SENATE COMMITTEE MINUTES

MINUTES OF THE

SENATE Committee on Government Affairs

Seventy-second Session

February 24, 2003

The Senate Committee on Government Affairswas called to order by Chairman Ann O'Connell, at 2:08 p.m., on Monday, February 24, 2003, in Room 2149 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4122, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Ann O'Connell, Chairman

Senator Sandra Tiffany, Vice Chairman

Senator William J. Raggio

Senator Randolph J. Townsend

Senator Warren B. Hardy II

Senator Dina Titus

Senator Terry Care

STAFF MEMBERS PRESENT:

Michael Stewart, Committee Policy Analyst

Scott Wasserman, Committee Counsel

Alice Nevin, Committee Secretary

OTHERS PRESENT:

Charles (Chas) L. Horsey III, Administrator, Housing Division, Department of Business and Industry

Lon DeWeese, Chief Financial Officer, Housing Division, Department of Business and Industry

Mary C. Walker, Lobbyist, Truckee Meadows Water Authority

Lori L. Williams, General Manager, Truckee Meadows Water Authority

Jennifer Stern, Bond Counsel, Swendseid & Stern

Douglas W. Karafa, Acting Program Administrator, Clean Water Coalition

Dan Musgrove, Lobbyist, Clark County

Jared Shafer, Former Public Administrator, Clark County

Tom Pitaro, Attorney, Democratic Party of the State of Nevada

Charlie Waterman, Chairman, Clark County Democratic Party

Harriet Trudell, Political Director, Nevada State Democratic Party

John Ponticello, President, Paradise Democratic Club

Christopher Hansen, Young Independent American Party of Nevada

Lucille Lusk, Lobbyist, Nevada Concerned Citizens

Janine Hansen, Lobbyist, Independent American Party (IAP) of Nevada

Todd Russell, Chairman, Commission on Ethics

Stacey M. Jennings, Executive Director, Commission on Ethics

Gary Peck, Executive Director, American Civil Liberties Union of Nevada

Merritt K. (Ike) Yochum, Independent American Party (IAP) of Nevada

David K. Schumann, Lobbyist, Independent American Party (IAP) of Nevada

Chairman O'Connell cancelled the scheduled work session. She opened the hearing on Senate Bill (S.B.) 78.

SENATE BILL 78: Makes various changes relating to assistance to finance housing. (BDR 25-467)

Charles (Chas) L. Horsey III, Administrator, Housing Division, Department of Business and Industry, stated S.B. 78 would give the Housing Division the flexibility and lending authority necessary to meet today’s challenges. He noted the Housing Division was created to augment or supplement the lending activities of the private sector. The concept was to get Nevada families into the mainstream of home ownership earlier by providing lower mortgage rates and interest rates. He pointed out approximately 38,000 Nevada families live in a home or apartment as a result of this program.

Nevada has changed, Mr. Horsey commented, and the agency’s role has changed as well. He said a recent study, looking at special needs groups in the State, identified a shortage of affordable housing for nine groups in the State. He stated the statutes were developed in 1975 when the main goal was to give help to first-time homebuyers and low-income families. He said S.B. 78 would give the additional flexibility needed to address today’s special needs groups.

Mr. Horsey referred to “S.B. #78 Section by Section Additional Information,” Exhibit C. He explained section 1 of S.B. 78, noting there were factors other than income to be taken into consideration. He stressed the Housing Division had tried to develop special programs because of special needs in the State, but programs funded by the Low Income Housing Trust Fund were excluded.

Chairman O'Connell called attention to subsection 5, section 1, of S.B. 78. She stated, “This language is so broad, even the people in Incline Village could qualify.” She asked Mr. Horsey to revisit the language.

Senator Care cited Nevada Revised Statutes (NRS) 319.020:

Legislative findings and declaration; liberal construction. The legislature finds and declares that: 1. There exists a serious shortage of decent, safe and sanitary housing in this state available to persons and families of low and moderate income and that many other persons and families are unable to secure or afford, without assistance, decent, safe, and sanitary housing.

Senator Care said he thought it referred to persons of low and moderate income. He noted the presentation seemed to indicate assistance would be given to people who were of average or above average income. He emphasized this would contradict the mission statement.

Mr. Horsey pointed out the tremendous shortage of teachers, nurses, and prison guards in this State. He noted the private sector was not providing housing for these groups, and there were circumstances where assistance could be extended beyond low to moderate-income families.

Chairman O'Connell noted the U.S. Department of Housing and Urban Development (HUD) offered a program for both teachers and police officers which provided financing for as much as 50 percent of the home.

Lon DeWeese, Chief Financial Officer, Housing Division, Department of Business and Industry, said the HUD program limited the location where people could live and not everyone wanted to live exactly where they worked.

Chairman O'Connell voiced, “With 50 percent of the home paid for, people could make a few concessions.”

Chairman O'Connell asked about funding other than the 10 cents on the real property transfer tax. Mr. Horsey answered the 10 cents on the real property transfer tax was exclusively for the Low Income Housing Trust Fund and was the only funding the Housing Division received from the State.

Senator Townsend said he had chaired a subcommittee on housing and homelessness, and it was very difficult to start on the road to recovery without some kind of housing. He noted in order to get employment a person had to have an address. He stated he was concerned adding upward flexibility might limit opportunities for those currently in need. There were as many as 12,000 homeless people in Las Vegas, he stressed, and although teachers needed housing assistance, there were homeless people who desperately needed help.

Mr. Horsey said the department had tried to develop programs to attract teachers and nurses to the State and if they were limited to first-time homebuyers, only beginning teachers and nurses would be given assistance. He stated the department thought the need to assist these special groups was more important than their income, especially for the rural areas.

Senator Tiffany asked how people would know what was available if the criteria changed.

Mr. DeWeese said a process had been outlined by department lawyers whereby the administrator of the Housing Division would go through a hearing process in the north, the south, and in rural Nevada. He said needs would be established both demographically and politically, and approval from the State Board of Finance would be necessary before activation of any program.

Senator Tiffany asked if the criteria could be changed at a later date because it was important to ensure the process could be revised.

Mr. DeWeese said there would be a two-step process. He stated the department would poll demographic areas and subgroups identified in legislatively approved studies, and also function on an ad hoc basis. He pointed out when the Ely prison opened, the department found it could not, through the tax laws associated with tax-exempt bonds, lend on a project to support the prison guards. Their income exceeded what was in the tax-exempt bond.

Mr. Horsey emphasized all financing was subject to public hearings with the findings given yearly to the State Board of Finance.

Chairman O'Connell questioned page 3, line 1, of S.B. 78, removing the department from the administrative code.

Mr. DeWeese answered there were maintenance problems with existing operating programs. He noted certain applications, such as loan origination, were done on the Internet. He stated, “While other states have in-house capabilities, the Housing Division had to subcontract the work out.” He added several areas, such as bond cash flow management systems and tax credit regulatory systems, were stifled in their ability to provide automated record keeping.

Mr. DeWeese emphasized the bill drafters suggested using the language in page 2, lines 42 and 43, and page 5, lines 33 and 34, of the bill. He stated section 5 added the department to a list of other specialized organizations with highly specialized software and computer systems to support their needs. He commented the Department of Information Technology, (DoIT) functioned well for many General Fund agencies. He noted because the Housing Division was set up like a commercial bank, specialized banking and regulatory software were necessary, and DoIT could not support those applications.

Senator Tiffany asked for clarification of the department’s intent on the exemption from DoIT and the ability to develop in-house systems.

Mr. DeWeese answered the department was unable to add modern enhancements to allow certain applications to function, such as reserving loans from banks directly on-line and having apartment buildings report directly to the department.

Senator Tiffany said, “There is no web interface on the IBM front end so you want to move it all off. ” She inquired if it had been built into the budget.

Mr. DeWeese said the department needed to interface now and DoIT did not have the expertise. He advised this request was in the current budget request.

Mr. Horsey referred to section 6 of S.B. 78, which extended or repealed the expanded statutory authority and was due to sunset July 1, 2003. He pointed out last year the department granted $2.7 million to the Welfare Division, Department of Human Resources, when they were experiencing financial
difficulties. He stressed the department voluntarily donated the funds to the Welfare Division, and it was felt such flexibility was absolutely critical to the department’s operation.

Chairman O'Connell clarified this would make the division independent of other State agencies.

Mr. Horsey said 36 or 37 housing divisions across the country functioned independently, but he was requesting independence only from the Purchasing Division and DoIT.

Chairman O'Connell inquired about accountability. She noted the new language did not explain who reviewed departmental decisions, and it appeared to give the administrator carte blanche powers over who would receive funding for low-income housing.

Mr. Horsey responded five hearings were held each year to consider projects. He noted all bonding programs received State Board of Finance approval. He added the administrator reported to the director, Department of Business and Industry, and the department had an advisory committee. He continued, ratings agencies, one or a combination of the agencies, reviewed every bond issue; the Legislative Counsel Bureau conducted audits; the department’s own independent auditors audited twice a year.

Mr. DeWeese added administrative expenses were part of the Governor’s budget and were reviewed by the Legislature each and every biennium.

Mr. Horsey discussed page 5, lines 5 through 15, of S.B. 78. He stated in the years he has been with the division, the debt limit was increased several times. He said this would ensure only investment-grade debt would be issued.

Senator Tiffany asked why the division needed a credit rating in one of the three highest categories of a nationally recognized rating agency.

Mr. DeWeese answered in order for bonds or letters of credit to have any meaning to a bank as a creditor, or to the buyer of bonds or funds that buy bonds, it had to be at an investment grade. He added this would attract the maximum number of buyers and the lowest cost of capital. He noted junk bonds would be the alternative.

Mr. Horsey clarified there was a direct correlation between the ratings achieved and the mortgage rate or the rent to be paid. He stated if AAA rated bonds were issued, the mortgage rate would be lower. He pointed out the State had one of the better reputations in the entire country. The public bond market was not accessed with anything less than an AA rating, which was extremely high and significant.

Chairman O'Connell asked how long the debt issuance limit had been at $2 billion, and Mr. Horsey replied 4 years.

Mr. Horsey said last time the expanded authority was approved, a 2-year limitation was added. He stated if the debt issuance limit was not extended, expanded operations would sunset on July 1, 2003.

Chairman O'Connell closed the hearing on S.B. 78 and opened the hearing on S.B. 140.

SENATE BILL 140: Revises provisions governing acquisition by county or state of municipal obligations issued by certain water authorities. (BDR 20-854)

Mary C. Walker, Lobbyist, Truckee Meadows Water Authority, introduced Lori L. Williams, Jennifer Stern, and Douglas W. Karafa, who will testify for the bill.

Lori L. Williams, General Manager, Truckee Meadows Water Authority, stated the bill would allow the Truckee Meadows Water Authority (TMWA), in the same way as the Southern Nevada Water Authority (SNWA), to use State bonding to do future financing. She said the TMWA currently had a BBB+/A- bond rating, which was less than the State’s bond rating. She said this would provide a savings in future bond financings.

Ms. Williams explained the TMWA was created under NRS 277, through a joint powers agreement, in order to purchase the water assets of Sierra Pacific Power Company. She said operations began on June 11, 2001 and part of the reason for the current bond ratings was the TMWA had to go out to bond ratings as a company with no history.She added the TMWA actually had good bond ratings for a new company. She said the TMWA served 78,000 connections in the greater Truckee Meadows area with potable water for fire protection.

Ms. Williams said the Office of the State Treasurer agreed to the bill because it would allow the TMWA to use State bonding as a source of financing for future bonding.

Chairman O’Connell asked about bond repayment.

Ms. Williams replied the TMWA had the right to raise rates to recover revenues to fund the bonds. She stated the TMWA would ask the State for help in securing revenue bonds, backed by the revenues of the company, raised at the sole discretion of the TMWA board.

Chairman O’Connell asked if the TMWA dealt directly with the ratepayers, and Ms. Williams replied yes. She added the board had the right and the obligation under the current bonding to raise the rates to secure bonds.

Chairman O'Connell asked for further clarification. Ms. Williams responded typically the operation ran off revenues, but there were bonds for upcoming capital improvement projects. Those bonds would be paid through those rates over a period of time, she stated. She acknowledged the TMWA concurred with the upcoming amendment proposal.

Jennifer Stern, Bond Counsel, Swendseid & Stern, said Swendseid & Stern served as bond counsel for a number of State agencies as well as local governments. She stated Swendseid & Stern were involved in the original financing by the TMWA to acquire the water facilities in Washoe County from Sierra Pacific Power Company.

Ms. Stern presented Exhibit D. She noted page 1 of Exhibit D explained the purpose of S.B. 140. She noted pages 2 and 3 were a proposed amendment by the Clean Water Coalition (CWC).

Chairman O'Connell asked Ms. Walker if she had reviewed the bill before it was introduced. Ms. Walker responded yes. She added the TMWA concurred with the bill, but last week the CWC, a southern Nevada group of local governments, saw this as a potential mechanism to go through the State bond bank, thereby decreasing the interest costs to them.

Chairman O'Connell clarified the amendment was a proposal from another group. She asked why they did not have a bill of their own.

Ms. Walker answered the CWC would request the same legal authority to use the State bond as the TMWA had requested. She said, “As long as it did not hurt our bill, we agreed to submit the amendment to the committee.”

Ms. Stern explained the CWC and the requested amendments. She said section 1 of S.B. 140 was an amendment to the county bond law. She stated the county had the authority to do a bond bank as did the State. She explained section 1 would amend the definition of a municipality and would delete the requirement that a water authority be comprised of members including at least two of the largest municipal retail water purveyors in the county. In the case of the TMWA, she noted it was comprised of Washoe County and the cities of Reno and Sparks. She commented one of the two largest municipal water purveyors was the Sun Valley General Improvement District and they did not belong to the TMWA. She said the preexisting language, drafted for purposes of the CWC, would not apply to the TMWA.

Ms. Stern explained section 2 of the proposed legislation limited the issuance of State securities and was an amendment to the State bonding law. She said it placed limits on acquiring bonds issued by a water authority whose members contracted to make payments from the member’s water system. She noted if they were not fully sufficient, they pledged their general fund and ad valorem taxing power.

Ms. Stern stated the TMWA was not structured that way. She said the members had not pledged general funds or ad valorem taxing power. She explained this was different because the TMWA was a retail water provider, not a wholesaler.

Ms. Stern explained as a wholesaler, the SNWA would sell water to its members who were the local governments. She said this would not happen in the case of the TMWA because the charges were levied directly against the users. She explained TMWA had basically acquired Sierra Pacific Power Company water facilities and rates were charged against water users. Continuing, she said the provisions of NRS 350A.152 would be inapplicable to the TMWA, which was the reason for proposing it apply solely to water authorities in counties of 400,000 residents or greater.

Ms. Stern voiced the CWC was a brand new coalition created, just as the TMWA was, by the joint powers authority. She said it was a cooperative agreement between the Clark County Water Reclamation District and the cities of Las Vegas and Henderson for the purpose of the construction and operation of a regional system for the conveyance of effluent. She noted, “When I reviewed their cooperative agreement, it became apparent they should have the various alternatives for financing the TMWA would like to have and the SNWA currently has.”

Douglas W. Karafa, Acting Program Administrator, Clean Water Coalition, testified the CWC was formed as a joint powers authority under NRS 277 in November 2002 and there was no time to submit their own bill.

Mr. Karafa said CWC was comprised of the Clark County Water Reclamation District and the cities of Henderson and Las Vegas. He added those three agencies had wastewater plants in southern Nevada. They came together to build a regional wastewater effluent system that would probably be a pipeline project to Lake Mead.

Mr. Karafa said the organization was new and revenue could come from those agencies or from the sale of effluent or electrical generations that were part of the project. He noted the CWC could assess regional surcharges if necessary.

Chairman O'Connell asked what entities were affected specifically before the amendment to S.B. 140. Ms. Williams responded S.B. 140 was intended only for the TMWA as the new water authority in the State.

Chairman O'Connell asked if these entities would be allowed to use the State’s rating, and to bond and collect money from the ratepayer for both operating and bonding.

Ms. Williams answered this would be a less expensive source of financing for the TMWA. The intent was to try to use the least cost financing in order to keep the water rates as low as possible while still collecting the revenues required to cover the bond money.

Chairman O'Connell asked if the bill affected the SNWA. Ms. Williams said no, the intent was not to impact the way they do business. Chairman O'Connell asked if the addition of the amendment would affect the SNWA.

Ms. Stern replied the proposed amendment to S.B. 140 merely changed the definitions in the county bond law and the State bond bank law to add the political subdivisions created by cooperative agreement as wastewater authority. She stated it was currently written only for the water authority because the SNWA was the only entity in the State created by cooperative agreement. She added now there were two more entities.

Senator Hardy asked if this would affect a small rural district within Clark County not a part of the SNWA. Ms. Stern said no, they merely expanded the State bond bank and county bond bank authority to provide financing, if they chose to do so. She added nothing in it was mandatory and the Office of the State Treasurer could determine not to fund a particular financing. She advised it just provided an alternative for the TMWA and the CWC if the parties wanted an alternative and the parties came to an agreement.

Ms. Stern explained all of the proposed amendments to S.B. 140 were just to add wastewater authority to NRS 244A, the county bond law, and to NRS 350A, the State bond law.

Chairman O'Connell asked if there would be any differing rules for the TMWA and the SNWA as a result of the bill. Ms. Williams said no, the bill was inclusive and enabling for all three agencies.

Ms. Stern said amending section 2 of the original bill made sure this particular provision, drafted solely for the SNWA, remained that way. She stated the TMWA had not been structured in the same way as SNWA and should not be subject to the same requirements. She said the cities of Reno and Sparks, and Washoe County pledged their general funds and their ad valorem taxing powers to bonds. She explained because they were straight revenue bonds, their authority extended only to revenue bonds. She added they just had the authority to raise their rates to pay bond operation and maintenance expenses.

Ms. Stern commented the way the bond resolution was drafted, the TMWA was required to keep those rates and charges at 1.25 percent of a combined operation and maintenance expense, as well as debt service. She noted they had more than enough money to cover their operations and their debt service.

Chairman O'Connell said, “Would you tell us one more time, who is involved with this new coalition group?”

Mr. Karafa said, “The member agencies of the Clean Water Coalition, a joint powers authority, are the cities of Las Vegas, Henderson, and the Clark County Water Reclamation district, which is a special purpose district that only does wastewater treatment.”

Chairman O'Connell closed the hearing on S.B. 140 and opened the hearing on S.B. 143.

SENATE BILL 143: Authorizes certain counties to appoint public property trustee to perform duties of public administrator of county. (BDR 20-419)

Dan Musgrove, Lobbyist, Clark County, testified for the bill. He said S.B. 143 should be debated in an open forum because it was a unique change in the law. He stated the intent was to change the public administrator position in Clark County to an appointive position and rename it the public property trustee.

Mr. Musgrove said a similar situation occurred 30 years ago when the county auditor position was renamed county comptroller. He said the intent was to mirror the language used in that section of the law. He stated the mechanics of the bill were in the statute and this bill would enable legislation allowing the county to give the duties of the public administrator to an appointed position.

Mr. Musgrove explained it was thought the position should not be an elected position. He added the public would be better served because there would be more control over the mechanisms of the office through audit and oversight. He stated this could only occur through oversight by the Clark County Manager’s office and the Clark County Board of Commissioners. He said he did not want to indicate the public did not have the ability to choose the best person for the job, but this position had very unique requirements.

Mr. Musgrove noted the public administrator was not a policy-making position, it was administrative and dealt especially with estate funds. He testified the position administered private estates held in trust, and there was a special fiduciary relationship between the public and those estates. He said it was the same kind of fiduciary relationship that existed between the public guardian and those individuals deemed to be incompetent or otherwise incapable of managing their own affairs. He stated the public administrator provided protection and management of estates, managing $15 to $20 million per year.

Mr. Musgrove said as an elected position, an audit of the funds could only occur if the public administrator himself asked for the audit. He stressed the county or State did not have auditing power over an elected position.

We believe this position warrants audit oversight, Mr. Musgrove emphasized, as well as a person with unique qualifications to carry out the duties. He said it was important for the person to have an understanding of probate law. He stressed, “I feel the Legislature should consider giving authority in the statutes to set minimum qualifications or to allow an audit of this position, both on performance and financial matters.”

Chairman O'Connell commented this was a unique job and required a very broad spectrum of knowledge.

Senator Care disclosed this issue came to his attention when he was serving as Democratic State Party Chairman. He noted the party did not like doing away with an elective position. He said the previous administrator, Jared Shafer, did a good job and he wondered why the change was requested after he left office.

Mr. Musgrove said Thom Reilly, County Manager, Clark County, had reviewed county government positions and made several recommendations. He noted there was another bill to divide the county recorder’s office among several elected offices for increased efficiency and to better serve the public.

Senator Care quoted page 2, line 28, of S.B. 143, “The board of county commissioners may fix the compensation of the public property trustee.“ He noted Assembly Bill 66 contained pay raises for county officers, including a pay raise for the public administrator. He asked how it would compare with the salary in this bill, which fixed the compensation.

ASSEMBLY BILL 66: Increases compensation of certain elected county officers. (BDR 20-170)

Chairman O'Connell said the suggested salary was $115, 584.

Mr. Musgrove said the intent was to set the salary at the level of similar positions throughout the county.

Jared Shafer testified he held the position of public administrator in Clark County from 1979 through 2002. He emphasized the position had access to $10 to $30 million of other people’s assets. He voiced the statutes should be changed to include tighter controls in NRS 253, rather than changing the position to an appointive position.He pointed out the public administrator must have knowledge of probate law, veterans’ affairs, social services, tax issues, insurance issues, banking issues, federal reserve problems, and even cemetery issues.

Tom Pitaro, Attorney, Democratic Party of the State of Nevada, and representing Dan Alhstrom, Clark County Public Administrator, testified against S.B. 143.

Mr. Pitaro said Abraham Lincoln gave the most eloquent definition of democracy when he spoke about government being of the people, by the people, and for the people.He added the Nevada State constitution had a constitutional preference for elections.He noted this bill would remove the rights of the people to elect one of their own as public administrator.

Mr. Pitaro admitted elections were costly and it would be more cost efficient to have the public administrator position as an appointed position.Mr. Pitaro voiced this issue transcended party lines. He said there was never too much democracy, but too little.

Charlie Waterman, Chairman, Clark County Democratic Party, testified against the bill.He commented he agreed with Mr. Pitaro’s testimony.

Harriet Trudell, Political Director, Nevada State Democratic Party, said she strongly opposed changing any office from elective to appointive.

John Ponticello, President, Paradise Democratic Club, testified against the bill.He stressed the club believed in the democratic process. He added the American way was to elect, not appoint, to government positions.

Christopher Hansen, Young Independent American Party of Nevada, testified he agreed with the previous testifiers. He opposed S.B. 143.

Lucille Lusk, Lobbyist, Nevada Concerned Citizens, expressed frustration over the wording of the bill.She noted she opposed eliminating an elective position although, she commented, there was a potential for misuse of the position.She agreed with the suggestion to amend the statutes to strictly specify the requirements.

Janine Hansen, Lobbyist, Independent American Party (IAP) of Nevada, said her mother ran for the public administrator position and while campaigning, she met a lot of people who expressed concern over the office.She said if the person had been appointed, instead of elected, people would be able to express their concerns in the same way they could during an election campaign.She stated there was little accountability without elections.

Chairman O'Connell closed the hearing on S.B. 143 and opened the hearing on S.B. 147.

SENATE BILL 147: Makes various changes relating to Commission on Ethics. (BDR 23-500)

Todd Russell, Chairman, Commission on Ethics, testified for the bill.He stated the current ethics law, including the panel proceedings portion of the law, had worked very well.He added it handled many issues in a judicious and economic fashion.

Mr. Russell noted this bill was a housekeeping bill to take care of issues which had arisen over the past 4 years.He voiced one issue was various portions of the bill had been declared unconstitutional by the State and federal court.He said this bill attempted to amend those sections to be in compliance with the law and the constitutionality of the law.

Mr. Russell testified another intent was to deal with the financial disclosure statement fines.He said the Commission on Ethics spent an enormous amount of time on the applications for waivers of fines and had tried to treat everyone fairly while not precluding people from running for office.

Mr. Russell said the Independent American Party of Nevada had taken the position the mere filing of the financial disclosure form, without any information on it, constituted a filing with the Commission on Ethics.He said the commission had filed a petition in the district court in Carson City to declare whether or not it was a proper filing.

Mr. Russell said the commission wanted to put a cap on the fines and establish a “willfulness.”He indicated over the last 3 years he had found most people did not willfully fail to file the financial disclosure statement, most of them did not know about the requirement.He stated there were provisions in this bill to make sure counties had a notification program so people were notified of the requirement to file the statement.

Chairman O'Connell said she understood the language had to be changed, but was concerned about taking out frivolous lawsuits.

Mr. Russell replied those sections were declared unconstitutional and had to be removed, but panel proceedings had taken care of the issue.He explained the panel existed primarily to handle complaints referred to the commission.He said staff reviewed the complaints and if the complaint had merit, it went to a panel.He expressed since he had been on the commission, complaints had always been handled on a fair and impartial basis.He noted in order to move forward to the full commission, one of the two people on the panel must determine there was probable cause.The panel disposed of most complaints and no one had been fined in the last 3 years. He commented the fine provision did not have the impact it was intended to have in the original statute.

In response to Chairman O’Connell’s question, Mr. Russell responded the panel has taken care of the problem and the essence of this bill was the area of fine provisions. He said the department spent time too much time discussing waivers at every meeting.He noted Ms. Jennings would discuss the bill particulars to include a flat penalty fee.

Stacy M. Jennings, Executive Director, Commission on Ethics, presented “Senate Bill 147 Executive Summary,” Exhibit E.

Ms. Jennings assured the committee even the smaller counties would be able to provide lists to assist in enforcement of the requirement to file financial disclosure statements. She said the commission did not know who was supposed to file them.She said staff consulted city and county governments, the Legislative Branch, and the Executive Branch and suggested a list be provided annually of public officers.She noted a reminder was sent recently to those who had not filed their annual financial disclosure statement, informing them it was due by March 31, 2003.

Ms. Jennings used Exhibit E to explain the bill.She explained the changes or deletions requested in each section of the bill, providing clarification in each section.

Chairman O'Connell noted in page 5, line 19, of S.B. 174, the words “any other person” were found to be unconstitutionally vague.She said, “The intent was to make it as clear as possible and I have a problem with the removal of those words.”

Scott Wasserman, Committee Counsel, called attention to page 5, line 17, “any member of his household, any business entity in which he has a significant pecuniary interest, or any other person.”He noted the court read the language to mean something different than the Legislature intended.He expressed they were limiting the applicability of this provision to members of a household or business entity.He noted another approach to satisfy the court opinion would be to say he could not secure unwarranted privileges for himself or any person, including any member of the household, and any business entity in which he has a significant pecuniary interest.

Ms. Jennings reviewed the suggested changes to section 8 of the bill as summarized on pages 2 and 3 of Exhibit E.

Ms. Jennings referred to Attachment A of Exhibit E, which used a flowchart to explain how a formal complaint was filed with the Commission on Ethics. She noted very few complaints had gone forward, but the average processing time was 119 days, almost twice what the statute stipulated.

Ms. Jennings stated the commission believed if one of the opinions came under challenge and the public officer had waived the statutory time frame, the court might see a violation of due process because statute said it had to be in a specific way.She noted the panel process worked very well, but it was hard to work within the timeframe listed in the statute.

Senator Titus stated 6 months was a lifetime in a public official’s career and it seemed unfair to the person in office.She asked if certain complaints before an election were expedited.

Ms. Jennings said the bill did not propose changing that part of the process. She noted if untruthful statements were made during an election time, the department expedited the process and held a hearing within 15 calendar days.

Senator Titus asked for further clarification. Ms. Jennings said the way the process was designed, when a complaint came in through the time when the panel made a decision, the information was confidential. She noted this was the safeguard for the public officer.She commented the process had broken down in the larger counties where someone would file a complaint and send a copy to the newspaper.She noted then the complaint got into the media before the department had dealt with it.

Senator Care asked how the commission determined the priority in investigations.

Ms. Jennings said the campaign practices statute clearly stated during an election cycle, any complaint relating to campaign practices had to be handled before anything else.She added it was first come, first served, with the weight of any one complaint not placed over another.

Senator Care asked, “If a charge was 40 days from the election, but referred to an incident that occurred 1 or 2 years earlier, would it fall under the purview of the election campaign mechanism in the statute?”

Ms. Jennings said the statute specifically said if false and misleading statements were published, the filing must be within 10 calendar days, or the statute of limitations expired.She said allegations about what was done while someone was in office went through the regular ethics complaint process.

Chairman O'Connell asked Ms. Jennings if she had worked with the Office of the Secretary of State to revise the forms.

Ms. Jennings acknowledged meeting with the secretary of State.She said legislation had been proposed changing the date to January 15.She noted the vast majority of people were appointed, not elected, and the secretary of State would like to take jurisdiction and enforcement for just the elected group.She noted the department would keep the appointed group and report those who had not filed.

Gary Peck, Executive Director, American Civil Liberties Union of Nevada, said the bill had provisions giving the ethics commission the authority to fine anyone they determined had made false and vexatious complaints about public officials.He said the courts had found those provisions were an affront to the First and Fourteenth Amendments of the United States constitution because they infringed on people’s fundamental rights to seek a redress of grievances from the government.

Mr. Peck said:

If a public official believed he or she had been slandered or defamed, the United States Supreme Court had said in order to prevail in a slander or libel action, they would need to meet a very high threshold of evidence showing the statement was made willfully, intentionally, knowingly, that it was a lie and that it actually defamed them.

The members of this committee should recognize whatever their motives or intentions, it ought not be the business of any political appointee to sit around and police the speech of people during political campaign seasons, to adjudicate the truthfulness of that speech and to do so in an expedited manner that denied people any meaningful due process, including levying fines when they decide the speech was malicious and intended to impede a campaign.

Mr. Peck asked the committee to do what he hoped the Assembly would do with A.B. 127, vote to strike the provisions before more money had to be spent defending unconstitutional provisions.

Assembly Bill 127: Repeals certain provisions relating to Commission on Ethics. (BDR 23-47)

Mr. Hansen said commission laws on free speech had been abused.He testified against S.B. 147. He said several members of his family had run for office and had challenged the law by refusing to follow the ethics commission rules.

He said:

The ethics commission acts like the prosecuting attorney, the judge, the jury, the sheriff, and the Legislature, since they write a lot of their own rules and regulations.The Legislature should not give such authority to an unelected body like this.I will never file the forms that the commission has asked me to file.If you have $2000, you do not have to file a form, so this discriminates against poor people.

Senator Care said political speech cannot be regulated and when people seek public office, they become public figures.He said there had been an ethics commission in this State for a long time, comprised of the press and the public. He stated conduct and running afoul of the law while in office were a different matter.

Mr. Peck commented he focused on the speech provisions, not the conduct provisions.He emphasized the ethics commission did have a legitimate job to do.

Ms. Hansen testified against the bill.

She said:

When the ethics commission’s provisions were expanded, I told the Senate and the Assembly it was unconstitutional and I am glad to see that what I said is now being proven in court. I anticipate we will continue to challenge this and we will prevail in court. I encourage you to take the initiative now to repeal these unconstitutional provisions.Anything dealing with candidates and the speech police responsibilities of the ethics commission should be repealed.

Ms. Hansen referred to a recent article in the Las Vegas Sun Times entitled, “Ethics Commission Can’t Agree on Fines for IAP Candidates,” Exhibit F.

She said:

The article noted the commission voted to seek a court ruling to interpret whether the Independent American Party candidates followed the law by filing statements on time, but refusing to disclose their finances, claiming it was a violation of their constitutional rights. This provision of the ethics law is unconstitutional and you should not wait for the courts to repeal these provisions.You should take action now to protect free speech in the State of Nevada.

She continued, the commission could not make up its mind and they have sought answers in the courts. She commented, “Free speech is messy, but that is what it is supposed to do, that all the points of view can be represented and not determined or interpreted or fined by some unelected commission and bureaucrats.”

Merritt K. (Ike) Yochum, Independent American Party (IAP) of Nevada, said:

The fact that the filing for office required signing certain papers can in no way be assumed as a granting of jurisdiction to this commission, for to be required to give up a right in order to exercise another right is an absurdity.

He presented a copy of a letter, Exhibit G.

David K. Schumann, Lobbyist, Independent American Party (IAP) of Nevada, spoke in opposition to the bill.He said the bill should be repealed because it served no useful purpose and violated the constitution.

Ms. Lusk noted she was not opposed to the entire bill, but was concerned about the removal of time limits.She suggested determining what was workable and then requiring it.

Ms. Lusk strongly supported the provision removing the commission’s ability to penalize a person who filed a bad faith claim because it was unconstitutional.She said if done willfully, the provisions making a candidate’s failure to follow up the actual disclosure on time was a good change.She stated deadlines for late filing and the maximum fine were more reasonable than the current law.

Ms. Lusk said the suggested change to section 6 of S.B. 147, the definition of what constitutes a conflict, would make it even more vague.

Ms. Lusk suggested the following language:

A public officer or employee shall not use his position in government to secure or grant privileges, preferences, exemptions or advantages for himself, any member of his household, or any business entity in which he had a significant pecuniary interest.

She voiced deleting the words ”unwarranted” and “any other person” and leaving the rest of the language. She added it would then be a definition of what constituted a conflict rather than a non-definition.

Ms. Lusk said:

I would like to finish by saying the ethics commission, despite its best efforts to do the job, has been given an impossible task and it would serve both the public officers and the people of this State to eliminate it, but if it is going to remain in place, please eliminate the campaign practices provisions and try to establish as workable provisions as possible.

Senator Care stated there was some confusion between the right to privacy and the Fifth Amendment.He said the general rule was the Fifth Amendment was only if you have a reasonable belief if you answered the question you could face criminal prosecution.He said he wanted to make that distinction because this would be discussed later.

Chairman O'Connell adjourned the meeting at 4:56 p.m.

RESPECTFULLY SUBMITTED:

Alice Nevin,

Committee Secretary

APPROVED BY:

Senator Ann O'Connell, Chairman

DATE: