.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
April 16, 2003
The Assembly Committee on Ways and Means and the Senate Committee on Finance, Joint Subcommittee on General Government, was called to order at 8:20 a.m., on Wednesday, April 16, 2003. Chairwoman Sandra Tiffany 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, Chairwoman
Senator Bob Coffin
Senator Dean A. Rhoads
Assembly COMMITTEE MEMBERS PRESENT:
Mrs. Vonne Chowning, Chairwoman
Mr. Bob Beers
Mr. Josh Griffin
Ms. Kathy McClain
Mr. David Parks
STAFF MEMBERS PRESENT:
Steve Abba, Principal Deputy Fiscal Analyst (Assembly)
Bob Guernsey, Principal Deputy Fiscal Analyst (Senate)
Bob Atkinson, Program Analyst
Julie Brand, Program Analyst
Michael Chapman, Program Analyst
Joyce Garrett, Program Analyst
Susan Cherpeski, Committee Secretary
Lila Clark, Committee Secretary
BUDGET CLOSINGS
PRINTING OFFICE, ADMINISTRATION (741-1330) BUDGET PAGE ADMIN - 29
Julie Brand, Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, addressed the Subcommittee and provided an overview of the Printing Office budget. She said the Printing Office had experienced a continued decline in printing sales, which had been discussed in previous budget hearings. There were no major closing issues, but there were a few closing items. The first of those items was depreciation. The State Printing Division had not funded depreciation in FY2002 and currently had not funded depreciation in FY2003. The Governor’s recommendation for FY2004 and FY2005 did not include depreciation funding.
Ms. Brand continued and said the next issue was the General Fund repayment obligation, which had not been made in FY2002 and had currently not been made in FY2003. The General Fund repayment was recommended for $40,486 in FY2004 and FY2005, and included an amendment for the repairs being done in the building for $20,614. The information provided by the Department of Administration for the Economic Forum on May 1, 2003, indicated the State Printing Division’s General Fund repayment obligation would be further reduced to $19,872 as a result of decreased cash flow.
Ms. Brand indicated the Subcommittee might wish to consider the following options: close the budget as recommended by the Governor without any adjustments, amend the repayment to $19,872 each year of the biennium, or forgive the outstanding debt. Forgiving the outstanding debt or reducing the repayment amount would require an amendment to session law and a Capital Improvement Program (CIP) bill.
Assemblywoman Chowning asked the State Printer, Donald L. Bailey Sr., to come to the witness table. She recommended that there be a Letter of Intent requesting the State Printing Division make quarterly reports to the Interim Finance Committee (IFC) so that the payment could be made.
Mrs. Chowning said that Mr. Bailey had previously stated that he was aggressively pursuing other projects in order to increase the Division’s cash flow, and she wanted to know how that would affect the repayment. She asked Mr. Bailey to respond to her request for quarterly reports made to the IFC.
Mr. Bailey said the Division would be willing to repay that obligation and report to the IFC.
Senator Tiffany commented that there had been three things that the State Printing Division could do internally to improve its financial situation: adjust the rates correctly, reduce the inventory, and actively pursue more business accounts. She indicated those three areas would be the focus of the quarterly reports to the IFC, and improvement in those areas should allow for repayment. Mr. Bailey agreed and said the Division had already reduced its inventory, adjusted the hourly rates, increased charges for standard printing and quick print jobs, and pursued outside sources, specifically counties and cities, to increase the number of printing jobs. Senator Tiffany indicated that the Subcommittee would like to issue a Letter of Intent stating the terms of the repayment and requiring a quarterly report be made to the IFC. Mr. Bailey agreed to those terms.
Assemblyman Beers remarked that the previous night a bill had been heard in the Committee on Elections, Procedures, and Ethics, which would eliminate the requirement that 100 legislative journals be printed every day. He pointed out that if passed, that bill would make a substantial difference to the Printing Office. Senator Tiffany indicated that the budget could be closed and reopened at a later time if adjustments needed to be made.
Senator Coffin said that the journals were an historic document, and he asked if those documents were printed on archival paper. Mr. Bailey explained that the final printing for the legislative materials each session was printed on acid-free paper and hardbound.
In response to Senator Coffin’s request for clarification, Mr. Bailey said that Mr. Beers had been referring to the daily journals, not the final record, and Mr. Beers concurred. Mr. Bailey explained that the Printing Division had worked with the Legislative Counsel Bureau (LCB) to reduce the numbers of journals and histories printed, and he believed that number would continue to decrease. Mr. Beers added that there would still be daily journals and histories printed, but there would be fewer of them. There was a statutory requirement that needed to be changed in order to reduce that number. Mr. Bailey indicated that was correct and said that the number of journals printed was far less important than the number of daily histories printed because the daily histories were used to function day-to-day and to know what actions had occurred.
Senator Tiffany commented that the Printing Office would continue to make adjustments as the process became more electronic. Mr. Bailey agreed. Senator Coffin said that he wanted the historic records preserved for posterity. Mr. Bailey said those records would be preserved; at the end of the legislative session, the Printing Office would receive instructions from the Legislative Counsel Bureau to print and bind the final editions of the journals and histories, and then the LCB would distribute them.
Senator Tiffany said that a printing shop in the private sector typically would employ outside salespeople who would have the responsibility of maintaining certain accounts and monitoring proposals and pricing to ensure competitiveness. Senator Tiffany asked how the State Printing Division handled sales.
Mr. Bailey responded that he would have a sales force in the private sector; however, his sales force consisted of himself and his deputy. The deputy, unfortunately, had been out of the office for a while, and so those duties had fallen on Mr. Bailey. He explained that he visited agencies and tried to solicit more work, specifically from the University System. He commented that the Legislature might be able to encourage the University System to work with the Printing Division. Senator Tiffany interjected that she would not mandate that the University System use the Printing Division’s services.
Senator Tiffany added that she would like Mr. Bailey to include a sales report in his report to the Interim Finance Committee. The sales report should include the agencies solicited and the results of that solicitation. She pointed out that Mr. Bailey had promised to pursue sales aggressively, and Mr. Bailey indicated that he had done that and would continue to do that. He agreed to provide that report to the Interim Finance Committee.
ASSEMBLYWOMAN CHOWNING MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY THE GOVERNOR WITH APPROVAL OF TECHNICAL CHANGES AND A LETTER OF INTENT REQUESTING A QUARTERLY REPORT TO THE IFC ADDRESSING THE REPAYMENT AS NECESSARY.
ASSEMBLYMAN GRIFFIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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Mrs. Chowning interjected that she was on the Joint Subcommittee on Higher Education, and she would be asking the University System about its printing needs. If it appeared that the Printing Division could provide those services in a cost-effective manner, she would encourage the University System to use those services.
PURCHASING, ADMINISTRATION (718-1358) BUDGET PAGE ADMIN - 45
Senator Tiffany indicated the Subcommittee would hear Budget Account 718‑1358. Ms. Brand said there were no major closing issues and staff recommended the account be closed as adjusted. She noted there were a few technical adjustments. One was an adjustment to reclassify interest expense associated with the General Fund repayment in the amount of $10,290 in FY2004 and $9,524 in FY2005. Additionally, there was an increase in depreciation in the amount of $15,748 in FY2004 and $19,002 in FY2005. That adjustment was associated with equipment placed in service in FY2003, FY2004, and FY2005. The other technical adjustment was an adjustment in decision unit E-710 for computer hardware pricing.
ASSEMBLYWOMAN CHOWNING MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY THE GOVERNOR WITH TECHNICAL ADJUSTMENTS.
ASSEMBLYMAN GRIFFIN SECONDED THE MOTION.
Senator Tiffany requested that a representative of the Purchasing Division come forward and respond to concerns regarding telephone services in the budgets. Senator Tiffany said it was her understanding that telephone services had been transferred from the Purchasing Division into the Department of Information Technology (DoIT).
Keli Hardcastle, Purchasing Division, said she had received a phone call from Ms. Brand regarding the telephone system contracts. Ms. Hardcastle had contacted the Chief of the Purchasing Division, Bill Moell, and Greg Smith, also with the Purchasing Division, in order to answer that question. Ms. Hardcastle had been informed that the contracts with DoIT were open contracts, but Mr. Smith would have to provide any additional information.
Senator Tiffany requested that additional information be provided as she was confused about the specific contracts. She thought the Purchasing Division had contracts with companies, but she was not sure whether that meant those companies were the only ones from which the agencies could purchase services or if an agency could make requests for pricing from private sector companies and choose to purchase services from those companies. Ms. Hardcastle said that Mr. Smith would work with Ms. Brand to provide that information.
Senator Tiffany commented that she was interested because there was an agency relocating to an office in an office park, and the agency needed to purchase a telephone system. The agency wanted to solicit bids, but Senator Tiffany was concerned that if the Purchasing Division did not have contracts with the companies submitting those bids, the agency would not have the authority to contract those services. She asked if DoIT would have to be included in the process in order to get approval, and she noted that would increase the price. Senator Tiffany indicated the Subcommittee would vote on the motion put forward by Mrs. Chowning.
MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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MAIL SERVICES, ADMINISTRATION (713-1346) BUDGET PAGE ADMIN - 67
Ms. Brand said there were no major closing issues and staff recommended the account be closed as adjusted. One closing item to note was decision unit M‑100. In M-100, the Governor recommended an increase to the operating reserve in the amount of $230,832 in FY2004 and $566,251 in FY2005. That would adjust the ending reserve balance in FY2005 to $450,000, which was consistent with the FY2002 base and FY2003 budget of $447,000 and $513,000 respectively. That increase to the reserve would be partially funded by a technical adjustment of $151,500 each year of the biennium to the Treasurer’s Office for postage charged on the mailing of vendor checks formerly captured within the Mail Services overhead rate. Effective in FY2004, charges for similar Treasurer’s Office mailings would be directly billed to the Treasurer’s Office by Mail Services and recaptured via the statewide cost allocation adjustment in the 2005-2007 biennium. Additionally, Mail Services was anticipating increased funding of approximately $62,000 each year due to a $15 increase per month in the mail stop charge. That increase, although small, was not reflected in the related agency expenditures for postage.
Senator Tiffany clarified that the reserve would be increased through the technical adjustments, and Ms. Brand indicated that was correct.
SENATOR RHOADS MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY THE GOVERNOR WITH APPROVAL OF TECHNICAL ADJUSTMENTS.
ASSEMBLYWOMAN CHOWNING SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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ADMIN – ADMINISTRATIVE SERVICES (716-1371) BUDGET PAGE ADMIN - 96
Ms. Brand said there were no major closing issues and recommended the account be closed as adjusted. There was one small technical adjustment to adjust computer hardware and software pricing in the amount of $755 each year of the biennium. Other closing items to note were the Governor’s recommendation of the elimination of one Accounting Assistant II position in E‑605. The position had been vacant since March 2002. In addition, the Governor also recommended the transfer of an Accounting Assistant II position back to the State Public Works Board. That position, and six others, had been transferred in the 2001 Legislative Session, and it had been determined that one position should be transferred back. Ms. Brand said that staff concurred with those recommendations.
ASSEMBLYWOMAN CHOWNING MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY THE GOVERNOR WITH APPROVAL OF THE TECHNICAL ADJUSTMENTS.
ASSEMBLYMAN GRIFFIN SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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DEPT. OF ADMINISTRATION – HEARINGS DIVISION (101-1015) BUDGET PAGE ADMIN - 101
Ms. Brand pointed out that revisions had been made to the budget and had been provided to the Subcommittee. She explained that the Hearings and Appeals Division was funded primarily by the Workers’ Compensation and Safety Fund; there were no General Fund appropriations in the account.
Ms. Brand said that the major closing issue for the Hearings Division was the request for the relocation of its Las Vegas office. The Governor had recommended a $394,325 increase in FY2003-2004 and a $312,544 increase in FY2004-2005 for the Division to relocate its Las Vegas office as of July 1, 2003, from the Grant Sawyer Office Building to a non-state building location. That relocation would allow the consolidation of the Hearings Division’s operations with the Victims of Crime Program and the Nevada Attorney for Injured Workers. Ms. Brand pointed out that, by moving from a state-owned property at $1.14 per square foot, the Division would be increasing that cost to $2.05 per square foot. However, it had been determined through a discussion with Buildings and Grounds Division that the cost was reasonable based upon other comparable properties in the Las Vegas area.
Senator Tiffany requested clarification of the cost, and Ms. Brand said the cost was $2.05 in FY2004 and would increase to $2.10 in FY2005. She added that the relocation would increase the square footage of the office from approximately 8,900 square feet to 17,000 square feet.
Mrs. Chowning asked if the cost per square foot was set in the lease or if it would continue to increase. Ms. Brand indicated that the cost would increase incrementally according to the lease, but she pointed out that it was a full service lease, which included janitorial and utility costs. There was a limitation placed on the utility costs because of the volatility of the electrical bills in Las Vegas. Ms. Brand said that might result in incremental changes in subsequent years but would not affect the current biennium.
Ms. Brand added that, in addition to the cost for building rent, there was a cost for additional furnishings, telephone equipment, and related moving expenses, which totaled approximately $84,299 in FY2004. The Division had obtained a quote from DoIT for the telephone system. Other estimates had been requested in order to determine the reasonableness of that current estimate. With the additional quotes, there might be an adjustment to the cost for the telephone system.
Senator Tiffany commented that a request for additional estimates should be included in the motion. Assemblyman Parks said he thought there could be a requested adjustment through the Interim Finance Committee because the session would be over before the final results were received. Senator Tiffany agreed, but said she would like further research of the telephone system.
ASSEMBLYMAN PARKS MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY THE GOVERNOR WITH APPROVAL OF TECHNICAL ADJUSTMENTS AND A REQUEST FOR MORE INFORMATION ON THE TELEPHONE SYSTEM.
ASSEMBLYWOMAN McCLAIN SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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PUBLIC UTILITIES COMMISSION, COMMERCE & INDUSTRY BUDGET PAGE PUC - 1
Michael Chapman, Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, presented the Public Utilities Commission (PUC) Budget Account 224-3920. He explained that currently the PUC was comprised of three commissioners who balanced the interest of consumers of public utilities with those of providers of utility services. Assembly Bill (A.B.) 661 of the 2001 Legislative Session increased the Commission from three to five members, effective October 1, 2003. The Governor’s budget did not provide any funding to support that increase, due to anticipation of a repeal of that provision in Section 28 of A.B. 661. Senate Bill 414 had been introduced in the current session and would have repealed that provision; however, that bill had been indefinitely postponed. Another bill, S.B. 102, had been amended recently in the Senate Commerce and Labor Committee and included a provision to repeal Section 28 of A.B. 661. Due to the continuing uncertainty regarding the level of membership of the Commission, staff would suggest a Letter of Intent be issued directing the PUC to submit the appropriate work program changes to the IFC should the 2003 Legislature not repeal Section 28 of A.B. 661.
Mr. Chapman referred to decision unit E-501 and said a decision needed to be made regarding a new Hearings Officer position. He indicated that he had provided information to the Subcommittee regarding the duties of the position, which included holding administrative hearings.
Mr. Chapman reminded the Subcommittee that in 1997 the PUC had been reduced from five to three members in anticipation of Nevada entering an open and competitive energy market. The energy crisis in 2000 and 2001 had prompted the 2001 Legislature to halt the deregulation movement and reinstate traditional rate-making. The reinstitution of traditional rate-making as well as deferred energy legislation, notably A.B. 369 of the 2001 Legislative Session, had increased the Commission’s responsibility and workload. Additionally, cases had been submitted to the Commission as large energy customers sought services from alternative providers, and those applications required a decision within 90 days.
Based upon that information from the PUC, Mr. Chapman said the recommendation for the new Hearings Officer appeared reasonable. The position was recommended to be included in the Unclassified Pay Bill with a maximum salary of $89,092 per year plus fringe costs. During budget hearings, the PUC testified that if Section 28 of A.B. 661 was not repealed and the Commission was expanded to five members, the PUC would recommend not funding the position. However, the PUC requested that the position be included in the unclassified pay bill should it be determined subsequent to the close of the 2003 session that the position was needed. The PUC would then have the option of going before the IFC to justify that position and the salary would already be in the unclassified pay bill.
Mr. Chapman suggested that if the Subcommittee wished to approve the position, that the aforementioned Letter of Intent include work program changes to eliminate funding for the hearing officer position if the Commission’s membership expanded to five commissioners.
Senator Tiffany asked what would happen if the Committee approved the hearings officer position and placed it in the unclassified pay bill, and then Senate Bill 102 passed. She inquired if the budget could then be reopened and adjusted.
Mr. Chapman said reopening the budget was an option; however, the passage of S.B. 102 had several ramifications as it increased the PUC membership, and that would need to be considered by the IFC.
Senator Tiffany asked if Mr. Chapman would recommend issuing the Letter of Intent including the aforementioned provisions. Mr. Chapman said he would recommend that course of action rather than approving the position without the Letter of Intent.
Mr. Chapman referred to the mill assessment and the level of reserves. Initially, in the Governor’s recommended budget, the projected ending reserve at the end of the biennium was $3.8 million. The PUC had testified that the optimum reserve level for the account was between $1.8 million and $2.2 million. Accordingly, the PUC and the Budget Office submitted a budget amendment to reduce the mill assessment from 2.5 mills to 2.25 mills, which would result in a reduction of revenue of approximately $635,000 per year, or $1.3 million over the biennium. If those projections were accurate, the reserve balance would be decreased to approximately $2.6 million. Mr. Chapman recommended that the Subcommittee approve that amendment reflecting a change in the mill assessment.
Senator Tiffany asked if the PUC would have to return to the IFC to ensure the rates were set correctly. Mr. Chapman said that he had already provided for that adjustment. If S.B. 102 passed, and the membership of the Commission changed, the PUC had the statutory ability to change their mill assessments should additional revenue be needed to support any membership expansion. Senator Tiffany said adjustments to the revenue could be made if the IFC determined the rates were too high. Mr. Chapman concurred that the PUC could return to the IFC in that case.
Mr. Chapman said that he had handled the PUC budget for the past three years, and the PUC had submitted work program changes increasing the regulatory revenue because typically the mill assessment was set around late May or early June and then was applied to the previous year’s operating revenue. It was an unknown that depended on how much revenue the utilities generated.
Mr. Chapman addressed the unclassified salary adjustments included in the budget and said that, subsequent to the budget hearings, the Budget Office submitted amendment number 112 to change the title of an unclassified Supervising Administrative Attorney to that of an Administrative Attorney. The PUC indicated that the position was not used in a supervising capacity, and it should be placed on the same level as the other administrative attorneys.
Senator Tiffany asked if the Governor had made that recommendation, and Mr. Chapman replied that it was not in the Governor’s recommended budget, but the unclassified salary adjustment had come from the Budget Office.
Perry Comeaux, Director, Department of Administration, informed the Subcommittee that the Budget Office had submitted that change after the completion of The Executive Budget. In putting together the budget, that particular position had been overlooked. Mr. Comeaux explained that the Budget Office had received numerous requests from various agencies for adjustments in unclassified salaries, and most of those were eliminated. The adjustment requested by the PUC was merely a change in title, which would result in a lower pay level, and it should not have been eliminated.
Mr. Chapman continued his presentation of the budget items, and said that during the Senate Finance budget hearing held on March 17, 2003, the PUC requested unclassified salary adjustments for two additional positions. Those salary adjustments were not included in the Governor’s recommended budget, and staff had not received an amendment from the Budget Office on that request. However, during the Senate Finance hearing, the Committee chairman directed the PUC to submit its request to the Fiscal Analysis Division staff for consideration in the unclassified pay bill. The response from the PUC indicated the adjustments were necessary to address compaction issues for those two positions. The first position was the Director of Regulatory Operations, whose salary was approximately $1,600 less than the next highest paid subordinate under his supervision. The other adjustment was an increase of approximately $200 per year for the General Counsel position, which would provide for a 5 percent salary differential over the highest paid subordinate staff.
Mr. Chapman informed the Subcommittee that if they wished to approve those recommended increases, that should be communicated to the Unclassified Salary Subcommittee of the Senate Finance and Assembly Ways and Means Committees.
Mr. Chapman pointed out a few other closing items. Decision unit E-300 requested funding for replacement of software. Decision unit E-710 requested funding to replace three vehicles, as well as a number of printers and computers. The PUC indicated that the equipment was on a four-year replacement schedule. Decision unit E-720 requested funding for four new printers, which should have been included in E-710.
Senator Tiffany remarked that the Subcommittee had examined those decision units and they appeared warranted. She summarized the choices before the Subcommittee and said the Subcommittee needed to decide whether to approve the hearings officer position and send a Letter of Intent requesting the PUC submit work program changes in the event of an expansion of Commission membership, whether to approve the reduction of the mill assessment, and whether to approve the unclassified salary adjustments as recommended by staff.
ASSEMBLYWOMAN CHOWNING MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY STAFF WITH A LETTER OF INTENT, A RECOMMENDATION TO THE UNCLASSIFIED SALARY SUBCOMMITTEE, AND APPROVAL OF TECHNICAL ADJUSTMENTS.
SENATOR RHOADS SECONDED THE MOTION.
MOTION CARRIED. (Senator Coffin was not present for the vote.)
BUDGET CLOSED.
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B & I, BUSINESS AND INDUSTRY ADMINISTRATION (101-4681) BUDGET PAGE B & I - 1
Joyce Garrett, Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, presented budgets from the Department of Business and Industry. The first budget was Budget Account 101-4681, the Business and Industry Administration. Ms. Garrett said the budget was funded through several sources including 20 percent from the General Fund, a cost allocation within the Department, and a transfer from the Industrial Development Revenue Bond Program. There were no major closing issues, but there were a few closing items. The first of those items involved the agency’s file server. The Governor had recommended funding to repair the file server for $12,398. Staff recommended that the file server be replaced for a cost of $12,568, which was an increase of $170.
Ms. Garrett referred to decision unit E-125, which concerned in-state and out-of-state travel. The increased in-state travel funding of $6,692 in FY2005 would allow the director to travel from Las Vegas to Carson City during the legislative session. That was an increase of $1,161 over the amount approved by the Legislature in FY2003. There was $1,060 in out-of-state travel for the Chief of the Office of Business Finance and Planning to attend conferences in Washington, D.C. in each fiscal year. Additionally, there was an increase of $880 in out-of-state travel in each year in order to allow the director to attend two out-of-state conferences related to the missions of the Financial Institutions Division and the Housing Division.
In response to a question from Senator Tiffany regarding justification for the out-of-state travel increase, Ms. Garrett said the agency had provided supporting documentation after the initial budget hearing and had indicated it was important for the director to be aware of the issues in the departments that she oversaw.
Ms. Garrett pointed out there was another decision unit, E-710, which recommended the replacement of two desktop computers and associated software and anti-virus software for a cost of $3,080 in each fiscal year. She noted the price had been adjusted to reflect current prices. Mrs. Chowning observed that the cost had decreased by $110 each year. She expressed her appreciation for the travel information that had been provided by the agency as, in her mind, it had justified the need for increased travel funding.
Senator Tiffany commented that the only change from the Governor’s recommended budget would be funding the replacement of the file server, and she asked for a motion from the Subcommittee.
ASSEMBLYWOMAN CHOWNING MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY THE GOVERNOR WITH APPROVAL OF THE REPLACEMENT OF THE FILE SERVER, THE INCLUSION OF THE TRAVEL EXPENSES, AND OTHER TECHNICAL ADJUSTMENTS.
ASSEMBLYWOMAN McCLAIN SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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B & I, INDUSTRIAL DEVELOPMENT BONDS (101-4683) BUDGET PAGE B & I ‑ 6
Ms. Garrett referred to Budget Account 101-4683, Industrial Development Bonds, and said there were not any major closing issues, and staff recommended the account be closed as recommended by the Governor with one technical adjustment. That technical adjustment was a $1,000 decrease in each year of the biennium in the fees the agency collected for volume cap transfers.
ASSEMBLYWOMAN CHOWNING MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY THE GOVERNOR WITH APPROVAL OF TECHNICAL ADJUSTMENTS.
ASSEMBLYMAN PARKS SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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B & I, CONSUMER AFFAIRS (101-3811) BUDGET PAGE B & I – 115
Ms. Garrett presented the Consumer Affairs budget and said there were a few closing issues. She pointed out that Consumer Affairs was funded by the General Fund. The first item for consideration was an option on the telephone system to either provide money to maintain the system or to replace the system. The maintenance option was recommended in the Governor’s budget for $9,943 each year of the biennium. That amount was for potential telephone system maintenance and totaled $19,886 over the biennium. The agency had supplied documentation that supported just $4,900 in actual expenditures for telephone system maintenance in FY2002. The other option required $27,000 to replace the telephone system.
Senator Tiffany asked if there were any questions. Mrs. Chowning commented there was no one from the Department of Information Technology or the Department of Business and Industry to answer questions, but she recalled that the Department of Business and Industry had provided previous testimony that the telephone system was being “taped” together in order to continue functioning. She pointed out that the telephone system was extremely important to the work performed in the Consumer Affairs Division.
Mrs. Chowning asked for two additional cost estimates for replacing the telephone system. Senator Tiffany agreed that the system should be replaced due to the nature of the work in the Consumer Affairs Division, which necessitated the use of the telephones. Mrs. Chowning reiterated her request for two additional estimates and said that if that resulted in a lower estimate, the motion would include authority to make the necessary adjustments.
Ms. Garrett said the second item was a recommendation from the Governor of $15,249 in each year of the biennium to provide maintenance for the database system. She indicated the agency had provided documentation that supported $5,500 for maintenance expenditures on the system in FY2002. Thus, as it appeared the funding in The Executive Budget was more than sufficient for database maintenance, staff recommended an adjustment to reduce the funding by $9,000 in each fiscal year, resulting in the amount of $6,249 for each year to fund potential database system maintenance.
Ms. Garrett referred to decision unit E-710 and said the Governor had recommended funding for two high-end color printers. She indicated that staff had not received sufficient justification for the printers at a cost of $3,500 each. Staff recommended an adjustment to approve funding for two mid-range printers at a cost of $2,000 each. That adjustment would result in a $3,000 savings over the biennium.
Senator Tiffany said it appeared that the Subcommittee was recommending a telephone system replacement with additional estimates, a reduction in database system maintenance, and a change to mid-range printers. Mr. Beers interjected that the agency did not need color printers as it could use the Printing Office. Senator Tiffany explained that the agency would not be receiving color printers, and Mrs. Chowning added that the agency could use the Printing Office if color printing was needed.
ASSEMBLYWOMAN CHOWNING MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY STAFF WITH APPROVAL OF THE REPLACEMENT OF THE TELEPHONE SYSTEM, A REQUEST FOR TWO ADDITIONAL ESTIMATES, AND APPROVAL OF THE REDUCTION IN DATABASE SYSTEM MAINTENANCE AND NETWORK PRINTERS, AND ANY OTHER TECHNICAL ADJUSTMENTS.
ASSEMBLYWOMAN McCLAIN SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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B & I, EMPLOYEE MANAGEMENT RELATIONS BOARD (101-1374) BUDGET PAGE B & I – 144
Ms. Garrett said there were no major closing issues in Budget Account 101‑1374, the Employee Management Relations Board, and recommended the account be closed as recommended by the Governor.
ASSEMBLYMAN PARKS MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY THE GOVERNOR.
SENATOR RHOADS SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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B & I, LABOR COMMISSIONER (101-3900) BUDGET PAGE B & I – 165
Ms. Garrett presented Budget Account 101-3900, the Labor Commissioner budget. There were no major closing issues; however, one notable item was decision unit M-400, which would reinstate travel. The Governor recommended funding in the amount of $5,537 in each year of the biennium to reinstate in-state and out-of-state travel that had been cancelled in FY2002 in order to comply with the Governor’s budget reductions. She explained that the in-state travel expenses were related to the performance of compliance audits on the apprenticeship programs and the Commissioner’s attendance of Nevada State Apprenticeship Council meetings. Both the audits and the meeting attendance were required by statute. In addition to the increase in in-state travel, there was a $1,895 increase in each fiscal year for out-of-state travel. That increase would allow the Labor Commissioner to attend two annual conferences, one in Washington, D.C. and one in Portland, Oregon. Ms. Garrett said that due to budgetary constraints on the General Fund, the Subcommittee might wish to consider funding for the Labor Commissioner to attend one conference in each fiscal year.
Senator Tiffany asked if any documentation had been provided to justify the conference travel. Ms. Garrett said the agency had indicated the attendance of the annual conferences ensured that Nevadans were able to benefit from participation in regional and national initiatives dedicated to workplace issues.
Senator Tiffany asked if the Labor Commissioner would decide which conference to attend if the Subcommittee approved only one conference per year. Ms. Garrett indicated that the Labor Commissioner could work with staff to decide which conference to attend and the funding would have to be adjusted accordingly as there were different costs associated with each conference. Senator Tiffany commented that most requests for travel funding were being reduced in a similar way, and she said it appeared that one conference per year would be acceptable.
Mrs. Chowning said the compliance audits were statutorily required, and she asked how the agency had met that requirement with the budget cut in travel. Ms. Garrett explained that the statutes did not dictate that a specific number of audits be conducted, but the audits were to be conducted periodically. The agency had delayed some audits because of the lack of travel funding and now wished to conduct those audits to ensure statutory compliance.
Senator Tiffany explained that the motion would be to close the budget as recommended by the Governor with an adjustment to out-of-state travel to fund travel to one conference.
SENATOR RHOADS MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY THE GOVERNOR WITH AN ADJUSTMENT TO THE OUT-OF-STATE TRAVEL FUNDING.
MRS. CHOWNING SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
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Mrs. Chowning clarified that the funding for in-state travel had been reinstated and the funding for out-of-state travel had been reduced to pay for only one conference per year.
PUBLIC EMPLOYEES BENEFITS PROGRAM (625-1338) BUDGET PAGE PEBP– 1
Bob Atkinson, Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, presented the budget and explained that the Public Employees’ Benefits Program (PEBP) was the health insurance program for state agencies and non-state entities that chose to participate in the program. The major closing issues were the amount of the state contribution on behalf of active employees, new positions, overtime pay, and the reserve.
Mr. Atkinson said the budget recommended by the Governor included an increase in the state contribution of 6.4 percent the first year of the biennium, which would bring the state contribution for active employees to $495.68. In the second year, an increase of 12.6 percent would bring it to $558.07 per year.
Senator Tiffany asked if that recommendation had come from the Public Employees’ Benefits Board, and Mr. Atkinson explained that the Board had made the initial recommendation, and then the Governor also recommended that contribution. The Board had used that contribution amount in order to set the rates for the next fiscal year. Senator Tiffany clarified that the contribution was set in the budget and then the program adapted to fit the budget.
Mr. Atkinson indicated that was correct and said the Subcommittee should note that currently the state contribution funded 100 percent of the insurance cost for the employee and approximately 60 percent of the cost for dependent coverage. A new plan had been developed, and the Board had approved a core plan that would have a $500 deductible. He offered to provide details if the Subcommittee wished, but he gave a basic overview and said there were different levels of deductibles, and the employees could choose a level, which would then dictate the amount of premium taken out of their paychecks. Selecting the $500 deductible would mean the state employee would pay a premium of $14.36 per month. Mr. Atkinson said that was not a large amount, but he wanted the Subcommittee to know that the state contribution would no longer be funding the entire amount of coverage for the employee. He pointed out that the option for funding the entire amount of coverage was available, but the deductible would then be $1,000. The Subcommittee would have to decide if they wished to approve the state contribution rates as recommended by the Governor. He noted that the rates were enacted each legislative session through a bill that contained the contribution made for active employees and for retirees. That bill had not been introduced yet, and he indicated that the Senate Committee on Finance or the Assembly Committee on Ways and Means needed to work with the Department of Administration to process that bill.
Senator Tiffany asked Mr. Comeaux to explain the situation with that contribution rate bill, and Mr. Comeaux indicated he was not sure where the bill was but he would find out.
Mr. Atkinson continued his presentation and addressed the enhancement units recommended in the budget. Decision unit E-500 recommended the addition of an unclassified Financial Analyst position. The position had been recommended by the Division of Internal Audits in its 2002 audit of the program. The position would be funded by a decrease in the contract costs that were currently paid to a consultant. He said that staff recommended the decision unit be approved. Decision unit E-501 recommended the addition of four Administrative Assistant positions in the operations section of the PEBP. Those positions would replace staff that was currently furnished through a temporary employment agency. The positions would funded through a reduction in contract services, and the agency would have the benefit of permanent, trained employees.
Senator Tiffany asked if decision unit E-501 would be revenue-neutral, and Mr. Atkinson indicated that was correct and reiterated that the positions would be funded through a reduction in the contract costs for temporary employment service, and staff recommended the approval of that decision unit.
Mr. Atkinson referred to decision unit E-502, which recommended the addition of an Administrative Assistant position to assist the Public Information Officer with communications to the participants of the program. He indicated that those duties had been performed by a temporary employee, and the agency wanted to eliminate that contract cost by hiring a state employee. Mr. Atkinson said that staff recommended approval of that decision unit and pointed out that approval of those positions was related to decision unit E‑503, which would provide additional office space for that new staff. He said staff recommended approval of that item as well.
Mr. Atkinson continued his presentation and said that decision unit E-275 recommended $44,203 each year in overtime expenses. That figure was based on overtime expenditures in the last few years. The agency had spent approximately $33,000 in FY2001, approximately $51,000 in FY2002, and approximately $58,000 in FY2003. Mr. Atkinson indicated that there had been a vacancy rate of approximately 30 percent during that time. He conceded that there might be a need for overtime during the peak times, particularly during the period of open enrollment when program participants submitted paperwork. He suggested that could be handled through effective use of compensatory time, and said that staff recommended that decision unit not be approved. Mr. Atkinson pointed out that overtime was generally not funded in budgets unless there was a compelling reason to do so.
Senator Tiffany asked if the addition of new staff would reduce the overtime. Mr. Atkinson explained that the new staff would replace existing temporary staff, but the overtime would be reduced with the reduction in the number of vacancies. Senator Tiffany asked if the agency anticipated that those vacancies would be filled, and Mr. Atkinson replied that the positions were there and available and it would be the agency’s responsibility to fill them.
Mr. Atkinson said that decision unit E-504 was a mechanical adjustment that needed to be made. He explained that there would be a deficit fund balance of approximately $20 million by the end of the current fiscal year. The program had an Incurred But Not Reported (IBNR) claim liability of approximately $26 million. The PEBP had cash reserves and other assets sufficient to fund approximately $4 million, but the balance would be an unfunded liability. A portion of the recommended contribution would be used to rebuild that reserve, and decision unit E-504 was the mechanical adjustment that would rebuild that reserve. If everything went according to plan, E-504 would result in approximately $10 million in FY2004 and approximately $15.8 million in FY2005 to apply to the reserve, although that would not fully fund the reserve. The IBNR claim liability would continue to grow, but E-504 would be a step in the right direction, and the plan was to rebuild that reserve to a fully funded level over a period of four years. Mr. Atkinson recommended that decision unit E-504 be approved.
Senator Tiffany commented that it would take four years for the reserve to be fully funded. She asked if the PEBP would have to return to the Legislature and ask for more money if the projections of $10 million and $15 million were not reached. In reply, Mr. Atkinson said that in future biennia, a portion of the IBNR claim liability would continue to be unfunded. Because that liability was paid out of retirement, it did not necessarily put the program in a bad cash position as long as a significant portion of that reserve was funded. Problems occurred when the reserve was too small to offset that IBNR claim liability. He indicated that the numbers did not need to be exact, but as long as the projections were close they could be adjusted for more accuracy in the future.
Senator Tiffany said that the increase in the reserve would be beneficial, regardless of the amount. Mr. Atkinson agreed and added that increasing the reserve was a necessity as he did not feel that the program should be operated with a continual deficit. He opined that operating with a deficit was bad policy and did not allocate the cost to the appropriate year when those costs were incurred. Mr. Atkinson emphasized that the PEBP needed to be operated on a sound financial basis.
Senator Tiffany asked if the program had been on a solid financial basis in the past, and Mr. Atkinson indicated that had not been the case. In 1999, the Legislature had appropriated $26 million to help the Program. Senator Tiffany questioned whether there had been other appropriations. Mr. Atkinson replied that the Legislature had appropriated an additional $18 million during the 18th Special Session. Mr. Atkinson indicated that the plan had been designed and the rates developed in such a way as to prevent that problem in the future.
Senator Tiffany repeated that the Program had approached the Interim Finance Committee (IFC) several times for money, and she asked if it would be necessary to appropriate more money. Mr. Atkinson observed that the PEBP Board had worked hard to develop a program that would fit within the state contribution. That plan included increased co-pays and changed rates, and attempted to decrease the utilization of the program, which was the determining factor in the cost. Mr. Atkinson said the intent of the plan was to eliminate the need to return to the IFC. Senator Tiffany commented that a return to the IFC inevitably meant a request for a large amount of money and should be avoided.
Mr. Atkinson indicated that the advantage to rebuilding the reserve was that there was a mechanism to absorb escalating costs due to medical inflation or increased utilization. The reserve could be used until the plan was adjusted, but without a reserve the PEBP Board would be forced to ask for more money or to leave bills unpaid.
Mr. Atkinson noted that there were technical adjustments in the budget, including a computer pricing adjustment made using the most current pricing information from the Purchasing Division. He also noted that there were several pieces of legislation that would have a direct impact on the program if they were passed.
Senator Tiffany requested that Mr. Atkinson address medical trend and inflation as those were two factors that could affect funding. Mr. Atkinson explained that at the time The Executive Budget was constructed, the program was experiencing a much higher trend in medical inflation than the regional trend in medical inflation. The medical inflation in the program was approximately 28 percent, while the regional trend was approximately 15 percent. He said the Board had anticipated that the plan would mirror the region and they built it accordingly with a medical inflation factor of 15 percent, prescription drug inflation factor of 18 percent, dental care inflation factor of 6 percent, and a vision care inflation of 8 percent. The budget had been built and submitted to the Budget Office in August and September. The Budget Office kept the budget through the fall, and by the time the budget was ready to go to the Board in March with the proposed rate structure, it had become apparent that the plan was not going to look like the regional trend. The proposals taken to the Board revised those inflation amounts and included an inflation rate of 28 percent in medical costs. Mr. Atkinson pointed out that did not mean the program was going to pay the 28 percent, but that was the basis used to project the costs, design the plan, and adjust the co-pays.
Senator Tiffany commented that any radical changes would mean the Public Employees’ Benefits Program (PEBP) would be back in the position of asking for more money. Mr. Atkinson agreed and opined the Board had made a wise decision by using higher inflation percentages.
Senator Coffin said that there were many things in the budget that he felt were warranted and should be approved, but he did not agree with the reserve amount. He said he had suggested two years earlier that the reserve amount would not be sufficient because it would only cover a two-month IBNR claim liability. He asked if that two-month assumption had changed, and he added that he felt the program had been underfunded two years earlier and it seemed that mistake was being repeated.
Mr. Atkinson agreed that the program had been underfunded two years earlier, and he noted that the $28 million discussed earlier would be approximately 1.75 month’s worth of claims. Senator Coffin interjected that he was not comfortable with that. Mr. Atkinson explained that $28 million was supposed to accommodate the claims that had been incurred but had not been reported. The IBNR claim liability would be adjusted based on the lag reports that would show when the bill was actually received in relation to when the service was performed.
Senator Coffin acknowledged that there was tremendous pressure to try to keep expenses down in order to balance the budget, but he pointed out that in the health insurance industry a three-month IBNR claim liability was typically used to avoid a “shock” increase, which was what had happened in the program.
Mr. Atkinson remarked that the budget was constructed with the 28 percent inflation factor and an increased contribution in order to rebuild the reserve. He pointed out that the biggest problem the program had had was that the cash reserve was insufficient to pay current bills. He conceded it was important to know the IBNR claim liability, but that was an amount that was not actually due until the bills were received.
Senator Coffin commented that the IBNR claim liability was difficult to determine because many claims were not reported for three or four months, but those claims still had to be paid. He related an experience that he had with family medical expenses in which a claim was incurred in October 2002, but the bill had not been received until April 2003. Senator Coffin said there were several pieces of legislation that would have an effect on claims cost and thus premium cost, and it was unknown which pieces of legislation would pass. He reiterated that he did not want to underfund the program.
P. Forrest Thorne, Executive Officer, Public Employees’ Benefits Program, replied to Senator Coffin’s comments and said the IBNR claim liability was based on actual lag reports, which indicated the program was currently running about $13.5 million in claims per month, which meant $27 million was a two-month IBNR claim liability. That would be updated in the summer for the period as of June 30, 2003, and he expected there would be an increase in order to adjust for the actual dollar amount of the claims and for the lag over the most recent year.
Senator Coffin repeated that there was pressure to keep costs down, but he would rather pay the taxes to fund the plan properly than repeat the situation of two years earlier. Mr. Thorne said the situation was different as there had been a substantial claims inventory that had been reduced over the biennium, which had lowered the amount in the reserve.
Senator Tiffany asked if that was due to the third party administrator (TPA) change, and Mr. Thorne explained that had contributed to the change in the TPA, but the Board had forced the TPA to pay the claims in a timely manner, which had created an influx of claims in FY2002.
Senator Tiffany inquired whether the Board had considered a three-month IBNR claim liability. Mr. Thorne replied that a consultant actuary had examined the IBNR, which was based on the quantity and dollar amount of the claims that were incurred prior to a set date and time. He said that many insurance companies added a contingency reserve in addition to the IBNR, but that was a policy decision that could tie up funds unnecessarily when the fund was doing well or act as a “rainy day fund” if it was not performing well. He noted that the current policy used the Legislature as the “rainy day fund” for the plan rather than establishing a contingency reserve.
Senator Coffin said that as the money came from the General Fund, it would be more responsible to follow industry practices, which meant not underfunding the program. He pointed out that state employees were not paid as well as local public employees, but there were two reasons to work for the state: a good retirement and a good health plan. He felt it was irresponsible to place the health plan in jeopardy by underfunding. Senator Coffin reiterated that there were several pieces of legislation that would increase the cost to the program. He pointed out there were bills that were favorable to doctors, and the doctors would be able to charge more for their services and insurance companies would increase their costs as well. He suggested that a three-month IBNR would be a more realistic solution and said that would be his recommendation to the full Committee and to the Committee on Taxation.
Senator Tiffany asked Mr. Thorne what would be needed to increase the two-month IBNR to a three-month, and Mr. Thorne indicated that an additional $13.5 million would be needed. Senator Tiffany repeated that $13.5 million would be needed in addition to the proposed rate and contribution changes, the co-pay adjustments, and the increased inflation factors. She asked if Mr. Thorne felt confident in recommending that plan design.
Mr. Thorne replied that he was as confident as one could be in projecting health care costs, which were constantly changing. He said it was impossible to make an accurate prediction, but as long as costs fell within the projected range, the program would be fine. Senator Tiffany noted that past costs had not fallen within the projected range, and she asked if the current plan dealt with those risks. Mr. Thorne assured Senator Tiffany that the Board had taken aggressive action to meet that projection, including accounting for a trend rate in medical costs that was twice the regional average. Senator Tiffany noted that the increased co-pays were a result of that and an attempt to fix that disparity.
Mr. Thorne agreed and explained that there were two elements to the cost, and it was a matter of price and quantity with the quantity being defined as the utilization. He said the utilization was affecting the cost far more than the price, and the plan adjustments with higher deductibles and co-pays were an attempt to reduce utilization.
Mrs. Chowning remarked that it was important to note that the quarterly reports to the Interim Finance Committee would be a constant update as to whether or not those changes were affecting the utilization and would allow the public to see whether the recommendations that had been adopted by the Board were making a difference and improving the program. Mr. Thorne interjected that he also provided monthly reports to the PEBP Board.
Changing the subject, Senator Tiffany asked Mr. Atkinson to address the situation with pending legislation that might affect the program. Mr. Atkinson informed her that most of the bills were exempt and not subject to the deadlines. Senate Bill 215 had been indefinitely postponed, but that might have been because it was a duplication of another bill. Senator Tiffany pointed out that there were other bills that might be passed, and she asked what Mr. Atkinson would recommend as far as closing the budget before knowing the outcome of legislation. Mr. Atkinson indicated that would depend on which bill passed. If a bill legislating commingling were passed, that would mean all state participants in the plan would pay the same premium, which would increase costs by approximately $4.5 million on the state side of the program. The commingling provision was included in A.B. 165, A.B. 222, and A.B. 286. Senator Tiffany asked if there were other issues, besides the commingling provision, that would affect the close of the budget.
Mr. Atkinson explained that if commingling legislation passed, that $4.5 million would be needed to support the account. He pointed out that the cost of participants was the same regardless of who paid the premium, so if a portion of the premium cost was shifted from the non-state entities to the state entities, a decision would need to be made regarding how to pay that $4.5 million. There were several options—the state employee could pay, the state contribution could increase, or the reserves could be depleted—and the way the bill was passed, whether there was an appropriation attached, would determine that choice. If the bill were passed with an appropriation attached, the budget closing would not necessarily be affected, but if it were passed without accounting for that $4.5 million, then the budget would need to be reopened in order to make adjustments to the reserves and the revenue. That would mean a $9 million decrease in the reserve over the biennium.
Senator Tiffany said it appeared that A.C.R. 10 would be the legislation that was passed. Assemblywoman McClain agreed and added that the passage of A.C.R. 10 would authorize a study of a multitude of issues regarding the PEBP, including uniform rates and commingling and the possibility of combining local and state governments to create an economy of scale.
Senator Rhoads asked if the Governor’s recommended budget had provided any relief for the non-state retirees, and Mr. Atkinson said it had not. He explained that the Governor’s budget did not determine the portion paid to the program or define the benefits; that was determined by the PEBP. He said the Board had established three levels of deductibles in the benefits that were offered, which slightly reduced the premiums for non-state retirees, but there was still a large disparity between what a state retiree and a non-state retiree paid.
Senator Coffin commented that the current group of participants was large enough to achieve economies of scale. The addition of other public entities might not have the desired effect as many of the healthiest and youngest people opted to have their own plans and not participate in the state program. Senator Coffin pointed out that government health insurance plans were different from private health insurance plans. He said that government health plans might need a higher reserve than a private plan because private companies typically did not have as much paid sick leave or vacation days. That time off allowed for more medical procedures, such as surgeries that required a longer recovery time. He opined that there were no “magical savings” to be found in making the plan bigger.
Ms. McClain interjected that an interim study would examine many possibilities, not just bringing public entities into the state plan, and would provide a clearer picture of health insurance statewide.
Senator Tiffany outlined the issues that had been discussed: the state contribution for active employees, the request for new positions, overtime, and the amount in reserve. She indicated that decisions needed to be made regarding those four issues in order to close the budget. She said that the Governor recommended that the state contributions for active employees be increased from $469 to $495 in the first year of the biennium, with an additional 12.6 percent increase to $558 per month in the second year of the biennium. The state employees’ contribution would be $14.36 and they would be able to choose a level of deductible and co-pay. The new positions would be replacing temporary employees, and additional office space would be needed. Senator Tiffany then confirmed that staff did not recommend funding the overtime as requested.
Mrs. Chowning referred to the state contribution and said she would make a motion that the state contribution be approved as outlined in The Executive Budget. She noted that a bill would need to be drafted as the amount of state contribution had to be established each legislative session. Mr. Atkinson indicated that the bill had been drafted and said that historically the bill had been introduced by one of the money committees under recommendation of the Department of Administration. He noted that Mr. Comeaux had indicated he would find that legislation and ensure that it was introduced.
Senator Tiffany repeated that staff had recommended that the overtime not be approved. She then asked what the choices were regarding the reserve account. Mr. Atkinson explained that the amount of reserve was actually a mechanical issue that used a portion of the state contribution to rebuild the reserve. He said that decision unit E-504 should be approved. Senator Tiffany asked if any additional issues needed to be included, and Mr. Atkinson pointed out that there were technical adjustments for computer prices.
Senator Tiffany questioned the necessity of including a statement regarding the possible passage of one of the aforementioned bills. Mr. Atkinson recommended that a provision be included that if the bills were passed, the budget might need to be reopened, depending on a recommendation from the Fiscal Analysis Division.
ASSEMBLYWOMAN CHOWNING MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY STAFF WITH APPROVAL OF THE EMPLOYEE CONTRIBUTION AS RECOMMENDED IN THE EXECUTIVE BUDGET, APPROVAL OF DECISION UNITS E-500, E‑501, E-502, E-503, AND E-504, WITHOUT APPROVAL OF DECISION UNIT E-275, APPROVAL OF OTHER TECHNICAL ADJUSTMENTS, AND INCLUDING THE OPTION TO REVISIT THE BUDGET IF NECESSITATED BY THE PASSAGE OF PROPOSED LEGISLATION.
ASSEMBLYMAN GRIFFIN SECONDED THE MOTION.
Senator Coffin stated that he would vote against the motion as he disagreed with decision unit E-504 and the funding of the reserve. He opined that the reserve was being underfunded and he felt additional information was needed before closing that portion of the budget. He said that raising the state employees’ contributions without raising salaries essentially meant salaries were being cut, and he felt that needed to be considered.
Senator Tiffany pointed out that the $14 contribution would only need to be made by those who had chosen the lowest deductible. Senator Coffin conceded that it was not a large amount of money, but he repeated that the reserve was underfunded.
Senator Tiffany opined that the Subcommittee had adequately considered the budget issues, and she pointed out that adjustments could be made by the IFC.
Senator Tiffany indicated the Subcommitee would vote on the motion before them.
THE MOTION CARRIED WITH SENATOR COFFIN VOTING NO.
BUDGET CLOSED.
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RETIRED EMPLOYEE GROUP INSURANCE (101-1368) BUDGET PAGE PEBP – 9
Mr. Atkinson presented Budget Account 101-1368 and explained that the Retired Employee Group Insurance collected medical insurance premiums and paid claims on behalf of the people who participated in the program. The account collected an assessment from all the state agencies and used that to fund a portion of the state retiree premium. The amount that needed to be spent was based on three things: the number of people who were retired, the years of service they had, and what contribution the Legislature determined as the base amount that participants would receive for the subsidized portion of their retiree premium.
Mr. Atkinson noted that the base amount was adjusted depending on whether the participants retired prior to 1994 or after 1994. Those who retired prior to 1994 received 100 percent of the base amount. Those who retired after 1994 received 25 percent for the first five years of service, and then an additional 7.5 percent for each year thereafter. That meant an employee with 20 years of service received 137 percent of the base amount as an offset against the premium that was established for health insurance coverage. Mr. Atkinson said the current premium was $263.89. Historically, that subsidy, or base amount, had increased in relation to the state contribution for active employees. The Executive Budget recommended a base amount of $280.78 in 2004, which was a 6.4 percent increase, and in 2005, it would be increased 12.6 percent to $316.26.
Mr. Atkinson noted that there were a number of issues in the construction of the account because it was dependent on the assessment received from all the other accounts. If the Subcommittee wanted to fund the base amount as recommended in The Executive Budget, then the amount of revenue collected and the expenditure authority would need to be increased by $3.2 million in the first year, and $3.5 million in the second year. That increase would allow the account to pay the anticipated retiree subsidy at the rates that were recommended. Mr. Atkinson said that the current assessment rates charged to state agencies as recommended in The Executive Budget would not generate enough assessments. The current rate of assessment, after the increase that was approved by the 18th Special Session, was 1.7 percent. The Executive Budget recommended a 1.49 percent rate in 2004 and a 1.6 percent rate in 2005. Mr. Atkinson noted that, even with the increase, those rates would not provide sufficient revenue to fully fund the account’s obligations. If that subsidy amount was approved, there was approximately $1.7 million in each year of the biennium in the University System assessment that had not been built into the University System budgets, and the Legislature would have to fund that shortfall.
Mr. Atkinson stated that if the subsidy amount were funded as recommended by the Governor, the assessment rate would need to be increased to approximately 1.72 percent in FY2004 and 1.88 percent in FY2005. That would result in an increase in the assessments of approximately $2.6 million.
Senator Tiffany commented that it was a policy decision whether to fund the base. She also pointed out that funding the increase would mean that the assessments would need to be increased and the University System budgets would have to be adjusted to include that assessment of $1.7 million. That would result in an increase of approximately $5.2 million to fund the Retired Employee Group Insurance.
Mrs. Chowning requested that Mr. Comeaux provide information regarding the Governor’s intent. Mr. Comeaux indicated that it was the Governor’s intention to fund the state’s contribution for retiree premiums and to fund an increase in that similar to the increase in the contribution for active employees. Mr. Comeaux said his office was reviewing the recommendation from Mr. Atkinson, which would be presented to the Governor. Mr. Comeaux said he would need to discuss that information with the Governor before providing a definitive answer.
Senator Tiffany indicated the budget would not be closed until Mr. Comeaux was able to provide that information from the Governor. She asked if there was any other business that needed to be conducted.
Mrs. Chowning said she would like to apologize for a miscommunication that had occurred when an agency had not been notified of a change in the meeting’s agenda. She said that agency’s budgets would be heard on April 24, 2003.
Senator Tiffany thanked Mrs. Chowning and adjourned the meeting at 10:10 a.m.
RESPECTFULLY SUBMITTED:
Susan Cherpeski
Committee Secretary
APPROVED BY:
Senator Sandra Tiffany, Chairwoman
DATE:
Assemblywoman Vonne Chowning, Chairwoman
DATE: