MINUTES OF THE meeting

of the

Assembly Committee on Ways and Means

AND THE

Senate Committee on Finance

JOINT Subcommittee on General Government

 

Seventy-Second Session

February 17, 2003

 

 

The Assembly Committee on Ways and Means and the Senate Committee on Finance, Joint Subcommittee on General Government, was called to order at 8:07 a.m., on Monday, February 17, 2003.  Chairwoman Vonne Chowning presided in Room 2134 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

Assembly COMMITTEE MEMBERS PRESENT:

 

Mrs. Vonne Chowning, Chairwoman

Mr. Bob Beers

Mr. Josh Griffin

Ms. Kathy McClain

Mr. David Parks

 

Senate COMMITTEE MEMBERS PRESENT:

 

Senator Bob Coffin

Senator Dean A. Rhoads

Senator Sandra Tiffany

 

 

COMMITTEE MEMBERS ABSENT:

 

None

 

STAFF MEMBERS PRESENT:

 

Steve Abba, Principal Deputy Fiscal Analyst (Assembly)

Bob Guernsey, Principal Deputy Fiscal Analyst (Senate)

Julie Brand, Program Analyst

Lila Clark, Committee Secretary

Catherine Caldwell, Committee Secretary

 

Chairwoman Chowning called the meeting to order at 8:07 a.m. 

 

ADMINISTRATION

INSURANCE LOSS AND PREVENTION – BUDGET PAGE ADMIN 17

 

Ms. Susan Dunt, Risk Manager, Department of Administration, Risk Management Division, introduced herself and Mr. Jim Fry, Deputy Risk Manager, Department of Administration, Risk Management Division. 

 

Ms. Dunt said that the Risk Management Division received its general authority under Nevada Revised Statutes (NRS) 331.182 through 331.188.  The required services and program of the Division were described in NRS 616, 617, sections of 618, and State Personnel Regulations, Section 284.  Ms. Dunt stated that the Division served to protect the assets of the state and performed the state’s legal obligations related to workers’ compensation that were statutorily required.  Ms. Dunt said the Division was also active in loss prevention and loss control to help minimize liability and financial risks to the state.  The mission of the Risk Management Division was to provide effective loss prevention tools, information, risk transfer options, and loss funding mechanisms to state agencies to protect the state’s assets, including personnel, from accidental losses and to adopt and promote effective loss prevention safety programs. 

 

Ms. Dunt said the Division had two primary sections:  Insurance and Loss Prevention and Workers’ Compensation.  She said the Insurance and Loss Prevention section administered the self-funded automobile physical damage program, the state property insurance program, negotiated for miscellaneous commercial insurance programs, and had a position dedicated to reviewing Requests for Proposal (RFPs) and contracts in order to establish insurance requirements for those particular assets of the state.  In addition, the section administered an insurance certificate program and was active in loss prevention through that program. 

 

Ms. Dunt reported that the Workers’ Compensation section was responsible for negotiating for and obtaining an effective workers’ compensation program on behalf of the state.  The section was very active in an early return to work program and a claims administration program.  Ms. Dunt said the Division coordinated and oversaw an occupational health program that provided physicals for police and fire employees and other miscellaneous occupational services required by the state.  In addition, the Division also administered a very proactive safety program. 

 

Ms. Dunt described the Division as small, having only seven full-time employees who were housed in the Carson City area.  They accomplished their goals through several independent contracts and, in addition, each agency designated a specific risk management liaison.  It was through those liaisons that the Division provided training and information and the liaisons helped administer the program through their various divisions.  Although the Division did not have a large staff, it offered training and information through many different representatives to accomplish its goals. 

 

Ms. Dunt said she had no new programs to present with the budget.  She referred the Subcommittee to Exhibit C, the annual risk management report.  Ms. Dunt said Section 1 of Exhibit C would give the Subcommittee an overview of how the state’s workers’ compensation program had progressed through the previous eight years.  The chart showed how the Risk Management Division had achieved a significant amount of savings over the past eight years through various types of rating plans that had been negotiated with insurers.  Ms. Dunt pointed out the state’s average costs for a standard premium, which was what the state earned on a guaranteed, fixed program based on the insurance modification factor, the various rates used, and the assigned payroll.  She said that the adjusted premium on average was approximately $8.8 million and from 1994 through 2000, when the state was on retrospective rating plans with Employers Insurance Company of Nevada (EICON), the state had received a significant amount of savings each year.  Ms. Dunt said that in calendar year 2001, the state moved from a retrospective rating plan to a large deductible program with a new insurer.  During that program, the state started out with a clean slate as far as claims costs were concerned.  Ms. Dunt said the program closely mirrored a self-insured program through the large deductible program and the state had enjoyed a significant cash flow savings in the 2001 policy year.  For the calendar year 2002 plan, the state had to date achieved a 41 percent savings compared to the average adjusted premium over the preceding eight years.  Ms. Dunt explained that Section 1 of Exhibit C would give the Subcommittee a picture of how the workers’ compensation program had been doing regarding savings when compared to what a guaranteed program would have cost the state. 

 

Ms. Dunt next referred the Subcommittee to Section 2 of Exhibit C, “Central Payroll Workers’ Compensation Statistics.”  Ms. Dunt said she was pleased to report that in calendar year 2002, the state had the least number of claims, 1,170 compared to 1998 when there were 1,510 claims.  Ms. Dunt said she was happy to report that the number of claims the state had incurred had been reduced.  Ms. Dunt brought the Subcommittee’s attention to the fact that in calendar year 2002, the state experienced 112 lost time claims as compared to 1998, when there were 225 lost time claims. 

 

Ms. Dunt stated that one aspect of the program that continued to be very successful was the early return to work program.  She said the Division had a very coordinated and strict policy with the state agencies that required them to bring their employees immediately back to work after an injury as soon as the employees were given work restrictions by the doctor.  If an agency did not want to return an employee to work, it had two options.  The agency could be assessed a penalty of $1,000 if the agency did not return its employees to work within 30 calendar days from the date the employee received work restrictions.  Ms. Dunt said she was pleased to report that since that had been announced, the Division had not had to assess the $1,000 penalty to any agency.  Ms. Dunt said the program also had the opportunity to offer an employee an assignment to an alternate agency if an agency was unable to bring the employee back to work.  That option was for a maximum period of 90 calendar days.  Ms. Dunt said the Division had administered that program quite often; if an agency could not accommodate the restrictions of its employees, the employee would be placed in another agency and the agency who had the employee at the time of the injury continued to pay the person’s salary.  The agency receiving the employee enjoyed the benefit of having a free employee.  Ms. Dunt said she had found the program to be very successful. 

 

Ms. Dunt asked the Subcommittee members to review the breakdown by claims costs shown in Section 2 of Exhibit C.  Ms. Dunt pointed out that the Division had reduced the severity of claims.  She said in calendar year 2002 there were only 8 claims that exceeded $100,000.  Ms. Dunt said that the statistics were a bit confusing because the policy years were calendar years and reporting years for budget purposes were fiscal years.  That resulted in the report combining calendar and fiscal year statistics to arrive at final figures.  Ms. Dunt said the number of claims between $25,000 and $100,000 had been reduced but there had been an increase in lower cost claims.  Ms. Dunt said the figures demonstrated that the severity of the claims had been reduced. 

 

Ms. Dunt next turned her presentation to the performance indicators included in The Executive Budget.  She said performance indicator one was to reduce workers’ compensation insurance and claims administration costs by 10 percent.  Ms. Dunt said that indicator had become a challenge for the Division due to the chaos that occurred in the insurance market subsequent to September 11, 2001.  Ms. Dunt referred the Subcommittee to Section 3 of Exhibit C, “Workers’ Comp Insurance/Claims Administration Costs.”  Ms. Dunt said that section showed a breakdown of premium costs including claims costs, the cost of administration with the third party administrator, and the managed care organization.  Section 3 showed all the costs individually as well as the total costs.  Ms. Dunt said that for the actual FY2002 the costs of administration of claims, not including the claims costs, totaled $2,941,466.  Projected for FY2003, was a cost of $3,035,771 which represented a 3.21 percent increase over fiscal year 2002.  Ms. Dunt said that when the Division negotiated the calendar year 2001 policy it was a new program and the insurer was not familiar with doing business in the state of Nevada and the insurer assessed a much higher credit risk charge.  Because of that, the state received a refund in policy year 2002 of approximately $450,000.  That appeared as a credit to the 2002 calendar year.  That credit allowed the program to have a 15.60 percent decrease in 2002 over the projected amount for FY2002.  Ms. Dunt went on to explain that as the cost of insurance increased, primarily due to September 11, 2001, the insurers became very nervous about accounts that had high concentrations of risk.  If there were many employees in one area the insurers were much more concerned about their coverage of those employees.  Ms. Dunt said the Division had to go into depth in 2002 to demonstrate where the concentration of employees was.  Ms. Dunt said that if the state had kept a $750,000 deductible as it had in 2001, the insurance costs would have increased by 40 percent for calendar year 2002.  Ms. Dunt said that the deductible had been increased to $1,000,000 in order to keep the premium costs as low as possible.  Ms. Dunt stated that in 2003 the insurance market was even more difficult than had been experienced in 2002 and the cost of keeping the deductible at $1,000,000 was cost prohibitive.  It would have been an increase of approximately 35 percent.  Ms. Dunt reported that for 2003 the deductible was $2,000,000.  When that deductible was chosen, the Division studied its actuarial report and during the period of time from 1994 until current, there had been only one claim that breached the $1,000,000 point.  The Division felt that based on the state’s loss history it was worth taking the risk to increase the deductible and use the savings to pay claims costs rather than to pay the additional insurance costs.  Ms. Dunt said that based on the loss history that had been a reasonable move.  Ms. Dunt said that the purpose of the performance indicator was to demonstrate that the state would be very proactive and prudent in making sure the Division balanced the cost of insurance versus the cost of claims to ensure a reasonable balance for the state. 

 

Chairwoman Chowning asked if it would not be more cost-effective to pay a higher insurance premium and have a lower deductible.  Ms. Dunt said there had only been one claim since 1994 that had exceeded the $1,000,000 cost mark. 

 

Senator Coffin asked what claim had exceeded a cost of $1,000,000.  Ms. Dunt responded that the claim had been for an accident involving a highway patrol trooper in fiscal year 2002.  She said it had been a $4.5 million claim. 

 

Chairwoman Chowning asked if the Division would achieve its projected $6 million savings in the 2001-03 biennium.  Ms. Dunt asked if Chairwoman Chowning was referring to calendar year 2002.  Chairwoman Chowning said that it appeared to her from the figures in Section 1 of Exhibit C that the Division would be close to meeting its projected $6 million savings. 

 

Senator Tiffany asked if the need to raise the deductible in calendar year 2003 had increased the Division’s need for additional cash in reserve and whether that change in deductible was more cost-effective than paying a higher premium with a lower deductible.  Ms. Dunt answered affirmatively.  She said that had been considered in the Division’s request for reserves going into FY2003-04.  Ms. Dunt deferred the question to Ms. Mary C. Keating, CPA, Administrator, Department of Administration, Administrative Services Division.  Ms. Dunt reported that Section 3 of Exhibit C showed that the “escrow level” as charged to the state by the insurance carrier had increased. 

 

Ms. Mary Keating, Administrator, Department of Administration, said that included in the budget was an increase in Category 15 from which the claims expenses were paid.  Included in that, through the actuarial report, was the amount to fund the difference in the deductibles.  In addition to that, in the fiscal year 2004 there was an increase in the overall program to re-establish reserves in the budget.  At the last Interim Finance Committee meeting the reserves for the budget were reduced to $134,000, which was far lower than what was necessary for the program.  Ms. Keating said the budget request, therefore, included an increase in operating reserves in fiscal year 2004 as well. 

 

Ms. Dunt continued with a discussion of the Division’s second performance indicator.  That indicator was the number of safety and loss prevention classes the Division offered and the attendance at the classes.  Ms. Dunt said the purpose of that indicator was to demonstrate the Division’s involvement in providing safety training classes to the state representatives and also to ensure that the Division advertised and promoted the classes so there would be good attendance at the training.  Ms. Dunt referred the Subcommittee to Section 4 of Exhibit C, which showed the classes offered by the Division and the number of students attending the classes.  Ms. Dunt said she was pleased to announce that the Division exceeded the standards called for by the performance indicator.  Ms. Dunt said that currently there was an interest in classes on workplace violence from state employees and management and the Division had provided training in that area. 

 

Ms. Dunt stated that the third performance indicator called for a reduction in the average number of lost time days per claim by 10 percent.  Ms. Dunt said that had been a new indicator and under the old insurance program there was not a way to track the number of lost time days.  Under the new program the lost time days per claim could be tracked.  That allowed the Division to establish a base line of what the number would be and between fiscal year 2002 and 2003 the Division did achieve a reduction in lost time claims.  Ms. Dunt referred the Subcommittee to Section 5 of Exhibit C, “Lost Time Claims.” 

 

Ms. Dunt said the fourth performance indicator was to reduce the total number of lost time claims per 1,000 full-time employees (FTEs) by 10 percent.  Ms. Dunt referred the Subcommittee to the second page of Section 5.  Ms. Dunt said that indicator would provide a method to measure how the Division was doing from year to year by gross number of employees versus claims.  She said the indicator was new and there had been a slight reduction from fiscal year 2002 to fiscal year 2003.  She said they would continue to attempt to reduce the number even further. 

 

Ms. Dunt said the fifth performance indicator dealt with the number of claims assigned to audit and the amounts recovered.  She said there was a program in the Division that identified different claims that would be assigned to an independent contractor for audit.  That achieved two purposes; one was for the open retrospective rating plan policies the state had with Employers Insurance Company of Nevada (EICON).  She said there were two years open with EICON and each year EICON reviewed the actual incurred cost of the claim and every July the Division received either a bill or a refund until the claims were closed.  Ms. Dunt said that early in the year the Division analyzed the reserves that had been established on the claims as they moved toward the date of adjustment.  Ms. Dunt referred the Subcommittee to Section 9 of Exhibit C, “Claims Audit Contract with Diversified Management Group.”  Ms. Dunt said the Division had assigned 200 claims to be audited for the adequacy of reserves and also for eligibility for subsequent injury in fiscal year 2002.  The savings that the Division was able to achieve by that action was approximately $3.3 million.  That was accomplished by identifying that reserves had been set too high on claims reserves and negotiating with the claims adjuster to bring the reserves down to a reasonable level that would reflect the actual status of the claims.  Ms. Dunt said that if a snapshot of the claims had been taken in April, costs would have been $3.3 million higher than the actual adjustment that was received in July.  Ms. Dunt felt that the audit contract was a very beneficial contract for the Division.  The cost of the contract was $72,000 annually and the return was approximately $3.3 million. 

 

Chairwoman Chowning commented that the cost of the contract was well worth the expense and the return was impressive. 

 

Ms. Dunt said the sixth performance indicator was to reduce the average number of automobile physical damage claims per 100 insured vehicles by 10 percent.  She said the purpose of that indicator was to set a benchmark on how many insured vehicles there were, how many accidents occurred, and then by focusing on defensive driving training, demonstrating that the Division was able to reduce the total number of vehicle accidents.  Ms. Dunt said that in the past year the Division had focused its efforts with the Nevada Highway Patrol and the Nevada Department of Transportation because those two agencies had the highest number of vehicle accidents.  Ms. Dunt referred the Subcommittee to Section 6 of Exhibit C for statistics on vehicle physical damage claims.  She said that indicator was new for the biennium and it was used as a way to measure how effective the automobile physical damage loss prevention program was. 

 

Chairwoman Chowning asked if there had been more or fewer vehicle accidents than in previous years.  She said she knew that the Highway Patrol used the greatest number of vehicles and had the most dangerous situations.  Chairwoman Chowning asked if the number of accidents for the Department of Wildlife had increased or decreased.  Ms. Dunt said she would be happy to provide that information to the Subcommittee.  Ms. Dunt said there had been a reduction in the number of vehicle claims with the Highway Patrol.  She said the Highway Patrol had assigned a group to work with the Division over the previous year that had been very interested in reducing their vehicle costs. 

 

Chairwoman Chowning said she would like to compare the costs from the University of Nevada, Reno, to those of the University of Nevada, Las Vegas, and she looked forward to receiving the information from the Division. 

 

Ms. Dunt said the seventh performance indicator in the budget was to monitor 30 targeted contracts to ensure compliance with insurance and bond requirements.  Ms. Dunt said the purpose of that indicator was to determine if the insurance requirements the Division had established for the contracts and the requests for proposal actually were followed through by the agencies.  Ms. Dunt said the Division audited 54 contracts and referred the Subcommittee to Section 7 of Exhibit C.  Ms. Dunt said the Division found through the audit that it had some work to do in working with the agencies to be certain they had the proper insurance documents with their contracts.  Ms. Dunt said of 56 contracts audited, 47 of those had been sent back for review.  Almost all of those had the additional insured endorsement missing.  She said that the Division required that a contractor indemnify the state if something the contractor did caused a liability for the state.  She said the Division found no evidence that the required endorsement was in the insurance certificates although that did not necessarily mean the state would not receive that benefit but it might make it more difficult for the state to receive the benefit.  Ms. Dunt said that the audit showed that the number of certificates in compliance was very low.  The audit found there were very few of the required insurance certificates in any of the contracts.  Ms. Dunt said it demonstrated that perhaps not only should the Division do more auditing and education but might need to devise a more effective way of making sure the insurance certificates were in place.  Ms. Dunt said the Division was trying to determine the best way to address that issue as the audit had been an “eye opening” exercise. 

 

Ms. Dunt stated that the eighth performance indicator was to review 90 percent of contracts and Requests for Proposal (RFPs) within ten days.  She said that was an internal indicator that had been established to ensure there were no agencies waiting for information from the Division in order to process their contracts.  Ms. Dunt said the Division had “pretty well met” the indicator.  She said that the Division became inundated with contracts and requests before every Board of Examiners meeting.

 

Ms. Dunt went on to say that the ninth performance indicator was to complete plan reviews on 95 percent of the Capital Improvement Program (CIP) projects exceeding $1 million.  That indicator related to the Division’s property insurance program and the current property insurer, FM Global.  Ms. Dunt said if the Division could achieve what was called a “highly protected status” on the buildings the cost of insurance would be reduced.  Ms. Dunt said the Division had worked with the state Public Works Board so when a large CIP project was being developed the plans could be sent to FM Global to be reviewed for fire protection, earthquake protection, and other criteria.  FM Global could then provide feedback as to whether they would expect a higher level of protection than the building code required.  Ms. Dunt said the program had been slow in getting started but she felt that over the last year the Division had established an open relationship with the state Public Works Board and the plans for new buildings were being sent to the insurer for review.  Ms. Dunt said the Division would continue to work on improving the area. 

 

Ms. Dunt said the Division’s tenth performance indicator was to submit 90 percent of its claims for payment within ten days.  She said the purpose of that indicator was to ensure that the vendors were paid in a timely manner.  Ms. Dunt said it had taken time to best determine how to track the payments.  She said the Division had developed a system to track all of the incoming bills.  The system recorded, documented, and followed up on the bills to ensure timely payment.  Some of the challenges the Division encountered were that agencies could be reimbursed in two ways.  They could either pay the vendor and ask for reimbursement from the Division or they could send the invoice directly to the Division for payment.  Ms. Dunt said that the Division was finding that the invoices for payment had to go through several hands before the Division got them.  That caused a long delay in processing the bill.  Ms. Dunt said the Division had identified several agencies where there was a “log jam” in submitting the bill to the Division for payment.  The Division had established procedures to streamline the process and the vendors did not have to wait so long for payment.  Ms. Dunt said the Division had made progress in that area. 

 

Ms. Dunt continued her presentation by referring the Subcommittee to Section 8 of Exhibit C, “Police/Fireman Heart Claims 1996 to Sep 30, 2002.”  She said the police/fireman heart claims represented a large liability to the state due to the expense of the claims.  Ms. Dunt said she wanted the Subcommittee to have the information on the number and cost of police/fireman heart claims.  Ms. Dunt said the Division oversaw the physical program so the Division’s occupational health nurse reviewed copies of the yearly physicals and did follow-up with the agencies.  Ms. Dunt said the Division tracked and monitored the claims and those claims were a large part of the workers’ compensation program.  Ms. Dunt said the Division had worked with state agencies and with the loss prevention contractor to develop a wellness and fitness program for police, fire, and correctional employees and she had seen a gradual improvement in the fitness and wellness of the employees.  Ms. Dunt said the chart in Section 8 of Exhibit C showed some of the risk factors that had been identified and that helped the Division target some of its wellness and loss prevention training programs.  Ms. Dunt said that the Division had some dedicated resources that could be used to improve an employee’s health if the need was identified on the annual physical.  The employee could receive help with diet or smoking issues and Ms. Dunt said the Division had dedicated resources to that area because it represented a large liability for the state.  Ms. Dunt added that retaining healthy employees was important to the Division. 

 

Chairwoman Chowning asked for clarification on the number of heart claims.  She also asked if the number represented a high percentage of police/fire employees.  Mr. Jim Fry, Deputy Risk Manager, responded that he had reviewed the claims back to 1990 and there had been an average of 7 to 12 claims per year.  That had risen recently and he believed that was partly due to education.  He said many people had not realized they were eligible for a heart claim.  Mr. Fry said he did not have statistics comparing Nevada’s claims to those of other states.  He said he knew that the state was running a comparable percentage to the Las Vegas Metropolitan Police Department on heart claims. 

 

Chairwoman Chowning asked how many total employees were eligible to make a heart claim.  Ms. Dunt answered that there were approximately 2,900 eligible employees.  Chairwoman Chowning asked if the 142 claims filed included active and retired employees.  Ms. Dunt said that number represented the total heart claims that had been accepted and the 2,900 were the total number of individuals eligible for the program.  Ms. Dunt said the 142 claims were approximately 5 percent of the 2,900 people eligible for the program. 

 

Chairwoman Chowning asked for confirmation that the 142 claims were filed over a six-year period and Ms. Dunt answered affirmatively.  Chairwoman Chowning said that represented less than 1 percent per year.  Ms. Dunt added that many of the eligible employees were not aware of the benefit available to them.  She said that after the physicals, some employees were sent pamphlets designed to help them address certain risk factors and some would become confused and believed they were going to lose their health plan benefits.  Because of those concerns, the Division had done a great deal of education in the preceding year regarding the program.  Ms. Dunt said the Division would go on-site and train the managers and supervisors to help employees understand how valuable the benefit was and how important it was for the employees to address risk factors when they were identified by the doctors.  Ms. Dunt said that over time the Division hoped to show that through the program there was a gradual increase in good health as shown in a reduction in the risk factors.  She said the Division had found that there had been an openness on the part of the employees to work with the Division. 

 

Senator Tiffany asked Ms. Dunt to explain what the benefit was.  Ms. Dunt responded that under the heart/lung benefit if a police officer, fireman, or correctional officer were diagnosed with any type of heart or lung condition it was conclusively presumed to have happened as a result of their job and they would be eligible for full compensation and medical benefits.  In addition, if for some reason that condition prevented them from returning to work as a police officer or fireman, they would be eligible for permanent, total disability benefits. 

 

Senator Tiffany asked if correctional officers were included in the program and Ms. Dunt answered affirmatively.  Senator Tiffany asked Ms. Dunt to explain why the risk was so high among correctional officers.  Ms. Dunt said that the majority of the employees in the program were correctional officers and many of their jobs were more sedentary than others in the program.  She said some correctional officers sat in towers or at checkpoints and might not have as much physical activity as some of the other eligible employees might have.  Ms. Dunt said the correctional officers also worked long shifts and might not have the best eating habits due to that.  All of those factors could make correctional officers more likely to have a lifestyle that was not as healthy as that of certain other people. 

 

Senator Tiffany asked how long the benefit had been in place and whether it had been stressful on the budget.  Ms. Dunt said the program was started in 1970.  She said the Division had been able to obtain Subsequent Injury Fund relief on a large number of the heart claims.  That meant that the cost of the claims was not paid out of the Division’s budget but it was disseminated to other employers due to the fact that it was an assessment made by all employers into the Subsequent Injury Fund.  Ms. Dunt said the state had averaged approximately $2 million per year in reduced premium costs because the employees qualified for subsequent injury payment.  Ms. Dunt stated that in order to qualify, the Division needed to know the employee had a heart problem and was retained in their employment.  Ms. Dunt said that the state had achieved premium savings of over $6 million due to the Subsequent Injury Fund and although the cost could not be seen in the Division’s budget, the cost was still paid by the state and the insurers of the state. 

 

Senator Tiffany asked if the benefit went to retirees as well as active employees.  Ms. Dunt responded that there had been a recent Supreme Court decision that had extended the coverage into retirement.  Ms. Dunt said there might be times when that decision could be challenged but the precedent had been set that the benefits followed the employee into retirement. 

 

Senator Coffin thanked Ms. Dunt for the information contained in Exhibit C.  He said the data presented “a scary picture” because the employees were mostly young men.  He asked Ms. Dunt what the retirement age was for police and fire employees and she answered that it was age 52.  Senator Coffin said he believed the cholesterol statistics showed that the police/fire employees had a greater risk than the general population in that age group and were “heart attacks in the making.”  Senator Coffin said he understood the sedentary nature of the employees and it was particularly alarming because the correctional officers did not have the same unit cohesiveness as a police department would have where “everyone forms up, shapes up, and looks at each other’s guts and tells each other they’re fat.”  Senator Coffin went on to say that the correctional officers were separated and under tension as evidenced by the hypertension numbers.  There was an elevated level of fear that was below the surface in their daily activity but when a sudden, violent action occurred in prison, which did not happen often, a heart attack could result.  Senator Coffin said the plaque that had built up in the employee’s arteries would break loose when the employee started to run and the adrenalin flowed.  Senator Coffin said the health risks could really hurt the employees and the education of the employees needed to be improved.  Senator Coffin said Sections 8 and 9 of Exhibit C were very revealing.  He said that health risks were identified in prisoners in the 1980s and the state had to cope with medical costs for the prisoners.  Senator Coffin said the prisoners were sedentary, ate too much, and used an excessive amount of salt on their food.  Senator Coffin said that he had made suggestions that had been ignored about substituting potassium chloride instead of sodium chloride for prisoner’s salt.  Senator Coffin said the point he was making was that it was difficult to persuade people to listen, especially people who thought they were “bullet proof” because they were in their 20s, 30s, and 40s, and yet, they were dying.  He said they did not know they were going to die an early death.  Senator Coffin said many of the employees would fall into the regular medical health plan because they did not know their medical problems were job related or could not prove it.  Senator Coffin said that Sections 8 and 9 of Exhibit C were worth their weight in gold to the Subcommittee but he wished he could do something more to spread the word regarding the risks. 

 

Ms. Dunt said she recognized the issue as a difficult challenge and the Division would like to see a fitness program for correctional officers once the state’s budget had been stabilized.  She said such a program would encourage the employees and provide them with an incentive to improve their health.  Ms. Dunt said that the physical process was mostly just a “big stick” for those that had high cholesterol or other problems. 

 

Senator Coffin said that the correctional officers had no fear of losing their jobs because of the health issues but that was not an excuse to not get into better shape. 

 

Chairwoman Chowning said that she wanted Nevada to be the best in the nation on any statistics kept but that was difficult to determine because no information on other states had been provided.  She said it seemed to her that less than 1 percent per year sounded like a low percentage.  Chairwoman Chowning asked Ms. Dunt to provide statistics from other states if they were compiled and complimented Ms. Dunt on the information contained in Section 8 of Exhibit C.  Chairwoman Chowning pondered whether the risk factors were all job related. 

 

Chairwoman Chowning said she appreciated that education had been offered and wondered if there was a requirement for employees to be educated and said that education could translate into better health, longer life, and less dollars being spent.  Ms. Dunt responded that part of the education came when the employee received the annual physical.  The contract that had been put in place had put some very stringent requirements on the physicians and the health care professionals who performed the physicals to talk to the employees face-to-face about the risks identified.  Ms. Dunt said her office followed up on the physical with a letter from the nurse with pamphlets on good health and offers of assistance.  Ms. Dunt said that although those services were provided, the motivation of employees was the determining factor in their success.  If the employee was accepting of the information or in denial of the situation was a factor.  She said that the Division had tried to look at the results of the physicals in order to identify persons with multiple risk factors such as diabetes, hypertension, and high cholesterol.  If a person had that combination of risk factors, the Division tried to work with the employee but it was difficult because at times the employee would get resentful of the Division.  Ms. Dunt said it was an art to identify when the employee was in the proper frame of mind to make the improvement needed and would accept the available resources. 

 

Ms. Dunt continued her presentation by referring the Subcommittee to Section 10 of Exhibit C, the “Year-End Risk Management Report for 2001.”  She said that every year her agency provided a report to the Governor’s Office on the status of the safety programs.  Ms. Dunt said that each agency was required to send the Division a year-end report containing what the agency had done pertaining to their safety activities.  She said that for the current year the Division had asked the agencies to develop a workplace violence prevention policy and an indoor air quality policy.  The report showed which agencies were cooperating, who was active, and who was not.  It was the Division’s way to focus attention on the programs so they would be continued. 

 

Chairwoman Chowning asked if the Department of Conservation and Natural Resources had had 102 fewer job injuries than it did in 1999 and Ms. Dunt answered affirmatively.  She added that most of the injuries were for the seasonal forestry employees.  Chairwoman Chowning said the report indicated the Department of Public Safety had 17 fewer accidents, the Department of Corrections had 13 fewer, the Department of Employment, Training and Rehabilitation had 8 fewer accidents, the Department of Business and Industry had 8 fewer accidents, and the Department of Motor Vehicles had 8 fewer accidents.  She asked what those reductions had meant to the state in terms of savings.  Ms. Dunt answered that a reduced number of claims would reduce the cost from the prior year.  She said to calculate an example of the savings, one could take the Department of Conservation and Natural Resources number of 102 multiplied by the average cost per claim of $6,772 to demonstrate the amount of savings per claim.  Chairwoman Chowning pointed out that the average cost per injury had decreased by 28 percent and Ms. Dunt agreed. 

 

Ms. Dunt pointed out to the Subcommittee that through the state’s managed care contracts, that had been put together by the insurer and the broker, the state had enjoyed a significant amount of medical dollar cost savings through the negotiated contracts with the managed care program.  Ms. Dunt said that information was included on the second page of Section 3 of Exhibit C.  She said that the chart showed the billed amount, the Department of Industrial Relations (DIR) rate for the claims, and the actual medical costs paid.  Ms. Dunt said that the DIR set maximum rates per type of medical service.  She said the DIR amount showed the reduction from the actual billed amount and the figures in the actual paid column showed the additional savings made through the managed care negotiated contracts.  Ms. Dunt said that for calendar year 2001 the Division achieved a savings of approximately $475,000, and in 2002 a savings of approximately $530,000 on the contracts for managed care.  Ms. Dunt said there had been a concern voiced about whether the managed care contracts were disallowing appropriate medical care and the Division had found that was not the case.  She said a great deal of savings was achieved in areas such as physical therapy and in hospital costs.  The negotiated contract with a Las Vegas hospital that was in place when the catastrophic highway patrol accident occurred had been tremendous according to Ms. Dunt.  The highway patrol officer had been in the intensive care unit for a long period of time and the negotiated contract cost for intensive care was $1,800 per day maximum and resulted in a significant savings. 

 

Chairwoman Chowning stated that Ms. Dunt had done an exemplary job on the performance indicators.  Chairwoman Chowning said she had noticed that 52 percent of the injuries on the job were due to slips and falls and she thought that was an area where education could provide maximum benefit. 

 

Ms. Dunt said that all of the adjustments to the budget were maintenance related items such as increases in insurance costs or changes in deductibles.  Ms. Dunt said that for maintenance unit M-100 the Division had received projections from insurance brokers that the property insurance premium would increase between 25 and 30 percent.  The premium on the excess liability insurance policy was also expected to increase.  Ms. Dunt said she was hopeful the Division would not have to raise the deductibles any higher than they currently were.  Currently the property insurance deductible was at $500,000 and that had been increased from $100,000 in the current biennium.  Ms. Dunt said that on July 1, 2002, it was not cost-effective for the state to pay a 35 percent increase in insurance premiums when there had not been a large loss history of claims over $100,000.  There had only been one property claim that exceeded $100,000 in the preceding four years.  Ms. Dunt reported that the cost-effectiveness of raising the deductible instead of paying insurance costs was probably the best choice at that time. 

 

Chairwoman Chowning asked Ms. Dunt to comment on the cost increases.  She wanted to know why the cost savings projected would occur primarily in 2004 instead of evenly throughout the course of the biennium.  Ms. Dunt said she would double check on that for the Subcommittee but she believed it was primarily due to the fact that the values of some of the buildings had been updated.  She said the state would also have to plan for insurance coverage for any construction that was completed. 

 

Chairwoman Chowning asked why the $36,000 payroll cap existed and what would the financial impact be if the cap were removed.  Ms. Dunt answered that the $36,000 payroll cap had been statutorily set for a long period of time under a guaranteed insurance program.  When the Division moved into its new insurance program the state was no longer assessed directly by the insurer through payroll.  The premium currently was partially established on payroll and partially established on loss history.  Because the statutory cap was $36,000, that was the total the insurer could charge for that factor.  Ms. Dunt said the Division charged the $36,000 cap to the agencies to remain consistent with what the insurers would charge.  She said there was no statutory requirement for the Division to limit the payroll cost of $36,000 that was charged back to the agencies and that might be an element the Division would consider when looking into the future.  Ms. Dunt said that had not, however, been contemplated for The Executive Budget.  Chairwoman Chowning added that it would be good to know what that financial impact would be. 

 

Ms. Julie Brand, Program Analyst, commented that she had recently received certain items she had requested from Ms. Dunt and she was in the process of reviewing those items. 

 

Chairwoman Chowning asked how the projected increase in the workers’ compensation premium compared to the increased cash requirements for claims.  She said the claims costs were approximately 50 percent and the predicted increase in the premium was 35 to 40 percent.  Ms. Dunt said she believed Chairwoman Chowning wanted to know how the Division had balanced out the increase in claims cost versus the increase in insurance costs.  She said that primarily the increased costs for claims had been due to the increase in the deductible level and when the Division negotiated the policy in the current year with the insurer, the insurer indicated it needed a four-month escrow fund set up so it would be comfortable in the knowledge that the Division had the funding to pay the costs at the higher level of retention that the Division had chosen.  Ms. Dunt went on to say that for the first year the Division had negotiated with the insurer to set up a two-month escrow fund because the funds were not available for a four-month fund.  She said that as part of the increase going forward the insurer had advised the Division that for calendar year 2004 it would want a four-month escrow fund and that would double the amount required from $1 to $2 million.  Ms. Dunt pointed out that for fiscal year 2004 the Division would finalize the 1999 retrospective rating plan with EICON.  That would mean that the Division would pay a one-time fee of 11 percent of the claims costs to buy out the liability and the state would have no additional liability for any reopened claims.  Ms. Dunt said that 11 percent cost was figured into the premium for fiscal year 2004. 

 

Senator Tiffany asked if the cost to insure state cars was included in the costs Ms. Dunt had discussed.  Ms. Dunt responded that the cost for physical damage on state cars was included.  Senator Tiffany asked how those costs would be changed if the Motor Pool was privatized.  Ms. Dunt said that some of the insured vehicles were Motor Pool vehicles and some of them were agency‑owned vehicles.  For example, the Highway Patrol and the Department of Transportation owned their own vehicles.  Ms. Dunt said the highest number of claims came from agencies that owned their own vehicles.  She believed that would not have an impact for the majority of the physical damage claims.  Ms. Dunt said some of the lower cost claims would be affected but not the significant areas.  Senator Tiffany confirmed that the Motor Pool was included in the agencies insured by the policy under discussion. 

 

Senator Tiffany asked if all automobiles were insured whether they were Motor Pool vehicles or agency-owned vehicles.  Ms. Dunt responded affirmatively.  She said the losses had not typically been on Motor Pool vehicles.  Senator Tiffany said it appeared the costs were high in the Highway Patrol. 

 

Chairwoman Chowning asked if the reserves would be adequate to sustain operations.  Ms. Dunt said the reserves were less than those in past years.  In fiscal years 2002 and 2003, the Division had maintained approximately $4 million in reserves.  She said that as they moved forward and tried to balance that with the budget needs it was a difficult call to make.  There were so many unknowns such as the events of September 11, 2001, and catastrophic claims costs.  Ms. Dunt said the Division needed to have a cushion available for unexpected events.  Ms. Dunt advised the Subcommittee that she felt the current reserves were the minimum that should be available.  She said she hoped there would not be more catastrophic claims and that the insurance market would settle down.  Ms. Dunt said if the country went to war and there were more attacks in our country resulting in damages, the issue of reserves would have to be reconsidered. 

 

Chairwoman Chowning complimented Ms. Dunt on her excellent presentation.  As there were no further questions or comments, Chairwoman Chowning called for a presentation on the budget of the Printing Office. 

 

ADMINISTRATION

PRINTING OFFICE – BUDGET PAGE ADMIN 29

 

Mr. Donald L. Bailey Sr., Chief, State Printing Division, Department of Administration, introduced himself and Ms. Stephanie Phenix, Budget Analyst, Budget Division, Department of Administration. 

 

Mr. Bailey stated that the Printing Division provided printing of all types of documents such as stationery, textbooks, law books, flyers, and programs.  The Division did a vast amount of printing for all state agencies and tried to provide that service in a timely manner, with a cost savings, and with a good turnaround time.  Mr. Bailey said the Division was constantly updating its printing facility to digital and to the latest technology.  Sometimes the Division was restricted due to finances but he believed the Printing Office was an up‑to‑date operation and he said he was proud of it. 

 

Mr. Bailey went on to say that the Printing Office was aware of environmental issues; the waste materials were all handled legally and the citizens were protected from chemicals going into landfills.  He said the Printing Office was governed by Nevada Revised Statutes (NRS) 344. 

 

Mr. Bailey referred the Subcommittee to Exhibit D, “Performance Indicator Data.”  He apologized for not submitting Exhibit D to the Subcommittee in advance of the meeting.  Mr. Bailey said the Printing Office was projecting total printing sales between the Printing Division and the Quick Print operation to be approximately $3,400,000 in fiscal year 2004 and $3,500,000 in fiscal year 2005.  The number of printing orders had been reduced according to Mr. Bailey.  The Printing Office projected 4,300 in FY2004 and approximately 4,500 in FY2005.  Mr. Bailey said the drop in the printing jobs was due to two factors.  The first factor was the economy.  The state agencies were “strapped” and the Printing Office was doing everything it could to support them although the State Printing Division was a service agency.  He said the Printing Office had lost revenue through state agencies because of budget cuts.  Mr. Bailey said it was not that the agencies were eliminating their printing, they were reducing printing to meet budget needs.  He said the Printing Office budget had definitely been affected and that could be seen throughout his presentation on the budget. 

 

Mr. Bailey said printing impressions had been reduced to approximately 36 million in FY2004 and approximately 37 million in FY2005.  Mr. Bailey said the numbers shown on Exhibit D were for full-sized parent sheets and the documents might be cut into 8, 6, or 4 parts.  In order to know the total number of copies, one would have to multiply the number of parts times the parent sheets.  Mr. Bailey said the Printing Office printed in the billions of impressions but the numbers provided in Exhibit D were for parent sheets. 

 

Mr. Bailey explained that one of the problems the state agencies were having, as ascertained by a survey conducted by the Printing Office and a separate survey conducted by the Governor’s Office, was regarding turnaround time.  He said that the Printing Office had worked on its turnaround time and in FY2002 the actual turnaround time was 12 days.  He said that it had been projected and he hoped the Printing Office could meet a turnaround time of 10 to 12 days in FY2004 and FY2005.  Mr. Bailey said that the printing of the Nevada Revised Statutes was a product that took months to print and assemble.  That did not fit into the 10 to 12 day turnaround time.  He said that time was for the general printing such as letterhead, business cards, regulations, duck stamps, or other types of printing jobs done for the state agencies.  Mr. Bailey said the Printing Office had been “pretty successful” in meeting the performance indicator as shown by the 12-day average in 2002. 

 

Mr. Bailey said the Printing Office’s job error rate of 1 percent was especially good for the industry.  The general industry rate was 3.8 percent.  Mr. Bailey said the Printing Office hoped to have no more than 38 jobs returned due to errors in FY2004 and 39 for FY2005.  He said the actual number for FY2002 was 36 jobs returned due to errors.  Mr. Bailey said the Printing Office would be lobbying in the next six months to get its business back.  He believed that the business from state agencies that had fallen off would return in the next biennium.  Mr. Bailey thought everyone needed to recognize that the country was struggling to get back on its feet.  The poor economy was affecting the state of Nevada and the Printing Office.  Mr. Bailey felt confident that the Printing Office would come back.  He believed the agencies would need more printing done in the programs that were being instituted. 

 

Mr. Bailey went on to say that he was very proud of the Printing Office’s customer satisfaction rate.  He said the surveys conducted by the Printing Office and the Governor’s Office had been previously supplied to the Subcommittee.  Mr. Bailey said that the Printing Office did not meet its customer satisfaction goals that had been set for FY2002 and FY2003, but the goals had been set high rather than setting the goals at an easily achievable number.  He believed the Printing Office would meet the goals in the next biennium and was very confident they would come back financially and continue to serve the state taxpayer and the state agencies. 

 

Senator Tiffany said she realized the state agencies had limited budgets but she wondered how the number of sales had been projected.  She said that technology had changed and she had observed color printers in almost every agency.  Mr. Bailey said the Printing Office had conducted a telephone survey of the larger agencies such as the Department of Motor Vehicles (DMV), Department of Transportation (DOT), and the Department of Wildlife.  The Printing Office had also done a survey of vendors of paper products, ink products and plate products, to determine costs.  Mr. Bailey said he had used those figures and the agencies’ projections of anticipated use to develop the projections.  He said the Printing Office had drastically lowered the sales projections for several reasons.  The Printing Office had incurred a loss in business with the loss of the State Administrative Manual and several budget cuts.  Mr. Bailey said he did not expect to recover quickly so the sales projections for the upcoming biennium had been reduced. 

 

Senator Tiffany asked if the Printing Office had taken into consideration the fact that some agencies were outsourcing their printing jobs when developing their sales projections.  Mr. Bailey answered affirmatively. 

 

Senator Tiffany asked Mr. Bailey if he had taken the technology changes into consideration when developing the projections.  Mr. Bailey responded affirmatively and added that the Printing Office was providing digital service through its Quick Print operation.  Mr. Bailey said the Printing Office was doing more digital printing online from the Legislative Counsel Bureau (LCB) and other agencies.  The LCB had a direct cable to the Printing Office and other agencies used disks.  Senator Tiffany clarified that her concern was not that the Printing Office had digital technology but that the agencies had digital technology.  Mr. Bailey said that had been taken into consideration and the Printing Office oversaw the requests for copiers for the state through State Purchasing.  He said that when any agency wanted a copier the request must go through the Printing Office to be screened to determine whether the agency’s request was reasonable.  Senator Tiffany asked if Mr. Bailey was comfortable with the printing sales estimates that had been made for FY2004 and FY2005.  Mr. Bailey said he thought the projections were very accurate but it would be very difficult to operate the Printing Office on the revenue generated from those sales. 

 

Senator Tiffany said she was concerned about Mr. Bailey’s projections of sales because the numbers projected in the past had not been accurate according to the audit report.  Mr. Bailey answered that Senator Tiffany was correct. 

 

Chairwoman Chowning asked about the cuts in positions that had been made by the Printing Office.  Mr. Bailey said the Printing Office currently had 28 positions and that number would be carried forward to FY2004 and FY2005.  He said that was 10 positions less than the Printing Office had in the previous biennium. 

 

Chairwoman Chowning asked if the Printing Office could accomplish all that it needed to with 10 positions less than it previously had.  Mr. Bailey said the Printing Office had set the goal to diligently work with the 28 people it had to see if it could meet the needs of the agencies in FY2004 and FY2005.  If the Printing Office found that it could not meet the state’s printing needs, it would have to go to the Interim Finance Committee and request additional positions.  Mr. Bailey said the staff had been cut to meet the sales projections and to meet the budget reductions requested by the Governor. 

 

Chairwoman Chowning asked whether there would be repayment to the General Fund of payments that had been deferred and the status of depreciation.  Mr. Bailey said the budget for FY2004 and FY2005 did not include any depreciation because the Printing Office did not feel that there would be enough revenue generated to fund depreciation.  He said that the Printing Office had not paid back the General Fund but he projected that in FY2004 and FY2005 the General Fund payback would be made.  Mr. Bailey said the revenue had fallen off to the point where the Printing Office was having a hard time paying its bills from vendors.  He said the Printing Office had been struggling due to the budget cuts.

 

Chairwoman Chowning asked if the repayment due to the General Fund for the color press was figured into the 2003-05 biennium.  Mr. Bailey deferred the question to Ms. Phenix.

 

Ms. Phenix said that the General Fund repayment for equipment was included in Budget Account 1331.  Ms. Phenix said that the figures were $46,500 in 2004 and $44,358 in 2005.  Chairwoman Chowning said it appeared that those were ongoing figures but the repayment amount was not figured in.  Ms. Phenix said the repayment could still occur in fiscal 2003 so amounts were not added to FY 2004 and FY2005.  Chairwoman Chowning asked where one could see that payment in the budget and Ms. Phenix said the agency could go to the Interim Finance Committee to request additional authority in that category to pay back the General Fund for fiscal years 2002 and 2003 in fiscal year 2003.  Chairwoman Chowning said her understanding was that if the revenue was up there was a plan to repay the General Fund and Mr. Bailey agreed.  Ms. Phenix added that the agency had not actually gone to the IFC to request the authority to pay in fiscal year 2003. 

 

Senator Tiffany said she had reviewed the audit report to determine why the Printing Office’s revenue was down.  One reason was that the rates had not been set appropriately, therefore the Printing Office lost almost $500,000 in fiscal year 2001-02.  The second reason was that there had been approximately $1.2 million in inventory but the agency was not using the inventory system, which required that the inventories should have been kept at approximately a level four.  She said the audit showed that only one or two categories had been kept at a level four.  Senator Tiffany said that the Printing Office also had some excess inventory that had been purchased for $35,000 and sold for $4,000.  She said those were other reasons why the revenues were down.  Senator Tiffany asked if Mr. Bailey had changed the rates, tightened up the inventory system, and used all four applications within the system for inventory control. 

 

Mr. Bailey answered that the Printing Office had adjusted its hourly rates twice since the audit and were reviewing the rates very thoroughly on a constant basis.  He said the Printing Office had cut its inventory drastically and were keeping on the floor only what was absolutely necessary.  Mr. Bailey said the inventory was ordered for specific jobs as it was needed.  He said the inventory problem had been a major mistake.  Mr. Bailey reported that the Printing Office had ordered grade 1 newsprint that they no longer used and it sat unused for several years.  The person who was to surplus that inventory had been out on medical leave, the paperwork was lost, and it had not been transacted.  At that point, the audit revealed that the product had been sold for $4,000.  Mr. Bailey said that was a good market value because no one really wanted the product.  He said the Printing Office had offered the product to approximately six prospects as surplus.  Mr. Bailey said the paperwork had since been “straightened out.”  Mr. Bailey said the Printing Office was currently using the “four programs” in the Logic inventory control system. 

 

Senator Tiffany stated that the audit reported that Mr. Bailey had in the past made assurances to the Legislature that certain things would be done by the Printing Office and then those things were not done.  She said the situation was chronic and she asked Mr. Bailey how she could be assured that the Printing Office had changed its rates, adjusted its inventory, and was bringing in the appropriate revenue.  Mr. Bailey answered that the Printing Office had not raised its hourly rates in a timely manner.  Mr. Bailey said that as the state printer he would take full responsibility for that.  He said the Printing Office held off raising hourly rates for the benefit of its clients.  He said he had the belief that the Printing Office was a service organization and he wanted to keep the rates down.  Mr. Bailey said that, unfortunately, it had gotten out of hand and revenue was lost in 2002.  Mr. Bailey gave his word that the hourly rates had been changed twice and the auditors could check that.  He said that all four functions of the Logic System were being used and the inventory had been reduced to save revenue.  Mr. Bailey said that information should be revealed in the follow-up audit to be completed. 

 

Senator Tiffany said she just wanted to be sure because the recommendations had never been fully implemented in the audits.  She said it was not unusual that agencies would do that and she was on the audit subcommittee and would watch for implementation of the recommendations.  Mr. Bailey commented that he was a “stick in the mud” on the hourly rate increase.  He said it was his fault and he would “take the heat.”  Mr. Bailey said he was leery to raise rates because of the clients, but on the other hand, the Printing Office had taken a major financial hit. 

 

Senator Tiffany added that $500,000 was a lot of money and when she heard that the Printing Office charged 32 percent less than commercial printers she was not surprised that the Printing Office had lost money because commercial printers could not afford to lose $500,000, to have bad inventory stock, or to surplus excess inventory at a loss.  Senator Tiffany advised Mr. Bailey that “we are watching” and Mr. Bailey acknowledged the comment.  Senator Tiffany stated that there had been a great deal of discussion about privatizing the Printing Office and the problems being discussed were some of the reasons why.  Senator Tiffany said she expected the problem areas to be tightened up. 

 

Chairwoman Chowning asked when the audit recommendations would be fully implemented.  Mr. Bailey said the date was May 9, 2003.  Chairwoman Chowning added that the six-month report was due on June 9, 2003.  Chairwoman Chowning commented that it must be a challenge to know where to raise the rates because the Printing Office needed to stay competitive as well.  She asked if the Las Vegas Quick Print operation ever “got off the ground.”  She said she had asked representatives of many agencies who were primarily housed in Las Vegas if they used the state Printing Office.  Chairwoman Chowning said that the agencies many times seemed to not realize that printing could be done through Quick Print.  She said agencies felt that it was more convenient to do their printing on their own in some manner.  Chairwoman Chowning asked if Printing still anticipated opening the Las Vegas Quick Print Office.  Mr. Bailey said that as far as he was concerned, the operation in Las Vegas was very much needed and he would continue to pursue setting up the operation.  He said that both times the Legislature had allowed the Printing Office the authority to set up the Las Vegas office, the Printing Office did not generate the revenue necessary to set up the operation.  Mr. Bailey said it would be a manned facility in either the Sawyer Building or the Bradley Building that would provide the same service that the Quick Print operation in Carson City provided.  Mr. Bailey said he felt that backing away from setting up the operation when there was not enough revenue was the best thing for the Division and the taxpayers at the time.  Mr. Bailey said the dream to have a Las Vegas Quick Print operation was still there. 

 

Senator Tiffany asked what percentage the Legislature represented of the Printing Office business.  Mr. Bailey answered that he did not have that information with him but he would calculate the numbers and report them to the Subcommittee.  He said that in the previous biennium the Legislature had spent approximately $820,000.  The Printing Office started the printing of the Nevada Revised Statutes after the end of each legislative session and that would generate over $1 million of revenue from the Legislative Counsel Bureau.  Mr. Bailey added that Ms. Phenix had just informed him that the Legislature comprised approximately 27 to 28 percent of the Printing Office business. 

 

Senator Tiffany requested that Mr. Bailey break down the percentages and provide more detail to the Subcommittee.  She also asked what percentages of the Printing Office’s business came from the Division of Transportation, the Department of Motor Vehicles, and the Division of Wildlife. 

 

Chairwoman Chowning commented that the Printing Office revenue in the 1989 Session of the Legislature was almost $700,000; the highest amount, $909,000, was in the 1997 Session; and in 2001 the revenue was down to $819,500.  She said that in 2001 there were not as many pieces of paper printed as there had been in 1997 and she thought it might be less in the 2003 Session. 

 

Chairwoman Chowning called for any questions from the audience and since there were none, she closed the hearing and opened the hearing on the State Motor Pool. 

 

ADMINISTRATION

MOTOR POOL – BUDGET PAGE ADMIN 36

 

Mr. Keith Wells, Acting Administrator, State Motor Pool, introduced himself.  Ms. Stephanie Phenix, Budget Analyst, Budget Division, identified herself.

 

Ms. Phenix said the primary objective of the State Motor Pool was to provide a safe, reliable means of transportation for state employees in an easily accessible, professional, and economic manner.  She said the Motor Pool had facilities in Carson City, Reno, and Las Vegas and the State Motor Pool currently serviced and maintained 787 vehicles statewide for use by authorized state employees on official state business.  Ms. Phenix said the Motor Pool was operated under the statutory authority of Nevada Revised Statutes (NRS) 232.213 and 336.  Ms. Phenix said the Division had not asked for any large enhancements in The Executive Budget except for funds to demolish the Las Vegas Motor Pool site, enhancement unit E-276.  She said some travel funds had also been included in the budget for the administrator to go to Las Vegas to oversee the move into the new facility, should that occur. 

 

Ms. Phenix said that currently six Requests for Proposals (RFPs) had been received by state Purchasing, which were being reviewed.  The proposals were for privatizing all or part of the State Motor Pool and the analysis of the proposals would be completed in mid-March 2003.  Ms. Phenix said she would be able to give the Subcommittee more information at that time regarding the plan for the Las Vegas Motor Pool facility.  Ms. Phenix said the building in Las Vegas would have to be demolished whether a new facility was constructed or not. 

 

Chairwoman Chowning asked who was performing the analysis on the feasibility of privatizing the Motor Pool.  She said the budget could not be closed without more information.  The budget contained a request for $1.6 million to purchase vehicles as though the Motor Pool would continue as it had in the past although the Motor Pool could be privatized. 

 

Mr. John P. Comeaux, Director, Department of Administration, identified himself.  He advised the Subcommittee that several months prior to the meeting an RFP, with many different options to take over some or all of the operations of the Motor Pool, had been issued.  Those proposals were received mid January 2003, and the state Purchasing Division had completed its part in the evaluation of the proposals.  Mr. Comeaux said state Purchasing would make a recommendation to him in the next week.  He said that within a very short period of time the Department of Administration would be ready to make a recommendation to the Legislature with the corresponding adjustments to The Executive Budget. 

 

Chairwoman Chowning said the Subcommittee needed to know if the cost‑effectiveness was great enough to warrant consideration of privatizing the Motor Pool.  She wondered what the benefit would be for state personnel.  She said that, as an example, employees might not be able to obtain a vehicle because all rental cars were unavailable due to a large convention in town.  Chairwoman Chowning said that the privatization would not be cost-effective if state employees were stranded and could not get to their destinations.  She said that state employees could be left with the option of renting taxis, limousines, or rent-a-wreck vehicles.  Chairwoman Chowning said rent-a-wreck vehicles were the last to be rented in times of high demand.  She said that awareness of risk factors was built into the State Motor Pool.  The vehicles were presumed to be as safe as possible and were replaced on set time schedules.  Chairwoman Chowning said there would be no assurance on those issues if the Motor Pool were privatized.  She said that rental company vehicles would not normally last as long as State Motor Pool vehicles.  Her concern was for safety issues that could result in even greater costs to Nevada.  Chairwoman Chowning said those were looming questions that should be taken very seriously.  She also pointed out that there were environmental concerns that should not be forgotten in an effort to save money.  Chairwoman Chowning stated that the Motor Pool would be forced out in Las Vegas and she understood that the University did not approve the project that had been presented to move the Motor Pool to University property.  Chairwoman Chowning asked for confirmation that there was no problem with the Motor Pool facility in Reno and that was why the Requests for Proposal were for “some or all” of the operations. 

 

Mr. Comeaux confirmed that was why the proposal was for “some or all” of the operations. 

 

Chairwoman Chowning said she thought a huge problem would arise if state workers could not perform their duties when cars were not available due to large conventions, such as COMDEX, being in town. 

 

Mr. Comeaux said he had never believed that under normal circumstances a rental car company could operate a motor pool more efficiently than the State Motor Pool could be operated.  He said that now seemed the time to look into privatizing the Motor Pool because the Las Vegas Motor Pool had to be relocated.  Mr. Comeaux said Chairwoman Chowning was correct that the state was being forced out of the Las Vegas location within a year’s time.  Mr. Comeaux said it was a little more pressing currently because the Airport Authority was demanding a rental rate on the existing location that was nine or ten times what the state had been paying.  According to Mr. Comeaux, the Airport Authority had no choice because the Federal Aviation Authority (FAA) required the Airport Authority to receive fair market value on any of its leased property.  Mr. Comeaux said the state had been paying well below fair market value for a long time and the state could be happy about that.  Mr. Comeaux said the requirement for the FAA to receive market value on rental property had given the Motor Pool a problem with the location that had been agreed upon with the University of Nevada, Las Vegas (UNLV), for the Motor Pool.  Mr. Comeaux said the location selected was on property that UNLV had leased from the Airport Authority.  Mr. Comeaux said the property that had been selected for the Motor Pool was just a small piece of the property leased by UNLV from the Airport Authority.  Mr. Comeaux said the Airport Authority indicated that the state would have to renegotiate the entire lease at fair market value in order to be able to use the small piece of land needed for the Motor Pool.  Mr. Comeaux said that requirement had “fouled up that deal.” 

 

Chairwoman Chowning interjected that it was not simply that the Board of Regents were being obstinate in negotiations, they were limited by the requirements of the Airport Authority. 

 

Mr. Comeaux reported that the most recent site selected was either the second or third site negotiated with UNLV.  Mr. Comeaux said that the Board of Regents would not approve at least one of the previously identified sites because UNLV had some other use for it.  Mr. Comeaux said there was no problem with the Board of Regents on the currently selected site.  The problem was that the parcel might be priced out of the range the state could afford.  Mr. Comeaux said all of those things combined made the Division decide to consider privatizing the Motor Pool.  Mr. Comeaux said it was a complicated issue with many points to consider.  He was unsure how many of the issues were included in the RFPs and how many of the issues would have to be considered outside the RFP.  Mr. Comeaux said he would return to the Subcommittee as quickly as possible with a recommendation for action.  Mr. Comeaux added that one of the proposals that had been received was from the Motor Pool. 

 

Mr. Comeaux stated that Mr. Wells had agreed to serve as the Acting Administrator in October 2002.  Mr. Comeaux said the previous administrator had retired and Mr. Comeaux did not want to make a permanent appointment until it was known in what form the Motor Pool would continue to operate.  Mr. Comeaux said that Mr. Wells had done a nice job as Acting Administrator and added that the Motor Pool had submitted a proposal that included some suggestions for a change in the way they would operate but he had not yet seen that proposal. 

 

Chairwoman Chowning asked Mr. Comeaux to provide a firm date for a report back to the Subcommittee with a recommendation for future action. 

 

Mr. Comeaux answered that the information could be provided to the Subcommittee by the end of the first week in March 2003. 

 

Senator Coffin commented that previously it had been decided to locate the Motor Pool on the UNLV campus but it had been determined that that would not have been a good location so a different location on Swenson Street was selected.  Senator Coffin asked what location was currently being considered. 

 

Mr. Comeaux said that when the state ran into the stumbling block with the high cost of the piece of property on the west side of Swenson Street, after UNLV had to renegotiate the lease on the entire parcel with the Airport Authority, consideration of that site was dropped in favor of doing the RFP.  Mr. Comeaux said that if there were no acceptable proposals for privatizing the Motor Pool the state would have to “hustle around” and either pay for land near the airport so a building could be constructed or another suitable location would have to be identified quickly. 

 

Senator Coffin asked what had happened to the potential location on Decatur Boulevard and I-215.  He said the location was a couple of miles west of the airport and was approximately 5 minutes driving time from the airport. 

 

Mr. Comeaux asked if the location he had mentioned was the site where the new Highway Patrol building and Nevada Department of Transportation (NDOT) building were to be built and Senator Coffin answered affirmatively.  Mr. Comeaux said he did not remember discussing that site as a potential location for the Motor Pool.  He said the Public Works Board had handled all the siting work and he would report back to the Subcommittee with more information. 

 

Senator Coffin said there was a philosophical dispute going on over the privatization of the Motor Pool.  He said there were logical reasons for privatizing both the Motor Pool and the Printing Office, however, there were exceptions to the rule to what appeared to be simple answers to questions.  Senator Coffin stated that Chairwoman Chowning had raised the question regarding what state employees would do for transportation when a large convention came to town and made it impossible to rent a vehicle.  Senator Coffin suggested the possibility of a downsized Motor Pool at the Decatur Boulevard and I-215 location.  He said that the state might not need as many cars, but when the cars were needed, they would be available.  Senator Coffin suggested that the parcel might accommodate two-story buildings, which would result in smaller footprints for the buildings.  Senator Coffin remarked that constructing multiple-story buildings might be considered unless the Capital Improvement Projects (CIPs) were already at the stage where it was too late to change the design. 

 

Chairwoman Chowning asked Mr. Comeaux to advise the Subcommittee of the possibility of building multi-story buildings when he reported his recommendations on whether to privatize the Motor Pool operations. 

 

Senator Tiffany commented that the real estate located near the airport was very expensive.  She said she had telephoned the Motor Pool to advise the staff of a five-acre site that was available on Eastern Boulevard and Sahara Boulevard.  She said the site had buildings for the maintenance and repair of vehicles and was approximately 20 years old.  Senator Tiffany said that the staff of the Motor Pool would not call to get more information on the site or go to see the site.  Senator Tiffany said she made a second call to the Motor Pool staff to ask them again to consider the property.  According to Senator Tiffany, the staff at the Motor Pool said the site was unsuitable because vans would have to be used to transport the riders back and forth from the airport.  She said that was what rental car agencies used.  Senator Tiffany said she believed the Motor Pool staff should have at least looked at the property before deciding it was unsatisfactory.  Senator Tiffany asked if the costs of maintenance and insurance on the vehicles, building costs, and costs to purchase vehicles would be considered when the practicality of privatizing the Motor Pool was considered. 

 

Mr. Comeaux answered that all costs would be considered when evaluating the RFPs.  He said that the state would evaluate the RFPs; analysis would not be done by an outside firm.  Mr. Comeaux said Purchasing had completed its evaluation of the proposals that had been received and was close to making a recommendation to the Department of Administration on a course of action.  He said all costs, including relocation costs, would be taken into account before a decision was made on the best course of action. 

 

Senator Tiffany said she assumed that the RFPs that were returned would include calculations for airport taxes and other considerations.  Mr. Comeaux said all the aspects had been considered down to looking at the applicability of fuel taxes if a private company was selected. 

 

Chairwoman Chowning said she had been aware of the property at Eastern Boulevard and Sahara Boulevard for a long period of time.  She said it was currently on the market for sale and the location was very centrally located.  Chairwoman Chowning requested that staff from the Motor Pool advise the Subcommittee whether the site was a good location for the Motor Pool. 

 

Mr. Wells said that the Motor Pool had been aggressively “scouring” the whole Las Vegas area looking for property.  Mr. Wells said he had a breakdown of approximately ten ideal locations but he was not aware of the location Senator Tiffany had mentioned. 

 

Chairwoman Chowning said that Mr. Wells was now aware of the location at Eastern Boulevard and Sahara Boulevard and she asked him to look at that location and determine its suitability for the Motor Pool site. 

 

Chairwoman Chowning asked if there were any questions and there being none, the Motor Pool hearing was closed and the hearing on the Purchasing budget was opened. 

 

ADMINISTRATION

PURCHASING – BUDGET ACCOUNT PAGE ADMIN 45

 

Mr. William C. (Bill) Moell, Administrator, Division of Purchasing, Department of Administration, introduced himself.  Mr. Moell submitted Exhibit E, “Nevada State Purchasing Division” to the Committee.  Mr. Moell said the Purchasing Division was charged with the performance of all functions related to service, procurement, purchasing, renting or leasing of supplies, materials, or equipment needed by state agencies.  The Division’s purpose was to obtain timely supplies, equipment, and services; to secure best value; and to give all vendors an equal opportunity to do business with the state.  Mr. Moell said the Purchasing Division maintained a limited distribution center in Reno and in Las Vegas, delivered statewide, and handled the reallocation and disposal of state excess property, maintained an inventory of the state’s fixed assets, administered the federal surplus property program, and distributed United States Department of Agriculture (USDA) food to all eligible recipients.  Mr. Moell said Nevada State Purchasing was committed to providing superior customer service.

 

Mr. Moell said Budget Account 1358 was the main Purchasing budget that included services procurement, materials management, and the fixed asset inventory program.  Mr. Moell said the budget was basically a flat budget and contained two requests.  The first request was the reestablishment of funding for the Administrator to go to the National Association of State Procurement Officials’ meeting.  That would need to be added back into the budget as an enhancement unit because the meeting had been cancelled in September 2001.  The second enhancement unit was a request for $5,000 for a staff purchasing officer and a technical person from an agency to travel to the location where there were complicated pieces of equipment being assembled that the state had purchased.  That was necessary in order to evaluate compliance with specifications at the place of manufacture rather than in Carson City once the equipment was received and delivered.  Mr. Moell gave the example of a $285,000 three-line paint striper that had been delivered to the Department of Transportation.  He said that if an employee from the Purchasing Division could have made a technical review and evaluated the project when it was 75 or 85 percent complete, the Division would have discovered 44 separate variations from specifications.  Mr. Moell said that would have been very easy to correct at the place of manufacture but tremendously difficult to correct halfway across the country.  It was a fairly small investment that could reap tremendous benefits for state Purchasing. 

 

Mr. Moell stated that one Purchasing Technician position was eliminated in the budget.  He said that would leave 26 positions paid out of Budget Account 1358. 

 

Chairwoman Chowning said the reserve balance was decreasing and she wondered if the balance would be sufficient or should the assessments be increased.  Mr. Moell said Purchasing had been buying down the reserve balance for the past four years.  He said the balance had been high and money had to be returned to the federal government approximately five years ago.  Mr. Moell said the Division was attempting to establish an ongoing reserve balance of approximately $400,000.  That would give the Division the working capital to maintain its operation at the beginning of the fiscal year and would allow the Division to purchase vast quantities of paper.  He said the paper was purchased in 20 truckload amounts for distribution to various state agencies during the course of the year.  Mr. Moell said that it was an adequate working capital, met all the federal requirements, and was not excessive. 

 

Chairwoman Chowning said the reduction in the reserve was from approximately $527,000 to $400,000 and asked if Mr. Moell was comfortable with that figure.  Mr. Moell answered that the amount would be a little less than $400,000 due to adjustments in rates in the budget and he felt that amount was adequate. 

 

Chairwoman Chowning asked Mr. Moell to discuss cash discounts received by the customers and the controls that were in place to monitor the timely processing of invoices in order to maximize the availability of cash discounts. 

 

Mr. Moell answered that the discounts on commodities purchased were monitored very closely.  He said the Division lost “a couple thousand dollars” per quarter in discounts.  That had to do with other governmental entities that made purchases using the state’s contracts.  Mr. Moell said the state could not control the other entities and that problem related to the Department of Transportation (NDOT).  He said NDOT had a great deal of difficulty processing purchases within the ten days required because of the decentralization of its receipt of goods.  Mr. Moell said that at one point the loss in discounts was running approximately $5,000 per quarter and that had been reduced as the Division had put more emphasis on timely payments.  Mr. Moell said three staff members in the Purchasing Division called agencies to remind them to process payments in a timely manner.  Mr. Moell said it was not just the discounts that were important to the Division; it was the fact that the Division had made commitments to the vendors to pay them in a timely manner.  Mr. Moell said those commitments for timely payments were the reason the Division was able to secure lower prices.  He said there was no excuse for not paying a vendor on time or even early.  Mr. Moell said that under the Division’s old system checks were run once a week and if a deadline were missed, payment would be delayed until the next week.  He said under the old system the Division was unable to take advantage of any discounts.  Mr. Moell said checks were currently run every night and that the problem regarding losing the discounts had just about disappeared. 

 

Mr. Moell said that the Division had projected a decline in the average percent of discount received by customers via central procurement of services from 61 percent in FY2001-02 to 35 percent for both years of the 2003‑05 biennium.  He said he thought that was an anomaly.  Mr. Moell said that as the economy had shriveled up in the private sector new vendors had entered the governmental sector.  He said that there was a great deal of competition in the public sector and the percentage was calculated on the difference between the highest proposal and the awarded bid.  Mr. Moell said that many vendors were caught off guard with how competitive the Division’s service procurements were.  Mr. Moell said that he would provide the Subcommittee with a quarterly report of the status of the Division’s performance indicators and a complete list of the performance indicators.  He said that information would demonstrate to the Subcommittee that the percentage was “coming back to earth.”  He said it had been approximately 66 percent in the first quarter of 2002 and was 44 percent in the final quarter of 2002.  Mr. Moell said there had been “a bubble” but the figure was returning to where it had been historically and he anticipated it would maintain that level. 

 

Chairwoman Chowning asked Mr. Moell to discuss why the number of transactions that customers purchased direct through the purchasing contract was projected at 6,000, but the actual number completed was 108,000.  Mr. Moell said that when he appeared before the 71^st Session of the Legislature he had assured the Legislature that the Division would do all that it could to put open-term contracts in place so that customers could order directly rather than having to go through the Division.  Mr. Moell said that was necessary because the Division’s staff was spending far more time doing service procurements and they did not get a great deal of “bang for the buck” on individual bids or transactions of commodities.  Because of that, the Division had put in place three vendors for office supplies, direct access to office furniture, industry tools and supplies, safety contracts, and a myriad of contracts designed for its customers to order direct.  Mr. Moell said that removed the Division from the paper processing business and into the contract management business, where it belonged. 

 

Senator Tiffany asked how the online mall was working out and if the Division had gone to any online bidding.  Mr. Moell replied in the negative.  He said that in the past there had been a bill draft request that would have allowed $150,000 to be transferred out of the legislatively established Purchasing Fund each year for an e-procurement type of project.  Mr. Moell said that prior to the events of September 11, 2001, the Division had talked to five companies about doing a password protected shopping mall where all of the contracts would have been in one location with one password.  He said that within a month of September 11, 2001, three of those companies went bankrupt and two companies changed their business processes so the Purchasing Division was left with no interested businesses.  In the meantime, staff of the Purchasing Division had talked to every company that wanted to discuss the project with the Division, evaluated every proposal submitted, and had not found any offer where the cost was worth the benefit.  Mr. Moell said the Division was doing a good job of working with its vendors to establish Web-based catalog purchases and he thought that maybe the “Nevada Mall” had been saved from itself by external events. 

 

Senator Tiffany said she appreciated Mr. Moell’s attention to new technologies and she believed the Division should make it as easy for the agencies as possible as well as to cut costs.  Mr. Moell said that the Division was doing things electronically, although not through a third party.  He said that a program would be put in place within the following two weeks that would allow vendors to maintain their own accounts in the vendor pool.  Mr. Moell said the Division was moving forward in contract management by setting up a database of all contracts in state government and the agencies would be able to enter data into the database through a Web-based site.

 

Senator Tiffany said she believed the agencies should be able to go online, look up an approved catalog, and place an order for delivery.  Mr. Moell responded that that was available to agencies at the current time.  He said part of the evaluation as the Division went to open-term contracts was that the vendor would have the ability to provide effective customer service in an efficient manner. 

 

Senator Tiffany asked if the vendors had catalogs online and Mr. Moell responded that most of them had catalogs online and those catalogs were being used whenever possible. 

 

Senator Tiffany asked if the Division had buying pools for pharmacy products.  Mr. Moell said that a senior member of his staff had just returned from Minneapolis, Minnesota, where he had gone to discuss buying goods through a consortium.  The consortium was a 41-state consortium that bought pharmaceuticals that must be delivered through a registered pharmacist.  Mr. Moell said he had previously spoken to Assemblywoman McClain about the Michigan plan.  The Division had ascertained that it could comply with the Michigan plan, which was one of the proposed solutions for the supply of pharmaceuticals for state customers.  Mr. Moell explained that the Division might have to be creative in setting up the program.  He said the main thing the Division had learned was that Nevada would not be tied to a single consortium.  That would give the Division the ability to look at consortiums with more flexibility as the pharmaceutical world and the regulatory laws changed rapidly. 

 

Senator Tiffany asked if Mr. Moell had staff that understood the pharmaceutical market.  Mr. Moell said Dr. Adams, a pharmacist, accompanied the staff member to Minnesota.  Mr. Moell said the Division would meet with Dr. Adams the day after the Subcommittee meeting to discuss some of the issues relating to the purchase of pharmaceuticals. 

 

Senator Tiffany asked if the statutes would need to be changed to allow the state to join a pharmaceutical purchasing pool.  Mr. Moell said that would not be known until the plan choice was determined but Dr. Adams would accompany Purchasing staff to any meetings dealing with the issue.  Mr. Moell said that finding a way to expand the number of programs that used leveraged, block buying of pharmaceuticals was in the best interest of the taxpayer and the state of Nevada. 

 

Senator Tiffany said health care costs were spiraling and she appreciated Mr. Moell’s efforts. 

 

Chairwoman Chowning asked if Mr. Moell was comfortable with the audit recommendations.  Mr. Moell said there had been six audit recommendations and the Purchasing Division had implemented four of those recommendations within 24 hours after they were pointed out.  The other two recommendations had to do with the integrated financial system and those were implemented prior to the last report.  Mr. Moell said the Division was completely current with the audit and in good standing.  He said he continued to get suggestions from the auditors as other programs were audited and those recommendations were implemented whenever possible. 

 

Chairwoman Chowning asked if the audit recommendations were helpful and Mr. Moell responded affirmatively and said that it was always nice to have new eyes look at things. 

 

Chairwoman Chowning asked if there were any questions from the public and since there were none, she opened Budget Account 713-1346, the Mail Services Division budget. 

 

ADMINISTRATION

MAIL SERVICES – BUDGET PAGE ADMIN 67

 

Mr. Mike Meizel, Chief, Buildings and Grounds Division, introduced himself and said that Mail Services was one of the programs managed under the Buildings and Grounds Division. 

 

Mr. Meizel said that Mail Services provided mail to most of the state agencies excluding the University System.  He said the main office in Carson City did the bulk of the mail work and Mail Services also had a smaller office in Las Vegas with five employees.  He said several years ago a legislative audit was performed that resulted in a consolidation of mail services within the state, primarily mail in the Department of Motor Vehicles.  He said the issue was revisited in the 71^st Session of the Legislature to determine if any changes should be made.  That review revealed that the savings had been beyond what the original projections had been.  Mr. Meizel said that Mail Services saved money each year by bar coding the mail that went out and the program was working well.  Mr. Meizel said Mail Services also provided ancillary services such as the interoffice mail service.  Day-to-day mail was supplied to agencies within the system and the agencies were charged an extremely low rate that was primarily subsidized by the percentage of overhead rate that was charged on outgoing mail.  Mr. Meizel said Mail Services also did folding and inserting services for many of the agencies prior to bar coding and mailing. 

 

Mr. Meizel stated that some of the larger agencies had said that they could get mail services provided less expensively but the audit showed that the primary increment of the consolidation was to take over the mail for the Department of Motor Vehicles (DMV).  Mr. Meizel said that the DMV in the past had a tremendous amount of equipment that was used to process a low percentage of mail.  That equipment was now used to process mail for all state agencies.  There were inherent benefits to the state such as the receipt of Highway Fund monies for processing mail for the DMV, which also helped the General Fund.  Mr. Meizel said that Mail Services had attempted to look at what benefited the entire state rather than what would benefit one agency. 

 

Mr. Meizel said one enhancement unit was requested in the budget.  He said Mail Services needed a $26,000 piece of equipment to be added to its inserter to collect all the trimmings that came off the inserter.  Mr. Meizel said Mail Services was not requesting positions or any other enhancements to the budget. 

 

Chairwoman Chowning asked about the proposed increase in the mail charges and the increase to the reserve category.  She also asked Mr. Meizel to discuss the projected revenues. 

 

Mr. Meizel deferred the questions to Ms. Phenix, Budget Analyst, Department of Administration.  Ms. Phenix explained that the reserve level for Mail Services needed to be increased to a reasonable level.  She said the options were to increase the rates or change the ways in which the agencies were charged.  Ms. Phenix said Mail Services would be requesting that a technical adjustment in the Treasurer’s Office budget be made.  She said that the cost of all the vendor payment checks mailed out for the state were currently included in the state Mail Services overhead.  That cost had not been charged to any agency so a technical adjustment in the Treasurer’s budget of approximately $150,000 would be requested.  That change would put sufficient expenditure authority and funds in the Treasurer’s budget and would then become part of the statewide cost allocation plan through the Treasurer’s Office.  Ms. Phenix said Mail Services would also increase the interoffice delivery fee by a small amount per agency.  Currently, Mail Services charged a fee of $540 per mail stop annually for the delivery of interoffice mail. 

 

Assemblywoman McClain asked who paid for the $100,000 license plate refund checks sent out by the Comptroller.  Ms. Phenix answered that the amount would have been included in the overhead and not directly charged to any agency. 

 

Assemblywoman Chowning asked Mr. Meizel to comment on a recent audit report that indicated the Division could reduce the state’s postage costs by processing mail for other entities such as Western Nevada Community College.  Mr. Meizel said he had had conversations with representatives of the University System and the University System had not felt it would be advantageous to use Mail Services for its mailing needs.  Mr. Meizel said the best he could offer was that he would keep in contact with the University to encourage them to join Mail Services.  He said there was no protocol that allowed Mail Services to do mailings for the University without the agreement of the University System. 

 

Mr. Meizel pointed out that one of the performance indicators showed the amount of savings that Mail Services wanted to achieve.  Another indicator showed the number of pieces mailed out and that was not currently growing at the rate it had grown in the past.  He believed that was primarily because of technology through the use of the Web.  He believed that a great deal of the costs that state agencies had for mail might not be included in the Mail Services budget. 

 

Chairwoman Chowning asked if Mail Services mailed out the sets of license plates for the DMV.  Mr. Meizel answered affirmatively.  Chairwoman Chowning said that 10,000 sets of license plates were mailed out each week and that number was growing.  Mr. Meizel said Mail Services worked with the DMV to mail out the plates. 

 

Chairwoman Chowning said the DMV currently had a kiosk pilot project in southern Nevada for license plates where people would be able to pay by cash or credit card into a machine and immediately receive a registration renewal sticker.  Chairwoman Chowning thought the kiosk project would cut down on the amount of DMV mail. 

 

Mr. Meizel said Chairwoman Chowning was correct and added that he was in favor of anything that would speed up the registration process.  He added that the state’s Web pages had cut down the mailings.  He said someone had mentioned to him that he had recently downloaded information from the Division of Wildlife’s Web site that he had previously had to request be sent to him through the mail. 

 

Chairwoman Chowning said that it was great anytime a customer could have immediate receipt of his DMV renewal registration sticker without waiting for the mail. 

 

Senator Tiffany asked why no one from Mail Services was at the meeting.  Mr. Meizel answered that he represented Mail Services although he did many other things as well.  He said there was a Chief who managed Mail Services and another employee who handled the business aspects of Mail Services.  Mr. Meizel said the employee who handled the business of Mail Services was out of town and that was why he was not present. 

 

Senator Tiffany asked what the percentage of the total mail was that went from Carson City to Las Vegas overnight by air.  Mr. Meizel said he did not have that information but could provide it later.  Senator Tiffany wondered if the cost of the overnight delivery was justified and Mr. Meizel answered that it was.  Senator Tiffany was concerned that some agencies used the regular mail as opposed to using the state mailroom.  Mr. Meizel said Mail Services had a large demand for the overnight Las Vegas service.  Senator Tiffany asked if the demand had increased or decreased.  Mr. Meizel said he would gather the information and provide it to Senator Tiffany.  Senator Tiffany asked Mr. Meizel to also provide an analysis showing which agencies used Mail Services most appropriately and frequently as well as those agencies that were chronic abusers and did not use Mail Services. 

 

Chairwoman Chowning asked when the budget adjustments would be made.  Ms. Phenix said that information would be provided as soon as possible. 

 

Ms. Phenix stated that she wanted to make a correction to an answer she had given to a question Assemblywoman McClain asked previously.  Ms. Phenix said that the DMV had paid for the checks used for license plate refunds.  She said the funds had been requested from the Interim Finance Committee and the amount was not included in the overhead. 

 

Chairwoman Chowning said those costs were unbelievable.  She thought that approximately 9,000 checks had been issued for amounts less that $1 although it cost approximately $13 to issue each original check.  If the check was not cashed and it was returned there would be additional cost.  Chairwoman Chowning said that in some cases the cost was $30 to $40 to process a check for less than $1 and there had even been approximately 900 checks for one cent.  Chairwoman Chowning said that was not spending money wisely and the Legislature was attempting to change the process. 

 

Chairwoman Chowning commented about receiving one piece of paper in an 8 ½-inch by 11-inch brown envelope.  She asked if it was more costly to fold the piece of paper and insert it into a smaller envelope than to send it in the larger envelope.  Mr. Meizel said an advantage to the large envelopes was that they were reused many times.  He said Mail Services had not studied the cost benefit.  Chairwoman Chowning said the envelopes sent to individual legislators were not reused and that was a terrible waste.  She suggested that resources be used wisely. 

 

Chairwoman Chowning asked if there were questions from the audience and since there were none, the meeting was adjourned at 10:38 a.m. 

 

RESPECTFULLY SUBMITTED:

 

 

 

                                                           

Lila Clark

Committee Secretary

 

 

APPROVED BY:

 

 

 

                                                                                         

Assemblywoman Vonne Chowning, Chairwoman

 

 

DATE:                                                                             

 

 

 

 

 

______________________________________________

Senator Sandra Tiffany, Chairwoman

 

 

DATE: