MINUTES OF THE
JOINT Subcommittee on
General Government
of the
Senate Committee on Finance
AND THE
Assembly Committee on Ways and Means
Seventy-second Session
March 28, 2003
The Joint Subcommittee on General Government of the Senate Committee on Finance and the Assembly Committee on Ways and Means was called to order by Chairman Sandra J. Tiffany at 8:12 a.m., on Friday, March 28, 2003, in Room 2134 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
Senate COMMITTEE MEMBERS PRESENT:
Senator Sandra J. Tiffany, Chairman
Senator Dean A. Rhoads
Senator Bob Coffin
Assembly COMMITTEE MEMBERS PRESENT:
Mrs. Vonne Stout Chowning, Chairman
Mr. Bob Beers
Mr. Joshua B. Griffin
Ms. Kathyrn A. McClain
Mr. David R. Parks
STAFF MEMBERS PRESENT:
Gary L. Ghiggeri, Senate Fiscal Analyst
Bob Guernsey, Principal Deputy Fiscal Analyst
Steven J. Abba, Principal Deputy Fiscal Analyst
Michael J. Chapman, Program Analyst
Julie Brand, Program Analyst
James D. Earl, Committee Secretary
OTHERS PRESENT:
Crystal Jackson, Commission Secretary, Public Utilities Commission of Nevada
David Noble, Assistant General Counsel, Public Utilities Commission of Nevada
John P. Comeaux, Director, Department of Administration
David McTeer, IFS Project Manager, Department of Administration
William Chisel, Chief, Division of Internal Audits, Department of Administration
Michael J. Colburn, Executive Branch Auditor, Internal Audits, Department of Administration
Lyn Callison, Purchasing Officer, Division of Purchasing, Department of Administration
Keith Wells, Acting Administrator, State Motor Pool
Mary C. Keating, Administrator, Administrative Services Division, Department of Administration
Bryan Nix, Senior Appeals Officer, Hearing & Appeals Division, Department of Administration
PUBLIC UTILITIES COMMISSION OF NEVADA
Public Utilities Commission – Budget page PUC-1 (Volume 1) Budget Account 224-3920
Senator Tiffany:
Copies of the closing list have been handed out (Exhibit C. Original is on file in the Research Library.). We have already had a hearing on this budget account (B/A), but we need to clean up a few issues. We just learned of the introduction of Senate Bill (S.B.) 414. Would you explain the contents of that bill?
SENATE BILL 414: Repeals prospective increase in number of commissioners comprising Public Utilities Commission of Nevada. (BDR S-1255)
Crystal Jackson, Commission Secretary, Public Utilities Commission of Nevada:
This bill was submitted by the Department of Administration to repeal a statutory provision that would have expanded the number of commissioners from three to five effective October 1, 2003.
Senator Tiffany:
Why was the decision made to repeal the expansion put on track last session?
Ms. Jackson:
I believe it was the expense of the legislation that prompted this action from the Governor’s office. We are looking at about $1.2 million to implement expansion to five commissioners.
Senator Tiffany:
What is the status of a possible merger of the Transportation Services Authority into the Public Utilities Commission of Nevada (PUC)?
Ms. Jackson:
I am not aware of a bill. We did receive a request from a Legislator asking the PUC to put together a proposal to combine the two agencies. We have done that and provided the result to the Legislative Counsel Bureau fiscal staff.
Assemblywoman Chowning:
Since the budget does not include funding to expand the PUC, what will happen if the bill does not pass?
Ms. Jackson:
We have prepared a separate module. Our plan is to go before the Interim Finance Committee (IFC) to request additional funding if the expansion provision in current statute is not repealed. We would do this before October 1.
Senator Tiffany:
What committee will hear that bill?
Ms. Jackson:
It will be heard in the Senate commerce committee. I do not know when it is scheduled.
E-501 Accessible, Flexible, Cost-Efficient Government – Page PUC-3
Senator Tiffany:
Is the hearing officer contemplated in enhancement module E-501 a new position? Are there other positions like this one?
Ms. Jackson:
This is a new position. Several months ago the PUC revised sections of its administrative code to provide for a hearing officer. This position is not currently in the unclassified pay bill. The commission is running a pilot program to address workload issues. We are using legal staff within the agency to perform the functions of a hearing officer until such time as we get the position.
Senator Tiffany:
Do you have a job description for the position? Does this position have to be filled by an attorney?
Ms. Jackson:
It is our preference that the person in this position have a legal background. The position is that of a presiding officer like a commissioner. Currently our commissioners have administrative attorneys on staff. We envision the person in this position not needing an administrative attorney.
Senator Tiffany:
What will be the impact of this position on caseloads?
Ms. Jackson:
We anticipate this position will handle complex cases such as those involving small water utilities. Many of these cases involve considerable technical information that results in an associated lengthy process. They require travel to remote areas. It is difficult to pull commissioners away to expend time on this type of case. We expect the hearing officer position will allow us to resolve cases more efficiently.
Senator Tiffany:
Is the position designed to help with the different types of cases handled by the commission?
Ms. Jackson:
That is correct.
Assemblywoman Chowning:
Who does this work now? Is there an increase in caseload that would justify this position?
Ms. Jackson:
Several cases have been assigned to a staff member acting in the capacity of a utilities hearing officer. This is being done on a trial basis. We have had several cases move through our trial procedure to a vote by the commission. We have the workload to support this position. We receive a number of consumer complaints and cases involving small water utilities. It is difficult to divert commissioners to these proceedings from traditional ratemaking cases. Ratemaking proceedings are often complex and time-consuming. One of the consequences of ratemaking procedures is that smaller cases have been delayed in the queue. Some commission proceedings have a statutory deadline associated with them. Commissioners are spread quite thin, and our cases back up accordingly. We want to assign certain cases to a hearing officer immediately so that they can be processed more quickly through the hearing and order-drafting stages. A hearing officer would act in ways similar to a commissioner but without a vote in the final commission decision.
Senator Tiffany:
Why was this type of position recommended in light of its unique functions?
Ms. Jackson:
The expense associated with a hearing officer is less than the expense associated with an additional commissioner.
Senator Tiffany:
Is the requested hearing officer a consequence of not increasing the size of the PUC from three to five commissioners?
Ms. Jackson:
Exactly.
Assemblywoman Chowning:
Can you provide staff with backup information so that we can have a clearer picture of the position? Are attorneys doing the work now?
Ms. Jackson:
Yes, the people are attorneys.
Assemblywoman Chowning:
It sounds as though the hearing officer should be an attorney, but I did not hear you say that would be a necessity.
Ms. Jackson:
We are looking for a person with a legal background and have included that in the job description. We will be happy to supply backup information.
Senator Tiffany:
Does the policy analysis staff continue to conduct research and analyze evidence in contested cases? Does it still draft decisions for the commissioners?
Ms. Jackson:
Yes, members of the policy analysis staff perform that function.
Senator Tiffany:
How does their work differ from that of the general counsel’s staff when reviewing petitions for reconsideration?
Ms. Jackson:
I think I understand your question. The policy analysis group assists commissioners during the administrative phase of cases. They provide technical guidance and research while a case is being heard. The function of the general counsel’s office on petitions for reconsideration is to review those petitions. This takes place after the commission has made a decision and a petition to reconsider that decision has been filed.
Senator Tiffany:
Are we dealing with different functions, one while a case is going on, and the second function concerned with the possibility of a case going before the commission a second time?
Ms. Jackson:
That is correct. Additionally, members of the policy analysis group are not attorneys. Attorneys are in the general counsel group.
Senator Tiffany:
Are contested cases before a final decision? Is the general counsel’s office involved only after a decision? I am trying to understand the difference between a contested case and a petition for reconsideration, and how the two functions of staff are related.
David Noble, Assistant General Counsel, Public Utilities Commission of Nevada:
The general counsel’s office looks at the legal aspect of all proceedings before the commission both before and after there is a decision. The policy analysis group contains economists who consider the financial intricacies of a case.
Senator Tiffany:
Let us turn to the mill assessment on the gross intrastate revenues of all public utilities, the funding source for the PUC. Will the budget office be coming forward with an amendment that will have the effect of reducing the amount in the reserve account over time?
Ms. Jackson:
Our budget was built around an assessment of 2.5 mills. During the hearing before the Assembly Committee on Ways and Means, the suggestion was made that we build a budget around an assessment of 2.25 mills. We have made that adjustment and have submitted it to the budget office and to the Legislative Counsel Bureau fiscal staff.
John P. Comeaux, Director, Department of Administration:
The amendment was sent forward yesterday.
Assemblywoman Chowning:
We are going to start closing budgets next week. We want to ensure the amendment arrives. Also, if there were five commissioners, would the reduction in mill rate still bring in sufficient income to cover PUC expenses?
Ms. Jackson:
Yes, it would.
Senator Tiffany:
We will close that budget account and turn to B/A 101-1340. There are continuing operations and maintenance issues associated with the Integrated Financial System (IFS). That budget is moving into a Department of Administration account from a Department of Information Technology (DoIT) account. Why has the amount increased by about $5000?
DEPARTMENT OF ADMINISTRATION
Budget and Planning – Budget page ADMIN-1 (Volume 1) Budget Account 101‑1340
Mr. Comeaux:
The costs were not in the DoIT budget; they were in the IFS budget. The increase in cost in enhancement unit E-910 is attributable to increases in DoIT charges. The charges being transferred are for Oracle software, maintenance for IBM hardware, and DoIT server support. The increase is in those assessments.
Senator Tiffany:
We want to address the two technology funding budgets later.
Mr. Comeaux:
I would like to introduce Dave McTeer. He is currently the IFS project manager. Should B/A 101-1320 be approved, he will become the chief of the new division associated with the technology improvement plan.
Senator Tiffany:
Does your position involve participation in technology committees? Will you be able to bring a financial and administrative component into the technology oversight process?
David McTeer, IFS Project Manager, Department of Administration:
I currently sit on a number of State information technology (IT) committees. I co-chair the architecture and planning committee, and I sit on the security and IT project oversight committees. Representing the Department of Administration and the budget director will be a collateral duty of mine. I will attempt to bring financial and budgetary perspective to the State’s technology issues.
Senator Tiffany:
Is your background in technology and finance?
Mr. McTeer:
My background is in technology and project management. I have managed private industry projects of various types.
Senator Tiffany:
We have considered a contingency fund in the operation budget to assist technology projects. Is the establishment of your position a precursor to the implementation of that concept?
Mr. Comeaux:
We did not really conceive of this position in that manner. However, it would certainly facilitate that oversight function in the future. We also plan that B/A 1325, involving technology project funding, be overseen by Mr. McTeer from a financial management standpoint.
Mr. McTeer:
I have a varied background accumulated over 40 years. I have experience in finance, operations, project management, and technology. I have worked for Hewlett-Packard and Union Carbide for over 30 years. I have worked on the IFS project since its inception 6 years ago.
Senator Tiffany:
Why should we fund an external contractor to evaluate current IT services as envisioned in E-500?
Mr. Comeaux:
We do not have the internal expertise to independently accomplish what needs to be done in the limited time we have. Two years ago we established a pilot project to decentralize some IT functions. We were going to consider this during the interim and provide a report containing recommendations. We did not get that done. Our recommendation to the Legislature was to leave things in place and do nothing until we could do a study. The expertise is in DoIT, but frankly, we feel an independent examination is required. We want to determine the best way to provide various IT services. We will need to purchase outside expertise.
Senator Tiffany:
What about the internal audit division? I think it has done a superb job in assessing department needs and providing IT recommendations.
Mr. Comeaux:
I agree it does a good job. I believe it can help in this effort. However, that division would have to acquire the same expertise we need.
Senator Tiffany:
We will ask about this during audit division testimony. I have a tendency to favor it in light of my reviews and the experience of its personnel in dealing with State agencies. An outside contractor would not know our agencies.
Mr. McTeer:
I expect to take the lead in this study, which is outlined in our IT handout (Exhibit D). We intend to use a series of mini-studies, each addressing a specific IT service, and each requiring different expertise. For example, the expertise helpful in determining the best technical implementation of microwave services will be very different from that examining how best to provide programming services. Our list is based on discussion with Executive Branch agencies. Items on the list that involve high capital investment need to be examined from the perspective of how to spread fixed costs fairly. We are very concerned about the radios, phones, microwave facilities, and fiber optic systems that make up our State network. On the other hand, programmer and local area network (LAN) functions may involve decentralization or outsourcing.
Senator Tiffany:
I think you have decided what functions you want to retain internally. The question remains, what should be decentralized out of DoIT. Do we need a consultant to do that?
Mr. McTeer:
We will need outside expertise, but we do not plan to hire a major consultant to produce numerous binders with pretty charts and graphs. We want to decompose the project into mini-studies and obtain outside expertise only when we determine we need expertise in a specific area.
Senator Tiffany:
Is it possible you will not need the entire $120,000?
Mr. McTeer:
That is possible; we do not know now. We think we can do a good portion of the work internally, but we need the option to go outside when we need to. We have a limited time. We need to complete this effort by May 2004, certainly no later than July 2004, in order to use the results in the next budget cycle.
Senator Tiffany:
Will you be the facilitator on this project?
Mr. McTeer:
Yes, I will.
Senator Tiffany:
Can we defer the $225,000 expenditure associated with the consultant for the Nevada Executive Budget System (NEBS)?
Mr. McTeer:
We need to undertake that work this biennium. The contractor with whom we have a potential agreement is at a business cycle low point. Our agreement will save the state 50 percent off the cost of development. This opportunity will not exist in 2 years; at that time the contractor will be placing its product into the commercial marketplace.
Senator Tiffany:
Has this software upgrade been implemented elsewhere?
Mr. McTeer:
It has not been implemented outside the State, but it is being implemented in our Nevada Employee Action and Timekeeping System (NEATS). The NEATS development is described in a handout (Exhibit E) and NEBS in another (Exhibit F). The vendor has done an outstanding job with NEATS. We have a very good working and financial relationship with this proven contractor.
Senator Tiffany:
Have you outlined the deliverable for the $225,000?
Mr. McTeer:
The contractor is working on the design phase; work is due to be completed on June 9. We will be ready to implement that design.
Senator Tiffany:
Would you provide staff with your working documents so we have a good idea what you want to accomplish by this $225,000 expenditure?
Mr. McTeer:
We can do that.
Senator Tiffany:
I want to address pay increases for the budget administrator and the chief assistant to the budget administrator. How are these justified?
Mr. Comeaux:
The chief assistant to the budget administrator is an unclassified budget analyst. We want to keep that position in the unclassified service because of the flexibility in getting personnel into the office quickly. As a result of the last pay increase, the classified analysts in our office now earn higher pay than this unclassified position. We have recommended bringing the unclassified position to par with the classified analysts.
My deputy’s position is in the unclassified service and not eligible for overtime. The analysts in the office are eligible for overtime. I considered the average pay of our supervising budget analysts over the 2-year budget cycle and proposed a salary for the deputy of 5 percent above that average. I have had difficulty getting people to serve as deputy when they can make as much or more in a budget analyst position without the headaches and stress associated with the deputy position. It is important we maintain a pay differential.
Senator Tiffany:
It sounds as though this boils down to differences between unclassified and classified overtime pay.
Mr. Comeaux:
That is the issue.
Senator Tiffany:
We will move on to B/A 101-1342. I like audit personnel. I would like to have them in every school district. We have a chart before us suggesting your division saves the State $8.4 million.
Division of Internal Audits – Budget page ADMIN-7 (Volume 1) Budget Account 101-1342
William Chisel, Chief, Division of Internal Audits, Department of Administration:
We do not justify our existence by asserting we can save $8.4 million. The Division of Internal Audits consists of three sections: internal audits, financial management, and post-review. The internal audits section identified $8.4 million last fiscal year (FY) in savings. We cannot promise that each year; variations occur because we may identify unquantifiable efficiencies involving public safety or child assistance. We are looking at about $7 in State savings for each $1 in division costs, a ratio we seek to maintain. The financial management and post-review sections do not necessarily identify savings. Financial management assists agencies, and post-review monitors expenditures for the board of examiners.
Senator Tiffany:
About 90 percent of your audit recommendations are implemented. When can we expect to realize $8 million in savings?
Mr. Chisel:
Our implementation rate for recommendations is 53 percent. We return each year to follow-up with each agency until our recommendations are fully implemented. We do not identify how much money an agency has saved by implementing our recommendations. Sometimes implementation has a cumulative effect year-after-year; sometimes implementations involve one-shot issues.
Senator Tiffany:
If you have identified a saving of $200,000, do you return to ensure your recommendation was implemented and the $200,000 was saved?
Mr. Chisel:
Yes, we do. We return 6 months after the recommendation to determine the status of its implementation. We return every year thereafter until a recommendation is fully implemented.
Senator Tiffany:
Let us take the example of the parole board in the Department of Public Safety. There is an estimated $200,000 in savings. When will you ensure that is realized?
Mr. Chisel:
That savings was contingent on the passage of legislation to allow the privatization of that function. The Legislature did not pass the bill. As a result, there has been a shift from a highly paid position to a lower-paid position. We will be glad to provide details.
Michael J. Colburn, Executive Branch Auditor, Internal Audits, Department of Administration:
This parole board audit was recently completed. The agency is planning on implementation in June or July. There is no statutory change involved; internal processes and procedures must be changed. A vote of the parole board will likely be necessary.
Senator Tiffany:
When could this happen, and when would we see the savings?
Mr. Colburn:
The “savings” involves resources that will be freed up. There are seven commissioners. Each commissioner hears about 3500 cases annually. We recommended elimination of the inmate hearing process in which the inmate is actually interviewed. The evaluation would be based on written documents supplied by the inmates. There would still be testimony from victims, as required by statute. This new procedure would save commissioners a lot of time that could be applied to case analysis. The commissioner caseload allows less than a half-hour to evaluate each case.
Senator Tiffany:
How long will it take for the board to take the necessary administrative action to implement the recommendation? What period of time will it take before savings are realized?
Mr. Chisel:
They were looking at September 2003. There are no immediate savings. Later, as the workload increases, there may be savings because staff will not increase.
Assemblywoman Chowning:
We always receive a follow-up in our Legislative audit projects after 3 or 6 months. I do not hear that here. It is wonderful to hear about savings if certain things are done. How do we know if there is actual implementation so we see the savings? Is there a follow-up report we can see?
Mr. Chisel:
We also do the follow up for the Legislative Branch audit recommendations. We follow-up our own recommendations 6 months after the report is issued and annually thereafter until full implementation. We provide status updates to the committee.
Assemblywoman Chowning:
Can we expect to see a report, good or bad, for each recommendation?
Mr. Chisel:
We submit a report to the agency and the committee identifying the status of the recommendations.
Senator Tiffany:
Let us move on to your Financial Management, Training and Controls Section. The new performance indicators appear lower; would you explain this?
Mr. Chisel:
We anticipate additional recommendations as a result of the recent General Accounting Office (GAO) pronouncement on internal control requirements. We want to integrate that into the State’s internal control system. Additionally, we are going to integrate the IFS internal control system into the IFS operating internal control system. We foresee additional recommendations. It will take time to implement those. As a result, we anticipate a decrease in our implementation rate. In order to offset that, we are considering a return to the agencies with a follow-up process to help them implement our recommendations. We hope to bring the compliance rate up, but we do anticipate a decrease.
Senator Tiffany:
I do not understand the changes the GAO recommended.
Mr. Chisel:
The recommendations broaden the internal control requirements by addressing risk assessment and other issues. Before, the focus was on segregation of duties and controls.
Senator Tiffany:
When I look at your audits, I see policies, procedures, and control issues. Will this change that? It looks like more of what has not already been done.
Mr. Chisel:
There is that difficulty. With the stresses on the agency and budget cuts, we are still focusing on high-risk areas such as segregation of duties. The focus of the financial management group is policies, procedures, and internal controls. Its recommendations will consist of those matters.
Senator Tiffany:
Every agency’s audit recommends tighter or better procedures. How do the GAO recommendations change that other than broadening the scope? How do auditors make sure something really happens?
Mr. Chisel:
The GAO provides the standards for our work.
Senator Tiffany:
Are you really going to be able to implement the wide, comprehensive changes in all of the agencies? Will you have to prioritize?
Mr. Chisel:
We are prioritizing higher risk areas. We cannot simply give an agency 50 recommendations. That would be overwhelming. We have to focus on the highest risk areas at that time and address them.
Senator Tiffany:
What are the highest risk areas? What departments are involved?
Mr. Chisel:
Segregation of duties is definitely one area. We go to every agency.
Senator Tiffany:
So, is it true you are going to check the high risk areas in every agency?
Mr. Chisel:
We do this case-by-case. We want to ensure each agency has good internal controls; we are not saying one agency should have them and another should not. We work with all agencies. Prioritization comes within the agency to identify its highest risk areas.
Senator Tiffany:
Can you accomplish your mission?
Mr. Chisel:
Yes. The mission is on-going so we cannot achieve perfection, but we do the best we can.
Senator Tiffany:
I would like to follow up on the question I asked Mr. Comeaux. Can your department help with IT? If so, how?
Mr. Chisel:
I think we can provide resources. I do not know the details, but we can provide personnel to benchmark and provide additional information on practices in other states. We can do in-state surveys.
Senator Tiffany:
Were you involved in the tax decentralization pilot project?
Mr. Chisel:
No, I was not.
Senator Tiffany:
I see a role for your division. I hope you will be included in this future effort. You know these agencies and have looked at their IT functions.
Mr. Chisel:
Information technology is included in our audits. We suggest efficiency and effectiveness issues. If software can save money longer term, we will suggest that.
Senator Tiffany:
I recall the printing office was not even using some of its existing systems. That came out in the audit. I encourage you to work together.
We will close that budget and open B/A 101-1325. I would like additional information about this budget. Why did you decide to have this funding account without any associated personnel?
Information Technology Projects – Budget page ADMIN-14 (Volume 1) Budget Account 101-1325
Mr. Comeaux:
This is the second time we have proposed project funding in this manner. The difficulty in funding IT projects individually is that costs are difficult to estimate. Our initial intent was to group projects funded from the General Fund into this single account. If, during the period of project development, it became necessary to reallocate money among projects, we would have flexibility to do so within a single account. The agency associated with a particular project will manage it; we will simply manage the finances.
Senator Tiffany:
Will you have some contractor oversight?
Mr. Comeaux:
We will be paying the bills and will have the opportunity to look at deliverables.
Senator Tiffany:
Is it true that you will have some interim process so that a project will not end up at the IFC as a disaster?
Mr. McTeer:
Our intent is to tie this oversight into my participation on the project oversight committee.
Senator Tiffany:
I have always thought we needed committee oversight of this nature.
Assemblyman Beers:
Are regulatory oversight groups, such as the real estate licensing system, generally funded by the industries they regulate?
Mr. Comeaux:
The license fees the division collects go into the General Fund. That explains the funding of this account from the General Fund.
M-501 HIPAA-Health Insurance Portability – Page ADMIN-14
Senator Tiffany:
Maintenance unit M-501 deals with a new client information billing system. Usually there are no contingency costs associated with software; here there are about $268,000 in contingency funds included in capital costs. Would you explain the cost structure?
Mr. McTeer:
I am aware of the projects in this account, but I am not aware of the subject of your question. We assumed agencies would answer detailed questions on their projects during their budget hearings.
Senator Tiffany:
Would you please get us an answer on this?
M-502 Federal Mandate –Page ADMIN-14
Turning to M-502, the replacement of the Advanced Information Management System (AIMS), do you have a contract project manager, funded at $145,000 annually for the next 3 fiscal years, included in the budget? If so, what functions will the manager perform?
Mr. McTeer:
I will have to get back to you; however, every project should have a manager whether provided by the agency or by DoIT.
Senator Tiffany:
Additionally, why is an Information Systems Specialist II position necessary on that project? Will the current agency resources supporting the AIMS application also be available for the Avatar system? The Avatar transfer is very expensive when I consider the agencies involved and the implementation costs.
M-503 Federal Mandate – Page ADMIN-14
Avatar implementation involves M-503 for the Northern Nevada Child and Adolescent Services. It looks as though there has to be an interface between Avatar and the UNITY system, the data system required for compliance with federal Title IV-E child welfare and adoption services tracking requirements. Is there such an interface? Does it involve the $173,000 recommended in the budget?
Mr. McTeer:
That should be easy. The UNITY personnel are across the hall from my office.
Senator Tiffany:
Is there a reason any interface would exist in the north and not in the south? Do you want to add anything about oversight of the realtors licensing system?
Mr. McTeer:
Our oversight will be the same: financial and budgetary oversight to ensure the right resources are applied and the contract terms are met. We also envision I will act as a referee between various agencies if that function is needed.
Senator Tiffany:
Will you also be involved when an agency does not believe it is getting value for the money it is paying DoIT?
Mr. McTeer:
I expect to be involved in those discussions.
Assemblywoman Chowning:
I need more information on real estate licensing in E-300. In FY 2001 a need was projected and a one-time appropriation was approved, some $321,000, to replace the licensing system. Now, we are being asked for almost $1 million. Why is there such an increase? Was the project not well thought-out? Are more “bells and whistles” being added? People have to renew their licenses every 2 years. The ability to do this online is nice, but it only replaces a single trip into a single office every 2 years. This is not a huge benefit for the person renewing the license, particularly in light of the fee increase. We need more justification.
Mr. Comeaux:
We discussed this at length during budget preparation. I would like to have the administrator of the division provide the subcommittee with that information. We can get that quickly.
Assemblywoman Chowning:
We feel placed in a box. We feel we are being presented with a done deal. We need to know if there is a less costly option.
Steven J. Abba, Principal Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau:
When you receive the information relating to child adolescent services decision units, there may be some adjustments needing explanation. I believe there is a budget amendment coming to reduce the $50,000 costs presently included. Would you please provide that in your information package?
Senator Tiffany:
We will close that budget and open B/A 711-1354 involving the motor pool. It looks as though privatization will not occur; six proposals have been turned down. I would like to know how this decision was made.
Motor Pool – Budget page ADMIN-36 (Volume 1) Budget Account 711-1354
Mr. Comeaux:
I provided a handout on rate comparison (Exhibit G). This is the basis for that decision. The coversheet provides a comparison of motor pool costs to the rates included in the lowest bid we obtained from private vendors. I cannot provide details from the vendors because we have not yet notified them of our acceptance or rejection of their proposals. We will provide those notifications in the next several days.
Senator Tiffany:
This involves a car-to-car rental comparison. Did you include a monthly lease fee for a space? Did you include involved personnel with all their benefits? We have to pay for gas as well; that seems to be dead even. It looks like this is just car‑to-car without including other expenses. You have to include those other expenses to make it a level playing field.
Mr. Comeaux:
The rates shown for the motor pool proposal show the revenue necessary to cover all the costs you just mentioned: facility lease cost, personnel cost, gasoline, maintenance, everything, including depreciation on the vehicles.
Senator Tiffany:
I was going to add buying new cars and depreciating them. Would you ever come back to the General Fund and ask for budget, personnel, or rent increases, which I see in here? I see rent increases in the budget. Were they included in this analysis?
Mr. Comeaux:
They were included. On the last page of our handout, you will find the adjustments that will need to be made to the motor pool budget as submitted to cover the increased cost of a new site.
Senator Tiffany:
What about taking the vehicles we now have that we would not need and selling those for capital infusion? Did you include that?
Mr. Comeaux:
We did not decrease the vendor bids by whatever we thought we would get upon fleet liquidation.
Senator Tiffany:
Do you have an approximate value for fleet liquidation?
Mr. Comeaux:
Keith Wells estimates it at $12 million.
Senator Tiffany:
A liquidation amount of $12 million is quite an offset of the $1.4 million dollar difference.
Mr. Comeaux:
That is a $1.4 million difference each year. Actually, the difference is greater because the $1.4 million does not include fuel. Our costs include fuel; the costs from the rental companies do not. Fuel would be an additional cost on top of the vendor bids.
Senator Tiffany:
Normally in a request for proposal (RFP), you can go back in and negotiate that contract even lower once a vendor has been selected. What should make me believe you cannot negotiate that $1.4 million difference out of the final vendor agreement?
Mr. Comeaux:
That is a lot of negotiating. The difference between our rates and the rates proposed by the vendors is enormous. The difference is so huge, I do not know what else to say.
Senator Tiffany:
I have seen it happen before. If the vendor wants this business, it can sharpen its pencil even more. They never start at the lowest point. I take that back. Some do start at the lowest point and then ratchet you back up. I am wondering whether you have even talked to the lowest bidder to say, “Look, you are the lowest bidder. There is a $1.4 million dollar difference between our keeping this business and you getting it. Are you going to come down that far for 3 or 5 years?” Has anyone asked that question?
Mr. Comeaux:
I doubt it. The person handling the RFP is here.
Lyn Callison, Purchasing Officer, Division of Purchasing, Department of Administration:
What was the question?
Senator Tiffany:
If you go to the lowest bidder, confident that the company is solvent, could do the job, and has the necessary assets, can you say, “We really would like to choose you, but you are about $1.4 million over what we can deliver that service for. Can you come down that $1.4 million?”
Ms. Callison:
We can enter negotiations. However, and all of this is confidential of course, the lowest bidder is not necessarily the vendor with the highest ranking. Many things were taken into consideration during evaluation. Cost is not necessarily the most important.
Senator Tiffany:
The company is solvent; it has the vehicles; it could service our volume demands.
Senator Rhoads:
How many bids did you receive?
Ms. Callison:
We received six bids.
Senator Rhoads:
What were the bid ranges? Were any lower than this?
Ms. Callison:
No, the illustrated bid is the lowest.
Senator Rhoads:
Did you consider quality?
Ms. Callison:
Everything was considered in the ranking, the company, the cost, the services provided, the geographic reach of service provision, insurance, and availability of alternative fuel.
Senator Rhoads:
That $1.4 million is a huge difference.
Senator Tiffany:
This is not an apples-to-apples comparison. When liquidation, vendor selection, and vendor negotiations are considered, this is not a complete comparison. It is rate-to-rate only. I do not think this is a comprehensive, accurate analysis. This is the point I was trying to make with my previous questions, and I do not think those questions have been answered.
Mr. Comeaux:
Our study involved more than a rate-to-rate comparison. It included what it would cost the State to provide the service. It compared that to what the lowest cost vendor would charge to provide the same service. The only factor not taken into consideration is the value of the existing fleet.
Senator Tiffany:
Negotiation was not considered either. You did not do that either. If you have talked to eight vendors, I am sure they would be willing to sharpen their pencils for a contract over a guaranteed period of time. Additionally, there is a $12 million infusion of cash into the equation. Lastly, we are not managing fleets.
Mr. Comeaux:
We put out an RFP for a 4-year term. I am concerned about where we would be in 4 years in terms of what type of contract we could get then and what it would cost the State to get back into the business if things did not work out.
The difference in costs was so great that negotiation never occurred to me.
Senator Tiffany:
It should always occur to you. I know in the private sector, it always occurs to me. In going to a banker, insurance company, accountant, or attorney, I always ask that. We do not. I have seen this happen before when we considered privatizing state health care insurance. We did not ask questions beyond our analysis of responses to the RFP. After the fact, many came back to the Legislature and said that they did not bring us back in, it was not apples-to-apples, and nobody even talked about negotiations. I think we have not done all our homework yet.
Senator Rhoads:
Many times the state motor pool runs out of cars in Las Vegas, and sometimes, even in Reno. We then end up with a rental car. What kind of a rate do we get? Is that subject to bid every year?
Mr. Comeaux:
That is not subject to bid every year, but it is open for bid periodically. We have one or more companies providing vehicles for overflow situations.
Senator Rhoads:
How does the overflow rate compare to the cost for a motor pool car?
Keith Wells, Acting Administrator, State Motor Pool:
Currently, Save More Rent-a-Car in Las Vegas, charges the State $34.40 plus $4 a gallon for fuel.
Senator Tiffany:
I rent a car every weekend from Thrifty. That is absolutely not a guaranteed rate. I have had as low as $19.
Mr. Wells:
Of course you can beat the State rate. I am reporting the current contract rate.
Senator Tiffany:
I go to Thrifty and I do not pay that. You are trying to make it look like the rental car rate is $34 or $35 and you can provide a car for less than that. That is not accurate. Also, the rates float. I have had a rate as low as $19 a day.
Mr. Wells:
The cost of the average trip, including miles driven and the fuel cost, fluctuates between $24 and $25. This is for the average rental. Calculating the fuel cost that would be added by the private sector would bump this cost up dramatically.
Senator Tiffany:
That can be negotiated.
Mr. Wells:
Let us back up a step. The $12 million in rolling assets the State has includes the entire fleet. The primary focus of this RFP was on daily rentals. No one was looking at replacing the entire fleet.
Senator Tiffany:
Why cannot a state employee fill up at a gas station like everyone else, like I do, before turning a rental car in?
Mr. Comeaux:
They can, but that cost has to be added to the $1.4 million differential. The fact of the matter is we put out an RFP in a competitive manner and received responses from the rental companies you would expect to reply. What you see on our handout is an analysis of the lowest bid. That is just a fact. We did not construct this exercise to obtain a pre-determined result. We asked a question, and this is the result we got. It is accurate to say we did not enter into negotiations with anyone. We certainly do that on construction contracts when the costs are close. This result is not even close. That is why it did not occur to me to enter negotiations. I was surprised. I did not think this project would project any savings. But, I was surprised that no bidder was close enough for us to approach it to get out of the business without costing us an arm and a leg. This bid, in my opinion, would cost us an arm and a leg.
Senator Tiffany:
I do not think you have apples-to-apples, or have even finished the analysis.
Assemblyman Parks:
I would like to inject something here. Would you take a step back and explain that this is an internal service fund? Also, would you explain how it operates? I was a government accountant and feel that explanation would benefit the subcommittee.
Secondly, I would like to make an observation. Having been a purchasing chief for an agency for over 9 years, I know the numbers you produced are exactly what I saw throughout the years I considered these issues. I concur you have the best bid you are likely to get, and I know vehicle contracting pretty well. I think you have obtained the best deal.
Mr. Comeaux:
An internal service fund is established so that the cost to provide a service is spread across the users of the service. Generally, some unit of usage is involved in the cost methodology. As an example within state government, DoIT operates an internal service fund, and most of the funds within the Department of Administration operate as internal service funds. We provide a service to other state agencies and spread the cost of that service to agencies based on their usage.
In motor pool operation, we spread costs on the basis of a daily or monthly charge plus a mileage charge. Every 2 years, we examine usage by number of rental days and number of miles driven. We then calculate rates based on that information. These rates are designed to recover all our costs in providing vehicles to the user agencies. Those costs are all-inclusive. They include depreciation, capital costs over the life of the vehicle, gasoline, vehicle maintenance, counter personnel, mechanics, and other service personnel. Our rates are designed to cover all costs and to maintain an operating reserve of $250,000.
Senator Tiffany:
As far as I can tell, these costs are not backed out of the motor pool rates. When I look at your proposed rates to cover the augmented budget, and when I look at the rates here, they match. I would like to see the fleet, staff, maintenance, fuel, and lease costs backed out of your costs to make an apples‑to‑apples comparison. We would also like to see the proposals too so that we can review them.
Ms. Callison:
In order to do that, I would have to cancel this RFP or issue a letter of intent and a notice of award. All the information is still confidential.
Senator Tiffany:
We are a state agency. Who are the bids confidential to?
Ms. Callison:
I can cancel this RFP, but at that point, we would need to go out to bid again in order to negotiate.
Senator Tiffany:
Mr. Comeaux, there has to be a way for persons outside the purchasing division to look at RFP responses. Are you saying that the only persons who can look at the RFP responses are in the purchasing division?
Mr. Comeaux:
No, I have looked at them. I think we can arrange some way for you to see them.
Senator Tiffany:
Thank you. I absolutely want to see where fleet, staff, maintenance, fuel, and lease costs are backed out of the numbers.
Mr. Comeaux:
That is not a problem. We can get you that.
Senator Tiffany:
As far as I am concerned, the decision to privatize is still open. Let us talk about alternatives for the motor pool facility. What have you looked at for relocation?
Assemblywoman Chowning:
We have a mileage target before vehicles are replaced. Was this factored into the RFP? Also, was airport pickup of large groups of state employees considered in the RFP? Many of these factors equate to safety of state workers. When I have rented vehicles privately, even though the vehicle is new, the maintenance is non-existent. Our majority leader had a private rental vehicle that broke down. He would have been stranded if someone had not picked him up. We count on the state motor pool to provide these services. Were these factors considered in the RFP? We have almost 200 vehicles. Did the companies agree to maintain a comparable standing inventory for state workers?
Mr. Comeaux:
When you see the RFP, you will see that many factors were included: airport pick-up, vehicles for the disabled, direct agency billing, and many others.
Assemblywoman Chowning:
We do not see the RFPs. Can details be given to us without vendor names?
Assemblyman Beers:
I would like to add to the list. Is there a performance indicator dealing with the average amount of time a user expends to get a car from the motor pool? My experience, comparing the Reno airport to the motor pool, is that the motor pool is a lot faster. Since state employees would be standing in line at taxpayer expense, I hope we included in the RFP a performance indicator reflecting processing time similar to that provided by the motor pool.
Ms. Callison:
We included airport pickup in the RFP. One vendor indicates we would have to call upon arrival, and the other vendors did not address the issue, assuming we would use their shuttles.
Mr. Comeaux:
This came in response to our inquiry as to the time required for pickup at the airport. I doubt we would be able to affect processing time from counter to car.
Ms. Callison:
That was not addressed.
Mr. Wells:
The main focus of the motor pool is customer support. We receive constant complaints when we have to use private contractors. Assemblyman Beers was exactly right. When a state employee goes to a private contractor, he is just another person standing in line. At the motor pool, a state employee signs his name; we give him the keys; and he is on his way. The average employee on his way to the motor pool probably is being paid by the State a minimum of $25 an hour. The average wait time in the private sector can be between 30 and 45 minutes. When a Southwest airplane carrying state employees lands in Las Vegas and 25 to 40 state employees hit the motor pool counter, we can get them out in a maximum of 5 to 10 minutes. I am confident that will not happen at any private contractor since the rest of those passengers also go to the private contractor.
We have been using private contractors for overflow for many years. The billing is never right. The customer service is not good; mistakes are made; charges are placed on personal credit cards; state drivers cards are refused. The bottom line is that a state employee is just another person in front of the counter. They care because they want to make money, but our employees generally bend over backwards for our customers. I think that should weigh a lot in considering an RFP. Our customers are not excited about going to a private contractor.
Senator Tiffany:
We are talking about costs too.
Mr. Wells:
Rental costs are escalating. There have been no successful RFPs of this nature across the United States. When I did a little bit of research…
Senator Tiffany:
Let us have the data and we will see. Can you tell us what the site alternatives are regarding the Las Vegas motor pool, specifically, locations, monthly lease costs, and square footage?
Mr. Wells:
The primary site under consideration is a former Thrifty rental site. It has two buildings. One has 4500 square feet of office space; the other has 4000 square feet of shop space. The motor pool would consume the shop space; we would plan on another state agency leasing the office space.
Senator Tiffany:
Who would lease that space?
Mr. Wells:
We asked the Buildings and Grounds Division to undertake a background check. It identified the Transportation Services Authority as the ideal agency. It currently leases 4800 square feet in Las Vegas under an arrangement that expires in September 2004. It pays almost $9000 monthly under the existing lease. Our lot would allow utilization of our services including the shuttle. We could also store their vehicles at the facility. We store agency vehicles now, and this facility would allow us to continue to support small State agencies that have nowhere to park their vehicles. Were we to outsource the motor pool to a private contractor, no comparable facility would exist.
Senator Tiffany:
Where is the Thrifty location?
Mr. Wells:
It is at 376 Warm Springs Road. The lease cost is $19,000 monthly; however, the owners are willing to negotiate with us.
Senator Tiffany:
There is a negotiation. Do you see that?
Mr. Wells:
The primary partner is very sick. They are holding off all negotiations. They call me every several days to update me on his status.
Senator Tiffany:
I asked you to look at that car dealership. I have to tell you, you came back with all the shuttle distances being too great. I say to you, “You will still get on a shuttle; you will still travel 5 to 7 minutes, but when you pick up a car you have to travel to a state agency on the north side of town.” While it may be convenient to get to the location from the airport, it is not convenient to get from the motor pool to the place where state employees do business.
Mr. Wells:
By the year 2006, McCarran Airport will relocate every rental car agency to the southern corridor of the airport, near Gillespie and Warm Springs Roads. A centralized rental car facility is under construction there; it will be used by all private rental car companies on a fee basis. The motor pool uses private rental car agencies daily for overflow and after-hours operation. We need to be located near those rental car agencies.
To answer your question about Jim Archer’s property, I looked into it. I have worked with him on a new location on Russell Road. He has offered to build any facility the State wants on Russell Road. While that location is okay, it is not as good as the Warm Springs Road location near the rental car agencies. The airport authority is going to modify the Russell Road access to the airport. This will make for smoother access.
Senator Tiffany:
Where you rent the car is one thing, but where you go is completely another. I want to make sure you looked at all options.
Mr. Wells:
I looked at all options. If you use our service or if you use a private contractor, you will be leaving from the southern corridor of the airport. We need to be located there for efficient operation. The Russell Road site is to the east of the airport, but it is still close enough to the rental agencies. As I mentioned, eventually all rentals will be on the south side of the airport.
Senator Tiffany:
What alternatives have you looked at in addition to the Thrifty location?
Mr. Wells:
We looked at three locations on Paradise Road. One is a former Budget location, but the lease is $25,000 a month. The second is at Paradise and Tropicana Roads with a lease of $10,000, but the building is in very poor condition, requiring improvements before we move in. That property would work, but it is still $10,000 a month. I looked at a third site on Paradise Road near the Hardrock Café, but the owners would rather sell than lease to the State.
The airport planning department advised me against relocating the state motor pool in the northern corridor. It told us to stay as far away from Paradise Road as possible, since all our vendors will be in the south and the area is very congested. Heavy congestion in the north adds to shuttle time. The Russell Road and Warm Spring Road locations are very close to the I-215 freeway. It would be very easy for state employees…
Senator Tiffany:
That would dump them into the I-15 freeway so they could wait in bumper‑to‑bumper traffic. That is not a smart way to go.
Mr. Wells:
Wherever you go in Las Vegas, you are going to have a traffic problem. My point is that there is no escape since all the private rental companies will be in the south. While we could relocate anywhere, the motor pool needs to be as close to the airport as possible.
Senator Tiffany:
Do you need to be there because there are other rental car agencies there, because there are fuel services there, and because there are car wash services there?
Mr. Wells:
We need to be there because however many cars the State has in its fleet, there will never be enough. There are days in Las Vegas when every rental car in the entire state is gone. Cars have to be brought from Los Angeles to supplement rental fleets. If the State were to use the private sector exclusively, I can assure you there will be problem days. Even with our current contracts, vendors run out of cars frequently. State employees have gone to Enterprise only to find it had run out of cars. The motor pool has had to scramble to make things work.
Rental car companies support us for two reasons. They take our overflow, and, after-hours, rental companies take our returns after 7 p.m. Late returns are infrequent, but we need someplace where a state employee can drop off a motor pool car. It has to be left at a secure location. The car cannot be left in an airport lot because we would never find it.
Senator Tiffany:
You have looked at five locations and you are leaning toward the Thrifty location.
Mr. Wells:
I think the Thrifty site would be ideal. It is close to the airport and the rental car companies, and it has room for growth. It has office space for lease to any state agency interested in it, and it has additional parking for small state agencies without their own parking facilities.
Senator Tiffany:
What will happen if we privatize motor pool functions? What will happen to the choice of the Thrifty site?
Mr. Wells:
I do not understand those questions. The Thrifty site would be a moot point. They want to sell.
Senator Tiffany:
It is going to be there no matter what. Would the decision to move to the Thrifty site change if we decide to privatize?
Mr. Wells:
Absolutely, we would not need the facility.
Senator Tiffany:
What would be the alternative? You will still want to maintain some motor pool functions.
Mr. Wells:
If the State were to privatize the daily rental operation, the state motor pool operation would ideally relocate near the Bradley Building or the Grant Sawyer complex. We would want a small maintenance facility, perhaps a 2000 square foot facility, to provide monthly maintenance for the 400 additional state vehicles based in Las Vegas.
Senator Tiffany:
Do you have locations picked for that?
Mr. Wells:
I worked with the Division of State Lands and learned there a number of locations. Site selection there is easy. Rents generally run around $3000 to $5000 a month. My ideal solution under that scenario would involve the State building a small facility at the Bradley Building. We would be very close to the customers to whom we provide service. We could operate an airport shuttle bus on demand. Someone wanting to go to the airport would walk to that new state facility to be taken to the airport. If that system were actually used by state employees, demand would be reduced for daily rentals. However, when we tried such a system in the past, state employees did not use it. Every state employee maintains he has his own agenda, but when we track rentals, many state employees go to the same place. University of Reno employees are the worst offenders. When regents from the University of Nevada, Reno come to Las Vegas, they deplete motor pool resources and all drive exactly the same number of miles. People have their own agendas; that is the difficulty in implementing a State shuttle service.
Senator Tiffany:
Could you provide us some information on the replacement shuttle?
Mr. Comeaux:
Certainly, we can do that.
Senator Tiffany:
We will close the hearing on the motor pool and move on to B/A 716-1371. I have no particular questions on this account. Would you give us an overview?
Admin-Administrative Services – Budget page ADMIN-96 (Volume 1) Budget Account 716-1371
Mary C. Keating, Administrator, Administrative Services Division, Department of Administration:
Our budget includes replacement items, computers, for example, so that we can remain current. We are eliminating one position. One position will transfer back to public works to correct an error. When we transferred positions from public works, we apparently transferred one too many.
Senator Tiffany:
We will close the hearing on that budget and open the hearing on B/A 101‑1015. Our main interest is your proposed move.
Dept of Administration – Hearings Division – Budget page ADMIN-101 Budget Account 101-1015
Bryan Nix, Senior Appeals Officer, Hearing & Appeals Division, Department of Administration:
I would like to take you on a tour of our offices using one of our handouts (Exhibit H. Original is on file in the Research Library.). This should provide you with an explanation for our request to move to new quarters. The floor plan on page 2 includes measurements to provide an idea of our work space. The two smaller courtrooms, one 184 square feet, the other 193 square feet, used to be clerical space. We had to cannibalize that because there was no additional space in the Grant Sawyer Building to accommodate past growth. Our caseload required additional courtrooms, so we converted clerical space to courtrooms and crowded the staff into the professional offices on the other side of our space.
Most staff work in cubicles of roughly 8 feet by 7 feet, smaller than most inmate jail rooms. We have been in these conditions for the last 8 years, but deferred this request because there is never a good time to submit it. We recognize this is not a good time either.
Page 3 depicts our proposed floor plan. We are trying to address a number of issues. We want to relieve clerical staff congestion and put the clerical staff next to the professional staff it serves. We want a secretary to be located next to the appeals officer rather than on the other side of our facility. This floor plan also includes space for the Nevada Attorney for Injured Workers.
The pictures on pages 4, 5, and 6 will give you a good idea of our staff cubicles and the conditions under which we function daily. Note the stacked boxes and file cabinets. We have less space now than we had before we moved into the Grant Sawyer Building. I do not know how we ended up in Grant Sawyer; we are a non-General Fund agency.
We also want to provide separate facilities for hearing officers. Hearing facilities are shown on pages 11, 12, and 13. Three clerical staff work in my office at the conference table because there is no other space where they can work on their current computer project. Hearing officers have to hold hearings within their offices.
Senator Tiffany:
Have you showed these pictures to the fire marshal?
Mr. Nix:
We are actually in violation of ordinances. The fire marshal has told us we cannot have file cabinets in our hallways, but we simply have nowhere else to put them.
Our hearing officers conduct 12,000 hearings annually in their offices. We have had situations where people in hearings have communicable diseases. Some visitors have very poor body hygiene. These are the conditions we live with. We want separate hearing rooms so that hearing officers have, among other things, a sense of security. Under present conditions, hearing officers are boxed in. If there is a violent act or an emotional claimant, hearing officers have to go around their own desks and tables to try to escape. A separate hearing room would provide a back door for quick exit.
Senator Tiffany:
It looks like you are doubling your square footage. Are you doubling the footage just for the hearing officers?
Mr. Nix:
Yes, but that is not entirely by choice. We plan on moving into an existing structure. In trying to build courtrooms and hearing rooms, we end up with odd spaces. Although we do not need all of the new space right now, we anticipate we will expand into all the space over the 10 years of the lease.
Senator Tiffany:
Have you looked for less expensive space?
Mr. Nix:
We have looked all over Las Vegas. We have considered all options. Our proposed location is the best we could come up with. It is priced at market. While our Grant Sawyer space is considerably cheaper, the attorney general would like most of that space, and the remainder could be used by other agencies.
Senator Tiffany:
Where else have you looked for space?
Mr. Nix:
We looked in Henderson, Green Valley, Summerlin, and downtown Las Vegas. The space we propose is at Rancho Road and Sahara Avenue, a central location. Many other options are in outlying areas. We prefer to stay close to downtown, thereby allowing access from all corners of the city.
Senator Tiffany:
Did you consider price as well as location?
Mr. Nix:
Yes, we did. We used a real estate agent specializing in finding space for the State. We looked at virtually every available option.
Senator Tiffany:
I do not think we have any other questions. The pictures were quite compelling.
Mr. Nix:
I know it is difficult to bring everyone to Las Vegas, so we tried to bring our offices to you.
Assemblyman Parks:
I have been in these offices as well as the offices of the Nevada Attorney for Injured Workers. I would like to reinforce Mr. Nix’s remarks. I have also toured the suggested building and believe it represents a fantastic opportunity.
Senator Tiffany:
Can you comment on the Nevada Attorney for Injured Workers as well?
Mr. Nix:
I cannot comment on the Nevada Attorney for Injured Workers; it is a separate state agency.
Senator Tiffany:
Would you comment on computer replacement?
Mr. Nix:
We try to cycle and replace computer equipment by thirds, rather than replace everything all at once. We budgeted to replace a portion of our computers. I think that policy was established by DoIT.
Senator Tiffany:
Are you replacing 2-year old computers? Do you know the details?
Mr. Nix:
We plan on replacing equipment only when we have to. Some replacements are driven by software changes. Even if budgeted, we would not replace equipment unless necessary.
Senator Tiffany:
Why was there a decrease in the percentage of hearing officer decisions that were appealed? This is item number 4 on the performance indicators.
Mr. Nix:
The bulk of our cases are dealt with by hearing officers in informal proceedings. The reductions are a good thing. This means fewer people are appealing to the appeals officers. This saves money since the appeal hearing is much more formal. It is conducted by an attorney with a court reporter. The reduction reflects either increased satisfaction with the decision of the initial hearing officer, or, for some other reason, decisions not to seek higher review.
Senator Tiffany:
What do you think the reasoning is?
Mr. Nix:
I think the hearing officers are doing a good job at mediating disputes and getting people to resolution of disputes. There may be other reasons as well. We have seen a change in the insurance industry. Several years ago, all the workers compensation in the state was provided by a single state agency. We now have multiple private insurance providers. They may have their own reasons for appealing or not appealing. I cannot go much beyond that as an explanation.
Senator Tiffany:
We will close the hearing on that account and move to victims of crime.
Victims of Crime – Budget page ADMIN-107 (Volume 1) Budget Account 287‑4895
Mr. Nix:
I am also the coordinator of the Nevada Victims of Crime Program.
Senator Tiffany:
We want to talk about court assessments. The Nevada Supreme Court has projected flat assessments. You have indicated an increase. Why will this happen?
Mr. Nix:
Perhaps Mr. Comeaux could help me out. We have attempted to reallocate some assessments from other agencies to the Victims of Crime Program.
Senator Tiffany:
Assembly Bill (A.B.) 242 would increase assessments. Why do you believe you can put in $650,000 in court assessment?
ASSEMBLY BILL 242: increases amount of certain administrative assessments and requires imposition of administrative assessment when imprisonment or community service is ordered in lieu of fine. (BDR 14-613)
Mr. Comeaux:
I do not have details with me. We attempt to arrive at a consensus forecast on court assessments when we assemble the budget. The Supreme Court gets 51 percent, and the Executive Branch gets 49 percent. This year the court determined it needs additional revenue from that source; it initiated the bill to increase court assessments. I understand the original plan was to increase the assessment by $5, all of which would be kept by the court. We discussed the matter with the court and reached an agreement whereby we would amend the court bill to increase the assessment to $9.80. The court would get its $5 increase and the Executive Branch would get an additional $4.80. I think we may have rounded up to a flat $10.
The additional court assessment dollars reflected in the Victims of Crime Program anticipates that new revenue and does not rely on an increased collection of the existing fee.
Senator Tiffany:
If the money does not come in, what would the contingency be?
Mr. Comeaux:
The Victims of Crime Program has been operating in a lean fashion when it comes to staff to process claims. Most funding for the program goes to the victims of crime in payment of medical claims and lost wages. Victims’ claims are now paid at 80 percent only because we do not have funds available to pay at 100 percent. We were able to pay victim claims at 100 percent until about a year ago. The statute requires a board of examiners to look at the financial situation of the program every quarter and determine at what rate claims will be paid for the following quarter. If more funding does not flow into this budget, the percentage at which we pay claims will decrease.
Senator Tiffany:
Do you have plans regarding restoration of the 100 percent payment rate?
Mr. Comeaux:
That plan is before you now.
Mr. Nix:
We have done some belt tightening and conducted a reassessment of claims we have paid. We are trying to concentrate on paying those items that most benefit the victims themselves such as medical bills and lost wages. We have been very careful about the types of benefits paid.
Additionally, the federal grant we receive has just increased from 40 percent of our state dollar expenditures to 60 percent. We just received notice of a federal grant of about $1.9 million instead of the $1.25 million we received previously.
Senator Tiffany:
With the increased assessment and the federal grant increase, do you anticipate going to a 100 percent claim payment?
Mr. Nix:
We are working towards that goal. We review the issue quarterly. It is harder to increase payment rates with escalating costs for medical expenses and prescription drugs.
Assemblywoman Chowning:
That is good news, but the increase is not built into the budget. What adjustments are necessary?
Mr. Comeaux:
The increase in federal grant money probably is not in the budget. We will have to send you an adjustment on that.
Mr. Nix:
We received notice of the federal grant increase only within the last week. We do not have the check yet; we have the award of grant notice.
Senator Tiffany:
When do you suppose that will become available?
Mr. Nix:
We hope it will be soon because we have a lot of bills.
Senator Tiffany:
I am assuming we will get an amendment to the budget.
Mr. Comeaux:
That is correct.
E-275 Working Environment & Wage – Page ADMIN-109
Assemblywoman Chowning:
Decision unit E-275 recommends a reduction in victim payments in order to fund this new position created to address a claims backlog. I do not see any data about that. What is the backlog? If there is additional federal funding, can some of that be used to pay for the position?
Mr. Nix:
We can use up to 5 percent of the federal grant for administrative costs. This position is a clerical one. We have been relying on volunteers in our Reno office. We have one compensation officer and one secretary. We have used volunteers from senior programs; unfortunately, the purpose of these programs is to provide employment for seniors. We are not budgeted to hire the trainees of these programs. We will not get these people in the future. We need a clerical person in the office. A state office really cannot be operated with only two people, taking into account leave, illness, calls, and appointments. We have started falling behind in meeting our workflow.
Assemblywoman Chowning:
When we heard other budgets, we learned about months-long backlogs. Is that the case here?
Mr. Nix:
No, we have nothing like that. We are trying to keep up with the workflow now that we are losing the volunteer positions. We also want to ensure adequate staffing in the office.
Assemblywoman Chowning:
Would you provide staff with background information on that position and on the federal funding increase as well?
Mr. Nix:
Senator Tiffany:
With no further questions, we will open our final budget, B/A 101‑1320. Could we have a quick overview?
Technology Improvement Plan – Budget page ADMIN-113 (Volume 1) Budget Account 101-1320
Mr. McTeer:
One of our handouts (Exhibit E) provides a pictorial summary of the Integrated Financial System (IFS)) structure. We want to show the multiple physical locations of our servers in addition to the number of involved agencies. We have four servers administered by the Department of Administration in conjunction with DoIT. The servers managed by the Department of Personnel and DoIT deal mainly with payroll and personnel, the Nevada Employee Action and Timekeeping System (NEATS), and two Web servers. We have two servers outside our firewall; these implement the training registration system of NEATS. They allow access for external users to access NEATS functionality without compromising security. The financial system administered by the State Controller includes servers for financial production, financial data warehousing, and financial report distribution. These servers allow agency users to access only those parts of reports that are needed. Finally, the Nevada Department of Transportation (NDOT) system includes a financial production server and its associated data warehouse server. These are the various pieces of the system we have constructed over the last 6 years of the project.
Senator Tiffany:
Do you have a facility? How many people do you have in the budget? Are any of those slots filled, other than your slot?
Mr. McTeer:
My office is on Fairview Drive; it is the IFS facility. It is occupied by a contract clerk, a consultant, and me. We also house the remnants of the State Controller’s staff who are in the process of moving to the capitol complex and will finish June 30. The Department of Personnel will then consolidate its remaining central records and central payroll personnel into the IFS building. As of July 1, the personnel department will occupy the majority of the floor space.
We also have two training classrooms in that facility. One contains 20 computers; the other contains 26 computers. We use them for IFS training as well as other agency training.
Senator Tiffany:
What will this new facility cost to set up?
Mr. McTeer:
I am located there now; we are not proposing to move anywhere. The cost of division management expenses, those associated with me, the contract person, and one position we want to convert to a classified service position, is approximately $147,000 in the first year and $152,000 in the second year. This is shown on page 4 of the handout.
Senator Tiffany:
I have seen large training rooms; welfare had a large one, for example, where there would be a sea of computers and not one would be turned on. Would I find this to be the case if I were to go to your facility?
Mr. McTeer:
It would depend on the day you visited. Typically we run classes from Tuesday through Thursday. Our IFS needs are diminishing, although they will never go away. Over the past several months, I have actively pursued other state agencies in the Carson City and Reno area to take advantage of our training facility. Other agencies are now using the IFS training facility.
Senator Tiffany:
Have you thought about downsizing the facility rather than attempting to induce others to use it?
Mr. McTeer:
We considered that. However, we do need to run simultaneous classes. We do both financial and human resources training. We also do NEATS on-line training. The State has already invested in the facility; we would be remiss if we were to take it apart. Additionally, the facility is the old public service hearing room. It is one large room, split by a portable divider. I doubt the landlord would rent half of that space.
Senator Tiffany:
Sometimes agencies cannot get the computer upgrades they requested because of budget limitations. There is no reason the computers could not go to another agency. You could downsize your training facility and get better at scheduling.
Mr. McTeer:
We already give computers to other agencies when we have an excess.
Senator Tiffany:
How many computers do you have now?
Mr. McTeer:
We have 20 student computers in one classroom and 26 in another. We also have two instructor computers.
Senator Tiffany:
You have almost 50 computers sitting there, a sea of computers. If they are not used efficiently, full-time, so what if you have the building space? Other agencies could use the computers. You really need to look at that. Nothing bothers me more than to walk into a state government building and have all these empty computer classrooms just sitting. There are other needs involving schools and women’s prisons
Assemblyman Beers:
I am familiar with the problem, having owned a small computer training facility. I do not know what the answer is. I recently received a visit here in the Legislative building from some IBM salesmen. They said they have almost no travel budget for education because they deliver training on-line. Clearly it would take some investment for IFS to get to that point. You may want to consider this long term.
Mr. McTeer:
We will certainly look at that.
Assemblywoman Chowning:
Are the IFS site expenditures one-time expenditures? Do they include maintenance costs?
Mr. McTeer:
The majority of the expenditures are on-going maintenance costs.
Assemblywoman Chowning:
Will the training facility be used only for IFS, or will it be used by other agencies so that we can make maximum use of the facility?
Mr. McTeer:
That is the way we work now; other agencies use the facility when we are not using it. We have been doing that for some time, and I anticipate external usage increasing. I agree with Senator Tiffany; we made a large investment, and we certainly want to use that investment. I do not know of another good classroom facility in northern Nevada owned by the Executive Branch that is equipped with computers. We have gone to great lengths not only to provide personal computers but also one monitor for every two students capable of displaying the screen of the instructor’s computer. This is a very good learning environment. I agree; we want to make maximum use of the facility.
Assemblywoman Chowning:
Good, because many times people have to go to community colleges in order to get access to similar facilities. How will the cost of the employee travel tracking module be allocated to the department of personnel?
Mr. McTeer:
Even though that is part of the NEATS system, it is financial in nature and will provide trip pre-authorization and supervisory approval as well as supplying travel information to the budget division. The $93,000 is a one-time cost.
Assemblywoman Chowning:
Is there existing staff to supply sufficient support for software and hardware maintenance? What is DoIT’s role?
Mr. McTeer:
Existing applications support in this area consists of a financial analyst/system consultant who has the required financial expertise required to work on the systems. There is also money for the two prime contractors to be available on an on-call basis. We have had on-site vendors for 5 years and 6 years respectively; we are weaning ourselves from their support. However, I do not want to take the state payroll system down a road where we cannot get contract assistance when we need it. We anticipate moving toward vendor telephone support. We are engaged in knowledge transfer. That will continue through June 30. This represents a compromise. I turned down a staff request for continued on-site support.
Assemblywoman Chowning:
What is the length of those contracts?
Mr. McTeer:
We have a contract through the end of this biennium. We anticipate reducing the contract to an on-call basis. I then want to review how much we used them, so we could re-evaluate what we request in the next budget cycle.
Assemblywoman Chowning:
What is DoIT’s role?
Mr. McTeer:
DoIT has a role, but it is not reflected in my budget, with one exception. I have a network technician whose costs are split between the IFS site expenses and the training facility expenses. The costs associated with programming staff, database administrators, and the system administrators are being transferred to the Department of Personnel. The one exception is that I am picking up some DoIT costs in the disaster recovery contingency expenses as shown on page 4 of the handout.
Assemblywoman Chowning:
What are the contingency costs, and what are they based on? What percent is attributed to recovery; what percent is attributed to contingency?
Mr. McTeer:
The costs are for Oracle software licenses; we need this software on all our machines, even those machines used in different backup modes. We also pay DoIT a Unix support charge on those machines. The payments to Oracle and DoIT are both based on the number of processors.
Assemblywoman Chowning:
What are the costs based on?
Mr. McTeer:
They are based on the number of processors in the machines.
Assemblywoman Chowning:
What percent is contingency, and what percent is recovery?
Mr. McTeer:
The primary purpose of the site is disaster recovery. The contingency plans for business resumption exist to assure a quick shipment from IBM of two replacement servers. The key word is “assure.” IBM will not guarantee immediate replacement. We must have our own servers for disaster recovery. Should we not have access to any of the three operational IFS sites, we go to the disaster recovery site in order to be able to pay people. I have 4 days to be able to run a payroll cycle. We have 10 days to bring the financial system back up to pay bills and ensure no one overspends his authority. If we cannot return to the IFS sites, we then invoke the quick-ship provision from IBM; we get the next two machines coming off the assembly line. Simultaneously, we need to tell IBM whether we will buy or lease those two machines. Funding for that would come from the emergency fund; such expense is beyond my budget. IFS bears a fairly minimal cost, some $300-plus monthly, for the ability to get a quick-ship from IBM. This is the contingency resumption part of the plan.
Assemblywoman Chowning:
What happens if the Legislature does not approve this?
Mr. McTeer:
If the Legislature does not approve this, the State does not have a disaster recovery or contingency plan for IFS. If we had an earthquake that made all three operational sites unusable, we would not be able to make State payroll and we would not be able to pay the state’s vendors at the very time we would need contractors to rebuild infrastructure.
Assemblywoman Chowning:
We certainly felt some movement on the fourth floor recently.
Assemblyman Beers:
I think that was the Long Valley caldera. There was a decent-sized earthquake last week. When it blows, it will be accompanied by ash and lava. It will be very exciting indeed.
Did I understand that the contingency fee is about $3600 annually?
Mr. McTeer:
That is correct. I have not signed that IBM contract. I need to ensure I have a budget first. That price is about 6 months old; I doubt it has increased very much. This is one of the least expensive disaster recovery expenses IBM offers. I am on a committee to select a vendor for the mainframe facility where there is no option other than to have an alternative site. To use a vendor off-site is very expensive, something in the six-figure range. We looked for the lowest cost arrangement whereby we could provide back up. Mr. Comeaux has made it very clear: I will not be well thought of should we have a disaster and be unable to make payroll.
Assemblywoman Chowning:
Would you provide our staff with a job description for the administrative chief and administrative assistant?
Mr. McTeer:
I am the administrative chief. My job will keep me very busy with IFS issues. I will also oversee the NEBS system and enhancement. I will also work with B/A 101-1325 and represent the director on IT matters before various committees. The administrative position is currently a contract clerical position. Making this part of the classified service will save the State some money. This person takes minutes at IFS meetings, does registration for training courses, and coordinates with other agencies in addition to performing standard office functions. I envision no change in duties, merely a change from a contract position.
Assemblywoman Chowning:
I am certain we will have other questions, and would appreciate your working with our staff.
Mr. McTeer:
I will be happy to provide backup information.
Assemblywoman Chowning:
We stand adjourned at 10:41 a.m.
RESPECTFULLY SUBMITTED:
James D. Earl,
Committee Secretary
APPROVED BY:
Senator Sandra J. Tiffany, Chairman
DATE:
Mrs. Vonne Stout Chowning, Chairman
DATE: