MINUTES OF THE
SENATE Committee on Finance
Seventy-second Session
February 6, 2003
The Senate Committee on Financewas called to order by Chairman William J. Raggio, at 8:02 a.m., on Thursday, February 6, 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
GUEST LEGISLATORS PRESENT:
Senator Michael A. Schneider, Clark County Senatorial District No. 11
STAFF MEMBERS PRESENT:
Gary L. Ghiggeri, Senate Fiscal Analyst
Bob Guernsey, Principal Deputy Fiscal Analyst
Brian M. Burke, Senior Program Analyst
Russell J. Guindon, Deputy Fiscal Analyst
Tracy Raxter, Program Analyst
Judy Coolbaugh, Committee Secretary
OTHERS PRESENT:
Terry Smith, Consultant, The Jason Foundation for Education
Sharon Pearson, Educator, Sheila Tarr Elementary School, Las Vegas
Curtis Jones, Principal, Sheila Tarr Elementary School, Las Vegas
Joseph W. Brown, Attorney at Law, Las Vegas
Kathy Augustine, State Controller, Office of the State Controller
Kim Huys, Chief Accountant, Office of the State Controller
Dean Heller, Secretary of State, Office of the Secretary of State
Renee Parker, Chief Deputy, Office of the Secretary of State
Brian Krolicki, State Treasurer, Office of the State Treasurer
Janice Wright, Deputy of Education Programs, Office of the State Treasurer
Susan K. Moore, Director of Millennium Scholarship Program, Office of the State Treasurer
Steven D. McDonald, Deputy of Unclaimed Property, Office of the State Treasurer
Senator Raggio:
The staff has distributed to the committee a list of budgets (Exhibit C). Following our past policy, we do not hold formal hearings on a number of budgets. Instead, we submit those budgets to the staff and they develop a report on those budgets.
Gary L. Ghiggeri, Senate Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau:
I have listed the budgets including the budget number, the budget account title, the volume number, and the page number in the Executive Budget. In the column listed under joint subcommittees on page 2, you will see “staff” listed opposite a number of areas. Those are the budgets the staff proposes to close or to bring back to the subcommittee with recommended closings. In total there are approximately 408 budgets in the Executive Budget. Staff has identified 80 budgets to bring back to the committee with recommendation for closure. That is approximately 19.6 percent of the budgets in the Executive Budget.
Senator Raggio:
I am going to ask the committee members to review this list. If any member of the committee has an objection to any of those budgets proposed for closing by staff, please make a note.
This morning, at the request of Senator Schneider, we are going to hear a presentation on the Jason Project.
Senator Michael A. Schneider, Clark County Senatorial District No. 11:
The Jason Project is a multidisciplinary multimedia curriculum enhancement program that has been ongoing in Clark County schools since 1993. The project combines public and private sponsorships into a cooperative partnership. The Jason Foundation for Education would like to bring the project to northern Nevada. The program is ideally suited to school districts where distance learning is necessitated by vast geographical areas. Senator Rhoads’ district would be a welcomed participant. In past sessions, I have invited everyone to come observe the Jason Project in operation in Clark County. This year we are bringing the project here to you. Joyce Woodhouse, co-chairwoman, has prepared this invitation letter from the Southern Nevada Jason Project Science Consortium for you (Exhibit D). I would now like to introduce Terry Smith, prime motivator and promoter of the program, to tell you more about the Jason Project.
Terry Smith, Consultant, The Jason Foundation for Education:
The Jason Foundation for Education (Exhibit E. Original is on file in the Research Library.) is a non-profit foundation created in 1986 by Dr. Robert Ballard who discovered the Titanic’s resting place. The underlying idea of this project is to enliven science education for students by bringing them in contact with, and making them part of, a real science expedition. I am going to show a set of slides that will give you an overview of the Jason Project.
Our goal is to interest kids in science and mathematics by making them part of real science. The Jason Project is an expedition-based multimedia science program. Every year there is a real science expedition somewhere in the world that illustrates how the planet works. We put real scientists on the site, doing real science, and we build a science curriculum around the theme for teachers to use with their students in school. We integrate all of the disciplines starting with science, but including mathematics, social studies, and English language arts. We correlate everything we do in the program to each state’s standards so all the work the teachers and students are doing in school around the Jason Project is related to the state’s required standards at each grade level.
We have a substantial list of corporate partners including the National Geographic Society. We also have partnerships with the National Oceanographic and Atmospheric Administration, National Aeronautical and Space Administration, and the Office of Naval Research.
We are now reaching about 1.5 million students in the United States and in seven other countries, and we are growing rapidly. We are science based and essentially a middle school program. Research shows that if students do not get “turned on” to science by middle school they tend to drop out of the study.
Senator Raggio:
What is the significance of the title Jason XIV?
Mr. Smith:
This is year 14 for this program. Bob Ballard is enchanted with the Greek myth of Jason and the Argonauts. Thus, the project was named Jason. We also have a Jason Web site. Students can access the Web site at school or at home. We have videos of each expedition, live broadcasts, and written materials that can be used as learning resources. We have integrated reading into the Jason Project. Novels are chosen each year that help teachers connect students to the science we are doing by reading.
Sharon Pearson, Educator, Sheila Tarr Elementary School, Las Vegas:
As a teacher, Jason has given me the opportunity to grow professionally. This is real science that is being studied now. It is not an old textbook with old information. This is current news that is exciting for all of us. The students are motivated to learn. It is an incredible experience to see students, who have a difficult time learning, being successful when they participate in the Jason Project. The project has become a very powerful learning tool.
The project has been evaluated, and what we are finding is it changes the way teachers teach. It also changes the way students learn because it is all encompassing. It gives them a global perspective. It encourages collaboration between teachers, since we can communicate with each other worldwide. The students do better on standardized tests, and the assessment tools within Jason help them prepare for those tests.
Senator Raggio:
What is the time schedule for the Jason Project in the classroom?
Ms. Pearson:
The project can be a yearly program or it can be for a couple of months. The time schedule depends on how the teacher wants to teach the project. If you taught the project on a yearly basis, you would not be teaching Jason on a daily basis. The teachers have what they call “Jason Days.” The project starts with a paper curriculum and from there a video component. We do the “hands on” experiments, and research connected to novels. The materials come packaged with the video, and the live expedition takes place in March.
Senator Raggio:
What is the cost of the program?
Ms. Pearson:
Terry Smith will explain the costs.
Mr. Smith:
There are a variety of ways for pricing and delivering the program. On average, the cost is about $3.50 per student per year.
Senator Raggio:
Where is the program used in Clark County?
Ms. Pearson:
The program is used across the district and it is used by teacher choice. It is taught from the fourth grade all the way through high school.
Senator Raggio:
We would like to hear from the district about the total cost and how it is funding the program.
Ms. Pearson:
Several students accompanied us today to explain what the Jason Project means to them.
Curtis Jones, Principal, Sheila Tarr Elementary School, Las Vegas:
From an administrator’s point of view, I look for teachers to hire who are willing to go beyond the regular curriculum. The Jason Project provides for this type of expansion. Mrs. Pearson is one of those teachers willing to take students to new heights and to open new doors of experience for them.
Mr. Smith:
This is a live video broadcast, approximately 25 minutes in length, from Santa Barbara, the expedition’s headquarters. Dr. Bob Ballard has a special greeting for all the Senators in Carson City who are viewing this presentation.
I like to think of the Jason Project as a “toolbox” for teachers. One of the most successful achievements of the Jason Project is its role modeling. I have two handouts. The first explains what students who completed the program are currently doing (Exhibit F). The second contains newspaper articles highlighting teacher and student “Argonauts” (Exhibit G). I am also distributing a list of all the locations worldwide of the Jason expeditions to date (Exhibit H).
Senator Cegavske:
I want to welcome the students who are all student council members that I had the pleasure of “swearing in” last year. Also, I want to thank Curtis Jones who is an excellent role model not only for the students, but also for the teachers.
Senator Raggio:
I would like to introduce Joe Brown who recently accompanied Dr. Ballard on a trip to the Black Sea to look for submerged archeological artifacts.
Senator Schneider:
The young lady who appeared with Dr. Ballard on the screen, Alicia Foyt Strogen, was a student in Las Vegas and she went on the Jason V expedition as a student “Argonaut.” Joe Brown, who will testify next, secured funding sources for the Jason Project.
Joseph W. Brown, Attorney at Law, Las Vegas:
At the time I met Dr. Ballard, Clark County School District had the foresight to be one of 13 districts in the world that included the Jason Project in its curriculum. Funding is provided by donations from private and corporate sources and from the Clark County School District budget.
Senator Coffin:
Is there school and student participation throughout the Clark County School District? Is the program administered uniformly across the county?
Ms. Pearson:
I do not have the exact data, but the information has been collected. It serves all students and schools including the “at-risk” schools.
Senator Cegavske:
Are lab fees charged to the students participating in the program?
Senator Schneider:
I am not sure that charging a fee, as a funding option, has been considered. Currently all funds are raised privately or provided by the school district.
Senator Cegavske:
I suggest the students participating in the program be assessed the $3.50 per‑student fee. Many schools have Parent Teacher Associations that willingly do fund-raising for those students who cannot afford to pay fees.
ELECTED OFFICIALS
Controller’s Office – Budget Page ELECTED-74 (Volume 1)
Budget Account 101-1130
Kathy Augustine, State Controller, Office of the Controller:
I am the chief fiscal officer charged with administering the State’s accounting system and the State’s debt collection program. My office administers the system to permit fair, accurate, and consistent financial reporting of both current and historical information. In processing financial transactions, my office has the Constitutional duty of conducting the final audit, settling all claims against the State, and ensuring compliance with the intent of the Nevada Constitution, federal laws, and State statutes.
I am responsible for the issuance of warrants in payment of State obligations and for preparation of all State employee payrolls. My office produces a comprehensive annual financial report prepared in accordance with generally accepted accounting principles. We prepare a citizens’ report of the State’s financial status and public debt. These reports are essential to the marketing and selling of State bonds.
As chief fiscal officer, I also implement procedures and computer systems that allow the State to comply with the Cash Management and Improvement Act of 1990. My office continually monitors the receipts and expenditures of agencies that administer major federal programs to minimize investment losses.
I refer you to the State Controller’s Office Receivable Summary by Agency (Exhibit I). My office initiated this debt-collection program for the State 4 years ago. State agencies are mandated to provide a summary of all their receivable accounts on a quarterly basis. The last page total shows the State is currently owed over $172 million from the agencies listed.
Senator Raggio:
How realistic is the figure of $172 million? We keep hearing large numbers, but then later we are told that a lot of the funds are not collectible.
Ms. Augustine:
Right now, it is just permissive that State agencies turn over their collection to us. We have 10 interlocal contracts signed with the controller’s office for collection of debts. The participating agencies are: Department of Motor Vehicles (DMV), Department of Business and Industry, Department of Agriculture, Department of Conservation and Natural Resources, Department of Taxation, Private Investigators Licensing Board, Commission on Economic Development, Department of Transportation, Public Employees Benefit Program, and Commission on Ethics. Your reference to non-collectible funds reflects bankruptcies in the Department of Taxation and the Nevada Tax Commission.
Senator Raggio:
Why are the columns headed “estimated to be collectible” and “estimated to be uncollectible” blank?
Ms Augustine:
We only do those two sets of calculations at the end of the fiscal year (FY), but I can provide you with those numbers. Currently about $7 million has been turned over to our office. We have been able to collect approximately $1.03 million through our contractor, OSI.
Senator Raggio:
Is it true there is a collection cost of 45 cents for each dollar that we collect, which means we only net 55 cents?
Ms. Augustine:
No, that is not true. I refer you to State Controller’s Office Debt Collection Totals (Exhibit J).
Senator Raggio:
Your performance indicators for FY 2003, FY 2004, and FY 2005 show cost incurred to collect each dollar is 45 cents.
Ms. Augustine:
We pass the cost of the debt to the debtor. The only fees the State actually paid last year amounted to $5500 on the $1.3 million of collections.
Senator Raggio:
I do not believe the performance indicators on your budget page really reflect that information. It shows cost-per-dollar was 45 cents and that is what you are projecting. The figures need to be clarified. Yesterday we talked to the head of the budget office and asked him to notify all the agencies and divisions to look at their performance indicators before they come here because the figures have been vague. We need that information to be as accurate as possible.
Ms. Augustine:
The contracts are signed by our office, then sent over to the Department of Administration. Perhaps they are looking at just the fee for the debt-collection agency. That figure is not what the State of Nevada pays. The only reason we had to pay the $5,500 in fees is because last session the Senate majority leader did not want the fee passed on to those debtors who owed less than $200. Therefore, in FY 2002, we paid $2,589.48, and in FY 2003, we paid the debt collection agency $2,956.44. Those are the only fees the State has ever paid for debt collection services. All other fees are tacked on to what is repaid.
Senator Raggio:
I still do not understand what the 45 cents represents.
Ms. Augustine:
I do not know what that figure is either.
Senator Raggio:
Please get together with the budget office and clarify the figure for us.
Ms. Augustine:
I will see Mr. Comeaux about it. We are collecting $243.73 for every dollar paid to a collection agency.
Senator Raggio:
What is the status of the Department of Motor Vehicles and the Department of Wildlife programs to impose sanctions on obtaining licenses if any of their debtors still have outstanding obligations?
Ms. Augustine:
In December 2001, the DMV turned over 6,000 debtors to us who had written bad checks. The attorney general determined we should send letters advising those people they were going to be turned over to a debt-collection agency if restitution was not made within 30 days. I refer you to Exhibit J that shows in one month, December 2001, we were able to collect $55,633.69 on those 6000 bad checks.
As shown in Exhibit K, entitled State of Nevada Controller’s Office Debt Collection Program as of February 5, 2003, we turned the balance of $5,675,883.63 over to OSI to collect on January 1, 2002. To date OSI has collected $1,029,542.01.
Senator Raggio:
Are these debtors all people who have given bad checks to the DMV?
Ms. Augustine:
The Legislature has now given DMV the “hammer” to suspend vehicle registrations, driver licenses, and driver permits if restitution is not made to the State. This regulation was a pilot program that we hope will be made permanent this session. We have a request pending for that purpose.
Senator Raggio:
There is still $4 million outstanding on bad checks given to the DMV. Do these people have licenses?
Ms. Augustine:
The licenses should have been suspended, but our office does not deal with the actual suspensions.
Senator Raggio:
I am going to request that Mr. Comeaux track this answer down. We need to know what is happening on the suspensions.
Ms. Augustine:
The Department of Wildlife has not been able to get its system running, so we can follow the same restitution or suspension procedures with them. They are in agreement with the program and want to work with us.
Senator Raggio:
Mr. Comeaux, please check with the Department of Wildlife to find out why they are unable to get their system running. The suspension authority was granted during the last session.
Senator Rawson:
I believe the authority to suspend licenses “sunsets” at the end of this year, and I believe we want to continue the procedure.
Ms. Augustine:
You are correct. Our bill draft proposal also requests that the regulation not “sunset” but continue uninterrupted. The other pilot program is our warrant offset/vendor hold. Permanence for this program is also requested. We developed this program with the Department of Taxation. The program has been so successful we now offer it to all State agencies. Since we already pay all debts for State agencies, we are now able to match the two figures. For example, if one agency bills our office for a service and it owes another agency, we put the two amounts together. We have been able to collect $226,951.75.
.
We are also looking at collection of payroll debt mostly owed by former State employees. Payroll is under the Department of Personnel even though the Office of the State Controller issues all the payroll checks. The total payroll debt is $323,818.02. Of that amount, payroll has turned over to our office $123,333.93 for collection. We have collected $33,095.59. We would like to expedite payment through online payments or automatic bank account deductions. Currently, the program is very labor-intensive, and we only have one administrative assistant to do the work. We have had to assign two other full-time equivalents into the office because debt collection has become so busy. We have reorganized so we now have separate debt collection within the office.
We turned over $1,572,517.00 to Recover Metrics for collection. So far it has recovered $6245.32 (Exhibit K). However, we have a large settlement pending with a mine bankruptcy in Yerington. We expect to receive another $.5 million in the next few months that will apply towards the Recover Metrics collection total. Our office alone has collected $315,681.03. The figures show the program is more than paying for itself.
Senator Raggio:
Please tell us about the Integrated Financial System (IFS) rollout. What is the status of the rollout?
Kim Huys, Chief Accountant, Office of the State Controller:
Controller’s Office – Budget Page ELECTED-74 (Volume 1)
Budget Account 101-1130
E-275 Working Environment & Wage – Page ELECTED-76
Phase I now has over 1000 trained users online. They are processing payments for bills to vendors and entering deposit and requisition information online. The agencies and vendors are both pleased with the one-day payment process.
Senator Raggio:
Are phases II and III projected for completion at the end of this year?
Ms. Huys:
We are currently 6 months ahead of the completion schedule finishing components of both phase II and III. The advanced receivables module will be online for all agencies in addition to some other documents. We are also finishing a workload component that will provide automatic routing of documents, creating an audit trail. The entire program will be fully implemented by July 1, 2003.
Senator Raggio:
The budget shows you presently have 42 authorized positions and you are requesting an increase to 45.
Ms. Augustine:
We want to keep three of those positions permanent within the office. One is an accountant III position that we want to transfer into our debt collection section. The other two management analyst I positions are needed to continue the IFS training program (Exhibit L).
Senator Raggio:
What did your office do to accommodate the Governor’s request for budget reductions?
Ms. Augustine:
The Governor’s office had asked us for 3 percent and we remitted 6.41 percent.
Senator Raggio:
How did you create the reduction without impacting positions?
Ms. Augustine:
We cut fringe benefits, eliminated some out-of-state travel, cell phone and pager costs, and some printing of forms. We also cut maintenance costs on our information technology, some training, and dues, registration, and related travel costs.
E-276 Working Environment and Wage – Page ELECTED-76
The Executive Budget recommends additional training funds of $11,290 and $15,787 in FY 2003-04 and FY 2004-05 respectively, for the professional accountant and information technology staff. The training funds would provide for additional continuing professional education (CPE) hours for maintenance of Certified Public Accountant (CPA) licenses of the staff.
Ms. Huys:
The CPA licenses require 40 hours of CPE per annum to maintain certifications. The information technology staff is also required to keep current in their field in order to maintain our systems.
Senator Raggio:
Paying for continuing education for professional employees to maintain their certification has not been a statewide policy. Has it been a policy for the State to pay for continuing education for professionals in your offices?
Ms. Augustine:
Yes. Since the state controller is the accountant for the State, we need to maintain our professionals’ certifications. Many times the CPE credit is part of the registration for the particular training that our personnel attend. We do not pay their licensure costs.
Senator Mathews:
I want to go on record that I believe in this department, and in all departments, professionals should be responsible for their own CPE credits and costs.
Ms. Augustine:
I would like to add I have three accountants attending the Government Finance Officers Association convention this year. I pay their registration fees but they are personally responsible for all travel, hotel, and incidental costs. They will be taking annual leave to attend.
We are also required to comply with the Cash Management Improvement Act, which mandates one of our accountants to liaise yearly with the United States Treasury Office in Washington, D. C. We do the arbitrage for the Office of the State Treasurer. If we did not do that function in-house, it would have to be contracted out. We also complete all of the form 1099s for the State. We have specialized areas in our office that other state agencies do not have.
Senator Raggio:
What is the plan for moving your office to the former Employers Insurance Company of Nevada (EICoN) building in Carson City?
Ms. Augustine:
We have a meeting in March 2003 with the treasurer, secretary of state, the Governor’s chief of staff, and public works to discuss movement and office changes.
Senator Raggio:
We are referring to Capital Improvement Project number 01-C3.
Ms. Augustine:
I believe all moving costs are in the public works budget. Unfortunately, the office space square footage in the EICoN building is inadequate, and we will be experiencing the same over-crowding problems that we currently have.
Senator Tiffany:
Your debt collection contractor, Recover Metrics, seems to have a very low collection percentage rate. Is that because the contractor is given the more difficult collections?
Ms. Augustine:
Yes, Recover Metrics only collects on debts over $25,000. The agencies have only turned over $1.5 million to Recover Metrics. Of that amount, $1 million is in the bankruptcy litigation of the Yerington mine. Hopefully, Recover Metrics will be able to recover about $.5 million from the settlement.
Unfortunately,the statute is permissive, so agencies do not have to turn over their debts to us. The Legislature will be asked to mandate that all collectibles delinquent over 60 days be turned over to our office.
Senator Tiffany:
Is the primary collection agent Recover Metrics, or are you building the collection function into your agency?
Ms. Augustine:
No, they are outside contractors. OSI and Recover Metrics were the low bidders to handle debt collections. The small debts under $25,000 are collected by OSI, and those over $25,000 by Recover Metrics.
Senator Tiffany:
Therefore, we have two third-party outside contractors doing the debt collections. It appears the controller’s office is growing in staff to become a collection agency. Are you doing collections in your office?
Ms. Augustine:
We were mandated by the attorney general’s office to send out the initial letters for collection. We have to notify the debtors that they have 30 days to make restitution before we can turn the account over to the collection agency. Yes, we do collect monies in-house, but the good news from that perspective is we do not have to pay the fees on the collection.
Senator Tiffany:
Why, then, does your office have to add another position for debt collections?
Ms. Augustine:
We currently do not have an accountant in the accounts receivable section. We have reorganized so we can start automating this function with the IFS program. The warrant offset/vendor hold function is also all done in-house.
Senator Tiffany:
Again, why do you need to add an accountant position when it looks like your office function is to send out letters? What will this accountant do?
Ms.Huys:
This accountant will be valuable in bringing on board all State agencies to use the advanced account receivable component of the IFS and for debt collection follow-up. Many agencies would benefit from some leadership, direction, and training. There is a component in our annual reporting that deals with disclosing the amount of debt. This position would support the report figures.
Senator Tiffany:
Whenever one agency offers another agency a service, there is an assessment fee. How much time do you estimate this new accountant position will need to work with the other agencies?
Ms. Augustine:
We are not authorized to charge any kind of assessment fee. We provide all our services to other agencies free of charge, including debt collection and training.
Secretary of State – Budget Page ELECTED-80 (Volume 1)
Budget Account 101-1050
Dean Heller, Secretary of State, Office of the Secretary of State:
The mission of the Office of the Secretary of State is to effectively and efficiently serve the public by performing its statutory duties to ensure integrity of elections, facilitate business filing, protect consumers against securities fraud, preserve public records, and to promote public awareness and education in these and related areas.
I refer you to page 3 of the handout entitled Secretary of State Biennial Budget Request FY 2004-2005. (Exhibit M. Original is on file in the Research Library.) Our overall revenues are up over 30 percent. The performance indicator I wish to stress during this presentation is the secretary of state’s office generates $6 of revenue for each $1 of expense. The chart on page 4 illustrates the growth in revenues per full-time employee. Our current revenues per full-time employee are over $400,000 as compared to $100,000 per full-time employee in 1987.
The Commercial Recordings Division is responsible for accepting, filing, and retrieving of organizational and amendatory documents. On July 1, 2001, Article IX of the Uniform Commercial Code (UCC) was revised and implemented.
Senator Raggio:
What does Article IX deal with?
Mr. Heller:
Article IX shifts the burden of responsibility from the county to the State for UCC filings. The commercial recording filings over the last 3 fiscal years have been relatively flat. The 30 percent revenue increase over the last biennium is due to fee increases.
In our Records, Retention, Retrieval and Reproduction Division, over 52,000 new business entities filed in FY 2002. There were over 300,000 total filings in this division, which generated $43 million in revenue.
Another performance indicator is our 2-week money-back guarantee. We have only had six refunds since the program was created in 1997. We continue to maintain a 2- to 3-day turnaround on most non-expedited filings, and we have handled over 300 expedited 2-hour filings since August 2001.
Senator Raggio:
The Governor has proposed doubling all the fees in the secretary of state’s office. Does that include the expediting fee as well?
Mr. Heller:
I believe it is an across-the-board increase including not only commercial recordings, but also fees for notaries, securities, and all other documents.
Senator Raggio:
Will the number of actual filings decrease if you double all the fees?
Mr. Heller:
I believe we are approaching the threshold of not being able to provide a competitive price, and we will lose business to other states because of the fee increases. I cannot project the amount of loss.
Senator Rawson:
An organization, Resident Agents Association, has suggested ways exist to set the fees to bring in as much revenue as before without impacting the number of people who file with us. I believe we need to talk to them before we make any fee‑raising decisions.
Mr. Heller:
I believe that is a prudent step. All of our commercial recordings forms are available and downloadable from our Web site. Business entity searches are on our database free of charge. We are also developing a fully integrated processing system for commercial recordings to replace our 25-year-old system.
In our Elections Division we have another performance indicator that shows voter registration and turnout. During the last two election cycles we have experienced a 10 percent increase in voter turnout. Statewide voter registration and the implications of the federal Help America Vote Act of 2002 (HAVA) are addressed in our bill draft proposal.
Another goal of the Elections Division is to meet the HAVA mandate to upgrade voting systems throughout the State. The punch-card systems must be removed and replaced with direct record electronic systems. We need to change in eight counties, and that funding comes to us through HAVA. We have a voter’s bill of rights for consideration, and Election Day registration.
Senator Coffin:
If a county has already upgraded its voting system, can some of this funding be used to reimburse the counties for their efforts?
Mr. Heller:
I understand your concern. Both Washoe and Clark Counties have up-graded their systems in the last couple of years. Congress is mandating that we have one system. The legislation does not allow for multiple systems. As we go through the process of the changeover, we will have to contact the vendors that supplied these up-graded systems to see whether they can provide the product necessary to satisfy federal law requirements.
Senator Coffin:
Do we ultimately have to come up with 5 percent of the appropriated amount?
Mr. Heller:
Nevada is slated to receive $25 million. Five million dollars come from the no‑strings attached Title I with no match required. The remaining $20 million is in Title II funds where the State has to provide the 5 percent match.
Senator Coffin:
Do we need all that money since we have 87 percent of voters currently on a good system? I am just referring to Washoe and Clark Counties. Is it because of the Florida voting problems in the last federal election?
Mr. Heller:
All this federal legislation was enacted because of concerns about the next federal election coming up in the presidential cycle. All of these systems, including statewide voter registration, buy-out of the punch card system, and access for disabilities using the touch screen systems, are required to be in place by January 1, 2004.
Senator Raggio:
The Senate Committee on Finance received a copy of your letter detailing the implications of HAVA (Exhibit N). The fiscal staff has been asked to review your comments with particular focus on the potential for sanctions either on the HAVA funds or on transportation funding.
Mr. Heller:
I would like to briefly cover the Securities Division section in Exhibit M. Broker-dealer branch offices that are both Nevada-based and nationally-based have increased even though the growth in sales representatives has decreased, attributable to the market weakness over the last 3 years.
We continue to routinely audit brokers and investment advisors every 2 years. Our complaints are up over the last biennium because of market weaknesses, so we have expanded our investor education program. We also sponsor the Economic Education Entrepreneurship Program in high schools, and have a Web-based stock market game for students. We deter security fraud through public awareness and enforcement activities.
I refer you to our Customer Service Division in Exhibit M and the chart logging our telephone inquiries. We receive 500 to 750 calls daily and occasionally up to 1000. Our goal is to decrease the number of calls by encouraging increased activity on our Web site. In 2002, we had over 40 million “hits” on our Web site.
Senator Tiffany:
Do you host the Web site with the State, and if so, what is your monthly charge?
Mr. Heller:
Our server is in our office.
Senator Tiffany:
Do you pay the Department of Information Technology (DoIT) to host your Web site?
Mr. Heller:
No, we do not.
Senator Tiffany:
Do you maintain your server internally with your own staff?
Mr. Heller:
That is correct.
Senator Tiffany:
Do you intend to offer any e-commerce options on your Web site?
Mr. Heller:
That is our number one goal in the office right now.
senator Tiffany:
Would the e-commerce have many functions?
Mr. Heller:
Absolutely. For example, we would have registration for securities, notaries, commercial recordings, and registration for elections. We want to move people to our Web site. The activity and interest is high. By the end of this month we should have the interactive Web portion completed for UCC.
Senator Tiffany:
I would like to see these business activities shifted away from the telephones and onto the Web as much as possible.
Mr. Heller:
We anticipate the majority of our Web site functions will be in place by the end of this calendar year.
Senator Tiffany:
How many functions will there be?
Mr. Heller:
We will have UCC and commercial recordings, which are the two largest areas in volume. Most of the securities filings are already done electronically through a national network.
Senator Tiffany:
Do you have a plan for direct bank deposits for credit card payments for customers who wish to file online?
Mr. Heller:
Direct bank deposits for credit card payments will be available.
Senator Tiffany:
What dollar volume do you anticipate will be brought in electronically?
Mr. Heller:
The commercial recordings division brought in $43 million in revenue last year.
Senator Tiffany:
Is the $43 million currently being collected by check?
Mr. Heller:
Some of the payments come by check through the mail. Credit cards and cash are also used for payments.
Senator Tiffany:
Your customers are fairly sophisticated.
Mr. Heller:
Most of our customers have computers and complete their searches online. They are very satisfied with our current system.
I would like to present some brief highlights on our Notary Division. We had 7431 notaries appointed during FY 2002. The Legislature implemented A.B. 266 of the 71st Session so we can charge to train notaries. We have actually had an increase in number of individuals who wish to participate in the training since we started charging for our services. We had 8752 apostilles issued in FY 2002.
The Electronic Secretary of State (E-SoS) is the name of the computer program used at our Technology Division Web site. It is the program I was referring to in answer to Senator Tiffany’s questions. Other projects we are developing for our E-SoS Web site are statewide voter registration, election night reporting, online contributions, and expense reports.
We provide ongoing support for existing software and hardware applications. We have 134 positions in four locations. We are concerned that we do not have enough staff to provide the technical support required. DoIT recommends one technician for every 50 personal computers (PC). We have one technician to service 140 PCs.
We have a high turnover in that position because of burnout generated by the heavy workload. We may lose our current technician if we do not get him some support.
We want to ensure the completion of the projects we have discussed today. Currently our seven employees have to put in substantial overtime just to maintain the existing applications. We are requesting reclassification of two existing clerical positions to technical positions, which is being considered for consideration by the Interim Finance Committee (IFC) at its February 18, 2003, meeting.
We are also requesting five new positions in the agency budget request. The Governor put in two of the positions and the IFC approval would further reduce the positions by reclassification.
Senator Raggio:
Can these new positions be funded in some way other than through the General Fund?
Mr. Heller:
The Executive Budget states the two technical positions are subject to incoming funds supporting those positions. Both positions would specifically be assigned to service the voter registration system. In addition, we have the two positions reclassified by the IFC. We are comfortable with the positions the Governor has recommended.
Senator Raggio:
Are the positions coming before the IFC for reclassification currently vacant?
Mr. Heller:
Yes, they are vacant.
Senator Raggio:
Where will these two positions be assigned if reclassified?
Mr. Heller:
They will become technical positions. Two years ago, when we presented this system to you, we indicated that we would be turning the clerical positions into technical ones. We will be changing our focus from manual functions to electronic.
The last page of Exhibit M shows you some of the countries that visit us on the Web. We had an increase in our travel budget because we anticipate visiting all these countries to understand their needs.
Senator Mathews:
If the contributions and expense reports are late, do you send the names of the people who are late to the ethics committee to determine fines?
Renee Parker, Chief Deputy, Office of the Secretary of State:
Candidates and public officers file statements of financial disclosure with the Ethics Commission. Simultaneously, the contributions and expense forms are filed with our office. We enforce the lack of filing or late filing of contributions and expense forms with our office. The Commission on Ethics enforces the lack of filing or late filing of financial disclosure forms. It has experienced some problems with enforcement. The commission has asked us to include taking over its enforcement function in our bill draft proposal for campaign finance reform. Further, it requested that the financial disclosure forms and contributions and expense forms be all due at the same time. The ethics commission will tell us who has not filed or filed late, and we will enforce the fines.
Senator Mathews:
What happens if someone does not file at all? I understand you have “forgiven” a group of people who did not file.
Mr. Heller:
I assure you we forgive very few people who do not file. The group you mentioned has not been forgiven. We are very ardent on enforcement and we move forward on the obligations that candidates and public officers have to the general public in releasing this financial information. It is very difficult to obtain a release from our office. We will be presenting the information on the group you identified to the attorney general’s office for further prosecution.
Ms. Parker:
We have three sets of filings, so we wait until all three reports are due before we turn all of them over to the attorney general. The court requests that all three be filed for prosecution in the same suit. The fine that accrues after 60 days of delinquency is the highest, so we wait the 60 days from the date of the last report due date, January 15, 2003. They will be turned over to the attorney general in March.
Senator Mathews:
After I filed the last report, the Reno voter registration office called me to ask whether I had made up my own form.
Mr. Heller:
We changed the form.
Senator Mathews:
Washoe County had no clue that we had a new form, so I request that you keep the county informed.
Mr. Heller:
I suggest we combine the various forms into a single document to make life a lot easier for everyone.
State Treasurer – Budget Page ELECTED-86 (Volume 1)
Budget Account 101-1080
Brian Krolicki, State Treasurer, Office of the State Treasurer:
I would like to give you a quick overview of our budget. Yesterday we testified before the Assembly Committee on Ways and Means. There was discussion on the potential of fund shortfall in tobacco funding for the Millennium Scholarship Program occurring as early as 2006. I am still unclear about what data was used by Legislative Counsel Bureau fiscal staff to prepare those projections. We wish to affirm our original position that the money will come in as projected under the master settlement agreement. We anticipate the scholarship being funded until the end of the decade. The number of students using the scholarship program and the amount of money coming in certainly are variables, but we will provide more detailed information to you later as we will to the Assembly Committee on Ways and Means. For the record, we respectfully disagree with their forecast, and we will do an analysis on the 2006 figures.
For the record, I also wish to clarify that the figures the press used for the Prepaid Tuition Program were incorrect. The number was not for the Prepaid Tuition Program but was a quote for one of 62 other mutual fund options open for public offer. There was the suggestion that the Prepaid Tuition Program portfolio was not doing well. Although the Prepaid Tuition Program fund is challenged by higher tuition fees and the market environment over the last several years, the fund is doing fine.
Senator Coffin:
My wife and I participated in the Prepaid Tuition Program for both our children for all 4 years. I read your newspaper comments that you did not foresee the university increasing its tuition fees quite as high and as fast as it did. I realize you figured in a certain rate of increase in tuition. We did not expect a high or fast return on our investment. We believed it was money put away in a risk- free account because it is backed by the State.
Mr. Krolicki:
The trust fund backs the program, not the State.
Senator Coffin:
Then the program is not backed by the full faith and credit of the State.
Mr. Krolicki:
That is correct.
Senator Coffin:
Are we taking risks with these funds? What is your projected goal from here?
Mr. Krolicki:
We will have a detailed report on the Prepaid Tuition Program ready for submission to you as required by statute on March 31, 2003. The anticipated investment return rate is 7.5 percent. With the history of the State’s higher education costs, we were using 5 percent as the estimated amount of tuition cost increases. We were not expecting the 15 percent tuition cost increase that we will be seeing in 1.5 years. We build in reserves. Each year we are mandated to recalibrate the cost of prepaid tuition. We put 7.5 percent tuition cost increase per year into the new model.
Senator Coffin:
Do you expect to see a drop in signups that will negatively impact the value of the portfolio?
Mr. Krolicki:
I do not believe so. We always said we needed about a $40 million corpus in the trust fund to be self-sustaining. We are at about $36 million right now, and close to $1 million a month goes into the fund from people who pay on a monthly basis rather than in a lump sum. The majority of the fund is using the monthly payment coupon system that is earning 7.5 percent.
Initially, we had to aggressively market the Prepaid Tuition Program to acquire the $40 million corpus so the program would not require further General Fund loans. In fact, we are trying to repay the original General Fund appropriations loan that established the Higher Education Tuition Administration account.
Senator Cegavske:
The Millennium Scholarship has a high number of students dropping out and not maintaining the required grade. Are you planning on having these students pay back the monies owed, which was part of the agreement? If the students paid the amount for each credit and there is money left over, the students receive checks for the remainder to spend as they please. I still have reservations about this practice and believe the money needs to be placed in a book account or a special university fund, other than in the hands of the student for discretionary spending.
Mr. Krolicki:
I am required to perform my function obeying the laws and the policies set by the Board of Regents. We are not the “bad” Millennium Scholarship collector. The students must come back at their own cost, successfully complete the course of study in the millennium style and then they would be reeligible. They must pay for that semester themselves, so they earn back the Millennium Scholarships. This is the policy of the Board of Regents. I defer to my colleague, Janice Wright, to answer your other question.
Janice Wright, Deputy of Education Programs, Office of the State Treasurer:
We do not provide any funds to any students, only to the university system. The university apportions those dollars to the various campuses based on the credit hours and the number of students. If, at that point, the individual students have already paid the costs through sources, such as their parents, that particular campus may provide refund dollars to the students. Those dollars should be used to reimburse the entity that paid the original costs.
Senator Cegavske:
I beg to differ with you. I know that statement is incorrect. The money is going back to the students.
Mr. Krolicki:
Our office is not making the refund.
Susan K. Moore, Executive Director of the Millennium Scholarship Program, Office of the State Treasurer:
After the Millennium Scholarship Advisory Committee and the Legislative Committee on Education met last spring, we received two recommendations from the advisory committee to help parents understand how the procedures work. We include in our award packet to each eligible millennium scholar an explanation of the funding the student can expect to receive and what it may be used for. We sent a similar letter from State Treasurer Krolicki to parents in August to notify them how the funding would arrive and how it can be used.
Senator Cegavske:
I have a child in the program and have not received such letters.
Ms. Moore:
I apologize that you did not receive the letters and will check as to why you did not. The letters to the students went to the eligible class of 2002, so perhaps your child had already graduated. To reiterate, the funding we give goes directly to the university system.
Senator Cegavske:
I understand that, but the groups need to work together to find a resolution to the problem.
Ms. Moore:
The university and the community college systems provide the refund checks directly to the students. They may wish to include additional language to remind the student what the funding is for. As State Treasurer Krolicki indicated, the statute asks us to distribute the money as all other financial aid is distributed, and this is the procedure.
Senator Raggio:
I suggest we be provided with back up on the reimbursement to show that it has been spent as allowed.
Mr. Krolicki:
Continuing, the Executive Budget eliminates an administrative aide position with which we agree. We request continuation of the baseline study. It represents $75,000 in the budget and is half way to completion. This important document answers questions as to who are millennium scholars, how the scholarship is changing behavior and study habits, and whether it is keeping university graduates in Nevada.
Senator Raggio:
Who is doing that study?
Ms. Moore:
The University of Nevada, Reno, Senator Alan Bible Center for Applied Research was selected as the vendor.
Mr. Krolicki:
The request for proposal process was used to select the vendor. The entire program is funded by the tobacco revenue settlement and no General Fund money is used.
Senator Raggio:
Will the balance in the trust fund affect the 2-percent cap on the administrative fee?
Mr. Krolicki:
The statute states the Office of the State Treasurer shall not expend more than 2 percent in the administration of the Millennium Scholarship Program. It does not say per annum. We have interpreted the cap to mean it applies over the aggregate of time for the scholarship program.
Senator Raggio:
It seems to me a 2 percent cap means 2 percent per annum.
Mr. Krolicki:
If we successfully complete securitization of the tobacco settlement funds, we will be able to hold administrative costs below the 2 percent cap.
Senator Raggio:
This is a trust fund and that is what it means, a trust fund. If there were a 2 percent cap on administrative costs, I would think that means annually. I refer you to NRS 396.926 that states, “not more than 2 percent of the money in the trust fund may be used to pay the costs of administering the trust fund.” I do not believe you can give the statute any other interpretation.
Mr. Krolicki:
There are several options we can take. If you look at the 2 percent limit as it is projected for 2004 and 2005, you see we are spending significantly less as we go forward.
Senator Raggio:
We need to have an alarm on this 2-percent.
Mr. Krolicki:
There are many ways we can solve this problem. We could change the statute. We could reorganize some of the costs. Even if we eliminated the baseline study, we would still be slightly over the 2 percent cap annually.
Senator Raggio:
I think we have to comply with the law.
Mr. Krolicki:
Would you agree to our position if we obtained an attorney general’s opinion?
Senator Raggio:
What are you going to get an opinion on? The law states “not more than 2 percent.” The law applies to the treasurer’s office as well.
Mr. Krolicki:
We believe we have Legislative remedy for this session and it is called tobacco securitization. If we were to successfully obtain tobacco securitization for all of the reasons we discussed historically, and some of the new ones we have presented to you, this question would become moot. If the legislative process determines securitization is not a place to go, all sections can be eliminated except the one that would cover changing the 2 percent cap.
Unclaimed Property – Budget Page ELECTED-101 (Volume 1)
Budget Account 101-3815
Mr. Krolicki:
With the enactment of S.B. 489 of the 71st Session, we expedited the movement of monies from the unclaimed property holders to the State. We suggested passage of this bill could generate somewhere between $9 and $12 million, extraordinary revenue for the General Fund. We are proud that we did accomplish the $12 million mark. Our performance indicators continue to be very strong for the program. In this current fiscal year, with 6 months left to go, we have already out-performed any previous year in terms of revenues collected.
Senator Raggio:
Is this unclaimed property account funded entirely by the Abandoned Property Trust Fund?
Steven D. McDonald, Deputy of Unclaimed Property, Office of the State Treasurer:
Yes, it is.
Senator Raggio:
What meetings do you attend? Are they useful?
Mr. McDonald:
Yes, the meetings are useful. I have been attending the meetings for 6 years, and for those 6 years I have served on the national executive board. The National Association of State Treasurers represents the policy makers at the elected level, who also discuss unclaimed property matters, nationwide legislation, and enacted case law. The National Association of Unclaimed Property Administrators represents the people who deal with unclaimed property on a daily basis. We are trying to combine the schedules of the associations so we can work together more closely.
Mr. Krolicki:
The problems inherent to unclaimed property are similar across the country. The function of the office is to get unclaimed assets back to the rightful owners or heirs. The creation of a national database is a project we have been working very hard on.
Senator Raggio:
What efforts are made to notify unclaimed property owners? Do you publish the names?
Mr. McDonald:
Yes. As mandated by statute, we publish the list in the major newspapers of each county. We also have a Web site where the names are listed. We get a lot of “hits” on the Web site from people nationwide since we are a transient state. We work with the Social Security Administration, although it is reluctant to divulge information. We also compare our list of names with the DMV records.
Senator Raggio:
How long does the property remain unclaimed before ownership reverts to the State?
Mr. Krolicki:
Different types of property have different durations before they transfer to the State’s unclaimed property fund. The average item has a 3- to 5-year waiting period. A few items have a 1-year time line. Currently, about one third of the unclaimed assets identified annually are repatriated to the State.
Senator Raggio:
What amount is projected to revert to the State’s General Fund during this upcoming biennium?
Mr. Krolicki:
We generated the extra $12 million by changing some of the statutes that had financial assets with a 3- and 5-year waiting period.
Mr. McDonald:
We project a $25 million infusion into the General Fund over the next biennium.
Senator Raggio:
Is there that much property out there that people do not claim?
Mr. McDonald:
Yes. It is unbelievable how many people lose substantial amounts of money. Since this program was created in Nevada in 1980, people have forfeited over $120 million.
Senator Raggio:
Can you return on Wednesday, February 12, 2003, to review those budgets we have not covered?
Mr. Krolicki:
Yes, that is perfect.
Senator Raggio:
The fiscal staff is suggesting that we may be able to resolve some of the issues
on the millennium scholarship. This committee will start at 7:30 a.m. tomorrow morning.
Chairman Raggio adjourned the hearing at 10:53 a.m.
RESPECTFULLY SUBMITTED:
Judy Coolbaugh,
Committee Secretary
APPROVED BY:
Senator William J. Raggio, Chairman
DATE: