MINUTES OF THE
SENATE Committee on Finance
Seventy-second Session
February 5, 2003
The Senate Committee on Financewas called to order by Chairman William J. Raggio, at 8:10 a.m., on Wednesday, February 5, 2003, in Room 2134 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator William J. Raggio, Chairman
Senator Raymond D. Rawson, Vice Chairman
Senator Barbara K. Cegavske
Senator Bob Coffin
Senator Bernice Mathews
Senator Dean A. Rhoads
Senator Sandra J. Tiffany
STAFF MEMBERS PRESENT:
Gary L. Ghiggeri, Fiscal Analyst
Bob Guernsey, Principal Deputy Fiscal Analyst
Joyce Garrett, Program Analyst
Tracy Raxter, Program Analyst
James D. Earl, Committee Secretary
OTHERS PRESENT:
Lorraine T. Hunt, Lieutenant Governor
Nancy A. Dunn, Deputy Director, Commission on Tourism
John P. Comeaux, Director, Department of Administration
Valerie M. Rosalin, Director, Office for Consumer Health Assistance, Office of the Governor
Mary Keating, Administrator, Administrative Services Division, Department of Administration
Judie M. Noriega, Operations Manager, Office for Consumer Health Assistance
Carl B. Linvill, Administrator, Nevada State Office of Energy
Todd Russell, Chairman, Commission on Ethics
Stacy Jennings, Executive Director, Commission on Ethics
Janine Hansen, lobbyist, Independent American Party of Nevada
Paul V. Townsend, Legislative Auditor, Audit Division, Legislative Counsel Bureau
Senator Raggio:
You have before you a proposed amendment (Exhibit C) to this committee’s standing rules adopted at our first session. Item 9 has been added, “Cell phones and pagers must be muted during hearings.” Apparently some people do not understand that is a general policy when in this building. This also includes committee members.
SENATOR RAWSON MOVED TO ADOPT THE AMENDMENT TO THE STANDING RULES.
SENATOR MATHEWS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY
*****
Senator Raggio:
The Chair received a letter from Secretary of State Dean Heller (Exhibit D). It deals with the effects of the Help America Vote Act of 2002 (HAVA). He reports that conversations with congressional staffers indicate Congress may appropriate the first phase of federal funding as early as February 5. To date there has been no federal funding for state implementation of HAVA. According to the Secretary of State, there are mandates requiring several legislative actions on voting. He indicates Nevada may become ineligible to receive federal monies unless the necessary enactments are passed. He suggests submission of a bill draft request (BDR) to create a specific fund for the deposit of the initial $5 million of federal funding. This could be followed by an additional $20 million under Title II of the act. He understands that Nevada cannot receive federal funding unless this “election fund” is in place. He believes HAVA requires the Legislature to have a 5-percent matching General Fund allocation to be set aside in 2003. Additionally, the State risks losing not only the financial support for HAVA implementation, but also federal transportation dollars, for failure to comply with the mandate.
I take this seriously. I do not like the idea that a mandate of this type is being placed upon the states. I certainly do not understand the threatened sanction of the loss of federal transportation dollars. I will make a copy available to committee members, and ask the staff to examine the matter and determine the possible level of federal funding. Such federal requirements should come with full funding, not some partial funding. I do not have a clue how this Legislature could come up with a 5-percent match in fiscal year (FY) 2003 when we are trying to fill a $180 million hole. I would also like a staff analysis of the potential sanctions referenced in the letter.
I have a letter from Stacy Jennings, the Executive Director of the Commission on Ethics (Exhibit E). Her budget will be heard this morning. This letter refers to the constitutionality of campaign practices law. Discussion of this issue has appeared in the media. Copies will be made available to members.
I also received a letter dated December 16 from the Office of the Attorney General, Bureau of Consumer Protection (Exhibit F). The Attorney General recently received approximately $1.7 million from the settlement of an antitrust lawsuit with six vitamin makers. It provides some information regarding the use of this money. I have not analyzed it, and am making copies available to staff and the committee for information. Apparently the Nevada Department of Education was awarded $641,625 to conduct a statewide breakfast-in-the-classroom pilot project.
The Legislative Commission’s Budget Subcommittee had a question arise during its joint hearings regarding the number of Nevadans participating in the Millennium Scholarship Program. Senator Cegavske asked for information. We have a response memorandum from the Research Division that I will distribute (Exhibit G). This will be included in the 2003 Nevada Education Data Book.
With no bill draft requests to be heard from committee members, we will address budget issues, and take testimony out of order to accommodate those appearing today.
ELECTED OFFICIALS
Lieutenant Governor – Budget Page Elected-20 (Volume 1)
Budget Account 101-1020
Lorraine T. Hunt, Lieutenant Governor:
I have with me Nancy Dunn who works with me on the budget. My oral presentation is also provided in written form (Exhibit H).
Nancy A. Dunn, Deputy Director, Commission on Tourism:
The business office of the Commission on Tourism is under contract to provide accounting and budget services for the Office of the Lieutenant Governor. I am here in that capacity. My oral presentation is also provided in written form (Exhibit I).
Senator Raggio:
Last session the Legislature authorized $8865 a year for the newsletter. That is not in the new budget. What is the status of the newsletter?
Ms. Dunn:
I believe the $8800 included software for the newsletter. The purpose at the time was to convert it from a newspaper to electronic format. There are actually no costs for newsletter production. The newsletter is now produced electronically.
Senator Tiffany:
Is the newsletter for tourism, economic development, or both?
Lieutenant Governor Hunt:
The newsletter deals with the activities of the Office of the Lieutenant Governor, and so deals with both subjects. I have undertaken the mission to communicate with Nevada’s rural communities. We are targeting development authorities, chambers of commerce, community leaders, financial institutions, and small business people. The newsletter has been an effective communication tool about the activities of the office.
Senator Tiffany:
Have you seen an impact on tourism stemming from terrorism?
Lieutenant Governor Hunt:
Air travel has been reduced. Automobile traffic from states in the region has been relatively stable. Winnemucca and some other areas have actually benefited. I called together a tourism task force immediately after 9/11 in order to realign state tourism marketing efforts. We wanted a common message. We realized international travel would decrease, so we realigned our efforts for about 14 weeks. Our message was to consider Nevada as the USO (United Service Organizations) of the United States, particularly the western region. This helped room occupancy rates. Clearly, airline travel is necessary to our economic vitality.
Senator Tiffany:
What are the main barriers to state economic development? Do issues like medical malpractice, impending taxes, and the education situation have an impact?
Lieutenant Governor Hunt:
Companies are attracted to Nevada by our lack of state income tax, affordable housing, and quality of life. Keep this in mind during the Legislative session. We need to diversify and expand our base. The last thing we want to do is provide disincentives to companies considering Nevada. The California Legislature often makes that state less business friendly, producing a market for us. Many companies, including those in Silicon Valley, are considering relocation to Nevada. Internationally, we think China, indeed, all Pacific Rim counties looking to invest, could be big for Nevada. After 9/11 they lost interest in coastal communities like San Francisco, Los Angeles, and New York. They are interested in Nevada. It is incumbent upon the Legislature to maintain a business-friendly environment and not lose those opportunities.
Senator Coffin:
American Airlines recently announced it would close its reservation center in Las Vegas employing 350 people. Do we know when that will happen? Do we have plans to promote occupancy of those facilities?
Lieutenant Governor Hunt:
We have no current information on the closure, but employees in such facilities have highly transferable skills. Other companies including major hotels could use affected employees. Hopefully that will happen.
Senator Coffin:
Broadcasters refused to run a Super Bowl commercial made by the Convention Authority. Have we protested to the NFL in light of its influence on the network?
Lieutenant Governor Hunt:
As a state agency, we respect the autonomy of local convention authorities. Were they to ask for assistance, we would certainly provide it.
Office of the Governor – Budget Page Elected-1 (Volume 1)
Budget Account 101-1000
Senator Raggio:
Please turn to Budget Account (B/A) 101-1000.
John P. Comeaux, Director, Department of Administration
I will deal with the budgets of the Office of the Governor and the Governor’s Mansion. There are transfers from the Health Division and Emergency Management budgets in like amounts into the resources section of the Office of the Governor’s budget in this program year. Similar transfers are proposed for the first year of the biennium. These transfers are to facilitate payment of salaries for two positions related to homeland security, the coordinator, and an assistant.
Mr. Bussel was appointed coordinator, but his assistant has not yet been named. The amounts in the base budget for the next biennium reflect funding available through September 30. We have no reason to believe this federal funding will not be continued. However, since we do not have notification yet of its continuance, we included in the budget only the amounts authorized to date.
We reduced the number of positions in the base budget by eight positions, but added back the two related to homeland security, for a net reduction of six positions.
Senator Raggio:
Last year we granted the Governor’s office discretion in hiring and salary levels. Does this budget delete some of those positions?
Mr. Comeaux:
It does. The Governor recognizes he will not have the funding to fill them, and believes they might as well be eliminated.
Senator Raggio:
You continued 22 positions and added 5 positions last biennium to fill growing needs, including a deputy policy advisor, a legislative director, a policy analyst, and two executive assistants. I understand the Governor is setting an example, but can the office function as necessary without these positions?
Mr. Comeaux:
The Governor believes he can function adequately with the positions recommended here although the office certainly would function better with the positions originally requested.
Senator Raggio:
You noted the budget reflects homeland security positions only through September. Do you expect these positions to be covered through federal funding? Are they solely federally funded?
Mr. Comeaux:
The positions are supported only by federal funding that we expect will continue. The local office of the Federal Emergency Management Agency assures me it has no reason to believe otherwise.
Senator Mathews:
I understand the positions for the Governor’s office are unclassified. Can we get a salary schedule for these people by name and position?
Mr. Comeaux:
I will provide that.
Maintenance decision unit M-100 demonstrates a pattern that will be repeated. The increase in operating expenses is related to the increases in rent, property insurance premiums, and information services. Information services expenses are related to the Web site and hosting. This is not a new service, but a change in the method of billing that the Department of Information Technology (DoIT) has employed in this period.
Decision unit M-300 reflects the increases in fringe benefit costs, including increases in the Public Employees Retirement System (PERS) rate, public employee benefit program premiums, workers’ compensation, unemployment compensation, and personnel payroll assessment.
The only enhancement item is E-710 involving replacement equipment. We provided your staff with the detailed list, which includes computer equipment, a replacement server in the second year, four desktops in each year, and miscellaneous software.
Senator Raggio:
Is that $36,871 and $40,460 respectively for each year?
Mr. Comeaux:
That is correct.
Senator Raggio:
Senate Bill 401 of the 71st Session provided for a Director for the Office of Science, Innovation and Technology and funding in specific amounts for 2002 and 2003. What happened to the money? Has a director been named?
Mr. Comeaux:
The office is not functioning. There is an account with $92,000 remaining in it. We have made no recommendation for this fund.
Senator Raggio:
What happened to the other funds?
Mr. Comeaux:
I do not have that information. I will get it for you.
Senator Raggio:
The committee would like to know about that funding, what the status of the office is, and whether there are ongoing funding requirements for that office. We need an understanding of its functioning level, and if it is not functioning, why not.
Mr. Comeaux:
We will get that information to you.
Mansion Maintenance – Budget Page Elected-4 (Volume 1)
Budget Account 101-1001
The next item is mansion maintenance. The base budget recommends a continuation of the three existing positions. The M-100 item reflects the increase in property insurance and the information technology changes I spoke of earlier. The M-300 decision unit reflects personnel fringe benefits. The only enhancement is the E-275 decision unit, a request for an additional $587 in each year so that the First Lady can accompany the Governor on one additional trip. There is funding in the base budget for one trip. This would provide a grand total of $1200 for two trips. The operating budget in the second year of the biennium is higher than the first simply because of costs associated with the Legislative session. This occurs every other year.
Senator Raggio:
Senator Jacobson used to oversee matters to ensure the mansion had what was needed.
Mr. Comeaux:
I believe Mrs. Guinn has talked to him.
Senator Raggio:
This committee has always considered the mansion facility as one we want to preserve and protect. If there is any additional need, we want to know about it.
Gov, Office of Consumer Health Assistance
Budget Page Elected‑13 (Volume 1) Budget Account 101-1003
Valerie M. Rosalin, Director, Office for Consumer Health Assistance:
You have before you our presentational handout (Exhibit J. Original is on file in the Research Library.) Our office has served over 9000 consumers since its creation by the 1999 Legislature. Our major funding source at the time was the Workers’ Compensation and Safety Fund (Workers’ Comp). When we were founded, five employees from Employers Insurance Company of Nevada (EICON) were transferred to us. Those employees did not remain. We now only have one worker’s compensation employee working as a quality assurance specialist. We have offices in Carson City and in temporary space in the Sawyer Building in Las Vegas. We have three quality assurance specialists, a nurse, and a workers’ compensation specialist. We received an employee when we took over the bureau for hospital patients in July 2001. We have been short of staff most of the year. We have cut the deputy director position and my assistant. A proposed cut in July will affect our nurse.
Senator Raggio:
How many ombudsman positions are currently filled?
Ms. Rosalin:
We had four through yesterday. The proposed cut would affect the fourth position.
Senator Raggio:
Would you go to three positions since the budget proposes eliminating one ombudsman position? That would bring your office staff to a total of seven from ten. Is that adequate for the next 2 years?
Ms. Rosalin:
That is correct. I really need the nurse; otherwise the work will be compromised. The workload has increased 38 percent over last year, following our previous annual workload increase of 78 percent. We have a statutory mandate for community outreach. We meet with special interest groups like the American Cancer Society, the Southern Nevada Executive Health Committee, the Nevada Hospital Association, and Legislators on a one-to-one basis. Frequently I receive referrals from them. I am part of the Division of Insurance (DOI) advisory committee. We get multiple referrals from the Division of Insurance, the Office of the Attorney General, and the Department of Industrial Relations.
Senator Raggio:
Have you made your needs known to the budget office?
Ms. Rosalin:
Yes, but we are required to make a 3-percent cut. We were over-budgeted for the workers’ comp fund.
Mary Keating, Administrator, Administrative Services Division, Department of Administration:
This agency has four funding sources. Portions come from Medicaid, assessments for hospital patients, the Workers’ Compensation and Safety Fund, and appropriations from the General Fund. All sources other than the General Fund have specific requirements that limit how their monies can be spent. When this agency was created, there was an understanding that certain activities would be managed in a certain way and that is how the funding stream was set up. However, after several years, there is a mismatch between the funding streams and agency activities. There are two decision elements in the budget to correct this situation. The budget reflects 27 percent of the agency activity is associated with workers’ compensation, but during FY 2002 that activity level was actually 33 percent. The actual level each year will fluctuate within this range. As a result, the funding from the workers’ comp fund was disproportionate to the agency activity. We have proposed a payback over 10 years to the Workers’ Comp fund.
Senator Raggio:
Recognizing there should be a payback, is ten years an appropriate period?
Ms. Keating:
We are not firm on the 10-year period. We thought it was a reasonable period.
Senator Raggio:
What are the hospital assessments? How much is in the budget?
Ms. Keating:
The annual hospital assessment runs about $130,000. We expect to receive full funding.
Senator Raggio:
How is the assessment determined for any particular hospital? What is the formula?
Judie M. Noriega, Operations Manager, Office for Consumer Health Assistance:
Assessments are determined by the Division of Healthcare Financing and Policy. There is an annual report given to us stating the number of beds per hospital and inpatient days. Administrative services calculates the actual rate, that is, their percentage contribution of the $130,000. We prepare letters to hospitals and they have some period of time to reply.
Senator Raggio:
Does that rate vary from year to year?
Ms. Noriega:
The base number does not vary. A hospital’s contribution will vary based on number of patients and inpatient days.
Ms. Rosalin:
Our office received temporary space and old equipment when it was created. We are not asking for new equipment, we simply hope to receive old equipment from agencies receiving new equipment. With the population increase, we had over 3700 contacts of which 2191 became cases for which we had to do extensive intervention and advocacy. We negotiated in cases involving benefit denial, workers’ comp benefits or claims denial, and hospital billing disputes. We provide a lot of information on how to appeal. In many cases, we advocate on behalf of people. We deal with insurance companies and engage in collaborative communication so that we do not cast ourselves in an adversary role.
Energy Conservation – Budget Page Elected-17 (Volume 1)
Budget Account 101-4868
Senator Raggio:
Let us move on to address the Nevada State Office of Energy.
Carl B. Linvill, Administrator, Nevada State Office of Energy:
I will structure much of my presentation around the handout you have (Exhibit K). Recent administrative changes in the office can be traced to the Governor’s Protection Plan, announced in February 2001 after the Governor received recommendations from a special committee. The plan has five components as shown on page 2. All Legislators should have received a report last week from the Nevada State Office of Energy. As a result of the plan, other events, and statutory changes, the energy office, as it used to be called, was moved into the Governor’s office. The responsibilities of the new office of energy are briefly outlined on page 3.
Senator Raggio:
Has the comprehensive plan been developed?
Mr. Linvill:
The comprehensive plan is presented in Chapter 5 of the report I mentioned. It is a plan in progress, but does lay out where we need to go regarding Nevada’s energy future. The plan has two major parts. First, it contains a 3-year strategic action plan for the office of energy, provided as Appendix 2 to the document, to ensure an adequate energy supply for the State. Secondly, the chapter references a need for the Public Utility Commission to consider resource-planning issues. The statute also calls for energy emergency planning activities by the office. We have undertaken that assignment.
The comprehensive plan combines the Governor’s plan with the statutory requirements resulting in the objectives listed on page 4.
Senator Raggio:
Who constitutes the task force? What does it do? It was created so that we could stay on top of the energy situation and not have a crisis.
Mr. Linvill:
The task force is composed of nine people, two appointed by the Governor, two by Speaker Perkins, two by you, one by Senator Titus, one by Assemblyman Hettrick, and one by the consumer’s advocate office. The task force convened on December 17, 2001, and has met monthly since then. It has taken testimony on issues related to renewable energy development and conservation and energy efficiency. Over the last several months, the task force has developed specific recommendations for the Legislative session. The task force report, delivered last week, provides 16 specific recommendations.
Senator Raggio:
Would you ensure the members of this committee receive a copy?
Mr. Linvill:
I am happy to do that. The task force is an advisory body to the Legislature and to the Governor’s office on renewable energy and energy conservation. While it is independent of my office, I am involved as the Governor’s agent.
Senator Raggio:
I ask because one of your duties is to seek to incorporate the advice of the task force. What do you do when you get recommendations?
Mr. Linvill:
We received the recommendations last week, just as you did. Many of the recommendations fit nicely within the scope of our strategic action plan.
Senator Raggio:
You do not meet with them?
Mr. Linvill:
I appear on their agenda and bring issues to members’ attention. Last February, for example, I delivered a letter from the Governor asking for advice in several areas. The task force recommendations include advice in those areas.
Senator Raggio:
Who chairs the task force?
Mr. Linvill:
Rose McKinney-James is the chair.
Returning to the handout, I have broken down the office’s activities over pages 5, 6, and 7. Page 5 details activities relating to provision of reliable energy sources in Nevada.
Senator Rhoads:
Have you been following the gas line proposal in northeast Nevada? How is it progressing?
Mr. Linvill:
I need to check for the most current information. My information today indicates that El Paso, the company now working on that project, is not proceeding with construction. They are dealing with permitting issues to clear the way for construction.
Senator Rhoads:
They did get their permits, particularly the clean air permit, did they not?
Mr. Linvill:
That is correct.
Senator Rhoads:
The price of gas went up and the price of power went down. That had something to do with El Paso’s decision, right?
Mr. Linvill:
Yes, that is right.
We also participate in regional organizations as noted on page 5, such as the Western State Energy Board and the Western Governor’s Association. The boxes on pages 10 through 13 summarize progress made on the activities listed on pages 5, 6, and 7. Boxes 1-1, 1-2, and 1-3 reflect new energy generation and projects expected to become operational over the next several years.
Senator Cegavske:
Your office receives a number of grants. Do you have to match any of them?
Mr. Linvill:
The only grant we match of which I am aware is the formula grant, our main funding grant. The office runs entirely from a formula grant from the U.S. Department of Energy.
Senator Cegavske:
Would you check on the other four grants listed in the budget? What is WAPA?
Mr. Linvill:
WAPA is the Western Area Power Administration. I believe the other four grant sources you reference do call for matching funds, but those funds are provided by other partners and not by our office. The only matching money our office provides is for the formula grant. We provide $98,000 of matching funds for the $394,000 grant. That $98,000 comes from the petroleum violations escrow account, created some time ago.
Senator Cegavske:
I would appreciate receiving information on that.
Mr. Linvill:
I will do that.
Page 6 lays out our priorities relative to promoting conservation and energy efficiency. You will have a bill before you to try to improve our retrofit program. Our outreach activities take place both within and outside the State government. We have, for example, endorsed the deployment of more utility demand-side management programs. These programs reduce electric load by providing incentives for people to conserve or use more energy-efficient appliances. We do outreach to small businesses, and have updated our Web site.
I refer to box 1-4 on page 11 of the handout dealing with grants and other boxes as referenced on page 6. We promote renewable energy projects as shown in boxes 1-3 and 1-5 on page 7. We strive to create markets for renewable energy and to reduce market costs by seeking grants to support better mapping of wind and geothermal resources.
Senator Raggio:
What are “green tags” and “green tariffs”?
Mr. Linvill:
“Green tariffs” are voluntary tariffs offered by a utility. A consumer could opt to purchase a richer mix of renewable energy than included in the portfolio standard. The western states are attempting to create additional incentives for renewable energy development standards by creating “green tags” allowing energy meeting criteria to command a premium in the regional market. Nevada has the potential to export renewable energy. If “green tags” were developed and extra premiums were available to developers of energy products, then the cost of bringing renewable energy to market would be lowered.
Senator Raggio:
Is there renewable energy produced in the State now that is exported?
Mr. Linvill:
Yes, the Dixie Valley geothermal facility is a 60-megawatt facility that transmits to southern California. As for recently developed renewable energy, the answer is “no”. All renewable energy developed in response to the renewable portfolio standard is either in the planning or construction phase.
We support reducing costs primarily through information relating to existing tax exemptions, and seeking research and development support through federal funding. Finally, we interact with the federal government regarding interstate site location and construction of interstate transmission lines.
Senator Raggio:
What are the energy conservation projects totaling $7 million in the budget? Does your office work with the Department of State on retrofitting?
Mr. Linvill:
I am aware of activities of the State Public Works Board project for public buildings. I do not have primary responsibility for it.
Ethics Commission – Budget Page Elected-66 (Volume 1)
Budget Account 101-1343
Senator Raggio:
Let us turn to our next item, Ethics Commission, B/A 101-1343.
Todd Russell, Chairman, Commission on Ethics:
First, I would like to commend the 1999 Legislature for funding a separate Ethics Commission. The procedures put in place by the 1999 Legislature have worked well. The commission, pursuant to these procedures, has handled complaints received quickly and professionally and with fairness to both the complaining party and the public official or employee involved.
Second, I would like to thank the Budget Division for its work with the Commission on its budget.
We have some concerns that center around the fact there are no funds included in the budget for either investigation of complaints, nor for the commission’s projected increased workload, based largely on the elimination of the ethics board of the City of Las Vegas. We are concerned with an apparent request, for budget reasons, that the commission be moved from the Governor’s office to the Office of the Attorney General. Concern stems from the fact that personnel from the Office of the Attorney General have appeared before the commission representing various public officers over the last year. The commission has concerns that such appearances on behalf of a party to the proceedings may be perceived as compromising the independence of the commission should the commission be moved to the Office of the Attorney General.
Stacy Jennings, Executive Director, Commission on Ethics:
I will be speaking from my PowerPoint presentation. It has been provided to you in written form as part of a larger handout (Exhibit L). The sources of the commission’s jurisdiction are shown on slide 1A. The commission receives both requests for advisory opinions and complaints. The category “Campaign practices complaints” on slide 2A includes candidate complaints alleging false third-party statements and their effect on the candidate’s campaign.
Senator Raggio:
Does anyone read the many filings that candidates must make with the commission?
Ms. Jennings:
Candidate filings are read primarily by media representatives and various consultants.
Senator Raggio:
Looking at your performance indicators, in FY 2002, the commission had thirty requests for opinions. Twenty were accepted and twelve were dismissed by the panel. Your projections show that workload would more than double. Instead of 30, you project 125 annual requests for opinions. What is the reason for that increase?
Mr. Russell:
The workload will increase primarily because Las Vegas has disbanded its ethics panel. We talked to them about their caseload. We anticipate we will pick up most of the items that panel would have handled.
Ms. Jennings:
The commission has eight members, four of whom are appointed by the Legislative Commission and four by the Governor. There are several restrictions affecting potential appointees: political affiliation, past work as public officials, and geographic distribution.
Slide 3A shows our workload projections. As indicated, we project a considerable increase in opinion requests. Las Vegas was the only local jurisdiction to have an ethics board, which was disbanded in December. We included a newspaper article about the dissolution in your handout. We also expect an increase in first-party advisory opinions coming from sitting public officers as depicted on slide 3B. The basis for this projection includes discussion with City of Las Vegas Ethics Board indicating that the city attorney’s Office was handling three to five such requests per month, or thirty-six to sixty per year. We projected we would have at least thirty-five new first-party opinion requests annually. We also considered the last 9 years of third-party ethics complaints before the Las Vegas board in our projections. Lastly, we have a statutory obligation to conduct compliance seminars for State and local public officials. This was not done in the base budget year. My position was vacant for about 6 months. Additionally, my predecessor was ill. I have made an effort to make these presentations and will continue to do so.
Included in the handout is a page explaining how three issues made expenditures in the base budget year not reflective of our actual budget requirements. One is the Executive Director vacancy. Another refers to the fact that after 9/11, the commission held many meetings via videoconference, thus our travel budget was under-spent. Third, we had no major investigations, so that category was under-spent as well. Also, we needed to have our server rebuilt. These factors caused our base budget year to be non-indicative of normal spending requirements.
As shown in slide 4A, 69 percent of our budget goes for salaries. Seventeen percent is operational expenses of which one-third is rent. Slide 5A shows the M-100 and M-300 budget items. The M-100 item is $4800 in FY 2004 and $5200 in FY 2005. Of that amount, $4200 is in new charges from DoIT. We are not paying those charges at this time. They relate to Web site hosting. Our Web site has 5000-10,000 hits per month. We do our Web site development in-house since we have no funds to have that done.
Senator Tiffany:
I find these DoIT charges interesting. My candidate Web site charges for hosting were $75 to $100 for a year. I got substantial hits, although not as many as the commission site. I will be looking at this in the DoIT budget examination. Is your site just informational, or is it interactive?
Ms. Jennings:
Our Web site is static; however, people can pull down various forms to be filed with us. Our opinions draw a lot of traffic. Currently, the site carries opinions back to 1992, and we plan on positing opinions back to 1975.
Senator Tiffany:
Site visitors are printing their downloads using their own resources. I support your Web site, but I do not see why DoIT should charge you $350 a month just for hosting, particularly where you add content yourself.
Ms. Jennings:
The large budget item that makes major adjustments from our base year is E‑275. This is necessary to return our funding levels to an appropriate amount. We would receive full funding for 13 commission meetings annually, allowing for a second meeting in one month. That would pay commissioner salaries for 13 meetings and allow two panel proceedings per month. It would restore funding for our participation in the Council on Governmental Ethics Laws, an annual conference and our only out-of-state travel. It involves meeting with our counterparts in other states to discuss topical subjects.
Senator Raggio:
How many people attend that conference?
Ms. Jennings:
I attend, as does the commission legal counsel. This expense is about $2000 to $3000 annually. Turning to in-state travel, this was underutilized in the past. When we meet in the south, we need to transport four commissioners and three staff. When we meet in the north, we need to transport four of them here. If we meet 12 or 13 times a year, plane ticket costs add up quickly. We are trying to use videoconferencing, but we have no funding for that. We plan to substitute videoconferencing for travel, but we do need travel funds in the budget.
We also under‑spent court reporting services in the base year, but we need funds for transcription of hearings since our opinions are subject to judicial review. These costs are hard to control. For example, we had a campaign practices hearing in September, which led to three full commission meetings that month. One hearing alone entailed transcription costs of $2000, and the commission only has $13,000 in funding for court reporting for the entire year.
The computer training funds address two major projects. One involves putting more information on our own Web site. The second entails a public officer database so we can monitor financial disclosure statements and remind people who have not filed in order to obtain better legal compliance. We maintain the data in Excel and so are looking at advanced Excel training. We receive information from state and local authorities in electronic form, which we can move it into Excel, but need to know how to do it efficiently.
Senator Raggio:
Do you also record your hearings? We do not use stenotype in the Legislative hearings. Everything is recorded. Would that be more cost effective than using court reporters?
Ms. Jennings:
The court reporter actually tapes the meetings.
Mr. Russell:
The primary reason we use a court reporter is that all our decisions are subject to appeal to the District Court. It is easier to have the transcript prepared and ready for that reason. We prepare additional minutes, but we believe the court reporter transcript is necessary because of the nature of the complaints and the likelihood of appeal.
Ms. Jennings:
The last item in E-275 is a security system for our office. Our office is off the State complex near the intersection of College Parkway and Goni Road. Our office has a single door. We get many angry people as visitors. Last New Year’s Eve, I was working in the office alone. An angry gentleman entered the office. His briefcase was ticking. I was scared. I do not know what he had in the briefcase. I did manage to calm him and address the issues he had with the commission. We are located next to the Commission on Judicial Discipline. Their personnel have asked us to keep our door locked this month. A felon convicted of battery has been threatening them. This system, similar to a burglar alarm, would include a motion sensor, 24-hour monitoring, and wireless panic buttons we could wear. In the event of a threatening intruder, we could press the button and get an immediate response.
Senator Raggio:
What is the total system cost?
Ms. Jennings:
The cost is $1100 annually. The system would be leased, so it would be a recurring expense.
Senator Cegavske:
Is Las Vegas the only city with a separate ethics board?
Ms. Jennings:
Las Vegas is the only city. An enabling statute exists, but only Las Vegas created its own board some 9 years ago.
Slide 6A breaks down our executive budget, with slide 6B depicting the dollar amounts as well as the percentage figures. Let me point out there is no money in the budget for investigations, which are part of my job according to statute. We also have a statutory time requirement, which requires us to bring the case to a panel in 15 calendar days. That is very hard if I am the only person doing the work.
Directing attention to slide 8A, our counsel has no paralegal support at present despite our expanding caseload.
Senator Raggio:
Are these requests on slide 8A in the budget?
Ms. Jennings:
They are not in the budget. We are asking for additional funding.
Mr. Russell:
We also have no funds for investigations.
Senator Raggio:
That was my next question. You requested something like $8200 annually for investigations. If there is nothing in the budget, what was contemplated in so far as investigation funding? Obviously there needs to be some.
Mr. Comeaux:
We based the Commission on Ethics funding primarily on its actual expenditures in FY 2002. There were no investigative costs that year. If something were to come up during the biennium, and funding were required, the Commission could access the contingency fund.
Senator Raggio:
Is there a proposal being aired that the commission be moved under the Office of the Attorney General, and the attorney general (AG) would make investigative assets available if needed? This has been in the media.
Mr. Russell:
There is some indication the ethics commission will be moved under the AG for budgetary reasons, but the commission has raised independence concerns. We work in a non-partisan capacity; four commissioners are Democrats, four are Republicans, although I have never seen a political issue arise. We are concerned because in the past year or two, the AG’s office has appeared at commission meetings representing public officials. If the commission were included in the Attorney General’s Office budget, such a move would create an appearance of impropriety or lack of independence. We respect Attorney General Sandoval. We do not want to disparage him at all. However, we believe the commission should maintain its independence.
Senator Raggio:
If no money is put in the budget for investigation, what will you do?
Mr. Russell:
Typically, staff performs the investigations. However, a major investigation would require us to seek money from the contingency fund.
In the period 1997 through 1999, the commission spent approximately $70,000 on investigations. We request funding to be prepared for situations we anticipate will come up.
Senator Raggio:
If you were provided the $8200 annually you requested, how would you use it?
Mr. Russell:
We understand there are people we could hire to do investigations.
Ms. Jennings:
I explored the possibility of purchasing paralegal services from the Legislative Counsel Bureau Legal Division. We are not sure how this would work, but believe we could work out an arrangement. We are asking for computers to replace those purchased in 1999 when the commission was restructured. One new computer would replace a twice-rebuilt laptop used by our counsel in the first year. My laptop and that of my assistant would be replaced in the second year of the biennium.
Proposed legislation will include reduced civil penalties for late filing of financial disclosure statements and caps on certain penalties that now accrue daily. We would like to remove the subjective element from the assessment, so the legislation proposes lowering the maximum penalty and removing the ability of the commission to reduce fines. The commission would simply have the ability to waive fines for good cause to avoid financial hardship. This is all in bill draft request (BDR) 23-500.
BILL DRAFT REQUEST 23-500: Makes various technical corrections and makes changes concerning filing of financial disclosure statement. (Later introduced as Senate Bill 147.)
We also are looking at changing the due date of financial disclosure statements to tax day, April 15, as a deadline that is easy to remember. We would use the public officer database to monitor financial submissions. The legislation would codify the modification although we have already begun compilation of the database. We have had 100 percent compliance this year. Additionally, we would like to change the statutory language so charging for training is permissive rather than required. We charge for presentations to outside groups, but prefer not to charge local governments attempting to improve compliance with State statutes, particularly in light of their financial situation. The last item would remove statutory provisions rendered unenforceable by court decision.
Senator Raggio:
Is there an associated cost? Is there an appropriation in the BDR?
Ms. Jennings:
No costs are associated with this proposed legislation.
Senator Raggio:
Is there any public comment?
Janine Hansen, Lobbyist, Independent American Party of Nevada:
We request zero funding of the campaign practices portion of the ethics commission budget. This request is based on constitutional concerns.
Our legal research shows the proceedings of the ethics commission to be quasi-judicial, leaving it in a constitutional “no-man’s land”. They want more money for investigations. How are our constitutional rights protected? The Nevada Constitution provides that every citizen may speak freely, write and publish his sentiments on all subjects being responsible for the abuse of that right, and no law shall be passed to restrain or abridge the liberty of speech or of the press. The purpose of the ethics commission is to serve as “speech police” in political campaigns. This violates the right to free speech. The U.S. Supreme Court has said the very purpose of the First Amendment is to foreclose public authority from assuming a guardianship of the public mind; in this field, every person must be his own watchman for truth because the forefathers did not trust any government to separate the truth from the false for us. In a decision involving the NAACP (National Association for the Advancement of Colored People), the U.S. Supreme Court said that the First Amendment is a value-free provision whose protection is not dependent on the truth, popularity, or social utility of the ideas and beliefs that are offered. Elsewhere the Supreme Court has said that the people in our democracy are entrusted with the responsibility for judging and evaluating the relative merits of conflicting arguments; state fear that voters might make an ill-advised choice does not provide a compelling justification for limiting speech.
The Ethics Commission’s enforcement of campaign practices laws violates our constitutional rights. Where are our Fourth Amendment search and seizure rights protected as also secured in the Nevada Constitution? We know there are many frivolous complaints filed with the commission. This results in the abuse of innocent people, considered by the press to be guilty until proven innocent. This is abused by people running campaigns. This happened during the last campaign. Numerous frivolous complaints were filed in an attempt to hurt campaigns. This process violates due process, search and seizure, witnessing against one’s self, and trial by jury.
The Nevada Constitution requires a trial by jury not only in criminal cases, and we consider this to be quasi-criminal because of the large fines imposed. My brother now has a fine against him of $80,000. In an arbitrary and capricious manner, this was reduced to $6000. The Nevada Constitution provision allowing jury waiver in civil cases implies a right to jury trial even in civil cases. This right is infringed by the ethics commission. Stacey said this serves as a quasi-legislative-judicial body. James Madison, in the Federal Papers, said the combination of the three powers of government was the very definition of tyranny. That is what we consider the commission’s “speech police” activity. We hope you will defund it, and spend our money on better things. The American Independent Party plans to continue our challenge on February 13.
Senator Raggio:
What is happening on February 13?
Ms. Hansen:
That is the date of an ethics commission hearing. We plan to be there to continue our challenge. But we will go beyond the commission to challenge in the media, at the courts, and in the legislature. We encourage your review.
Senator Raggio:
You have made some compelling arguments, often advanced by others. I understand your concern has evolved through a series of events. Obviously, everything someone says is not constitutionally protected. I believe a Supreme Court Justice once wrote no one has the right to shout “fire” in a crowded theater. Courts have upheld criminal libel as well as civil libel; even public officials are liable if malice is shown. So, there is no clear right to say anything one wants. I understand events in Nevada arose where someone said something scandalous about a candidate. There was concern that there should be a way, other than just denial, for a candidate to obtain redress in a campaign. The initial proposal was to apply felony criminal sanctions if an incident were to occur in the last days of a campaign. The damage could be irreparable for the affected campaign. Bringing suit is not viable since the suit would be heard only years after the election was held. The concept was to provide a forum capable of providing a more immediate airing of grievances. This may be constitutionally impermissible, but the question is why the commission has not been challenged in court.
Ms. Hansen:
I do not know the reason. I speculate the ability to challenge a commission determination in court is limited. Providing for a trial de novo, as passed by the Assembly last session, would allow protections not afforded by the ethics commission. Now, there are only limited appellate rights.
Senator Raggio:
What is a candidate to do if 10 days before the election there is an allegation that the candidate is a sex offender?
Ms. Hansen:
Of course one denies it, but how does a candidate deal with a false claim filed with the ethics commission?
Senator Raggio:
I simply want to alert you. I have explained the reason the compromise giving rise to the ethics commission was reached. There simply needed to be a forum to examine scandalous charges made under circumstances similar to the ones I described.
Ms. Hansen:
I am concerned about providing a new trial when someone is dissatisfied with the outcome from the ethics commission after the election has taken place, to use the scenario you described. I am objecting to the campaign practices law, but a new trial provision may be a solution meeting my concerns.
Ms. Jennings:
I just want to clarify a significant point. All cases heard by the commission under the Campaign Practices Act are subject to judicial review, as are our normal cases. There is a right of appeal to the District Court. The issue pending before the commission regarding the Hansens is not related to the subject you described, but it is amenable to appeal.
Senator Cegavske:
What are the consequences of not filing disclosure statements? Do you feel there are sufficient penalties?
Ms. Jennings:
We are trying to modify the statutory structure to provide, essentially, a penalty for not filing. Waiver would occur only where someone could prove a hardship. For example, we have a case involving a gentleman who has been hospitalized 18 times this year, has had a stroke, and now has difficulty speaking. The commission considers all circumstances on an individual basis. In the past, we did not know who had not filed. Our database solves that problem. We now can ask them to file.
Senator Raggio:
Would you provide this committee with a list of those people who have failed to file and those who have been fined and failed to pay?
Ms. Jennings:
We will provide such a list.
Senator Raggio:
We will now move on to the Legislative audit function. We have a copy of the Audit Division’s Report Summaries before us.
Paul V. Townsend, Legislative Auditor, Audit Division, Legislative Counsel Bureau:
This committee is important in the audit process. It has played a key role when we identify problems. We have identified $25 million in savings and revenue enhancements in the last 2 years that resulted from our prior audit recommendations. The report you have before you is similar to a binder you have received before in a slightly different format. (Exhibit M. Original is on file in the Research Library.) It contains information on all the audits we have completed over the past biennium. The Table of Contents correlates the audit, the page, and the relevant location in the Governor’s budget.
Several reports demonstrate how the information can be used. If you look at page 4 dealing with the state mail services, you see the audit results in brief at the top of the page. This audit has resulted in considerable cost savings. We also identified areas for additional savings through consolidation. These opportunities are identified in the text under the heading “Principal Findings”.
Senator Raggio:
I want to complement you on the information display. This is very helpful. I am going to ask the audit committee to go through this and identify those areas where future savings might be made. This is a good example. We are very concerned about savings in the next biennium.
Mr. Townsend:
Thank you. We look forward to working with Senator Rhoads, the chairman.
A second example at page 79 under the tab associated with “Public Safety” concerns the Administrative Services Division of the Department of Motor Vehicles (DMV). A major issue here involved the distribution of tax revenue. As indicated in the findings, a computer spreadsheet contained formula errors. This led to $9.5 million in sales tax revenue not being distributed to the General Fund over a 20-month period. The “Principal Findings” section describes another error and the system weaknesses allowing these errors to occur and go undetected. Corrective action, and the status of steps taken to date are described.
Another audit I would like to highlight concerns the Division of Forestry shown on page 104 under the “Infrastructure” tab. This is another example of how we are always on the lookout for additional revenues that could be collected by the concerned agency. In this case, we discovered the agency failed to bill the federal government for about $300,000 in fire suppression charges, mainly related to air support as described. When brought to its attention, the agency promptly billed and collected the money. The agency is taking steps to prevent similar problems in the future.
Finally, if you will go back to page 25, you will see an audit on the reliability of performance measures used in the State budget process. We noted that the performance measures used were not always reliable. As you see in the “Principal Findings” section, about one half of the measures we examined lacked sufficient documentation, were based on inappropriate methodologies, or were calculated incorrectly.
We have recently undertaken a project related to this audit. When the 6-month report was submitted to the Legislative Commission, the commission directed us to perform additional procedures in selected agencies and notify the money committees regarding the reliability of measures presented in the current Executive Budget. While these actions will not be audits, we will obtain sufficient information to provide a reasonable basis for our conclusions. We are currently verifying selected measures at DMV, public safety, DoIT, and the Department of Human Resources. We will release these as we finish with each agency. All results should be to you by the end of the month.
We are also increasing our emphasis on performance measures in the planning phases of our audits. We will address them when applicable and provide a similar analysis next Legislative session.
Senator Cegavske:
I do not know whether you were here when Jack Close was an Assemblyman. He sat down with each agency that requested it and laid out what a performance indicator was and what it was meant to do. Does that need to be done again?
Mr. Townsend:
Despite some of our past and on-going activities, additional communication and information on what makes a good performance indicator is always helpful. So, I agree with you.
Senator Raggio:
Mr. Comeaux, would you step forward for some questions.
As you know, there has been considerable effort over several sessions by your office and by our Legislative staff to develop effective, meaningful performance measures. There should be an effort by managers in dealing with their budgets to ensure accuracy. How do you try to ensure accuracy? Budgets are as important to the Executive as to the Legislative Branch. If this finding is correct, and half of the budget accounts are incorrect, what are we to do? This committee often finds errors and gets pretty lame excuses from presenters. Is this just sloppiness?
Mr. Comeaux:
You are correct. Several things probably contribute to the problem. We put considerable effort into training. Our personnel turnover is just incredible. We get people in, and then, quickly, they are gone. Part of the reason is they go to work for local governments for higher pay. The emphasis in the budget process is more on the numbers than on the performance measures. The Executive Branch, and I think this is also true of the Legislature, does not use performance measures to make funding decisions. There are very few performance measures that are connected to the funding.
Senator Raggio:
However, we talk about caseloads and projected caseloads. These measures have meaning for budgets.
Mr. Comeaux:
I do not want to suggest performance measures are not meaningful, but we have not used them to make funding decisions in any consistent manner. We do in some areas; for example, caseload measurements are used that way. However, those metrics are not really performance indicators, those are workload indicators. The most difficult part of our training sessions is to get people thinking about outcome indicators. “What are we getting for what we are spending?” is the right sort of question.
Senator Raggio:
That is exactly the question the public wants answered. That is what we want to know as the public’s representatives. That is why we request performance indicators. We need indicators that are informative and pertinent to the relevant budget. Moreover, we need accountability for this process.
We have no ability to direct the Executive Branch, but I would suggest you tell your department heads to convey to their people to consider the indicators before they come before the committee on budget hearings. If there are corrections that need to be made, let us have them up front.
We are being asked to fund a billion-dollar shortfall over the next 2.5 years, including this fiscal year, and one of our prime responsibilities is to identify real needs. Without meaningful performance indicators, I am not certain we can perform this task. I think it is imperative before people come into hearings, starting tomorrow, that they look at performance indicators and bring them up to date. They know how to do this. They know how many complaints they have had, how many phone calls they have had. Our initial responsibility is to consider whether we can make additional reductions in any budgets. Were I in your position, I would have people immediately revisit the performance indicators so that when they testify, assurances can be given as to the existence of real needs with backup information available.
Mr. Comeaux:
I will take care of that.
Senator Rhoads:
Is the report format of the Executive Branch Audit Committee similar to ours? Have you discovered the same number of problems when you duplicated an audit on an agency budget?
Mr. Comeaux:
There is not much duplication looking at the Executive Branch internal audits and the audits of the Legislative Counsel Bureau. The format is probably similar. Our internal audit section issues an audit report considered by the Executive Branch audit committee established by the Governor. Findings are discussed. The internal auditor does appear before the committee.
Senator Rhoads:
Does the Legislature get a copy?
Mr. Comeaux:
I believe so.
Mr. Townsend:
The Audit Division is provided a copy.
Senator Rhoads:
Are Legislators given a copy?
Mr. Comeaux:
I doubt Legislators are provided a copy.
Senator Raggio:
Mr. Townsend, I complement you on the new format, well done. With no further business, the committee stands adjourned at 10:49 am.
RESPECTFULLY SUBMITTED:
James D. Earl,
Committee Secretary
APPROVED BY:
Senator William J. Raggio, Chairman
DATE: