MINUTES OF THE
SENATE Committee on Finance
Seventy-First Session
March 14, 2001
The Senate Committee on Financewas called to order by Chairman William J. Raggio at 8:12 a.m., on Wednesday, March 14, 2001, in Room 2134 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator William J. Raggio, Chairman
Senator Lawrence E. Jacobsen
Senator William R. O’Donnell
Senator Joseph M. Neal Jr.
Senator Bob Coffin
Senator Bernice Mathews
COMMITTEE MEMBERS ABSENT:
Senator Raymond D. Rawson, Vice Chairman (Excused)
STAFF MEMBERS PRESENT:
Gary L. Ghiggeri, Fiscal Analyst
Bob Guernsey, Principal Deputy Fiscal Analyst
Michael J. Chapman, Program Analyst
Russell Guindon, Program Analyst
ElizaBeth Root, Committee Secretary
OTHERS PRESENT:
Renee Lacey, Chief Deputy Secretary of State, Office of the Secretary of State
Don Hataway, Deputy Director, Budget Division, Department of Administration
Scott K. Sisco, Administrative Services Office III, Department of Museums, Library and Arts
Freeman K. Johnson, Assistant Director, State Department of Conservation and Natural Resources
Douglas C. Thunder, Deputy Superintendent for Administrative and Fiscal Services, Department of Education
Dennis K. Neilander, Chairman, State Gaming Control Board
Brian E. Sandoval, Chairman, Nevada Gaming Commission, State Gaming Control Board
Donna Varin, Chief, Administration Division, State Gaming Control Board
Mike Pieper, Director, Nevada State Office, Washington, D.C., Division of Economic Development, Commission on Economic Development
Chairman Raggio stated he has two bill draft requests (BDRs) for committee introduction, as indicated in the document entitled, “BDR’s for Senate Finance Introduction – March 14, 2001” (Exhibit C). Chairman Raggio indicated that BDR 23-752 is requested by the Public Employees’ Retirement System (PERS) and makes the changes PERS mentioned in a previous hearing before the committee on various new PERS proposals.
BILL DRAFT REQUEST 23-752: Makes various changes regarding public employees’ retirement system. (Later introduced as Senate Bill 349.)
SENATOR JACOBSEN MOVED TO INTRODUCE BDR 23-752
SENATOR O’DONNELL SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR RAWSON WAS ABSENT FOR THE VOTE.)
*****
The other bill, Senator Raggio added, is BDR S-1496 requested by the Senate Finance Committee to provide a General Fund appropriation of $200,000 to the Northern Area Substance Abuse Council for expansion and upgrades to its facilities.
BILL DRAFT REQUEST S-1496:Makes appropriation to Northern Area Substance Abuse Council for expansion of and upgrades to its facilities. (Later introduced as Senate Bill 348.)
SENATOR JACOBSEN MOVED TO INTRODUCE BDR S-1496
SENATOR O’DONNELL SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR RAWSON WAS ABSENT FOR THE VOTE.)
*****
Senator Jacobsen requested a BDR for Genoa proclaiming its sesquicentennial and said he would like a proclamation to that effect, which he has drafted. Senator Raggio requested Senator Jacobsen provide that BDR to the committee.
SENATOR JACOBSEN MOVED TO INTRODUCE A BILL DRAFT REQUEST
PROCLAIMING GENOA’S SESQUICENTENNIAL.
SENATOR O’DONNELL SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR RAWSON WAS ABSENT FOR THE VOTE.)
*****
SENATE BILL 249: Makes supplemental appropriation to Secretary of State for unanticipated shortfall in money budgeted for salaries. (BDR S-1253)
Chairman Raggio opened the hearing on Senate Bill (S.B.) 249, asking whether there is anyone who wants to be heard on this item. Renee Lacey, Chief Deputy Secretary of State, Office of the Secretary of State, introduced herself to the committee. Ms. Lacey indicated she wanted to speak in favor of S.B. 249 so the office can pay salaries.
Chairman Raggio stated this request is for a supplemental appropriation from the General Fund of $222,508 as indicated in the Legislative Counsel Bureau (LCB) document (Exhibit D). Ms. Lacey referred to her handout (Exhibit E) entitled, “Proposed Amendment to Senate Bill No. 249 Offered By Secretary of State Dean Heller,” which is to amend section 1, line 3 of the S. B. 249 by inserting the words, “and information technology” following the word “salaries.” Ms. Lacey indicated this amendment is necessary because Category 01 is salaries, and Category 26 is the office’s information technology category. Those are the two categories in which the Secretary of State has the shortfall, she added.
Ms. Lacey also called attention to another handout (Exhibit F), which is the Secretary of State’s updated projections. She explained the first sheet reflects projections for Category 01 payments for salaries through March 9, 2001, showing the estimated shortfall is $180,249. Of that amount, she added, part is paid through the Special Services Fund and $118,604 is proposed to be taken from the General Fund. Ms. Lacey stated this is a conservative estimate, taking into account merit increases expected before the end of the current fiscal year (FY).
Ms. Lacey continued with the second page of the handout (Exhibit F), which shows a projected shortfall in Category 26, especially in general ledger items 7212 and 7213 in programmer charges and data communications charges, respectively. She added these are the technicians from the Department of Information Technology (DoIT), paid by the agency for services rendered, for which the shortfall from the General Fund is estimated at $102,561.
These estimates, she added, are based on what DoIT charged the Secretary of State’s office for the first half of this fiscal year. She said it is estimated DoIT will charge her office the same amount for the second half of the year. However, Ms. Lacey cautioned, DoIT’s charges have not been consistent and have been almost double what DoIT originally said they would charge the Secretary of State. So, this is merely a best estimate.
Chairman Raggio asked Ms. Lacey whether this estimate is a conservative guess and whether the numbers are still valid. Ms. Lacey stated that DoIT is several months behind on its billing, so the office has not received all of the billed charges. Ms. Lacey explained the Secretary of State’s office came before the Interim Finance Committee (IFC) in September 2000 and her office’s request is a continuation of the request for that hearing. The charges in the first half of the year, she added, were greater than originally anticipated for these positions. Because DoIT is so far behind on its billing, she stated, her office is guessing on the projected charges yet to be received from DoIT and is assuming DoIT’s charge will be comparable to historical figures.
Chairman Raggio asked when the committee would get a specific “fix” from DoIT on these charges. Ms. Lacey replied she did not know, adding she last talked to a DoIT representative a few days ago and they could not provide her that information at that time.
Chairman Raggio recognized Don Hataway, Deputy Director, Budget Division, Department of Administration, who commented DoIT is in the process of finalizing its rate structure for the next biennium, and part of that is updating the current billings to make sure everything is billed properly. Mr. Hataway said he believes that, out of that process, he would have a better “guesstimate” on DoIT charges. He indicated at this point he is comfortable with the estimates the Secretary of State’s office put together on best available information.
Chairman Raggio asked what the difficulty is in DoIT’s coming up with its rate in the current year. Mr. Hataway replied DoIT’s accounts receivable and accounts payable systems are not up to reasonable standards, and DoIT is attempting to rectify that. Regarding the Secretary of State’s office, he offered his guess as to why this office is under budgeted for this biennium. He said three of the positions were approved by IFC in December 1998. Mr. Hataway said the Budget Office attempted to include all those rate adjustments into the work program, but guessed DoIT did not take into consideration all of the costs they were going to have to charge the Secretary of State, and the matter fell through the cracks. However, based on the first six months billing, Mr. Hataway did not see any reason why the rates would be going down in the last six months. So, Mr. Hataway is comfortable in supporting the Secretary of State’s calculations based on that estimation.
Senator Coffin asked whether any money could be moved around in the Secretary of State’s budget so this would become an IFC issue, rather than a General Fund appropriation. Mr. Hataway responded that, in working with the Secretary of State’s fiscal staff, he determined most of that department’s categories are fairly “tight.” Therefore, he said, the Secretary of State is going to have to rely on the committee’s “good graces.”
Mr. Hataway said he does not, at this stage, believe the Secretary of State has the capability to move money in those categories around. In any event, he added, if there is money available at the end of the year, those funds would revert to the General Fund. He reiterated that if there were savings available in Category 04, those funds would revert to the General Fund.
Senator Coffin inquired whether Mr. Hataway is aware of any other state agencies with the same problem as that experienced by the Secretary of State’s office with DoIT billings. Mr. Hataway responded the Secretary of State’s office is the only state agency he is aware of requiring supplemental income because of DoIT charges. Mr. Hataway said he is aware of other agencies needing supplemental income because of increased utility charges.
Senator Coffin inquired whether Mr. Hataway is aware of any other state agencies that have not asked for a supplemental appropriation because they do not know they need it. Mr. Hataway responded there are some accounts that have reserves or other sources of revenue to pay for any needs that arise. He added the Secretary of State’s office is the only General Fund account he is aware of that has a DoIT issue, but there may be others; we just need to wait and see.
There being no further questions, Chairman Raggio closed the hearing on S.B. 249 and opened the hearing on S.B. 248 referring to an LCB staff document (Exhibit G.), which relates to a supplemental appropriation to the Department of Museums, Library and Arts for additional utility expense in the amount of $15,220 for the current year.
SENATE BILL 248: Makes supplemental appropriation to Department of Museums, Library and Arts for unanticipated additional utility expenses. (BDR S-1255)
Scott K. Sisco, Administrative Services Office III, Department of Museums, Library and Arts (DMLA) requested S.B. 248 be amended. He explained that when his original request was submitted, his department was working on the utility costs at that time. Referring to the third page of his handout (Exhibit H), he indicated the original request was $15,220, and now the department is asking for an additional $20,571 for a total request of $35,791. Mr. Sisco said this increase would bring the museums’ utilities up to date, including an estimated increase of 20 percent in electricity and 35 percent in natural gas expenditures. This will get the museums through until the end of this fiscal year, he added.
Mr. Sisco then discussed the fourth page of his handout (Exhibit H), which reflects the five budgets involved in this request. He pointed out the first budget account is Cultural Affairs Administration, which is the only budget with a request in a category other than utilities. He added that personnel services in Category 01 has an anticipated shortfall of $15,916, even considering the $143,000 available in the “salary need” amount provided for the 2 percent pay increase distributed by the Board of Examiners. Unfortunately, he added, this “salary need” was primarily created by frozen merit salaries and the department is not eligible to utilize any of those funds. So, $130,000 of that will revert to the General Fund.
Mr. Sisco indicated the director’s office also needs Category 04 funding in the amount of $2,640 for a state purchasing assessment. Mr. Sisco explained that in the first year of the budget the department was able to cut back on planned purchases. Unfortunately, he added, in the second year of the budget there is no “wiggle room” in these budgets for the department to delay the assessment. The last item in the director’s office budget is $670 for utilities.
Chairman Raggio asked about the remaining supplemental requests for the Nevada Historical Society budget, the State Museum budget, the State Railroad Museum budget, and the Lost City Museum budget. Mr. Sisco indicated requests for these budgets are due to utility needs in the total amount of $35,791. The Chairman asked Mr. Hataway whether he had reviewed and agreed with these requests. Mr. Hataway replied he had no objection to any of the requests.
Senator Neal asked Mr. Sisco to further explain the state purchasing assessment of $2,640 in the director’s office budget. Mr. Sisco replied that the purchasing assessment was implemented the last legislative session. The department, he added, was assessed $2,900 last year, and cut back on authorized equipment purchases to pay the purchasing assessment. However, he explained, this year, the department is unable to cut back on equipment purchases to pay the purchasing assessment.
Senator Neal commented the DMLA, “Comes in asking for money, but has money they have not used.” Mr. Hataway recalled that in the latter stages of the last legislative session, a new purchasing assessment procedure to fund purchasing became effective. He stated the Budget Division testified there would be some winners and some losers in the individual agencies because individual budgets were not adjusted accordingly. There were a few agencies, such as the DMLA, that had an account that could not make it, he added. Mr. Hataway indicated it was fortunate that every other agency was able to address the assessments in some fashion, and so the number of these kinds of requests was nominal.
In response to Senator Neal’s question, Mr. Hataway explained the $2,640 is what this agency owes the Purchasing Division for the support of purchasing activity and services provided to the DMLA. He said the amount budgeted for the next two years is okay, but the department did not have any funds budgeted for the assessment this time.
Chairman Raggio closed the hearing on S.B. 248 and directed attention to S.B. 250. He referred to the relevant LCB handout (Exhibit I), which includes information on the supplemental request from the Department of Conservation & Natural Resources (CNR) in the amount of $21,689. He said it is for expenses related to the terminal pay for annual and sick leave to the former director, who retired.
SENATE BILL 250: Makes supplemental appropriation to State Department of Conservation and Natural Resources for certain shortfalls in budget.
(BDR S-1260)
Freeman K. Johnson, Assistant Director, State Department of Conservation and Natural Resources, explained he was here to speak to S.B. 250 and to urge the committee’s favorable consideration. Mr. Johnson said there are two major components to his request. The first is a request for $21,689 to cover the salary expenses of the former director, which created this shortfall and was not budgeted for. The second component is due to an unanticipated shortfall in the stream-gauging activity as a result of the U.S. Geologic Survey (USGS) increasing its budget for that. Mr. Johnson indicated his agency has a matching obligation regarding federal funds according to a formula, which resulted in the agency’s being short approximately $6,800. He reiterated the supplemental amount of $11,619 is one that slipped through the cracks during the budget preparation process.
In response to Chairman Raggio’s question regarding what the $11,619 amount is for, Mr. Johnson replied that the total amount needed for the USGS stream gauging is $6,800 plus the $11,619.
Mr. Hataway commented that the Budget Office is responsible for this oversight by “not picking up another page.” However, he continued, the bill currently states the $6,800 is for maintenance of the South Fork Dam. Mr. Hataway indicated he had failed to pick up the $11,619 for stream gauging.
There being no further questions, Chairman Raggio closed the hearing on S.B. 250 and opened the hearing on S.B. 251 referring to the relevant LCB handout (Exhibit J). He said this is for a supplemental appropriation to the Department of Education for a shortfall in the Terra Nova Tests contracts.
SENATE BILL 251: Makes supplemental appropriation to Department of Education for shortfall in money budgeted for contractual obligations for Terra Nova Tests. (BDR S-1262)
Douglas C. Thunder, Deputy Superintendent for Administrative and Fiscal Services, Department of Education stated the department had some good news for the committee. He testified the department does not need all of the requested $71,470 and requested to amend the bill from that amount to $38,890. Mr. Thunder explained the initial request was based on a projection received from CTB/McGraw-Hill, the vendor for the Terra Nova Tests. However, he added, the actual billing came in at $38,890.
There being no further testimony or questions, Chairman Raggio closed the hearing on S.B. 251. Chairman Raggio indicated the committee would take no action on the supplemental requests until the appropriate time, but he did direct staff to obtain the appropriate amendments for the senate bills.
Regarding S.B. 248, Mr. Hataway commented Mr. Sisco had failed to mention there are a couple of his agency’s accounts that are starting to run into problems in paying their bills. He requested the committee expedite the approval process on that particular bill. Mr. Hataway indicated he did not believe there is a problem requiring expediting the remaining bills heard. Chairman Raggio stated the bills could be expedited at the next meeting of the Senate Committee on Finance, given the appropriate amendments are provided.
Chairman Raggio indicated the committee has received a list of requested budget changes from the Executive Branch, including both the General Fund and other funding. The Chairman requested Mr. Hataway attend the next meeting of the full committee in order to outline those changes. Mr. Hataway responded that he or John P. Comeaux, Director, Department of Administration will attend that meeting.
Gaming Control Board – Budget Page GAMING-1 (Volume 2)
Budget Account 101-4061
Dennis K. Neilander, Chairman, State Gaming Control Board introduced Brian E. Sandoval, Chairman, Nevada Gaming Commission and Donna Varin, Chief, Administration Division, State Gaming Control Board. Mr. Neilander introduced his presentation (Exhibit K. Original is on file in the Research Library) entitled, “Legislative Budget Presentation.”
M-301 Adds Step 9 and 4% COLA – Page GAMING-3
M-305 Unclassified 9%, 4% Adj. – Page GAMING-4
Mr. Neilander pointed out that tab 3, page 1, of his handout (Exhibit K) outlines the State Gaming Control Board (GCB) and provides a summary of the requested changes to this budget account. Mr. Neilander began with M-301, which is what the Governor is recommending for all classified employees. Continuing, he indicated decision unit M-305 was what the Governor is recommending for all unclassified employees.
E-275 Working Environment & Wage – Page GAMING-4
Mr. Neilander stated this decision unit of $16,320 is for a small amount of additional space in the Grant Sawyer State Office Building. He pointed out that the GCB has the second floor of that building, except for a small corner, which has been occupied by the Secretary of State’s office. Through the Buildings and Grounds Division, he stated, his agency is seeking to obtain that space for enforcement agents, who are currently doubled up in the other end of the building. Moving into that space will allow the Enforcement Division of the GCB a much-needed additional 1,700 square feet, he explained. In response to Chairman Raggio, Mr. Neilander said the Secretary of State’s office desires to consolidate their staff out of that office space into other space they have in Las Vegas.
E-720 New Equipment – Page GAMING-4
Mr. Neilander indicated this request is for some new equipment for the GCB network system in the amount of $29,000. He pointed out the GCB has purchased a number of new computers in the last biennium, which are now being linked through a network system. This request is for new equipment to complete that project, he added.
E-806 Unclassified Pay Changes – Page GAMING-5
Mr. Neilander stated this is the GCB’s biggest request, in the amount of $2,122,600, which is funded by an increase in GCB Investigation fees. This amount, he explained, is being used to offset salary increases requested by the GCB.
Chairman Raggio asked Mr. Neilander whether he had any “gnashing of teeth” by the gaming industry over these fee increases. Mr. Neilander responded, “The industry is fretful about anything we do. So, there is always a gnashing of teeth whenever we do anything; however, in this respect, there has not been a lot of backlash because the majority of those fees are going to be paid by persons who are attempting to get a license and are not yet in the system.”
Chairman Raggio asked Mr. Neilander about the Investigation fees and how they would be imposed. Mr. Neilander indicated that applicants who were midway in their licensing investigation were grandfathered into the old fee structure, and any applicant applying after January 1, 2001, is subject to the new fee structure.
Chairman Raggio asked whether the GCB anticipates the new fee increase for investigations would be sufficient to cover the full cost of the requested salary adjustments. Mr. Neilander answered in the affirmative. He added that, according to his discussions with the Governor, any request made by the GCB could not impact the General Fund. Therefore, Mr. Neilander indicated, he has structured all requests in that fashion and believes those fee increases will cover all budget needs.
Mr. Neilander said the big corporations’ coming into the system for licensure is a “valuable service to them.” These corporations want the most professional investigators to work on their cases. Chairman Raggio inquired as to how the augmented fee increases for investigations compare with other states that charge for investigations. Mr. Neilander indicated the GCB has raised the base rate for investigative fees from $45 to $70. That figure, he added, reflects Nevada is behind the states of New Jersey and Oregon in respect to the hourly fee, but a little higher than Mississippi.
Chairman Raggio indicated he asked that question, realizing he does not believe those fee increases would be a big factor for someone who is a serious applicant. Mr. Neilander agreed with the Chairman, indicating there are many fees associated with trying to obtain a license, and investigative fees are less than fees for structuring a new equity operation, bank financing fees, and other similar fees.
E-900 Transfer to Gaming Commission – Page GAMING-5
The next item Mr. Neilander discussed was decision unit E-900, which creates a new budget account 101-4067. Mr. Neilander explained it transfers the existing money allocated for the business of the Nevada Gaming Commission (NGC) and creates a new account. He added this also adds two new staff to assist the NGC in policy matters. Mr. Neilander stated he and the Chairman of the NGC, Brian Sandoval, have had several conversations about this matter and have determined there is a need for the NGC to have some staff assistance in reviewing policy matters. In particular, he indicated, were matters involving technology. Mr. Neilander said his feeling is that, while Nevada remains one of the top gaming regulating agencies in the world, we need to be proactive when attacking the technology issues. Therefore, he said, a portion of the funding is for technology and the balance is for a major undertaking to revise the Nevada gaming regulations, which he indicated were “antiquated and have not been amended since the 1970s.”
Mr. Neilander added that many regulations do not recognize some of the financial transactions that occur, nor do they recognize the corporate structures available today. The Senior Research Analyst would be handling this effort.
Chairman Raggio indicated he understood the Senior Research Analyst and the Program Assistant positions were needed to conduct a comprehensive study on Internet gaming. Mr. Neilander responded his initial discussions with the Budget Division had to do with the problem of Internet gaming. After discussions with Chairman Sandoval, Mr. Neilander explained the NGC held a workshop on Internet gaming, and accomplished it through volunteer assistance since there was no money to conduct that seminar. He continued by explaining they thought Internet research would be a portion of that, but these positions are needed for other kinds of research.
Mr. Neilander explained there is a bill, not as yet heard, that would allow the GCB and NGC to authorize and regulate Internet gaming if certain conditions are met. Mr. Neilander clarified the GCB has been trying to keep up with technology, and with respect to Internet wagering, this is a huge task. With the existing staff at the GCB, the focus is primarily on gaming devices, because that is the heart of what the agency regulates. However, he added, the GCB and NGC need to be proactive in staying on top of these technology issues, such as Internet gaming, cashless wagering systems, smart terminals, and other issues facing the global gaming markets.
Chairman Raggio asked how the GCB plans to conduct the review of the Nevada gaming regulations. Mr. Neilander explained that, in the past, the agency has attacked regulations on a piecemeal basis, and as the need arises, the GCB conducts hearings. However, he said, he believes the best method is a systematic approach, with some changes requiring changes to the Nevada Revised Statutes (NRS). Therefore, he said, he will have to come back to the next legislative session based upon his agency’s research findings. He reiterated he anticipated a systematic review beginning with looking at the entire regulatory body of law.
Senator Neal asked Mr. Neilander what would cause him to want to remove the NGC from the budget control of the GCB. Mr. Neilander explained the statutes require the GCB to administer the budget for both his agency and the NGC. He said in his opinion the GCB is merely setting up a separate account for the NGC, but the GCB will continue to administer the budget for both agencies, writing checks from the new account for the NGC.
Chairman Raggio recalled that in the past it has been a touchy issue when members of the NGC wanted to travel, and they were concerned about the manner in which those funds were made available. Chairman Raggio asked whether that problem has been resolved. Mr. Neilander responded that he believed it had. When asked by the Chairman, Mr. Sandoval responded it is not a problem, nor is it a current issue.
E-806 Unclassified Pay Changes – Page GAMING-5
Chairman Raggio asked the speakers to comment on the credential payments and how that program is working. Mr. Neilander answered the program is going well, and that it is a useful tool for the GCB. This program, which began in 1995, he added, was beneficial toward discontinuing high turnover, particularly in the GCB Audit Division for certified public accounts. Mr. Neilander stated it has also been helpful for recruiting purposes, but, as salaries fell behind, the credential payment plan could not help the agency retain professional employees.
Chairman Raggio asked Mr. Neilander whether the materials presented to the committee indicate the number of GCB employees who receive remuneration under the credential payment plan and how the total amount was utilized. Ms. Varin responded as follows:
The credential payment program in our base year, the first payment of the $177,500, which our previous plan, we divided the dollars amongst the number of eligible employees. In the first payment there was 70 employees and for the second payment, which is in June, there were 65 employees. That was due to turnover where we had lost some of the people participating in this plan.
Chairman Raggio asked how the agency identifies eligibility for this program. Mr. Neilander responded they were either certified public accounts, lawyers or engineers.
In response to Chairman Raggio’s question as to how the $2,122,600 would be distributed, Mr. Neilander indicated it is a 9 percent increase for rank and file employees, with a few internal justifications. Chairman Raggio pointed out this is in addition to the pay raise recommended in The Executive Budget for cost of living adjustment (COLA) for state employees. Mr. Neilander indicated the Chairman’s statement is correct.
Chairman Raggio asked whether that would address the GCB’s current turnover situation. Mr. Neilander responded that in the last fiscal year, the GCB had a 12 percent turnover rate. He said it recently dropped a slight amount, but since the session started, the turnover rate has increased. So, he added, the GCB has found through its employment studies, as well as the study by the Department of Personnel, that GCB is about 8 percent to 10 percent behind the classified pay service. However, Mr. Neilander indicated, most of the GCB’s employees are unclassified employees. He continued by stating the GCB is a little bit behind other state agencies, the local governments, and the private sector, but this pay increase would allow the GCB to be competitive in salaries. Mr. Neilander indicated this pay increase would help retain employees, as well as recruit new employees, adding the GCB’s eligibility lists are not now getting the “cream of the crop.”
In response to Chairman Raggio’s question as to how many employees would benefit from this pay increase, Mr. Neilander indicated “a majority of the board.” However, he added, some of the engineers in the Electronic Services Lab have previously been given a pay raise with IFC approval. Those people may not receive the benefit of any further pay raise or would receive a reduced increase, he added.
Chairman Raggio inquired about why the downtrend in gaming revenue, especially in the last three to four month period. Mr. Neilander indicated it is an odd phenomenon because the last two months the GCB has experienced negative collection numbers, which is a rare occurrence. In furthering his explanation, Mr. Neilander stated the following:
I believe it is a function of two things. One is credit play. There is a tremendous amount of credit play that occurred in the last two months that we reported. Total marker issuances were up over 8 percent when compared to the previous months. Win is up year-to-date about 3.7 percent, but total collections are down 2.3 percent. So, what we think will happen is there will be a truing up that as that credit begins to get collected, hopefully we will see that come in the next month or two. I think that part of it is that the way you had New Year’s fall, over a weekend, and a portion of that fell into December and January, and the Chinese New Year fell into a different month. You had a leap year month this time and so, I think, you had several factors that made the issuance of credit higher. So, hopefully the collections will catch up and true up. Mr. Chairman, right now our collection rates tend to fluctuate between 94 percent and 96 percent, and that is the amount of total markers that are ultimately collected. So, assuming that those collection rates remain the same, we should see some improvement in the next month of two.
Senator Coffin indicated he sensed there to be a drop in the state’s gaming revenues from the regulations that have been adopted, such as the artificial limits on telephone betting. He indicated the state could be making money off the Internet from sports betting, if properly regulated. He indicated he did not believe that could be conducted with table games, because of collusion and the lack of monitoring such games. Senator Coffin commented he believes the state is “missing the boat, because we have a real brand to sell here.”
Regarding the issue of Internet wagering, Mr. Neilander responded the GCB continues to evaluate that matter, but the problem with the Internet is the agency has yet to see any technology the GCB has not been able to corrupt. So, he added, there is no foolproof way to keep bets from coming from jurisdictions where that activity is illegal. He said the second matter is minors’ gambling and their access to the Internet. He stated the agency’s technology continues to evolve, but from a regulatory perspective, the agency has not seen any technology it cannot corrupt.
Senator Coffin inquired about a customer with an established credit card and the possibility for a juvenile to use that card and wager, given the individual looks like he or she is older than eighteen. Mr. Neilander indicated the GCB monitors juvenile betting; however, monitoring betting by minors in those kinds of situations would be much more difficult. Mr. Neilander agreed with Senator Coffin’s comments regarding other sources of gaming revenue that are not currently being regulated. However, he added, those are issues the agency needs to work through, especially regarding technology matters. With respect to sports wagering, Mr. Neilander indicated the agency has stepped up its efforts to stop messenger betting, among other matters. Again, he added, the agency has found telephone wagering situations in which there are telephone systems that could be corrupted. So, that is why the agency “set about with that cap,” he added. Mr. Neilander pointed out the GCB is evaluating this issue, because the agency has been looking at new technology regarding telephone wagering, and there are some systems he believes are appropriate and may prevent any kind of corruption.
Senator Coffin inquired about whether a 1-800 number for out-of-state, incoming only telephone calls, detects call forwarding. Mr. Neilander indicated that technology does not adequately exist to detect such calls, and the agency needs to find some form of technology to stop those kinds of telephone calls. However, Mr. Neilander stated, they have been viewing promising technology that may stop such calls. Senator Coffin mentioned the possibility of monitoring these calls by retrieving some kind of log reflecting the calling record. Mr. Neilander agreed with Senator Coffin and added, with a sufficient call-back mechanism in place, the agency could retrieve such information.
Senator Neal commented on Mr. Neilander’s response as to why the gaming revenue is down for the months indicated. Senator Neal asked whether the GCB had reviewed statistics for one year ago for the same period, and asked whether that would show the same results. Mr. Neilander said it should show similar figures because patterns are generally established. March and April are typically the months gaming revenue and collections increase, he added.
Senator Neal asked when the rates and collectible markers are looked at in comparison to the coin-operated machines, whose gaming revenue is up, and he asked whether that is because there are better controls over coin-operated machines. Mr. Neilander stated he did not think so. He added the good thing about electronic gaming devices is there are several things they can look at, such as meters and other things, that keep track of coins in and coins out. With table games, he explained, the internal controls are just as good a monitor. He indicated internal controls are more cumbersome because they are not evaluated by a computer, but must be monitored “through the chips from the cage to the table through the tray, through the drop box into the count room.” In other words, Mr. Neilander stated, the internal controls achieve the same means of regulations as do computer controls.
GAMING COMMISSION
Gaming Commission – Budget Page GAMING 7 (Volume 2)
Budget Account 101-4067
Chairman Raggio stated the speakers had previously testified to the purpose of this new budget account, and asked whether there are further comments. Mr. Sandoval commented that, in his experience of chairing the NGC over the last 18 months, he is convinced the NGC is faced with new issues regarding technology in gaming. He said the NGC needs assistance to properly evaluate those issues, as well as conduct a comprehensive review of the Nevada gaming regulations. Mr. Sandoval reiterated the NGC has heard from others in the industry how antiquated those regulations have become, and in order for Nevada to maintain its status as the leading gaming regulators in the world, it is appropriate for his agency to review and update regulations.
Chairman Raggio indicated that it would be helpful if NGC and GCB staff would develop performance indicators for the NGC, now that there is a new budget account in place.
E-175 Increase Non-Gaming Business – Page GAMING-7
Chairman Raggio noted that LCB staff had indicated there had been discussion regarding possible reductions that might be presented today at the hearing. Mr. Neilander responded in the negative, adding that a re-evaluation had been completed and, after discussions with Mr. Sandoval and the Governor’s office, he decided the agency needs to go forward with the budget requests as presented. He clarified that the Senior Research Analyst may be required to analyze, with great scrutiny, the policy issues affecting the board.
In response to Chairman Raggio’s inquiry about the work assigned to these two new positions, Mr. Neilander indicated one position is secretarial and will assist the members of the NGC in their travel plans. The other, he added, is a professional position that would analyze technology issues discussed earlier, overhaul the Nevada gaming regulations, and interact with other regulatory bodies throughout the world. He stated the following:
We have had some discussions about Australia, New Zealand, Great Britain and several places where they have always looked to us to be the leader. In fact, there are some areas where they are getting ahead of us, and we need to look to them in some cases. We would see this person doing that.
Chairman Raggio said he understands this new budget is in its developmental stage, but he requested clarification as to whether the GCB would be providing administrative and operating cost information to the Legislature. Mr. Neilander indicated his agency would continue to provide all of that information. When asked by Chairman Raggio whether that is satisfactory to Mr. Sandoval, he replied it is.
Chairman Raggio stated he believed decision unit E-175 is the enhancement that provides for out-of-state travel. Mr. Neilander responded he knew of several multi‑national conferences that the GCB and NGC members have never attended that need to be attended. He added that regulators from around the world often ask him why Nevada regulators are not involved in these conferences. Mr. Neilander indicated he thinks it is appropriate at this time to attend these kinds of functions and become involved. Typically, he indicated, many jurisdictions do not get involved in the bigger issues until Nevada becomes involved, and then they follow Nevada’s lead. However, there are other jurisdictions on the cutting edge of gaming regulation, from which Nevada could prosper.
Chairman Raggio asked how many meetings the NGC holds during the year. Mr. Sandoval indicated there are 12 regular business meetings, not including interim, special, and workshop meetings, which total about 20 in all. Chairman Raggio inquired as to the time frame in which a gaming applicant could expect to have an application processed through both the GCB and NGC. Mr. Neilander stated that non-restricted applications of a complex nature take approximately 6 months to 1 year; a restricted application generally takes about 3 months; and emergency applications intervene occasionally, depending on the circumstances.
GAMING CONTROL BOARD
Gaming Control Board Investigation Fund – Budget Page GAMING-9 (Volume 2)
Budget Account 244-4063
Chairman Raggio indicated this is the budget account for the Investigation Fund, which is a pass-through account. There being no question or comments from the committee or from the speakers, Chairman Raggio closed the hearing on this matter.
Washington Office – Budget Page Elected-7 (Volume 1)
Budget Account 101-1011
Don Hataway, Deputy Director, Budget Division, Department of Administration said
he would present a brief overview of the budget. Mr. Hataway stated there are no enhancements. He pointed out the contract with the Washington office expires June 30 and it is the intent of the Governor and the contractor to extend the existing contract under the same terms and conditions. Therefore, Mr. Hataway added, the budget represents what is actually the financial obligation in FY 2001, extended to FY 2002 and FY 2003.
Mike Pieper, Director, Nevada State Office, Washington, D.C., Division of Economic Development, Commission on Economic Development, read from his prepared speech (Exhibit L). Mr. Pieper indicated the Nevada Washington Office opened in February 1986 and is located in the Hall of States, along with the office of nearly 30 other state governments and dozens of state government associations. The office, he added, currently has two full-time employees including a legislative assistant.
Mr. Pieper testified his office has achieved a great deal of success in the past two years, which he described as functioning as a liaison or facilitating the collection of information for members of Congress. Mr. Pieper indicated the accomplishments of the office are detailed in his handout (Exhibit M) entitled, “1999-2001 Washington Office Goals and Accomplishments.”
He said the following are the accomplishment of his office: 1) Securing $2.5 million for Nevada’s nuclear waste oversight program; 2) Lobbying for transportation funding and money available for highway projects in Nevada; 3) Continuing a working relationship to develop the state entrepreneurship program under the auspices of the National Governors’ Association and the Kauffman Center for Entrepreneurial Leadership, which dovetail the work by the Nevada Commission on Economic Development on the Batelle study. (The Batelle Study reviews the future of Nevada and what the state must do to better support economic growth and diversity); 4) In the area of tourism, monitoring the Visa Waiver Pilot Program to work for increased funding for U.S. Department of Commerce tourism-related program; 5) Assisting with gaming issues; 6) Monitoring legislation in the area of Medicaid and Temporary Assistance for Needy Families funding; 7) Monitoring education issues for changes in Nevada’s testing and accountability programs as a result of changes in proposed federal programs; and 8) Scrutinizing hearings regarding the California energy crisis and bills introduced in Congress affecting energy policy.
Mr. Pieper stated the Governor has requested the same amount of funding for the next two years as was allocated for FY 2001. He added the total budget for each year of the coming biennium is proposed to be $259,300, with minor adjustments; however, the total expenditures will remain the same.
Chairman Raggio indicated he had a letter dated March 12, 2001, (Exhibit N) from U.S. Senator John Ensign, U.S. Senator Harry Reid, U.S. Representative Jim Gibbons, and U.S. Representative Shelley Berkley expressing their support for continued funding. Chairman Raggio asked Mr. Pieper whether he is going to be able to resolve the issue of sports betting in Nevada’s favor. Mr. Pieper responded he has been working with the delegation (NGC, GCB and the Governor’s office) and feels the role of the Washington office on that issue is to make sure the state is providing the delegation with the information necessary for them to continue that fight.
Senator Jacobsen stated he had experienced in the past that the Washington office and various Nevada delegations had not talked with each other. The Senator wanted to know whether that occurs today. Mr. Pieper responded it does fluctuate
from year to year, and in the past the amount of cooperation between and among the delegations had been nominal. However, he said, he feels the Nevada State office currently has one of the best working relationships with the delegations in many years. In response to Senator Jacobsen’s question, Mr. Pieper indicated the Nevada public land interests use the office frequently and come at least once or twice a year to Washington, D.C. The office, he added, helps that organization set up meetings with the U.S. Department of Interior, Department of Energy, and other federal agencies.
Senator Coffin thanked Mr. Pieper for corresponding to him on a consistent basis by electronic mail, which keeps him informed. Senator Coffin asked Mr. Pieper whether he is working with the National Conference of State Legislators (NCSL) on the onerous requirement that legislators report to the federal government, via tax identification numbers assigned to all legislators, all contributions, which are currently regulated at the state level. Mr. Pieper stated he is not familiar with that issue. Senator Coffin indicated Mr. Pieper could assist the legislators, and all the elected officials of Nevada, if he would coordinate with NCSL on that. He noted it is one of their goals to eradicate this legislation. Mr. Pieper indicated he would look into that matter.
Chairman Raggio indicated that Tom Stephens, Director, Nevada Department of Transportation and Robert E. Shriver, Executive Director, Nevada Division of Economic Development, commented that Mr. Pieper is doing a “great job for Nevada.”
Chairman Raggio closed the budget on the Washington office and adjourned the hearing at 9:29 a.m.
RESPECTFULLY SUBMITTED:
ElizaBeth Root
Committee Secretary
APPROVED BY:
Senator William J. Raggio, Chairman
DATE: