florence agreed to provide Ms. Tiffany the documentation, and she offered to attend any meetings Ms. Tiffany was able to arrange on this matter.

Ms. Giunchigliani questioned how the “welfare-to-work” money is distributed to prisoners. Ms. Florence explained that the local workforce investment board distributes the “welfare-to-work” program funds. It is a collaborative effort between the welfare division, the local board and the Department of Prisons. She said the allocation of funds is based on a formula approved by the state board who then distributes the funds to local boards. Ms. Giunchigliani requested assurance that funds are being directed toward careers, not merely filling a worker shortage in one industry, such as hotel maids. Ms. Florence stated local boards, not her agency, are responsible for determining the targeted careers; DETR merely provides technical assistance. Ms. Florence suggested Ms. Giunchigliani review the source of revenue in the Department of Prison’s budget to determine the amount of “welfare-to-work” funding received.

Ms. Florence stated DETR has been very proactive in finding opportunities for “e‑government.” She indicated this was a recommendation of the Governor for all state agencies. In addition to a website, she added, DETR has the Virtual Telephone Claims Center which will open in May 2001. This Virtual Telephone Claims Center will enable claimants to file initial unemployment claims from the convenience of their homes, and the next step for the agency is to look toward the Internet for future filing opportunities. Other system projects currently in progress include an automated adjudication process to resolve nonmonetary issues in the unemployment insurance claims process. She said DETR estimates this system replaces the services of approximately nineteen employees.

Ms. Florence said further technology improvements include re-defining Unemployment Insurance Contributions Programs to accommodate expanded business requirements. She said the federal Social Security Administration (SSA) is in the process of working with individual states to improve their case processing systems. The ultimate goal is to initiate a paperless process to expedite SSA and Supplemental Security Income (SSI) determinations.

Ms. Florence continued her review of page two of Exhibit E with the fundamental review. The first topic addressed was the consolidation of the following budgets: the DETR Director’s Office, 101-3270 and DETR Administrative Services, 101‑3272. She explained that they are funded similarly and provide administrative support to all divisions within DETR. Other issues of fundamental review include the transfer of the DETR Vocational Assessment Center budget 101-3264 into DETR Vocational Rehabilitation budget, 101-3265. Ms. Florence said DETR will continue to evaluate the consolidation of Bureaus of the Vocational Rehabilitation and Services to the Blind and Visually Impaired. Additionally, the transfer of the Office of Community Based Services and Developmental Disabilities budgets into the Department of Human Resources Director’s Office was presented at a previous hearing by Charlotte Crawford, Director, Department of Human Resources.

Ms. Leslie explained that the disabled community is “lukewarm” to the transfer of the Office of Community Based Services and Developmental Disabilities budgets into the Department of Human Resources Director’s Office. She said they do not perceive any advantages to this transfer. Ms. Florence responded that there are many advantages, including easier access to resources.

Ms. Florence stated that the Governor, in the fundamental review hearings, recognized that the disabled services in Nevada should be consolidated and coordinated to facilitate access. However, she added, it is unclear how best to accomplish that goal. Ms. Florence explained:

The funding to include a blueprint for disability services into the long term is a very important first step in my mind. We are not only talking about services, but the locus of those services and how should they be organized. Medicaid is a major funder [sic] . . . . So, it makes sense to me that the planning effort and the delivery stream be within the Department of Human Resources. That is just one step, I think, of the entire process.

Ms. Leslie asked that the disabled community be included in the development of this transfer to ensure their ultimate support. Ms. Florence responded that the invitation to participate in the planning has always existed, and she hopes to resolve these issues.

Ms. Florence proceeded to review the department overview (Exhibit E). She called attention to the second tab of Exhibit E which provides a detailed comparison of the United States and the Nevada employment structures. She said there is a great deal of information regarding demand occupations, and the economist requested in the budget could enhance these reports in the future. She noted that Nevada enjoys a 4 percent annual growth rate in jobs. Las Vegas consumes 87 percent of those new jobs created while Reno consumes only 9 percent (Exhibit E).

Continuing, Ms. Florence said information regarding unemployment rates, initial claims, continued claims, eligibility determinations, appeals, receipts and disbursements, benefits paid per $100 of Income, and unemployment insurance trust fund solvency is located after the third tab in Exhibit E. She noted that a trust fund balance of $548 million is projected for 2001. She said approximately $220 million is paid out for unemployment benefits. She added that the employment security council advises DETR on trust fund solvency.

DETR Director’s Office – Budget Page DETR-1 (Volume 2)

Budget Account 101-3270

E-930 Transfer to B/A 3272

DETR Administrative Services – Budget Page DETR-6 (Volume 2)

Budget Account 101-3272

E-930 Transfer from B/A 3270

Mr. Arberry asked whether cost savings would result from merging the two budget accounts DETR Director’s Office, 101-3270, and DETR Administrative Services, 101-3272. Ms. Florence replied it is a consolidation without any cost savings. Mr. Arberry stated he would like an LCB staff member to review the consolidation plan.

DETR Information Development and Processing – Budget Page DETR-11 (Volume 2) Budget Account 101-3274

DETR, Research & Analysis – Budget Page DETR-17 (Volume 2)

Budget Account 101-3273

Ms. Florence pointed out there are no new programs requested during the next biennium for Budget Accounts 101-3274, DETR Information Development and Processing, and 101-3273, DETR Research & Analysis. However, she said, there are some new initiatives in the latter budget account including system enhancements and an additional economist. She explained the economist would provide information, training and support to the local workforce investment boards and their staff.

DETR, Rehabilitation Administration – Budget Page DETR-53 (Volume 2)

Budget Account 101-3268

E-910 Transfer to B/A 3266 Base – Page DETR-56

Ms. Florence stated the transfer of Chief, Office of Community Based Services from Budget Account 101-3268 to Budget Account 101-3266, HR-DIR, Community Based Services, is to align the position with the proper funding source.

DETR, Disability Adjudication – Budget Page DETR-58 (Volume 2)

Budget Account 101-3269

Ms. Florence said that within the Bureau of Disability Adjudication, Budget Account 101-3269, there is a request for a new federally-funded position. This position will hopefully expedite case processing, she noted. She said the federal government usually prefers to fund overtime in lieu of new full time positions, and that has been a recurring problem. Additionally, she added, DETR is requesting reclassification of 26 adjudicator positions involved in the new method of claims adjudication.

DETR, Vocational Rehabilitation – Budget Page DETR-64 (Volume 2)

Budget Account 101-3265

E- 276 Working Environment & Wage – Page DETR-69

E-900 Transfer from B/A 3264 Base – Page DETR-70

E-902 Transfer from B/A 3264 E710 – Page DETR-71

Ms. Florence stated that within the Bureau of Vocational Rehabilitation budget account 101-3265 is the consolidation of the Vocational Assessment Center (VAC) Budget. This budget is funded 78.7 percent by Federal “Section 110” grant funds combined with required state matching funds of 21.3 percent. Ms. Florence stated the VAC transfer is the most significant issue within this budget account. She said decision units E-276, E-900, and E-902 are related to returning the Vocational Assessment Centers to the Bureau of Vocational Rehabilitation, as it was prior to the 1997 Session of the Nevada State Legislature. She pointed out there are many graphs regarding the workload of the vocational rehabilitation staff found in Exhibit E. To credit the vocational rehabilitation staff, Ms. Florence noted over 70 percent of placed employees are placed with employers who offer medical insurance.

DETR, Client Assistance Program – Budget Page DETR-79 (Volume 2)

Budget Account 101-3258

Ms. Florence stated the Client Assistance Program is maintained at status quo.

DETR, Services to the Blind & Visually Impaired – Budget Page DETR-83 (Volume 2)

Budget Account 101-3254

E-325 Improve Pupil Achievement – Page DETR-87

Within the Bureau of Services to the Blind and Visually Impaired, budget account 101-3254, Ms. Florence cited, the most significant recommendation is the addition of 1 position, Coordinator of Transition Services, to work with the Clark County School District. The Coordinator of Transition Services will work with blind and visually impaired children within the school district.

Ms. Florence stated an accomplishment of this program is that last year 79 percent of the people placed in competitive employment had medical insurance coverage available to them.

DETR, Blind Business Enterprise Program – Budget Page DETR-90 (Volume 2)

Budget Account 101-3253

Ms. Florence informed the committee the Blind Business Enterprise Program, Budget Account 101-3253, is a self-sustaining program. She said the most significant issue in this budget is an increase in insurance to the participating vendors.

Senator Raggio questioned whether the vendors are satisfied with the new program that is similar to an annuity, and he asked whether it is functioning as anticipated. Ms. Florence responded that the program is similar to an annuity, as the vendors make contributions, and they are satisfied with the outcome. She explained that the Vendors’ Advisory Board initiates all of the recommendations within this budget account.

Mr. Hettrick complimented Ms. Florence on the performance indicators. He said they have not risen significantly in the past six years, which indicates the use of technology or other means to improve efficiency. Mr. Hettrick recommended other state agencies might benefit from perusal of DETR’s performance indicators. He said it might encourage them “to make meaningful judgments about how work is being done at the state agencies.” Ms. Florence thanked Mr. Hettrick and acknowledged performance indicators are very important to her. She said there would be a meeting Tuesday to further discuss performance indicators and source documentation for those indicators. She noted DETR tracks even more indicators than what is included in the budget books.

DETR, Equal Rights Commission – Budget Page DETR-95 (Volume 2)

Budget Account 101-2580

Ms. Florence said the only significant change in this budget is the reclassification of a supervisor to an investigator. The only other issue within this budget account is the discussion at the Nevada Equal Rights Commission hearings that they would like to report directly to the governor as they did in 1993, she added. She said she believes the commission has improved their performance since becoming a part of DETR. She pointed out there are many graphs depicting this comparison included in Exhibit E.

DETR, Employment Security – Special Fund – Budget Page DETR-44 (Volume 2)

Budget Account 235-4771

E-850 Special Projects – Page DETR-47

Senator Raggio called attention to the reduction in DETR’s reserve level to approximately $2 million caused by the new administrative office facility requested in The Executive Budget, decision unit E-850. He asked whether this reduction concerns Ms. Florence. Senator Raggio pointed out this is a net reduction in the reserve balance of $5.1 million. Senator Raggio warned that there is some evidence of a looming recession that may result in increased unemployment claims. Ms. Florence responded she was not concerned. She said she believes the reserve would grow with the completion of the new building through rent savings and additional funding from the U.S. Department of Labor Reed Act funds. She said the long-term plan should focus on relieving dependence on leased facilities and combining operations within Las Vegas.

The meeting was adjourned at 10:44 a.m.

RESPECTFULLY SUBMITTED:

Jennifer Ruedy

Committee Secretary

APPROVED BY:

Senator William J. Raggio, Chairman

DATE:

Assemblyman Morse Arberry, Chairman

DATE: