THE FOURTH DAY

Carson City (Friday), June 6, 2003

Senate called to order at 8:05 a.m.

President pro Tempore Amodei presiding.

Roll called.

All present.

Prayer by the Chaplain, Pastor Albert Tilstra.

O Lord, our God, as we seek Your guidance, today, we do not ask to see everything in the future, knowing that we can take only one step at a time. Make that first step plain to the members of this body, that they may see where their duty lies, but give them a push, that they may start in the right direction and finish the task before them. We pray in Your mighty name.

Amen.

Pledge of allegiance to the Flag.

Senator Raggio moved that further reading of the Journal be dispensed with, and the President and Secretary be authorized to make the necessary corrections and additions.

Motion carried.

MESSAGES FROM THE GOVERNOR

State of Nevada

Executive Chamber

Carson City, Nevada 89701

June 5, 2003

The Honorable Senator William J. Raggio, Majority Leader, Nevada State Senate

Legislative Building, Carson City, Nevada 89701-4747

To the Members of the Nevada State Senate:

Section 9 of Article V of the Nevada Constitution provides that the Governor may request the Legislature, when convened in Special Session, to consider matters other than those set forth in the call.

With this letter, I am exercising my constitutional authority to bring additional legislative business to your attention for consideration. I would request that you consider the matters contained within S. B. No. 191 of the 72nd Session of the Nevada Legislature.

Best wishes in your deliberations.

Sincerely,

Kenny C. Guinn

Governor of Nevada

MOTIONS, RESOLUTIONS AND NOTICES

Senator Raggio moved that the Senate resolve itself into a Committee of the Whole for the purpose of considering various revenue plans and the unresolved issues of the 72nd Legislative Session, with Senator Raggio as Chairman and Senator McGinness as Vice Chairman of the Committee of the Whole.

Motion carried.

IN COMMITTEE OF THE WHOLE

At 11:40 a.m.

Senator Raggio presiding.

Various revenue plans and the unresolved issues of the 72nd Legislative Session considered.

The Committee of the Whole was addressed by Senator Raggio; Mindy Braun, Fiscal Education Program Analyst; H. Pepper Sturm, Chief Principal Research Analyst; Senator Coffin; Senator O'Connell; Senator Cegavske and Senator Neal.

Senator Raggio:

As everyone is aware, various Senators have been involved in discussions to try to accommodate a revenue plan, this being the last designated day the Governor has indicated for this special session. We now have agreement on the three bills dealing with education funding and other matters related thereto. I am going to ask Pepper Sturm and Mindy Braun to speak. I believe by now we are familiar with all the issues. We have before us BDRs (bill draft requests) which will be introduced when we return to the Senate. The No Child Left Behind Act is bill draft request (BDR) 34‑0008. The Distributive School Account (DSA) issues are in BDR 34-9, and the State Distributive School Account for class-size reduction is BDR S-0010. It is the Chair’s understanding there are no significant differences in BDR 34-9, the DSA, and BDR S‑0010, the class-size reduction appropriation, other than that upon which the Senate has previously acted. Is that correct?

Mindy Braun (Fiscal Education Program Analyst):

I believe you are correct.

Senator Raggio:

There is now a change that has been agreed to, apparently, on BDR S-0008.I would ask you to indicate the changes in the bill, which was S.B. No. 191 of the 72nd Legislative Session, that have occurred. I believe one change is necessitated because of concern about the failure of a large number of students to pass the math portion of the high school proficiency examination and a situation that has occurred, primarily, in the Clark County School District. I believe there are minor adjustments in the area of corrective plans with respect to schools needing improvement. If there are others, call them to our attention because the bill now before us has 192 pages, and Senator Neal, among others, prides himself on reading every page of these bills. We need to have an explanation for the record.

H. Pepper Sturm (Chief Principal Research Analyst):

The BDR before you now is, essentially, what the Senate passed as S.B. No. 191 of the 72nd Legislative Session. As you will recall, that measure completely revises our State’s accountability system to comply with the federal No Child Left Behind Act. I will not repeat the summary of BDR S-0008, but several amendments need to be noted for the record.

First, BDR S-0008 is amended to address a serious problem within the school districts with regard to the mathematics portion of the high school proficiency examination. Since this appears to be an implementation issue on the part of the school districts, this bill will require the Department of Education to reset the passing score in accordance with the original recommendation by the Department’s staff. This will make the passing rate for students similar to that of the reading portion of the test, which no one is challenging. The score will be lowered for this graduating class and will then be incrementally increased over the next several years until, for the 2007 graduating class, it is at least the same as the current passing score. The BDR directs the districts to review curriculum and the amount and type of mathematics credits required for high school graduation and report back to the Legislature in 2005.

Second, we have revised the list of corrective actions for non‑Title I schools. The list has been simplified and limited to instituting a new curriculum, decreasing management authority or extending the school year or school day. I believe that is for schools in the fourth year of not meeting adequate yearly progress, or non-Title I.

Third, the sections of BDR S-0010 requiring a state accountability data system requiring the system to have the capacity for longitudinal analysis of student scores is clarified to provide the information will not be used for teachers’ or paraprofessionals’ evaluations.

Finally, there are several minor technical amendments to align reporting periods for reports missed in the original. These would add institutions like Child Haven to accountability requirements, requiring a request for proposal process for appropriation in the bill to the Interim Finance Committee (IFC) for student testing brochures. Additionally, they would restore the statute for the one-fifth retirement offset for experienced teachers in low‑performing schools.

Senator Raggio:

I know this is something we dislike doing, and I do not want to enlarge this situation too much, but something needs to be said. It is distressing to know this large number of students in the State, particularly in Clark County School District, were unable to pass the math portion of the exam. We adopted these elevated standards eight years ago, and everyone, we assumed, was following the law in adjusting curriculum to these standards. The Legislative Commission surveyed the standards in 2000 and 2001, and in those surveys, the Legislature was assured by all school districts, the curriculum had been adapted to the required standards. There has been ample time for these subjects and the curriculum to include these requirements.

It is distressing to hear that, in response to the concerns raised by parents whose children did not pass, the superintendent was quoted as saying, the students who failed had not been taught these courses. This is remarkable to hear. As one person, I fail to understand how that can be when we had such assurances. It does not do any good to continue to remonstrate about it, but we need to send a strong message this accommodation is being made at this time. As you heard under the proposal, the test scores will be ratcheted up again. I cannot stress enough that something is wrong when they have assured us it is in the curriculum and then later say, publicly, “Well, we did not teach these students those issues.” Currently, we have a 60 percent passing average. A student could fail those parts of the test, it would seem to the Chair, and still pass the exam.

Mr. Sturm:

I should point out a couple of key sections. There is a statement about what the Chair just mentioned in section 101. Section 101 talks about the purpose of doing this, and I should point out section 103 of BDR S-0008 says this does apply to seniors graduating this school year. It requires school districts, in which pupils are enrolled, to allow pupils to participate in the graduation ceremony for the graduating class of 2003 under the presumption the pupil passed the mathematics portion of the high school proficiency exam. Test scores will have to be recalculated based on this new pass rate, but for the purposes of this graduating class, at least, there is going to be a presumption they may pass.

Senator Raggio:

To get a diploma, they will still have to pass.

Mr. Sturm:

They still need to pass for the diploma, yes.

Senator Coffin:

When we closed S.B. No. 191 of the 72nd Legislative Session and passed it out of committee, the chair directed me to offer staff language for a letter of intent to help spell out to the districts and superintendents that parents and students need to be notified they would be tested on materials they may not be taught. I gave suggested language to staff, which of course, they will not have time to finish drafting until, probably, next month. It essentially called for a letter of intent, which would require informing students not just once or twice but throughout their high school careers, they may be tested on specific subjects they had not been taught. It seems to me, the districts have to do that. I personally feel they ought to be taught geometry as a requirement, but that is one of the subjects heavy weight is given to and you use in real life, probably, even more than algebra. Geometry was one of the subjects the students were failing. I want to ensure we reiterate for the public we are sending out a letter of intent. It should be in more than one language. It should be in the other predominant languages, which are perhaps understood by the parents. The students probably understand English, but some of the parents, godparents or whoever the responsible parents are do not. The people who do not speak English well will pressure their children about this. I suppose I have added a little more to the letter of intent, but I hope it is going out.

Senator O'Connell:

Mr. Sturm, do we have any information from other states as to how they are handling this, and will this affect, in any way, the funding expected from the federal government for the No Child Left Behind Act?

Mr. Sturm:

The No Child Left Behind Act does not require a high school exit exam. This is required in approximately 28 other states. I would have to double-check the statistics, but federal law does not require a high school exit exam. However, we are using the first administration of the high school proficiency exam to comply with the requirement of one test, in the high school period, for adequate yearly progress purposes under No Child Left Behind. There is no requirement the child take an exam to receive a diploma.

Senator Raggio:

It is a requirement under the Nevada Education Reform Act.

Mr. Sturm:

Correct, and I believe that requirement has been in place since the 1977 or 1979 Legislature.

Senator O'Connell:

Do we have information from any other states that have experienced similar circumstances?

Mr. Sturm:

Many states proposing high school exit exams, since the standards-based reform movement has been implemented, have been running into similar problems. In a number of those states, like Nevada, the tests were minimum competency tests. Once academic standards were adopted, the test had to be realigned with what every child is expected to know according to their academic standards. The exit tests, like Nevada’s, now reflect those rigorous academic standards. So, yes, they are running into this. Many of them are lowering the test score or saying this is not going to count for a diploma or delaying it for a few years. It runs the gamut, but it is an issue with other states.

Senator Cegavske:

As one who started in this Legislature when this was being discussed and remembering some of the concerns expressed at that time, I must say, unfortunately, it seems those concerns have come to be.

One of the concerns I have, Mr. Chair, and want to ensure is passed along to the school districts, is to make certain in this exemption the things we are doing are not being done for everything, overall. If a student’s attendance was not there, if behavior was poor, if there are any other areas in which criteria must be met in order to graduate, those are all adhered to. I believe those are all things that need to be looked at and ensure they are not also given exemptions.

Mr. Sturm:

I should point out the BDR specifies this just applies to students who have otherwise met all requirements for graduation other than passing the math part of the exam.

Senator Neal:

Have there been any studies, among the states you mentioned, to determine the benefit of a law requiring an exit exam upon finishing high school?

Mr. Sturm:

I do not recall any. I know there have been recent studies about having accountability and a testing program, and they both yielded opposite results. It depended upon who ran the study. That study may have looked at exit exams. I would have to check.

Senator Neal:

We have no guidelines as to what direction we are going by requiring this. Would that be the case?

Mr. Sturm:

I am not sure how to answer that.

Senator Neal moved to introduce and do pass BDR 34-008.

Senator Mathews seconded the motion.

Motion carried.

Senators Titus, Schneider and Nolan were absent for the vote.

Senator Raggio:

As soon as we leave here, we will return to the Senate Floor; we will introduce the BDRs, and we will file a committee report as a whole indicating a do pass recommendation. Is there any additional question or comment on BDR 34-9, which is the DSA? I should indicate, depending on the ultimate tax package or revenue bill, the appropriations in approving this may require an adjustment in the General Fund appropriation in the tax bill that pertains to commissions, sales tax apportionment and so forth. With that understanding, I will accept a motion to do pass.

Senator Townsend moved to introduce and do pass BDR 34-9.

Senator Wiener seconded the motion.

Motion carried.

Senators Titus, Schneider and Nolan were absent for the vote.

Senator Raggio:

The next one is BDR S-0010, the class-size reduction bill. Are there any questions on BDR S‑0010?

Senator Townsend moved to introduce and do pass BDR S-0010.

Senator Mathews seconded the motion.

Motion carried.

Senators Titus, Schneider and Nolan were absent for the vote.

On the motion of Senator Townsend, the Committee of the Whole did rise and report back to the Senate.

SENATE IN SESSION

At 12:10 p.m.

President Hunt presiding.

Quorum present.

MOTIONS, RESOLUTIONS AND NOTICES

Senator Raggio moved that all rules be suspended, that for the remainder of the Nineteenth Special Session, reading so far had considered second reading, rules further suspended, and that all bills and joint resolutions reported out of the Committee of the Whole for floor consideration be declared emergency measures under the Constitution and be immediately placed on third reading and final passage, time permitting.

Remarks by Senator Raggio.

Motion carried unanimously.

Senator Raggio moved that all rules be suspended, that for the remainder of the 19th Special Session, all bills and joint resolutions returned from reprint be declared emergency measures under the Constitution and immediately placed on third reading and final passage, and that concurrent resolutions returned from reprint be placed on the resolution file, time permitting.

Remarks by Senator Raggio.

Motion carried unanimously.

Senator Raggio moved that all rules be suspended, that for the remainder of the 19th Special Session, all bills and resolutions be immediately transmitted to the Assembly time permitting.

Motion carried unanimously.

Senator Raggio moved that all rules be suspended, that for the remainder of the 19th Special Session, the Secretary of the Senate dispense with reading the histories and titles of all bills and resolutions.

Motion carried.

INTRODUCTION, FIRST READING AND REFERENCE

By the Committee of the Whole:

Senate Bill No. 1—AN ACT relating to education; requiring the State Board of Education to define the measurement for determining whether this state, each school district and each public school has made adequate yearly progress in accordance with the federal No Child Left Behind Act of 2001; requiring the State Board to prepare an annual report of accountability; requiring the State Board, each school district and each public school to develop a plan to improve the achievement of pupils; revising provisions governing the designations of public schools; requiring the Department of Education to designate school districts based upon the achievement of pupils enrolled in the school district; prescribing the consequences for public schools and school districts that are designated as demonstrating need for improvement; revising provisions governing accountability and reporting; revising provisions governing the examinations that are administered to pupils in public schools; revising provisions governing the qualifications required of certain teachers and paraprofessionals to comply with the federal No Child Left Behind Act of 2001; revising provisions governing the regional training programs for the professional development of teachers and administrators and the Statewide Council for the Coordination of the Regional Training Programs; making appropriations; revising various other provisions governing education to comply with the federal No Child Left Behind Act of 2001; and providing other matters properly relating thereto.

Senator Raggio moved that the bill be referred to the Committee of the Whole.

Motion carried.

By the Committee of the Whole:

Senate Bill No. 2—AN ACT relating to public schools; requiring the Department of Education to prescribe a minimum amount of money that each school district must expend each year for textbooks, instructional supplies and instructional hardware; requiring that a certain amount of money must be withheld from the basic support allocation to a school district if the school district does not expend the required amount; revising provisions governing the purchase of retirement credit for certain teachers; requiring the boards of trustees of school districts to purchase retirement credit for certain school psychologists under certain circumstances; apportioning the State Distributive School Account in the State General Fund for the 2003‑2005 biennium; authorizing certain expenditures; providing for a final adjustment following the close of a fiscal year; making various other changes concerning the administration of money for public schools; making an appropriation; and providing other matters properly relating thereto.

Senator Raggio moved that the bill be referred to the Committee of the Whole.

Motion carried.

By the Committee of the Whole:

Senate Bill No. 3—AN ACT relating to education; making appropriations to the State Distributive School Account for purposes relating to class-size reduction; authorizing certain school districts to adopt a program of alternative pupil-teacher ratios for the 2003–2005 biennium; requiring larger school districts to study current class sizes in certain grades; and providing other matters properly relating thereto.

Senator Raggio moved that the bill be referred to the Committee of the Whole.

Motion carried.

REPORTS OF COMMITTEES

Madam President:

Your Committee of the Whole, to which were referred Senate Bills Nos. 1, 2, 3, has had the same under consideration, and begs leave to report the same back with the recommendation: Do pass.

William J. Raggio, Chairman

GENERAL FILE AND THIRD READING

Senate Bill No. 1.

Bill read third time.

Roll call on Senate Bill No. 1:

Yeas—20.

Nays—None.

Excused—Schneider.

Senate Bill No. 1 having received a constitutional majority, Madam President declared it passed.

Bill ordered transmitted to the Assembly.

Senate Bill No. 2.

Bill read third time.

Roll call on Senate Bill No. 2:

Yeas—20.

Nays—None.

Excused—Schneider.

Senate Bill No. 2 having received a constitutional majority, Madam President declared it passed.

Bill ordered transmitted to the Assembly.

Senate Bill No. 3.

Bill read third time.

Roll call on Senate Bill No. 3:

Yeas—20.

Nays—None.

Excused—Schneider.

Senate Bill No. 3 having received a constitutional majority, Madam President declared it passed.

Bill ordered transmitted to the Assembly.

Senator Raggio moved that the Senate recess subject to the call of the Chair.

Motion carried.

Senate in recess at 12:17 p.m.

SENATE IN SESSION

At 3:01 p.m.

President Hunt presiding.

Quorum present.

MESSAGES FROM THE ASSEMBLY

Assembly Chamber, Carson City, June 6, 2003

To the Honorable the Senate:

I have the honor to inform your honorable body that the Assembly on this day passed Senate Bill No. 1.

Diane Keetch

Assistant Chief Clerk of the Assembly

MOTIONS, RESOLUTIONS AND NOTICES

Senator Raggio moved that the Senate resolve itself into a Committee of the Whole for the purpose of considering various revenue plans and the unresolved issues of the 72nd Legislative Session, with Senator Raggio as Chairman and Senator McGinness as Vice Chairman of the Committee of the Whole.

Motion carried.

IN COMMITTEE OF THE WHOLE

At 9:21 p.m.

Senator Raggio presiding.

Various revenue plans and the unresolved issues of the 72nd Legislative Session considered.

The Committee of the Whole was addressed by Senator Raggio; Senator Neal; Senator Carlton; Senator Cegavske; Senator O'Connell; Gary L. Ghiggeri, Senate Fiscal Analyst; Senator Care; Senator Coffin; Brenda J. Erdoes, Legislative Counsel; Senator Nolan; Senator Shaffer; Richard S. Combs, Deputy Fiscal Analyst; Senator Tiffany; Senator Washington; Senator Amodei; Senator McGinness; Senator Titus; Mark Diego, President and CEO, Colonial Bank; Mindy Elliot, Wells Fargo Bank; Senator Townsend; Samuel P. McMullen; Senator Mathews; Russell J. Guindon, Deputy Fiscal Analyst; Jim J. Avance, Restricted Slot Representative; Sean T. Higgins, Herbst Gaming Inc. and the Nevada Retail Gaming Association.

Senator Raggio:

Following the meeting this morning of the Committee of the Whole, each of the caucuses discussed a potential revenue plan. Each of the caucuses started with a proposed revenue plan, which hopefully would garner the required support, ultimately, to get a two-thirds vote in the Senate. During this time, we have had continued discussions between the two caucuses. I want to, first of all, commend the fiscal staff, which has been working since early this morning until this hour, trying to crunch numbers and determine the impact of each and every change that was discussed or accommodated. The final version, which is before the Committee of the Whole, has had many revisions throughout the day. The fiscal staff has been up and down, crunching numbers, and we really appreciate their effort as well as the effort of all who have participated in trying to reach an accord that might receive sufficient support to constitute a revenue plan, at least acceptable to the Senate.

In addition, we have been mindful of the efforts of the lower House to also develop a revenue plan. We understand any plan that will survive needs to be one in which two-thirds of each House will agree. It has been a long process, and throughout the process, there has been agitation and stress. There have been distractions, and we are mindful of the concerns that have come forth from the various sectors of this State. Those are concerns we have tried to address. We have made every effort to try to accommodate the concerns and still meet the obligation of the members of this Legislature. This is what is best for the paramount interest of the State as a whole. Rather than go through all the details and how they were derived, the Chair is going to review the components of, what I would term, the compromise plan, which has at least been reached by a sufficient number in each caucus, hopefully, sufficient for passage. As we review those items, and if there is sufficient agreement, we then need to look at some proposed amendments.

Some of these amendments were contained in S.B. No. 509 of the 72nd Legislative Session to be considered by the Senate. Others are amendments that have been suggested for other reasons by the Senate Committee on Taxation. Most of the amendments, do not change, in material form or substance, the components of the taxation revenue plan now before us. We will take those at the end of the presentation. I would like to go through this so you will have a picture of it, and then, we will take any questions.

First, as you understand, we were looking at the need to have a General Fund revenue increase of approximately $350 million in the first year, fiscal year 2004, and approximately $509 million in the second year, fiscal year 2005. This plan almost hits that on target. There is not a lot of wiggle room as a result of the plan. I might indicate one of the concerns that continued throughout these discussions and negotiations was to keep it within those parameters.

Obviously, no one wants to have to increase taxes more than necessary. On the other hand, we want to make certain any plan, ultimately, adopted by the Legislature not only funds the budget requirements but also constitutes revenues which will be long-term and broad-based. I do not believe the next Legislature or any other Legislature, barring some extreme circumstances, wants to go through this process or ordeal in the future. Hopefully, what we do here will be sufficient.

Under the plan, the components are the revenue projected in each year of the biennium. Also, the effective date is mandated either by the fact they are already existing revenue sources or they may require some time before implementation. Most of these, if not all, were on the approved list this Committee indicated would be potential components of a revenue plan. The first ones are the reduction of the cigarette stamp fee, the reduction of the other tobacco allowance, the reduction of the liquor tax allowance and the reduction of the State and local school support tax retailer allowance. In each of those cases, the allowance is reduced to 0.5 percent, which produces the revenue indicated. The business license fee is increased to $100 annually from the existing $50 annual fee. That produces $23.5 million and $24.4 million, respectively.

The live entertainment tax is 10 percent on casino and non-casino events. The 10-percent tax on admissions to live entertainment events includes food and beverages. This is effective for gaming properties and not until January 1, 2004, does it apply to non-gaming establishments. The additional revenue projected from this source is $47.9 million in fiscal year 2004, and $81.1 million in fiscal year 2005. The cigarette tax is a 50-cent increase in fiscal year 2004, with an additional 15-cent increase in fiscal year 2005. That produces $74.3 million in the first fiscal year and $99 in the second. The liquor tax is an increase of 89 percent, which, I believe, was the Consumer Price Index (CPI) increase since the last tax increase. That produces $18 million and $18.4 million, respectively, in each year.

The gaming tax would reflect an increase of 0.25 percent in fiscal year 2004, with an additional 0.25 percent in fiscal year 2005. This is on all present tiers. There was discussion at some point about an additional tier. As a result of discussions, that was removed, and it is now in this form. The increased gaming tax produces $22.5 million in 2004 and $48.8 in 2005. The restricted slot tax, this is the fee on each of the machines in the restricted slot establishments, is a 33.33 percent increase across the 2 years, resulting in $2.3 million and $2.4 million, respectively in each year. Secretary of State fees and the security fees are indicated at $14.8 million and $17.3 million with the effective dates for the respective fees being July 1, 2003, and October 1, 2003.

The BAT tax, what we now call the business license tax, is $170 annually. That generates $56.8 million and $58.7 million, respectively. There is a room tax component of 1 percent across the State, and that generates $24.8 million and $34.4 million, respectively. The room tax increase would be implemented August 1, 2003. The real estate transfer tax is computed at $1.55 per $500 of value which generates $50.9 million in fiscal year 2004 and $67.9 million in fiscal year 2005. The net profits tax component would not be implemented during the first fiscal year because of the reasons stated by the Department of Taxation. Implementation on January 1, 2004, represents a half-year collection, that would be collected in the second year at $41.7 million. That is computed on the basis of every business having a $50,000 exemption against net profits. Each business would pay no tax unless they had profits in excess of $50,000. Anything above $50,000 is computed at a 3-percent rate.

Total revenue from those sources is projected to be $351.3 million in fiscal year 2004 and $511.2 million in fiscal year 2005. The total revenue to be raised by a revenue plan, based on the budgets we have now approved and that have been signed by the Governor, is $862.5 million for the biennium. The General Fund need for 2005 is $509.1 million. The total General Fund need is slightly under what is generated from this revenue package. It is $858.6 million, which is the amount in the budget. It is a close computation. If the revenue is projected as indicated, there is a difference in the first year of $1.8 million over the need, and for the second year $2.1 million over the need, for a total of $3.9 million. I believe, that covers the extent of the tax package.

Senator Neal:

I do have some questions and a statement I would like to make relative to the gaming tax’s increased rates. As I understand this, there would be a 0.25 percent increase and another 0.25 percent added during the second fiscal year on the three present tiers. The bottom two tiers, currently assessed at 3 percent and 4 percent, would be raised 0.5 percent for the first time in 16 years. The third tier assessed at 6.25 percent would be raised to a less than a 1-percent increase in the last 16 years. I wanted to point this out because I have had some proposals that were in the tax committee’s possession. We had a hearing, but we did not vote. The chair indicated to me we would have an opportunity to vote on these particular proposals. Before that happened, we went into the Committee of the Whole to look at these increases. The proposal, as far as the gaming tax is concerned, was discussed in caucus, but we were not allowed in the caucus to keep a record of what actually was being discussed. We bantered back and forth, and what we are now winding up with, I believe, is a tax insufficient to take care of the needs and problems generated by gaming. I have discussed the problems caused by gaming over the last eight years. As I see this, gaming is clearly the winner. This suggests to me, if we are going to get a fair hearing in terms of a proper increase in this particular area, we are going to have to go to the people. I do not see any means by which we can do this in this particular Legislature.

Even you, Mr. Chairman, when you were setting up this process to consider this tax, came to me and said, “You will get an opportunity to offer your proposals relative to these increases.” I have not been able to do that, as of yet, unless you make available some time tonight for such proposals to be made. I feel somewhat marginalized by this whole process as to not being heard in the regular committee in terms of what I had brought forth in a legal manner and presented to the committee according to the rules of this House. Over the years, when I do something, I try to follow the rules. If I am out voted, I leave it at that, and I move forward. In this particular case, I have not even had the opportunity to have a vote in committee on the proposals presented to the taxation committee. I have to be suspicious of this particular process and have to say the gamers were clearly in control of what was going to be presented in terms of their own particular increases as far as the gross gaming taxes were concerned. I find that somewhat appalling, and the people of the State of Nevada should know and understand gaming has asserted itself once again. Even though they have made billions of dollars, and the tax proposal I made was based on the billions of dollars they have brought in so far, we were only able to get about $658 million out of the $9.2 billion they made last year. That is aside from the other billions they made in the other four categories associated with casino gaming, such as food, beverages, rooms and merchandise shops.

What we have done here is a disservice to the people of the State, and in years to come, we are going to be right here again. Even when I look at the proposed increase of $48.8 million, this does not go into effect until fiscal year 2005, which I presume is in July, 2005. That means the gamers have an opportunity to come back and take this off the books before we even leave the Legislature next session.

Senator Raggio:

That becomes effective 2004.

Senator Neal:

It says 2005.

Senator Raggio:

It says fiscal year 2005, but it becomes effective July, 2004. The second rate goes into effect on July 1, 2004.

Senator Neal:

If that is the case, it still is not sufficient when we look at other states going after the gaming tax to address problems generated socially and otherwise. I have made the statement here. The University report done in the early part of the year was speaking to gaming addiction and said the addiction rate in Las Vegas alone would cost something like $300 million to $459 million per year. The $22.5 million or $48.8 million of additional revenue does not come close to addressing those particular problems. Next legislative session, we will be back here raising money, trying to take care of these particular problems. It is regrettable this Legislature cannot act on its own in terms of raising these taxes and that gaming has to say what it will pay or not pay. I find that somewhat appalling, and I hope the people of the State of Nevada will take note of this and do some type of petition drive to get what is deserved from that particular industry in proportion to the problems it has caused this particular State. I will not be voting for this particular proposal because when you look at it, you are talking about hitting the average person, those who smoke cigarettes, who drink liquor; businesses who have to pay the increased fees, and secretary fees and business licenses. The only thing we get here is $24 million extra as opposed to gaming would be the room tax, the $24 million in fiscal year 2004 and $34.4 million in fiscal year 2005. That is a pass through. Gaming does not mind doing that because it is not money coming out of the drop box.

In closing, when we were talking about gaming, we were talking about $9.2 billion made last year aside from the other $9 billion in the other four income categories. When we looked at that we found $6.3 billion of the $9.2 billion came from coin-operated machines. When you get a breakdown of that, we were talking about the quarters and nickels put into those machines by a lot of our people. Now, we are saying we cannot get some of that money back to take care of some of the problems generated from the gaming industry. As I say, I find this somewhat appalling, and I will not be voting for this particular measure.

Senator Carlton:

Mr. Chairman, when you were explaining the list, you said the net profits tax, after a $50,000 exemption and 3 percent of any amount over that, would bring in $41.7 million. Was the $41.7 million a full-year’s revenue or was that a half-year’s revenue?

Senator Raggio:

That is a half-year of revenue. It is implemented on January 1, 2005.

Senator Cegavske:

Is the BAT being phased out?

Senator Raggio:

That is the business license tax at $170? That is the cost both years?

Senator Cegavske:

Correct, there was talk about phasing it out because of the net profits tax.

Senator Raggio:

There is no phase out under this plan at this time. I think discussions were that it could be phased out in the future, but I would defer to others in the negotiation group on that.

Senator O'Connell:

Do we have any idea, yet, on the cost for implementing the net profits tax?

Senator Raggio:

I believe the budgets approved some augmented amounts for the Department of Taxation, but I will defer to Fiscal staff, if they have that information.

Gary L. Ghiggeri (Senate Fiscal Analyst):

Chuck Chinnock testified to the Committee yesterday, and he has not provided us a written cost estimate to implement collection of this tax. However, I do believe during his testimony he indicated it would equate to the estimated cost of the service tax. The cost for the service tax, based on the estimate he provided to us, with an effective date of January 1, 2005, was approximately $1.8 million in fiscal year 2004 and approximately $4.5 million in fiscal year 2005. There are also additional support costs he has itemized, and I believe he has indicated for the service tax approximately $116,000 for additional personnel and operating costs in fiscal year 2004 and $103,000 in fiscal year 2005. Additionally, he has itemized some information technology costs of approximately $498,000 in fiscal year 2004 and $465,000 in fiscal year 2005.

In the appropriations act, as approved by the Legislature, I believe it was $12.5 million provided in fiscal year 2004 and $20 million in fiscal year 2005 for costs associated with implementation with the provision that the Department of Taxation comes to the IFC (Interim Finance Committee) before expending any of those funds. There is approximately $32.5 million, over the biennium, approved by the Legislature, for implementation of whatever tax package is approved.

Senator O'Connell:

How many personnel did Mr. Chinnock talk about?

Mr. Ghiggeri:

On the service tax, he indicated there were 35 personnel in 2004, and 81 in 2005 for the direct implementation. In the support package, it looks like it is 18 total personnel.

Senator Care:

I gather it is the Chair’s intent to vote on the concepts.

Senator Raggio:

In order for the bill draft to be started or completed, we need to have something recommended. In addition to the revenue components, there are other components that do not affect the revenues or the nature of the tax components that we will vote on after we do this part of it. The Legislative Counsel wants to know in which direction to go because Legal Division is looking at working all night on something.

Senator Care:

That is fine, Mr. Chairman. Of course, it is difficult to vote on a bill without reading the bill; although, we have seen so many drafts, many of us anyway, that we could probably take a good stab at this as written. Some of us still have questions on what constitutes, for example, live entertainment; and when you get into net profits, issues like does every business have to file, how do the exemptions work and that sort of thing. If that discussion can take place at a later time, so staff can get started, that is fine with me.

Senator Raggio:

There was a lot of discussion on the live entertainment tax in the tax committee itself and, otherwise, in the Committee of the Whole. Does anyone want to offer anything in addition at this time?

Senator Coffin:

Yes, Mr. Chairman, because this is more than just a concept vote here tonight, we probably ought to give some direction, at least of our intent, to the drafters so they can begin to think about what it is we have discussed either here or in the taxation committee. I do not know whether they take the form of amendments or whether they take the form of particular segments of the bill. They must keep in mind the things that came up. For example, we did discuss a live entertainment tax. I believe we had an affirmative feeling in this Committee of the Whole we were going to exempt 501(c)-type organizations. I do not want to say 501(c)(3) or any of the subletters because then you might exclude some you mean to include. I hope that is one of the features.

Senator Raggio:

The Chair’s recollection was the discussion seemed to indicate it would apply to all forms of live entertainment, but would not apply to non-profit organizations or events. We had discussions about whether boxing, racecar events or rodeos would be included. There was some discussion about brothels and things of that nature. It was the Chair’s understanding all of those would be included but not non-profit organization events. There is some concern about competitiveness, and the Committee’s implication was they would look at that during the interim to determine whether or not those could be problems. S.B. No. 509 of the 72nd Legislative Session did include the creation of an interim committee on taxation, a Legislative Committee on Taxation, Public Revenue and Tax Policy. It would have broad powers during the interim, and it is a continuing committee that could certainly look at all of these things during the interval between now and when the Legislature next convenes. Probably, those things could be best discussed in that committee.

Senator Coffin:

Before that committee even meets, I would like to make certain of our intent on tickets sold. Many tickets have been sold for various events in advance, and we do not intend to levy a tax retroactively on tickets that might have been sold in blocks, whether to individuals or to brokers.

Senator Raggio:

That could be understood and made a part of the record. I do not believe anyone intended that to occur.

Senator Coffin:

This is only for the purpose of giving intent to our drafters, Mr. Chairman.

Senator Raggio:

I think it would be prospective.

Senator Coffin:

On the net profits tax, we have a tax to be levied on many businesses. Many businesses have contracts which were previously executed, perhaps with governments or some other entity, such as garbage companies. I received a letter from one of them asking that we keep in mind they had a signed contract basing their costs upon these kinds of things.

Senator Raggio:

I believe there was some discussion, and I will defer to our Legislative Counsel, it might not have been that type of company, but some companies that cannot pass on a tax that would apply to them. They might have a franchise or be a utility company, and there should be some language that would indicate in those situations the tax could be imposed by that body. That is understood by Legislative Counsel.

Senator Coffin:

Other thoughts would be to make sure, for example, in the health field, the tax does not apply to federal programs such as Medicare, Medicaid, the federal health programs because those programs were exempted under federal law.

Senator Raggio:

Unless there is objection, that could be included. Legal Counsel has that language.

Senator Coffin:

Regarding intercompany transfers and so on, I want to make sure we do not have double taxation. In other words, payments from one group of related enterprises to another group should not be taxed.

Senator Raggio:

If that language has not been made available to the Legislative Counsel, I believe that was the understanding.

Senator Coffin:

I do not know who has received them, which is why I thought we would enter them into the record so we do not end up in lawsuits quickly after the Session. Healthcare payments to providers would be another one.

Senator Raggio:

Legislative Counsel is here. If any of those are not appropriate, we will let her indicate that. Ms. Erdoes, are those appropriate?

Brenda J. Erdoes (Legislative Counsel):

Mr. Chairman, I am not certain I am comfortable with the term “appropriate.” We can certainly do it. I did not have direction before to take out health care providers. If that is your wish, we can certainly do it.

Senator Raggio:

I do not believe they are taking out health care providers. What was the request?

Senator Coffin:

Mr. Chairman, if we did not exempt health care payments to providers, obviously there are contracts between providers and insurance companies and other third parties, we would end up taxing health care. I believe we intended not to tax insurance premiums because we already tax that industry. However, that does not take care of the problem of taxes charged on health care. We have never discussed taxing health care; but again, for the record, I would suggest language to the effect any revenue received by an entity or health care provider for the payment of health care services should not be taxed. I will be happy to give a list of my suggestions to Mrs. Erdoes if you wish, Mr. Chairman.

Senator Raggio:

Does staff have a thought on that? I am not sure how far that goes.

Senator Coffin:

I will give it to you, Mr. Chairman, and you can pass it on at your leisure. Those are the things I had seen because I believe we are trying to establish intent here.

Senator Raggio:

Let staff see whether that seriously impacts the projections.

Senator Nolan:

I would like to pass along information given to me with respect to a conversation we had earlier on the slot route operators. I would like to give this to Mrs. Erdoes, if I could. Their concern, which I told them I would address, was answered by your remark with respect to it possibly being double taxation. However, giving them a level of comfort with a legal opinion might head off possible legal action down the road.

Senator Raggio:

What was the question?

Senator Nolan:

I was looking to pass some information along to our Legislative Counsel with respect to the possibility of the double taxation issue for slot route operators and looking for an opinion from Legal Division based upon the information I was provided. My concern is an assurance that we are not double taxing and that we provide a legal opinion to that effect.

Senator Care:

I believe I have the same question.

Senator Raggio:

Is the question whether it is constitutional or legally challengeable?

Senator Care:

I believe the question, Mr. Chairman, is regarding the mechanism of net profits. My understanding is, if a business in Nevada has an industry-specific tax, the testimony from Mr. Aguero was, for example, mining insurance, when you file your federal return, you take that deduction, and after you have done that, you have your taxable income on your federal return. The State would then figure your net profits from that number. That would avoid double taxation. You have gotten the deduction when you filed with the federal government. You paid the tax in Nevada, you have taken the deduction off the federal form, and then your computation of net profits is after the taxation in Nevada has been removed. Is that correct?

Mrs. Erdoes:

I believe all of that is correct but part of the slot route tax is not based on income. It is a static fee per machine, so we have not been directed to take that out of the formula, to date. We are definitely taking out the gross revenue, the other gaming part, but we have not yet been directed to take out any of the slot route part that was not based on income.

Senator Raggio:

Staff, did you have a comment on the other proposal?

Mr. Ghiggeri:

Yes, I am reading the portion Senator Coffin provided concerning payments to health care providers. I would need clarification. Would this mean any payments made to physicians would be exempted?

Senator Coffin:

We are looking at payments made under contract. It follows the same philosophy of the discussion we had earlier on organizations, which might be bound by a contractual price for their services, that they be allowed sufficient time for the contract to be renegotiated, including the fee.

Mr. Ghiggeri:

The effective date of this tax would be July 1, 2005.

Senator Coffin:

Some of the contracts extend beyond that, which is why I believe we should at least express our intent.

Senator Shaffer:

I am wondering if we have any documentation on what effect the room tax will have on our tourism industry?

Mr. Combs:

I do not have any documentation, as such, to indicate the impact the additional $1 fee on the room tax would have. I imagine it is a number that would be speculative. The industry came in and argued it would have an impact if the room tax were raised. Clearly, it is a policy decision. If you raise taxes, it does have an impact, and this is one of the things it would impact.

Senator Tiffany:

What is a business entity? If you have a family limited partnership, say a retired person is involved with a family limited partnership, would he or she be responsible for a net proceeds tax? In other words, is a partnership considered a business entity?

Mr. Combs:

It is my understanding, if you are part of a business entity, the business entity you are a part of is responsible for payment of that tax. This tax would cover all forms of business.

Senator Tiffany:

So if a retired person gets income from a family trust, the retired person would not, individually, be responsible for the net proceeds?

Mrs. Erdoes:

The way the tax works is it has an overall exemption that applies to everything the State cannot tax constitutionally under either the State tax or the federal tax. In some cases, those limited partnerships, because they are conducting actual business, will be taxable. Those that are simply dormant, not conducting business, will not be taxable because the Constitution, as you know, does not allow any taxation of individual income. It is something that will be worked out. It is clear you cannot tax things that are unconstitutional to tax. We tried to craft something, but everyone’s circumstances are so different in this area, specifically, that we have left it to the Department of Taxation to come up with regulations to make this work.

Senator Tiffany:

My next question is regarding a partnership. For example, a friend of mine is a partner in a business with other women in which they invest in stocks. They receive income from the stocks. Would that partnership be taxed, or would the individuals in the partnership be taxed?

Mrs. Erdoes:

It is the same answer because it depends on how much business activity there is. There are a number of treatises and rules under which the Department of Taxation can decide these things, just as the federal government does. The information is out there. It is voluminous depending on the facts of the particular case.

Senator Tiffany:

Will these gray areas be determined by the Department of Taxation or the Taxation Commission?

Mrs. Erdoes:

My understanding is it would work as it does now with other tax matters, where you would go to the Department first. The Department would do the auditing function or work out the first scenario, and you could then appeal the decision with the Tax Commission if you did not agree with the Department of Taxation’s ruling.

Senator Tiffany:

Did we add auditing positions for this?

Mr. Combs:

There were no extra audit positions added to the Department of Taxation’s budget because when that budget was closed, we had no idea what tax package would come out of this Legislature. However, there was $32.5 million provided for the biennium for the Department to implement whatever tax package is approved by the Legislature. We have not seen a concrete plan from the Department other than estimates. That is why in the appropriations act there is a requirement to go before the IFC with a plan indicating how they would implement the approved package.

Senator Care:

My inclination is to think a business that has no tax liability should not even have to file. That question would be determined by whether it had a federal taxable income of $50,000 or above. That is somewhat of an honor system. If you take that approach, the Commission would have to have some authority to look at the books of businesses where there is a reasonable belief the business would have an obligation and either did not report it or did not file with the federal government in the first place. As I recall, two years ago, one of the problems with the teachers’ initiative was that every business had to file even if its net profits were $10,000, $15,000 or $20,000. I am inclined to believe, if you do not reach that threshold, you should not have to file.

Senator Raggio:

I would believe that is the reason for the $50,000 exemption. Is that correct, Mrs. Erdoes?

Mrs. Erdoes:

Yes, that is correct.

Senator Washington:

I received a note regarding the utility companies. They had concern about the net profits tax and our inability to actually collect the tax.

Senator Raggio:

I believe that was included in the response. Mrs. Erdoes understands it will relate in the bill if they are required to pay the tax, they would have the authority to pass it on. I will take a motion for approval of this portion of the proposed revenue plan, and then we will look at the other amendments.

Senator Amodei:

With respect to the comments by my colleague from District No. 4, is it the intent of the process to not accept amendments from any members of the Senate on the floor regarding any components?

Senator Raggio:

Under the rules, the amendments must be made to this Committee, and this Committee is the only one that can recommend amendments.

Senator Amodei:

I do not know whether Senator Neal was told he could or could not offer an amendment about any aspect of the tax plan, but I believe our process contemplates the ability to offer amendments.

Senator Raggio:

In this process, absolutely.

Senator Amodei:

I would request the amendment process for a colleague be left open until such time as he returns so he can exercise the right of any member of the 21 of us with respect to offering whatever he planned to offer. I would hate to leave here tonight and have anybody in this room have the impression a State Senator was prohibited in any way, shape or form from offering what he or she thought was a relevant amendment regarding an $860-million tax package.

Senator Raggio:

I believe it was made clear in the rules, amendments can be offered if offered to this Committee. The problem we have is mechanical, because if we do not tell the Legislative Counsel soon to start drafting the bill, we will be here much longer than we anticipated.

Senator Raggio:

We will go on to the amendments that have been proposed as components, not of the tax revenue plan but as additions to a proposed bill.

Senator McGinness:

If the Committee would look at the two-page document titled “Other Provisions of S.B. No. 238 of the 72nd Session as Amended by Senate Taxation Committee,” these provisions came from the Governor’s recommendation of S.B. No. 238 of the 72nd Session and S.B. No. 382 of the 72nd Session, the Care-Amodei bill and, finally, “Issues of Concern to the State Controller Regarding Debt Collection.”

Senator Raggio:

Let me first ask if there are any questions on these proposed amendments? I assume they were considered and approved in the taxation committee. These are provisions from S.B. No. 238 of the 72nd Legislative Session, as amended by the Senate Committee on Taxation, and issues of concern to the State Controller regarding debt collection.

Senator McGinness:

My recommendation would be to make permanent the pilot project approved by the 2001 Legislature and include standardizing the returned check fee provisions included in A.B. No. 41 of the 72nd Legislative Session, but not approved.

Senator Raggio:

I will accept a motion as an amendment to any bill draft. Senator Townsend moved to accept the proposed amendments discussed as an amendment to any proposed bill draft. Senator McGinness seconded the motion. The motion carried. Senators Neal and Schneider were absent for the vote. Senator Schneider is excused.

There were two provisions in S.B. No. 509 of the 72nd Legislative Session that addressed concerns brought to the attention of the committee. The first provision is the creation of the Legislative Committee on Taxation, Public Revenue and Tax Policy. Legal Counsel will briefly tell us what this provision does.

Mrs. Erdoes:

This provision consists of eight sections. The first seven sections add to chapter 218 of the NRS a standard study committee for the study of taxation, public revenue and tax policy. The membership is a little different than most committees. This committee contains four members consisting of the leadership of both Houses and both parties or their designee and two members from each of the taxation committees from the previous session, for a total of eight members. As you move through section 3, the provisions are fairly standard with the Committee on Public Lands, the Committee on Education and the other statutory committees. This was modeled after those. It provides for meetings, payments and such. Section 5, specifies the duties of the committee. Section 5, subsection 1, paragraph (a) would be modified to match the taxes you choose to pass in this bill. Currently, it references some of the taxes you have already looked at. The rest of the sections are about implementation.

Senator Raggio:

Senator Coffin would be particularly interested in section 5, subsection 1, paragraph (c) because that is the broad authority to study the impact of changes to taxes or fees that result from actions of the Legislature and the fiscal effects of taxes and fees. It gives the continuing, permanent committee broad authority to do so. I believe there is an appropriation for the purposes of that committee.

Mrs. Erdoes:

Yes. The rest of the document is the subpoena power and the witness fees. Section 8 provides an appropriation for the committee of $125,000 for each of the two years of the biennium.

Senator Raggio:

That appropriation ensures the committee can contract with appropriate consultants. I have a motion by Senator Townsend to include the provisions just discussed in the amendment to the bill. Senator Rhoads seconded the motion. The motion carried. Senators Neal and Schneider were absent for the vote.

Senator Coffin:

I want to make certain this Committee is in harmony with the legislatively authorized Tax Commission to ensure we do not step on each other’s toes and do not assume authority that properly belongs to the Commission.

Mrs. Erdoes:

I can assure you, Senator, they are done in a proper fashion so the committee would be studying and, ultimately, making recommendations to the next session of the Legislature. There would be no interference with the Tax Commission’s duties.

Senator Coffin:

Is it possible the Commission and the committee could work with each other in the event either one finds difficulty so that they may make recommendations to each other for the next 18 months?

Mrs. Erdoes:

I believe the powers, certainly of this committee, are broad enough to encourage that, and the powers of the Tax Commission are very broad as well. I do not believe that would present a problem.

Senator Raggio:

We have another proposed amendment that was in S.B. No. 509 of the 72nd Legislative Session and dealt with accountability on the various tax components.

Mr. Ghiggeri:

This section provides for a trigger to provide for the transfer of revenues generated to the General Fund excluding reversions exceeding 7 percent above the projected level for General Fund revenues. The funds in excess of 7 percent would go to the Fund to Stabilize the Operation of State Government. Once that fund is filled to the appropriate level, the remaining funds would go to the Fund to Reduce Taxes, which is also created by this legislation.

Senator Raggio:

This was in response to many people who believed there should be accountability for additional revenue over and above that projected. With some reasonable allowance, the funds would be used, first, to go to the rainy-day fund, up to the amount authorized. If that were not appropriate, it would be used to supplant the General Fund, in effect, reducing the General Fund requirements.

Senator Titus:

What is the appropriate amount for the rainy-day fund? What is the current amount?

Senator Raggio:

In the next biennium, it would be up to $50 million. The budget funded it at $30 million, with a trigger to fund an additional $20 million if the trigger were reached.

Senator Titus:

In other words, if you receive the additional $20 million, any money that comes in over what is projected would go into an additional fund, called the Fund to Reduce Taxes. Is that correct?

Mr. Ghiggeri:

I believe, and Legal Counsel can correct me if I am wrong, in statute, the rainy-day fund is set at 10 percent of the General Fund appropriations. For example, let us say the General Fund appropriations are $2 billion. The maximum that could be placed in the rainy-day fund would be in the neighborhood of $200 million.

Senator Titus:

Would the Fund to Reduce Taxes be controlled by the IFC, or how would that operate?

Senator Raggio:

It is obviously something that would be reviewed by the IFC, but I believe it is self‑enacting.

Mr. Ghiggeri:

I would have to get clarification from Legal Counsel, but I believe this fund would be used to supplant future revenue increases by the State required to fund General Fund expenditures.

Mrs. Erdoes:

That is correct. As proposed, there is no mechanism to touch this money between sessions of the Legislature. It would build up, and the next session of the Legislature would decide what to do with it. The purpose, as set forth, would be to reduce other taxes.

Senator Titus:

I am opposed to that. It is not because I do not believe we should try to reduce taxes, but we are already putting a lot of money aside in a General Fund, and to try to bind the hands of future generations to say they have to use any extra money to reduce taxes when we might be facing another crisis or other needs in the State for which they might want to use the money, I believe would be a mistake. Furthermore, if, indeed, the IFC has some authority over that, I believe it gives them too much power to control tax dollars. It is a handful of people not the entire Legislature.

Senator Raggio:

The provision was provided because it is probably something that would be advisable. It is accountability as to the usage of taxes, and it also gives the public assurance that taxes are not going to be collected in addition to what is reasonable and necessary. As a practical matter, it is an essential element in this tax plan to get the support needed to pass the bill out of both Houses. I believe there is a twofold reason for it.

Senator Titus:

I appreciate that, and I support putting the money in the rainy-day fund, but I cannot quite understand why this additional part is needed. We are not raising excessive taxes. If we are, we need to go back and look at the chart. We are raising just enough taxes to fund the budget. We said we only had a little play of $2 or $3 million.

Senator Raggio:

Are there any other comments? Is there a motion to include this in the bill? Senator McGinness moved to include the provision just discussed in the tax plan bill. Senator Rhoads seconded the motion. The motion carried. Senators Titus, Wiener and Carlton voted no. Senators Neal and Schneider were absent for the vote.

Senator McGinness:

There is an amendment proposed on behalf of the resident agents that says the provisions of this chapter shall not apply to businesses that are not subject to the provisions of Nevada Revised Statutes (NRS) 372.125 and 364A.140.

Senator Raggio:

Mrs. Erdoes, do you have a copy of this proposed amendment? Is this going to affect the projections we have for the net profits tax?

Mrs. Erdoes:

I would defer to Mr. Combs or Mr. Ghiggeri, but it is my understanding this was not considered in the revenue, anyway, because it is not Nevada income that is being considered. These are the S-corporations. Is that correct?

Senator Raggio:

They would still be required to pay the license fee. Is that correct?

Mrs. Erdoes:

That is correct. They are required to register with the Secretary of State, as they do now, and they pay the fees there. They would also pay the business license fee, and that would be it.

Senator Raggio:

What purpose does this serve? I am not clear. If they do not have business here, then they do not have any net profits in this State. I do not know the purpose.

Senator O'Connell:

Mr. Chairman, I believe they just wanted to be certain that was the current law so they would not be subjected to a net profits tax.

Senator Raggio:

With that understanding, is there any further discussion? Senator Rawson moved to include the amendment just discussed in the tax plan bill. Senator McGinness seconded the motion. The motion carried. This amendment will be included as part of the bill.

I believe we already had a discussion, Mrs. Erdoes, on the language for those who operate under franchises that would give them authority to otherwise pass through any tax. Is that understood?

Mrs. Erdoes:

Yes, it is.

Senator Raggio:

Are there any other amendments? Senator Neal, did you have an amendment?

Senator Neal:

Yes. My proposed amendment, Mr. Chairman, is over and above what has already been recommended to add 0.5 percent to the third gaming tier, making it 1 percent, effective in fiscal year 2005, and an additional 2-percent increase be submitted to the voters for their approval on the same tier.

Senator Raggio:

I believe the rule requires amendments in writing, but we will accept that as a proposed amendment. The motion is to increase the third tier over and above what has been proposed by 0.5 percent and bringing it up to 1 percent. What is the threshold of the third tier so we understand the motion?

Senator Neal:

It is $134,000 monthly.

Senator Raggio:

The motion is to add an additional 0.5 percent, bringing the total increase to 1 percent on the third tier of 6.25 percent, raising it to 7.25 percent. In addition, 2 percent would be submitted to the voters for their approval. Do you want to bifurcate those motions, or do you want them together?

Senator Neal:

I can bifurcate them, yes.

Senator Raggio:

We will take your first motion. Senator Neal moved to raise the third tier, over $134,000 monthly, by an additional 0.5 percent. Senator O'Connell seconded the motion. Senators Mathews, Wiener, O'Connell, Cegavske, Neal and Care voted yes. The motion failed.

Your other motion was to present to the voters a 2-percent increase.

Senator Neal:

Yes, a 2-percent increase over the third tier.

Senator Raggio:

Would that be appropriate in this bill draft?

Mrs. Erdoes:

Yes, constitutionally, I believe you could do that.

Senator Raggio:

What kind of ballot issue would it be?

Mrs. Erdoes:

The Legislature would have an act to raise the tax, and the act would only become effective if the question put to the voters was approved by a majority vote.

Senator Raggio:

The motion, by Senator Neal, is to present to the voters a proposed question on the ballot to raise the tax on the third tier by 2 percent. The motion failed for lack of a second. Are there any additional proposed amendments?

Senator Amodei:

I have a motion in the same subject area. I move to take the existing proposal, which is 0.25 percent on all three tiers in the first year, add a fourth tier with a threshold at $250,000 a month and increase the rate at the new fourth tier to 7 percent.

Senator Raggio:

Let us understand the motion. It would be in addition to what is on the plan, to have a fourth tier. Is that correct?

Senator Amodei:

That is correct, but it would do away with the 0.25 percent increase on all tiers in the second year. All tiers in the first year would go to 0.25 and the addition of a fourth tier in the first year, with the threshold being $250,000 a month, and the tax rate for the new fourth tier established at 7 percent.

Senator Raggio:

The motion was seconded by Senator O'Connell. Is there any discussion?

Senator Amodei:

As I look down this sheet, we started this venture 120 days ago by asking businesses in the State, in a non-gaming sense, to do more. I believe when you look at the numbers being imposed here, you have no doubt business will do more. Look at the addition of what some refer to as a broad-based business tax, which generates a significant amount of money a year. Look at the retention of the business license tax, that is increased by nearly $70. Look at what we are asking the most important industry in our State to do. When I testified on a tax bill earlier this year with a colleague of mine, I said, “Gaming is not the answer,” and it is not. However, when we look at what we did to the restricted slot route people, that tax was last increased in 1989. The CPI has increased approximately 33 percent since we last visited this tax area.

Our proposal is to increase the tax rate on the gaming industry by less than 10 percent. In comparison with the other proposed taxes, it is not appropriate. The motion as stated would result in an increase of about 12 percent. I believe it gives credence to a dynamic where, if this is the pleasure of the members of this House, that is a decision made here and validates our process as a public one and one where the majority rules.

Senator Coffin:

I have participated in this to the extent of taxing myself several times so I believe I am qualified to speak as a person who is going to pay more and will help pay for the burdens which I have laid upon the State, too, just by being here. We all are in the same situation. Everyone contributes to the problems and the solutions of the State. Senator Neal indicated something in the neighborhood of $9 billion is handled by the gaming industry. I am not going to quarrel with those numbers. On the other hand, we have heard the Senate Committee on Taxation wrestled with this problem. The gaming industry also handles another $9 billion in non-gaming activities, which will be taxed fully under these new tax increases. Everything is listed without cap on the net profits, as I see it. I am thinking there is a broadening of the tax structure which includes the revenue from gaming and not just all other businesses.

Senator Raggio:

While I think everyone believes there is public support for an increased gaming tax, there is also the necessity to finalize a tax plan in this session of the Legislature. Any proposal we put forth is going to require a two-thirds vote in each House. We all recognize, through the work we have done in the last 123 days, if we start doing something in addition to what we are trying here, we may lose any support for a tax plan at all. I might concur in some of the comments, but I also want to know that we can get a tax plan through that funds the budget we passed and does not result in an impasse that closes down State government. I do not believe that is our objective.

How many favor the motion to add a fourth tier and raise the tax to 7 percent for anything over and above $250,000 each month? The motion failed.

Senator Care:

Regarding the gross gaming revenue tax, currently, we are looking at 0.25 percent on three existing tiers the first year, and an additional 0.25 percent on the three existing tiers the second year. My amendment would be to an increase of 0.5 percent for the three existing tiers beginning the first fiscal year.

Senator Raggio:

The amendment is an increase of 0.5 percent on all tiers.

Senator Care:

Yes, Mr. Chairman, a one-time increase of 0.5 percent on all three tiers as opposed to a 0.25 percent increase this year and an additional 0.25 percent the following fiscal year. My understanding is the difference would be approximately $24 million coming in the first year and approximately $4 million the second year.

Senator Raggio:

Senator Care moved to increase the tax by 0.5 percent on the three existing tiers. Senator O'Connell seconded the motion.

Senator McGinness:

Senator Care, with the additional revenue, did you propose to lower another one of the revenue categories?

Senator Care:

Yes, the other part of my amendment would be, assuming the appetite is there to go with 0.5 percent on each gaming tier, to decrease in the second fiscal year, the corresponding, anticipated incoming revenue from the cigarette tax.

Senator Raggio:

Let us make sure staff understands the effect of that. What would that do?

Mr. Ghigerri:

If I understood what you are proposing, you are increasing the percentage fees on gaming revenue during the first year by an additional 0.25 percent, which would generate an additional $24 million in the first year. Any adjustments you may want to make would be in the first fiscal year.

Senator Care:

Whichever year would be appropriate, yes.

Senator Raggio:

You would have to fill the hole in the first year.

Senator Care:

Yes, Mr. Chairman, that would be it then.

Senator Raggio:

The motion is to increase the 0.25 percent in the first year on the gaming tax and to adjust the rate on cigarette tax to accommodate the increase. In other words, reduce the amount necessary in the cigarette tax to accommodate the increase in the gaming tax. Senator O'Connell seconded the motion. The motion carried.

We will change the plan we discussed according to the motion just passed. It will increase the gaming rate by 0.5 percent in both years of the biennium, and the cigarette tax will be reduced to an appropriate amount to accommodate that.

Mr. Ghigerri:

That would be a reduction in the first year in the cigarette tax, and in the second year, in order to stay in balance, we would have to increase it to 65 cents from whatever it is reduced to in the first year.

Senator Washington:

Mr. Chairman, Mark Diego is sitting in the audience. I know we have not taken any testimony, but Senator Tiffany had asked a question regarding investments, securities and money markets and how this tax might affect them. Mr. Diego has indicated he is able to answer that question, if the Chair permits.

Senator Raggio:

We will give you an opportunity to indicate what this does and the effect of it.

Mark Diego (President and CEO, Colonial Bank):

Included in the language of the document I just distributed is an issue addressing an exemption for intangible asset holding companies, as an example, the stock or investment club brought up earlier. Those are asset holding companies residing in the State of Nevada to hold assets, but other than that, they are not conducting material activity. Those are the assets discussed, periodically, with respect to taxes on them generating no revenue because they are portable. The language addresses those intangible asset holding companies being exempted from a net profits tax.

Mindy Elliot (Wells Fargo Bank):

A few years back, we invited to Nevada two financial institutions, City Bank and Household Bank. Part of the operations of those financial institutions has bundled national assets into the State of Nevada. For example, City Bank has approximately 2 percent of their asset base from Nevadans, and the remaining 98 percent is from outside the State. Those assets are portable. What we were requesting is that the assets outside the boundaries of Nevada are exempt from a net profits tax. Those assets belonging to Nevadans, held by Nevadans, of which Wells Fargo is one of the largest holders of Nevadan’s assets, are taxed within the net profits parameters, and we want to pay this tax. We want to be a participant; however, we were hoping you would consider the exemptions that would help us remain competitive in this State and provide employment. At Wells Fargo, we have 400 positions based on investments of the holding company located in the southern part of the State.

Mr. Diego:

Regarding the entities Ms. Elliot is discussing, I would like to give an order of magnitude example. I will use my company for the example. The business revenue tax you have proposed, according to the discussion, in the first, semi-annual period would generate $41.7 million. Certainly, Colonial is proud of the size it has achieved in this market, but it is one of the smaller players within the financial institutions market. This exemption would have nothing to do with our core-banking operations within the State. However, to understand that an implication of a 3‑percent net profits tax that includes those intangible asset holding companies, Colonial Bank, which has a royalty company incorporated in Nevada and an asset holding company that holds the investable assets of the parent company, would represent a tax in the magnitude of $6 million just on Colonial Bank’s portion. I do not believe the intent of this group would be to tax one of the smaller institutions in the State at a rate of 12 percent of the entire tax you are looking to raise in a net profits tax. That is why, to understand the magnitude, without excluding those intangible asset holding companies as well as the much smaller ones brought up earlier, you create a scenario that dramatically changes the magnitude of the numbers you are looking at.

This issue is similar to one addressed with respect to resident agents because many of the intangible asset holding companies are housed by resident agents. One existing benefit with respect to those assets is they are housed and managed here by, in our case, an independent management company. We pay significant management fees for maintaining and investing those assets which would still be taxed under a net profits tax through the organization that is managing those assets. There is a tangible benefit to the State of Nevada in retaining those assets in the State.

Senator Raggio:

Where did the language you propose come from?

Ms. Elliot:

The language was created by a technical committee comprised of our tax attorneys and tax certified public accountants.

Senator Raggio:

To what do the citations refer?

Mr. Diego:

The citations refer to apportionment language for income of banks in terms of how you would apportion income from an inter-company standpoint within banking. The references you are seeing are IRS (Internal Revenue Service) statutes.

Senator Raggio:

This is all new and at the last hour. It is difficult to understand. For example, under apportionment it says, “A financial institution is not required to have a physical presence in any other state or be subject to another state’s taxing jurisdiction in order to apportion receipts within and without the state pursuant to this section.” Where does this exist?

Senator Townsend:

One of the representatives of the banking institution submitted language a week ago. Is this different from that language?

Mrs. Erdoes:

Yes, this language is different from the language about which you asked me.

Senator Coffin:

I will try to help without complicating things and offer a little reassurance to the lady and gentleman who are here for their respective financial institutions. In yesterday’s discussion on the concept of a franchise tax on banks, I brought up the point of how complex that is. It is not something we can take lightly, and I was using a PriceWaterhouse report commissioned 13 years ago and the Urban Institute. They cautioned about taxing financial institutions. You can do it; you can have a franchise tax. The same cautions would apply to a net profits tax on these institutions. We can do it; we just have to be careful. There are a number of methods we could use, many of them unconstitutional, many of them unworkable, but some that are workable. Therefore, when I say reassure you, I do not mean to say “trust us,” but that, in effect, this tax does not take effect until January 1, 2005. That gives you and other financial institutions the opportunity over the next 1.5 years to work with the committee that was enacted here, and the Tax Commission to see if there is an inequity. I believe all we can say to you, and this will happen to all taxpayers in all of these taxes, especially the new ones, we are plowing new ground. There will be situations in which you believe you are being mistreated, and we will need to look at the resources at hand. We cannot hear an appeal at the last minute to not do something.

Samuel P. McMullen:

I just want to clarify what is being requested. One is the major language on the first 13 pages, which I believe will already be covered with some definitions; not all will be included. Your Legal Counsel will be able to mold those into a bill. Those are clarifications of definitions for purposes of defining income for banks. Second, on the last page, in relation to investment companies or intangible holding companies, the request is they be exempted from the income for the reasons you have heard. However, we have discussed and believe the appropriate way to handle it is to charge them a flat fee of $10,000 per month per corporation or affiliated corporation. That will be a representative cost without losing the business. We have discussed this with others making sure that was covered that way and that there was a significant contribution for each one of those companies or affiliated groups.

The third important issue is, in the untried and untested waters of a net profits tax, we have an opportunity to shake this out. The 3-percent tax, while we are sure it will raise the amount of money we are talking about, we are not sure it will not raise a lot more for everyone, not just for the banks we are participating in. It might be prudent to put a cap on it, and I would defer to your staff’s decisions on what would be the right level. Our thought process was a cap on gross payroll, of at least 0.15 percent. I believe this would raise over $50 million on a $40.9 billion gross payroll in the State of Nevada times 0.15 percent. If that is too little and staff believes we have not appropriately guessed at that correctly, we would be happy at whatever level you believe. There ought to be some reasonable relationship. Again, it is not a total exemption for the investment companies or intangible holding companies. We want to make sure for clarity, in that exemption of the income, there is a significant contribution from each of those companies or affiliated groups.

Ms. Elliot:

If I can add, 0.15 percent is only representative of six months of your $41.7 million, so I would recommend 0.3 percent would be the cap, and I see your Counsel saying, “Yes, that is correct.” That is a recommendation for a capping mechanism if you are interested. I want to impress that we are not trying to evade any taxes. It is just that, as Senator Coffin alluded to, the industry itself is extremely delicate, and we want to be sure that we can continue to invite these types of businesses.

Senator Townsend:

Note, for the record, I sit on the board of Mr. Diego’s bank, and I am a shareholder in that bank so I will abstain from voting.

Senator O'Connell:

I will also be abstaining from the vote on this issue.

Senator Raggio:

We are faced with a 13-page amendment. What can be gleaned from this? Can Counsel help us? Is there anything essential that should be addressed by the Committee out of the presentation?

Mrs. Erdoes:

I am not sure. We have not gone through it.

Senator Raggio:

What is the Committee’s suggestion? I believe we should go ahead with a bill draft. They will have time to look at it before it is enacted, and if there is a glaring problem that can be brought to our attention, at this point, I believe we should leave it at that.

Senator Mathews:

I would like to disclose that I sit on a bank board and will not be voting on this issue.

Senator McGinness:

The restricted slot representatives wanted to ensure the taxes they pay for gaming would be treated the same as other gaming, and they would not be paying double taxes.

Senator Raggio:

Mrs. Erdoes, do you understand what we are doing on the restricted slot taxes?

Mrs. Erdoes:

I need to defer to the Fiscal staff on this to make sure what the estimates were. I believe, if I understand correctly, the gaming portion of that is taken as an offset, but the non-gaming portion of the revenue would not be.

Russell J. Guindon (Deputy Fiscal Analyst):

It is my understanding, the estimate we put together, with regard to the numbers you are seeing, was for the deduction against the liability for the gaming side of a non‑restricted location. Therefore, the restricted locations would not be offset because they are paying the fee based on the number of restricted slots.

Senator Raggio:

This would not be consistent then. Is that what you are saying?

Mrs. Erdoes:

Yes, this would not be consistent because what we are doing is taking just the non‑restricted licensees that pay on gross gaming, the tiers that you talked about earlier, that is subtracted but nothing for the restricted licensees at this point, in both the draft and in the estimates of revenue, as I understand.

Senator Carlton:

With all these amendments, I just wanted to make certain I have all of the correct information so could we do a quick review to make sure?

Senator Raggio:

Is that consistent, Mr. Guindon, with what we are doing otherwise or not?

Mr. Combs:

I believe, as Legal Counsel indicated earlier, the reason she had been given to exclude non‑restricted gaming revenue was because that is already a tax on a form of income. Additionally, the non-restricted slot fees are based on the number of machines and not based on any type or form of income.

Senator Raggio:

The issue is, since it is a fixed fee and not a tax on income, this would be inconsistent with that policy.

Mr. Combs:

It would, and that is a policy decision.

Senator Raggio:

Would we be doing this for any other component in the tax plan?

Mr. Combs:

No.

Senator Raggio:

I guess the question is do we want to do this for the slot route tax?

Senator Titus:

When they calculate their net, they can deduct the amount they pay in this fee from the amount on which they owe the net tax. Is that correct?

Mr. Combs:

Currently, based on exclusion of gaming revenue for non-restricted licensees, the bill would be put together in that manner. These are restricted licensees because it does not have anything to do with their revenues. It is their per-machine charge and was not something that was anticipated, at the current time, to be credited. Currently, the answer would be no, but that is a policy decision for the Committee to make.

Senator Titus:

I thought they did not want to pay any tax because they were already paying a tax, not that they just wanted to deduct the amount they pay in the fee from the amount on which they owe tax.

Senator Townsend:

I believe the question is whether the proposal would exempt them from the net altogether, because they pay a fee, or is the proposal to allow them to use the fee against the net paid?

Mr. Combs:

My understanding is, since they are not a non-restricted licensee already paying on income, they would currently not be able to receive any type of credit. This presentation that is being made is asking you whether or not you want to allow them to not pay on income resulting from their operation of gaming devices.

Senator Townsend:

Since this is a fee and not a tax on their income like non-restricted licensees, they should get a credit against their net, using the fee as the basis, but not escape the net.

Jim J. Avance (Restricted Slot Representative):

I am representing the slot machine people. What is being presented to you as a fee is actually a tax. It was created by this Legislature in conjunction with the Gaming Control Board. I am a former chairman of the Board. It was created to avoid all of the problems of going out and calculating the tax on all of these mom-and-pop operations, of which there are over 2,000 throughout the State. The Gaming Control Board would have to hire agents and go all over the State to do this. This fee, and it has been testified to time and time again in taxation committees, has been adjusted so that it was appropriate and comparable to the amount of the percentage fee. It was done to help gaming control and to help the mom-and-pop with the calculation of the percentage tax.

The other thing that occurs when you are on a percentage tax is, anytime you open a machine, you must have contact with the Gaming Control Board so they can be there. That means you have to do it at a certain time every day, and it becomes horrendous. This was set up in 1981. It has been adjusted from time to time to keep us consistent with what the various tax committees of this Legislature believes makes us even with the 6.25 percent the gaming machines are making in the non-restricted locations. It is a tax. It was created that way. But for ease of collection and to help the people who run it, it was set up as a flat fee. That is why, for example, in this Legislature, we are proposing a 33 percent increase again on this to bring it up and keep it with what you are doing to everyone else.

Senator Raggio:

Are there not differences? Some of the small mom-and-pop-stores just lease space. They do not pay a fee on the machines. Is that correct?

Sean T. Higgins (Herbst Gaming Inc. and the Nevada Retail Gaming Association):

The fact is, everyone calls it a slot route operator fee. However, it is a restricted location fee. If a person owns his own bar and holds the gaming license to that bar, he is responsible for this tax. If it is a space lease location and the slot route operator owns the machines and holds the license to that location, he is responsible for the tax. Over 95 percent of the taverns in the State of Nevada and the vast majority of convenience stores hold their own licenses. There are certain locations that do not. Most of those are publicly traded companies that are not domiciled in the State of Nevada, such as grocery stores. Almost all owners of convenience stores, taverns and restaurants hold their own gaming licenses and are taxed. It is not the slot route operators. It is a restricted location tax, and as Mr. Avance alluded to, the fact it is a flat fee rather than a percentage does not mean it is not a tax. You, by you own admission, are proposing to increase our flat-fee tax this legislative session. Just because it is taxed differently than non‑restricted gaming, is not a reason the gaming component of restricted licensees should be subject to a tax.

Senator Raggio:

Hearing that, what is the Committee’s desire? If we have a motion, please restate it.

Senator McGinness:

The motion is to allow them the credit.

Senator Raggio:

Senator McGinness moved in determining net profits, the amount of the fee paid on restricted slots be considered a deduction from net profits. Senator Cegavske seconded the motion.

Senator Carlton:

Mr. Chairman, I am still confused because that is not what I heard and not where I thought we were trying to go. My understanding is that they are being taxed now the way we are taxing other gaming components. Why are they, as a gaming entity, being included in net profits at all? When we look at the casino portion and how we divide the pie, net profits applies only to non‑gaming. So, what would be the non-gaming component of this entity since they are all machines? I do not understand what other portion we would be taxing.

Mr. Combs:

I believe the way the motion was phrased; this would be treated a little differently than non‑restricted locations. The way the motion was phrased, they would only receive a deduction for the fees they did pay from their normal liability, whether it was from gaming operations or non‑gaming operations. Obviously, the other way to look at it would be that they would not pay on income received as a result of gaming operations. If they are, for instance, a convenience store or a tavern and they hold a license, they obviously have other income that comes in from sources other than the operation of the slot machines.

Senator Raggio:

As the Chair understands it, a slot route operator would be allowed, under the motion, to deduct from any net profits of his business the amount paid for slot machine fees.

That is the motion, and there is a second to the motion by Senator Cegavske.

The motion carried. Senator Carlton voted no.

Senator Titus:

Senator Schneider asked me to present this amendment in his absence. It has to do with moving a license. I do not know much about it. I know he discussed it with Senator Amodei and Senator Care. Perhaps, one of them would like to present it.

Senator Care:

Mr. Chairman, this is not the amendment contemplated. I am familiar with the amendment Senator Schneider had. It was to S.B. No. 432 of the 72nd Legislative Session, but this is not it.

Senator Raggio:

I am going to call a halt here, because it is about 11:30 p.m. Senator Carlton asked for clarification of the amendments we have adopted. The amendments we did adopt are as follows: one contained provisions from S.B. No. 238 of the 72nd Legislative Session and other items including A.B. No. 314 of the 72nd Legislative Session. We also adopted the amendment to the revenue plan which changed the rate on gaming tax and reduced the rate on cigarette tax. I believe those were the only actual amendments to the revenue plan. Additionally, we adopted an amendment that the revenue provisions would not apply to businesses that are not subject to the provisions of those cited sections. One was they did not have a sales tax permit requirement or a requirement to pay BLT because they had no employees. This would apply to companies whose presence in Nevada was simply for the purpose of incorporation status; although, they would pay the business license fee. It was not an amendment but was assumed to be part of the bill. Entities that have franchise operations would have authority to pass on the tax that would be imposed otherwise. We also adopted the amendment with the provisions included under tax accountability, and we adopted the amendment, in addition to the former, contained in S.B. No. 509 of the 72nd Legislative Session. It creates the Legislative Committee on Taxation, Public Revenue and Tax Policy. We deferred action on, at this time, the definition of net profits or net income in investment companies and financial institutions. The others were, to the Chair’s understanding, all the amendments that were accepted.

Senator Townsend moved to recommend to introduce and do pass the revenue plan.

Senator Nolan seconded the motion.

Motion carried.

Senators Schneider and Neal were absent for the vote.

Senator Mathews:

I did not vote against accepting this, but once I see all of the amendments and the bill together, I reserve the right to change my vote.

On the motion of Senator Townsend, the committee did rise and return to the Senate Chambers.

SENATE IN SESSION

At 11:33 p.m.

President Hunt presiding.

Quorum present.

MESSAGES FROM THE GOVERNOR

State of Nevada

Office of the Governor

Executive Order

A PROCLAMATION BY THE GOVERNOR:

On June 3, 2003, I, Kenny C. Guinn, Governor of the State of Nevada, through my proclamation, convened a Special Session of the Nevada Legislature. The Senate Majority Leader and the Speaker of the Assembly have requested that I extend the 19th Special Session of the Nevada Legislature for two days. Therefore, by virtue of the authority vested in me by the Constitution of the State of Nevada, I hereby amend my proclamation of June 3, 2003, and extend the 19th Special Session of the Nevada Legislature until 5:00 p.m. on June 8, 2003.

IN WITNESS WHEREOF, I have hereunto set my hand and caused the Great Seal of the State of Nevada to be affixed at the State Capitol in Carson City, this 6th day of June, in the year two thousand three.

Kenny C. Guinn

Governor

Dean Heller

Secretary of State

Renee Parker

Chief Deputy Secretary of State

GUESTS EXTENDED PRIVILEGE OF SENATE FLOOR

On request of Senator McGinness, the privilege of the floor of the Senate Chamber for this day was extended to Shannon McGinness.

Senator Raggio moved that the Senate adjourn until Saturday, June 7, 2003, at 12 m.

Motion carried.

Senate adjourned at 11:35 p.m.

Approved: Lorraine T. Hunt

President of the Senate

Attest: Claire J. Clift

Secretary of the Senate