MINUTES OF THE meeting
of the
ASSEMBLY Committee on Ways and Means
Seventy-Second Session
May 26, 2003
The Committee on Ways and Meanswas called to order at 9:06 a.m., on Monday, May 26, 2003. Chairman Morse Arberry Jr. presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Mr. Morse Arberry Jr., Chairman
Ms. Chris Giunchigliani, Vice Chairwoman
Mr. Walter Andonov
Mr. Bob Beers
Mrs. Vonne Chowning
Mrs. Dawn Gibbons
Mr. David Goldwater
Mr. Josh Griffin
Mr. Lynn Hettrick
Ms. Sheila Leslie
Mr. John Marvel
Ms. Kathy McClain
Mr. David Parks
Mr. Richard Perkins
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
Assemblyman Joe Hardy, District No. 20
Senator William J. Raggio, Washoe County Senatorial District No. 3
STAFF MEMBERS PRESENT:
Mark Stevens, Assembly Fiscal Analyst
Steve Abba, Principal Deputy Fiscal Analyst
Lila Clark, Committee Secretary
Susan Cherpeski, Committee Secretary
Senate Bill 473 (2nd Reprint): Makes various changes to provisions governing abatement of taxes for new or expanded businesses. (BDR 32-1241)
Mr. Robert Shriver, Executive Director, Division of Economic Development, introduced himself and Mr. Berlyn Miller, Vice Chairman, Commission on Economic Development. Mr. Shriver said S.B. 473 was designed to change some of the tax incentives and also added one incentive for renewable resource devices. Mr. Shriver said the Division wanted to stay ahead of the curve and to promote entrepreneurship in technology development by encouraging technology development of intellectual property, trademarks, and patents.
Mr. Shriver referred the Committee to Exhibit C, “Proposed Amendment to S.B. 473 (As Amended).” Mr. Shriver said the amendment pertained to Section 1, page 2, line 17, of the bill. Currently the bill pertained to businesses with 30 or more full-time employees in counties with a population over 100,000 or cities over 60,000. Mr. Shriver said his amendment would revert back to “75” employees. Mr. Shriver said Section 1, page 2, line 38, would delete “10” and insert “15” jobs for rural communities under 100,000. He said the bill was very important in the rural communities. Mr. Shriver said in Section 2, page 6, line 17, the amendment would delete “$5,000,000” and insert “$50,000,000.” Mr. Shriver said Section 2, page 6, line 18, of the amendment would delete “1,000,000” and insert “$2,000,000.”
Mr. Goldwater said he was hoping the amendments had been made in an effort to elicit his support. Mr. Goldwater asked what had changed to prompt Mr. Shriver to request the amendments.
Mr. Shriver said the only changes that were being made were to change the urban thresholds to what they had been previously and to hold the rural communities at a lower level because the job impact and the capital investment impact was much more significant at the lower numbers than it would be in the urban areas.
Assemblywoman Giunchigliani asked if there should be a population cap on line 6 for the urban areas. Mr. Shriver said that was correct.
Assemblywoman Giunchigliani asked if Mr. Shriver was recommending changing 60,000 to 75,000. Mr. Shriver said no; that was not the intent.
Mr. Shriver said the amendment in Section 4, page 9, line 3, would satisfy some of the concerns the Department of Taxation had in administering leased capital equipment. He said that rather than the “duration of the lease” it would be for a two-year period. The words “the duration of the lease for” would be removed so that it would coincide with the two-year window that all other capital equipment had.
Assemblywoman Giunchigliani asked for clarification of the wording and Mr. Shriver clarified it.
Assemblywoman Giunchigliani asked if the Commission currently dealt with machinery or equipment because it appeared to be new language. Mr. Shriver answered affirmatively, it was the capital equipment requirement. He said companies would submit a list of capital equipment and that equipment was considered capital equipment under Internal Revenue Service (IRS) regulations.
Assemblywoman Giunchigliani asked Mr. Shriver to address the energy storage device referred to in Section 4. Mr. Shriver said that was technology that was on the horizon that the Commission wanted to take advantage of. Mr. Shriver said the section referred to an energy storage device for the use and storage of electrical energy. Mr. Shriver said it had enormous potential for Nevada and the Commission wanted to be there and ready for the companies that were going to develop that technology and it would coincide with the other renewable energy resource items.
Assemblywoman Giunchigliani asked if a device referred to a building or a facility. Mr. Shriver said it could be a battery-sized operation that used renewable energy.
Assemblywoman Giunchigliani asked if the company would still have to employ 10 employees by the fourth quarter and meet all other requirements. Mr. Shriver said the company would have to meet all the factors required.
Assemblywoman Giunchigliani asked Mr. Shriver about the proposed change from four quarters to four years. Mr. Shriver said that section had to do with the current business license tax abatement. Currently, the abatement was for 80 percent in the first year and the percentage was reduced in the following years. The change would simplify the process and require less explanation as it was self-explanatory.
Assemblywoman Giunchigliani reviewed the step down and the proposed change. Mr. Shriver said it was a clarification of language that made the abatement easier to understand.
Mr. Shriver said Section 3 would encourage entrepreneurial and technology development. He said that technology companies, by nature, started small and the Commission wanted to encourage the development of technology. He said the Commission wanted technology transferred from the college campuses and to develop commercialized product development. One of the ways to encourage companies in the development of technology was to create an incentive that would attract those types of companies into Nevada.
Assemblywoman Giunchigliani asked if the $500,000 investment required was a small investment. Mr. Shriver said that $500,000 was “in the ballpark” for technology companies. He said the idea of Section 3 was to have different criteria for those companies because they were attempting to bring a prototype into commercialization. Mr. Shriver said those firms would create the technology jobs in Nevada and employ the graduates of the University System.
Assemblywoman Giunchigliani asked if the language regarding the average hourly salary and the business health plan was applicable to Section 3. Mr. Shriver said that language applied and was standard language for any of the Commission’s incentives. Anyone receiving an incentive would have to have a health care package for employees paid for by the employer.
Assemblywoman Gibbons asked for a clarification of the sections being amended and Mr. Shriver clarified the sections being amended.
Assemblyman Beers asked if the newer battery storage technology was built around the metal lithium. Mr. Shriver said it was lithium-based.
Assemblyman Beers said that would be “a double whammy for Nevada” because Nevada supplied most of the nation’s lithium out of Silver Peak, Nevada. Mr. Shriver concurred.
Assemblyman Goldwater asked if the battery storage companies would locate in Nevada even without any incentives and said that was why he had always opposed the bills and would continue to oppose the bills. He asked if the companies would locate in Nevada anyway since the lithium was mined in Nevada and all the appropriate distribution channels were in Nevada.
Mr. Berlyn Miller, Vice Chairman, Commission on Economic Development, said that the Commission was currently talking to a company from Canada that was doing a joint venture with a United States company who was looking to build an operation in southern Nevada and, in his opinion, if it were not for the tax incentives being offered the company would not be talking to the Commission. He said the company was still talking to several other states that were offering far more than Nevada offered.
Assemblyman Goldwater asked if the companies would mine the lithium and ship it out of state. Mr. Miller responded that he did not know because he had not talked to the company about mining the lithium. He said the company might be using a new technique that was not solely dependent upon lithium.
Assemblyman Goldwater inquired if the Commission had a letter from the Canadian company stating that it would locate in Nevada if S.B. 473 was passed. Mr. Miller stated that he did not have a letter from the company because it would not commit to relocating to Nevada even with the tax incentives.
Mr. Miller referred the Committee to Exhibit D, “Estimate of Impacts for All Abatements 1/1/2001 – 12/31/2002.” Mr. Miller said the estimates had been based on one-year’s computations. He said Exhibit D showed the length of time it would take for payback on the companies and he had assumed that the majority of the companies would never have come to Nevada without the abatement so the taxes generated would never have been received. Mr. Miller stated that the sales and tax use calculations included all companies that had been abated for the two-year period. The sales and use tax abatement was $11,500,000 and it took 1.1 years in direct benefits to achieve a return. After that, it was all “gravy.” Mr. Miller said that it took only four-tenths of one year to get a payback on the incentives. With the personal property abatement of $6,000,000 it took one-half a year on the direct return and two-tenths of one year on the total. Mr. Miller reported that on the business tax abatement it took two and one-half weeks on the direct and 1.3 weeks on the total. Mr. Miller said that amounted to a total of $45 million for the first year of new tax revenue that would not have been received. Mr. Miller pointed out that there had been 2,243 new jobs created at an average rate per hour of $20.19, when the state average during that period was from $14.61 to $15.48. Mr. Miller stated that some of the high tech companies that came in had averaged from $30 to $40 per hour.
Assemblyman Goldwater asked if Mr. Miller had done an expense spreadsheet on what the costs were for the companies during that time frame for employees that had children in school, grandparents on Medicaid, or other benefits afforded by the state during the time the companies were not paying taxes.
Mr. Miller responded that he did not have the costs but for the most part the employees were not new people moving into the state, they were companies employing the citizens of Nevada.
Assemblyman Beers offered that he had just researched lithium production on the Internet and found out that most of the lithium produced was not used in Nevada. He said the established distribution chain was outside of Nevada so if the lithium was a part of the batteries it would be a new use for lithium in Nevada.
Chairman Arberry asked if there was any additional testimony on S.B. 473 and there being none, he closed the hearing on S.B. 473 and opened the hearing on A.B. 460.
Assembly Bill 460 (1st Reprint): Makes various changes regarding manufacture, sale and use of tobacco products. (BDR 15-1283)
Mr. John Albrecht, Chief Tobacco Counsel, Office of the Attorney General, introduced himself. Mr. Albrecht referred the Committee to Exhibit E, “AB 460 – The Need.” Mr. Albrecht said that counterfeit cigarette producers had a financial incentive to produce counterfeit cigarettes. Currently, at a minimum, $1.14 of the cost of $3.56 for a typical pack of cigarettes, went to either the federal government through taxes, the state taxes, or the state Master Settlement Agreement (MSA) payments. Some of the participating manufacturers would project higher than $.40 but that was the minimum projected by the National Association of Attorneys General (NAAG). Mr. Albrecht stated that Nevada had experienced a $2.6 million drop in the cigarette taxes collected from 2001 to 2002. Mr. Albrecht offered that one of the explanations for that could be counterfeit cigarette sales. He stated that the National Association of Attorneys General projected that Nevada had lost $2.74 million in MSA payments due to the downward adjustment caused by non-participating manufacturer (NPM) cigarette sales.
Mr. Albrecht advised the Committee that the MSA contained two primary adjustments that could result in the reduction. There was a volume adjustment that was based on the number of cigarettes, referred to as sticks, sold. The volume could be adjusted downward if the number of sticks sold by the participating manufacturers went down and was picked up by NPMs. Mr. Albrecht said he would like to see people smoke less, however, if there was a downward adjustment caused by the sale of NPM cigarettes, that did not result in decreased health problems to the state of Nevada and its people.
Chairman Arberry asked how much money would be needed by the Attorney General’s office if A.B. 460 was enacted.
Mr. Albrecht responded that the Attorney General’s Office fiscal note was approximately $320,000 per year for two investigators, one and one-half attorneys, and a legal secretary.
Chairman Arberry asked what the fiscal impact would be on the Department of Taxation.
Mr. Dino DiCianno, Deputy Executive Director, Department of Taxation, introduced himself. He said that based on the original fiscal note that the Department had provided to the Legislative Counsel Bureau for fiscal year 2004, $419,787 was needed, and for fiscal year 2005, $312,596 was needed. Mr. DiCianno added that for the future biennia $625,192 would be needed. Mr. DiCianno said it was important to understand that the enforcement and administration of A.B. 460 would raise the bar for the Department of Taxation. Mr. DiCianno said that currently the Department had five Tax Examiners dealing with nine excise taxes. In order to fully administer A.B. 460 as written the Department would have to add one Management Analyst I, two Revenue Officer IIIs, an Auditor I, and a Tax Examiner.
Mr. Mark Stevens, Assembly Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, commented that he did not see a funding mechanism to provide for the expenses related to the Attorney General’s Office or the Department of Taxation. He said there were a couple of proposals to provide funding to pay for the administrative expenses that were involved. Mr. Stevens stated that one proposal would be to assess a fee to wholesalers, retailers, and manufacturers and that would generate funds. Mr. Stevens reported that there was also a proposal to tax cigarette sales of non-participating manufacturers, which would produce millions of dollars. Mr. Stevens said that as the Committee deliberated on the bill there would be $700,000 to $800,000 per year that the two agencies were requesting in additional funding. Mr. Stevens observed that the Committee might not want to use General Fund dollars for that and a funding mechanism would have to be determined to be utilized to pay for the costs. Mr. Stevens advised the Committee that they should consider what the effective date of the bill should be. He said it would take time for the Department of Taxation to be ready to administer the enforcement provisions of the bill. Mr. Stevens said he guessed that the Department of Taxation would need approximately six months to prepare to administer the bill if it was passed.
Assemblywoman Giunchigliani asked how and when the state would make up the $1.2 million it would cost to implement the provisions contained in A.B. 460.
Mr. Stevens reported that there were a couple of proposals for financing the expenses. One would charge a fee to wholesalers, retailers, and manufacturers and, depending upon how much was charged, that would produce $700,000 to $800,000 or higher if a higher fee was assessed. Mr. Stevens said that there was also a proposal to assess cigarette sales of non-participating manufacturers $1 per pack of cigarettes. He said the estimates he had seen on that proposal would generate approximately $6.5 million per year.
Assemblywoman Giunchigliani said that there was a group who chose not to participate in the plan and she asked if that group was the group that A.B. 460 was designed to “capture.”
Mr. Albrecht responded that counterfeit cigarettes were not produced by NPMs, they were produced by people who smuggled cigarettes into the nation. He said those cigarettes were not “picked up on the NPM radar.”
Assemblywoman Giunchigliani asked who A.B. 460 was designed to apply to. She said she wanted to be sure of what would be accomplished and that the correct group would be “captured.”
Mr. Albrecht referred the Committee to page 16 of Exhibit E and said that there were manufacturers, wholesale dealers, and retail dealers. He said that counterfeit cigarettes could be sold at different points in the stream. A.B. 460 would provide for a reporting mechanism to be added to the Department of Taxation where the manufacturers would be required to report by brand their shipments to wholesale dealers.
Assemblywoman Giunchigliani asked if the shipments were currently reported to anyone or reported to any other states. Mr. Albrecht said he was not aware that any other states required reporting and some of the major manufacturers were requiring private reporting but the state did not have access to that data. Mr. Albrecht said there was no reporting between manufacturers and wholesale dealers by brand.
Mr. Albrecht explained that the reporting requirements were contained in Section 27 of the bill and required reporting from wholesale dealers to the store level. Mr. Albrecht said there was no reporting by retailers. Mr. Albrecht said the Department of Taxation would observe the change in trends of prior cigarette sales. For example, a retail store that previously had received 30 cartons of a certain brand, month after month, suddenly stopped buying them. The Department would make that report to the Attorney General’s Office that there was a store that had stopped purchasing a certain brand. In turn, the Attorney General’s Office would then go into the store and investigate the inventory records that were required to be maintained by that retail store.
Assemblywoman Giunchigliani asked if the inventory records currently listed all the brands. Mr. Albrecht said the inventory records were required by A.B. 460 to list all of the brands.
Assemblywoman Giunchigliani said that since the inventory records in the past had not listed all the brands, she wondered how the Department could tell that someone was not reporting sales that they had not been required to report in the past. Mr. Albrecht said that the staff of the Attorney General’s Office, including himself, would be attempting to reach out to retailers to urge them to comply with the law rather than to break the law and get caught. Mr. Albrecht said the bill had serious consequences for retailers that attempted to defraud the state of their tax funds. He said that if it could be established that a retailer was planning to defraud the state of tax revenue it would allow the state to seize the personal property of the business. Mr. Albrecht explained that first the retailers would be educated regarding the law.
Assemblywoman Giunchigliani asked how the state would conduct the investigation to determine that a retailer was attempting to defraud the state.
Mr. Albrecht continued his explanation of how the investigators would determine whether a retailer had attempted to defraud the state.
Assemblywoman Giunchigliani asked if the bill would allow the state to seize cigarettes on the shelf that were not reported as sold by the supplier. Mr. Albrecht explained that current law would allow for a seizure of the cigarettes and A.B. 460 would allow an investigation as to whether or not other crimes defined by the bill regarding the defrauding of the state had taken place.
Assemblywoman Giunchigliani commented that she was attempting to determine how the cash would be generated to pay for the costs of enacting the bill. Mr. Albrecht answered that his point was that the cash had already been lost. He believed that if the state worked with the retail community in an education program to learn not to break the law, the state would not lose the $2.6 million lost from 2001 to 2002 because the retailers would be buying the correctly stamped cigarettes to begin with.
Mr. Stevens said that using Mr. Albrecht’s scenario and logic, the Fiscal Division would have to recommend re-projecting cigarette tax revenues over and above what the Economic Forum forecast by $1.2 million per year in order to pay for enacting A.B. 460 and that would be very difficult for the Fiscal Division to do. Mr. Stevens said the Fiscal Division typically did not re-project revenues based upon the premise that stricter enforcement would bring in more tax revenue. He said that may be true but the Fiscal Division had never re-projected revenue on that basis in his tenure.
Assemblywoman Giunchigliani stated that perhaps the state could charge those companies who chose not to participate in the Master Settlement Agreement (MSA) and she asked how many of those companies there were.
Mr. Albrecht reported that the number changed every day because new companies came into the market regularly. Mr. Albrecht said there were approximately 110 manufacturers who sold cigarettes in Nevada currently according to the Nevada Department of Taxation.
Assemblywoman Giunchigliani asked if all of those manufacturers were participating in the MSA and could they be identified. Mr. Albrecht said he believed there were approximately 30 participating manufacturers in the nation.
Mr. DiCianno said he did not have the information with him but he would gather the data and provide it to the Committee. He stated that the Department of Taxation had been requested to provide the Committee with some alternative proposals with respect to generating funds to pay the administrative costs incurred by the Department of Taxation. Mr. DiCianno said that currently there were 102 wholesalers, over 7,000 retailers, and 122 manufacturers nationwide.
Mr. DiCianno explained that he did not know the split between the participating members and the non-participating members.
Assemblywoman Giunchigliani asked if it was possible to obtain that information. Mr. Albrecht responded that he would provide that information to the Committee.
Assemblywoman Giunchigliani said one of the proposals from the Department of Taxation was to charge $50 for wholesalers on an annual basis, $75 for retailers, and $100 for manufacturers. Ms. Giunchigliani stated that the Attorney General’s Office had suggested $1,000 per manufacturer and there were 122 of those. Ms. Giunchigliani said the state could charge businesses that were not domiciled in Nevada. Mr. Albrecht pointed out that would be a licensing fee to sell cigarettes.
Assemblyman Beers asked if there was a physical stamp issued by the Department of Taxation that went on legal packs of cigarettes. Mr. DiCianno responded affirmatively.
Assemblyman Beers said that he assumed illegal counterfeit cigarettes would not have the stamp on them and he asked why the Department of Taxation did not currently send out investigators with its existing staff to identify fraud. Mr. DiCianno said given the staffing of the Department of Taxation and the number of retailers the Department did not have the staff to enforce the law at that level. Mr. DiCianno said the Department would have a Revenue Officer go out to a retailer, review the packages on display, and make a determination whether or not they were correct and proper, and if not, notify the retailer of potential seizure of those cigarettes. Mr. DiCianno explained that once cigarettes were seized they were destroyed. Mr. DiCianno said some of the proposals he had seen would create a different stamp for those non-participating manufacturers. Mr. DiCianno reiterated that the difficulty for the Department of Taxation was having the staff to enforce the law.
Assemblyman Beers asked if there was an existing penalty for having retailed cigarettes without a stamp. Mr. DiCianno said there was a penalty and it was assessed although it had not brought in a large sum in the past.
Assemblyman Beers asked if the penalty was assessed often. Mr. DiCianno answered that he suspected there were many sales of cigarettes without stamps but the Department of Taxation did not have the staffing to discover all of the illegal sales.
Assemblyman Beers asked if there were federal investigations of rings of cigarette smugglers who had quantified the number of situations in Nevada. Mr. DiCianno said he did not know the answer to the question.
Mr. Albrecht referred the Committee to page 7 of Exhibit E to an article regarding the ports of Long Beach and Los Angeles. He said that in 2002 the U.S. Customs Service seized $28 million worth of counterfeit cigarettes.
Assemblyman Beers said Exhibit E also contained information on the number of dollars lost through volume adjustment due to NPM sales. Mr. Albrecht responded that page 5 of Exhibit E did not show counterfeit cigarettes but was the loss estimated due to NPM cigarettes for the downward adjustment.
Mr. Albrecht said page 7 of Exhibit E, in the article from the Long Beach Press-Telegram, the second paragraph read, “At the port of Long Beach and Port of Los Angeles more than $28 million in counterfeit cigarettes were seized by U.S. Customs investigators.” Mr. Albrecht went on to say that on page 10 of Exhibit E was an article about how the federal government had begun a crackdown on counterfeit cigarettes. He said on page 13 of Exhibit E was a press release from the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) regarding an illegal cigarette trafficking operation that operated on the East and West Coasts.
Assemblyman Beers pointed out that paragraph 3 of the press release said that some portion of $20 million of cigarettes was moved to Nevada. He asked if the Bureau of Alcohol, Tobacco, Firearms and Explosives quantified the amount. Mr. Albrecht said he had called the ATF several times in an attempt to quantify Nevada’s loss and got no information.
Mr. Albrecht said there would be a proposed amendment to the bill that would delete the amendment provided for in Section 80 of the bill. He said if Section 80 of the bill was amended Nevada Revised Statutes (NRS) 370A.150 would be left as it currently stood. He said the Attorney General was in favor of the amendment in Section 80. Mr. Albrecht said the model act, Chapter 370A, as it stood, required non-participating manufacturers to deposit $3.50 per carton sold in the year 2003 into an escrow account and that was to remove the economic advantage of not signing the MSA or the economic disadvantage of signing the MSA. He said that participating manufacturers paid between $4.00 and $5.00 per carton in payments to the state of Nevada. NPMs, under the model statute, paid $3.50 to an escrow account that could not be accessed unless the state of Nevada sued the NPM.
Mr. Albrecht said that current law as it stood allowed for a release from the escrow account based upon what that manufacturer would have paid if it had been a participating manufacturer. Mr. Albrecht said the formula was worked out so that companies that sold regionally to a certain number of states would get a refund from the escrow account. Not only did they pay less but they would get a refund from the escrow account.
Mr. Albrecht went on to say that Section 80 as proposed to be amended would close that loophole. He emphasized that the escrow payments did not go to the state of Nevada, the payments went into escrow for 25 years and the interest was paid to the companies and after 25 years on an annual basis they would get the money back. Mr. Albrecht also emphasized that the NPMs were not bound by the youth marketing restrictions of the Master Settlement Agreement. They could have outdoor advertising, transit advertising, giveaways that appealed to young people, and they could develop caricatures to help sell cigarettes to adults, which also might appeal to people under age 18. Mr. Albrecht said the NPMs were not bound by any of the advertising restrictions of the Master Settlement Agreement. Mr. Albrecht urged the Committee to reject the amendment that was proposed for Section 80, leave it as it was and close the loophole.
Assemblywoman Chowning referred the Committee to the “ATF News” article in Exhibit E, which reported that it had been determined that the state of California had been defrauded of approximately $5 million in tax revenue. She said the article mentioned Nevada but did not track how many tax dollars Nevada had lost.
Mr. Albrecht said he had asked ATF for the information on a number of occasions but was not able to get it. He said he would request the information again.
Assemblyman Beers said he had a lingering concern regarding the apparent advent or increase in counterfeit sales to which Mr. Albrecht was attributing the difference between what should have been sold and what was sold based on the rate of smoking. He said if that was due to Internet sales then the steps Mr. Albrecht proposed would not bring in adequate revenue to pay for the steps proposed in the bill. Assemblyman Beers said the proposed steps would not solve the problems and he was concerned about that as the Committee contemplated funding the process on the hope that the loss that had been suffered was from counterfeit cigarettes, not online sales.
Mr. Albrecht stated that the bill separately addressed Internet sales starting at Section 28 and continuing through Section 32 and put additional requirements on Internet sellers. Mr. Albrecht said that currently the state had no authority over Internet sales of cigarettes other than taxing them when they were sold. He said that under the Jenkins Act the person who shipped cigarettes into Nevada was supposed to notify the Department of Taxation who could then bill the individual taxpayer. Mr. Albrecht said that the Jenkins Act was not working. He said the bill was a first attempt at addressing the problem of Internet cigarette sales. Mr. Albrecht said the state was also concerned about Internet sales to minors. Mr. Albrecht said A.B. 460 would require certain steps by Internet sellers that would enforce the tax laws more strongly against them.
Assemblyman Beers asked if Mr. Albrecht was proposing that the Internet retailers that ignored the federal law would be “slapped around and woke up” by the Nevada law.
Mr. Albrecht said Nevada was hoping that a number of states would work together. He said that one of the things done at the National Association of Attorneys General Conference in February 2003, was to urge all states who worked under the Master Settlement Agreement to work on stronger enforcement of state taxes collected on Internet sales.
Mr. Alfredo Alonso of Lionel, Sawyer and Collins, representing R. J. Reynolds Company, introduced himself. He said there were two significant concerns. The first concern was the tax revenue the state had already lost, including the NPMs that had not paid into the fund, and the counterfeit issue, which was a relatively new issue. Mr. Alonso said the problems had all stemmed from the tax increases over the past ten years and he thought that states were trying to grapple with and address the problems. Mr. Alonso said the other issue was how to fund A.B. 460. Mr. Alonso thought if tax increases on cigarettes were adopted by the Legislature it would be money lost in the future. He said that as it got more expensive to purchase cigarettes people would find other ways to do so. Mr. Alonso believed the Committee should consider the money the state had already lost, including the $2.6 million from the previous year. Mr. Alonso said the National Association of Attorneys General (NAAG) projected that Nevada would have had as much as $32 million more. Mr. Alonso said the loss was somewhere between $2.6 million and $32 million and he thought that as time went on and tax increases took effect he believed the loss would be greater. Mr. Alonso said the Attorney General’s proposal in A.B. 460 was not perfect but it was a good start. Mr. Alonso said he also supported the NPM impact fee. He said many retailers did not pay into the escrow account and the state could not get that money if it tried unless it filed suit. Mr. Alonso said the fee would make it more difficult for children to purchase low cost cigarettes, it would be added income for the state, and more importantly, would fund some of the efforts.
Mr. Sam McMullen, representing the Retail Association of Nevada and Philip Morris USA, Inc., introduced himself. He said he supported the bill and supported the efforts to ensure the bill was funded adequately. Mr. McMullen said there was a consortium of interests that would make the costs of the bill much more feasible and much more effective in terms of enforcement, and not the least of those was conducting the investigations and helping with the workload of the cases. Mr. McMullen said he was absolutely against any change in Section 80 of the first reprint of A.B. 460. Mr. McMullen said he believed the proposal would be to return to the existing language and he supported the Attorney General’s language. That language had been decided upon by the NAAG across the states and the other interests that were involved. Mr. McMullen said it was important to have a uniform law across all 50 states as that would be critical in the enforcement of the MSA and related documents. Mr. McMullen reiterated that there should be no changes to the first reprint of Section 80.
Mr. McMullen referred the Committee to Exhibit F, “Amendments to AB 460,” that had been proposed by the Indian tribes. He said the amendments clarified the status of the Indian tribes as an entity that could be on the list and receive cigarettes to sell. Mr. McMullen said the amendment had been drafted by the Indians and he believed the Department of Taxation was comfortable with the amendments. Mr. McMullen said the amendments would clarify that the list of dealers in the state would also by definition include Indian tribes. Mr. McMullen said the tribes had an agreement where they charged the tax so the amendments were not a revenue issue, they were just for clarification.
Mr. Alonso said his amendment to the bill would add an impact fee on NPMs only. He said the theory behind the amendment was that the NPMs in many cases did not even pay into the escrow account.
Assemblywoman Giunchigliani said that if that amendment was to be considered the Committee would at least be charging an additional amount of tax that would go into the state’s account to help offset costs.
Assemblywoman Giunchigliani asked if there was an amendment the Committee had not yet seen and Mr. Alonso answered that another amendment would be forthcoming.
Assemblywoman Giunchigliani asked what account the impact money would go into. Mr. Alonso envisioned the funds going specifically to enforce A.B. 460 and the laws dealing with the MSA.
Assemblywoman Giunchigliani asked how many dollars per pack the impact fee would be. Mr. Alonso responded that it would be approximately $1 per pack.
Assemblywoman Giunchigliani asked if the impact fee would generate enough funds to pay for the Department of Taxation’s costs and Mr. Albrecht’s costs. Mr. Alonso said that it would.
Assemblywoman Giunchigliani asked how Mr. McMullen’s amendment, Exhibit F, would interact with Mr. Alonso’s suggested amendment. Mr. Alonso said the amendments were unrelated. Mr. Alonso said the forthcoming amendment would essentially delete the new language in Section 80.
Assemblywoman Giunchigliani asked for clarification on some of the wording in Section 5 of the bill and Mr. Alonso explained the language.
Mr. Bob Ostrovsky, representing the Council of Independent Tobacco Manufacturers of America, introduced himself. Mr. Ostrovsky said that the organization represented the non-participating manufacturers and he referred the Committee to Exhibit G. Mr. Ostrovsky said that the bill proposed that in addition to the tax that was being considered as an addition to tobacco, another $1 per pack would be added to the cost of the cigarettes, which do not have the brand names on them. Mr. Ostrovsky said the bill would take the choice away from Nevada smokers to purchase those products that were often generic brands and other types of brands. He said it would add an enormous cost to Nevadans who bought and used those products. At the same time the retailers would have to create new record keeping methodologies and be at risk of having their assets confiscated under a new law. Mr. Ostrovsky said he believed the bill was an effort on the part of participating manufacturers, those who had signed onto the Master Settlement Agreement, to squeeze out of the marketplace those people he represented at the Council of Independent Tobacco Manufacturers. Mr. Ostrovsky said the people he represented were not counterfeiters, they paid into the escrow account, they were at risk to be sued and that money was available in those escrow accounts if it was necessary to pay judgments, they followed all the rules regarding tax stamps, they delivered all of their products appropriately, and Section 80 would change the way they were assessed.
Mr. Ostrovsky said some of the people he represented did not do business in all states and the bill proposed an assessment methodology that would cover all participating states. Mr. Ostrovsky said the change proposed to Section 80 would increase costs to the non-participating manufacturers at the expense of Nevada consumers who used those legal products. Mr. Ostrovsky said his organization had huge concerns about what it believed “big tobacco” was attempting to do to “little tobacco” and he urged the Committee to strongly consider the amendment proposed in Exhibit G.
Mr. Mike Sullivan, representing the Council of Independent Tobacco Manufacturers of America, introduced himself. Mr. Sullivan said Exhibit G contained an error. It should have referred to Section 80, lines 21 through 29, and he apologized for the error.
Assemblywoman Giunchigliani asked for clarification that Mr. Ostrovsky represented the non-participating manufacturers who paid into the escrow account. Mr. Ostrovsky said that was correct.
Assemblywoman Giunchigliani asked where the model legislation existed. She wondered if it had been adopted by states or was it the federal model statute.
Mr. Ostrovsky responded that it was a position paper that was “floated” by the National Association of Attorneys General. He said that to his knowledge it had not been approved by the Board of the National Association of Attorneys General although he believed the representative from the Attorney General’s Office should comment on that. He said he did not know if it had been adopted by any state but it had been proposed in numerous states and he believed it was an effort on the part of certain manufacturers.
Mr. Albrecht said the Attorney General’s Office was a member of the NAAG. He said the NAAG Tobacco Project had written the language that was in Section 80 of the bill and it had been approved by the states participating in the MSA and it had been agreed to by the overwhelming number of participating manufacturers. Mr. Albrecht said there were a few participating manufacturers that had not signed onto the language but those were very small companies.
Assemblywoman Giunchigliani asked if it was up to each state to adopt the model language. Mr. Albrecht said it would be up to each state to amend the statute but if it was not amended regional companies would be authorized to receive a refund and they would pay even less than the $3.50 they currently paid into escrow. Mr. Albrecht said that currently regional companies were entitled to a refund based upon what they otherwise would have paid under the MSA. He said they paid into escrow based upon 1.6 cents per stick and they could get a release based upon what they would have paid if they had been a participating manufacturer.
Assemblywoman Giunchigliani asked who had set up the reimbursement policy and Mr. Albrecht said it had been done by the authors of the MSA and he and the other members of the NAAG were attempting to correct the problem.
Assemblyman Joe Hardy, District No. 20, introduced himself and referred the Committee to Exhibit H. Dr. Hardy explained that his goal was to help the children and people of Nevada avoid second-hand smoke exposure and he prefaced his remarks by saying that the amendment he proposed would be a government revenue neutral bill having neutrality on the industry in place and the cottage industry of child care.
Dr. Hardy said the amendment dealt with video arcades and child care in a mock-up form and conceptually on public buildings. Dr. Hardy said the first goal would be to preclude smoking in video arcades as defined in Nevada Revised Statutes (NRS) of ten machines or more, and preclude smoking in child care facilities. He said private homes that were the personal residence of the person babysitting fewer than five children would be exempt from the bill. Dr. Hardy said the amendment on public buildings was conceptual in that it would allow one of the entrances to be the outside smoking area, thus allowing those who wished to avoid smoke exposure to enter one of the other entrances. Dr. Hardy said the amendment would also allow convention centers to have smoking areas appropriately ventilated while providing a smoke free environment to the participants in general. The amendment would also allow for local entities or federal entities that were correctional facilities, such as the Washoe County jail system, to set their own policies for a smoke free environment. Dr. Hardy said airports could provide smoking areas with separate ventilation systems to prevent smoke exposure to the public and, likewise, the airports could choose to be smoke free, as had the Reno Airport.
Dr. Hardy reflected back on the title of his proposed amendments, which was “Tolerance and Consideration.” He said the title referred to tolerance from non-smokers and consideration from smokers. Dr. Hardy added that the proposed amendments had been agreed upon by the Clark County Health District, the American Heart Association, the State of Nevada Employees Association, the Retired Chapter of the State of Nevada Employees Association, Local 4041, the American Cancer Society, and the amendments were not opposed by Philip Morris, Lorillard Tobacco Company, or M. J. Reynolds Tobacco.
Mr. Peter Krueger, representing the Nevada Petroleum Marketers Convenience Store Association, introduced himself. Mr. Krueger said he supported the current language of A.B. 460 prior to any amendments. Mr. Krueger said that as retailers the Association was in opposition to any licensure fee at the retail level. He said that with increases being proposed in the tobacco tax any additional fee would be an economic burden to retailers who were already faced with an increased tax and competition with the Internet and other out-of-state sales venues that allowed people to purchase tobacco other than at local “brick and mortar” type stores.
Assemblywoman McClain asked for a definition of “delivery sale” as shown in Section 28 of A.B. 460. She said she wanted to be certain that Internet tracking would not be done against some private citizen who chose to make a purchase over the Internet. Ms. McClain said that if there was to be an attempt to track private citizens she did not understand how that could be enforced.
Mr. Albrecht pointed out that Section 13 defined a “delivery sale” for purposes of Sections 28 to 32.
Assemblywoman McClain asked how the section would be enforced. Mr. Albrecht responded that it would be enforced against the seller, not the individual citizen.
Assemblywoman McClain stated that the sellers did not comply with the Jenkins Act and she did not see why they would comply with the state of Nevada’s laws. Mr. Albrecht said that the sellers did not comply with the Jenkins Act and Nevada would start by looking at Internet sites that sold into Nevada. He said the first step was that the sellers would have to be licensed and Mr. Albrecht said he hoped to work with the Department of Taxation to get the Internet sellers licensed and bring them into compliance.
Assemblywoman McClain opined that the effort was futile and an infringement on personal rights.
Assemblyman Beers asked if Mexican or Antiguan Internet sellers could be licensed. Mr. Albrecht responded that they could be licensed if they sold cigarettes into the state of Nevada. Mr. Albrecht said that currently he was suing those companies in Greece. Mr. Albrecht said he was having trouble serving the companies and that was why the provisions contained in A.B. 460 were needed.
There being no further testimony on A.B. 460, Chairman Arberry closed the hearing on A.B. 460.
Chairman Arberry adjourned the May 23, 2003, Committee on Ways and Means hearing, which had been previously recessed, and opened the hearing on A.B. 550.
Assembly Bill 550: Increases certain fees collected by State Registrar. (BDR 40-1357)
Mr. Stevens explained that A.B. 550 had been drafted based on the closings of the money committees. He said it would provide a $2 increase in the cost of birth certificates and charge an additional $1 for death certificates. Mr. Stevens said the increases had been built into the budget closings and status sheets.
Chairman Arberry asked if there was any testimony on A.B. 550 and there being none, he closed the hearing on A.B. 550 and opened the hearing on S.B. 324.
Senate Bill 324 (1st Reprint): Makes various changes concerning Veterans’ Home Account and Gift Account for Veterans’ Home. (BDR 37-305)
Assemblyman Joe Hardy, District No. 20, announced that he supported S.B. 324 and there was a Veterans’ Home in Boulder City, Nevada. Dr. Hardy said the proponents of the bill had shared with him the rationale for the bill and the attempts made to open the gift account for such amenities as vans and wheelchairs and other things needed by the patients in the nursing home.
Assemblyman Parks added that the gift account was not necessarily for expensive items, it was also for some of the lesser essential items for which individuals had an ongoing need. Mr. Parks said the gift account was intended for the improvement of the patients’ quality of life and a major point on the gift account was that it stayed intact at the end of the fiscal year; it would not revert back to the General Fund.
Assemblywoman Chowning said the gift account was very important for patients. Some patients came with family support and extra funds and some did not. Some patients needed items such as a bulletin board for the patient’s room for cards, cheery notes, or items of business. Mrs. Chowning said that when people gave donations to the veterans they did not expect that the funds would be deposited in the General Fund. Mrs. Chowning asked if the bill would apply to the funds that came from the license plates as well. She said that when people purchased the license plates for an extra fee they believed the funds would go directly to the veterans themselves.
Assemblywoman Chowning said she did not know what the significance of the change of the word “Administrators” in the bill was.
Dr. Hardy explained that the word “Administrators” had been defined elsewhere as those people who had been designated to administer the individual account for those who were unable to administer their own accounts. Dr. Hardy said there was some legality of transfer and fiduciary responsibility implied in that word. Dr. Hardy said the definition might not be in S.B. 324 but the word had been addressed in other testimony in other places.
Chairman Arberry asked if there was any additional testimony on S.B. 324 and there being none, he closed the hearing on S.B. 324 and opened the hearing on S.B. 249.
Senate Bill 249 (2nd Reprint): Creates Nevada Commission on Minority Affairs. (BDR 18-766)
Mr. John Wagner, representing the volunteer group of the Nevada Republican Assembly, introduced himself. Mr. Wagner opposed the bill for one reason and one reason only. Mr. Wagner stated that we were one nation under God indivisible. He said he believed the bill would have the effect of dividing people. Forty years ago the bill would have been necessary but was not necessary today because the nation did not have the problems it had 40 years ago. Mr. Wagner said Nevada did not need a Commission on Minority Affairs when it did not have a Commission on Majority Affairs. Mr. Wagner asked if women would be included in the bill. He said he did not like to divide people by race. Mr. Wagner said that when he was asked in a questionnaire for his race he always wrote down “human.” Mr. Wagner stated that he hated discrimination as much as anyone in the room and since he was older than most people in the room he said he had probably been against it longer than anyone in the room. Mr. Wagner said he thought the bill appeared to divide the nation or divide the state and he did not like anything that divided the state as one people and one race.
Chairman Arberry said he agreed with Mr. Wagner but being a minority he wished all the things Mr. Wagner had just said had been true. Chairman Arberry said that racism still existed and was prevalent. He said he wished Mr. Wagner could “walk in his skin” some days and he would experience racism.
Mr. Wagner responded that he hoped what Chairman Arberry discussed was not prevalent. Mr. Wagner said that when he had been in the armed service in 1957 he nearly got into a fight with a man from the southern United States because the man had made some disparaging remarks at “chow time.” Mr. Wagner said he provoked the man as much as he could in an attempt to have him turn against Mr. Wagner so he would have been justified in case he was court-martialed for his actions. Mr. Wagner said he felt very strongly about discrimination and he hated it wherever it happened to exist. Mr. Wagner said he did not care whether the discrimination was based upon skin color, women, or people of religion; he said there was no place for it.
Chairman Arberry said Mr. Wagner’s words were encouraging and he wished everyone thought the way Mr. Wagner did. Chairman Arberry thanked Mr. Wagner for his testimony.
Assemblywoman Giunchigliani asked if Mr. Wagner had testified against S.B. 249 in the Senate. Mr. Wagner said he did not testify in the Senate.
Assemblywoman Giunchigliani said the Assembly had changed the bill in the Committee on Elections and Procedures.
Mr. Wagner said that 20 members of the Senate had co-signed on the bill and he could understand the reasoning for co-sponsoring the bill. Mr. Wagner said he would like to see an end to discrimination although he did not think the bill was needed and there might be other avenues to take care of the problem. Mr. Wagner said that, for example, a minority business could go to the Small Business Administration (SBA) for a loan. Mr. Wagner said that minority businessmen should be given the same consideration as anyone and if that did not happen, there should be action taken against the SBA or the bank that discriminated. Mr. Wagner said there were laws against discrimination and those laws should be enforced.
Assembly Bill 544: Establishes for next biennium amount to be paid by this state for group insurance for certain public employees, public officers and retired public employees. (BDR S-1342)
Mr. Mark Stevens, Assembly Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, explained that A.B. 544 would provide for the monthly contributions for group insurance on behalf of state employees in each year of the biennium and also set the base rate for the subsidy for state retirees. Mr. Stevens said those were the amounts that had been built into The Executive Budget and in the budget closings. The Senate and Assembly closed the Public Employees Insurance Budget without commingling state and non-state participants and, therefore, the bill could go through without amendment.
Assemblywoman McClain asked if the bill included funding for the budget mistake that had been made in calculating the state retirees’ contribution. Mr. Stevens said the bill would provide for the subsidy for state retirees that was built into The Executive Budget. He said that in a separate item within the budget closings there was approximately $1.6 or $1.8 million additional state dollars that would be necessary to take care of the mistake.
ASSEMBLYWOMAN LESLIE MADE A MOTION TO DO PASS A.B. 544.
ASSEMBLYWOMAN CHOWNING SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Assembly Joint Resolution 16: Proposes to amend Nevada Constitution to provide that State Treasurer is ex officio State Controller. (BDR C-1109)
Mr. Stevens, Assembly Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, said A.J.R. 16 proposed to amend the Nevada Constitution to provide that the State Treasurer is the ex officio State Controller. The resolution would combine the Treasurer’s and Controller’s Offices. The State Controller’s Office would be eliminated and the Controller’s staff would be placed in the Treasurer’s Office.
ASSEMBLYWOMAN GIUNCHIGLIANI MADE A MOTION TO DO PASS A.J.R. 16.
ASSEMBLYWOMAN McCLAIN SECONDED THE MOTION.
Mr. Beers commented that he would be voting no on the resolution because of his concerns over the internal controls that he had expressed in the past. Mr. Beers said he believed the resolution was a recipe to be “ripped off.”
Assemblywoman Chowning said she had concerns about the accountability and oversight needed by the offices and for that reason she would be voting no on the resolution.
Assemblywoman Gibbons said she also would be voting against A.J.R. 16.
Chairman Arberry announced that A.J.R. 16 would be held.
Assembly Bill 490 (1st Reprint): Revises provisions governing mortgage brokers and mortgage agents. (BDR 54-998)
Mr. Mark Stevens, Assembly Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, said there were some items that needed to be changed in A.B. 490. He said there were some fees that were currently deposited in the General Fund, which would need to be deposited in the Division for Mortgage Lending if a proposed amendment was adopted. Mr. Stevens said the proposed amendments were 85 pages long and he had not had an opportunity to review the amendments. Mr. Stevens suggested that the bill be held until staff could review the bill.
Chairman Arberry held the bill and opened the hearing on A.B. 521.
Assembly Bill 521: Expands title and duties of Section for Control of Emissions from Vehicles of Department of Motor Vehicles to include enforcement of certain matters relating to use of special fuel. (BDR 43-1273)
Mr. Stevens said the bill related to special fuels and it was currently the administrative responsibility of the Department of Public Safety. The bill would also allow the Department of Motor Vehicles to regulate special fuel matters as well. Mr. Stevens said he was unsure whether there was an amendment to the bill or not.
Assemblyman Hettrick said he had a note that said the Department of Motor Vehicles should be given authority because they did not have the authority in certain places but they did not need the money, therefore, the fiscal impact should be removed and the bill amended to say the Department would have the authority to inspect for special fuels.
Assemblywoman Chowning said that was correct and an amendment would give the Department the ability to receive federal funds. She said the Department’s representatives said that the amendment would eliminate the fiscal note and more dollars could be captured because now the state was losing millions of dollars because the enforcement was not being done.
ASSEMBLYMAN PARKS MADE A MOTION TO AMEND AND DO PASS A.B. 521.
THE MOTION WAS SECONDED BY ASSEMBLYMAN HETTRICK.
THE MOTION CARRIED UNANIMOUSLY.
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LEGISLATIVE COUNSEL BUREAU (2631)
NEVADA LEGISLATURE INTERIM (2626)
Mr. Lorne Malkiewich, Director, Legislative Counsel Bureau, introduced himself. He said he was there to propose closing the Legislative Counsel Bureau budget (2631) and the Interim Nevada Legislature budget (2626).
Mr. Malkiewich said Budget Account 2626 contained six employees and there were no additions or upgrades proposed. Mr. Malkiewich said he believed that the budget should be closed as recommended by the Governor.
Mr. Malkiewich referred the Committee to Exhibit I, “Adjustments to the Budget of the Legislative Counsel Bureau.” He said he proposed adjustments in the budget as follows:
Mr. Malkiewich said that A.B. 641 of the 2001 Legislative Session amended the Multi-State Highway Transportation Agreement to provide that the chairmen of the two transportation committees served as the representatives of the state of Nevada. That bill included a $7,500 Highway Fund appropriation and since there was no corresponding bill in the 2003 Legislative Session it was not included in any budget. Mr. Malkiewich said he proposed adding it to the Legislative Commission budget because it was similar to other out-of-state travel for state legislators.
Mr. Malkiewich asked for the approval of the Committee to make non-dollar adjustments approved by leadership when possible for upgrades in some positions. Mr. Malkiewich said a review would be done on several divisions to see if adjustments should be made in some of the positions. He said the divisions would have to absorb the costs and the proposals would be reviewed by leadership before making any adjustments.
Assemblywoman Chowning said that she continually heard that the In$ite Program was not effective or paid attention to because the format was totally different than the accountability reports that the school districts used. She said she had been told that the program was perceived as a carryover out of respect for a deceased fiscal analyst. Mrs. Chowning said she believed that even that deceased analyst would not agree with the program because it served no useful purpose. Mrs. Chowning said she wanted to know why the program continued to be funded when it was not being used. Mrs. Chowning said she believed that with the oversight and the evaluation by the Legislative Counsel Bureau someone might finally see the non-use of the program.
Assemblywoman Chowning said she agreed with Mr. Malkiewich’s proposed Highway Fund appropriation but she believed it was the transportation “agreement” rather than “association.”
Mr. Stevens said the In$ite system had been in place for three or four years and there had been some resistance to completing the reports because it took expenditures down to the individual school level. Mr. Stevens said there had been some problems in the first biennium but he believed most of the reporting problems had been resolved. Mr. Stevens said the Department of Education had not been enthusiastic about the program but he believed the Department was being won over. Mr. Stevens stated that the program was useful but the Committee members would have to make that decision. He said that over time the program would provide a consistent manner in which to review expenditures by schools. Those changes would be apparent over time and if the program was stopped now the changes over time would not be able to be analyzed. Mr. Stevens said he did not work with the reports directly every day but he believed that over time it would be a more useful tool each session that it was used. Mr. Stevens said the In$ite system had been discussed at length during the Legislative Committee on Education during the interim period. He said that the committee took a hard look at the reports and received progress reports on how the reports were being utilized. Mr. Stevens said the Committee would have to choose whether it wanted to continue the In$ite system.
Assemblywoman Chowning said she would look at the reports and she did agree with the extra degree of oversight that would be provided.
SPEAKER PERKINS MADE A MOTION TO CLOSE THE BUDGET WITH STAFF RECOMMENDATIONS.
ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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Senate Bill 249 (2nd Reprint): Creates Nevada Commission on Minority Affairs. (BDR 18-766)
Senator William Raggio, Washoe County Senatorial District No. 3, introduced himself. Senator Raggio said the bill had been introduced at the request of various minority interests and he was unsure if those groups were aware that the bill was being heard. Senator Raggio said the bill was a response to continuing requests from representatives of minority communities in the state who wanted to create a Commission on Minority Affairs. Senator Raggio stated that the bill was a small start by creating a Commission although it was not funded. He said he believed the Commission might be able to receive funding from other sources. Senator Raggio said the bill attempted to provide some authority as a Commission and outlined the purposes that the minority interests felt were important.
Senator Raggio said the bill had been amended to provide more specific studies. For example, Section 6, subsection 3, provided for the availability of employment for minorities and the manner in which minorities could be encouraged to start and manage businesses. He thought the amendments were commendable and he supported the amended version of the bill. Senator Raggio said that with the growth in the state and the growth in minority communities the minority groups were entitled to have special recognition and he and the Senate as a whole supported the bill.
Chairman Arberry asked for additional testimony on S.B. 249 and there being none, he closed the hearing on S.B. 249 and opened the hearing on Budget Accounts 101-3243, 101-3228, and 101-3230.
DEPARTMENT OF HUMAN RESOURCES
WELFARE ADMINISTRATION (101-3228)
TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (101-3230)
MEDICAID (101-3243)
Mr. Stevens said there were a few items that needed to be brought to the Committee’s attention for guidance on how to proceed.
Mr. Stevens said that in the Medicaid Program there was an error in the information in a spreadsheet that had been produced by the Division of Health Care Financing and Policy. Mr. Stevens said Mr. Steve Abba found the error as he was inputting the figures into the Basin Accounting System. Mr. Stevens said the error was a negative impact on state General Funds of $975,960 in the first year of the biennium and $484,557 in the second year. Mr. Stevens said that based on the way the budgets were closed, it should have been included in the budget closings at that time if that error in the spreadsheet had not been made.
Mr. Stevens reported that the other issue was in the Welfare Administration account. He said the Division of Information Technology (DoIT) cost numbers had been input and there were reductions in many of the costs because of the reductions to the Governor’s recommended expenditures within DoIT. Mr. Stevens said that the reduction was a particularly large one and he wanted to advise the Committee because it could potentially be used to offset General Funds if the Committee chose to do so. Mr. Stevens said in that particular case there was an adjustment downward of $642,217 in the first year and $333,856 in the second year of the biennium. Mr. Stevens said that would be a reduction in TANF revenue that could remain as a reserve in that particular account or could be used to offset General Funds because General Funds were included in a much larger degree in the 2003 Legislative Session because the TANF reserve had been exhausted. Mr. Stevens said the funds could be used to partially offset the Medicaid increase or the funds could be left in reserve and the Medicaid increase absorbed through additional General Fund appropriations. Mr. Stevens asked the Committee for guidance on how to proceed.
Assemblywoman Giunchigliani cautioned the Committee against lowering the General Fund because the whole situation would be started again. She said Nevada was still 51st in the nation in Medicaid even with what had been done in budget closings. Assemblywoman Giunchigliani asked if funding could be restored to the Intergovernmental Transfer (IGT) Account and if so, could that assist with the reimbursements to doctors in southern Nevada.
Mr. Stevens advised Assemblywoman Giunchigliani that those were two unrelated issues. He said the Medicaid program involved the IGT Account. The current situation required additional General Fund dollars of approximately $1.5 million just to fund the budget closings due to the mistake. Mr. Stevens said that potentially that cost could be reduced in the Welfare Administration Account, which would be unrelated to the current issue. He said the DoIT assessments had reduced those costs by approximately $1 million over the biennium. Mr. Stevens said that would be TANF reserve but the General Fund had decreased dramatically in that particular account due to heavy use of the TANF reserve during the current biennium. He said General Funds could be saved but did not have to be and if the Committee chose to do that some of the cost would be offset. If the Committee chose to leave the funds in reserve the Committee would need to add $1.5 million in Medicaid over the biennium in General Funds.
Assemblywoman Giunchigliani said she was concerned about reducing TANF any further.
Assemblywoman Leslie asked if there was a possibility of using the new additional Medicaid funds that had just been appropriated by Congress.
Mr. Stevens responded that the new Medicaid funds could be used. He said there were any number of ongoing discussions on the use of those funds including that purpose or a number of other purposes. Mr. Stevens said the Committee could make that decision now and use additional funding if it wanted to. Mr. Stevens said that at some point in time in the next few days the Committee would have to determine how to use the additional federal funds that totaled approximately $68 million in flexible funds. Mr. Stevens said from the reports that he had received from national organizations and discussing it with the Legislative Counsel the funds could be used very flexibly and could be used for many purposes. He said the other portion of that was approximately $35 million or more over fiscal year 2003 or 2004 in increased Medicaid federal participation rates and that was what could be utilized in the current case. Mr. Stevens said the amount of money or the percentage of federal funds that were coming from the federal government to provide Medicaid dollars to the state would go up temporarily in the final two quarters of fiscal year 2003 and the first three quarters of fiscal year 2004.
Assemblyman Beers said that Nevada was 51st in Medicaid and that was per capita. He said the reason Nevada ranked so low was because Nevada had the third lowest rate of poverty in America. When measured on a per recipient basis Nevada actually led the western states and was considerably higher than California.
ASSEMBLYWOMAN GIUNCHIGLIANI MADE A MOTION TO TAKE $1.5 MILLION FROM THE NEW FUNDING THAT WAS TO BE RECEIVED FROM THE FEDERAL GOVERNMENT FOR MEDICAID.
Mr. Stevens said his staff would be able to build in a line item for the new federal funds but at some point in time the percentage of federal funds would have to be increased and that would free up some state funds. He said there had been proposals to let that flow into the IGT account to save General Funds, and any other number of proposals. Mr. Stevens said he could make it work depending upon what the Committee wanted to do.
Assemblywoman Giunchigliani asked Mr. Abba if the first federal funds would be received by September 2003. She asked if the funds would have to be taken from TANF and then reimbursed later.
Mr. Steve Abba, Principal Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, said the TANF money would be freed up just because of the budget action with the DoIT cost allocation. He said that was free money to be used to help offset the cost or it would be used and obligated and would be placed in the TANF reserve. Mr. Abba said there was currently no TANF reserve. Mr. Abba said the TANF funds were available as they were within the scope of the block grant that was anticipated for the upcoming biennium. Mr. Abba said the funds would either be placed in reserve and then used for a purpose later or the General Fund could be reduced.
Assemblywoman Giunchigliani asked if that would cover the entire shortfall of the error. Mr. Abba responded that it would cover the majority of the error.
Assemblywoman Giunchigliani asked if the $976,000 was used could it later be replaced into the TANF reserve. She wondered if the federal dollars, when they were received, could be paid back into the TANF reserve.
Mr. Abba stated that the federal match participation money that had been approved by Congress would strictly be used for the Medicaid budget.
ASSEMBLYWOMAN GIUNCHIGLIANI MADE A MOTION TO ACCEPT THE FEDERAL DOLLARS AND OFFSET THE GENERAL FUND ERROR UTILIZING THE FUNDS.
THE MOTION WAS SECONDED BY ASSEMBLYWOMAN LESLIE.
THE MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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Mr. Tony Sanchez asked if there would be any action taken on S.B. 473 and Chairman Arberry said no.
There being no further business, Chairman Arberry adjourned the meeting at 11:01 a.m.
RESPECTFULLY SUBMITTED:
Lila Clark
Committee Secretary
APPROVED BY:
Assemblyman Morse Arberry Jr., Chairman
DATE: