MINUTES OF THE

SENATE Committee on Government Affairs

 

Seventy-First Session

April 18, 2001

 

 

The Senate Committee on Government Affairswas called to order by Chairman Ann O'Connell, at 2:30 p.m., on Wednesday, April 18, 2001, in Room 2149 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 Ann O'Connell, Chairman

Senator William R. O’Donnell

Senator Jon C. Porter

Senator Dina Titus

Senator Terry Care

 

COMMITTEE MEMBERS ABSENT:

 

Senator William J. Raggio, Vice Chairman (Excused)

Senator Joseph M. Neal, Jr. (Excused)

 

GUEST LEGISLATORS PRESENT:

 

Assemblywoman Kathy A. Von Tobel, Clark County Assembly District No. 20

Assemblyman Douglas (Doug) A. Bache, Clark County Assembly District No. 11

 

STAFF MEMBERS PRESENT:

 

Kimberly Marsh Guinasso, Committee Counsel

Juliann K. Jenson, Committee Policy Analyst

Julie Burdette, Committee Secretary

 

OTHERS PRESENT:

 

Robert S. Hadfield, Lobbyist, Nevada Association of Counties

Thomas J. Grady, Lobbyist, Nevada League of Cities and Municipalities

Kurt R. Segler, Lobbyist, City of Henderson

Richard W. Wilkie, Lobbyist, City of Henderson

Warren B. Hardy II, Lobbyist, Moapa Valley Water District

George Pyne, Lobbyist, Executive Officer, Public Employees’ Retirement System

Robert T. Moore, Senior Vice President, Marsh Advantage America

 

Chairman O'Connell opened the hearing on Assembly Bill (A.B.) 99.

 

ASSEMBLY BILL 99:  Makes various changes regarding elections held by local governments. (BDR 31-418)

 

Robert S. Hadfield, Lobbyist, Nevada Association of Counties (NACO), explained A.B. 99 had been proposed by NACO in cooperation with state bond counsel John Swendseid, Consultant, Swendseid and Stern (Exhibit C), to correct an oversight in a Nevada statute.  They believed the statute inadvertently restricted when special elections could be held.  Mr. Hadfield stated, under the current law, in counties without an incorporated city, the school district and county government would have to wait for a county general election in order to present tax override questions.

 

Mr. Hadfield explained A.B. 99 proposed to change the language requiring a city election, to the “first Tuesday after the first Monday in June of an odd-numbered year.”  He pointed out the bill would clarify existing language by requiring questions to be placed on the ballot by a governing body at a time sufficient for the registrar to, in an orderly way, organize a “for” and “against” committee, receive the “for” and “against” arguments, and print ballots.

 

Mr. Hadfield summarized, saying the amendment would correct deficiencies in the current statute and provide uniformity across the state so all counties had the same right of election as counties containing at least one incorporated city.  The bill, he noted, would ensure any measure before the citizens in these elections would have ample time for arguments to be prepared so the voters would understand the issues.

 

Senator Care noted the language in section 1, subsection 2, paragraph (a), said “unanimous vote,” and he asked if it means a unanimous vote of at least the majority of the members present.  Mr. Hadfield, in response, said he understands it does, noting a quorum of members would have to be present in order to conduct business. 

 

Chairman O’Connell asked Senator Care if he wanted it so stipulated in the language of the bill.  Senator Care stated, yes, noting it would make it clear a unanimous vote would be needed in a meeting where a quorum was present.  Mr. Hadfield stated there had been no opposition to the bill in the Assembly. 

Chairman O'Connell closed the hearing on A.B. 99 and opened the hearing on Assembly Bill (A.B.) 100.

 

ASSEMBLY BILL 100:  Authorizes board of county commissioners to provide by ordinance for payment of travel expenses of members of advisory board. (BDR 20-412)

 

Mr. Hadfield acknowledged committee members were aware citizen advisory boards played a large role in the conduct of government or county business (Exhibit D), and local governments relied more and more on volunteer groups of citizens to assist in the management of affairs and planning for government.  He explained A.B. 100 proposed to allow county commissioners, by ordinance, to provide for compensation for members of advisory boards.  Mr. Hadfield stressed they did not want to restrict the volunteer nature of advisory boards, but in most counties throughout the state, advisory board members were often required to travel great distances for special meetings or training sessions. 

 

Mr. Hadfield explained A.B. 100 would specifically amend the language in the Nevada Revised Statutes (NRS) 244.1945 to add the provision to compensate members of an advisory board.  This bill, he noted, would allow citizen advisory board members to be compensated for travel in the same manner as town board members.  He stated there had been no opposition to the bill in the Assembly. 

 

Chairman O'Connell closed the hearing on A.B. 100 and opened the hearing on Assembly Bill (A.B.) 101.

 

ASSEMBLY BILL 101:  Requires inclusion of certain portions of county roads, state highways and railroads in territory annexed by cities in larger counties. (BDR 21-362)

 

Thomas J. Grady, Lobbyist, Nevada League of Cities and Municipalities, explained A.B. 101 corrected a problem which arose when cities annexed properties containing roads.  Mr. Grady testified there had been discussion on the Assembly side with Clark County, and noted the league accepted Clark County’s amendment, which was in the bill.  There had been no other opposition to the bill, he said.

 

Kurt R. Segler, Lobbyist, City of Henderson, explained, currently, in a county with a population over 400,000, when a city annexed property to the center line of a street, right-of-way, or railroad alignment, each half could be in different jurisdictions.  In one such case, one half was in the City of Henderson and the other half was in Clark County.  The issue of responsibility arose and the result was citizens of Henderson would call Clark County to complain about maintenance and vice versa, he said.  With A.B. 101, if property or a right-of-way was annexed, the City of Henderson would be responsible for the entire right-of-way, and both sides of the road, he explained.

 

Chairman O'Connell asked why an entity would annex right down the middle of a street.  Mr. Segler responded it just happened to be the way the NRS was currently written.  For instance, he said, if the property was in two pieces, abutting each other, the property line was to the centerline of the street, and the right-of-way was taken from both sides.  He confirmed to the chairman, the annexation involving Pecos Road was an example of this kind of situation.  The City of Henderson would take the full responsibility for the street, he said, which would allow for orderly planning and maintenance.

 

Senator Care questioned whether there was statutory framework to prohibit the City of Henderson from annexing both sides of the road.  Mr. Segler replied this was specifically covered for counties below 400,000 (NRS 269.650); however, he said, when property was annexed, typically it was on a quarter of a section where the section line would probably be a road, and the other side would be an entirely different piece of property.  For these purposes, he said, Henderson would be allowed to take just the right-of-way part of the other piece of property, the other half of the section line, or quarter-section line or half-section line.  

 

Senator Care read from section 1, subsection 1, “The governing body of a city may annex the remaining portion of the road,” and asked if this was a second act of annexation or if it was all the same.  Mr. Segler explained it was all part of the same annexation, and the term, “may,” indicated they would not be required, but rather it would be Henderson’s decision to annex the entire right-of-way.

 

Senator Porter asked, in the case of an incomplete roadway, how they would work with the adjacent property owners as far as receiving funds back to the City of Henderson to help pay for the improvements to the road.

 

Mr. Segler replied, they would want to annex that portion of the right-of-way, either through Clark County or the City of Henderson, and if the determination had been made for a 100-foot or 120-foot right-of-way, then Henderson would look to annex 50 feet or 60 feet of the other side of the street.  Senator Porter said he understood the property acquisition, but wondered who would pay if it were not a Regional Transit Commission (RTC) project.  Mr. Segler explained most of the large streets were often RTC projects, and if not, then they were developer-funded projects.  Senator Porter asked how they would get the developers to pay their share of half of the street if it was a county project in the City of Henderson.

 

Mr. Segler stated there were several ways to pay for the project.  If it was in Henderson, it would be a local improvement district (LID), he said, noting Clark County used the terminology, “special improvement district” (SID).  A street would not be approved unless the project was within the improvement district, he said, and if developers needed development rights, they would go to the City of Henderson for planning purposes and would have to build those portions of the road.  Mr. Segler stated there were very few times the city had actually built a road completely without developer or RTC funding. 

 

Senator Porter said he was thinking of an example where property was in Clark County, but the road was in the City of Henderson, and wondered how they could be certain to obtain help in paying for the street.  Mr. Segler stressed the city has a great working relationship with Clark County on these types of roads.  They would work with Clark County up front to determine whether this would be the time to annex the other side, and whether it would be mutually beneficial. 

 

Senator Porter clarified, saying if it was a half street, and Henderson annexed the full street, the city would still have the ability to ensure cooperation to pave the other half of the street, which had been in the county or in another city, but was now in Henderson.  Mr. Segler replied they had the tools, and could work through the developer and sometimes get refunding agreements. 

 

Senator O’Donnell asserted it was the practice of the counties or the cities to pay for roads under new construction.  He explained a bond would be used to build the road, and if built to the specifications of a developer or property owner, the bond money would be returned.  He noted there was a provision whereby the property owner could be required to put up a bond or complete the second half of the road.  In response to a question from Chairman O’Connell, he said it did not matter whether or not the road was in an improvement district.

 

Chairman O'Connell remarked they had an interesting situation happen with Pecos (Road), from Warm Springs (Road) to Tropicana (Avenue), where for many years, the road had not existed.  She asked Mr. Segler when the bridge had been built; he replied he thought the bridge was built 10 to 12 years ago, and noted the area was very well developed on both sides of what was now the road.  In that case, he said, either Clark County or Henderson, or perhaps both, would have to pay for the right-of-way.

 

Mr. Segler stated the City of Henderson had the east side of the road from Warm Springs to the bridge and from there it was Clark County on both sides.  He said this had been a RTC project when the bridge was constructed.  In the cases of RTC projects, he said, where there were two entities, both owning one half of the road, the RTC would adopt the other half for funding purposes and sponsor the full width of the right-of-way.

 

Chairman O'Connell asked Mr. Segler if there had been opposition on the Assembly side.  He said there was an amendment after joint discussion with Clark County, but there had been no further opposition. 

 

Chairman O'Connell closed the hearing on A.B. 101 and opened the hearing on Assembly Bill (A.B.) 180.

 

ASSEMBLY BILL 180:  Amends charter of City of Henderson to make various changes concerning municipal judges. (BDR S-489)

 

Mr. Segler explained A.B. 180 would make four changes to the city charter with regard to municipal judges.  Chairman O’Connell remarked the only question she had was whether the language was new regarding judges receiving increases in salary prior to election.  Mr. Segler added, “or during the term of office,” noting the language was new.

 

Chairman O'Connell said the language was not new to the committee because many counties were asking for similar changes.  She asked for the rationale behind the specific language.  Mr. Segler said, in the past, the City of Henderson’s charter had not specifically stated, during the term of office for municipal court judges, their salaries could be adjusted.  It had been the opinion of the city attorney, absent any specific ordinance or absent the authority through the charter, it would be best if this were a charter change, he said, and currently, this benefit was allowed in the Cities of Las Vegas, Reno and Sparks.

 

Senator O’Donnell questioned the language, “not more than 5 years,” and why it stated an odd number of years when elections were held in even-numbered years.  Mr. Segler said he believed it had to do with the fact there would be a new department, trying to bring some synchronization in off years, which had to do with the appointment of an additional municipal judge or a completely new department.  Mr. Segler noted they currently had two departments in the City of Henderson and were contemplating a third department.

 

Senator Care asserted the language in section 2, subsection 3, was designed to ensure a municipal judge must be a member of the bar.  He asked if Henderson currently had a municipal judge who was not a member of the bar.  Mr. Segler explained Henderson had two municipal court judges; the senior judge was not a practicing member of the bar, but the other judge was.

 

Senator Care stated he understood what the subsection was intended to do, but it also said each municipal judge “shall devote his full time to the duties of his office.”  He asked if this would prohibit a municipal judge from having any other employment.  If the judge were a member of the bar, the Code of Judicial Conduct prohibited a judge from practicing law, and engaging in certain other transactions, he said.  The senator said he did not know whether they were specifically prohibited from outside employment, but, the way he read the bill, the municipal judges in Henderson, who were attorneys, would be prohibited from outside employment.  Mr. Segler said he agreed with Senator Care’s interpretation of the bill, but was not entirely certain, and perhaps they should talk with the Legislative Counsel Bureau (LCB) regarding the language.

 

Richard W. Wilkie, Lobbyist, City of Henderson, said he believed this was standard language existing in other city charters, although, he said, he did not know why.  Senator Care said he thought it was intended to mean if the judge was not a member of the bar now, he would not have to be, but a new judge would have to be a member of the bar.  The language, “full time to the duties,” meant no other employment, he said, because they were trying to keep out those who were not members of the bar.  A full-time municipal judge who was not a member of the bar could still have outside employment, whereas a member of the bar would not be able to have outside employment, he reasoned.

 

Chairman O'Connell asked Kimberly Marsh Guinasso, Committee Counsel, Legislative Counsel Bureau, if she could shed any light on the language.  Ms. Guinasso responded, her interpretation was, this would be the only source of employment for a municipal judge.  Further, the municipal judge must also be a member of the bar, she said, and she did not see any provision in the bill providing for a grandfathering-in of someone who was not a member of the bar.  She reiterated the language, “a municipal judge shall devote his full time to the duties of his office and must be a duly-licensed member of the State Bar of Nevada,” and noted the act would become effective upon passage and approval.

 

Chairman O’Connell asked if the language had been taken from one of the other charters to make it conform to existing language.  Mr. Wilke said the new language, relating to the salaries and the requirement to be a member of the bar, had been taken straight out of the charters of Las Vegas and Sparks.  With regard to incumbency, he said, language on page 2, line 30, provided, if you were an incumbent when the section became effective, you may continue to serve as long as you had uninterrupted terms.  But, to address Senator Care’s comment, Mr. Wilke pointed out, they would expect the incumbent to have the same requirements to devote full time to duties as would a member of the bar.  Mr. Wilke said they would work with committee counsel or come back with new language.

 

Ms. Guinasso maintained Senator Care’s point was well-taken, if the committee wanted to ensure this provision applied to those municipal judges in Henderson who were not members of the bar.  The way it read, she said, the provisions of the section would not apply to any municipal judge who was an incumbent; neither the requirement for full-time devotion to duties, nor membership in the bar.  Ms. Guinasso continued, stating if it were the intent of the committee to ensure the person who was not currently a member of the bar still be required to devote his full time to the duties of the municipal court, she believed the language could be clarified.

 

Chairman O'Connell asked Mr. Segler and Mr. Wilkie if this was their intent.  They responded it would be very acceptable.  She closed the hearing on A.B. 180 and opened the hearing on Assembly Bill (A.B.) 257.

 

ASSEMBLY BILL 257:  Revises provisions governing Virgin Valley Water District. (BDR S-935)

 

Assemblywoman Kathy A. Von Tobel, Clark County Assembly District No. 20, said Warren Hardy would explain the two bills to the committee.

 

Warren B. Hardy II, Lobbyist, Virgin Valley Water District, stated A.B. 257 was cleanup language.  In 1995, Mr. Hardy said, the Virgin Valley Water District annexed the Bunkerville Water District into its service area, and as a result, needed to provide representation for them.  The bill draft, he stated, moved the language, in terms of election and appointment of the Bunkerville Water District representative, directly into the language providing for the Virgin Valley Water District.  The result created a situation where the overwhelming majority of the board, or possibly the entire board, could be replaced at one time, he said.  In the interest of institutional memory and institutional knowledge, he stated, it was believed the elections and appointments should be staggered.  He reported the LCB developed a draft dealing with the appointed terms of one member of the Bunkerville Water District, and one member appointed by the mayor of Mesquite, for one term, in order to get back into synchronization.  Mr. Hardy reiterated, all the bill was designed to do was to stagger the terms.

 

Chairman O'Connell asked if there had been any opposition to the bill.  There being none, she closed the hearing on A.B. 257 and opened the hearing on Assembly Bill (A.B.) 440.

 

ASSEMBLY BILL 440:  Revises provisions governing qualifications and election of members of governing board of Moapa Valley Water District. (BDR S-334)

 

Mr. Hardy explained the problem addressed in the bill appeared on page 3, lines 3 to 6.  He said it had come to their attention the Moapa Valley Water District had a nonpartisan board, but the requirements of service on and elections to that board, were not consistent with other nonpartisan positions in Clark County.  This had come to light, he noted, when some of the board members were in violation of their filing requirements.  Mr. Hardy said the county clerk (Shirley B. Parraguirre) had been contacted in Las Vegas and she had recommended the statute, or enabling legislation regarding the election of officers, be in line with the other nonpartisan offices in Clark County, which is what the bill does.

 

Mr. Hardy explained section 1 clarified the office was a non-partisan office, which had been the practice, but had not been clarified in legislation.  Section 2 dealt with residency requirements and filing language, which, he said, would bring the Moapa Valley Water District into conformity with other non-partisan offices in Clark County.  He noted there was no opposition to this bill, either.  There being no questions from the committee, Chairman O'Connell closed the hearing on A.B. 440.

 

Chairman O'Connell opened an informal discussion on the Public Employees Retirement System (PERS), which, she said, both Senate and Assembly government affairs committee members had been very concerned about and wanted to address this session.  She invited Mr. Pyne to share with the committee what was occurring at PERS.

 

George Pyne, Lobbyist, Executive Officer, Public Employees’ Retirement System, testified he had spoken with Mr. Grady regarding pre-funding of retiree health care.  Mr. Pyne pointed out the committee was familiar with the state’s health insurance program, and noted he was not an expert in reference to the public employees’ benefits program.  The retirement system, he said, paid benefits to approximately 23,000 retirees of PERS.  There were approximately 80,000 active members, he said, and this would cover school districts, public hospitals, the state, cities, counties, and virtually every public employee in the state who worked half-time or more.  When public employees retire, they have a choice to continue coverage with their own public employer or choose coverage under the state’s program, he said, noting premiums were deducted once a month from the retirees’ retirement checks and then forwarded to the appropriate carriers.  Currently, he explained, PERS served as a fiscal agent, and did not administer any sort of retiree health care.  The Legislature had studied this issue in 1977 and 1989, he said, and the most recent study was conducted under Senate Bill (S.B.) 507. 

 

SENATE BILL 507 OF THE SIXTY-FIFTH SESSION:  Authorizes public employees’ retirement board to contract for study of health care benefits provided to retired public employees.  (BDR S-2121)

 

Under that bill, he stated, $70,000 had been appropriated out of the PERS trust fund, by virtue of NRS 286.220, to study retiree health care in order to review the current benefits retirees had, as well as look at alternative methods for providing and delivering health care to retired public employees.  The 1989 study, Comprehensive Study of Retiree Health Care Benefits looked at two different approaches, both of which addressed the fundamental problem: retiree health care and health care in general, unlike pension benefits, were not funded on a pre-funded basis.  In other words, he explained, they did not put money in the bank, and did not use the power of compounding to set aside reserves to provide for future benefits.  Rather, he said, they were funded on a pay-as-you-go basis, which, he said he believes, caused the financial dilemma. 

 

Mr. Pyne explained the 1989 study reviewed pre-funding methods; one would provide for a subsidy for retirees upon retirement, based on how many years of service credit they had in the plan, and the subsidy would be paid out of the trust fund.  The trust, he noted, would be funded by 1 or 2 percent of payroll, or whatever the case was, of all the active employees in the plan.  Then, he indicated, this money would be paid into the trust which would go to fund the subsidy towards retiree health care.  The other method considered at the time was to have a retirement system offer a catastrophic medical plan to retirees who wanted to elect that as well; again, it would be pre-funded by active member employee and employer contributions into the trust fund, he noted. 

 

Mr. Pyne stated it had not been enacted into law due to budgetary considerations and issues brought up by public employees’ groups; either they wanted greater pay raises or were happy with the insurance programs they had.  He noted some of the local government retirees have pretty good health care coverage and subsidies coming from their employers.  He asserted the bottom line was, sooner or later, retiree health care needed to be pre-funded in the same manner as pension benefits, and there were some good trust vehicles through which this could be accomplished.  Quite frankly, Mr. Pyne stated, it was time to look at this issue again.

 

Chairman O'Connell clarified, Mr. Pyne was recommending another study be done, and she again noted this was an informal discussion.  She asked Mr. Grady if he knew who would be testifying from the current board.  Mr. Grady said he had only spoken with Mr. Pyne and Robert T. Moore, Senior Vice President, Marsh Advantage America.  Chairman O'Connell asked whether an interim study was being recommended, or if the committee needed to act even sooner.

 

Mr. Pyne reported, after speaking with Mr. Grady, he had telephoned the chairman of the PERS board to discuss the issue.  Obviously, he said, the board had not taken a position on a formal study at this point.  Mr. Pyne said his inclination would be for staff to recommend the study, if that was what the Legislature decided, provided the proper funding and assistance were in place.  He said they did not have the expertise to complete all the required calculations, and would need to consult with an actuarial firm again.  Mr. Pyne suggested the 1989 funding source might work well again.  He said he had a resource issue internally at PERS, because they had at least one other study to do during the interim and they might also be taking over the judges’ retirement plan.  He stated they would be comfortable with the study, and the timing of a study was appropriate, provided they had the financial reserves and resources set aside to do the study correctly.

 

Senator Porter emphasized he would be more blunt than Mr. Pyne.  He asserted it was time to set aside the politics of the situation and said he applauded Assemblyman Bache and what had occurred in the Assembly Committee on Government Affairs.  Senator Porter pointed out, every turn taken was another challenge.  He said he believed it was necessary to bring experts into the process as there had been difficulty in getting numbers and difficulty in setting proper premiums.  He reiterated it was time for review; 11 years had passed, and it was time to bring in professional help.

 

Robert T. Moore, Senior Vice President, Marsh Advantage America (MAA), explained MAA was the largest insurance brokerage firm in the world and was privileged in Nevada to represent most public entities.  He stressed, the issue had been serious before, but was becoming more acute daily.  The fundamental problem, he stated, was if you worked for a public entity, whether it was the City of Carlin, the City of Las Vegas, the State of Nevada, or the City of Reno, when you retired, you had the option (NRS 287.023) to continue your coverage with the public entity from which you retired.  The problem had snowballed, in 1985, he said, approximately 8 to 9 percent of a typical public entity’s group was retired; in 1990 it was about 14 percent; and in 2000 the number approached 20 percent.  Mr. Moore noted this was a uniform problem for all public entity groups.  He said MAA conducted a study every year and he would share two numbers with the committee.  He reported 1-year-old data on public entities, including some who covered retirees, and others who did not.  For groups not covering retirees, he said, the average cost for employee-only coverage was $183; for those covering retirees, the average cost was $297, a significant increase. 

 

Mr. Moore pointed out, in 2005, the estimated number of public entity retirees would be 24 percent; in 2010, the 24 percent would probably grow to 34 percent; and the percentage would continue to grow and grow.  The fundamental issue, he noted, was public entities could not afford their group health programs because of the disparately large numbers of retirees on the plans.  Mr. Moore mentioned he had two very small groups with more retirees covered than active employees, and mathematically, you could not function in such a manner.  He stated there had to be a better way to fund the program and they wholeheartedly endorsed, on behalf of their clients contacted, the pre-funded concept.  Through a payroll withholding of 1 or 2 percent, whatever was actuarially sound, a post-retirement health care trust could be pre-funded, so when someone retired from the city or county, coverage would shift to the state’s public employees’ retirement health care trust, or some other vehicle.  He declared they could not continue to cover retirees, as the group was getting larger and larger.  Fortunately or unfortunately, we are living longer, Mr. Moore stated, so the retiree group will continue to balloon and be more costly.  He said this needed to be addressed because it had been critical in 1973, disastrous in 1989, and it was very serious now.

 

Senator Porter said, in all fairness to retirees, he believed many would like to remain with the program they had in place with some of the local governments which could afford it.  However, he stated, the issue was retirees going into the state system, and in some cases, the state system plans were not as good as local government plans.  In essence, he asserted, the state was subsidizing some of the local governments with programs which did not have retirees.  He stressed the committee wanted the best program possible for retirees, but in many cases when the option was available, the local government had better coverage than the state.  He said he knew some of the smaller governments had problems, but in southern Nevada, a lack of funding for health care was not a problem.

 

Chairman O'Connell stated another cause for concern was the number of employees leaving state employment in order to simply have a better retirement system as far as health benefits were concerned.  She asserted this was unacceptable, and the state program should be very competitive with what the local governments could offer.  She asked Assemblyman Bache if his committee had arrived at a focus point on what they thought could be done to assist the current program, or if they thought it would be better to start over.

 

Assemblyman Douglas (Doug) Bache, Clark County Assembly District No. 11, said the Assembly Committee on Government Affairs had submitted a bill draft request, later introduced as Assembly Bill 564, based upon hearings regarding the group health plan. 

 

ASSEMBLY BILL 564:  Makes various changes to public employees’ benefits program.  (BDR 23-1346)

 

Assemblyman Bache said he did not believe the drafted language or the amendments would take care of the problems.  There had not been time to process everything before the deadline date, he said, but there had been a number of amendments, including an appropriation to ensure the bill would go to the Assembly Committee on Ways and Means.  He stated he would meet with Assemblyman Arberry and perhaps there would be an opportunity for the two committees to work together.  He said it was his opinion this was the only vehicle for dealing with the Board of the Public Employees’ Benefits Program during this session. 

 

Chairman O'Connell called attention to S.B. 298 which would be going to the Assembly, noting either of the bills could be used as a vehicle for this issue. 

 

SENATE BILL 298:  Revises provisions relating to public employees’ benefits program.  (BDR 23-542)

 

Chairman O’Connell explained S.B. 298 was a PERS housekeeping bill and could fit right into this discussion.  She wondered if there might be a way Assemblyman Bache could get exempt status on A.B. 564, because it had gone to the Assembly Committee on Ways and Means, which might help give it that status.  She said she wholeheartedly agreed with Senator Porter’s statements, and asserted the committee could not wait, because it was the middle of session and they needed expertise and direction.  Chairman O'Connell stated she had not had the opportunity to speak with the Governor regarding this and asked Assemblyman Bache if he had spoken with the Governor.  Assemblyman Bache stated he had spoken with the Governor on this issue and related items; however, he said, there were no conclusions on the direction to take.

 

Chairman O'Connell asked Mr. Pyne and Mr. Moore what their suggestions for first steps might be, so the committee could begin to address the issues.  Mr. Pyne stated the 1989 study had looked at pre-funded retiree health care in some shape or form to make health care premiums for retirees of all public employers in the state more affordable.  He asserted fixing the state program was a different issue, and while a pre-funding study might not solve whatever financial difficulty the state’s program had, it might be a good, long-term method of dealing with retiree health care.

 

Chairman O’Connell reported a suggestion had come from Mr. Grady to create a subcommittee under S.B. 253 of the Sixty-ninth Session to look at this issue. 

 

SENATE BILL 253 OF THE SIXTY-NINTH SESSION:  Creates legislative committee to study distribution among local governments of revenue from state and local taxes.  (BDR 17-193)

 

Chairman O'Connell asked Assemblyman Bache what he thought about this suggestion, and noted Senator Porter also had suggested the “253 committee” as the vehicle for this issue.  Assemblyman Bache noted S.B. 253 of the Sixty-ninth Session dealt with tax distribution and there would, of course, be tax implications for doing this type of program.  He said he thought it would be an appropriate vehicle.

 

Senator Porter expressed concern, if the legislature waited 2 more years, the program would fail, creating another State Industrial Insurance System (SIIS) debacle with too many politicians involved.  He asserted something needed to be done, separate from politics, or the system would collapse.  He reiterated, the legislative committee created by S.B. 253 of the Sixty-ninth Session would be a good vehicle, but, he added, the committee needed someone with expertise who would give the facts, and had the ability to make the right decisions, so it would not be done in a political arena.

 

Chairman O'Connell asked Senator O’Donnell for information from the finance committee, and asked Assemblyman Bache if they had similar problems matching numbers.  Assemblyman Bache said they had a lot of problems with numbers matching and not having correct information, and said he believed Senator O’Donnell, in the joint subcommittee, had basically said to the PERS board, “Do not come back until you bring your actuary and give us the right numbers.”  Senator O’Donnell said they had the right numbers now, but they did not have a solution.  He said the numbers indicated a real problem, and said he agreed with Senator Porter, politics should be separated from this issue.  In this instance, he said, in terms of people’s retirement and people’s futures, there is much at stake and the actuarial numbers have to be right.

 

Senator O’Donnell said the numbers from the Board of the Public Employees’ Benefits’ Program showed there was not enough money coming in for reserve or for the incurred-but-not-reported (IBNR) costs.  He stated the actuarial data showed there would not be enough money to cover the claims.  The question was whether the legislature should raise the rates, he said, and the reply was, yes, PERS had planned on raising the rates, but had not yet notified the Governor of this.  This was a huge mess, said Senator O’Donnell, and, “Senator Porter’s suggestion was correct; experts in this area need to be brought in to study this issue.”

 

Mr. Moore stated the issue was pertinent to the State of Nevada program, but was equally pertinent to the City of Carlin, the City of Fallon, or Lyon County.  Those entities just could not afford to cover their retirees the way they currently were, and, he said, this would just exacerbate the issue, which would get worse and worse.  In his opinion, Mr. Moore said, first there needed to be a determination of the nature of the problem today, and what it would be 2, 4, 10, or 15 years from now.  He asserted, “That would be a pretty depressing study.”  The second step would be to determine a solution, he said, adding he was convinced the solution was some sort of pre-funding vehicle, such as an extra PERS contribution, somewhat like the Medicare Trust, where all working people put monies into a public employees retired health benefits trust which would be used to pay for retiree benefits.  He asserted, removing the burden from the City of Carlin, Lyon County, the City of Fallon, and the City of Las Vegas, was the most logical solution.  He suggested a study be funded to determine the nature of the problem, and a solution be proposed for implementation in 2 years.  Mr. Moore asked Mr. Pyne if this was consistent with his thinking. 

 

Mr. Pyne agreed, saying he did not know whether to take the burden entirely away from the public employers or the public employees, because there would have to be some sort of a contribution made into the trust to fund future benefits.  Again, he stated, with the linkage between the health and welfare benefits trust of the state and the studies done in the past, it was difficult for him to say, conceptually, if a program was designed to pre-fund retiree health care in the future, to what extent it would solve the financial dilemma the state was in right now with the benefits program.  It made good, long-term and strategic sense, he said, but he did not know if it would address the short-term issues.

 

Chairman O’Connell noted her concerns for the short-term issues included people she had spoken with, prior to the beginning of the session, who said they simply could not afford to pay any more for their insurance.  Many could not now afford to cover their families, she added, asserting this was a disgraceful commentary on the legislature.  She asked when there would be another appropriate time to meet, and suggested Senator O’Donnell bring some of the LCB experts, as well as the actuarial data and other numbers from the PERS budget he thinks are now correct.

 

Senator Porter emphasized he would not want to leave the hearing room with an assumption it would cost any less by doing it right.  The costs would probably go up, he said, and the question was, who would pay for the increase.  If $500 was the actual cost, he said, the premium paid now was not enough to cover the costs, and the actual cost of insurance might go up if the legislature did this right.  The next question was, he said, who would pay for this.  Senator Porter expressed concern the program is being underfunded right now. 

 

Senator O’Donnell said he concurred with Senator Porter, 100 percent.  Senator Porter asserted actual costs needed to be calculated; and then, how much the retiree could afford to pay, and employee and family costs could be determined.  Chairman O’Connell noted since Senator Porter was in the insurance business, he could be of assistance to the committee.  Senator Porter qualified he was not in the health insurance business, but did know what he had seen, which was, the state had a broken system which would collapse around state employees and retirees, which was not right; the legislature had to get on top of this right away.

 

Senator O’Donnell noted the calculations they had seen for the budget, including information coming from the welfare benefits and trust funds, were erroneous, and members of his staff were working to resolve a possible $5-million “hole” (deficit) in this budget alone, just on unfunded reserves.  So, he said, it is a larger problem we are discussing.

 

Senator Porter said, when they talked last Session, he thought there were some well-intentioned people trying very hard to make the right decisions, but we are now beyond good-intentioned people.  The committee, he said, has to have people who know what they are doing to help make these decisions, and he noted he does not know what the costs would be to bring in some assistance, but possibly Mr. Pyne and Mr. Moore might have some ideas.  He stressed it is beyond just having a citizen’s board, experts are needed, and this is not unlike the SIIS problem. 

 

Chairman O’Connell asked Mr. Pyne and Mr. Moore if they could suggest names of companies to come in and assess the situation and make proposals.  Mr. Moore stated he would be a bad person to ask, since he worked for a company which did this sort of work.  Mr. Moore queried Mr. Pyne regarding the 1989 study, clarifying the interim finance committee authorized $70,000 to conduct the study, noting there were many fine firms doing this sort of work.  The chairman asked if $70,000 was an appropriate number.  Mr. Moore stated because it was 15 years later, the number was probably a little low right now, but perhaps $100,000 to do a study of this magnitude was reasonable.  Mr. Moore said Mercer (William M. Mercer Consulting Group of Marsh & McLennan Companies Incorporated) was a fine firm; Segal (The Segal Company), and Hewitt (Hewitt Associates Limited Liability Corporation), Wyatt (Watson Wyatt & Company) had done the work 15 years ago.  Chairman O’Connell said she thought The Segal Company had produced the current numbers; Senator O’Donnell confirmed this.  Mr. Pyne pointed out The Segal Company’s actuarial services division did the actuarial work and a different branch of the same firm (public sector consulting services) did the health care work. 

 

Mr. Pyne said if a study looked at pre-funding retirees in the future, where all public employees in the state shared in the cost of the program with the employers, possibly at 1 percent or 2 percent of payroll, it would go into a trust fund to make retiree health care more affordable in the future.  He explained, if the money came out of the PERS trust fund to do the $100,000 study, a bid would be made by one of those firms to assist them in arriving at a cash-flow analysis and actuarial analysis.  It would be decided how the money would go into the trust, he said, and what sort of financial assistance could be provided to retirees upon retirement, or perhaps even offering some sort of a catastrophic group medical program to retirees upon retirement.  Again, he said, this was separate from or a little different than the immediate problem.  Certainly if something was set up over the next few years to provide retirees with some sort of an additional subsidy towards their insurance, it would be great, he said.  However, an unfunded liability would have been created, so rates might be a little higher than otherwise, he said, because the trust would be starting up today, rather than 20 or 30 years ago when those people were working.  Mr. Pyne asserted such a study would be a good long-term strategic focus.  With respect to the other analysis The Segal Company had done, he said, he could not offer much comment on where to go with it.

 

Senator Porter pointed out everyone had seen articles on other trust funds having serious challenges right now, including other government trust funds for health care benefits.  It was not just the state, he said, and without insurance department oversight, there were a lot of things happening.  His question was, how to immediately take care of Nevada retirees, he said, but this was far bigger than just a state issue, because of all the local governments involved.

 

Chairman O’Connell asked Assemblyman Bache if the department (Division) of Insurance had ever been asked to look at these issues, and if Alice A. Molasky-Arman, Commissioner, Division of Insurance, had been asked for feedback on these issues.  Assemblyman Bache replied, no, they had not spoken with Ms. Molasky-Arman regarding these issues.

 

Senator O’Donnell pointed out Ms. Molasky-Arman, as he understood it, was a regulator, who regulated rates and made sure the insurance companies were adhering to the law.  He said he did not believe this would be within her purview, in terms of actuarial data and the necessity for the increase or decrease in a premium paid by employers or employees to the fund in order to make it whole.  He asserted this was a systemic problem which was not going to go away and had been precipitated by the aging population.  Number one, Senator O’Donnell said, medical capabilities are far superior than even 10 years ago, with more medicine available to more people, making them more productive and extending life expectancies 10 to 15 years.  This has an impact on the retirement board, he asserted, because baby boomers who were beginning to retire would add an exorbitant number of people to the retirement system, and new people coming on board were bearing the brunt of the premium costs.  To effectuate the situation fairly, Senator O’Donnell stressed, they would have to look at this, put the politics aside, and do it right.

Assemblyman Bache pointed out one of the problems in the health care industry was similar to what was going on in energy right now: market forces, no matter what was done, could not be controlled.  For example, pharmacy costs had gone through the roof because of the numbers of new drugs and increased advertising, he noted.  He said his health and welfare trust had increased co-payments, and prescription drug costs increased from a two-tier to a three-tier program, because of usage. Just like the price of gas, said Assemblyman Bache, the cost of prescriptions had gone up.

 

Chairman O'Connell said she has suggested Ms. Molasky-Arman participate, because she works in this field, is very familiar with state issues, and might have some very helpful input in trying to work through the problems.  Senator Porter noted one of Ms. Molasky-Arman’s areas of expertise is solvency.  He claimed, even some of the world’s largest insurance companies are failing today because of changes in health care and prescription drugs.  Senator Porter asserted the state needed to get out of the insurance business.  “We would be kidding ourselves if we kept putting on Band-Aids and more Band-Aids,” he said.  Many people wanted to keep the status quo, he said, but it could not be done.  The outcome would be very painful to do this right, but the legislature would have to do it or there would not be coverage for seniors and young families.  Looking at this, Senator Porter reiterated, politics and special interests would need to be separated, and it would be critical to get experts involved quickly.

 

Senator O’Donnell reported a subcommittee member had suggested, after looking at this for years and years, perhaps it was time to privatize.  He asserted privatization should be on the table in terms of the future of the welfare benefits trust fund.  Then, he stated, the insurance commissioner would have the purview of making certain the fund was solvent.  Senator O’Donnell said he does not think the idea of privatization should be discarded.

 

Assemblyman Bache reported Assemblywoman Giunchigliani had mentioned privatization, and therefore, he said, she was certainly taking this issue very seriously.  He said he wondered if there was a way to have a joint subcommittee work on this to provide different exposure and do it right.

 

Senator O’Donnell said the budget had to be closed shortly, and one of the decisions to be made was how much money would be needed to plug into the retirement system benefits trust fund in order to make it whole this year.  Again, he said, echoing Senator Porter’s remarks, this would only be a Band-Aid, but it should be the last Band-Aid the Legislature puts on this issue. 

 

Chairman O'Connell asked Senator Porter if he thought the committee should try to schedule a meeting where the interested parties could come together to talk about future direction.  She suggested Ms. Molasky-Arman be included, and since she dealt with solvency issues, Ms. Molasky-Arman might be able to review the actuarial data which Senator O’Donnell referenced earlier.  Chairman O’Connell suggested this could be a beginning point for the steps to be taken in order for PERS to climb out of the hole.

 

Senator Porter said he thought the chairman was headed in the right direction.  The committee could put together a core group, in the short term, and the first step would be working with the insurance division.  Perhaps, he suggested, a few of the subcommittee members could sit down soon and make some determinations to recommend back to this committee and to Assemblyman Bache’s committee, while still in session.

 

Chairman O'Connell asked Senator O’Donnell if he would contact Ms. Molasky-Arman to discuss the dilemma and see if she might have her actuary look at the numbers.   Senator O’Donnell stated he would like to include the fiscal staff as well, because the finance committee had to get an answer in regard to what would be done with the budget.

 

Mr. Moor and Mr. Pyne agreed to participate.  Mr. Pyne noted it would give him time to review the subject with his board, as well as discuss with them doing a study similar to the one done 10 years ago. 

 

Chairman O'Connell tentatively set the meeting, and noted Assemblywoman Giunchigliani would also be invited, as she had been involved in this issue.  

 

 

 

 

 

 

 

 

 

Chairman O’Connell adjourned the meeting at 3:47 p.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

 

Julie Burdette,

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Senator Ann O'Connell, Chairman

 

 

DATE: