MINUTES OF THE meeting
of the
legislative commission’s budget subcommittee
Seventy-Second Session
January 28, 2003
The Legislative Commission’s Budget Subcommitteewas called to order at 8:45 a.m., on Tuesday, January 28, 2003. Chairman Morse Arberry Jr. presided in Room 4100 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.
ASSEMBLY COMMITTEE MEMBERS PRESENT:
Mr. Morse Arberry Jr., Chairman
Mr. Walter Andonov
Mr. Bob Beers
Mrs. Vonne Chowning
Mrs. Dawn Gibbons
Mr. Josh Griffin
Mr. Lynn Hettrick
Ms. Sheila Leslie
Mr. John Marvel
Ms. Kathy McClain
Mr. David Parks
Mr. Richard Perkins
ASSEMBLY COMMITTEE MEMBERS EXCUSED:
Ms. Chris Giunchigliani
Mr. David Goldwater
SENATE COMMITTEE MEMBERS PRESENT:
Senator William J. Raggio, Chairman
Senator Barbara Cegavske
Senator Bob Coffin
Senator Bernice Mathews
Senator Raymond D. Rawson
Senator Dean A. Rhoads
Senator Sandra Tiffany
STAFF MEMBERS PRESENT:
Mark Stevens, Assembly Fiscal Analyst
Steve Abba, Principal Deputy Fiscal Analyst
Gary Ghiggeri, Senate Fiscal Analyst
Bob Guernsey, Principal Deputy Fiscal Analyst
Rick Combs, Deputy Fiscal Analyst
Larry Peri, Senior Program Analyst
Bob Atkinson, Program Analyst
Julie Brand, Program Analyst
Carol Thomsen, Committee Secretary
Anne Bowen, Committee Secretary
Chairman Arberry called the Subcommittee to order, and recognized P. Forrest “Woody” Thorne, Executive Officer of the Public Employees’ Benefits Program (PEBP).
PUBLIC EMPLOYEES’ BENEFITS PROGRAM -
PEBP 1-9 – VOLUME III
Mr. Thorne called the Subcommittee’s attention to the booklet entitled, “Public Employees’ Benefits Program, FY2003 & 2004 Budget, Accounts 1338 & 1368,” Exhibit C, which was displayed for the audience via a PowerPoint presentation. He indicated he would review a number of items for the Subcommittee, which included:
· Insurance economics
· The health benefits environment today
· State of Nevada trends
· PEBP operation milestones
· The budget request
· Future directions
According to Mr. Thorne, the PEBP was the state’s insurance company for medical, dental, and vision coverage for employees and retirees under Budget Account 1338. In that capacity, it faced the same economic risk factors as private insurance companies for the self-insured products, except the profit. Mr. Thorne explained that health benefits were offered under both self-funded and fully insured models, with the vast majority of health benefits funded under the self-funded model. He advised that the PEBP was fully insured for its life, disability, and Health Maintenance Organization (HMO) products.
Mr. Thorne noted that self-funded plans were exposed to the financial risk of claims and, typically, 80 percent of the costs were attributable to 20 percent of the participants. He explained that from July to December 2002, 54 percent of the costs in Nevada’s self-funded plan were attributable to 2 percent of the participants. Mr. Thorne indicated that self-funded plans mitigated the risk in a number of ways, one of which was to enlarge enrollment in order to spread the risk of high claims across a larger pool of premium dollars. The PEBP included both state and non-state groups, with each of those groups rated separately, which subjected the smaller non-state group to dramatic premium fluctuations. According to Mr. Thorne, a second factor to mitigate the risk was purchase of “reinsurance“ or “stop-loss insurance.” However, for the PEBP, that option did not appear to be cost-effective, and was not typically done for a plan of its size. In addition, explained Mr. Thorne, the reinsurance market had been tight for the past five years, and following the events of September 11, 2001, the market had become cost-prohibitive.
Mr. Thorne indicated that the risk could be mitigated by funded reserves that would absorb any spike in claim costs. Unfortunately, program losses in the state’s self-funded program over the past 18 months had depleted the program’s reserves, and it faced significant cash flow issues every month. Mr. Thorne indicated the estimated funded reserve at the end of FY2003 would be $3.9 million compared to a recommended reserve level of $24.9 million. The budget request for Budget Account 1338 included $6.9 million in reserve restoration each year, which would result in a 61 percent funded reserve at the end of the biennium. Mr. Thorne explained that over the next four years, the goal was to fully fund the reserve.
Mr. Thorne advised the Subcommittee that from an operational standpoint, the industry standard was an approximately 13 to 14 percent expense ratio, exclusive of profit, for self-funded plans. In other words, 86 percent to 87 percent of the costs would be attributed directly to claims. Mr. Thorne emphasized that the cost of claims was what drove premium costs, and within the Public Employees’ Benefits Program (PEBP), 90 percent of the self-funded plan’s costs were directly attributable to claims. He noted that a fully insured plan would shift that risk to the insurance carrier. According to Mr. Thorne, Health Maintenance Organization (HMO) products were only available for the PEBP participants in southern Nevada, and actual enrollment was 38 percent of the participants that lived in that geographical area. Further, he explained that cost increases for fully insured products were approximately 10 percent per year, and that applied to HMO products, which were only available in the large metropolitan area in southern Nevada. Mr. Thorne stated that life and disability products were fully insured for all participants of the plan.
Mr. Thorne advised that the chart on page 6 of Exhibit C demonstrated that operating and administrative costs, along with funding the reserve, represented approximately 11 percent of the total budget, with 89 percent allocated to claims and premiums to HMO and insured products. The cost increases or “trend” that the PEBP was facing was comprised of a number of items:
Chairman Arberry asked Mr. Thorne to elaborate regarding cost increases brought about by government mandates. Mr. Thorne explained there were no specific government mandates in existence at the present time, however, over the course of time that was one of the factors that entered into the “trend.” For example, he explained that a mandate could require certain coverage, or certain levels of coverage for mental health and substance abuse treatment. According to Mr. Thorne, a government mandate to include such treatment would have an impact on cost increases. The aforementioned listing was offered as an example of the elements that caused cost increases (trend).
Mr. Thorne disclosed that in the health benefits environment today, in accordance with the Segal Health Plan Cost Trend Survey, cost increases reflected a 5-year trend that was disturbing for self-funded plans. The rate of increase was on the rise each year and, in fact, the rate of increase had more than doubled since 1999. Mr. Thorne noted that two elements at opposite extremes were: (1) the prescription drug trend, which was expected to be almost 20 percent in 2003, with over half of that increase because of utilization; and (2) the dental Preferred Provider Organization (PPO) trend was projected at 6.5 percent, which was almost entirely attributable to inflation, as the dental PPO utilization rates were relatively stable and the maximum benefit was fixed, unlike the medical plan. Mr. Thorne pointed out that HMOs were facing similar rates of growth in costs. It was predicted that the western portion of the country would experience higher than expected trends, because managed care in the West had experienced a much higher participation rate. With the erosion of that rate over the past several years, and because of pressure on managed care organizations to ease restrictions of access to care, Mr. Thorne explained that HMOs would face higher rates of increase.
In order to deal with the problem and control cost increases, Mr. Thorne stated that employers would be faced with possible plan design changes that would shift the cost to employees and/or reduce the overall benefits. Another avenue that employers might consider would be to restructure vendor and HMO contracts. Mr. Thorne stated that a prime example was the action taken by the California Public Employees’ Retirement System (CalPERS), which over the past two years had drastically reduced the number of plan options available to participants in an effort to leverage additional purchasing power and control costs. Another option for employers would be the introduction of consumer‑based or consumer-driven health plans. According to Mr. Thorne, some employers had negotiated lower wage increases to offset the cost of active employee benefits and to finance the long-term cost of retiree benefits. He indicated that a human resource strategic approach would include review of the total compensation package and what would be necessary for employee retention.
Mr. Thorne emphasized that it was important to note that nationally, there was a continued increase in cost sharing by participants at all levels, from “Employee Only,” to “Retiree w/Family,” as depicted by the chart on page 12 of Exhibit C. Another approach to deal with rising costs was the “Cafeteria Plan,” a form of defined contribution where the employer provided a predetermined amount of money and employees purchased health care coverage from a list of options. Mr. Thorne pointed out that the employer contribution would not necessarily correlate with future increases in health care costs.
Another option, stated Mr. Thorne, was consumer-driven health plans, where the employer provided a predetermined contribution, either to the overall cost of coverage or to an account to which the employee had access to pay for care. That was known as a health care reimbursement account, and Mr. Thorne explained that such plans had experienced a boost over the past year, since the Internal Revenue Service (IRS) had ruled that employer money placed in a health care reimbursement account could be rolled over for use in future years, unlike other medical reimbursement accounts which operated on a “use it or lose it” basis. Mr. Thorne indicated that within such a plan, the employee was responsible and accountable for health care and health coverage decisions. The employer provided electronic health (e-health) tools and resources for use by employees. The plan design and option pricing supported employee accountability, and could be structured as a mechanism for pre-funding retiree benefit costs.
Mr. Thorne advised there were a number of important factors that should be considered when the budget request for the Public Employees’ Benefit Program (PEBP), Budget Account 1338, was reviewed. He pointed out that demographics appeared to be the key to the increase in costs, and also the level of claim costs that faced the program. The bulk of the covered population was over 40 years of age, and of the primary insured population, i.e., employees and retirees, only 22 percent were below the age of 40. Mr. Thorne noted that when dependants were included, 41 percent of the participants were below the age of 40 (page 16, Exhibit C). Those statistics had important ramifications on claims costs. Mr. Thorne indicated that the distribution between state and non‑state populations, as depicted on page 17 of Exhibit C, detailed the dramatic difference between the participation levels of state versus non-state employees and retirees.
Mr. Thorne informed the Subcommittee that the aggregate self-funded claims history showed a significant increase over the past two years, due in part to the loss of Health Maintenance Organization (HMO) options for participants in northern Nevada. The primary user of the self-funded plan, and the highest in both aggregate and average dollar costs, was the primary employee or retiree, as pointed out by the chart on page 19, Exhibit C. Mr. Thorne stated it was interesting to note that the category for “Male Spouses” depicted the highest average claim costs, however, the lowest total dollar amount. That statistic came about because of the low number of male spouses covered by the plan, which kept the aggregate dollar cost the lowest of any particular group; however, that category also had the highest average claim of any of the participant groups.
In review of the rate changes proposed for January 2003, Mr. Thorne noted there had been substantial discussion regarding the suggestion that participants with dependents should pay more, however, in review of the actual claim costs, it became apparent that children were the second lowest group for the actual claim costs, and the lowest group for average amount of claims. Mr. Thorne stated that the age range of insured children indicated that the bulk of those covered were in the 4- to 14-year-old age group, which tended to incur lower costs from a claim payment standpoint.
Mr. Thorne indicated that the chart on page 20 of Exhibit C delineated the distribution of participants between the Public Employees’ Benefits Program (PEBP) self-funded plan and Health Maintenance Organizations (HMOs). In 2001 and 2002 forward, there was a significant drop in HMO participation, again because of the loss of the HMO option in northern Nevada. Mr. Thorne remarked that a review of the totals, for both the self-funded costs and HMO premiums, revealed that as the aggregate self-funded costs rose, the amount allocated to HMOs continued to drop, and prescription drug allocation expanded slightly in its relative share.
In reviewing the history of the net income and of the funded reserve for the plan since FY1999 (page 22, Exhibit C), Mr. Thorne noted the $26 million additional funding provided by the 1999 Legislature, and the net income and increase in funded reserve for that year. He also noted that FY2000 and FY2001 produced no net income, but appropriate reserve levels were maintained. Mr. Thorne reported that beginning in FY2002 the PEBP discovered there were significant problems with its claims administrator, and an effort was made to finalize claims in a timely manner and to clean up the claims backlog. That, combined with extremely large claim costs, had profoundly affected the self-funded plan in FY2002, and produced not only a significant net loss, but also a significant erosion of the funded reserve. Mr. Thorne projected that even with the $18 million subsidy approved by the Legislature via S.B. 3 of the Eighteenth Special Session, the self-funded plan would end the current fiscal year with a projected net loss and a funded reserve balance of $3.9 million. Had it not been for that $18 million subsidy, Mr. Thorne opined that the plan would not have remained solvent through the beginning of the present legislative session.
Chairman Arberry inquired what action the Board of the PEBP contemplated to ensure that the amount spent for the plan did not exceed the available resources over the upcoming biennium. Mr. Thorne replied that projections to carry the plan to the end of FY2003 and through the upcoming biennium had been reviewed in August 2002, and the Board’s request for funding would meet the trend and provide a gradual buildup of the funded reserves. Given the financial situation of the state, the Board did not believe it would be prudent to attempt to fund the entire reserve via a single allocation, as that would create a huge increase for either the state or the participants.
Mr. Thorne explained that the Board had devised a recommendation to add funding over the next four years in an effort to reach a fully funded reserve at the end of the fourth year. He indicated that when the Board reviewed rate and plan design at its March 2003 meeting, it would review a “laundry list” of options to ensure that the plan could remain within the constraints of the proposed funding package. Mr. Thorne observed that the Public Employees’ Benefits Program (PEBP), like many other employers, soon would not be able to afford the current level of health coverage. He reiterated that the Board would review a “laundry list” of benefit changes, rate changes, and cost sharing with participants to ensure that the program remained within the projections. According to Mr. Thorne, one issue of concern to the Board was that because of the low funding level of the reserve, it would not take a significant error in projections to place the plan in dire straights.
Chairman Arberry asked when the “laundry list” would be presented to the Legislature, to assist in the determination of funding needs. Mr. Thorne advised that the Board would make a decision regarding rate and plan design changes at its March 2003 meeting, and he would provide a copy of the “laundry list” to the Legislature at the same time it was available to the Board. Chairman Arberry inquired about the implementation time frame for the approved “laundry list” in an effort to produce possible cost savings. Mr. Thorne indicated that the Board would make its decision at the March 2003 meeting for implementation July 1, 2003.
Senator Tiffany asked why an employee would choose an HMO plan over the self-funded plan where the state paid 100 percent of the premium for employee coverage. Mr. Thorne pointed out that HMO plans, while more restrictive in access to care, incurred lower out-of-pocket expenses. Senator Tiffany noted that the Board would be reviewing the plan design, and asked whether the state would retain the self-funded plan, or if other options were under consideration. Mr. Thorne replied that the Board had reviewed other options, however, it appeared that the self-funded plan would be retained. Senator Tiffany asked about the average retirement age for state employees in relation to Medicare coverage. Mr. Thorne stated the current distribution contained approximately 60 percent Medicare-age retirees, and 40 percent early retirees. The expensive group was the early retiree, as most were retiring in their mid- to late 50s.
Senator Tiffany asked whether early retirees were given the option to pay premiums via an HMO plan until eligible for Medicare, and whether that would make a difference in the self-funded plan costs. Mr. Thorne indicated that 99 percent of the participating retirees of the self-funded plan, once they reached the appropriate age, were eligible for Medicare. There was a significant reduction in the premium and the out-of-pocket expense for retirees once they became eligible for Medicare. The PEBP did attempt a Medicare supplement approach to provide another option for the retiree group, however, there was no response to the Request for Proposal (RFP) for that option. Mr. Thorne stated a great deal of feedback had been received from potential carriers, and the RFP would be reworked and reissued. At the present time, early retirees had no other options for medical coverage, unless they went to work for a company that offered an insurance plan. Senator Tiffany opined that another option could be that the PEBP would not offer coverage to that group.
Senator Coffin thanked Mr. Thorne for the service provided by the PEBP. He asked why the Legislature could not review the aforementioned “laundry list” of options prior to March. Senator Coffin noted that both the state and the self-funded plan were experiencing financial difficulties, and he did not feel the Board would object if the “laundry list” were provided to the Legislature as soon as possible to facilitate necessary budget decisions. According to Senator Coffin, during prior discussions several options had discussed for retirees, and quick timing was important so retirees could protect their estates. Senator Coffin noted that the issue had been discussed during earlier meetings of the Interim Finance Committee (IFC), and perhaps some options could be presented to the Legislature prior to March. Mr. Thorne advised that the Board of the Public Employees’ Benefits Program (PEBP) expected to meet with the consultant to review options and arrive at a finalized list by mid‑February, and he expected the list to be completed during the third week in February. Senator Coffin stated he had been in the business for over 30 years, and knew that rates and adjustments were available from an actuary of an insurance company. That information might consist of approximate amounts for discounts, based on certain actions that would either increase or lower benefits, and he wondered why the process would take so long. Senator Coffin stated the time frame befuddled him and made him wonder whether the state was getting its monies worth from the consultants. For example, the PEBP should be able to pick up the phone and request costs for senior retirees if the plan offered that group a $5,000 deductible option.
Mr. Thorne explained that the “laundry list” of options and approximate percentages of savings was easy to acquire, however, what was difficult was updating the actual experience for the past six months in review of the rates, and what the actual rates would be if an option were implemented. Arriving at the estimate of what the percentage savings would be was an easy task. Senator Coffin agreed, and noted there was a manual available that could provide the discount or increase under normal circumstances. Senator Coffin did not feel the PEBP should rely upon the information from the most recent six‑month period, because claims were finally being adjudicated based upon the inaction of the former claims administrator, UICI Administrators. He asked whether those claims would be charged against the percentages for the most recent six months, which would distort those results. Mr. Thorne explained the figures for the past six months would be distorted on a paid basis because of the “lag” time between when the claims were incurred and when they were paid. That fact would be taken into consideration when the “trend” was computed, and the PEBP would not only review the past six months, but would update to the most recent 18 months.
Senator Coffin inquired when the “laundry list” of options would be available to the Legislature, in order to determine how funding should be allocated. Mr. Thorne reiterated that the “laundry list” would be ready during the third week of February.
Chairman Arberry asked whether Senator Coffin felt it would be fair to the Board if the Legislature received the “laundry list” first, simply because the Board was not scheduled to meet until March. That would allow the Legislature to scrutinize information that had not been subject to review by the Board. Senator Coffin indicated he felt the Board was acting very slowly by adhering to their regular meeting schedule rather than holding emergency meetings. Senator Coffin suggested that the Board expedite action rather than operating on its regular schedule; he did not believe it would be an insult to the Board if the necessary data were furnished to the Legislature to assist in securing funding for the plan.
Chairman Arberry conceded that Senator Coffin had a valid point, and asked whether the Board could hold an emergency meeting to review the “laundry list.” Mr. Thorne acknowledged that the chairman of the Board could call an emergency meeting, however, the process dictated that staff and consultants had to gather the information. He emphasized that staff was obligated to be fiscally responsible and utilize the most recently available claims information in development of rates to be implemented on July 1, 2003. In addition to preparation time, the information had to be formatted into viable options and presented to the Board. Mr. Thorne pointed out that there were a number of RFPs outstanding, and one in particular was the Preferred Provider Organization (PPO), where a decision had to be made by the Board at its February meeting. That decision would have a significant impact on what the rate and trend projections would be for the next year. Mr. Thorne stated there were a number of items that needed to be completed before the staff could establish a finalized “laundry list” of options, along with the proposal regarding reasonable rates that would fully fund the program. Until that time, the Board could call a meeting, but it would not have the necessary information available for consideration. Mr. Thorne reiterated that he would be happy to provide the information to the Legislature at the same time it was provided to the Board, once it was complete.
Chairman Arberry opined that there did not appear to be any urgency on the part of the Board, even though the PEBP had testified before the Eighteenth Special Session that there was some urgency to the situation. At the present time, however, it did not appear that the PEBP Board sensed any urgency and Chairman Arberry asked what could be done to address the crisis situation. Mr. Thorne assured the Committee that the Board of the Public Employees’ Benefits Program (PEBP) had been operating in an urgent mode.
According to Mr. Thorne, there had been a significant number of Request for Proposals (RFPs) issued regarding whether or not the PEBP could insure the programs, as opposed to self-funding. The Board attempted to maximize the benefit from vendors, which included HMOs, PPOs, Medicare supplement potentials, life, long-term disability, and other insurance coverage. Mr. Thorne emphasized that the PEBP was attempting to assemble the entire package, and the process had been running at full speed since August of 2002. He explained that the RFP process required time for development, release, and to allow for a reasonable time frame for companies to prepare and submit a response. The PEBP also required a reasonable time to evaluate the response and initiate the process to determine the final selection. Those selections would have a significant impact regarding the options available to the Board.
According to Mr. Thorne, the Public Employees’ Benefits Program (PEBP) had issued an RFP for a statewide Health Maintenance Organization (HMO), however, there had been no response to that RFP for the northern Nevada area. The PEBP attempted to secure a Preferred Provider Organization (PPO) to fully insure the self-funded plan via an RFP, however, not one response had been received. Mr. Thorne explained that once the plan’s claims experience was reviewed, no PPO wanted to assume the risk. The state was basically “stuck” with the self‑funded plan and would have to deal with the situation in the best possible manner.
Continuing his presentation, Mr. Thorne explained that the cash flow situation was a reflection of the claims costs, which had exceeded revenue and caused a reduction in the funded reserve (pages 22 and 23, Exhibit C). From the beginning of FY2001 through the end of calendar year 2002, there had been a significant reduction in the available cash balance. Mr. Thorne noted the PEBP was in a position where it had to manage cash on a day-to-day basis. At the end of the current fiscal year, the total in the funded reserve would be $3.9 million, which would cover approximately 6.5 to 7 days of average claims. Mr. Thorne disclosed that it would not take many large claims to exhaust that reserve, and it was incumbent upon the PEBP to carefully manage that cash reserve.
Per Mr. Thorne, the recent RFPs included:
Chairman Arberry asked how the PEBP advertised its RFPs. Mr. Thorne indicated the RFPs had been sent to major insurance carriers, and were advertised through the Purchasing Department. To his knowledge, that process covered all the major carriers within the state.
Speaker Perkins asked what had been included in the RFPs, and what the PEBP was asking for in those proposals. Mr. Thorne replied that the PEBP had sent out separate proposals for HMOs and PPOs. In both RFPs, a response was requested that would provide coverage, including all state and non-state active participants and retirees, with either a fully self-funded or a fully self-insured product. The only response was to the self-funded options, and Mr. Thorne noted that no HMO had offered a statewide plan, but rather had offered a fully insured HMO only in the southern Nevada area. Should the PEBP want to establish an HMO outside that geographical area, it would be required to self‑fund the program, and Mr. Thorne emphasized that was not financially viable to the plan. The PEBP was seeking an insured product and the RFPs had provided carriers with its plan of benefits, population statistics, and claims history over the past two years.
Speaker Perkins inquired whether the Board had given any thought to issuance of an RFP to take over the entire program, from administration to the groups that required insurance, and let another entity craft the product. Mr. Thorne responded that the PEBP had not offered an RFP that would provide for another entity to assume control of the entire operation and develop the plan design. If the PEBP were to take that action, there would be a number of different responses that would include different plan designs, which would make it very difficult to compare on an “apples-to-apples” basis to determine whether there was a response which met the needs, and to determine how responses compared to each other. According to Mr. Thorne, the RFPs had asked whether the plan design could be implemented on a fully insured basis and asked that carriers provide alternative options to the offered plan design. He emphasized that the design baseline was needed to achieve an “apples-to-apples” comparison to work from, in order to determine the difference, should carriers offer a lesser or modified plan design.
In essence, stated Speaker Perkins, it appeared that no request had been made for a carrier to review the entire operation and absorb it as a whole. Mr. Thorne replied that most of the PEBP’s duties, outside the payment of claims, were conducted as the employer function. The PEBP operated as the employer and administrator of the plan, and its duties included determination of eligibility, and keeping track of covered and non-covered employees, which would be reported to an insurance carrier on a fully insured basis, or to the claims administrator on a self-funded basis. Mr. Thorne indicated those duties would essentially remain the same.
Speaker Perkins opined that one challenge appeared to be the fact that there were so many pieces to the puzzle, particularly when a carrier would not assume responsibility for the complete puzzle. Certainly, health care costs were on the rise throughout the country, and Speaker Perkins indicated he would prefer to have Nevada’s plan be a model, rather than an out-of-control plan. The Board of the Public Employees’ Benefits Program (PEBP) would also face administrative challenges, and unless an offer was made to assume responsibility for all aspects of the plan, Speaker Perkins did not believe the situation would ever be under control. Rather than approaching the issue from the aspect of how much money was available and what programs could be offered for that amount, it appeared that the plan established the benefits and the PEBP continued to request additional funding from the Legislature each session to cover the costs of those benefits. Speaker Perkins emphasized that such actions could not continue, since the state simply did not have sufficient funds to continue to boost the revenues of the plan without correcting the problem.
Chairman Arberry added that Nevada did not want to face an “Enron” type of situation, where it appeared that funding was on a “runaway train.” The PEBP was considered a business, and the Subcommittee considered the budget as a business. Chairman Arberry indicated that as the Executive Officer, Mr. Thorne and his staff had a responsibility to the Board. He noted that somewhere along the line, someone had to accept the responsibility and submit a plan that would be a model rather than the same plan that continued to be problematic. Chairman Arberry asked that Mr. Thorne and the Board work toward presentation of a program that was viable.
Mr. Thorne assured the Subcommittee that both staff and the Board were attempting to develop a viable program, and had been reviewing the latest models of programs available in the industry, such as consumer-driven health plans. At its January 2003 meeting, the Board received a presentation on consumer-driven health plans. Mr. Thorne explained it would be easy to arrive at a model that would fit into the budget request, however, that would mean that costs would be shifted to the participants. According to Mr. Thorne, medical costs were rising, and the population of the plan included an age bracket that would incur the more costly types of claims. The question was how those claims would be covered, whether by the plan or the participant, and to what extent, along with a determination of the balance between the two. Mr. Thorne indicated those types of options would be presented to the Board at its March meeting, hence the “laundry list” of options, which, from a consumer‑driven health plan standpoint, were very new. Based on information received to date, the initial consensus was that costs would actually increase initially, and it would be several years before the plan realized a reduction. Mr. Thorne acknowledged that the Public Employees’ Benefits Program (PEBP) was not currently in a financial position to undertake such an option; the option was being offered for the first time to U.S. Postal workers and other federal workers as of January 2003. The Board would monitor that program over the next two years to ascertain the experience, and how that experience might assist in crafting a plan for participants of the PEBP.
Senator Rawson opined that the health care system in Nevada was facing a “meltdown,” with 60 percent of the health care costs paid through public entities. Every time Medicare, Medicaid, or the PEBP decided to either cut or shift options, it created a very profound effect on the entire market. Senator Rawson indicated that the Legislature needed to take the lead and have the courage to create policy rather than simply reacting to the trend of the market. He felt the issue was serious enough to consider the appointment of a subcommittee to determine a solution that would be far-reaching, even though it might be more costly. Senator Rawson believed the state needed to develop a comprehensive plan, rather than simply reacting each session, which usually costs the state $30 million. He offered his help in any possible way.
Chairman Arberry inquired whether the PEBP had implemented any cost-saving measures since January 2003. Mr. Thorne explained that some plan design changes went into effect in January 2003, and he called the Committee’s attention to page 27 of Exhibit C. In addition to the transition of the plan from calendar to fiscal year, with a six-month plan adopted for January through June 2003, plan changes effective January 1, 2003, included an increase in the maximum amount of out-of-pocket expense within the network from $2,000 to $2,400 per individual, and from $4,000 to $4,800 for family. For out-of-network, the increase was from $7,500 to $8,500 per individual and $15,000 to $17,000 for family. Mr. Thorne indicated the utilization review had been modified from on-site to telephonic, and a true Preferred Provider Organization (PPO) was implemented for the dental plan with differences between in-network versus out-of-network benefits. Those were the plan changes implemented as of January 1, 2003, and Mr. Thorne reiterated that the Board would be reviewing a “laundry list” of options and changes as possibilities for implementation on July 1, 2003. That would be part of the cost-shifting effort as the trend was projected over the upcoming biennium.
Chairman Arberry stated that the PEBP had received an allocation of $18 million from the Eighteenth Special Session of the Legislature, and he asked whether any improvement in the financial condition of the plan had been realized from that allocation. Mr. Thorne advised he could not provide that information. The direction the Board had taken with the additional funding had been an attempt to maintain benefits to the greatest extent, and to minimize the impact on the employees for premium increases. According to Mr. Thorne, the plan was only in the second month after implementation of those benefit changes, and with the normal “lag” between when a claim was incurred and when the expense was actually paid, it would be much later in the year before the impact of the savings would become apparent.
Chairman Arberry asked for information regarding the budgeted amount of the cost savings proposals. Mr. Thorne stated that information was not available, and he would provide that information to the Subcommittee at a later date.
Speaker Perkins inquired about the ratio of participants to utilization, and what action the plan contemplated in order to address the utilization. He asked whether the ratio of 80:20 was viable in the self-funded plan. Mr. Thorne explained that for the most recent six-month period, the ratio was actually more extreme, in that 2 percent of the population generated 54 percent of the dollars paid by the plan. In a larger sampling, it appeared that approximately 65 percent of the population generated only 35 percent of the total costs. Mr. Thorne indicated the 80:20 rule was the general “rule of thumb,” however, the program ratio was closer to 90:10, which was part of the difficulty in making plan design changes that would generate a significant amount of dollar savings without exposing participants to devastating levels of out-of-pocket expense.
Speaker Perkins inquired whether the PEBP had investigated the 10 percent that were responsible for 90 percent of the dollars spent, in an attempt to lessen the impact of that utilization. Mr. Thorne advised that the PEBP was receiving more comprehensive data from the new claims administrator, and had begun to review that type of analysis. The top ten treatment diagnoses conformed almost precisely to the demographics of the age group. Mr. Thorne pointed out that the top diagnoses were cardiovascular, cancer, and the other age-related illnesses that tended to be chronic with acute episodes, which were very expensive. Mr. Thorne indicated that much of the utilization was unavoidable in the short term, however, the plan did offer health fairs, along with a wellness benefit. The plan attempted to encourage the participation in that type of benefit and provided information to the participants, but since premiums were paid by the state, it was difficult to promote. Mr. Thorne stated a financial incentive was needed to encourage participants to utilize such benefits, which was an issue the Board would review.
Mr. Thorne returned to his presentation, pages 25 and 26 of Exhibit C, which depicted changes that had been made throughout the current biennium:
Mr. Thorne addressed the rate changes effective January 1, 2003, and explained that the $18 million subsidy from the Eighteenth Special Session kept increases in employee deductions at a minimum. The changes or reductions in the retiree rates were the result of the full implementation of the required commingling of state active and retiree costs, which had been approved during the 2001 Legislature.
Review of the non‑state rates effective January 1, 2003, revealed an increase of 45 percent for active employees, and over 100 percent for retirees. Mr. Thorne explained that reflected the volatility of the smaller non-state group, which had experienced a horrendous claims year, as reflected in the new rates. Statutes prohibited commingling active non-state employees with non‑participating retiree groups; and non-state groups could not be commingled with the state.
According to Mr. Thorne, because the Public Employees’ Benefits Program (PEBP) functioned as an insurance company, it compared itself with industry norms in the establishment of the following performance measures:
Mr. Thorne stated that an overview of the budget indicated an adjusted base for FY2002 of approximately $168 million, FY2003 work program of $195 million, FY2004 request of $213 million, and FY2005 request of $245 million. The chart on page 33 of Exhibit C provided an overview of expenditures, which included fully insured, self-funded administration, the PEBP’s actual operating expense, and the reserve. Mr. Thorne remarked that approximately 76 to 77 percent of the total budget was expended on claims. Over 95 percent of the revenue was realized from premiums, and Mr. Thorne explained that premiums were paid through the state subsidy and the participants’ share.
According to Mr. Thorne, the vast majority of the maintenance items within the budget request were based on the projected increase in claims costs. Enhancements within the budget request consisted of increased funding for the reserve account. Mr. Thorne stated the adjusted base budget was the same as the current operation, without provision for increases in self-funded claims or fully insured product costs. The base budget allowed for the continued use of approximately eight temporary staff for daily operation, continued use of private consultants at current levels, and reflected the full year costs for contracts approved in FY2002. Mr. Thorne indicated there was no restoration of the reserve contained in the adjusted base budget. The maintenance decision units included inflation and per unit increases, and overall inflation, which consisted primarily of claims costs and benefits.
Mr. Thorne explained that maintenance decision unit M-101 included a 10 percent cost increase for Health Maintenance Organizations (HMOs) and adjusted for HMO enrollment reductions since FY2002. HMO contract renewal rates had been received by the PEBP and were slightly above the 10 percent increase. Mr. Thorne stated the budget included a 5 percent cost increase for basic life, long-term disability, accidental death and dismemberment, and travel accident insurance; new vendors for those products would be selected by the Board at its February meeting.
According to Mr. Thorne, the PEBP used trends to project self-funded claims expense as follows:
Mr. Thorne explained that PPO network selections made at the February Board meeting from the Request for Proposals (RFPs) would have an impact on the overall costs. He stated the inflation unit was funded with premium revenue increases.
Mr. Thorne stated that the key enhancement decision units included a financial analyst, operations personnel, and the reserve restoration. The financial analyst position would be filled by a person with underwriting experience, and would replace services currently contracted with an outside consulting firm. The new position would be fully funded by reduction in the contract expense. Mr. Thorne noted that in discussion with the current consultant, it was determined that hiring a financial analyst would provide the most “bang for the buck.” He noted there would be one-time startup expenses for furnishings and computer equipment that would be depreciated over five and three years respectively.
According to Mr. Thorne, the requested operations and public information positions would replace temporary staff with four positions in operations and one in public information. The PEBP had required temporary resources on an ongoing basis for several years, utilizing an average of ten staff per month. The PEBP needed to improve responsiveness to participants and pay centers, and improve coordination of communication efforts with participants. Mr. Thorne stated that costs would be fully offset by the reduction in temporary agency staff, and no new furnishings or computer equipment would be required. Mr. Thorne remarked that until permanent staff could be hired, there would be no continuity of the information necessary for good communication.
The most important element of the budget, stated Mr. Thorne, was the reserve restoration, enhancement unit E-504, which consisted of $5.9 million per year in reserve restoration, in order to arrive at 61 percent of the recommended reserve by the end of the biennium.
Mr. Thorne indicated that state participant rates would be determined at the March Board meeting, and would be subject to final decisions regarding:
The state subsidy for active employees, stated Mr. Thorne, was derived by taking the total active state participant costs times the historical state share of 87 percent, divided by the number of active state participants. The FY2003 rate as approved by the Eighteenth Special Session was $465.78 per month, per participant. For FY2004, the requested rate was $495.68, a 6.4 percent increase, and for FY2005, the requested rate was $558.07, a 12.6 percent increase. Mr. Thorne noted that the same process was utilized for retired employees in calculating the state subsidy. The historical state share for retired employees was 66 percent, and the FY2003 approved rate was $263.89 per month, per participant. Mr. Thorne noted that the FY2004 requested rate was $280.78, a 6.4 percent increase, and the FY2005 requested rate was $316.26, a 12.6 percent increase.
Mr. Thorne remarked that non-state rates would be determined based on the same final decisions as the state rates, however, non-state rates would be fully self-supporting and the rates would reflect that group’s experience. The PEBP had budgeted 12.5 percent and 13.2 percent increase in each fiscal year in its projections for non-state rates.
In reviewing pages 47 – 49 of Exhibit C regarding future directions of the program, Mr. Thorne pointed out that privatization had already been discussed earlier in the meeting. To summarize, he noted that many functions were currently privatized including: (1) Claims administration; (2) Utilization management; (3) Enrollment and eligibility information systems; (4) The entire risk for life, long-term disability, accidental death and dismemberment, and travel accident products; and, (5) The risk for 13 percent of the population through an HMO in southern Nevada.
Mr. Thorne explained that the remaining areas for consideration of privatization were:
Alternatively, Mr. Thorne explained the program could go in the opposite direction of privatization with self-administration of claims. That option would utilize the concept that the PEBP could process self-funded claims in-house. There was a potential for administrative cost savings in that concept, however, the impact on claims costs was unknown.
Another area that PEBP must consider in the future was groups of 300, with proposed regulations being drafted with input from the interested parties, and Mr. Thorne expected hearings surrounding those regulations would be conducted during mid-2003.
Mr. Thorne stated another item for consideration in the future was the consumer-driven plan design option, or a defined contribution approach to the benefits program. He noted that would be a long-term approach and would require much consumer education. An increased administrative overhead cost would be associated with the option, explained Mr. Thorne, particularly if the PEBP proceeded in that direction by utilizing a health care reimbursement account as a funding mechanism for retiree coverage, or with the use of individual accounts that would require tracking. Mr. Thorne explained that the demographics of the PEBP meant that such a program would be more expensive in the near term, before any savings were recouped. The newly implemented option for the American Postal Workers and the Federal Employees’ Health Benefit Plan were examples of the consumer-driven plan design that would be monitored by the PEBP.
Chairman Arberry indicated that during the Eighteenth Special Session, the Legislature directed the PEBP to initiate a Request for Proposal (RFP) process for possible privatization options, and asked for clarification regarding the situation. Mr. Thorne stated that the functions currently performed by the PEBP were administrative functions and were similar to those that would be required of any employer, regardless of how the insurance was provided. Privatization would consist of transferring the risk and processing for the entire program to a third party via an insurance mechanism. Mr. Thorne indicated that following the Eighteenth Special Session, the PEBP reissued the RFPs based on feedback regarding the RFP that had been issued earlier. The PEBP solicited bids both for HMOs and for an insured indemnity plan through a Preferred Provider Organization (PPO). Mr. Thorne informed the Subcommittee that the PEBP had received no response whatsoever to its RFPs from any carrier, and no carrier had indicated a willingness to take over the program.
Chairman Arberry asked Mr. Thorne to enlighten the Subcommittee regarding the contents of the RFPs. Mr. Thorne indicated he would be happy to provide the Subcommittee and its staff with copies of the RFPs. The RFPs requested a fully insured PPO for a comprehensive State of Nevada program. As an alternative, the PEBP was also searching for PPO networks for a self-funded program. The same information was included in the RFP for the HMOs, which consisted of information regarding claims experience, demographics, and plan design. Mr. Thorne noted that the RFPs also asked carriers to provide possible alternatives, along with the base bid on the existing plan designs, in order to compare “apples to apples.” He noted that whether coverage was provided via an insurance company or a self-funded plan, the administrative functions necessary by the employer would remain the same.
Chairman Arberry stated when Legislative Counsel Bureau (LCB) staff reviewed the RFP, suggestions might be forthcoming that would aid in the process, and he asked Mr. Thorne whether the PEBP would have objections to such suggestions. Mr. Thorne assured the Subcommittee that there would be no objections, and the PEBP would be happy to review additional suggestions.
Chairman Arberry asked how the PEBP intended to become compliant with the requirements of the Health Insurance Portability and Accountability Act (HIPAA). Mr. Thorne testified that the PEBP had appointed an internal HIPAA security officer who would monitor that compliance. The PEBP was also working to ensure that all vendor contracts included provisions requiring HIPAA compliance. Mr. Thorne indicated the PEBP would meet the April 1, 2003, HIPAA deadline and was working with all its vendors regarding the Electronic Data Interchange (EDI) privacy requirements. As regulations were finalized, Mr. Thorne indicated the PEBP would continue to work with its consultants on the HIPAA issues to become compliant. Chairman Arberry inquired when the process would be finalized. Mr. Thorne was unable to provide an actual date when the PEBP would reach compliance status with the HIPAA requirements. The EDI was due to be implemented in October 2003; a HIPAA conference was also scheduled and staff would attend that conference in order to receive information regarding the requirements for each section.
Assemblywoman McClain asked for the number of enrollees in the plan. She referenced the charts contained on pages 28 and 29 of Exhibit C and asked for the number of participants in each category. Electing to respond was Leslie A. Johnstone, Accounting Officer, Public Employees’ Benefits Program (PEBP). Ms. Johnstone reported that the number for the state active enrollees in January 2003 was 22,537; the number for the state retirees in January 2003 was 5,400; the number of non-state active participants was 1,733; and, the number for the non-state retirees was 1,572. Ms. McClain then inquired whether the PEBP could provide the actual number of enrollees for each coverage category. Ms. Johnstone indicated she would provide that information to Legislative Counsel Bureau (LCB) staff.
Assemblyman Parks noted there were a significant number of local government groups that utilized various insurance plans, and asked whether the PEBP had discussed the possibility of creating a consolidated pool of all public employees with those other groups, in order to benefit through better rates for a larger group. Mr. Parks indicated the rates were quite different among groups such as Clark County, the City of Las Vegas, the Las Vegas Metropolitan Police Department, and the Clark County School District. He asked whether there had been any opportunity to explore the possibility of joining with other public agencies. Mr. Thorne said the PEBP had not held any formal discussions with local entities, but had discussed the issue informally with a few entities. The problem was that most public entities dealt with a localized area with the concentration of covered participants located within that defined area. Mr. Thorne opined that perhaps the PEBP could form some type of coalition to research that possibility, and it was an issue that the PEBP intended to explore.
Mr. Thorne advised the Subcommittee that the PEBP also included Budget Account 1368, which was the retired employees group insurance account. That account served as a pass-through to the PEBP from each state agency’s operating budget for the state retiree subsidy. Mr. Thorne indicated that pre-1994 retirees received 100 percent of the state subsidy, and post-1994 retirees received a percentage of the state subsidy based on years of service. He explained that 100 percent of the state subsidy was achieved with 15 years of service; the average years of service for post-1994 retirees however, was more than 20 years. The actual subsidy credit exceeded the amount funded under that methodology. Mr. Thorne also noted that the requested amount for the budget reflected the historical share for retired employees of 66 percent paid by the state. The rate approved for FY2003 was $263.89 per month, per participant; the request for FY2004 was $280.78, and the request for FY2005 was $316.26.
Chairman Arberry asked why the recommended assessment rates were lower than the rate that resulted from the increase granted by the 2002 Special Session. Ms. Johnstone asked whether Chairman Arberry was referring to the percentage increase or the absolute dollar amount. Chairman Arberry indicated he was inquiring about the percentage increase. Ms. Johnstone explained the main reason was that the rate included in the 2002 Special Session request included a rate of $30.15 for the per participant reserve restoration. That amount dropped to $18.16 per participant with the reserve restoration of $5.9 million over the full fiscal year. Ms. Johnstone indicated the second element was that the 2003 rate was for a 9-month period and the requested rates were for a 12-month period. She noted that the medical increase was 11.3 percent, basically because of a lower per participant cost for restoring the reserve.
With no further testimony forthcoming regarding Budget Accounts 1338 and 1368, the Public Employees’ Benefits Program, Chairman Arberry closed the hearing and declared the Subcommittee in recess.
Chairman Arberry called the Subcommittee back to order and recognized Mr. Comeaux.
DEPARTMENT OF ADMINISTRATION
ADMIN 1-113 – VOLUME 1
John Perry Comeaux, Director, Department of Administration, informed the Subcommittee that the purpose of the Department of Administration was to provide central services to the agencies of the state which provided services to the citizens of the state. The Department consisted of ten divisions:
· Administrative Services Division
· Budget Division
· Buildings and Grounds Division
· Hearings and Appeals Division
· Division of Internal Audits
· State Motor Pool
· State Printing Division
· Public Works Board
· Purchasing Division
· Risk Management Division
Mr. Comeaux indicated the Department would propose the creation of an eleventh division, Information Technology. Mr. Comeaux then introduced the division administrators present at the hearing:
As Director of the Department of Administration, Mr. Comeaux revealed that he served as the state’s Budget Director, Clerk of the Board of Examiners, and served as a member of the Public Works Board. In total, the Department of Administration consisted of 363 full-time equivalent (FTE) positions in FY2003. Mr. Comeaux indicated the Department’s goals were basically unchanged, and remained: (1) To measurably improve customer service; (2) Find more efficient ways to provide that service; and, (3) Serve customers as well as the private sector, for as little or less, or allow them to go elsewhere.
Mr. Comeaux stated the recommended budgets of the Department of Administration contained very few changes of significance, and he would review those changes as each division was discussed.
Budget and Planning Division – BA 1340
Mr. Comeaux reported that the mission of the Budget and Planning Division was to produce a fiscally sound Executive Budget that followed the Governor’s priorities, and provided necessary resources for state agencies to fulfill their missions; the Department was also responsible for providing budgetary oversight to the various agencies of the state. The Budget and Planning Division had a total of 25 positions in FY2003, however, decision unit E-605 included the recommendation to eliminate one of those positions, the Public Service Intern. Mr. Comeaux divulged that because of the state’s financial situation, that position had not been filled and he did not feel it would be filled over the next biennium, hence the recommendation for elimination. When times were better, Mr. Comeaux stated the Department would once again discuss the possibility of restoring the Public Service Intern position.
Senator Rawson asked about the significance of eliminating the Public Service Intern position to other programs, and was that cut from the positions at the University of Nevada, Reno (UNR). Mr. Comeaux stated the last incumbent in the position was from UNR, however, he did not believe there was a program that “fed” public service interns to the Department, and the position had not been filled during the current biennium. Senator Rawson wondered whether it was a $20,000 or $30,000 per year position. Mr. Comeaux advised that including benefits, the position was $43,000 per year.
Mr. Comeaux stated decision unit E-300 recommended funding for further development of the Nevada Executive Budget System (NEBS), which was one of the highlights of the budget. The enhancement would provide the Executive Branch with more meaningful budgetary information in a timelier manner throughout the budget-building process. Mr. Comeaux reported that the enhancement would add funding source maps, a more manageable security model, and would also allow analysis of the entire budget for different Internal Service Fund rate scenarios. That would allow the Division to complete “what if” scenarios through The Executive Budget system.
Mr. Comeaux noted that the budget also recommended an enhancement of $125,000 via decision unit E-500 in FY2004. That funding would be for the Division to contract with an external consultant in order to analyze and recommend the optimum organizational structure to provide or acquire information technology service throughout the Executive Branch of state government.
Chairman Arberry asked why the service could not be provided in-house via the Department of Administration’s Internal Audits Division. Mr. Comeaux explained that was somewhat beyond the area of expertise for the Internal Audits Division. He believed a consultant was needed to advise the Department regarding the most efficient way to provide information technology services for the state, whether in a centralized or decentralized manner. Mr. Comeaux stated that would include every aspect from the facility to the technician positions, which the Department had attempted to facilitate in-house during the current biennium without much success. The question had to be answered, and Mr. Comeaux stated he did not know how to accomplish that without the assistance of a consultant.
Chairman Arberry asked Mr. Comeaux to give the problem additional thought, and perhaps arrive at a different solution. He noted that General Fund allocations would be transferred for the request, and asked why funding could not be transferred from the Department of Information Technology (DoIT) budget. Mr. Comeaux explained the Division’s thinking was that eventually the allocation would be budgeted through the statewide cost allocation plan, or built into DoIT’s rates, in order to recover the funding. The Division had not made provisions for that recovery within the current budget, however, Mr. Comeaux emphasized that it was the intention of the Division to recover at least a portion of the cost of the information technology service.
Mr. Comeaux indicated the only other item of significance within the Budget and Planning Division budget was decision unit E-910, the transfer of a portion of the ongoing Integrated Financial System (IFS) costs from Budget Account 1320, Information Technology, since the development budget would not be continued. The costs considered for transfer to the Budget and Planning Division were $95,000 per year for software and hardware maintenance, and additional processors.
Division of Internal Audits – BA 1342
Per Mr. Comeaux, the mission of the Division of Internal Audits was to improve state government operations and to ensure taxpayer monies were spent wisely by providing Executive Branch agencies with analyses, appraisals, recommendations, training, and assistance concerning the adequacy of their systems of internal control, and the effectiveness and efficiency of agency operations. Mr. Comeaux stated there were currently 24 positions in that Division, and the only decision unit of significance in the budget, E-605, was the recommendation to eliminate one Auditor III position, which would save approximately $113,000 over the biennium. Because of the state’s fiscal situation, the position had not been filled during the current biennium, and Mr. Comeaux did not believe there were any prospects of filling the position during the upcoming biennium, therefore, the position would be recommended for elimination.
Assemblyman Beers questioned the 70 percent increase in General Fund overall expenditures for the Department at a time when the state was looking at an 11 percent growth inflation factor for the biennium, and referenced decision unit E-300, an upgrade to the Nevada Executive Budget System (NEBS) within the Budget and Planning Division budget. Mr. Beers noted that the decision unit would add funding for source maps, internal service fund rate structures, and would provide for more flexible reporting. Mr. Beers pointed out that the issue would be reviewed in great detail during future joint subcommittee meetings. He noted that $237,492 of unexpended funds appropriated for NEBS by the 2001 Legislature had been approved to balance forward by the Interim Finance Committee (IFC) at its June 18, 2002, meeting. Mr. Beers asked how those unexpended funds had been spent, and whether there were any funds remaining for possible enhancement of the NEBS.
Mr. Comeaux pointed out that almost all of the increases to the Department’s budget were because of a budget account that proposed funding for information technology improvement projects for several different agencies. The Department proposed that all funding be included in one budget account that, from a financial standpoint, would be administered by the Department of Administration to maximize its flexibility in funding the projects. Mr. Comeaux advised that budget account would explain the majority of the increases. Mr. Beers noted that there would be concern about funding that allocation fully from the General Fund, when if undertaken by DoIT, pieces would be eligible for federal funding.
Assemblywoman Chowning referenced the performance indicators for the Division of Internal Audits, BA 1342, as contained in The Executive Budget, page ADMIN-7, and voiced concern regarding the zero percent for agencies attending training sessions in Actual FY2002 depicted by Performance Indicator number 3. She commented that training equated to more efficiency, which equated to saving dollars. Mrs. Chowning also noted that Performance Indicator number 4, which indicated that the percentage of agencies implementing 75 percent of the recommendations made by the Division of Internal Audits was only 49 percent, and asked for an explanation.
In reply to Mrs. Chowning’s inquiry, Mr. Comeaux explained that the Department believed training was essential, however, during FY2002, in connection with the initiation of the Integrated Financial System (IFS), before the Department would allow agencies access to the financial piece of the IFS, the agencies were required to transfer from a pre-audit arrangement, which had been in effect in Nevada for many years, where claims were examined prior to payment, to a post-audit arrangement. Mr. Comeaux noted that the Department would then randomly select transactions after the fact to ensure they were handled correctly. Before the Department put an agency in that position, it insisted that the agency initiate an approved set of internal controls for the processing of those claims. The Division of Internal Audits had spent a great deal of time with that process during FY2002, however, that function had been completed and it was back to providing additional training.
Mr. Comeaux indicated the Department would like to improve the percentage of the implementation of the Division of Internal Audit’s recommendations, however, that proved difficult, as audit recommendations were not widely accepted.
Senator Rhoads inquired how the Department’s audits differed from those of the Legislative Counsel Bureau (LCB) Auditor, and asked if it was a duplication of effort. Mr. Comeaux replied that the Department attempted to ensure that duplication did not occur. The Department’s audit staff coordinated with LCB auditors to eliminate duplication. Mr. Comeaux stated when the Governor proposed the Internal Audit Division, he believed he would be in a much better position to try and improve the efficiency of state government if there was an audit arm that could be used to review the efficiency with which the agencies conducted their affairs. Mr. Comeaux indicated that the LCB auditors would not come close to auditing all state agencies on anything resembling a routine basis, nor would the internal audit of the Executive Branch. He emphasized that he was not aware of any duplication of effort.
Risk Management Division, Insurance and Loss Prevention – BA 1352
Mr. Comeaux stated the mission of the Risk Management Division, which consisted of two sections; (1) Insurance and Loss Prevention; and (2) Workers’ Compensation, was to assist state agencies in minimizing the state’s property and liability exposure, to obtain cost-effective and quality workers’ compensation for the state, and to encourage safe work environments to reduce the number of employees who suffered work-related injuries. Maintenance decision unit M-100 requested authority to receive additional premium revenue of $11.4 million in the first year of the biennium and an additional $8.9 million in the second year. Mr. Comeaux stated in general, there were no new programs or positions requested in the budget account. However, unexpected increases in workers’ compensation and property insurance program costs had developed in FY2002 and FY2003, which had resulted in a depletion of reserves. Those increased costs, plus the fact that the base year, FY2002, was the lowest cost year for workers’ compensation in the past ten years, had resulted in a need to significantly increase assessments over the next biennium. Mr. Comeaux explained that workers’ compensation costs, based on change in revenue dollars for workers’ compensation, would increase over base year FY2002 by 167 percent in FY2004, and 113 percent in FY2005.
Mr. Comeaux believed it was important to point out that FY2002 represented the lowest cost year ever for the fund during the past ten years. That was due to the transition from a retrospective rating plan with Employers Insurance Company of Nevada (EICON) to a large deductible plan, which closely mirrored self-insurance. Mr. Comeaux indicated that in January 2001 the Division basically started out with a clean slate, i.e., very few claims costs were incurred over the first six months, which was considered a cash flow benefit of the new plan. The average total program cost over the past five years had been approximately $11 million, so overall, the increases proposed in FY2004 and FY2005 were not as dramatic as they appeared, because the Division was comparing them to a very low base year. Mr. Comeaux explained that rates had been held below the 1995 costs, which were $4.65 per $100 of payroll for over six years. The rates in FY2002 were only $1.28 per $100 of payroll, however, there were multiple factors that occurred in FY2002 and FY2003 that had increased costs over what was budgeted, and had resulted in the depletion of reserves.
Mr. Comeaux explained those factors included increases in commercial insurance costs, which forced the Division to increase deductibles, and several catastrophic claims had occurred in FY2002 and FY2003, which significantly increased costs. In addition, stated Mr. Comeaux, in FY2004 the Division would incur additional expenses to buy out the open retrospective rating plans with EICON.
Total property and other miscellaneous insurance premiums were projected to increase by 31 percent in FY2004, and 35 percent in FY2005 over base FY2002 costs, and Mr. Comeaux informed the Subcommittee that property rate assessment to Central Payroll agencies was recommended to increase by approximately 70 percent over the FY2002 base costs. That increase was related to increases in commercial insurance costs, but also to an increase in the claims deductible level from $100,000 to $500,000, which became effective in July 2002. Mr. Comeaux stated the FY2003 base year amounts included the University and Community College System of Nevada (UCCSN), but in July 2001, the UCCSN elected to fund its own claims program and in July 2002, began paying its premiums directly rather than passing them through the fund; therefore, they were no longer part of the program. Mr. Comeaux stated that the property claim category remained nearly the same as in the base year, in lieu of being reduced to reflect the decrease in exposure for UCCSN claims, due to the deductible increase from $100,000 to $500,000.
Senator Raggio requested a chart from the Risk Management Division that depicted an overview of the areas of commercial insurance, to what extent the state self-insured, and where there was commercial insurance, the extent of that expense to the state. Senator Raggio noted that the area had been reviewed over the years with the concept of tort immunity or minimal immunity, and asked whether the need for commercial insurance had been analyzed. Mr. Comeaux said that the Division would provide a detailed chart of that information, however, indicated that Susan Dunt, Risk Manager, Risk Management Division, was present and would address the Subcommittee.
Ms. Dunt conveyed that currently the Division basically carried three commercial insurance programs:
Senator Raggio reiterated that he would like a chart that depicted the companies currently in place, which would be an aid to understanding the program. Ms. Dunt indicated the Division would be happy to provide that information to Subcommittee members.
State Printing Division – BA 1330
Mr. Comeaux informed the Subcommittee that the mission of the State Printing Division was to provide quality printing and reproduction services to all state agencies at a competitive rate. In FY2003, the Division had 37 authorized positions, however, was currently fighting for survival. Mr. Comeaux explained that the level of printing jobs at the present time would not allow the Division to continue to operate in a competitive manner with its current organization. Seven positions had been eliminated in the base budget, and as a further cost cutting measure, two additional positions were recommended for elimination in decision unit E-605. According to Mr. Comeaux, Donald Bailey, Supervisor of the Division, was currently attempting to secure more printing jobs, principally from the UCCSN and local governmental entities. The current cash flow was adequate, however, should Mr. Bailey fail to secure additional printing jobs at the end of the Legislative Session, additional options would have to be discussed.
Chairman Arberry inquired why many of the state agencies were not utilizing the services of the Printing Division. Mr. Comeaux stated it appeared that computer desktop publishing had severely cut into the level of the Division’s business. At one point in time, there appeared to be some confusion surrounding whether agencies were required to utilize the services of State Printing, and Mr. Comeaux advised that agencies were under such a requirement by statute. The level of printing jobs simply did not appear to be what it had once been.
Senator Rawson indicated there had been many discussions over the years surrounding the possibility of privatizing the Printing Division. During session, the Division provided services that might be difficult to contract, however, many agencies complained that oftentimes the actual expenses exceeded the original bid amount. Senator Rawson stated that did not happen in the private sector, and most businesses would deliver the service for the amount listed on the original bid. He did not know the factual aspect of those complaints, however, agencies did believe the Division was more expensive, was slower, and the actual cost was unknown until the project was completed. Senator Rawson believed that much could be done in that regard to improve the situation, and stated it did not make sense for the state to mandate that agencies were required to utilize the services of the Printing Division when projects could be completed for less cost in the private sector.
Mr. Comeaux testified that during the 2001 Legislative Session, the Department of Administration recommended elimination of the existing mandate within the Nevada Revised Statutes (NRS) that required agencies to utilize the services of the State Printing Division. The Division would then simply be allowed to compete with private entities for the state’s business. According to Mr. Comeaux, that change had not taken place, which meant that state agencies were, in fact, mandated to use the Printing Division for printing projects. That did not mean the Division was not interested in customer service, and Mr. Comeaux explained that one of the ways the Division attempted to determine customer satisfaction was via surveys, which for the most part, were usually very positive. However, he noted the Division did receive negative feedback and there were certainly jobs that contained errors. Mr. Comeaux emphasized that the Division did attempt to deliver a quality product at a competitive price, and would continue to do so.
Senator Tiffany opined that it was very difficult for the State Printing Division to remain abreast of the improvements in equipment and technology, such as the desktop innovations, and she noted that Internet brokering was currently available for printing jobs. Senator Tiffany indicated she had researched the area extensively during recent research on digital printing, and did not believe the Division could keep pace with the innovations, because it was such a fast‑moving, technology-oriented business. She explained that many of the smaller printing firms in Las Vegas had gone out of business and larger companies had taken over those businesses; it appeared changes were occurring in the industry. Senator Tiffany believed that if the state compiled the right request for its printing needs, it could find the proper service in the private sector, and inquired whether that possibility had been reviewed. Mr. Comeaux replied that no action had been taken to privatize the Printing Division.
Senator Tiffany opined that the problematic time frame regarding privatization would be during and at the close of legislative sessions, and whether there would be a printing business in Carson City that would be willing to literally drop all of its business for that time frame to cater to the Legislature. Senator Tiffany indicated she would like to see some changes in the printing area. She referenced a prior bill sponsored by Senator O’Connell, which stipulated that government should not compete with the private sector when that sector could provide the service in a more cost-effective manner. Senator Tiffany asked since when should a governmental entity seek business from the private sector in order to stay “alive.”
Mr. Comeaux explained that the additional work the Printing Division was attempting to solicit at the current time was from other governmental entities that were more than likely having their printing needs served via the private sector. The Division believed that as long as it was serving only governmental entities, it would not be in direct competition with the private sector.
Senator Cegavske asked about the copy center in Elko, when it had been established and what entities it served. She also asked about the out-of-state travel expenses within the Printing Division budget account. Senator Cegavske did not believe that legislators had any concept of the printing being done for the Legislature. She noted that presently, legislators had not yet received their business cards, which presented a dilemma for new legislators. Mr. Comeaux indicated he would provide the information requested by Senator Cegavske at a later date.
Chairman Arberry noted that The Executive Budget recommended reduction of seven positions, some of which were already vacant, along with the two employees that had been laid off. With the reduction of nine positions, he wondered whether the agency would be able to meet future responsibilities. Mr. Comeaux explained that he and Mr. Bailey had had that same conversation, and both felt the staffing level was adequate at the present time. During the legislative session, the Division operated more than one shift because of the demands; he reiterated it was believed that the Division was adequately staffed at the present time to complete printing orders.
Mr. Beers asked Mr. Comeaux to consider the creation of a performance indicator regarding the number of surplus bills and printed materials at the end of legislative sessions. With the increased reliance on technology and the ability to download files, bill draft requests (BDRs), and also bills through improved technology, Mr. Beers was curious whether there had been a decrease in the volume of required printed material for legislative sessions.
Chairman Arberry indicated that should the printing function be privatized, the Request for Proposal (RFP) should specify the long hours necessary during session, and the cost factor for time that was spent when session ran until 2:00 or 3:00 a.m. If the Printing Division were privatized, the cost should be noted to hire additional staff during legislative sessions to facilitate necessary reprints. Chairman Arberry noted that state employees had set salaries versus private industry that utilized an overtime mode. The cost benefit between the two options should be reviewed, because the Legislature asked a great deal of the Printing Division during, and at the close of session, to ensure that the state would not pay an exorbitant amount during the legislative session when reprints were needed in the early morning hours. Chairman Arberry reiterated that cost benefits of both options should be considered. He stated he would hate to see the Printing Division fail and the operation privatized with enormous costs to the state.
Senator Raggio stated that over the years, the Legislature had been very appreciative of the extra effort that was put forth by the Printing Division, particularly in meeting the needs of the Legislature during session years. He requested a breakdown of the costs of the Legislature’s printing needs. Senator Raggio commented that the Legislature had an extraordinary need at acute times for those kind of services, and he wondered whether those needs could be met if the Division were privatized. According to Senator Raggio, some years ago, the cost of printing one bill had been computed, and the cost was in the vicinity of $650. At that time, Senator Raggio proposed a review of those costs, and for every bill introduced that did not pass, he suggested that the legislator pay the printing costs.
Motor Pool Division – BA 1354
Mr. Comeaux explained that the mission of the Motor Pool was to provide clean, safe, and environmentally friendly vehicles to state officers and employees conducting official business. The Motor Pool currently consisted of 15.5 positions statewide. Mr. Comeaux indicated that on January 17, 2003, State Purchasing received six responses to the RFP to privatize Motor Pool functions. The RFP essentially asked for proposals to privatize the daily rental piece of the business, the monthly rental piece of the business in either southern or northern Nevada, or both. Mr. Comeaux stated entities had been invited to submit a response on all or any part of the RFP, and six responses had been received. The evaluation of those responses would be completed by mid‑February and the state would be ready to contract within 30 days, if the decision was made to privatize part or all of the Motor Pool operation.
Mr. Comeaux explained that the possibility of privatizing the Motor Pool had been under discussion for years, and what prompted the Department to pursue that option this session was the requirement from the Airport Authority to relocate the Motor Pool operation in Las Vegas. He noted that the Airport Authority needed the property where the current Motor Pool was located. The Public Works Board had received an appropriation during the 2001 Legislature to build another Motor Pool. The Board had been principally working with the University of Nevada, Las Vegas (UNLV) for quite some time, in an effort to locate a site that would allow the state to partner in a Motor Pool operation with UNLV. Mr. Comeaux reported that a site had been located, however, the site was one that UNLV leased from the Airport Authority, which informed the state that it was under mandate from the Aviation Administration to charge market rate for any of the property it leased. The rate the Airport Authority would be required to charge UNLV when the lease for the site was renegotiated would make it prohibitive for the State Motor Pool use.
In addition, stated Mr. Comeaux, within the past two months, notification had been received from the Airport Authority that it wanted to renegotiate the amount the state was paying for its existing Motor Pool site. He explained that the state currently paid between $2,000 and $2,500 per quarter for its existing Motor Pool site, and the Airport Authority was proposing an increase to approximately $9,000 per quarter, which would begin immediately. Mr. Comeaux opined that the state would be required to make those increased payments within one to two months, and he would present the renegotiated lease to the Board of Examiners. Currently, the state was on a month-to-month lease with the Airport Authority for its Motor Pool location in Las Vegas, and basically had no other options available. Mr. Comeaux emphasized that the issue was being given serious review, and the budget for the Motor Pool contained in The Executive Budget had been prepared on the basis of the Motor Pool continuing to operate as it had in the past, mainly because there did not appear to be any other options available. According to Mr. Comeaux, when the evaluation of the proposals was complete, the Department of Administration would present the Legislature with a proposal to change the budget in whatever manner necessary as a result of the proposals received.
Senator Raggio stated there were two major issues to consider in privatization of the Motor Pool: (1) The level of service, and whether that would be maintained or bettered; and, (2) cost-effectiveness. He asked whether there was reason to believe at the present time that there would be a significant cost savings if the function was contracted out. Senator Raggio assumed that the cost would include the necessity for replacement of vehicles, and wondered whether there had been a preliminary analysis leading up to the issuance of the RFP. Mr. Comeaux informed the Subcommittee that the Department was in the process of conducting an evaluation, and there was no reason to believe there would be significant cost savings, however, if there were cost savings, it would be discovered after completion of the evaluation. Senator Raggio felt cost savings and level of service would be the crucial questions when a determination was made regarding the proposals submitted in response to the RFP.
Assemblywoman Chowning commented that the personal service offered by the Motor Pool Division in Las Vegas had been stupendous. One example of service occurred when Motor Pool staff had met her group, which was running late, and picked up the state vehicle. Mrs. Chowning believed that type of personal service would not be offered by a private company, and suggested that costs might continue to rise. It appeared the state was being forced to vacate the present site, which presented a difficult situation. Mrs. Chowning asked when the evaluation would be ready for Subcommittee review. Mr. Comeaux indicated that the evaluations would be completed by mid-February and within approximately three weeks the information would be available to the Legislature.
Senator Rawson asked how many vehicles were owned by the State. Mr. Comeaux said that Keith Wells, Acting Administrator, State Motor Pool, indicated that the state currently owned approximately 787 vehicles.
Motor Pool Vehicle Purchase – BA 1356
Mr. Comeaux stated the budget included a request for authorization from decision units E-710 and E-720 to replace 68 vehicles in the first year of the biennium, 36 in the second year, and to purchase 23 new vehicles, for a total of approximately $2 million over the biennium. Obviously, indicated Mr. Comeaux, if the Department recommended privatization of the operation, the recommendation for vehicle purchase and replacement would change significantly.
Senator Raggio asked about the standards for replacement of vehicles. Mr. Comeaux asked Keith Wells, Acting Administrator of the Motor Pool, to address that question. Mr. Wells explained that the Motor Pool evaluated the maintenance records of every vehicle extensively to determine the cost per mile, which was how a vehicle was judged ready for replacement. The Motor Pool attempted to replace every vehicle between 90,000 and 100,000 miles as long as it remained cost-effective up to that point. According to Mr. Wells, should maintenance begin to exceed the benchmarks, the vehicle would be replaced earlier. However, if a cost-effective vehicle reached the appropriate mileage and it was not the time frame to cycle out equipment, that vehicle would be retained. Mr. Wells concluded that operating costs were the basis for judgment regarding replacement of vehicles.
Senator Tiffany inquired whether the Department had considered a “blend” of services, where mileage reimbursement was offered to employees rather than offering a rental car. Senator Tiffany advised that in past jobs she had been offered business miles when her private vehicle was used for business. Mr. Comeaux replied that the state did offer mileage for personal vehicle use on state business to some extent. Some employees preferred to use their own vehicles, and when that was done for the employee’s convenience, the state reimbursed at half the normal mileage rate. Mr. Comeaux did not believe that option had been reviewed for use in lieu of Motor Pool services. Senator Tiffany indicated that “blending” might be an issue for further review, as it might make sense for some employees to receive mileage as opposed to continually utilizing a Motor Pool vehicle.
Purchasing Division – BA 1358
Mr. Comeaux revealed that the Purchasing Division consisted of three budgets:
Mr. Comeaux stated the Purchasing Division budget contained the programs that acquired materials, supplies, equipment, and services for state agencies. The budget also included property management services, which consisted of inventory records, excess property redistribution, and asset identification. The Division had 27 employees in the main purchasing function and 11 employees in the Commodity Food Distribution Program. Mr. Comeaux testified that the general Purchasing Division budget was essentially flat, and contained only two small enhancement decision units.
Mr. Comeaux advised that the Commodity Food Distribution budget received, processed, and distributed more than 20 million pounds of United States Department of Agriculture (USDA) commodity food to schools, senior centers, needy families, and food banks statewide. The budget received revenue from federal grants and from service and handling fees; the budget contained no state appropriations. Mr. Comeaux revealed that the largest budget item was $3.6 million for the Food Processing Program. School districts paid the Program to combine allocated USDA food into packaged food items for distribution as part of the school lunch program.
Mr. Comeaux advised that the Purchasing Assessment, which had been initiated several years ago, was now fully implemented, with a three-year average of Purchasing Division contracts used as the basis for the assessment calculation. According to Mr. Comeaux, the assessment was based upon the utilization of contracts, along with purchases by the Purchasing Division, for a particular budget account. That utilization was then calculated against the total utilization of all eligible budget accounts to determine the percentage of use. Mr. Comeaux explained that percentage was then applied against the total amount of the Division’s budget. The amount of the Purchasing Assessment was $2.1 million within each year of the biennium.
Assemblywoman Chowning questioned the reduction in reserves, and asked how the state ended up in the food business with the schools. She also asked whether the Commodity Food Distribution Program was profitable for the state, and how the program came about. Mr. Comeaux replied that the federal government required a central point of contact, which was the state, so the Purchasing Division received the food items and redistributed those items to the school districts. He noted that the state did not make any profit on the program, however, neither did the program incur any cost to the state. Mr. Comeaux explained that the program was funded via federal funding, along with service fees from the school districts and other receiving agencies.
Assemblyman Beers presumed that at least 70 percent of the food was drop‑shipped to Las Vegas, to which Mr. Comeaux concurred.
Buildings and Grounds – BA 1349
Mr. Comeaux stated that the Buildings and Grounds Division consisted of 58 positions during the current fiscal year. The Division provided physical maintenance, housekeeping, and security for most state-owned and leased buildings and grounds in Carson City, Reno, Las Vegas, and Elko. The Division also negotiated leases for state agencies throughout the state. Mr. Comeaux testified that the offered services ranged from general janitorial and grounds maintenance to minor remodeling. In addition, the Buildings and Grounds Division provided Capitol Police coverage, which was funded through the Division, but actually administered via the Department of Public Safety. Mr. Comeaux noted those services were provided within the Capital Complex and the Grant Sawyer State Office Building in Las Vegas. Additionally, stated Mr. Comeaux, the Buildings and Grounds Division provided management of the Central Mail Services, Marlette Lake Water System, and the Clear Creek Youth Center, for which separate budgets were maintained.
According to Mr. Comeaux, the rent rate proposed for FY2004 and FY2005 for state-owned space was $1.14.2997 and $1.14.6499 respectively per square foot. Rent in the previous biennium was comprised of three separate rental rates for buildings with Capitol Police coverage, buildings with no Capitol Police coverage, and buildings with contract security coverage. Mr. Comeaux said the separate rates did not take into consideration any other differences in the facilities, other than the security provided. The rates did not take into account the age or location of the building, which could affect the utilities, such as buildings in the southern part of the state that depended heavily on air conditioning.
Mr. Comeaux advised that one rental rate for all tenants would be recommended for the upcoming biennium. The elements that determined what the rate would be were varied, and the Capitol Police component was only one of the relatively small components. For example, explained Mr. Comeaux, for FY2004, the cost of Capitol Police coverage would contribute about 12.8 cents to the rental rate of $1.14. On the other hand, utilities would contribute almost 28 cents to the rate, and the personnel of the Buildings and Grounds Division would contribute almost 22 cents to the rate. Renovations proposed during the upcoming biennium to a variety of the state-owned buildings would contribute 10 cents to the rental rate. Overall, stated Mr. Comeaux, it made more sense and would certainly be easier to administer one rental rate for all state-owned space on a statewide basis.
Chairman Arberry stated that the Legislature approved rental rates for FY2003 at 85 cents for buildings with no security; $1.01 for buildings with contract security; and $1.04 for buildings with Capitol Police coverage. The Executive Budget recommended setting one rate of $1.14 in FY2004 and $1.15 in FY2005, and Chairman Arberry inquired whether the state was attempting to save money. Mr. Comeaux explained that the overall increase in the rental rate was mainly because of the increase in utility costs. Combining the three separate rental rates into one rate would simply recognize that the cost of the security provided by the Capitol Police was only one relatively small element of the rental rate. Mr. Comeaux stated the Division believed it made more sense to offer one rate overall, and the proposed $1.14 and $1.15 rates per square foot were basically the amount necessary to provide the necessary revenue to operate the Division of Buildings and Grounds over the biennium. Mr. Comeaux informed the Subcommittee that he would provide a chart to members that delineated the basic elements of the rental rates, and the amounts that each of those elements contributed to the overall rate. The rate was determined by taking the total budget of the Division, dividing it by the number of square feet available, and arriving at a rate per square foot.
Mr. Comeaux reported that the purchase of the Employees’ Insurance Company of Nevada (EICON) building located in Carson City had been successfully completed; the building should be fully renovated and occupied by May 2004. The intention was to move the majority of the Controller’s Office staff into the building, as well as the Public Works Board, and the Purchasing Division. According to Mr. Comeaux, that move would allow renovation projects to begin in the Capitol, the Capitol Annex, and the Blasdel Building. The renovations to the Capitol and the Annex were estimated for completion in approximately one year. Mr. Comeaux noted that the renovations to the Blasdel Building were projected for completion by July 2004. He pointed out that the budget also included the authority to receive revenue from new space that had either already come online or would come online during the biennium. That included: (1) the old Carson City Courthouse, which added 14,680 square feet to the inventory; (2) the Armory Building in Carson City, with a total of 55,000 square feet, of which 27,167 was currently occupied; and, (3) Building 17 at the Stewart Facility, where the first floor would be occupied initially, with funding for the second floor renovation included in the recommended 2003 Capital Improvement Program (CIP) that would be reviewed by the Legislature. Each floor contained 21,000 square feet.
Mr. Comeaux explained that the budget also recommended the elimination of two positions, which would reduce the total number of positions from 58 to 56. Decision unit E-730 recommended the authorization to undertake over $3 million in renovation projects for various state-owned buildings during the biennium. Per Mr. Comeaux, many of those projects had been authorized for the current biennium, but were not completed because of the lack of funds. Mr. Comeaux explained that the Buildings and Grounds Division had been forced to absorb the additional utility costs, and had used the available funding to pay those utility bills, therefore, many of the renovation projects had not been completed. Mr. Comeaux informed the Subcommittee that a schedule of projects that had been approved for the current biennium, and those that had been completed, would be provided to members for their perusal.
Chairman Arberry inquired about the status of the new Highway Patrol building, and asked when that building would be completed. Mr. Comeaux replied that he could not answer that question, and he would provide information to the Subcommittee regarding that building at a later date.
Senator Rhoads asked Mr. Comeaux to elaborate on the future of the Clear Creek Youth Center. Mr. Comeaux explained that the Department of Administration had issued a Request for Proposal (RFP) for the management and operation of the Center in October 2002. One response had been received from the Nevada Future Farmers of America (FFA) Foundation. Mr. Comeaux indicated the Department was in the process of negotiating with the FFA, and he hoped to have a proposal for review by the Board of Examiners and the Legislature within a matter of weeks. The targeted beginning date of the arrangement with the FFA would be July 1, 2003.
Mail Services – BA 1346
Mr. Comeaux stated that Mail Services was under the Buildings and Grounds Division, and provided mail services to most state agencies in the Carson City, Reno, and Las Vegas areas. That included all incoming and outgoing mail, certified, UPS, and express mail service. Mr. Comeaux testified that Mail Services also included overnight mail to Las Vegas from Carson City, and vice versa; interoffice mail delivery and pick-up in the Reno, Carson City, and Las Vegas area; and also offered a folding, inserting and addressing, and bulk mail service. Mr. Comeaux advised that decision unit M-100 included authority to accept additional revenue, which would be generated by a proposed increase in overhead charges, or via charges added to the actual cost of postage, or because of an increase in interdepartmental mail delivery charges. Mr. Comeaux believed that those charges had not been increased in several years, and the increase would be very modest; however, in order to keep Mail Services operational, a slight increase would be proposed.
Senator Raggio asked how overnight mail service was routed between Las Vegas and Carson City. Mr. Comeaux indicated that Mail Services utilized both air and surface vehicles for overnight service. Michael Meizel, Chief, Buildings and Grounds Division, explained that the Division contracted with an air carrier. Senator Raggio asked whether the contractor picked up the mail in Carson City and transported it to Reno for transport. Mr. Meizel stated at one time, the Division had contracted with ground carriers. He advised that the service was put out to bid approximately every two years, which had been fairly successful.
Chairman Arberry asked about the increase in costs and how that might affect state agencies. Mr. Meizel replied that it should have a minimal impact on the agencies, and indicated that some current charges were totally inappropriate, such as the interoffice mail charge, which was grossly understated. Mr. Meizel remarked that the Division would attempt to equalize the rates to the agencies, however, emphasized that the overall impact would be minimal, and increases by the U.S. Post Office would have a greater impact on agencies. Chairman Arberry asked when the figures would be available. Mr. Meizel indicated he would provide that information to the Subcommittee.
Administrative Services Division – BA 1371
Mr. Comeaux remarked that the Administrative Services Division provided fiscal and administrative support to divisions of the Department of Administration. In addition, the Division provided fiscal services to the Board of Examiners, Office of the Governor, Governor’s Mansion, Governor’s Office of Consumer Health Assistance, Civil Air Patrol, Deferred Compensation Committee, the Ethics Commission, and the Commission for Women. Per Mr. Comeaux, funding for the Division was via an assessment to those aforementioned accounts. The budget request included funding for 19 positions; the only enhancements to the budget dealt with computer replacement. The budget did recommend elimination of one Accounting Assistant II position, which would save approximately $88,000 over the biennium. Mr. Comeaux reported that position elimination was recommended based on the financial situation of the state, and since the Division had been unable to fill the position during the current biennium, it would recommend the position for elimination.
Hearings and Appeals Division – BA 1015
Mr. Comeaux advised the Subcommittee that the Hearings and Appeals Division currently had 45 positions, and its mission was to provide fair and timely administrative hearings in contested workers’ compensation cases. The Division also contracted with other agencies to provide hearings where necessary. Mr. Comeaux said the significant feature of the budget was the request to relocate the Division during the next biennium to more appropriate space in Las Vegas. The Division was currently housed in the Grant Sawyer State Office Building, and Mr. Comeaux indicated it had been jammed into inadequate space for quite sometime. The Division proposed a move into non-state-owned space in a centralized location in the Las Vegas area, along with the office of the Nevada Attorney for Injured Workers, and the Victims of Crime Program. Mr. Comeaux testified that the budget recommended funding for that move, including the moving costs.
Senator Raggio inquired about the salary level for Appeals Officers. Mr. Comeaux stated that Bryan Nix, Senior Appeals Officer for the Division, would provide an answer to that inquiry. Senator Raggio then asked whether the officers were attorney-trained positions. Mr. Nix explained that the Division offered two levels of appeals, and noted that Appeals Officers were attorneys, while Hearings Officers were non-attorneys. The basic salary level was somewhere between $85,000 and $98,000. Senator Raggio asked whether Appeals Officers were full-time positions, to which Mr. Nix replied in the affirmative. He also pointed out that Appeals Officers were precluded by law from participation in a private practice.
Victims of Crime Program – BA 4895
Mr. Comeaux indicated that the Victims of Crime Program existed to provide financial assistance to innocent victims of crimes committed in the state of Nevada. For the most part, that program was funded by court assessments, and also via recently initiated participation in the federal Victims of Crime Program, which provided federal funding. The significant feature of the program, aside from the requested relocation of the office in southern Nevada along with the Hearings Division, was a request to add a third staff position in the Reno office. Mr. Comeaux noted that office was currently staffed with two individuals, and that meant it could not always remain open during regular business hours. He also explained that the caseload was simply more than two people could handle. Additional staff was, therefore, being requested for the program.
Mr. Comeaux testified that the other significant feature of the budget was a recommendation that court assessment revenue be increased within the account. The Supreme Court had submitted a bill draft request (BDR) to increase the administrative assessment for misdemeanors by $5.00, which would be for the court’s use. Mr. Comeaux stated it was recommended that the program maintain the existing ratio between the Judicial and Executive Branch of 51:49 percent; the total increase would be $9.80, with $4.80 distributed to the Executive Branch. Of the amount collected, approximately $600,000 would be allocated to Victims of Crime in the first year of the biennium, and approximately $650,000 in additional revenue in the second year. Mr. Comeaux commented that would facilitate the Victims of Crime Program to return to paying claims at 100 percent. The Nevada Revised Statutes (NRS) required that the Board of Examiners determine on a quarterly basis at what level claims by victims would be paid, so that all claims in that particular quarter would be paid at the same level. Mr. Comeaux explained that determination had to be made on the basis of the revenue available compared to the anticipated claims. For approximately the last 12 months, claims had been paid at the level of 80 percent, simply because there was not sufficient revenue to pay at a higher level. According to Mr. Comeaux, the proposed increase in the administrative assessment for misdemeanors would allow the program to return to a 100 percent payment level.
Senator Raggio inquired whether there was a cap on the individual amount paid to victims of crime. Bryan Nix, Senior Appeals Officer, Hearings and Appeals Division, explained that the statutory cap per claim was set in the amount of $50,000. There were also other caps within that limit for certain things such as funeral expense and wage reimbursement. Mr. Nix remarked that the Board of Examiners could exercise some flexibility in adopting regulations, rules, and guidelines for the program. He noted that administratively, the cap had temporarily been reduced from $50,000 to $35,000.
Chairman Arberry stated decision unit E-125 within The Executive Budget recommended an increase to court assessment revenue to provide additional funding for victim payments, however, within the summary, it appeared that payments to victims were projected to remain the same over the upcoming biennium. He asked how the program would increase reimbursements. Mr. Comeaux noted that the figures contained in the Summary Section, page ADMIN-111 of The Executive Budget, would require further research. The intention of the program was to make available any additional funding for payments to victims. He also noted that it did not appear the reserve would be greatly increased. Mr. Comeaux indicated he would review those figures and provide further information to the Subcommittee.
Mark Stevens, Assembly Fiscal Analyst, Legislative Counsel Bureau (LCB), advised that in FY2001-02 actual, the amount of the balance forward was $524,192, which had been reduced over the upcoming biennium to approximately $50,000 per year. The additional administrative assessment revenue would replace the reserve monies; however, Mr. Stevens pointed out that since the program was only reimbursing at a rate of 80 percent during the actual, he was unsure how that percentage could be increased to 100 percent without additional funds.
Mr. Comeaux commented that the 80 percent payment had not commenced until the end of FY2002, and the program had been paying 100 percent until the final quarter of FY2002. The payment had been reduced to 80 percent during FY2003. Mr. Comeaux reiterated that he would review the figures and provide additional information to the Subcommittee at a later date.
Information Technology Division – BA 1320
Mr. Comeaux indicated that the Department of Administration proposed creation of another division. Within The Executive Budget, unfortunately, that budget account was titled, “Technology Improvement Plan,” which should be changed to the “Information Technology (IT) Division.” The proposed Division would protect the state’s investment in the Integrated Financial System (IFS), and provide ongoing system oversight and coordination. Mr. Comeaux stated it was proposed that the Department be provided with funding for two positions, and the associated costs, to form the IT Division. Those costs represented approximately 15 percent of the total budget request for Budget Account 1320, and the remaining 85 percent would be utilized to provide funding for overall IFS support, disaster recovery, and business contingency expenses. Also proposed was the development of an Employee Travel Tracking module, which would actually be an enhancement to the IFS. Mr. Comeaux noted that the cost of that module would be approximately $93,000.
According to Mr. Comeaux, the ongoing system and maintenance costs, previously supported by the IFS development budget, would be apportioned to the IFS core departments for each year of the upcoming biennium as follows:
· Approximately $90,000 to the Department of Administration
· Approximately $164,000 to the State Controller’s Office
· Approximately $535,000 to the Department of Personnel
· Approximately $275,000 to the Department of Transportation
The proposed IT Division, stated Mr. Comeaux, would also provide technology- related assistance to the various agencies within the Department of Administration. The Division would be instrumental in the new responsibility of the Department to provide budgetary oversight for the major projects within Budget Account 1325, Information Technology Projects. Mr. Comeaux explained that budget account contained funding for several information technology improvement plans, most of which were funded via General Fund appropriations, to afford maximum flexibility in the use of those funds.
Chairman Arberry pointed out that in Budget Account 1340, Budget and Planning Division, decision unit E-910 recommended the transfer of the ongoing costs associated with the IFS from Budget Account 1320. He asked whether there was duplication within the two budget accounts. Mr. Comeaux advised there was no duplication, and the figures within Budget Account 1340 were essentially related to The Executive Budget system.
Senator Tiffany asked whether the Department of Administration was literally creating an Executive Branch committee that would review technology projects under the proposed Information Technology Division budget account. Mr. Comeaux replied that was not the intention of the Department. The proposal was that the Department of Information Technology (DoIT) would review all proposals for significant system development or information technology projects. It was recommended that the budget for identified projects, basically accounting and data system replacements for Mental Health and Developmental Services (MHDS), Northern Nevada Child and Adolescent Services, and a new Integrated Licensing System (ILS) for the Real Estate Division, would be administered by the Department of Administration. Mr. Comeaux noted that the Department would provide fiscal support and budget management for divisions with projects approved by DoIT, in order to maximize the use of the funds appropriated for each individual project.
Senator Tiffany asked if projects recommended for funding would be reviewed fiscally by the Department, could the Department also address problems caused by contractors who failed to comply with agreements. Mr. Comeaux replied that the main function of the Department would be to review and pay the bills, and ensure that money was applied as needed to the various projects. Senator Tiffany inquired whether the Department could stop or start a project, or contact the contractor. Mr. Comeaux indicated that would be done by either the agency or by DoIT, if it were providing the project management. Senator Tiffany noted that in years past, computer programs and projects would often create a barrier within the Budget Office, causing a longer delay in securing needed equipment and contracts. She asked whether the Department would create such a barrier with its proposed program. Mr. Comeaux stated the Department of Administration hoped to facilitate the fiscal aspect, and project management would be left to the agency; he emphasized that the Department would simply provide the fiscal support.
Mr. Comeaux advised the Subcommittee that he would provide a written update to members regarding the status of the implementation of the Integrated Financial System (IFS).
Chairman Arberry called the committee back to order after recess, and invited Mr. Cotton to proceed with his budget overview.
DIVISION OF CHILD AND FAMILY SERVICES
DCFS 1-91 – VOLUME II
Edward E. Cotton, Administrator, Division of Child and Family Services (DCFS), introduced Diane Comeaux, Deputy Administrator, and James Baumann, Administrative Services Officer IV, to the Subcommittee. He called the Subcommittee’s attention to Exhibit D entitled, “Department of Human Resources, Division of Child and Family Services, FY2003/2005 Budget Overview,” and explained that items in the budget centered around five issues:
Mr. Cotton referenced the chart on page 1 of Exhibit D, which indicated that the Division’s budget constituted approximately 8 percent of the total Department of Human Resources (DHR) budget. The budget overview would include:
· Purpose and mission
· History and overview
· Impacts on service provisions
· Proposals to address children’s issues
· Budget summary
Mr. Cotton stated that various aspects of the budget would be addressed throughout his presentation. Addressing the purpose and mission of the DCFS, Mr. Cotton noted it was fourfold: (1) Protection and permanency for children; (2) Unifying of communities; (3) Preservation of families; and, (4) Correctional services for youth. He pointed out that as the DCFS had striven to make children safe and arrange for permanent placements, it recognized that the best permanency plan for any child was to never leave home. Mr. Cotton advised that the DCFS was focused on families and keeping children with their families from the beginning. Many services would focus on lower-levels and maintaining children in placements rather than long-term, high-cost care, while keeping in mind that safety was paramount; he emphasized that the DCFS would not maintain a placement that risked a child’s safety.
The DCFS had undergone some significant changes over the past two years, and Mr. Cotton explained that implementation of A.B. 1 of the Seventeenth Special Session, which ended the bifurcation of child welfare services in an effort to provide additional stability for children, less movement within the foster care system, and more immediate services had commenced. Mr. Cotton advised that some of the mandates of that legislation had been implemented, and some had not, but the Division did have a plan in place for total implementation.
According to Mr. Cotton, the Division of Child and Family Services (DCFS) was focused on moving children from higher-cost residential to community-based placements, and that was not simply a cost issue. The Division believed that placing a child into a community-based placement was actually better for the child. Mr. Cotton stated that improvement of juvenile correctional facilities would guarantee that the DCFS was not simply maintaining youth, but was actually focusing on growth, development, and treatment as needed. Mr. Cotton remarked that expansion of the Division’s ability to meet the mental health needs of youth was also a focus.
Over the past few years, Mr. Cotton noted that the DCFS had faced many challenges, which included rising caseloads. The Division had experienced some success in providing services, and keeping children in the home, which caused the non-custody caseload to increase faster than the custody caseload. Mr. Cotton stressed that the backlog within juvenile detention facilities had to be addressed. As of the present time, there were 57 youths in county juvenile detention facilities that had been committed to state facilities, however, explained Mr. Cotton, because the Nevada Youth Training Center (NYTC) and the Caliente Youth Center were both full, youths could not be moved to those facilities to take advantage of the programs.
Mr. Cotton testified that the Division had overutilized higher levels of care because of a lack of resources, which meant that a larger percentage of children were placed in high-level care, rather than basic foster or familial care. Mr. Cotton stated that the Division had insufficient staff to provide mental health assessments and services in a timely manner, and that challenge would be addressed in the budget.
Mr. Cotton explained that page 5 of Exhibit D listed four major impacts on the Division’s service provision:
1. Civil Rights of Institutionalized Persons Act (CRIPA) investigation.
2. Child and family services review.
3. A.B. 1 of the Seventeenth Special Session.
4. A.B. 94 of the Seventy-First Session.
The proposal to address children’s issues was outlined on page 6 of Exhibit D, and Mr. Cotton noted there were 11 major issues that were part of the Division’s plan to build on the successes and alleviate the existing problem areas. According to Mr. Cotton, pages 7 through 10 of Exhibit D contained the budget summary, which would be addressed as the final issue of his presentation.
Mr. Cotton stated the CRIPA investigation of the Nevada Youth Training Center (NYTC) in Elko was conducted to determine whether or not conditions at the NYTC violated the constitutional rights of the youths placed there. The investigation took place in February 2002, and Mr. Cotton indicated the DCFS did have an exit interview that provided some information, however, the actual report was not received until November 2002. Although the report noted many positive aspects about the programs, the educational program, the various job training programs, and the athletic programs, it also pointed out that changes were needed to assure the safety of the residents at the NYTC. Mr. Cotton indicated the major issues brought forth by the CRIPA report were noted on page 11 of Exhibit C, and included ensuring safety of the residents, and providing residents with a workable grievance process. The report was concerned that a youth grievance process was entirely within the facility, and involved persons who worked directly with the youth; the report indicated that the process did not function well. Mr. Cotton indicated that another issue was to ensure that youths were properly monitored when restrained or secluded; he explained there were many laws surrounding restraint and seclusion of youths, and what action should be taken during that time. Another identified problem area was the ability to meet the mental and physical health needs of the youths.
Mr. Cotton noted that nearly every one of those issues related to a major issue with the staff-to-resident ratio at the NYTC. Although the investigation centered on the NYTC, approximately the same staffing levels and issues existed at the Caliente Youth Center. Mr. Cotton informed the Subcommittee that the issues would be addressed for both institutions within the budget.
According to Mr. Cotton, the staffing ratio of both institutions was 15:1 at best, and as high as 30:1 during the evening hours. The M-502 decision module within the Division’s budget requested 18 new group supervisor positions at the NYTC and 14 at Caliente. Mr. Cotton stated the national standard was an 8:1 ratio, and the requested positions would bring the ratio to 10:1 during waking hours, and 16:1 during evening hours. The number of professional level counselors was also cited as problematic by the CRIPA report. The national standard was 25:1, and the ratio at the NYTC was 53:1, and much higher at the Caliente facility. Mr. Cotton reported that the budget requested four youth training counselors at Caliente and three at the NYTC, which would reduce the ratio to 27:1.
Mr. Cotton indicated that another safety issue noted that the NYTC had only one nurse on staff to monitor medical care of youths; one issue dealt with restraint and another addressed monitoring youths during periods of isolation. Obviously, stated Mr. Cotton, with only one nurse working a regular shift, youths were not monitored, therefore, the budget request would add one additional correctional nurse at both Caliente and the NYTC. Mr. Cotton reported that the Division’s budget requested a total of 19 additional full-time equivalent (FTE) positions at Caliente and 23 at the NYTC. In addition, the Division also requested funding in the Youth Parole Services budget, Budget Account 3263, for psychiatric consultations, and costs for medications to assist in addressing the needs of youths and residents who suffered from either mental health or substance abuse disorders.
Assemblywoman Leslie stated she had spoken to Michael Willden, Director, Department of Human Resources, and Mr. Cotton about the CRIPA report which she recently had the opportunity to read. Ms. Leslie stated she was completely appalled, embarrassed, and ashamed that one of Nevada’s state institutions would receive such a report from the U.S. Department of Justice (DOJ). It appeared that the DCFS had taken some corrective action, however, Ms. Leslie wanted to put the Subcommittee on notice that members should read the report, as there appeared to be a culture problem at the NYTC, a culture of brutality that had to be addressed. According to Ms. Leslie, the report stated that investigators found credible instances of staff using excessive force against youths, which included, “…punching youths in the chest, kicking their legs, grabbing shirts and shoving youths against lockers and walls, ‘dipping’ or throwing youths to the floor, slapping youths in the face, smashing youths’ heads in doors, and pulling youths from their beds to the floor.” Ms. Leslie explained that the report continued, “… youths further indicated that, typically, one of the triggers for that type of force were youths disobeying or failing to follow directions, rather than youths posing an immediate threat of harm to themselves or others.”
According to the CRIPA report, Ms. Leslie stated that at the NYTC youths were, “…subjected to verbal abuse in which their race, family, physical appearance and stature, intelligence or perceived sexual orientation were aggressively attacked. It was evident that some staff used verbal abuse to provoke youths into physical confrontations to provide a pretext for the use of force.” Ms. Leslie noted that investigators found that in many incident reports and other documentation, misuse of force was treated as “horse play,” with no significant repercussions to staff, leading investigators to the conclusion that, “there is a pattern or practice of use of excessive force at NYTC.”
Ms. Leslie remarked that senior staff persons were promoted at the NYTC, even after being written-up for inappropriate force against youths, and she asked Mr. Cotton to explain to the Subcommittee exactly what was occurring at the NYTC, and why legislators were unaware of the situation. During future joint subcommittee hearings, Ms. Leslie stated she wanted information regarding what action would be taken, not only from the budgetary aspect, but what action had or would be undertaken to change that culture of violence at the NYTC, such as:
Ms. Leslie noted that the NYTC had also censored the mail, and she believed the CRIPA report contained much additional information that should be reviewed by the Legislature. The final recommendation from the consultants was that the superintendent and the Department had to make a public commitment to change. Ms. Leslie indicated that she was certainly going to make a public commitment to change, and was hopeful that the Subcommittee would agree that the state had to do a much better job at NYTC. Ms. Leslie wondered what was occurring at Caliente, as the DOJ had not investigated that facility. If within three days, the investigators could uncover the type of abuse that was documented in the CRIPA report, it made Ms. Leslie very fearful regarding what was happening in Nevada’s youth training centers. Ms. Leslie informed Mr. Cotton that she would review the CRIPA report incident-by-incident, recommendation-by-recommendation. She hoped that Mr. Cotton could assure the Legislature that more would be done to correct the serious problems at Nevada’s juvenile facilities.
Mr. Cotton assured Ms. Leslie that the Division would take additional steps to address the problems at the NYTC, and indicated it had already initiated some steps. In January of 2003, Mr. Cotton reported that he had interviewed several of the youths individually at the NYTC, and asked questions regarding the same type of issues addressed in the CRIPA report. Immediate action had been taken, and the grievance process had already been changed, and would continue to receive additional changes. Mr. Cotton emphasized that the DCFS had already taken substantial steps, however, realized that more could be done. For example, an issue of the CRIPA report surrounded staff training regarding how and when to restrain a youth without unnecessary force, a process which demanded that two people be present; however, because of the staffing levels at the NYTC, quite often two people were not present during a restraint procedure.
Ms. Leslie indicated that she understood the budget request for additional staff, but was concerned about the ingrained culture at the NYTC, which had obviously been in place for a long, long time. Senior staff persons had been allowed to abuse youths, and Ms. Leslie noted that the DCFS had completed mandated child abuse report training with the staff. Ms. Leslie acknowledged that Mr. Cotton had done as much as he possibly could after the problem had been uncovered, and noted that he currently reviewed every disciplinary action at the NYTC. Mr. Cotton indicated that he could not argue with any of the points made by Ms. Leslie, and invited any and all Subcommittee members to visit both the NYTC and the facility at Caliente. There had already been major changes at the facilities.
Ms. Leslie noted that the CRIPA report stated the current superintendent had been at the facility for a long time, and if a culture and institution of brutality had been tolerated, Ms. Leslie asked whether the DCFS would hire an assistant superintendent who had not previously worked at the facility. Mr. Cotton replied in the affirmative, and concurred that it did not make sense to promote someone who currently worked at the facility. Obviously, the DCFS had not made any decisions regarding that position, and there would be many tasks facing that person. Ms. Leslie simply wanted to put the Division on notice that she was serious about reviewing the NYTC and Caliente facilities, and would support budget requests that improved staffing and training. However, she stated she would not support those requests unless there was a clear message and concrete plan regarding how to change the culture at the NYTC. Ms. Leslie indicated that she had spoken to the Chief Juvenile Probation Officer for Washoe County, and after reading the report from CRIPA, her feeling was that youths from Washoe County should not be sent to the NYTC. She encouraged the members of the committee to read the CRIPA report, as a very sad state of affairs had been allowed to develop at both Nevada youth training facilities. Ms. Leslie stated tax increase or no tax increase, it was a problem that could not be swept under the rug, and Nevada owed its youth a lot better treatment than they had received in the past. Mr. Cotton reiterated that the Division would welcome any visitors to the facilities.
Mr. Cotton indicated that he would address the Department of Health and Human Services (DHHS), Child and Family Services reviews, which consisted of a Title IV-E, Foster Care Eligibility Review, conducted during the week of April 22, 2002. A federal team reviewed the Division’s compliance and found it to have a less than 5 percent error rate. Mr. Cotton stated that since the DCFS had passed that review, it would be a period of three years before another review would be scheduled. He offered to provide additional information regarding that review at the request of the Subcommittee.
The DHHS changed its rules in 2000, and Mr. Cotton explained that the Child and Family Services Review greatly increased the federal monitoring of child welfare programs in each state. The review was to determine whether the state was in substantial conformity with Title IV-B and Title IV-E. Mr. Cotton noted that the Division’s review was set for early 2004 and would be a massive task, which included a self-review. The DHHS would rate the Division on seven basic outcomes, and to date, approximately 20 states had undergone the review, and not a single state had passed. Mr. Cotton explained that he mentioned the review because it could carry some significant financial penalties as depicted on page 12 of Exhibit D. Should the state not pass the review, the DHHS would work out an improvement plan with the state, and the Division of Child and Family Services (DCFS) would prepare the self-study in correlation with that plan. According to Mr. Cotton, the penalties could amount to a significant amount of funding.
Mr. Cotton announced that the Division’s Family Programs Office (FPO) would undergo significant changes. Two of the new positions approved by A.B. 1 of the Seventeenth Special Session, along with existing FPO staff, would evolve into a Quality Assurance/Quality Improvement unit. Mr. Cotton explained that unit would conduct reviews of the child welfare sites in Nevada, which would include review of files, conversations with youth and foster parents, contacting schools, and would determine whether the appropriate response was made to reports. Mr. Cotton indicated the review would include the rural counties, along with Clark and Washoe Counties.
According to Mr. Cotton, A.B. 1 of the Seventeenth Special Session included a new integrated child welfare service delivery model, which was depicted on page 14 of Exhibit D. The model transferred many of the child welfare services from the DCFS to Clark and Washoe Counties, and required the DCFS to work with those counties to develop and submit a funding plan for that transfer to the Legislative Committee on Children, Youth, and Families prior to September 15, 2002, which had been completed. Mr. Cotton noted there had been much discussion surrounding the plan, and he pointed out that the plan was developed under the basic principle that the purpose of the integration was to improve the delivery of services, not to shift financial responsibility in either direction.
Mr. Cotton indicated that the costs of transferring services were reflected in Budget Account 3142. The transfer of services in Washoe County was basically complete, and Washoe County was now providing both the in-home Child Protective Investigations, and foster care services. Mr. Cotton noted that because of budget constraints, the integration in Clark County that had been scheduled to occur in January 2003 had not occurred, and the DCFS had developed a plan with Clark County to design a phase-in process to facilitate that transfer. Mr. Cotton noted that the Division’s budget actually called for transfer of the Family Preservation Program in October 2003, and other support programs such as licensing and adoption would transfer in April 2004, with the case management/eligibility programs being transferred in October 2004. That fit the Division’s budget and the budget worked out with Clark County, however, in the meantime, the Division would continue with its move to improve services. Both the DCFS and Clark County staff scheduled to be co‑located would still be co-located, but would remain state staff until 2004. Mr. Cotton indicated that the conversion of Clark County to the Unified Nevada Information Technology for Youth (UNITY) computer system would continue to go forward. Finally, stated Mr. Cotton, A.B. 1 of the Seventeenth Special Session also provided for improvement of staffing levels so that workers would have a 1:28 staff-to-youth ratio for child welfare caseloads. To accomplish that, the bill added 11 new full-time equivalent (FTE) direct caseworker positions in Clark County, which were included in the Division’s budget. Additionally, two Social Work Supervisors were funded for rural regions to provide adequate supervision to the caseworkers.
According to Mr. Cotton, the legislation also dealt with mental health services, and required the Division of Child and Family Services (DCFS) to oversee the establishment of three regional Mental Health Consortia, and provide increased funding to phase-in a wraparound program. There were approximately 327 seriously emotionally disturbed (SED) children under child welfare care, and the Consortia members had submitted the second annual plan in January 2003. Mr. Cotton noted that the Consortia consisted of extremely active groups which included a wide variety of citizens from various disciplines as members. Due to budget constraints, Mr. Cotton explained that the DCFS was unable to provide wraparound services for all 327 of the SED children, and the number was reduced to 216 in FY2003. The proposed budget for FY2004 and FY2005 would restore funding for the remaining 111 slots for SED children, and the plan was to serve 327 children via the wraparound program in FY2004.
Mr. Cotton stated that the rural regions had also been identified as having insufficient resources to provide mental health assessments and intense child intervention services, therefore, A.B. 1 of the Seventeenth Special Session also provided for three mental health counselors, a mental health supervisor, and three family support workers to assist families. Those costs were included in Budget Account 3142. All three Consortia identified a multitude of unmet needs, and recommended steps for action to address those needs, however, Mr. Cotton explained that many of those recommendations would involve significant costs to the DCFS and/or to Medicaid. Because of the “2 x FY02” budget rule, the Division was unable to budget for those costs for the upcoming biennium.
Mr. Cotton remarked that A.B. 94 of the Seventy-First Session was passed to assist youths in making the transition from foster care to economic self‑sufficiency. During 2002, working with county staff, the DCFS compiled regulations regarding how county recorders would charge and collect the additional fees that would provide that assistance. According to Mr. Cotton, the Division wanted to ensure that at least 90 percent of the funds were spent on concrete services such as rent, food, or job training for youths rather than overhead, assessments, or other costs. The regulations were reviewed as part of a public hearing in June 2002, and were approved in July 2002. Mr. Cotton explained that the regulations required the establishment of oversight committees for each of the three entities which provided child welfare services, i.e., the DCFS for the rural regions, and Clark and Washoe County Family Services. Those committees had been established and plans developed regarding how to make the best use of the funds, and Mr. Cotton stated the DCFS would commence disbursement of that money on February 1, 2003.
Ms. Leslie asked whether the amount available via A.B. 94 of the Seventy-First Session was approximately $1.2 million. Jim Baumann, Administrative Services Officer IV, stated that the amount of money collected to date was in excess of $1 million; he noted that the money had been received sporadically from the counties. Ms. Leslie inquired whether there was a current balance of approximately $1 million. Mr. Baumann replied in the affirmative. Ms. Leslie asked how much of the funds had been expended to date, and Mr. Baumann advised that no money had been expended. Ms. Leslie then asked how quickly the funds would be available to youths. Mr. Baumann explained that the plans were recently approved, and he believed that interlocal agreements would be required with local jurisdictions in order to disburse the funds. Ms. Leslie asked how long that process would take, and Mr. Baumann said he believed the time frame would be approximately one month. Ms. Leslie said she hoped the process could be expedited, as there were foster children desperately in need of the services, and there was a $1 million balance available.
Senator Coffin asked Mr. Cotton whether the DCFS had taken action to address the proposed closure of the eight-bed Children’s Acute Care Unit at the Desert Willow Treatment Center in southern Nevada for youths under the age of 12 years. Mr. Cotton explained that the children’s unit was operating with an average population of 4.8 children at any given time, and as budget cuts were contemplated, the DCFS reviewed areas that were being underused, and the unit fell into that category. The Division believed it could develop programs for those children in specialized foster homes, or treatment foster homes that would provide “wrap” services. Mr. Cotton explained that if a child were in a program at a cost of $303 per day, that would equate to approximately $9,000 per month, and if the Division were able to locate a therapeutic foster home at the cost of $50 per day, for a total of $1,500 per month, that left a balance of $7,500 per month to purchase the type of services needed to maintain that child in the community. Mr. Cotton indicated that the Division would develop specific plans for those children in a therapeutic, familial community setting, where they would receive “wrap” services, rather than an extended stay in a hospital setting.
Senator Coffin inquired whether the proposed therapeutic foster homes would offer 24/7 “awake” care with skilled nursing, and pointed out that children in need of acute services were currently being transported to local area hospital emergency rooms. Mr. Cotton stated that was not necessarily the case. In a wraparound scenario, there could be a basic foster home set up with a normal “awake” time frame, but the extra funding would allow the Division to program for “awake” care around-the-clock. Mr. Cotton explained that “wrap” programs had been developed where there was an “awake” person in the home during the evening hours; such support could be provided at a much lower cost than that of hospital care. Mr. Cotton noted that the Division would attempt to individualize the plan based on the needs of the child.
Senator Coffin stated that on the average, five of the eight beds in the unit had been filled, and the emergency rooms in Las Vegas reported that for quite a few months, attempts had been made to refer youths to that unit, however, those referrals were discouraged, or the hospitals were advised that there were not enough beds. It appeared that the reason for that action was because staffing levels were being cut because the Division recommended closure of the unit, without consultation with the Legislative Committee on the issue. Senator Coffin stated he found out about the closure via feedback from the community, and he asked what part of the Division’s program would benefit by the savings realized from closure of the unit. He emphasized that suicidal children could not be carefully monitored in a residential setting until they had been stabilized.
Mr. Cotton explained that it went far beyond saving money. The notion of step‑down and wraparound services was to provide a child with a setting in the least restrictive placement where the child could grow and develop, and learn to live in families and communities, rather than hospitals. The proposed closure of the unit at Desert Willow was based on the idea of saving money, but also on the idea of providing better services for youths. Mr. Cotton disclosed that one child placed in his home as a foster child had burned down his former home, and another child had shot at someone and been shot at himself. He had trouble believing there were youths who could not be served in family and community settings. According to Mr. Cotton, both of the aforementioned children were currently enrolled in college and doing very well, which would not have occurred if they had remained in a hospital setting.
Senator Coffin opined that the mere existence of the Children’s Acute Care Unit at the Desert Willow Treatment Center was not simply to serve the average 4.8 children. There were many hundreds of families who were aware that the service existed, and should a child reach the “trigger point” the facility had been available to those families. Senator Coffin indicated the service population was a great deal larger than the average 4.8 to 5 children, and the comfort and security to the community in knowing there was a place to take children which would prove safe for them, was incalculable in its cost. He believed the unit should not be used as a cost-saving measure, as there were few proven venues for the younger children. Senator Coffin noted that in terms of dollars and cents, the mental health program should have been exempted from the Governor’s required flat budget mandate, as the cut appeared to be too deep, and would actually cut the heart out of many families. He opined that the approach might cost some children their lives. Senator Coffin was saddened by the proposed closure of the unit, and noted that the Division of Child and Family Services (DCFS) had made the decision to close the unit prior to the beginning of the 2003 Legislative Session, giving legislators no other choice than to bring the issue before the appropriate committee as soon as possible, because every hour and every day counted. Senator Coffin was very upset that the Division was not prepared to take further action to correct the situation, which would remain status quo, and he wondered what part of the budget he should support.
Mr. Cotton continued his presentation, and indicated that the Chafee Foster Care Independence Program had come about as a result of A.B. 94 of the Seventy First Session, and provided slightly more than $500,000 per year to assist youths who were transitioning from foster care to independence. Much of that money was different from the basic allocations, as the funds were used to provide services to youths 15.5 years of age and older, who were in foster care and expected to remain there until age 18. Mr. Cotton explained there was $114,500 set aside for youths 18 - 20 years of age who had left foster care and were in need of room, board, or other services, and the plan was to pull the two programs together to assure there was continual care available.
Mr. Cotton testified that he would continue his presentation with a review of the “Proposal to Address Children’s Issues” as contained in Exhibit D, beginning on page 17.
Mr. Cotton explained that higher levels of care represented an increasingly higher percentage of the overall placement costs, with as much as 40 percent of placements occurring in higher levels of care. Mr. Cotton indicated the Division would tighten up the decision-making process regarding the type of care children required. Children with significant behavioral and/or mental health issues were often placed in residential placements to ensure their safety and the safety of others, however, Mr. Cotton explained that would not address the underlying causes of the problems. Negative consequences that occurred from placement of children in residential programs included:
· Children learned to function only in situations where their behavior and actions were controlled by others, and they did not learn to manage their own behavior, or learn how to live in familial or community settings, therefore, often ended up back in treatment facilities.
· Residential placements were expensive, and could cost up to $500 per day, or more.
· Such facilities were often out-of-state or a significant distance from the community where the child’s family or relatives resided, and often when children were shuttled to higher levels of care, they remained there for long periods of time. It became very difficult to work with both the child and the family to reunite the family.
· Federal rules mandated that children should be placed in the least restrictive environment that could meet their needs.
Mr. Cotton explained that “wrap” services were based upon the principle that many of the children in residential care could be placed in foster homes, whether they were regular, therapeutic, or specialized. That type of placement offered some of the following advantages:
· Children lived in the community and became the responsibility of the community and its support networks. Community groups were interacting with DCFS to plan for such placements, in an effort to return children to the community.
· The cost was much less than residential costs, and whether that constituted a savings or not, those funds could be utilized for services directly for children, rather than for residential overhead, which was substantial.
· Foster homes were often set in the child’s community or county, so that visitation and involvement of the parents in the service planning was much easier.
Mr. Cotton advised that the DCFS had met with provider networks in Clark County to move the focus to programs that were community-based, and provided wraparound services to children, rather than continuing to place children in long-term residential care. There were studies available from other states where results indicated that children who were provided wraparound services tended to experience far less movement, far less recidivism, or require additional service needs. Mr. Cotton stated that the Division felt very strongly that the program would work, and was the direction in which it should move.
Mr. Cotton indicated that such placement made it more difficult to monitor a child’s care and achieve reunification with the family, or pursue other permanency options. According to Mr. Cotton, the budget contained ten positions in the Neighborhood Care Center at the Southern Nevada Child and Adolescent Services, which had been funded via a federal grant that would terminate within the next year. The DCFS believed those positions were critical in providing services to children in out-of-state placements when they returned to the community. Mr. Cotton noted the budget requested that those ten positions be funded as state positions in FY2005, since the grant was not renewable.
Chairman Arberry inquired whether the Division would seek additional federal dollars to support the salaries for those ten positions, or would the funding be totally absorbed into the Division’s budget, if approved. Mr. Cotton explained that the decision module would make those positions state employees, and salaries would be paid from the General Fund. Chairman Arberry asked whether the Division would continue to seek federal dollars to assist with the program. Mr. Cotton noted that the Division was constantly seeking federal dollars in all aspects of its budget.
Mr. Cotton stated that the DCFS had reduced the number of out-of-state placements by insisting that the day a child was placed out-of-state, the program would include a plan, and also a discharge date.
Mr. Cotton believed that issue had been addressed via the previous discussion surrounding the Civil Rights of Institutionalized Persons Act (CRIPA) investigation. According to Mr. Cotton, the grievance process had been greatly improved at the Nevada Youth Training Center (NYTC). However, he also proposed the creation of a three-person unit, the Administrative Appeals/Ombudsman Unit, which would consist of two professionals and one paraprofessional individual that would operate centrally and serve three distinct functions. The first function would be that the unit would hold grievance hearings. When there was a grievance that the superintendent at the NYTC or at the Caliente facility could not address the grievance would be resolved by a person from the proposed unit. Mr. Cotton stated that would meet the recommendations made by the Department of Justice (DOJ) in the CRIPA report.
Senator Mathews asked that Subcommittee members each be provided a copy of the CRIPA report. Mr. Cotton indicated that he would provide both a copy of the report and a copy of the Division’s response to the report.
Mr. Cotton asked the Subcommittee’s indulgence, and stated Mr. Baumann would like to provide additional information regarding the aforementioned ten positions that were federally funded for the Neighborhood Care Center. Mr. Baumann explained that review of The Executive Budget revealed that the cost of those positions in FY2005 would be $841,000, and there was $333,000 in Medicaid case management built into the budget.
Senator Mathews asked what type of nurses would be added at the juvenile facilities. Mr. Cotton pointed out that the current nursing position was filled by a Registered Nurse (RN), and that would be the status of future positions.
Chairman Arberry advised that he had inquired about the ten positions at the Neighborhood Care Center because quite often, federal dollars were used to fund positions, and at some future point, those positions quite often had to be absorbed by General Fund dollars, because the need and the outcry for assistance continued.
Mr. Cotton pointed out that the aforementioned grievance system would be located outside the institutional setting, which was a major issue in the CRIPA report.
Mr. Cotton indicated that as stated in the section of Exhibit D that addressed A.B. 1 of the Seventeenth Special Session, the Division would phase-in a wraparound service model to provide mental health care to 327 children identified with serious emotional disorders. Mr. Cotton pointed out that included the proposal to close the acute unit for children under 12 years of age at Desert Willow Treatment Center, as those children should be served in familial, community-based settings. The Division had begun to work with providers to focus on specialized foster care with an array of wraparound services. Also, stated Mr. Cotton, through A.B. 1 of the Seventeenth Special Session, the DCFS added three Family Support Workers, three Mental Health Counselors, and a Mental Health Supervisor in the rural region. The Southern Nevada Child and Adolescent Services budget, Budget Account 3646, also requested two Mental Health Counselor positions, a Public Service Intern in the Early Childhood Services Program, two Developmental Specialist positions, and a Public Service Intern in the First Step program.
Mr. Cotton noted that the five neighborhood centers in Las Vegas had been instrumental in providing community-based services to keep children in their homes, and prevent others from moving to a higher placement level of care. He explained that part of the reason the programs were so successful was the aforementioned ten positions that had been funded via federal grant funds.
Assemblywoman Leslie inquired whether there were any positions set aside in the budget for Northern Nevada Child and Adolescent Services. Mr. Cotton stated there were no additions to that budget, and indicated the two eliminated positions were clerical. Ms. Leslie then asked about the current status of the waiting list. Les Gruner, Director, Northern Nevada Child and Adolescent Services, stated that the current waiting list for the outpatient program was 173 children. Ms. Leslie inquired about the availability of beds at the Adolescent Treatment Center. Mr. Gruner stated the budget called for the continued operation of a 16-bed program. Ms. Leslie noted that those 16 beds were for all of northern Nevada, and asked whether there was a waiting list for the Center since it handled the suicidal and critical children. Mr. Gruner explained that children who were suicidal or in crisis received service first, and if there was no room in the Center, a private facility was utilized to provide the necessary services. Ms. Leslie asked how many children were typically located in the private facility. Mr. Gruner stated that 25 adolescents had been serviced at the private facility at a rate of $544 per day. Ms. Leslie noted there had never been a request to add beds to the Adolescent Treatment Center. Mr. Gruner indicated the program was approximately 22 years old, and bed space had never been increased. Ms. Leslie asked whether any thought had been given to making such a request for the upcoming budget cycle or addressing the waiting list. Mr. Cotton indicated that all of the waiting lists had been discussed, but in order to remain within budget constraints, the Division had arrived at the best possible statewide plan.
Senator Cegavske stated that emergency room doctors had informed her they were devastated by the proposed closure of the Children’s Acute Care Unit at the Desert Willow Treatment Center, as they had no resources available for those children. Senator Cegavske indicated that many of the children with severe problems would be placed back in the school systems and neighborhoods, and she was concerned about the situation. She asked whether the DCFS had provided information to emergency room doctors regarding where to send the children in crisis. Senator Cegavske voiced grave concerns regarding the closure, and wondered why the Division had not cut adult services rather than services for children.
Senator Cegavske stated that she was not aware of the contents of the CRIPA report, and asked when the report had been completed. Mr. Cotton replied that the investigators were at the Nevada Youth Training Center (NYTC) in February 2002, and the report was received by the DCFS in November 2002. Senator Cegavske asked whether the Division had been aware of the circumstances at the NYTC, and had appropriate action been taken to correct the conditions between February and November of 2002. Mr. Cotton replied that because of the exit interview conducted by the investigators, the Division had been aware of the positives and negatives of the investigation, and some action had been taken. He stated that he had also interviewed several of the youths at the facility, and had taken appropriate action based on those interviews.
Senator Cegavske inquired whether there was a breakdown available regarding the number of children that participated in the various programs offered by the Division. Mr. Cotton stated that he could provide information regarding caseloads within the various programs. Senator Cegavske inquired whether the unit at Desert Willow Treatment Center was totally closed, or was the closure set for April 2003, and was there any chance of revisiting that issue. According to Mr. Cotton, the closure was part of the Division’s balanced budget plan. Senator Cegavske reiterated that emergency room doctors had indicated to her that they did not have an alternative program available for youth under the age of 12 with severe problems. Mr. Cotton asked Christa Peterson, Deputy Administrator, Southern Region, DCFS, to address the Subcommittee regarding that situation.
Ms. Peterson explained that the Children’s Acute Care Unit at Desert Willow Treatment Center was still open, and closure was planned for April 2003. As an alternative, patients were referred to Montevista Hospital, which had a pediatric acute unit available to serve that age group. Ms. Peterson advised that the DCFS had very limited funds to fund treatment at the Montevista unit for children that did not have alternative sources of funding. Senator Cegavske asked whether Ms. Peterson could provide the number of children currently housed at Desert Willow Treatment Center and at Montevista Hospital, and the total number of beds available in the unit at Montevista Hospital. Ms. Peterson stated the Desert Willow Treatment Center had a capacity of eight beds. Senator Cegavske asked how many children were currently in that unit. Ms. Peterson replied that the unit was being held at half-full status, because of the imminent closure. Senator Cegavske inquired whether that unit could be filled, and Ms. Peterson advised that the DCFS did not maintain a waiting list for that program, so she was unaware of the number of children in need of the service. According to Ms. Peterson, children determined to be a danger to themselves or others were immediately referred to placement in the appropriate facility, or the Division developed a wraparound plan for those children, in order to meet their needs.
Senator Cegavske inquired whether emergency room doctors had been advised that children in distress should be referred to the Montevista Hospital; she also asked how many beds were in that unit. Ms. Peterson explained that the unit at Montevista Hospital contained eight beds for acute pediatric, and eight beds for long-term pediatric residential, and those numbers shifted depending on the need. Ms. Peterson pointed out that there were five Neighborhood Care Centers, where children in crisis could receive immediate assistance around the clock. Doctors at University Medical Center (UMC) would be able to refer patients to those centers for either service or placement in the Montevista Hospital unit, if necessary.
Senator Cegavske suggested that it might behoove the Division to contact and talk to emergency room doctors, and the hospitals, as several patients were currently being housed at southern Nevada hospitals because the doctors were unaware of available services. She had been advised that an armed guard was necessary at the door of the floor of the acute pediatrics unit to protect the children from injury to themselves, or from escaping the confines of the hospital. Senator Cegavske stated that was why she had difficulty understanding the decision to close the unit at Desert Willow Treatment Center.
Senator Coffin thanked Senator Cegavske for her in-depth questions regarding the closure of the unit, and wanted to assure that his comments were not directed to individuals within the Division who had been instructed to cut the budget, and had to determine where to make those cuts. Senator Coffin stated, in his personal opinion, the Division had picked a “rotten” place to make those cuts. He noted that Mr. Cotton testified earlier that children in crisis would be placed in therapeutic foster homes, and yet the budget recommended closure of the Therapeutic Family Care Program, which trained the foster care parents. Senator Coffin stated the issue was confusing because Mr. Cotton’s testimony stipulated that at-risk children would be placed in foster care, yet the budget recommended elimination of the program needed for such placements. Furthermore, stated Senator Coffin, younger children were not well segregated at the acute care unit at Montevista Hospital, and it was not the same as the unit at Desert Willow Treatment Center.
Mr. Cotton indicated that the Therapeutic Family Care Program was primarily developed quite a few years ago when there were no private providers of therapeutic foster care, which were now available. Senator Coffin reiterated that it appeared the program which would provide training for therapeutic foster care was being closed; he noted that program currently consisted of three positions. Ms. Peterson explained that the Therapeutic Family Care Program referred to in The Executive Budget, and recommended for closure with the elimination of three positions, was a program put together many years ago when the Division did not have access to private providers of therapeutic foster care services. Ms. Peterson assured the Subcommittee that the Division currently had at least four private providers of therapeutic foster care services that not only provided the licensed, specialized homes for placement, but also therapists to train and support the homes. Those providers were on contract with DCFS, and could provide at least 200 available beds in southern Nevada. Ms. Peterson stated the program recommended for closure in the budget was one that DCFS believed was no longer needed, because the service could be provided by the private sector in contract form.
Mr. Cotton explained that there were currently over 50 youths on corrections admission lists who had been committed for correctional care, but were waiting in detention centers. The Division proposed to address that issue by reopening Summit View as a state-run facility, and the costs were identified in Budget Account 3148, Juvenile Correctional Facility. The plan was to reopen the facility in July 2003 with 32 youths, then implement a “ramp-up” schedule that would attain capacity of 96 beds by May 2004. Mr. Cotton stated the cost would be $140.38 per day, per child. The savings listed on page 19 of Exhibit D were based on the bids received via the Request for Proposal (RFP) process. More importantly, stated Mr. Cotton, a number of those children were now placed out of state or housed in Rite of Passage (ROP) facilities. The proposal to reopen Summit View would fit in with the original discussion of a continuum of care that housed children in Nevada, where they could receive the type of correctional services developed by the Juvenile Correctional Department.
Mr. Cotton noted that the Division was working with Clark and Washoe Counties to develop a standardized safety assessment so that children, no matter where they were located, who were reported as being abused or neglected, would receive the same standardized assessment, whether it was by county or state employees. Mr. Cotton stated the eventual goal was that once a report was accepted, the victim would be seen within 24 hours to assess safety. In order to accomplish that, investigators should average 12 new investigations per month. Mr. Cotton noted that currently in the rural areas, the investigation rate was much higher, more than 16 investigations per month, and the Division was adding positions in the rural areas that would alleviate the problem somewhat. Rural workers did both investigations and child welfare work.
Mr. Cotton stated that fingerprints required time to process, and the Division was requesting funding for an administrative support position to handle the fingerprinting process in order to provide information in a timely manner when a person applied for a day care job, and possibly had a criminal history that had not been identified.
According to Mr. Cotton, the Division was requesting two professional staff and one administrative support position to create an Administrative Appeals/Ombudsman Unit within the Division, which would handle the grievance procedure at the juvenile facilities. In addition to the development of standards for child abuse and neglect, the unit would also create a legal, standardized process to notify people who were substantiated as child abusers of their rights of appeal. Mr. Cotton explained that in September 2002, two plaintiffs filed suit in the United States District Court naming 41 defendants, including several current and former state employees, and Clark County employees. The suit alleged that the state system failed to notice or disclose to persons who were placed on the child abuse and neglect list, and the process did not afford the right to appeal. Mr. Cotton stated the Division would review the system to make it legally defensible and allow persons due process so they were not put on the state’s central register in an arbitrary manner, and had the right to an appeals process.
Mr. Cotton stated that would be an additional function of the Administrative Appeals/Ombudsman Unit. One need identified by the Nevada Foster Parents Association was the need to have a professional person receive calls from foster parents, consumers, citizens, community partners, and others regarding problems or for clarification on specific cases and issues. Issues raised by those calls would be routed to local offices for resolution, and tracked to ensure appropriate follow up. Mr. Cotton explained he would receive a quarterly report that identified recurring problems and trends. Currently, the only position available to handle those calls was a clerical position, and the information was then provided to Mr. Cotton for resolution.
Chairman Arberry asked how Mr. Cotton would define the “Ombudsman” position. Mr. Cotton replied that it would be an office where persons could call who had problems with the type of services being received, and issues they might have with the Division that could only be handled by an “advocate” or “listener” who would actually follow-up on the issue and provide a timely response. Chairman Arberry asked whether the person would work for the Division. Mr. Cotton replied in the affirmative, and noted that the Administrative Appeals/Ombudsman Unit would consist of two persons who also conducted appeals and received calls, as there were not enough appeals to justify a full-time position. According to Mr. Cotton, the Division believed that the opportunity had arisen where two functions could be combined within one unit. Chairman Arberry stated he had asked the question to determine whether a person employed by the Division could be biased. Normally, an ombudsman would not work for the agency.
Mr. Cotton stated that currently, when foster parents, community providers, or other persons had issues with the way Division staff had handled a situation, they would call his clerical staff person, who took the basic information and Mr. Cotton then followed up by reading the file, talking to the concerned party, and dealing with the issue. Creation of the unit would allow those staff members to resolve whatever problems they could, and bring the remaining problems to Mr. Cotton’s attention. He stated that quite often, there were questions that surrounded proper understanding of certain processes. Mr. Cotton did not view the position of ombudsman as a person that would deal with malfeasance, but rather a site for basic complaints. Chairman Arberry noted that the person in the position of ombudsman would not handle disgruntled employees or clients who had complaints against the Division. Mr. Cotton stated the position would handle disgruntled clients or foster parents. Chairman Arberry reiterated that the person would work for the Division, and would act as a “shield” to protect the Division. Mr. Cotton stated he wanted to resolve the problems facing foster parents, and if foster parents were mistreated by staff, he believed the problem should be corrected. He stated he would expect the ombudsman to provide direct answers, and that person would not be under pressure to “cover” for staff if they were not doing a proper job.
Assemblywoman Chowning noted that a few years ago, the Legislature passed a bill she had sponsored that provided funding for extracurricular activities for foster children, such as visiting with siblings at summer camp. She asked whether that program had been initiated and if so, how the funds had been spent over the past biennium. Mrs. Chowning stated that hopefully, the funds had been utilized rather than not spent. Mr. Cotton indicated that he would supply that information to the Subcommittee.
Senator Mathews opined that the name “ombudsman” indicated that the person would have some type of legal authority to initiate action, and she felt that perhaps the Division should consider using a different name for its unit. Mr. Cotton stated he was open to suggestions regarding the name for the unit.
Mr. Cotton explained that would create one number for persons to call in certain counties to report incidents of child abuse and neglect. The program was set up as a pilot and would not be available on a statewide basis. Mr. Cotton stated the model would have one staff person, and one publicized number to report child abuse for Carson City, Douglas, Lyon, and Storey Counties. One number would make it easy to remember, as it would be well-publicized, but just as important, it would mean that staff in those rural regions would not be required to stay in the office and take calls. Mr. Cotton stated it was a pilot model that had worked extremely well in other states, and the Division would like to expand the program once it was proven to work. A central intake for the rural regions would be a boon, both to private citizens and to Division staff.
Mr. Cotton opined that Nevada could take the lead at developing “best practices” standards that would delineate what action should be taken in a case, rather than having many workers making decisions regarding necessary action. The establishment of such standards would most likely result in additional requests for child protection staff, but Mr. Cotton wanted the Subcommittee to be aware of the direction in which the Division would like to move. He understood that a bill would be proposed this session to establish child death review teams. The Division would certainly support child death review teams composed of citizens who would take a very close look at child deaths in Nevada that were due to abuse or neglect, how they could have been prevented, and what kind of practices should have occurred that would have prevented the deaths. Mr. Cotton indicated it was more of an alert that there would be much research in the area, and the Division expected the child death review teams to become very strong in the near future, look very closely at “best practices,” and identify what should be done and how it could be accomplished.
Mr. Cotton informed the Subcommittee that the expanded budget narratives for each of the budget accounts were included in Exhibit D. Mr. Cotton then called the Subcommittee’s attention to the Budget Summary portion of the exhibit, and explained that page 7 depicted spending by program, and page 8 depicted the funding sources. Mr. Cotton noted that page 9 depicted programs in the budget summary as follows:
According to Mr. Cotton, under “Federal Mandates,” there were Health Insurance Portability and Accountability Act (HIPAA) Privacy Officer positions included in three separate budgets, and the Division would replace its billing and data collections system in order to become HIPAA compliant. There were also federal mandates as a result of the CRIPA investigation.
Mr. Cotton explained that budget cuts resulted in elimination of one Personnel Analyst position, and two administrative support positions at Northern Nevada Child and Adolescent Services. The Southern Nevada Child and Adolescent Services recommended closure of the Children’s Acute Program at Desert Willow Treatment Center; closure of the Therapeutic Family Care Program; and, continued closure of three of the seven On Campus Treatment Homes, which had been closed for quite some time and positions had been vacant. Mr. Cotton stated the Division planned to maintain operation of the remaining four On Campus Treatment Homes. Also recommended was closure of the Specialized Adolescent Treatment Program at Desert Willow Treatment Center in FY2005. That was a sexual abuse treatment program, and Mr. Cotton explained that the Division believed there were other programs that could address those needs. There was also a recommendation to reduce the General Fund allocations passed through to the China Spring Youth Camp, Aurora Pines Girl’s Facility, and Spring Mountain Youth Camp.
Page 10 of Exhibit D depicted:
Mr. Cotton stated there were enhancements in juvenile correctional facilities, and enhancements in Southern Nevada Child and Adolescent Services to reduce waiting lists for Early Childhood Mental Health Services, and First Step Development Services; also, the continuation of the ten positions in the Neighborhood Care Centers.
According to Mr. Cotton, “New Programs” requested the establishment of the Administrative Hearings Office/Ombudsman Unit; add one position for the centralized intake project; funding for design and development of a unit to provide support for new/modified system functionality; added clerical support to improve processing of fingerprint background checks on child care providers; and, add an Assistant Superintendent position at the Caliente Youth Center.
Mr. Cotton explained that “Budgetary Transfers” contained information regarding the internal transfer of positions pursuant to A.B. 1 of the Seventeenth Special Session from the Child Welfare Integration budget to the appropriate budget accounts. He commented that external transfers would include transfer of the Home Activities Program for Parents and Youngsters (HAPPY), First Step, and Infant Enhancement Programs to the Division of Health, Special Children’s Clinic budget. Mr. Cotton noted that the Medicaid category in the Placement Budget would be transferred to the Division of Health Care, Financing and Policy.
Mr. Cotton informed the Subcommittee that concluded his budget presentation, and he would be happy to answer questions. Ms. Leslie stated she had been a member of an interim committee that worked with counties regarding the long‑term funding plan, and the potential swap with the counties of long-term care. She noted that was not included in the budget, and asked what had occurred in that area. Mr. Cotton replied that the Division was still working with the counties on the long-term funding plan, however, the swap was eliminated in the budget negotiations. Ms. Leslie indicated that it was frustrating to spend several months on an interim committee working on a plan that was not successful, particularly when there were no other plans that could be initiated. Mr. Cotton noted that there were plans to fund those services, which would be worked out as services were transferred to Clark County. The Division would undoubtedly be required to change some of its interlocal agreements to ensure that the funding was at appropriate levels. He reiterated that what had been eliminated was the swap. Ms. Leslie then asked about the phase-in with Clark County, and wondered whether there were annualized figures available for that process. Diane Comeaux, Deputy Administrator, Division of Child and Family Services (DCSF), stated that the Division had not annualized those costs. She explained that changes had been made very late in the budget process, but the Division would continue to work on those figures. Ms. Leslie inquired about the availability of information for upcoming hearings, and Ms. Comeaux stated the Division would attempt to provide the necessary information for hearings. Ms. Leslie encouraged the Division to provide the necessary information to Legislative Counsel Bureau (LCB) staff as soon as possible.
Senator Mathews referred to the proposed closure of the Children’s Acute Unit at Desert Willow Treatment Center, and could not believe the Division was not as concerned as the Subcommittee regarding that closure. She asked how the Division made the determination to close that unit, as opposed to taking other action to reduce the budget. She asked that the Division provide information during future subcommittee hearings regarding the process it had used to make the determination that closure of the unit would be necessary.
Senator Coffin noted that in the near future, the members of the Interim Finance Committee (IFC) would be asked to vote on a measure changing the statutes to allow $100 million to flow into the General Fund from the Rainy Day Fund, in order to bridge the gap in the state deficit for the current year. He asked whether the Division had been informed that it would receive additional funding, and if so, where would that funding be allocated. Mr. Cotton stated additional funding had not been discussed. Senator Coffin then inquired whether the Division was fighting for a share of that money. Mr. Cotton stated the Division fought for funding for all of its programs. While the Division felt all of its programs were worthwhile, it had to review utilization, along with many different issues, and Mr. Cotton assured the Subcommittee that the Division was very focused on receiving a fair share of funding for Nevada’s children. Senator Coffin asked for clarification regarding new programs. Mr. Cotton stated the proposed Administrative Hearings Officer/Ombudsman Unit would be a new program. Senator Coffin noted the budget also contained a proposal to establish a centralized child protective services intake pilot program, and pointed out that the Division was initiating new programs at the same time it was cutting proven programs from its budget. Mr. Cotton explained that during the budget process, the Division had laid all of its needs on the table, identified the programs it felt were necessary, and determined what would fit into the flat budget.
Chairman Arberry indicated that the Division currently paid the Correctional Services Corporation (CSC) $113 per day per child, and Rite of Passage (ROP) approximately $124 per day, and asked for the estimated cost per bed, per day, for the proposal to reopen the Summit View Youth Correctional Center. Mr. Cotton replied that the cost would be approximately $140 per day. Chairman Arberry then asked about the cost to house youths in out-of-state facilities. Mr. Cotton indicated that the cost was $113 per day.
Leonard Pugh, Director, Washoe County Department of Juvenile Services, informed the Subcommittee that he would like to reinforce the need to reopen the Summit View Youth Correctional Center, and the need for expansion of juvenile correctional beds. Mr. Pugh explained that in Washoe County during the past year, 133 juveniles were committed to state care, and of that number, 75 juveniles remained in detention an average of 40 days before being transported to a state juvenile correctional facility. In 1995 and 1996, prior to the agreement with the state that Washoe County would retain the juveniles for 30 days after commitment, juveniles were transported to state facilities from seven to ten days after commitment. Mr. Pugh noted that without the additional correctional beds to facilitate transfer of juveniles more quickly, more and more juveniles would be held in the local detention centers, which would create an overcrowded condition in the centers; it also created additional costs for the counties. Mr. Pugh reiterated that some action should be taken to add additional juvenile correctional beds, and he voiced support for the recommendation to reopen the Summit View Youth Correctional Center as of July 1, 2003.
Assemblywoman Leslie asked Mr. Pugh whether he had read the CRIPA report. Mr. Pugh replied that he had been unaware of the report until the present meeting. Ms. Leslie asked that Mr. Pugh read the report and give her his thoughts regarding the contents, how that might relate to reopening Summit View and privatization, and whether Washoe County should be concerned about the report. Ms. Leslie opined that juveniles might be safer in the overcrowded conditions in the county’s detention center rather than being transferred to the NYTC. Mr. Pugh stated that, while he understood Ms. Leslie’s concern, the county facility consisted of 76 beds with a recommended capacity of 51, and during October 2002, it had housed 106 juveniles, which was not conducive to safe conditions. Mr. Pugh indicated that retaining juveniles in local detention centers because there was no room in state facilities would only acerbate the problem, and he believed action should be taken to address that issue.
Ms. Leslie asked when the new Washoe County juvenile detention facility would be opened. Mr. Pugh stated that the estimated completion date would be in February or March of 2004. It would take approximately 60 days to finalize the building and make the appropriate transition plans, and Mr. Pugh opined that it would be approximately May of 2004 before the facility was operational. Ms. Leslie asked how many beds that facility would add. Ms. Pugh replied that with the new facility, Washoe County would have a total of 108 beds, with the capacity to expand to 144 beds. Ms. Leslie acknowledged that the new facility would help the situation, albeit in the future. Mr. Pugh stated if the pressing problems were not addressed at the present time, the current facility would reach capacity much sooner than projected.
Kim Hernandez, Nevada Parents Encouraging Parents (PEP), stated it was a nonprofit organization that advocated for children with mental and physical disabilities within the education and juvenile justice systems. More importantly, explained Ms. Hernandez, she was the parent of a child currently housed in an out-of-state facility, and she had not seen her child since October 2002. Ms. Hernandez advised that she was very concerned, and believed that parents and families should have contact with their children. The transition of children back into communities and families would be beneficial to children housed in‑state. Currently, explained Ms. Hernandez, contact with her child was made once a week at best, and contact with staff at the out-of-state facility was very difficult, since her phone calls were often not returned.
Ms. Hernandez opined that in order to facilitate a successful transition back into the community, children should be supported in that community. It was difficult for children to feel the support of the community when there was no community involvement in their treatment. Ms. Hernandez believed that family should be a vital part of any treatment plan. Parents and other family members needed to understand what was expected of their children when they returned home. Ms. Hernandez indicated that support teams should be developed and put into place for children returning to the community so those children would not fall back into the same old patterns, would know what was expected of them, who they could turn to when help was needed, and that there were individuals committed to making their transition successful. Ms. Hernandez pointed out that parents also had to deal with the financial aspect when children were placed out of state. She noted the cost for each phone call that her child made home was between $8 and $10, and to visit her child would undoubtedly cost over $1,000 for airfare and overnight accommodations for a two- to three-hour visit, which was beyond her financial capability.
Ms. Hernandez indicated it had been reported that over 60 percent of the population of America’s youth detention centers suffered from mental illness, and for those children with disabilities which had contributed to their confinement, it was essential that families were active supporters in their rehabilitation. According to Ms. Hernandez, “out of sight, and out of mind” was not a viable solution for children. Children needed to be supported in the communities or state in which they lived. Ms. Hernandez asked how children could be expected to become productive members of the communities, if the communities in which they lived did not actively support their rehabilitation.
Senator Cegavske thanked Ms. Hernandez for her testimony. She stated that she had been in contact with several judges, and had received a recent e-mail, which requested that favorable statements be made regarding the community support system within treatment programs. Senator Cegavske pointed out that the judges concurred with that concept, and believed it was very difficult for not only the families, but also the juveniles who were placed out of state. According to Senator Cegavske, the judges opined that it was also difficult for those children to return to the family unit as they had not been working together, and the community involvement aspect was missing from their treatment. Senator Cegavske stated that out-of-state placements in juvenile corrections had been discussed in the past, and the same circumstances surrounded incarcerated adults who were sent to out-of-state facilities. She hoped that the Legislature would negotiate the reopening of the Summit View facility, and ensure that those beds would be available for juveniles in an effort to repair the family unit. Senator Cegavske advised the Subcommittee that Parents Encouraging Parents (PEP) was a fantastic organization that had grown statewide, and advocated for parents, families, and youth. Senator Cegavske advised that when constituents needed assistance with children, the organization would provide that assistance.
Ms. Hernandez added that her son was one of the juveniles that had spent over 30 days at the local juvenile detention facility after his commitment, which was time that was not counted toward his commitment. She commented that she did not believe reopening the Summit View facility would constitute a “new” program, as it had once been an existing program within the state. An attempt had been made to privatize the facility, which had not been successful, and Ms. Hernandez believed the state owed it to the children to reopen the facility, and bring those children currently residing in out-of-state placements home.
With no further testimony forthcoming regarding the Division of Child and Family Services budget account, Chairman Arberry declared the committee in recess.
Chairman Arberry reconvened the hearing, and opened the budget overview regarding Veterans’ Services.
VETERANS’ SERVICES
BUDGET PAGE – VETERANS 1-9
Charles W. (Chuck) Fulkerson, Executive Director, Office of Veterans’ Services, introduced Thomas Feeback, Interim Administrator, Veterans’ Home, and Darrel Hansen, Administrative Services Officer, Veterans’ Home.
Mr. Fulkerson advised the Subcommittee that the Veterans’ Home had received its initial Veterans’ Administration (VA) certification survey in May 2002, had been dedicated on June 28, 2002, had received its Medicare and Medicaid Certification and license in August 2002, and had begun admitting veterans on a regular basis that same month. Mr. Fulkerson stated that Mr. Feeback accepted the position of Interim Administrator in September 2002, and a 24-bed Alzheimer’s unit had been opened in December 2002. The current census of the Veterans’ Home was 44, and the current staff level was 75. Mr. Fulkerson advised that staffing was higher than normal because the Home required back‑up administrative staff to run the unit.
Mr. Fulkerson commented that a consultant from Idaho, Gary Bermeosolo, had been hired to assist with the second VA certification visit, which should take place in 30 to 60 days. That certification would determine when the Home would begin receiving the $50 per day per diem from the VA. Mr. Fulkerson announced that efforts to obtain a new administrator for the Home would continue, and he hoped to have a commitment from one of two very qualified candidates within the next two weeks. The Office of Veterans’ Services was conducting a national-level search for a Director of Nursing, to replace the director who had resigned in December. Mr. Fulkerson advised that the state personnel system was being utilized for that search, as well as the National Association of State Directors of Nursing Homes, and the opportunity might also exist to promote from within.
According to Mr. Fulkerson, the Home would cease admitting veterans for a 30‑day period, after 59 veterans had been admitted, to facilitate an overall top‑to-bottom review of all areas of operation. That review was to ensure that residents were receiving quality care, proper medication, and that the Home was utilizing proper documentation and accounting procedures. The admissions rate had been slower than anticipated, and Mr. Fulkerson explained that was primarily because of stale application information. Most applications were over two years old, and over 60 veterans had passed away since submitting applications while waiting for the Nursing Home to open.
Mr. Fulkerson stated the Alzheimer’s Unit had been opened based on the 50 applications that had been received, and it was immediately discovered that 7 of those veterans had passed away, and another 6 or 8 had been moved to other facilities. Mr. Feeback and his staff were working very diligently to bring the state-of-the-art, long-term health care facility online to serve Nevada’s veterans. Mr. Fulkerson remarked that because the Home had experienced low admissions, the Office of Veterans’ Services expected the balance of calendar year 2003 would be required to fill it to capacity.
Mr. Feeback advised the Subcommittee that the capacity of the facility was 180 residents, and was currently serving 44 residents. The Alzheimer’s Unit opened on December 17, 2002, and currently 8 residents were being served in that locked unit. Mr. Feeback explained other units would be coming online, but it was a slow process that required orders from attending physicians, and review by the approval committee before the resident would be admitted. He commented that the current low capacity was not because there were no qualified residents for the Alzheimer’s Unit, but rather because of the slowness of the process.
Mr. Feeback stated that the VA certification was still pending. The VA survey had been conducted in May of 2002, and all requested items had been provided. The final determination for approval was currently in Washington, D.C. According to Mr. Feeback, when the facility reached 50 to 60 residents, the VA would conduct a follow-up, on-site survey. Information received from the local VA indicated that interim certification could be granted. Mr. Feeback stated he had been advised that the local VA was somewhat remiss in gathering the necessary information to send to Washington, D.C., and additional requests for information had been received. Mr. Feeback noted that the Office of Veterans’ Affairs had responded to all requests as soon as possible. If the certification was not received, Mr. Feeback indicated the facility would have sufficient funding through the end of the current fiscal year, providing all categories were controlled, and census was controlled to a maximum of 60 residents. He emphasized that additional census would require additional expenditures for labor that the current fiscal year appropriations could not withstand.
It was unknown at the present time whether VA funding would be retroactive, and Mr. Feeback reported that the facility had complied with all of the timetables stipulated by the VA. If funding were not retroactive, it would be through no fault of the Home, as it had responded to all requests for information. Mr. Feeback reported that other sources of funding for the facility included the private portion paid by the individual residents, along with Medicare and Medicaid benefits, which had been approved. Recent bills had been submitted to all sources of revenue, and through the end of December 2002, the accounts receivable for the private portion was $7,220; Mr. Feeback advised that collection efforts were ongoing.
Mr. Feeback believed there was sufficient funding for the facility to operate through the end of the current fiscal year via state appropriations and private funds, without supplemental appropriations being required. Mr. Feeback referenced the handout provided to the committee, Exhibit E, that contained an attachment which provided an overview of the estimated revenues and expenditures for FY2003. Overall, there should be no adjustments necessary to the budget once a new administrator was hired, and Mr. Feeback stated it might be necessary to move funds via a work program between categories, however, there should not be a request for additional funds. He opined that adherence to the budget on a monthly basis, and the use of sound business practices would be a prerequisite to the success of the facility.
Eventually, stated Mr. Feeback, the facility would be operated at capacity of 180 beds, and the Home would attempt to reach 88 percent capacity for the upcoming fiscal year. In order to ensure compliance with sound business practices, the facility would cease admitting residents when the census reached 60. Mr. Feeback stated for that period of time, admissions would be curtailed to complete an audit of all nursing practices, chart audits, personnel analysis, and a complete review of all business office functions to ensure that everything was being done to provide the utmost service to the veterans. Mr. Feeback stated that once those satisfactory results were achieved, the second 60-bed unit would be opened, and admissions would resume until the remaining beds were full.
Mr. Feeback reported that at the April 10, 2002, meeting of the Interim Finance Committee (IFC), a work program revision for $111,233 was approved for a grounds building. That project was currently on hold while questions regarding its feasibility, and other options were reviewed. Also at the April IFC meeting, an additional work program revision of $69,050 was approved for a bar code inventory tracking system. Mr. Feeback stated that two-thirds of the equipment had been paid for and installed, and by the end of February 2003, the software would be in place and the system would be operational. He believed the system would be a much better method of capturing costs rather than the antiquated sticker system.
Assemblywoman Chowning advised the Subcommittee that the facility was beautiful, as was its location overlooking the valley. Nevada could be very proud of the facility, even though it had been a long time coming. Mrs. Chowning noted that testimony indicated there would be no change in the budget with the hiring of a new director, however, she asked about the other vacant positions, i.e., the Director of Nursing and the Administrative Services Officer, and whether those positions would alter the budget. She also asked when the VA certification would be received, since it was anticipated that the facility would be at capacity by the end of the biennium.
Mr. Feeback replied that the Home would be resurveyed by the VA, however, he was not aware of the exact date. Normally, it would be a surprise survey conducted at the time the facility had admitted 50 to 60 residents, or had been open for a period of six months. Mr. Feeback believed the survey would occur sometime during the month of February 2003, which would be the six-month mark since the Home had started admitting residents.
Mrs. Chowning asked that once the VA had conducted the resurvey, how long would it take to complete the certification process. Mr. Feeback replied that once the resurvey was completed, that would be the end of the certification process, and the certification should be granted. He explained that the local service center, which was the VA clinic in Las Vegas, conducted the survey process, and would send the appropriate paperwork along with its recommendation to Washington, D.C. Mrs. Chowning inquired whether that process would take approximately one month. Mr. Feeback believed that the process would not take that long, as the paperwork should be returned from Washington, D.C. in the near future.
Mrs. Chowning asked whether the Veterans’ Home would be eligible for federal funding from the VA once the certification was complete. Mr. Feeback replied in the affirmative, and stated that hopefully payments would be retroactive to the opening date of the Home. Mrs. Chowning noted that it had taken quite awhile before the Home was able to open, and there appeared to be a great demand to commence funding for another Veterans’ Home in northern Nevada. She stated she had real concerns regarding that issue, because the current tight fiscal times did not appear to be the appropriate time to spend additional money. Mrs. Chowning remarked that the Legislature would have to be sure that great demand existed in northern Nevada for an additional Home, and the Veterans’ Home in southern Nevada would also have to be successful in order to serve as the model.
Mr. Fulkerson shared Mrs. Chowning’s concerns, and reported that the Office of Veterans’ Services had $50,000 in Capital Improvement Program (CIP) funding to conduct a feasibility study to ascertain what the demand would be for a nursing home in northern Nevada. There was also an opportunity to take over an existing medical facility, which would be remodeled by the owners, on a long-term lease basis. Mr. Fulkerson noted that a long-term lease would be favorable to both the federal and state Veterans’ Administrations, and would mean that neither entity would be required to expend millions of dollars. It would also mean that Nevada would not have to fight for space on the priority list with all the other states for a new construction program.
Mrs. Chowning stated that was the first she had heard about the possibility of a long-term lease, and asked where the building was located. Mr. Fulkerson explained that the Office of Veterans’ Services had been in contact with the owners of the present Carson-Tahoe Hospital, which was scheduled to break ground on a new facility in Carson City in the near future. Mrs. Chowning noted those were factors that absolutely constituted a cost savings, and produced a very different picture.
Mr. Fulkerson continued his presentation, and stated that the Office of Veterans’ Services had recently met in Fernley with the Undersecretary for Memorial Affairs of the federal VA. That meeting included a visit to the Fernley cemetery, which was the first state cemetery the Undersecretary visited, and he was very impressed. According to Mr. Fulkerson, the Undersecretary’s staff had informed him that the two Nevada cemeteries were the flagships of the cemetery system. During the visit to the Fernley cemetery, a demonstration was conducted of the new underground watering system that would reduce water usage by 50 percent. Mr. Fulkerson explained that the Office of Veterans’ Affairs was shocked when the town of Fernley incorporated and assumed the water delivery service, rather than Lyon County. The county had been selling water to the cemetery for $240 per month, and the new Fernley water service charged $2,300 per month. Mr. Fulkerson stated that a meter had been installed, and the cemetery immediately cut usage by 50 percent, however, the monthly bill remained $1,400.
Mr. Fulkerson remarked that the northern Nevada Veterans’ Memorial Cemetery opened in July 1990, and encompassed 43 acres. Currently, there were 6 acres under irrigation, and there had been a total of 393 burials performed in FY2002. Mr. Fulkerson stated the total number of burials over the past 10 years had been over 3,000. There were four employees at the cemetery, one Superintendent, one Administrative Assistant, and two Groundskeepers. According to Mr. Fulkerson, a master plan for the cemetery was initiated in FY2000 in preparation for an extensive expansion in the spring of 2003, and it was anticipated that ground would be broken in March or April. The expansion would add four additional acres under irrigation, new administration and maintenance buildings, and improved public areas.
Mr. Fulkerson said the southern Nevada Veterans’ Memorial Cemetery opened in April 1990 in Boulder City with a total of 80 acres designated as burial grounds. As of FY2003, 24 acres had been developed and were under irrigation. A total of 1,579 burials were performed in FY2002, and a total of over 15,000 burials over the past ten years. Mr. Fulkerson reported there were 11 employees at the southern cemetery, which was 50 percent of what the National Cemetery Association recommended for a cemetery of that size. The southern Nevada cemetery was also the second busiest veterans’ cemetery in the nation, and Mr. Fulkerson noted that cemetery buried 25 percent of the veteran deaths in the state when the national average was 10 percent. He indicated a major expansion program had been completed in FY2001, and a chapel was also completed and opened in FY2001.
According to Mr. Fulkerson, there were no new programs contained in the current budget submission. A separate request for seed money to develop six acres of burial grounds at the southern Nevada Veterans’ Memorial Cemetery was contained in CIP funding for FY2002-03, and that project was currently in the design phase. Mr. Fulkerson stated that the expansion program for both cemeteries was totally funded via a federal grant.
Chairman Arberry inquired about the increase of cemetery internment fees. Mr. Fulkerson reported that federal legislation had gone into effect in October 2002 that doubled the burial fee for combat-era veterans, which encompassed 93 percent of the total number of veterans. The cost rose from $150 per burial to $300 per burial, which accounted for the increase in revenue, plus the increase in the number of burials experienced by the cemeteries. Mr. Fulkerson explained that would continue through the year 2008, when the number of World War II veterans began to taper off.
Chairman Arberry noted that the fee went from $150 to $300 dollars, and asked what the basis was for the $150 increase. Mr. Fulkerson stated there had been much hard work and lobbying on the part of the National Association of State Directors of Veterans Affairs, along with much hard work by the Nevada Congressional Delegation. There were many states where costs for burial approached $600.
Chairman Arberry asked how much additional revenue was anticipated during FY2003, which would be greater than the sum of $351,050 reflected in The Executive Budget. He noted that as of January 2003 the agency had collected $428,675. Mr. Fulkerson stated that the projections were for approximately $500,000 in income from burial fees through the end of the current fiscal year. Chairman Arberry inquired whether the agency had adequate expenditure authority for FY2003. Mr. Fulkerson stated that a work program would be submitted to increase the amount to $500,000, and further augmentation might be needed.
Assemblywoman Chowning noted that veterans purchased license plates and the funding was allocated to the Veterans’ Home. However, it appeared there had only been $59,500 raised, and she asked whether that was the total, or if there was some change that should be accomplished so that the extra money could be utilized in operation of the Veterans’ Home. Mr. Fulkerson explained that a printout had been secured from the Department of Motor Vehicles that indicated $69,000 had been collected, but that figure might be for calendar year sales, rather than fiscal year. He stated that something more should be done, and during the 2001 Session, a bill had been introduced to keep those funds from becoming part of the General Fund, however, the legislation had been unsuccessful. Mr. Fulkerson noted that Senator Shaffer had submitted a bill draft request (BDR) to address that issue during the 2003 Session. Mrs. Chowning believed that something should be done to ensure that all of the money from the sale of license plates was utilized by the Office of Veterans’ Affairs. Veterans who purchased those plates did not intend that a portion of that money would be utilized elsewhere, but rather intended that all the funding would be allocated to the Veterans’ Home.
Senator Tiffany opined that the budget accounts for the Veterans’ Home should receive further review, and she was concerned about the Home and its longevity. She wondered whether the Home was actually serving the veterans. Senator Tiffany voiced concern about whether the facility would be certified, and if not, what would occur with the available beds. She was also concerned about the projected 88 percent occupancy rate, staffing levels, and the different costs that veterans were being charged for their stay. Senator Tiffany stated there were many concerns that she believed should receive in‑depth review. Mr. Fulkerson stated he was looking forward to spending all the time necessary to answer questions from the Subcommittee, so that members would be comfortable with the status of the Veterans’ Home. Senator Tiffany indicated that the Legislature wanted information on staffing, occupancy, and certification, before expansion would be considered for northern Nevada. Senator Tiffany stated that she would like to involve all interested parties in the discussion. Mr. Fulkerson opined that the more information available, the better the decisions would be.
Chairman Arberry noted that there was a possibility of legislation to submit an RFP to privatize the nursing home operation. Mr. Fulkerson opined that there were many well-run privatized veterans’ nursing homes in the nation today.
With no further business to come before the Subcommittee, Chairman Arberry adjourned the hearing at 4:25 p.m.
RESPECTFULLY SUBMITTED:
Carol Thomsen
Committee Secretary
APPROVED BY:
Assemblyman Morse Arberry Jr., Chairman
DATE:
APPROVED BY:
Senator William J. Raggio, Chairman
DATE: