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
March 13, 2003
The Assembly Committee on Ways and Means and the Senate Committee on Finance, Joint Subcommittee on General Government, was called to order at 8:10 a.m., on Thursday, March 13, 2003. Senator Sandra Tiffany and Assemblywoman 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.
Senate COMMITTEE MEMBERS PRESENT:
Senator Sandra Tiffany, Co-chairwoman
Senator Bob Coffin
Senator Dean A. Rhoads
Assembly COMMITTEE MEMBERS PRESENT:
Mrs. Vonne Chowning, Co-chairwoman
Mr. Bob Beers
Mr. Josh Griffin
Ms. Kathy McClain
Mr. David Parks
STAFF MEMBERS PRESENT:
Mark Stevens, Assembly Fiscal Analyst
Bob Guernsey, Principal Deputy Fiscal Analyst
Jim Rodriguez, Program Analyst
Linda Smith, Committee Secretary
Lila Clark, Committee Secretary
Senator Tiffany called the meeting to order and stated she would chair the portion of the meeting devoted to the Department of Information Technology (DoIT) and Assemblywoman Chowning would chair the portion of the meeting devoted to the Department of Personnel.
INFORMATION SERVICES
Senator Tiffany said the Subcommittee would not address each budget individually because the Department’s budgets had been reviewed in previous meetings. However, a variety of issues related to the Department would be discussed. Senator Tiffany then asked for an explanation of the Department’s policy for setting reserves.
Shelly Person, Chief of Administration, DoIT, said The Executive Budget included reserve amounts to cover 60 days of operating expenses for each budget account. Estimated reserve amounts were based on the rate model. Once the budgets were finalized, the Department would develop the final reserve amounts. Ms. Person explained the maximum reserve allowed by the Office of Management and Budget (OMB) Circular A-87, the federal policy the Department followed for “charge back,” was 60 days.
Senator Tiffany said Subcommittee staff indicated the reserve amounts should be approximately $5.1 million each year of the biennium, rather than $9.2 million in FY2004 and $8.9 million in FY2005.
Brian Spencer, Administrative Services Officer III, Fiscal Group, DoIT, said the Department had made a policy decision to have reserve levels higher than the 60-day reserve because of the need for a major upgrade of the Computer Facility during the 2003-2005 biennium. The higher reserves would provide sufficient funding to cover the costs of the upgrade.
Senator Tiffany said the Subcommittee would be referring to the mainframe and the upgrade of the mainframe in addition to capitalization versus leasing. She asked if Mr. Spencer agreed that the reserves were high and had been set aside for capitalization on the mainframe. Mr. Spencer answered in the affirmative. Mr. Spencer said the Department had met with Jim Rodriguez, Program Analyst, Legislative Counsel Bureau (LCB), during the last biennium to determine what the reserves should be. As a result of those discussions, a decision was made not to adjust the rates downward for the facility. However, for BA 1365 it was decided the reserve level was too high, and at that point in time the rate model was adjusted to reduce the reserve in the account.
Senator Tiffany asked how the Department arrived at the reserve amounts of $9.2 million and the $8.9 million for the 2003-2005 biennium. Mr. Spencer said during the last legislative session, the DoIT had projected expenditures, subtracted out capital outlay, and then calculated reserve-level needs. If the operations returned more than was anticipated, the reserve level increased, which was the case in BA 1387, Telecommunications. Mr. Spencer explained there had been a significant increase in utilization of long distance and “800 services” due to changes in the economy. Mr. Spencer said the Department had been working with the federal Division of Cost Allocation and there would be a federal payback. The Department would be adjusting the reserve levels downward to reflect this change. Senator Tiffany said Subcommittee staff had indicated the reserves budgeted for each year of the 2003-2005 biennium should have been in the $5 million range versus the $9 million range. She said adding another million for the anticipated federal payback on top of the approximate $5 million included in the budget would result in a reserve of approximately $6.3 million. Senator Tiffany asked how reducing the reserves to $6.3 million would impact the DoIT. Mr. Spencer said reducing the reserves to $6.3 million would not have a significant impact on the Department, but would impact the rates. Mr. Spencer wanted the Subcommittee to understand that because of the budget crises the Department had not been able to purchase needed equipment and positions had been frozen. The decrease in expenditures contributed to the increase in the reserves.
Terry Savage, Director, DoIT, interjected that the DoIT FY2002 expenditures were below the sustainable level and that level could not be maintained indefinitely. Senator Tiffany asked about the rate changes that would result from reducing the reserves. Mr. Spencer said in order to reduce the reserve the Department looked at each budget account and cost pool and allocated the excess reserve to each cost pool, reducing the amount needed to recover from that cost pool, which reduced the rates and the reserve level. Mr. Spencer said an analysis of the federal payback for the Computer Facility indicated the federal participation rate was slightly less than 40 percent and less than 30 percent for the telecommunications area. Senator Tiffany asked if the Department had a policy that allowed equipment to be purchased with reserve funds. Mr. Savage did not think there was a general policy but thought there had been cases when equipment was purchased with reserves.
Mr. Savage asked for clarification on reducing the reserves. Mr. Spencer said if there was too much money in the reserves and the reserves were reduced, the cost of services to the Department’s customers would be reduced. The rates would stay the same if the reserve amounts were correct.
Senator Tiffany referenced the reserve amounts calculated by Subcommittee staff and said, based upon Mr. Spencer’s comments, the impact of the reduced amounts varied. Senator Tiffany thought Subcommittee staff needed to review the possibility of reverting reserves to the General Fund and the Department’s policy of purchasing equipment with the reserve funds. In response to a request made by Mr. Spencer, Senator Tiffany agreed to have Subcommittee staff work with the Department on the reserve calculations.
Co-chairwoman Chowning understood the Department agreed with the reduced reserve amounts and she requested a copy of the analysis that included the federal breakout referenced earlier by Mr. Spencer.
Senator Tiffany asked if there were any more questions on the reserves. Co-chairwoman Chowning asked for an explanation of significant changes, what impact the changes would have on the DoIT customers, the status of the federal review, and the estimated amount of the repayment.
Mr. Spencer noted there had been a number of changes. Probably the most significant was the change in methodology for billing Silvernet customers. Historically, the Department had tried a number of different methods to ensure sufficient revenue to cover the cost of the data network services. Mr. Spencer said the methodologies tried had not worked well, resulting in insufficient revenue. The 2001 Legislative Session had approved new software that measured network traffic and accumulated the data. Mr. Spencer said the software had been purchased and explained that customers would be billed based upon the amount of traffic each generated across the network. Customers having more traffic would pay more, and those with less traffic would pay a lower percentage. Mr. Spencer said current billing was based upon the size of an agency’s connection.
Senator Tiffany said she understood there was a different billing procedure for Silvernet, but she wanted information on how the rates had changed based on position reclassifications, transfers, and the three new assessments included in the budget.
Mr. Spencer said the reclassifications did not have a major change in the rate model per se. An upgrade would require recovery of a small additional amount from the position’s rate pool. Mr. Spencer indicated transferring the database administrators (DBAs) should not have a significant impact upon the rates because the costs of the DBAs were billed out in the existing model in Budget Account 1385. In the proposed model the costs would still be billed out but in a different budget, BA 1365. The actual rates revealed no major shifts in rates. Senator Tiffany asked specifically about the 23 reclassifications and wanted to know how those reclassifications affected the rate model. Mr. Spencer said the 23 reclassifications were included in the cost model. Mr. Spencer referred to the new assessments and acknowledged there were some additional costs. For example, the state operators had been “bundled in” with the telecommunications rate, and the DoIT customers had been paying for the operators based upon the amount of long distance services used. Under the new rate model, cost of the operators would be included in an enterprise assessment, requiring everyone who utilized those services to pay for the services. Mr. Spencer said the state operators answered calls that covered all state agencies and the new methodology would appropriately allocate those costs to the agencies benefiting from that service.
Senator Tiffany asked why the three Web developers had been changed from billable to rate assessment, and she wondered if the cost allocation was correct. Mr. Spencer said last session Web billing was new to the Department. The Division had billed the costs for Web page development in with the same cost pools providing actual hardware and maintenance for Web services. The billing method turned out not to be a good idea because there was not a one-to-one relationship between Web developing and Web hosting services. Currently the Web services rates for hosting a Web site were reduced and the cost for the Web page developers was pulled out of that cost pool and placed in the enterprise access cost pool. Senator Tiffany wondered if it was appropriate to keep all three Web developers and place them into an assessment cost pool because they could not be maintained in a billable cost pool. Senator Tiffany said the developer of her Web site spent a maximum of ten hours a month working on the site. Mr. Spencer said currently the DoIT was not billing out the Web page developers at an hourly rate. The developers were included in the domain name, session count, and storage volume rates. Senator Tiffany asked if there was a need for the three Web page developers under all of those assessments.
Assemblyman Beers said there had been discussion with another state agency about the high cost of the domain fee. Mr. Beers said he now understood why the fee was so outrageously high. He asked why the Web page developers were not billed out hourly since the work performed by the developers was specific to each agency at a particular hourly rate.
Ms. Person noted Web site development had been a new service during the current biennium and Nevada was one of the first states to develop a billing methodology. The DoIT had worked with a consultant to develop the breakdown between the domain name, session counts, and storage, to pay for the services. Ms. Person acknowledged that the billing methodology might not have been perfect, but felt it was “good enough to start with.”
Mr. Beers again asked why the developers were not billed hourly based on the actual work performed.
Mr. Savage said some Web work “does fall into that class.” Some of the work was more generic to the state, specifically the upgrade of the state’s Web site, which included designing the standards and procedures that all the Web sites were going to use. The charges were not attributable to an individual Web site, but to the entire state enterprise. Mr. Beers asked if designing the set of standards was a one-time process and Mr. Savage answered affirmatively.
Mark Blomstrom, Deputy Director, Communications and Computing Division, DoIT, said the Web page developers performed primary tasks that were generic for the state. Maintaining the state’s Web page required approximately a 1.5 full-time equivalent position (FTE). The developers generated guidelines and policies for use by the entire state and the state Webmaster was working in favor of the entire state at a fairly high level. Time was also spent on training and policy development and the information and coordination of all of the state’s Webmasters. Mr. Blomstrom acknowledged the Web page developers were working on individual agency Web sites, but that task was not primary to their duties.
Mr. Beers said it appeared that the 1.5 FTE could be eliminated from the budget if money ended up being tight. Mr. Savage said perhaps the 1.5 FTE could be eliminated and the Web site would continue to function, however, the quality of the site would gradually degrade. Mr. Beers asked if a portion of what the developers were doing was attributable to specific agencies. Mr. Blomstrom answered, “Yes.” He said the Web developers provided services to small state agencies, boards, and commissions that maintained low‑level Web sites in order to meet the executive requirement for a Web page presence. Mr. Beers asked if the billings would all be non-General Fund. Mr. Spencer said that remained to be seen. Some of the smaller agencies were fee-based; some received funding from the General Fund. If the developer positions were eliminated, there would be agencies developing their own Web sites with varying degrees of skill. The resulting Web sites might not function together properly and might not follow the standards. Mr. Spencer thought the Department and the Governor’s Office would agree on the importance of ensuring Nevada’s image was as high as possible and there needed to be some Web site standardization. Mr. Beers acknowledged that the developers did a fine job and did not think the Subcommittee was recommending eliminating the positions. However, Mr. Beers thought the developers should be direct billed, not placed into the cost allocation.
Mr. Savage did not know if the actual distribution costs between the two charging methodologies would be significantly different and did not know that there would be a savings in excess of the additional costs incurred by the billings that would be required for the services. Mr. Savage said the Department could provide an analysis. He thought the magnitude of the cost savings would be small and perhaps not be positive.
Senator Tiffany said the Subcommittee was concerned with the appropriateness of the cost allocations. She thought Mr. Beers was asking if moving the Web developers from billable to the rate assessment was an appropriate cost allocation. Senator Tiffany said the majority of agencies had indicated their Web page developers were employed by the agencies.
Senator Tiffany referred to the software executive position that had been direct‑billed to the Department of Human Resources (DHR) during the 2001‑2003 biennium. The DHR had indicated a full-time position was no longer required, so the position was moved under the Chief Information Officer (CIO) function for support. Senator Tiffany was concerned with the correctness of the cost allocation for building the rate model and also wondered if the position was necessary. She said it appeared the Department was trying to “find a fit” in order to keep the position.
Mr. Savage said the charging methodology originally devised to allocate the cost for the software executive position turned out to be unworkable. The actual allocation of the DHR software executive time was different than what had been projected because the actual needs turned out to be different. The change was a charging methodology that would allocate costs based on the actual project management work provided. Mr. Savage explained that in addition to the DHR project management work, the role of the executive would be expanded to cover the entire Executive Branch that DoIT serviced with programming and project management staff. The role of the executive position was being expanded, simplifying the charging methodology and making it more appropriate so the costs would be allocated over the projects actually worked.
Senator Tiffany reiterated that it appeared the executive position would be supporting a great deal of the CIO functions and there was already a project manager. The DoIT was assessing the position rather than billing directly. Senator Tiffany asked if there was a duplication of management. Because of the expense of maintaining the software executive position, Senator Tiffany said she was not certain it made sense to keep the position. Mr. Savage thought it made sense functionally to keep the position, and he deferred to Ms. Person to address the allocation issue.
Ms. Person said the intent was not to have the software executive position provide major support to the Chief Information Officer (CIO) function during the next biennium. The scope of the position had been expanded to include the entire Application Design and Development (AD&D) unit (BA 1365), which included applications, design and development, database administration, project management, and Web page development services. Ms. Person said the cost of the position was included into that specific budget account and allocated across all of those services. Ms. Person clarified that none of the charges were dedicated directly to the CIO.
In response to a question on the positions posed by Senator Tiffany, Ms. Person offered to provide information on the number of positions the software executive would manage and the number the AD&D project manager would manage.
Mr. Savage said the software executive position would have responsibility for NOMADS, AD&D, and database staff, and the number of staff was close to 40 or 50 positions. He also indicated the Department would provide the actual numbers.
Senator Tiffany said the Subcommittee would have to determine if the case had been made for the rate model based on the change from direct billing to assessments, reclassifications, and the three new cost allocations. Changing any of the areas would require additional review of the rate model. Mr. Spencer acknowledged that any changes made to the costs included in the rate model could have an impact on other rates.
Co-chairwoman Chowning understood the other project managers were direct‑billed and she asked why the software executive position was different. She also asked the impact of eliminating the position. Mr. Savage said the manager of the AD&D unit would not be spending significant amounts of time on any one project, but would spend the majority of time managing the unit. The manager had responsibility for all the AD&D staff and through the rate model staff time was billed to projects in proportion to the amount of time worked on the projects. Mr. Savage clarified there were 64 FTE positions in the AD&D unit.
Senator Tiffany asked if the $200,000 included in The Executive Budget for a security risk assessment was really needed. She also asked if the four additional positions were necessary. Mr. Savage said more than the two existing positions and four new positions were needed to do the job correctly. He explained there were known security practices and issues and there were unknown security practices and issues; the study would identify the unknown areas. Mr. Savage said the Department had estimated 40 FTE positions would be required to perform the security functions for the entire Executive Branch, but realized that number was not realistic. Senator Tiffany noted that DoIT “was not the Pentagon” and she said none of the agencies had indicated to the Subcommittee that more information technology security was needed. It appeared the agencies were already addressing the issue of information technology (IT) security.
Senator Tiffany referred to a document presented at a prior Subcommittee meeting that included information on the infrastructure, computer security, telecommunications network, security passwords, and access codes for secure software. She noted all of the applications listed were already in place in the Department. Senator Tiffany asked for additional information on the four new positions included in the budget.
Mr. Savage said the document referenced by Senator Tiffany covered specific requirements for confidential documents. He pointed out that the document was never intended to be a listing of all the security tasks that needed to be performed for the proper levels of IT security. Mr. Savage said security had a “weakest link” problem that could not be ignored. When all the agencies were linked, the entire state information technology system was vulnerable. Mr. Savage emphasized that the Department was only requesting funding to cover the minimum areas that needed to be addressed. He said the state of system backups within the Executive Branch fluctuated enormously. Mr. Savage explained that generating an inventory of all the state systems and making certain there were appropriate backup mechanisms that had been performed would keep the four recommended positions busy for months. Senator Tiffany asked what agencies were actually at risk for security problems. Mr. Savage reiterated that as long as security holes existed anywhere in the state’s information systems, the entire infrastructure of the state was at risk.
Senator Coffin referred to the positions that Senator Tiffany was questioning and he noted that Mr. Savage kept returning to the “weakest link” factor, which was important. Senator Coffin agreed that one weak link could create a security problem and said he liked the analogy of the Pentagon example. He said the terrorists of September 11 had reached the Pentagon by way of an obscure, small airport that had light security. Senator Tiffany explained the issue was the appropriateness of DoIT’s assessments to the agencies. The infrastructure security, which included firewalls and making certain the technology lines were secure, was the responsibility of the DoIT. Senator Tiffany indicated other issues included the specific agencies and their needs, billable versus assessed, and if there was a need for six positions even though a study had not yet been completed to determine what agencies might be vulnerable. The high-risk agencies, such as Public Safety or Employment Security, already had security mechanisms in place. Senator Coffin felt the larger issue was the security of the entire technology system.
Co-chairwoman Chowning said it appeared the DoIT had already decided what was needed but was still requesting a study, and she also thought there should be a determination made on the need for the $200,000 study.
Mr. Savage did not think he had succeeded in explaining the security issue and stated the four new positions would address the security issues that had been identified. He reiterated that the study would address the unknown security problems that might occur. Mr. Savage pointed out security was not just one factor, and the DoIT understood only the security issues that had been worked on to date. Mr. Savage said a billable service implied service was optional, and he emphasized security for information systems should not be optional.
Senator Tiffany asked the Department to explain the distinction between the roles of the DoIT Director and the state CIO and the benefit of the CIO position. Mr. Savage said the main benefit of the CIO position would be the avoidance of duplication and incompatible technology systems, such as the incompatible radio systems between the Department of Transportation, the Department of Public Safety, Emergency Medical Technicians, and a host of other first responders. If there had been a coordinated, enterprise-wide approach the incompatibility of the systems would not have occurred. Senator Tiffany asked why a director could not provide the same service. Mr. Savage said if there were no exemptions to the Department’s operations, part of what Senator Tiffany suggested might be true. The coordination function enterprise‑wide was a new and distinct function and as the DoIT Director, Mr. Savage said he had been providing some of the functions at the Governor’s direction and would continue to do so at the Governor’s direction. However, the CIO position should be part of the overall legal organizational infrastructure of the state.
Senator Tiffany again asked Mr. Savage to explain the difference between the job descriptions of a director versus a CIO and explain what the benefit would be to the state. Mr. Savage said the director’s position was responsible for providing operational information technology services in the 43 different cost pools. Senator Tiffany added that the director set policies and procedures and standards and protocols. Mr. Savage said the CIO would have responsibility for information technology enterprise-wide rather than on an isolated basis. Mr. Savage said the CIO position would “bring in for policy coordination, not for service provision.” Senator Tiffany said the Department already had a planning division and policy and standards were already being set that were implemented through operations. Mr. Savage acknowledged there were embryonic beginnings of planning, policy, and standards within the Department’s structure. However, those were not sufficient to maximize the efficiency of the information technology operation statewide. Senator Tiffany asked Mr. Savage to provide three benefits resulting from the proposed CIO position. Mr. Savage replied and said the three benefits were interoperability, more efficient operation, and more coordination, none of which were being fully realized at this time.
Mr. Beers said it was his understanding that the director was responsible for ensuring uninterrupted delivery of services and infrastructure and the CIO was “the thinker.” Mr. Savage said the description was essentially correct. Mr. Beers was intrigued by the accounting aspect and effect of the change in allocation and said it appeared that the director and the immediate assistant directors were being allocated to the pools inside the DoIT and then allocated out to agencies. The recommendation was to take the same group, unless the Subcommittee made changes, and allocate positions to all agencies rather than going through the pool. Mr. Beers wondered if the recommendation would be an accounting benefit or a policy benefit.
Edward Perry, consultant to the Department of Administration and the DoIT, said he had worked with DoIT’s rates and the statewide cost allocation plan for a decade. Mr. Perry said many of the recommended changes in the rate model were based upon his discussions with the DoIT. Mr. Perry explained the state used the rates to build federal programs and, as such, had to follow federal guidelines. In accordance with federal guidelines, any cost of service billed to a federal program had to be distributed to all users of the service in proportion to the benefit received. If the CIO had global responsibility and global coordination over all state agencies, it was not fair to bill only the Department’s customers. Spreading the CIO costs over only DoIT customers would conflict with federal cost standards. Mr. Perry said the same constraint drove several of the recommended changes in the cost allocation.
Mr. Perry said the Department’s business had changed dramatically over the past decade. There was no longer the same connection between service and customer; the customer base was expanding, but the service billings were not. As an example, historically costs for the state telephone operators had been included with long distance services, which in the past had been appropriate. Currently the operators had little to do with outgoing long distance traffic and the operator services were being billed inappropriately. Mr. Perry said within the context of building a relationship between the cost and the benefit, there were many conventions and standard ways that had been accepted by the federal government. The federal cost standards indicated the process should be completed in a reasonable manner.
Senator Tiffany recognized the Subcommittee would have to make a policy decision whether there needed to be “a thinker” called a CIO and the staff under the CIO, and whether there would be a benefit to the state in moving from a Director to a CIO. Senator Tiffany thanked Mr. Perry for his explanation of the assessment.
Mr. Beers said he had received an e-mail from a DoIT employee that indicated there were approximately 50 agencies, mostly boards and commissions, that had non-state developed Web pages. Mr. Beers thought the majority of boards and commissions were not funded by the state General Fund. Mr. Beers said, “That is an opportunity to lighten the load on the General Fund.”
Senator Tiffany asked the DoIT to provide information on the new and restored positions, particularly the new project manager position and the workloads of the project management staff.
Angela Grato, Software System Executive, Communication and Computing Division, DoIT, said she believed the new project manager position, which was requested by the Division of Mental Health and Developmental Services (MHDS), would oversee replacement of the AIMS (Advanced Information Management System). Ms. Grato said the position was included in the Department of Administration’s budget request. She said the project manager position would be required if the request was granted to replace the system. Ms. Grato said the request for a full-time project manager was made by the MHDS. The Department estimated 10 to 15 percent of the total cost of the project should be devoted to project management. Senator Tiffany asked Ms. Grato to provide Subcommittee staff with documentation to support the need for the three full‑time programming positions.
Senator Tiffany asked what the impact would be if the software system executive position were eliminated. Mr. Savage said projects would talk to each other less, there would be less coordination, and fewer people to “go fight the fires” that invariably surfaced in development projects. Also, more money would be expended fixing “things that break.” Mr. Savage said the DoIT would end up spending more money without the system executive than with the position.
Senator Tiffany asked for an explanation of the recommendation to reclassify 23 positions during the 2003-2005 biennium. Mr. Savage said the reclassifications were based only partially on workload. The type of workload changed rapidly within the organization. Mr. Savage thought the number of reclassifications was remarkably stable. The general policy was to change positions to correspond properly with the workload. Senator Tiffany asked Mr. Savage to prioritize the reclassifications. Mr. Savage said the DoIT had a lot of good people who remained with the Department not because of money. He thought many of the employees would voluntarily work out-of-class. Mr. Savage explained that a person working out-of-class could submit an NPD‑19 to have the position reclassified. Reclassification was not granted based on an agency’s ability to fund the reclassification. Senator Tiffany asked Mr. Savage to take the 23 positions that were recommended for reclassification and provide a listing of how the duties had changed and prioritize that list by critical need.
Assemblywoman McClain asked if the DoIT had used the Department of Personnel’s procedure for reclassification of positions. Mr. Savage answered affirmatively. He said a reclassification was based on work requirements as opposed to an individual doing a good job. The DoIT had used the appropriate NPD‑19 form required by the Department of Personnel. Ms. McClain asked about the approval process.
Ms. Person said approximately one year ago the DoIT had received a memo from the Budget Office requesting all recommended reclassifications be included in the budget request. The agency had looked at all the positions and looked at the specific positions that were performing duties above and beyond the job requirements. The NPD-19’s had been completed and submitted to the Department of Personnel and copies of the NPD-19s were included in the documentation provided to the Subcommittee. Upon approval of the Legislature, the reclassifications would be reviewed by the Department of Personnel as requested by DoIT. Ms. Person said the Department of Personnel had indicated NPD-19’s prepared for position reclassifications that were requested through the budget process were not reviewed until receiving approval through the legislative process. Senator Tiffany explained there would be an impact on the rate model if the reclassifications did not occur.
Senator Tiffany referred to the numerous position transfers that were recommended in the budget and asked for an explanation. Ms. Person said the DoIT was realigning units to have similar services grouped together. Ms. Person used Budget Account 1365 as an example. Currently there were applications, design and development programmers that were billable hourly. Programmer functions were closely related to project management functions. In the information technology industry programmers did graduate into project managers. It made sense to combine those two types of positions into the same budget account. The project managers were currently in the planning unit. Ms. Person said the database managers performed functions similar to programmers. Project managers, database managers, and programmers all worked on projects together; it made sense to bring the hourly billable DBA’s over to Budget Account 1365. The DBA’s were currently in BA 1385 and were the only hourly billable staff in that account. The DoIT was attempting to place the like functions and like billable functions into the same unit.
Senator Tiffany asked if the state agencies had requested the position transfers. Mr. Savage said the agencies did not request the transfers, but the change would be transparent because the agencies were billed for the services under the old way of organizing and would be billed for the services under the new scenario. Mr. Savage said the demand for individual services had increased in some cases and decreased in others; the amount of billable hours had been adjusted accordingly. Senator Tiffany said it appeared the need for the programmers, project managers, and the database administrators had declined. Mr. Savage said the need for programmers had declined and the need for project managers had increased. Mr. Savage said cross training of staff would allow individuals to move to locations of need, which was a much more efficient way of managing software services. The agencies would receive more efficient service and the overall rates would be lower due to the increased efficiencies.
Co-chairwoman Chowning asked if the funding for the services was included in the different budgets. Ms. Person answered affirmatively and said the costs associated with each of the transfers had been moved to the appropriate budget accounts and the cost pools and rates had been constructed based on the transfers. Ms. Person noted the transfers had not had a detrimental effect on the rates. Senator Tiffany said the Subcommittee was concerned that the efficiencies helped the DoIT, but perhaps had a different impact on the agencies. Senator Tiffany said an agency had complained about the change, and the fact that staff was not adequately trained in the correct areas had delayed a project for six months, and had almost cost the agency federal funding. Mr. Savage indicated there was no good solution to address the problem of new trainees. Senator Tiffany asked Mr. Savage to provide documentation that the Department had the proper number of programmers, project managers, and database administrators, and that the services would be billable to the requesting agencies. Mr. Savage agreed to provide the information.
Senator Coffin asked about the life span of the mainframe and said he understood replacement of R-35 was being considered. Mr. Blomstrom said according to the “Gartner Study” and using IBM as a baseline, the time frame was approximately eight years per generation. The given generation of equipment was good for eight years, but there were also overlapping generations. The DoIT was using two generations of equipment, the R-35 and the R-46. The mainframe upgrade, based on the Department’s recommendation, would be moved to a “Z series platform.” The platform had been on the market for approximately one year and would be placed into service in the Department approximately two years into the machine’s estimated life span. The Division would expect the Z series to be in service for five to six years from the date of installation, which would maximize the return on investment over a period of time.
Senator Coffin asked if the DoIT was set up to have a company other than IBM serve as the mainframe provider. Mr. Blomstrom said IBM was the dominant market force for mainframes. The Department had looked at the possibility of other mainframe providers and had conducted an analysis based on the cost of conversion. The primary problem was the vast amount of software that the DoIT already had.
Mr. Savage said the cost of converting from the existing IBM system to anything else would overwhelm the savings that might result from another available system. The Department had looked at transitioning some of the systems off of the mainframe onto some of the more distributed systems. However, there were always costs in transitioning from one system to another. A much higher fraction of the new systems would be developed on the distributed systems like the Unix system. The large Legacy systems, such as NOMADS and Unity, were likely to remain on the mainframe unless there was a major rework of those systems. Mr. Savage said when there had been a recommendation to move the Nevada Executive Budget System (NEBS) off the mainframe, what was actually developed was a formal methodology for evaluating a project to determine if it would be more effective to have it on a mainframe, a mid-range system, or a PC-based system. The evaluation included issues of technical supportability, cost, speed, and reliability. A program had to be extremely large for the mainframe to be considered as a solution. Senator Coffin indicated he was not comfortable with having one provider.
Mr. Blomstrom indicated no new mainframe programs had been implemented during the past two years. During the past six years, the Unix platforms had been increased from 1 to 8, and NT server platforms totaled 28. The first order of business in looking at any new application was cost. Mr. Blomstrom said the Department was making an effort through a methodical analysis process to identify the correct type of platform for each application.
Senator Tiffany said the Subcommittee might have to determine if there was a need for a mainframe upgrade if the applications were moving toward the Unix‑based servers or the NT-based personal computers.
Co-chairwoman Chowning said the funding included in The Executive Budget for the mainframe upgrade was $2.6 million. She asked the DoIT to provide Subcommittee staff with cost figures, the pros and cons of a mainframe upgrade, and an explanation of why $2.6 million appeared to be the best alternative.
Senator Tiffany said the Subcommittee might keep in mind the impact that the cost of a mainframe upgrade would have on the reserves. Senator Tiffany asked Mr. Blomstrom to provide information to the Subcommittee related to his philosophy on upgrading the mainframe, the time lines for any upgrade, and shifting new projects to the Unix-based systems.
Senator Tiffany asked why the DoIT preferred purchasing the upgrade, versus a lease. Mr. Spencer said a big consideration with lease versus purchase was the allowable cost; interest on software was not an allowable cost. Additionally, once lease payments were completed, the vendor had the right to repossess the property. Senator Tiffany wondered if leasing would provide more options on reducing the need for the mainframe and moving into the other types of technology. Mr. Spencer said a big consideration on whether to purchase another machine or convert was the associated costs to retrofit the programs currently running on the mainframe to a distributive system. Senator Tiffany emphasized she was not talking about converting. Mr. Savage indicated the vast majority of the programs, if not all of the new programs, would go onto distributed systems. Mr. Spencer said the Department needed to maintain a mainframe presence for the foreseeable future and was attempting to minimize the costs.
Senator Tiffany asked for an explanation of the capital improvement project that would increase the Computer Facility space from 14,400 square feet to 25,550 square feet. Mr. Blomstrom explained that the facility was completed in 1970 and the building had not had a major upgrade or renovation in terms of the equipment space. The facility was originally designed for 25 staff and the mainframe processing operations. Mr. Blomstrom acknowledged the size of equipment was not as large as in the past, however, the state had vastly increased the amount of equipment and the types of functions going on within the facility. The facility housed 46 staff, and the intent was to bring in another 13 positions. The 13 positions included: 5 data communication staff, 3 help desk staff, 3 PC LAN technicians, and 2 Unix support positions. The Department was also considering moving 2 state telephone operators to the facility. Some of the staff housed in the facility were working in hallways and were sitting on otherwise usable computer flooring. The space in the building was cramped. There was a need for additional space for equipment. In the last six years the number of Unix boxes had increased from one to eight. There were 28 NT servers and that number was expected to continue to increase. Mr. Blomstrom explained that there were also functions that were moved into the facility, such as the telephone PBX system, microwave communications terminal equipment, the entire Carson Campus cable system, and Datacom router switches. Mr. Blomstrom said the plan was to clear more space for equipment and actual operations and move the staff into the expanded area. The help desk would also be located in the expanded space. Senator Tiffany referred to the recommended expansion of the facility and asked Mr. Blomstrom to provide information on the square footage proposed to house staff and the square footage proposed for equipment. Mr. Blomstrom said he would be happy to work with the Public Works Board in order to provide the requested information.
Co-chairwoman Chowning referred to the $5.2 million included in the budget for the expansion and renovation of the Computer Facility and she asked if the facility could be upgraded and remodeled instead of expanding the facility. Mr. Blomstrom explained that a portion of the $5.2 million would be used for the rehabilitation and renovation of the existing facility. The building needed: 1) seismic inspection and retrofit; 2) heating, ventilation and air conditioning (HVAC) work; 3) plumbing work; 4) and electrical work. The balance of the $5.2 million addressed the expansion of the facility. Completing the work simultaneously would be cost-effective and would save money.
Co-chairwoman Chowning noted there were several budget areas that did not have performance indicators and asked Mr. Blomstrom to provide the indicators.
Senator Tiffany referred to the new equipment requested in the budget and asked Mr. Blomstrom to provide a prioritized list for all of the equipment.
FINANCE AND ADMINISTRATION-PERSONNEL (717-1363)
BUDGET PAGE PERSNL-1
Co-chairwoman Chowning opened the hearing on Personnel, Budget Account 1363, and referred to the Personnel/Payroll System General Fund repayment approved by the 1997 Legislature and asked if there would be a budget amendment to address an additional amount of $100,000.
Kim Foster, Administrative Services Officer, Department of Personnel, said through the cost plan recovery, the Budget Office had looked at the system implementation and determined how fast the system could be depreciated because the depreciation amount was eligible for federal reimbursement. The Budget Office had calculated the cost for the payback through the end of FY2002, so any costs incurred for FY2003 would be in addition to the payback amount as calculated to date. Ms. Foster said the Budget Office would reassess the payback in FY2005 and would build the additional dollars into the budget for the 2005-2007 biennium.
Senator Tiffany said she did not understand why the payback for the 2003‑2005 biennium would be skipped. Ms. Foster said the system development costs had been accumulated. The original projection for the cost of the system during the 1997 Legislature was approximately $7 million, and a payback schedule was developed and approved. The Department was paying back the amount at a rate of $466,000 per year. Senator Tiffany said there did not appear to be a payback included in The Executive Budget. Ms. Foster maintained the Department was not skipping the payback for the 2003 development costs. She explained the 2003 development costs were not yet known and had not been assessed. Senator Tiffany asked if the payback numbers would be available prior to the end of the current legislative session. Ms. Foster said the estimated numbers would be close and would be available prior to the end of the session. Ms. Foster said the Budget Office had projected $997,562 to complete the project. Senator Tiffany said the Subcommittee wanted to know if the payback amount could be included in the budget for the 2003-2005 biennium. Ms. Foster emphasized that inclusion of the payback amount in the budget would require recalculation of the assessment rates and would impact all state agency budgets.
Co-chairwoman Chowning asked why the 60-day operating reserve was less than half of the estimated reserve level of $1.2 million. Ms. Foster said the Department had met with the Budget Office and had discussions with the federal auditors about the high reserves. The Department had attempted to spend down the reserves to avoid a penalty. In order to most effectively use the state’s dollars, a determination was made to have a 30-day reserve because the Department planned to implement “a snatch and grab” process that would collect assessments on the first day of each quarter, which would fund the operating costs for that quarter and would avoid any cash flow problems.
Senator Tiffany asked what the impact would be on the rates if the Subcommittee decided to increase the Department’s reserves. Ms. Foster said the rates would increase. Senator Tiffany indicated she was not comfortable with the reserves included in The Executive Budget and thought the reserves should be at the $1.2 million level. Ms. Foster agreed to provide information on how increasing the reserves would impact the rates.
Co-chairwoman Chowning asked if the change to quarterly collections would provide more of an ongoing flow of assessment dollars versus the current system. Ms. Foster acknowledged the Department was planning on changing the method of collecting assessments, however, the change did not relate to the decision to go with the 30-day reserve. Ms. Foster said the assessments were currently collected up-front for the full year. Co-chairwoman Chowning asked Ms. Foster to let the Subcommittee know which was better, the 30-day reserve or the 60-day reserve, and why the selected reserve would be better.
Co-chairwoman Chowning felt decision unit E-276, which recommended a Discrimination/Harassment Investigation Unit, would be beneficial. However, she wondered if it would be feasible to increase the funding for training and other proactive measures so the decision unit would not have to be implemented. Co-chairwoman Chowning said the Department had indicated the proposed unit would result in reduced claim costs, and she requested information on how the Department reached that conclusion.
Jeanne Greene, Director, Department of Personnel, said the Department thought court costs would be reduced because the investigations would be conducted in a timely manner. As indicated in prior documentation provided to the Subcommittee, employees currently conducting investigations had other job responsibilities and were unable to proceed with investigations immediately. If the Department had three investigators assigned to discrimination and harassment investigations, the investigations could be conducted immediately by a trained investigator, which would add a great deal of credibility to the investigations. Ms. Greene said some cases were settled out of court due to the length of time involved in undertaking investigations and hopefully the new unit would eliminate court costs. Ms. Greene said the Department currently provided training in sexual harassment, but there was no tie between the training and the cases. The investigators would be able to work closely with the trainers and would identify areas that needed to be addressed in the training environment, which would hopefully reduce the number of claims. Co-chairwoman Chowning asked about other types of training provided by the Department, and Ms. Greene said an Equal Employment Opportunity (EEO) class was provided that covered all types of discrimination, including the Americans with Disabilities Act (ADA).
Senator Tiffany asked if the investigator would be aware of the agencies that had the most problems. Ms. Greene answered in the affirmative. The Department planned on collecting statistics, which would be shared with the Governor’s Office and the Attorney General’s Office. The Department would be able to identify specific departments, agencies, or programs where there seemed to be continuous problems and would then address those issues. Senator Tiffany asked if the Department could currently provide information on the most problematic agencies. Ms. Greene said she would not be able to provide the information because the Department “was not in the loop”—the Attorney General’s Office was. Ms. Greene said the addition of the investigation unit would place the Department in the loop. Senator Tiffany asked for additional information on why there would be fewer court cases. Ms. Greene referred to a specific case that went to court because the investigation was completed internally. The employee that conducted the investigation worked directly for the department director so the person bringing the case said there was bias. Ms. Greene felt an outside investigator would have prevented the bias claim.
Senator Tiffany asked if the Department conducted follow-up to determine if once training was provided the policy was implemented. Ms. Greene said all employees had to sign statements indicating they read and understood the policy. Ms. Greene noted that another decision unit would increase training and require refresher training for employees on a periodic basis.
Co-chairwoman Chowning asked if the goal was to try and reach settlements rather than going to court. Ms. Greene said, “Yes, if there is liability to the state that would be the case.”
Co-chairwoman Chowning referred to decision unit E-277, which recommended the establishment of a Certified Public Manager Program (CPM) to meet the accreditation standards of the National Certified Manager Consortium. She asked if the costs should be the responsibility of the agency requesting the training. Ms. Greene explained the costs were included in the Department’s budget for the 2003-2005 biennium because the agencies did not have an opportunity to build the costs into their budgets. Ms. Greene believed after the next two years the Department would contract with the instructors, but the agencies would pay for their employees to go through the program.
Co-chairwoman Chowning said the Department indicated the state of Oklahoma had realized a $6 million savings through implementation of the CPM program. She asked Ms. Greene to compare the training programs in Oklahoma to the programs in Nevada. Ms. Greene said there was also documentation from the state of Mississippi that had realized the same types of savings. Ms. Foster said the Department had not made a direct comparison between the types of programs offered in Oklahoma versus Nevada. The CPM program was an aggressive program that required the student to participate in a certain number of hours and there was testing. Through the process, the student was expected to do a quality improvement project by identifying a project within an agency that needed improvement. At the end of the program, the resulting recommendations had to be implemented. For example, in Oklahoma changes were made to child enforcement collections policies and procedures, which resulted in $1 million in savings. In Mississippi one of the quality improvement projects involved the method used to process audits. There was a large backlog of audits, and the project put forth a new method of processing the audits, which resulted in a savings in excess of $1 million.
Co-chairwoman Chowning asked about the funding that was requested for contracting services and if the services could be provided in-house. Ms. Foster replied that the Department would be funding teacher contracts out of the dollars that the students paid. The cost for one level, and there were six levels in the CPM program, was $600 per student. Ms. Foster stressed the Department did not have the resources to fund the teacher contracts.
Ms. McClain said there had always been a problem with the state training people and having those individuals move into county employment. She asked if there was a problem with training people to become better managers, which might result in losing more employees. Ms. Greene said the Department was looking at improving the quality of the state’s managers and administrators. She felt the trainees would feel a great sense of satisfaction by going through the CPM program. Perhaps there would be more loyalty to the state because of the investment. Ms. Greene explained that the state would have a large number of retirements in the upper management levels and she thought training would result in supervisors and managers being promoted up through the ranks into the vacant positions. Ms. McClain acknowledged the program was a great idea.
Co-chairwoman Chowning said decision unit E-282 would add a part-time position to provide training in the rural areas of the state for the prevention of sexual harassment in the workplace. She asked if decision units E-276 and E‑282 could be combined and then asked why the training was needed in the rural areas. Ms. Greene said decision units E-276 and E-282 were tied directly together. The Department was asking to increase a half-time Equal Employment Opportunity (EEO) Officer to a full-time position, which would allow the officer to provide services in the rural areas and provide additional training for all employees and managers. Additional travel money was also included in the budget to cover travel costs to the rural areas. Co-chairwoman Chowning asked what the percentage was statewide for discrimination, sexual, and harassment suits. Ms. Greene felt the vast majority of suits were in the urban areas, however, the rural areas also required services. Ms. Greene said the only additional cost was $2,500 for travel from Carson to Reno and to the rural areas. Ms. Greene said the service to the rural areas would be one benefit, but was not the driving force for increasing the half-time position to full time.
Senator Tiffany asked about the state employees in the rural areas that would require training. Ms. Greene said there were Department of Transportation stations throughout the rural areas, Human Resource facilities, Conservation, Natural Resources, and such. Senator Tiffany asked if the services had been requested. Ms. Greene said the Highway Patrol had requested refresher training for the patrolmen. She noted it would be more cost-effective for the Department to send one trainer to Elko and bring in staff from the rural areas. Senator Tiffany asked how the position would be cost allocated. Ms. Foster said all the Department’s positions were paid out of BA 1363. Ms. Greene reiterated that providing services in the rural areas was only one part of the position’s assignments. The majority of the training would continue to be in the urban areas. Ms. Greene explained some training was already provided in the rural areas.
Co-chairwoman Chowning referred to decision unit E-285, which requested $50,000 each year of the 2003-2005 biennium for a consulting service to assist with recruitment since approximately 39 percent of state workers would be eligible for retirement in the next ten years. Co-chairwoman Chowning said the agency had been successful in recruiting efforts and asked why the consulting services were needed. Ms. Greene said the consultant would develop a profile of Nevada’s most critical workforce needs related to the long‑range business plans of the agencies; the Department recruited for vacancies. The Department did not have the resources or expertise to look at the long-range plan. In response to a question from Co-chairwoman Chowning, Ms. Greene stated in the first year of the biennium $50,000 would be used for a consultant to help establish the plan; the second year the $50,000 would be used to develop the program to implement the strategies. There would be no ongoing costs.
Ms. McClain asked if decision unit E-285 would tie into the leadership training classes. Ms. Greene said the Department would be able to identify what skills would be needed in the future and training programs could be developed to address the skill areas. Ms. McClain asked if the study would include a review of the different positions and would determine a reasonable compensation rate. She then asked if a full study had been conducted of all the agencies. Ms. Greene explained the study would not look at compensation, but would look at the workplace skills that would be needed in the future. The consultant would do more than just travel around the state talking with agency directors. The consultant would also be looking at trends in the nation and in the state. Ms. McClain thought it made sense to look at compensation. Ms. McClain again asked if the state had ever done a “class and comp” study. Ms. Greene said statutes required the Department to conduct a salary survey every two years. The survey included salaries and benefits paid to the employees of both the public and private sectors within the state and the ten western states. The report was provided to the Legislature every two years.
Ms. McClain referred to reclassification comments made earlier in the meeting by the DoIT staff and asked made the final decision on position reclassifications. Ms. Greene said the Department had analysts that conducted the studies. An analyst would meet down with the employee requesting the reclassification, go through the paperwork and ask for clarification. The analyst might observe the employee performing job duties, would talk with the supervisor to verify that all of the information provided was accurate, and then the Department made a determination. There was an appeal process.
Co-chairwoman Chowning asked what happened when a budget was approved by the Legislature that included reclassifications, and the Department did not approve the reclassifications. Ms. Greene said the budget did not get changed. Co-chairwoman Chowning thought the system was “backwards and upside down.” Ms. Greene said that in the past, the Department had received letters from Senator Raggio that indicated funding had been approved for reclassifications, but the responsibility of the Department was to determine the appropriate classification. Ms. Greene noted that the Department approved 95 percent of the reclassifications approved by the Legislature. Ms. McClain felt the reclassification process was a “backdoor way” of getting an employee a raise. Co-chairwoman Chowning said she thought the reclassification justification should be made prior to approval of the budget rather than after approval. Ms. Greene said a reclassification was not a raise, but rather compensated the employee for the duties and responsibilities performed.
Senator Tiffany asked Subcommittee staff if the consultant should be included in the budget or included in a bill.
Mark Stevens, Assembly Fiscal Analyst, Legislative Counsel Bureau, said the consultant could be included in either. In the DoIT budget there would be two studies; one would be the $200,000 security study that was built into the DoIT budget and $125,000 in the Department of Administration budget for information technology services. Mr. Stevens thought the reason the consultant recommended in E‑285 was not included in a one-shot or separate bill was because there was no one-shot money available. There would be some supplemental appropriations on passage and approval, but there were no surplus funds available for separate bills. There could be a separate bill with an effective date of July 1, 2003, which would do the same thing.
Senator Tiffany said a number of agencies had human resource services and she asked if the study would also apply to those agencies. Ms. Greene said all agencies would be included, including the University and Community College System of Nevada (UCCSN) if they elected to participate.
Co-chairwoman Chowning asked about decision unit E-281, which recommended converting the existing indexing records system to digital imaging technology. It appeared sharing the existing system with the Library and Archives or the DoIT would result in a reduction of the funding request. Ms. Greene said the Department had worked with the Department of Cultural Affairs, Micro Graphics Division, to determine the costs if the system was shared. The projected savings was approximately $17,000. Ms. Greene thanked Senator Tiffany for her recommendation on sharing the system. Co-chairwoman Chowning commended Senator Tiffany and the Subcommittee on the recommendation.
Co-chairwoman Chowning asked about the occupational studies. It appeared the fiscal impact was more than originally recommended. Ms. Greene said in order to arrive at the costs, the Department had looked at all of the positions that were moving using step 5 on the salary schedule. The Budget Office included the actual step of the employee occupying the position. The Budget Office had also included a fringe rate of 28.8 percent, which was not included in the Department’s estimates. There were also some positions that the Department thought would be moved to the counties, so those additional costs were also included in the budget.
Co-chairwoman Chowning thanked the Department for implementing the policy that excluded an employee’s social security number on the time sheet, and recognized that the implementation costs had been much less than approved. Co-chairwoman Chowning felt that too many times employees worked diligently and did not receive the praise needed.
Co-chairwoman Chowning adjourned the meeting at 10:56 a.m.
RESPECTFULLY SUBMITTED:
Linda J. Smith
Committee Secretary
APPROVED BY:
Senator Sandra Tiffany, Co-chairwoman
DATE:
Mrs. Vonne Chowning, Co-chairwoman
DATE: