SENATE COMMITTEE MINUTES

MINUTES OF THE

SENATE Committee on Finance

Seventy-second Session

February 12, 2003

The Senate Committee on Financewas called to order by Chairman William J. Raggio at 8:13 a.m. on Wednesday, February 12, 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 Dean A. Rhoads

Senator Barbara K. Cegavske

Senator Sandra J. Tiffany

Senator Bob Coffin

Senator Bernice Mathews

STAFF MEMBERS PRESENT:

Gary L. Ghiggeri, Senate Fiscal Analyst

Bob Guernsey, Principal Deputy Fiscal Analyst

Russell J. Guindon, Deputy Fiscal Analyst

Brian M. Burke, Senior Program Analyst

Denise Davis, Committee Secretary

OTHERS PRESENT:

Robert E. Shriver, Executive Director, Division of Economic Development, Commission On Economic Development

Gerald Sandstrom, Deputy Director, Division of Economic Development, Commission On Economic Development

Charles Geocaris, Director, Division of Motion Pictures, Commission on Economic Development

Robin Holabird, Deputy Director, Division of Motion Pictures, Commission on Economic Development

Carl Dahlen, Director, Rural Community and Economic Development, Division of Economic Development, Commission On Economic Development

Rick Horn, Director, Procurement Outreach Program, Division of Economic Development, Commission On Economic Development

Bruce Bommarito, Executive Director, Commission on Tourism

John P. Comeaux, Director, Department of Administration

Stephen C. Woodbury, Operations and Finance Manager, Commission on Tourism

Nancy A. Dunn, Deputy Director, Commission on Tourism

Richard Moreno, Publisher, Division of Publications, Commission on Tourism

Brian K. Krolicki, State Treasurer, Office of the State Treasurer

Janice A. Wright, Deputy of Education Programs, Office of the State Treasurer

COMMISSION ON ECONOMIC DEVELOPMENT

Commission On Economic Development - Budget Page TOUR & ECON-1 (Volume 2) Budget Account 101-1526

Robert E. Shriver, Executive Director, Division of Economic Development, Commission On Economic Development, read from the Nevada Commission on Economic Development, tab 1526 (Exhibit C. Original is on file in the Research Library.). Senator Raggio asked for specifics regarding the Synchronist software. Mr. Shriver explained it serves as a questionnaire to be used with existing businesses to learn about the issues they face concerning expansion. Results are forwarded to local governments and the Legislature.

Examples of image advertising featuring the Minden/Gardnerville Starbucks facility and Ford Motor Credit Company in Henderson were displayed during the marketing program presentation. Senator Tiffany inquired whether Nevada’s tax environment and business climate were still the focus of the marketing program. Mr. Shriver said the attention might be changed depending on the outcome of the current Legislative session. He said tax issues are not the top concern for many businesses. Senator Tiffany responded the State proposes taxes as an issue to consider.

Gerald Sandstrom, Deputy Director, Division of Economic Development, Commission On Economic Development, pointed out the Starbucks advertisement presented the State’s incentive plan and the Ford advertisement highlighted telephone infrastructure. Examples of newspaper ads detailing Nevada’s ratings for start-up businesses and favorable business climate were presented. Mr. Shriver said future campaigns would highlight Nevada’s advantages, such as location, smaller government, transportation network, workforce development programs, and ease of doing business. While discussing advertorials, Mr. Shriver stated the potential for rural growth is expected to come from the urban areas as companies consider expansion options.

Senator Tiffany inquired whether the commission’s Web site was developed in‑house, through the Department of Information Technology (DoIT), or by a third party. Mr. Shriver explained it was designed by a private contractor, then maintained and updated by staff. Senator Tiffany asked where the site is hosted and whether it is independent of DoIT. Mr. Shriver indicated DoIT had provided advice and procedures, which were followed. Senator Tiffany asked about DoIT assessments. Mr. Shriver responded only quarterly assessments are paid and detailed some of the special assistance DoIT had provided, such as new server installation in the Las Vegas office and help with software problems. He added the full value of the assessment is not used every quarter.

In regards to the Made in Nevada program, Mr. Shriver stressed the focus has been on cottage industries. He indicated there would be increased awareness of the program in retail stores.

Mr. Shriver attributed increased global sales to the efforts of Nevadans working with the Western United States Agricultural Trade Association. He explained Trade Representative Offices were developed in China and Taiwan at no cost because overseas representatives will charge their clients for services. Senator Raggio asked what performance indicators were used in the global trade program. He observed many of the projected future sales in the table under tab 1526, page 15, are to be determined (TBD) and asked whether any updated information is available. Mr. Shriver replied he has to rely on companies to report their projections and many agricultural contracts will not be signed until summer. Senator Raggio asked about job growth in general resulting from the efforts of the division. Mr. Shriver compared Nevada to neighboring states and said his office was associated with over 4000 new jobs in the last year. Senator Raggio pointed out this information should be included in the performance indicators.

Senator Coffin asked how important worker training is in location decisions for large companies. He explained large companies expect to train their workers and have mechanisms in place to do so. He questioned whether the small amounts of money spent on training through Train Employees Now (TEN) actually served as enticements to large companies. Mr. Shriver responded workforce development is and would continue to be a key issue for companies. He reminded the committee companies are required to contribute at least 25 percent of TEN’s $1000 maximum expenditure per employee and projected most companies would spend $3000 to $5000 training an employee. As an example, Mr. Shriver reported Ford Motor Credit Company spent over $1 million for training in Henderson, compared to the program’s expenditures of $113,000 over two phases of training. He pointed out requirements stipulating funds are only available for Nevada citizens and the State’s post-secondary education system should be used. Mr. Shriver explained the program benefited the company, the employee, and the community college system. Senator Coffin said small and medium size companies benefit from the program. Mr. Shriver agreed smaller companies depend more on the program to train workers. He added the community colleges now have enough expertise in different areas to customize programs to better suit the needs of different companies.

Senator Raggio asked whether the advertising budget is based on a contract. Mr. Shriver replied the contract was terminated and will expire in March. The commission is considering its options, which include a full-service agency; contracting different functions such as advertising, public relations, and Web site separately; or teaming with the Commission on Tourism. Senator Raggio asked how advertising effectiveness is measured. Mr. Shriver responded market analysis could be done, but it would be expensive to conduct. Currently, effectiveness is judged by Web site tracking, leads passed on to development authorities, and other anecdotal information. He stressed the cost‑effectiveness of the Web site and the focus on getting people to use the Web site as a key source of information. Senator Tiffany inquired which company had the advertising contract. Mr. Shriver said Trahan, Burden & Charles held the contract for the last 3.5 years; when they moved their Reno office out-of-state, the contract was terminated. Senator Tiffany asked whether R&R Partners also had a contract. Mr. Shriver explained the Commission on Tourism would discuss that item. Senator Tiffany said she is concerned about contracts because of a $1 million Nevada Department of Transportation contract to an out-of-state firm. She said in-state firms should be used, especially by the Commission On Economic Development. Mr. Shriver reiterated efforts are being made by the Commission On Economic Development to work together with the Commission on Tourism. Senator Tiffany stressed consistency between the two commissions and advised Mr. Shriver more programming could be done to allow the Web site to capture more information.

Senator Raggio questioned whether the commission had sufficient accountability from the fourteen development authorities for the use of their matching grant funds. Mr. Shriver said the goal is for urban areas to find private money for their match, and rural areas are allowed to apply in-kind contributions such as office space or equipment toward their match. Senator Raggio inquired about the reports received from the development authorities. Mr. Shriver explained annual reports are received prior to funding cycles, along with detailed after-action reports and plans of action for the coming year, which include accountability measures. He reported some rural development authorities are having difficulties, but most are performing well. He further commented the authorities are focused on the common goal of keeping projects in Nevada, and communication between groups is excellent. Senator Raggio asked whether funding for the Washington, D.C. office comes from this budget and whether the office has been effective. Mr. Shriver affirmed the office’s funding and effectiveness. As an example, he explained White Pine County would have lost an Economic Development Administration grant if the Washington, D.C. office had not notified them of proposed budget cuts and introduced them to people influential in the budget decision process.

Senator Rhoads asked Mr. Shriver about the effects of proposed tax increases on bringing new businesses to the State, and whether the previous focus on tax advantages would have to be changed. Mr. Shriver indicated changes corresponding to proposed legislation had already been discussed and reiterated his opinion economic incentives would be a better focus than tax advantages. Citing previous efforts with incentives, he claimed economic benefits to communities are greater than the incentives given. Senator Rhoads asked what the primary issue is for a company that is deciding whether to locate to a community. Mr. Shriver responded the workforce is the top issue because it has the highest costs attached. He said taxes are one of the top five concerns, depending on the company; taxes would be of lesser consequence to national firms. Incentives were cited as more beneficial to small businesses because benefits are realized sooner, but Mr. Shriver conceded small business recruitment would be affected by tax changes.

Senator Tiffany inquired whether issues such as medical malpractice and energy costs have become significant in businesses’ relocation decisions. Mr. Shriver identified energy prices as a concern for some businesses, but noted Nevada is competitive with other states. When specifically asked by Senator Tiffany about medical malpractice, Mr. Shriver asserted it is viewed as part of the price of doing business.

Nevada Film Office - Budget Page TOUR & ECON-7 (Volume 2)

Budget Account 101-1527

Charles Geocaris, Director, Division of Motion Pictures, Commission on Economic Development, read from tab 1527. Senator Raggio asked whether the $110,000 allowed for the production directory advertising revenue is adequate. Mr. Geocaris confirmed it is. A copy of the 2003 production directory was shown to the committee. Senator Raggio inquired how the directory is distributed. Mr. Geocaris explained it is mailed to interested parties worldwide, displayed at trade shows, and available on the film office’s Web site. He pointed out that film commissions around the world now copy the format of the production directory because it has been so well received. Mr. Geocaris described the series of visual guides the office produces in-house for use by filmmakers, and reported the positive comments it receives. He said the Web site averages 70,000 hits a month. Senator Raggio questioned how the office determines production revenues to the State, as well as revenues the office is associated with. Mr. Geocaris reviewed the formula and calculations used by the industry (tab 1527, page 21). He reported Nevada is now ranked as one of the top filming sites in the nation and was recently ranked first in the Southwest. Current projects in southern Nevada were mentioned.

Robin Holabird, Deputy Director, Division of Motion Pictures, Commission on Economic Development, reported on production activity in northern Nevada. Senator Raggio asked whether any State money was used for, or the film office was involved with, the television program highlighting brothels in the state. Ms. Holabird responded Home Box Office (HBO) contacted the Carson City office and was referred to the phone directory for information. There was no film office involvement in the project.

Rural Community Development - Budget Page TOUR & ECON-11 (Volume 2)

Budget Account 101-1528

Carl Dahlen, Director, Rural Community and Economic Development, Division of Economic Development, Commission On Economic Development, read from tab 1528. Senator Raggio asked whether the U.S. Department of Housing and Urban Development (HUD) grant requires a 2-percent state match. Mr. Dahlen confirmed it does. Senator Raggio questioned why more than 2 percent is being requested. Mr. Dahlen explained the extra funding is to help pay for the four staff people involved in the program.

Procurement Outreach Program - Budget Page TOUR & ECON-15 (Volume 2)

Budget Account 101-4867

Mr. Shriver read from tab 4867. Senator Raggio called attention to performance indicator discrepancies between the group’s report provided to staff and the Executive Budget. He confirmed the correct figures should be 754 contracts awarded in FY 2002 totaling over $345 million. Rick Horn, Director, Procurement Outreach Program, Division of Economic Development, Commission On Economic Development, added the U.S. Department of Defense has experienced difficulties with its electronic tracking program, so incorrect information may have originated there. Senator Raggio asked how a business joins the Procurement Outreach Program (POP). Mr. Horn responded the business needs to contact POP; POP will assist with technology, review marketing plans, and advise the company throughout the entire process. Senator Raggio asked how companies learn about the program. Mr. Horn outlined POP’s involvement with the local business communities and community college system. He reported contacts are largely through referrals and POP’s Web site. Senator Raggio asked Mr. Horn about cooperation with development authorities and was assured everyone works together. Mr. Shriver expressed concern again over the accuracy of the statistics regarding contracts awarded and dollar totals. Senator Raggio emphasized correct information should be forwarded to staff.

Commission on Tourism - Budget Page TOUR & ECON-19 (Volume 2)

Budget Account 225-1522

Senator Raggio introduced Lieutenant Governor Lorraine Hunt’s letter of February 12, 2003 (Exhibit D).

Bruce Bommarito, Executive Director, Commission on Tourism, reviewed the information contained in Budget Presentation to the 2003 Legislature (Exhibit E. Original is on file in the Research Library.). Senator Mathews questioned why economic development and tourism are not combined into one agency. Senator Rawson offered to distribute Nevada promotional materials at professional conferences he attends. Mr. Bommarito urged him to contact the office for materials. In response to Senator Mathews, Senator Rawson commented on the difficulty of asking one person to focus on the different needs of tourists and businesses. Mr. Bommarito reported the commission currently has a baseline return on investment of $121, against which potential projects are evaluated.

Senator Raggio asked how transfers are determined. John P. Comeaux, Director, Department of Administration, explained the Commission on Tourism had large reserves at the beginning of the previous Legislative session; money was transferred from tourism to other agencies that typically receive General Fund money. Senator Raggio pointed out there is over $1 million in reserves projected for FY 2005. Mr. Bommarito said the reserve is necessary in case of war or terrorist attack; if State revenues decrease, reserves could be used to maintain programs. Mr. Comeaux added the reserve was depleted due to transfers and decreased revenues following September 11. He stressed funding for the biennium is to maintain existing programs at their current levels. Any money in the reserve over a pre-specified amount will be used for transfers. Senator Raggio replied the plan exacerbates the problem of funding other General Fund budgets. He observed $5.5 million a year is budgeted for promotion and advertising and directed the commission to confer with staff regarding unresolved issues. Stephen C. Woodbury, Operations and Finance Manager, Commission on Tourism, said all questions asked by staff had been answered.

Senator Tiffany added she would like a listing of vendors, projects, and funding. She also inquired about projects out to bid. Mr. Bommarito explained the advertising contract is divided in three parts: advertising, public relations, and Internet services. Three requests for proposals have been issued. Senator Tiffany asked with whom the current contract is and how long they have held it. Mr. Bommarito stated R&R Partners has the contract for all three areas and estimated the length of time at 8 to 9 years. Senator Tiffany urged the commission to be “open minded” when considering the new proposals. Mr. Bommarito responded the contract had been divided so more companies would be eligible to make proposals.

Senator Tiffany reviewed the eight recommendations of the commission’s audit and inquired how they had been addressed. Nancy A. Dunn, Deputy Director, Commission on Tourism, testified the issues were in the process of being resolved when the audit was conducted. She said the office‑sharing arrangement between the Commission on Economic Development and the Commission on Tourism created the problems. In the last few years, the commissions have moved into separate offices, so the issues are resolved. Senator Tiffany asked whether all recommendations have been addressed and implemented. Ms. Dunn assured her they have.

Senator Raggio reviewed the request for a development specialist position in enhancement unit 175 (E-175) and questioned the justification based on savings. Mr. Woodbury responded there are no savings; the change will potentially allow the commission to conduct more research. Senator Raggio pointed out the position is also responsible for completing a statewide visitor profile study and asked whether the study is essential at this time, considering the revenue shortages the State faces. Mr. Bommarito suggested it will allow more efficient operations. Senator Raggio asked again about the need for the study. Mr. Bommarito asserted it identifies potential markets and best uses of funds for return on investment. Senator Raggio inquired whether the study will be conducted in-house. Mr. Bommarito responded it will be contracted and coordinated in-house. Senator Raggio questioned the phrase “contracted in‑house” and countered his understanding is a specialist would be hired. Mr. Bommarito indicated some of the work will be done in-house, but a specialist will be required to complete the study. Senator Raggio inquired where the money is in the budget for contracting the specialist. Mr. Bommarito specified it will come from the advertising budget. Senator Raggio stressed this is the type of detailed information staff needs. He acknowledged Mr. Bommarito’s inexperience in the position, but urged clarification to staff questions.

Nevada Magazine - Budget Page TOUR & ECON-25 (Volume 2)

Budget Account 530-1530

Richard Moreno, Publisher, Division of Publications, Commission on Tourism reported no increases are requested for the Nevada Magazine budget. Senator Raggio asked how many historical calendars were printed; Mr. Moreno estimated 30,000. Mr. Moreno reminded the committee that, during the last session, the division assumed responsibility for in‑house production of some Commission on Tourism publications. Senator Raggio inquired how often Nevada Magazine is printed and how many are printed. Mr. Moreno responded publication is bimonthly, totaling six times a year, and explained 80,000-83,000 copies are run, depending on number of subscribers at the time. Mr. Moreno directed attention to Nevada Magazine Highlights (Exhibit F) and spoke briefly about selected items. He stressed the division is constantly looking for new partnerships to reach potential subscribers.

Mr. Moreno reported the division reorganized its advertising department and is currently outsourcing advertising sales. Senator Raggio commented staff has several unresolved issues concerning the budget, including base calculations and determinations of revenues and expenses. He reminded the division of the audit findings, questioned whether remedies are in effect, and reiterated staff has questions that remain unanswered.

Senator Raggio inquired whether printing publications and Nevada Magazine in‑house is cost-effective compared to outsourcing. Mr. Bommarito said in‑house production is more cost effective and savings have been used to increase the quantity of publications produced. Senator Raggio highlighted inconsistencies regarding costs of producing publications in FY 2003, and directed the division to clarify the information to staff. Mr. Moreno pointed out the Commission on Tourism realized savings on its travel planner because outside contractors had charged fees for rights to photography and higher expenses than Nevada Magazine. He explained one designer at Nevada Magazine works on all tourism publications, which increases efficiency. He also informed the committee Nevada Magazine is selling advertising for tourism’s new visitor guide to offset printing costs, which would amount to a $120,000 savings in that budget category. Mr. Moreno asserted cooperation between the two agencies is saving hundreds of thousands of dollars. Senator Mathews asked who distributes Nevada Magazine. Mr. Moreno answered local distributors and subscribers. He estimated the number of subscriptions at 45,000-50,000.

STATE TREASURER

State Treasurer - Budget Page ELECTED-86 (Volume I)

Budget Account 101-1080

Brian K. Krolicki, State Treasurer, Office of the State Treasurer, announced three positions are being eliminated, but assured Senator Rawson the allodial title program will continue with existing staff. He itemized expenditure requests denied by the Executive Budget, including $895 for a VeriSign SSL certificate for the nevadatreasurer.com Web site, and postage and printing increases estimated at $2000 in FY 2004 and $3000 in FY 2005 due to state controller changes.

Treasurer Higher Education Tuition Administration - Budget Page ELECTED-92 (Volume I) Budget Account 101-1081

Mr. Krolicki reminded the committee $40 million is the amount identified as necessary for sustaining the Nevada Prepaid Tuition Program. He reported approximately $36 million is in the fund, along with $1 million in monthly receipts. He assured the committee he would not be requesting any loans from the General Fund and projected existing loans would be repaid in the next 10 years. Senator Raggio observed the fund value is down from the previously reported $39.2 million. Mr. Krolicki replied some losses are due to market conditions, while others are the result of families withdrawing their funds for other needs. He explained half of the portfolio is invested in fixed income securities and half in a variety of index funds. Senator Raggio clarified losses are in the equity portion of the investments. Mr. Krolicki refuted media reports that the fund lost 22 percent; he said the loss is 3.8 percent. He suggested there is confusion between the Nevada Prepaid Tuition Program and one of the mutual funds available through the College Savings Plan.

Senator Raggio inquired about the current actuarial report. Mr. Krolicki mentioned only early drafts are available and noted the report is not due to the Legislature until March 31. Senator Raggio suggested staff should receive copies of the draft. Mr. Krolicki said the fund has gone from being $5 million overfunded last fiscal year to being underfunded by $3 million to $5 million. Senator Raggio confirmed Milliman and Robertson performed the study and asked whether 62 percent program sufficiency is the correct figure. Mr. Krolicki indicated it is not correct. He went on to explain that the unfunded liability, if there is one, is due to projected increases in tuition and not to investment performance. The model was created using a 5-percent annual increase, he said, but increases for the next 2 years are already at 15 percent. The models have been recalculated using a 7.5 percent increase. Mr. Krolicki insisted increases for prepaid tuition contracts are caused by projected tuition increases and not fund losses.

Senator Raggio asked whether applications are still being accepted. Mr. Krolicki answered no. Senator Raggio inquired as to the status of enrollment. Mr. Krolicki specified enrollment was closed last year to everyone except newborn infants, who were eligible to enroll through December 31, 2002. He explained last year’s open enrollment was delayed because market uncertainties made program pricing difficult. Mr. Krolicki anticipated open enrollment would begin in approximately 1 month, but emphasized a “passive mode” will be used to get people to enroll. He stated selling contracts is not as important as it has been in the past because the fund is nearing its sustainable level. Senator Raggio asked whether Mr. Krolicki knows how long the delay will be. Mr. Krolicki pointed out the oversight board will meet March 13, and he expects them to approve the new enrollment period and contract pricing; he predicted enrollment will begin in early April and continue for 30 days.

Senator Raggio raised the issue of the payback. Mr. Krolicki said he expected to repay $25,000 each biennium. He emphasized all efforts are being made to accurately project costs, returns, and contract pricing, but market conditions and unexpected cost increases sometimes make this difficult. He urged reasonable repayment expectations and reassured the committee concrete plans are in place to pay back the borrowed funds. Senator Raggio questioned the amount budgeted for marketing and promotions, considering applications are not being accepted. Janice A. Wright, Deputy of Education Programs, Office of the State Treasurer, explained $370,000 has been budgeted annually for marketing and advertising. In FY 2004 and FY 2005, the proposal is to divide that amount equally between the Nevada Prepaid Tuition Program and the College Savings Plan, which should result in a savings for marketing and advertising.

Mr. Krolicki proposed elimination of two salaried positions in exchange for the new unclassified position of senior deputy treasurer. Senator Raggio clarified this position is not in the budget. Mr. Krolicki said he is seeking two senior deputy treasurer positions, but only one would come from the Nevada Prepaid Tuition Program. He pointed out one of the positions proposed for elimination has the same salary costs as the new position being requested, so personnel costs in total would be less. Senator Raggio asked what source would be used to fund the other senior deputy treasurer position. Mr. Krolicki stated it would come from the College Savings Plan and not the General Fund. Senator Raggio questioned the need for senior deputy treasurer positions. Mr. Krolicki indicated one would be responsible for the Las Vegas office and the other would have administrative duties in Carson City. Senator Raggio requested written justification for the positions be submitted to staff.

Millennium Scholarship Administration - Budget Page ELECTED-96 (Volume I) Budget Account 260-1088

Mr. Krolicki noted a baseline study request is still included in the budget and explained its necessity to determine success of the program. He reminded the committee all funding is from the master settlement agreement and not from the General Fund. He agreed with the elimination of an administrative aid position as recommended in the Executive Budget. Mr. Krolicki offered his opinion that the Millennium Scholarship Program is a great success and it prepares Nevada’s future workforce for economic development. He said initial projections for the program have been accurate, and outlined challenges the program faces, such as decreased master settlement agreement funding, decreased interest rates, and increased student participation. He observed there might have been communication problems between his office and staff, based on his experience at a recent Assembly Committee on Ways and Means hearing, and assured the committee his office is working with staff to clear up any misunderstandings.

Mr. Krolicki warned the Millennium Scholarship Program might come under stress in FY 2007 or FY 2008. He presented a proposal to extend the program by changing two requirements for new scholarship recipients. First, grade point average (GPA) requirements would be raised from 2.0 to 2.5. Second, the eligibility time period would be decreased from 8 years to 5 years. By implementing these changes, Mr. Krolicki projected scholarship utilization would be reduced by 16-17 percent. Senator Raggio clarified new recipients would have to be made aware of these requirement changes, while current recipients would have to meet the original requirements. Mr. Krolicki added the proposed changes would require legislation.

Senator Coffin suggested difficulty in maintaining grade point averages supports arguments grades are being inflated in high school so students will be eligible for scholarships. He proposed requiring all millennium scholarship recipients achieve a 2.5 semester GPA. He stated it is time to demand a higher standard of performance now and not allow current recipients to continue to underperform. Mr. Krolicki observed current recipients maintaining a 2.0 cumulative GPA would have difficulty raising their GPA to 2.5 in one semester. He said he would need to discuss this in more detail with Dr. Jane Nichols. Senator Coffin responded, “They will tell you at the university they can’t do anything, and yet, when you finally pin them down, ‘Oh yes, we can provide that information.’ They can certainly find it within their potential to give you, at least track the grades of the current ones and see if they are improving, because 2.5 is easy to maintain. I did, when a grade point average really meant something. It’s terribly inflated now.”

Mr. Krolicki reminded the committee all changes will be made by the Legislators, not his office. He stressed his objective in making changes to the program is to extend the length of time it will exist. Senator Coffin asked about changing the entrance eligibility to a 3.2 GPA. He repeated concerns regarding grade inflation in high school. Mr. Krolicki acknowledged those concerns, and went on to explain initial eligibility changes affect actuary calculations, while continued eligibility changes immediately affect cash flows. Senator Coffin countered that reducing the number of students initially eligible for scholarships would help from an actuarial standpoint. Mr. Krolicki reiterated Legislators will decide the changes. Senator Coffin commented these are issues he would look for in a bill.

Senator Cegavske asked whether the current reinstatement policy will continue. Mr. Krolicki predicted no changes to reinstatement procedures. Senator Rawson pointed out possible interruptions students might face during college, such as military service, missionary service, and the Peace Corps, and requested calculations be done for 6 years of eligibility. Senator Raggio asked whether time for military service is included in the 5 years of eligibility. Mr. Krolicki answered it is not, but it could be. He promised to continue working with staff and to provide results of calculations using the various proposed changes. Senator Rawson affirmed the merits of the Millennium Scholarship Program and urged its continuation.

Nevada College Savings Trust - Budget Page ELECTED-104 (Volume I)

Budget Account 605-1092

Mr. Krolicki reminded the committee funding for the program comes from revenues generated by partnerships with private sector firms that handle Internal Revenue Service (IRS) section 529 educational savings programs. He stressed the program has been self-sufficient from its beginning. He requested one of the classified positions be changed to an unclassified senior deputy treasurer position, as was discussed previously. Senator Raggio questioned plans to use funds from this budget to pay back the Nevada Prepaid Tuition Program. Mr. Krolicki remarked the College Savings Program was always imagined to be a potential supplement to the prepaid tuition trust fund. He noted both are structured as IRS section 529 programs and stated it is appropriate to use funds in this manner. Mr. Krolicki emphasized he did not want to present the committee with any unfunded liabilities and reiterated the College Savings Program will not be requesting funds. He asserted the Nevada Prepaid Tuition Program is viable and disclosed his three children are enrolled in it. He repeated the March 31 report from the board will detail funding from the College Savings Program to the Nevada Prepaid Tuition Program to avoid unfunded liabilities.

Senator Raggio adjourned the meeting at 10:49 a.m.

RESPECTFULLY SUBMITTED:

Denise Davis,

Committee Secretary

APPROVED BY:

Senator William J. Raggio, Chairman

DATE: