MINUTES OF THE ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session April 13, 1995 The Committee on Government Affairs was called to order at 8:00 a.m., on Thursday, April 13, 1995, Chairman Douglas A. Bache presiding in Room 330 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Douglas A. Bache, Chairman Mrs. Joan A. Lambert, Chairman Mrs. Deanna Braunlin, Vice Chairman Mr. P.M. Roy Neighbors, Vice Chairman Mr. Max Bennett Mrs. Marcia de Braga Mr. Pete Ernaut Mrs. Vivian L. Freeman Mr. William Z. (Bill) Harrington Ms. Saundra (Sandi) Krenzer Mr. Dennis Nolan Mrs. Gene Wines Segerblom Ms. Patricia A. Tripple Mr. Wendell P. Williams STAFF MEMBERS PRESENT: Denice Miller, Senior Research Analyst OTHERS PRESENT: Mr. Eric Cooper, Nevada Sheriffs and Chiefs Association; Sergeant Geoffrey Wise, Civil Division, Washoe County Sheriff's Office; Sheriff Jerry Maple, Douglas County; Sheriff Neil Harris, Elko County; Mr. Robert A. Hadfield, Executive Director, Nevada Association of Counties; Mr. Robert Seale, Treasurer, state of Nevada; Mr. Brian Krolicki, Chief Deputy Treasurer, state of Nevada; Mr. Gary Crews, Legislative Auditor, Legislative Counsel Bureau, state of Nevada; Mr. Timothy Brown, Principal Deputy Legislative Auditor, Legislative Counsel Bureau; Ms. Rose McKinney-James, Director, Department of Business and Industry, state of Nevada; Ms. Constance Longero, Administrator, Unclaimed Property Division, Department of Business and Industry, state of Nevada; Mr. Marty Bibb, Executive Director, Retired Public Employees of Nevada; Ms. Rita Hambleton, Vice Chairman, Nevada State Legislative Committee, American Association of Retired Persons; Mr. George Pyne, Executive Officer, Public Employees Retirement System; Mr. Thomas Grady, Executive Director, Nevada League of Cities; Mr. Robert Gagnier, Executive Director, State of Nevada Employees Association; Ms. Debbie Cahill, Nevada State Education Association; Mr. Gary Yoes, Political Action Coordinator, SEIU Local 1864 (See also Exhibit B attached hereto). ASSEMBLY BILL NO. 417 - Increases fees charged by county sheriff. Mr. Eric Cooper, Nevada Sheriffs and Chiefs Association, testified. He advised the purpose of A.B. 417 was to raise fees for service of civil process by sheriffs. He contended there was a great difference between the fees paid by attorneys and litigants to have civil process served by a sheriff and the amount of money sheriffs' departments expended for costs incurred in serving civil process. He provided a chart setting forth expenditures for and income from service of civil process for most of Nevada's counties (Exhibit C). He called attention to the information provided for Esmeralda, Lyon and Storey counties. He said, from that information, it would appear those counties were making a profit, however, those counties were unable to estimate the money they expended for service of civil process because they utilized on-duty deputy sheriffs for that purpose. He explained, in the other counties, an individual was assigned solely to the duty of serving civil process. He declared service of civil process created a considerable drain on the budgets of sheriffs' departments. Sergeant Geoffrey Wise, Civil Division, Washoe County Sheriff's Office, testified. He said the Washoe County Sheriff's Office served approximately 12,000 to 13,000 documents per year and its annual budget for service of process was nearly $.5 million. He advised it cost the sheriff's office nearly $40 per document to serve civil process and contended, because the fee charged for serving a document was approximately $10 to $15, the cost of service created a large deficit. He said the Washoe County Sheriff's Office supported an increase in fees for service of civil process as provided for in A.B. 417. Sheriff Jerry Maple, Douglas County, testified. He advised he had both a full-time civil deputy and a full-time civil clerk (assigned to service of process). He referred to the fact Exhibit C set forth Douglas County's expenditure as $70,800 and said the actual cost to Douglas County was $87,000. He explained, in Douglas County, it required a full-time civil deputy to serve civil process and a full-time civil clerk to deal with the civil documents mailed or delivered to the sheriff's office for service. Sheriff Maple contended, as a sheriff, he incurred great liability with respect to service of civil process. He indicated dealing with civil process required the sheriff's office to handle large sums of money, to seize property and sell it at auction, and to do "...executions on payroll..." He advised his civil clerk was required to log in all documents received for service. He said there were time restraints imposed on a sheriff with respect to each and every kind of document he received for service. He explained the civil clerk logged documents and prepared them for service, after which the deputy sheriff served the documents and the civil clerk then prepared a return of service for the attorney who submitted the documents and collected the fees for the service. Sheriff Maple advised his office collected approximately $17,550 per year for serving civil process while it cost his office $86,000 per year to perform such service. He declared the more money a sheriff had to expend on such "...losing projects..." the less law enforcement service the sheriff could provide to his community. He suggested the raise in fees proposed by A.B. 417 would not be sufficient to make the fees equal to the cost of serving civil process but indicated he would like to see his costs offset by more than $17,000 (per year). He advised the fees proposed by A.B. 417 would generate between $60,000 and $65,000 (per year) for his office, which would reduce the deficit for service of civil process to between $15,000 and $20,000 (per year). Sheriff Neil Harris, Elko County, testified. He stated Elko County consisted of 17,200 square miles and was the fifth largest county in the nation. He explained, generally, a deputy was required to make three or four trips to effect service and, in a county as large as Elko County, making those trips could be very time consuming and involve traveling over large distances. Sheriff Harris advised he utilized one full-time civil deputy and one full-time civil deputy clerk for the function of serving civil process. He said he had asked his clerk to provide him, in writing, her feelings regarding service of civil process, and he read from her written comments as follows: "Writ of executions for wages and bank accounts require a minimum of three forms the civil department provides: return of service by mail, certificate of return of garnishment and return of writ of execution. When the issuing party does not supply all of their necessary forms, the civil department provides them also. Writ of garnishments and interrogatories. The time it takes to set up each writ of execution, having it served and then distributing the garnishment money is justification for a change increase in that charge." Sheriff Harris advised the civil deputy responsible for serving civil process served 3,075 civil documents during the past year. He said an additional 4,369 civil documents, which the civil deputy did not have time to serve, were served by "...regular deputies." He advised his civil deputy worked five days a week and drove 15,774 miles (to serve process during the past year). He indicated it cost his office $107,900 to serve civil process while his office collected only $49,978 for doing do. He declared a major increase in fees was needed. Mr. Eric Cooper gave further testimony. He said, attached to the chart of expenditures for and income from service of civil process (Exhibit C), there was a matrix which showed raises the legislature had made in fees for service of civil process since 1973. Mr. Cooper advised, generally, private process servers in Clark County charged $50 for each document they served. He suggested, in performing service of civil process, sheriffs rendered a service to a very narrow segment of the population and contended that segment of the population should pay for that service. Assemblyman Lambert observed the fees constables charged to serve civil process were approximately the same as the fees charged by sheriffs. She advised Clark County, through Assembly Bill 198, sought to change its sheriff's civil division into a county department and "...having the process servers just get the fees." She asked if that would prove workable in other counties. Mr. Cooper responded many counties had no constables and, therefore, it fell to the sheriff's office to serve civil process. He said the only way to relieve sheriffs of that duty would be to divest them, entirely, of the duty of serving civil process. He indicated he knew of no sheriff who wished to retain that duty but said, "Unfortunately, that would be a pretty major overhaul that would be required." Mrs. Lambert asked whether Mr. Cooper believed anyone in the smaller counties of Nevada would be willing to serve civil process in return for the fees that were charged. Mr. Cooper indicated he was unable to answer Mrs. Lambert's question. Sheriff Harris gave further testimony in response to Mrs. Lambert's question. He said his county had eight townships of which only Jarbidge, which had approximately 75 year-around residents, had a constable. He advised it was his understanding constables could serve civil process only within their own townships and indicated most townships in Elko County were sparsely populated. He advised, by statute, certain papers must be served by a sheriff. Sheriff Harris said, of the documents served by his staff in the past year, 64 percent were civil documents. Assemblyman Tripple stated, if she understood correctly, it was being requested that those who received sheriffs' services for service of civil process be required to pay for those services, which would lower costs to taxpayers. Mr. Cooper responded affirmatively. He indicated raising the fees charged by sheriffs for service of civil process would save taxpayers money because, under present circumstances, taxpayers' money subsidized such service. Sheriff Maple gave further testimony. He advised, in Douglas County, the $87,000 per year which the sheriff expended to serve civil process was paid from the taxpayers' general fund and the people who utilized the service, which was a minority of the population, paid only a small fee for the service. He reiterated his previous testimony that the necessity to spend such a large amount of money on service of civil process prevented him from providing additional law enforcement services to his community. Chairman Bache asked whether he understood correctly that sheriffs were required to serve documents for district attorneys and received no fees for doing so. Sheriff Harris replied affirmatively. He advised 36 percent of the documents his office served in the past year consisted of summons, complaints and subpoenas generated by district attorneys' offices. Chairman Bache asked if the cost of serving documents for the district attorney was included in Sheriff Harris' expenditures. Sheriff Harris replied affirmatively. Chairman Bache suggested Sheriff Harris' inclusion, in his expenditures, of the cost incurred to serve that percentage of documents for which he received no fees greatly inflated the difference between Sheriff Harris' income and his expenditures. Sergeant Wise asked permission to respond to Chairman Bache's comment. He contended the issue was that taxpayers should not be required to subsidize private industry. He advised, in Washoe County, the actual cost to taxpayers for the sheriff to serve civil process was $40.18 per document served. He indicated service of process on behalf of the district attorney was a service which should be paid for by the government and said he did not believe any of those who had testified were requesting an increase in fees in order to support the cost of that service. He suggested what was being requested was that private attorneys pay the actual cost for sheriffs to serve their civil documents. He said A.B. 417 would increase the fee for a sheriff to serve civil process to as much as $25, which he advised, still, would leave a deficit of $15 per document. Mr. Robert A. Hadfield, Executive Director, Nevada Association of Counties, testified. He advised, in the last legislative session, the Nevada Association of Counties proposed the legislature pass a bill which would allow fee increases for county government. He advised that bill did not include the fee increases proposed in A.B. 417 because it was desired those fee increases be addressed separately. He suggested there was an ongoing problem with respect to county governments' ability to charge fees adequate to support their services. He declared the Nevada Association of Counties supported A.B. 417. Assemblyman Freeman said, "...we're not just talking, it seems, about A.B. 417 today, we're also talking about A.B. 198." She asked, "If we were to do what Clark County is doing -- is asking for -- in 198 for all the counties that we have newly elected constables -- have you thought that out?" Mr. Hadfield replied he had not taken the time to analyze A.B. 417 and A.B. 198 and to compare them one to the other. He suggested both bills should be considered on their own merits. Chairman Bache closed the hearing on A.B. 417. ASSEMBLY BILL NO. 403 - Revises definition of "allocable local revenues" for purposes of provisions governing issuance of state securities to acquire revenue securities issued by municipality. Mr. Robert Seale, Treasurer, State of Nevada, testified. He advised, during the last legislative session, the state treasurer submitted proposed legislation which would allow municipal governments to utilize the municipal bond bank in a manner which would permit them to finance debt more cheaply. He said, however, the language of that proposed legislation was somewhat vague and difficult to enact and, therefore, the treasurer was resubmitting such proposed legislation with modifications thereto. Mr. Brian Krolicki, Chief Deputy Treasurer, State of Nevada, testified. He said, "The mechanism that we put into the bond bank is called `the intercept program'." He advised, under the traditional working of the bond bank, the state gave its full faith and credit as security for a general obligation bond. He explained the intercept program provided a means by which local government could issue debt without the state being required to pledge its full faith and credit. He said, if a local government was to default on a bond, the state had the authority to intercept monies which would have been paid to that local government by the state. He contended Wall Street rating agencies liked that mechanism. He indicated the problem encountered with the intercept program was the necessity to go through a process called judicial confirmation, in which it was necessary to file a lawsuit in district court, to lose that lawsuit and then to appeal to the supreme court, which would rule on "...the liability to the state." He said Section 1 of A.B. 403 would provide that intercepted monies did not constitute a debt to the state. Chairman Bache asked whether the "timing" of A.B. 403 had anything to do with White Pine County School District. Mr. Seale replied it did not. Chairman Bache closed the hearing on A.B. 403. ASSEMBLY BILL NO. 407 - Makes various changes concerning state treasurer. Mr. Robert Seale, Treasurer, State of Nevada, testified. He advised A.B. 407 consisted of three parts. He said the first part of A.B. 407 would permit the state treasurer to pay for banking services directly, by check. He advised the treasurer currently paid for banking services by maintaining a compensating balance, which meant maintaining money, in a bank account, which the bank invested to obtain interest which interest paid for the banking services. He said the interest rate paid on those compensating balances was not as great as the interest rate the treasurer could obtain if he invested those monies directly. He stated, heretofore, state law had not allowed the treasurer to make direct payments to the bank. He indicated the first part of A.B. 407 would allow the treasurer to do so and, therefore, would significantly increase the treasurer's earnings. He advised the treasurer maintained between $14 million and $20 million dollars in a compensating balance in the state's main bank account and contended those monies could be put to better use by allowing the treasurer to invest them. Assemblyman Bennett asked what difference in interest Mr. Seale believed the treasurer could earn by investing the monies maintained in the compensating balance. Mr. Seale replied the difference would be "...upwards of one percent." Assemblyman Neighbors asked why past legislatures did not want the treasurer to make direct payments to the bank. Mr. Seale replied he did not know. He said the treasurer would not completely abandon maintaining a compensating balance (If A.B. 407 was passed by the legislature) but the treasurer could pay directly for the majority of his banking services and his doing so would save a great deal of money. Mr. Neighbors asked whether this was the first time Mr. Seale had requested the legislature to make this change. Mr. Seale replied it was. He indicated the Legislative Counsel Bureau also believed the mechanism provided by A.B. 407 would be good for the state and for its citizens. Mr. Seale advised the second part of A.B. 407 dealt with unclaimed properties. He said, currently, the Unclaimed Property Division (hereinafter referred to as UPD) was part of the Department of Business and Industry and it was his suggestion that division be moved to the treasurer's office. Mr. Seale stated UPD was established and implemented in 1979 and 1980 and was placed in the Department of Commerce and Industry to assist the new division in establishing immediate credibility and recognition in the state's regulation enforcement area. He said the division's primary source of funds was the auditing of insurance companies and financial institutions. He advised, at that time, there appeared to be a perception that the treasurer's office did not have the capacity or ability to implement the new division. He stated UPD remained part of the Department of Commerce and Industry until reorganization of the government transferred the majority of the functions of the Department of Commerce and Industry to the Department of Business and Industry. He contended UPD was not individually evaluated or reviewed but was grouped within the Department of Commerce and Industry's functions. Mr. Seale said, in his opinion, the logic behind including UPD in the Department of Business and Industry was no longer relevant. He stated UPD was now established and its primary functions were not regulatory but, rather, consisted of identifying, disbursing and maintaining custody of unclaimed property throughout the state. He indicated, currently, there was a trend in state governments to include the responsibility for administering functions related to unclaimed and abandoned property in the responsibilities of the state treasurer's office. He declared the treasurer's offices of more than 35 states presently performed those functions. He advised the logic behind this trend was that functions related to unclaimed and abandoned property, such as depositing funds, investing funds, safekeeping of funds and property belonging to others and disbursement of funds, were essentially extensions of functions already performed by the treasurer's office. Mr. Seale suggested the second part of A.B. 407 was an attempt to consolidate similar functions of different state departments. He contended UPD's mission, which was to receive funds, disburse funds to their true owners and maintain custody of property for the benefit of the state, was clearly unrelated to the primary mission of the Department of Business and Industry, which was to promote commercial, industrial and agricultural growth and development. He suggested the state treasurer's mission, which was to receive, deposit, invest and safeguard all monies and securities of the state, unless otherwise provided by law, appeared compatible with the mission of UPD. Mr. Seale declared the treasurer's office could ensure greater regulatory compliance by holders of unclaimed and abandoned property. He advised financial institutions were a primary source of unclaimed and abandoned property funds and said the treasurer's office did continual business with most of the financial institutions throughout the state. He suggested that business relationship provided the treasurer's office with significant authority to aggressively pursue greater cooperation and compliance by financial institutions in their reporting and paying over to the state of unclaimed and abandoned property funds. Mr. Seale advised the treasurer's office did not contemplate a change in either the physical location of UPD or its current staffing level. He contended the Department of Business and Industry's annual overhead allocation to UPD, which was less than $7,000, would not seriously affect the department's other divisions. Mr. Seale said he believed it would be beneficial to UPD, the Department of Business and Industry and the treasurer's office to transfer the statutory authority for collection of unclaimed and abandoned property from the Department of Business and Industry to the treasurer's office. Mrs. Lambert asked if the treasurer's office could perform the function (of administering UPD's) for less money than could the Department of Business and Industry. Mr. Seale replied he did not believe so. Mr. Seale advised the last part of A.B. 407 dealt with the board of the Public Employees Retirement System (hereinafter referred to as PERS). He referred to a document entitled "Section VI, State Pension Funds" (Exhibit D) and pointed out the state treasurer was a member of 63 of the 83 pension boards in the United States. Mr. Seale advised the treasurer's office of Nevada transferred significant amounts of money to PERS but there was no oversight of those funds by the state. He contended the expertise in investing which the treasurer could bring to the board of PERS would enhance the board. Mr. Bennett asked if he correctly understood Mr. Seale sat on 63 retirement boards. Mr. Seale replied that was incorrect. He advised state treasurers sat on 63 of the 83 pension boards in the United States. Chairman Bache said he believed Section 25 of A.B. 407 would contravene the intent of Assembly Joint Resolution 19 of the 67th session, which was to prevent the executive branch of state government from becoming involved in PERS. He invited Mr. Seale to comment on his observation. Mr. Seale stated he agreed with A.J.R. 19 of the 67th session and said it was very important the executive branch of state government have no ability to raid PERS' funds. He said he was not suggesting the state treasurer have anything more than a position on the board, in order to provide the board with his knowledge concerning investments and to ask questions which might otherwise not be asked. Assemblyman Segerblom asked if all members of PERS' board were appointed by the governor. Mr. Seale replied affirmatively. Mrs. Segerblom asked Mr. Seale's opinion of what might occur if the governor, the treasurer and all those appointed to PERS' board belonged to the same political party. Mr. Seale replied he believed the state treasurers of all the states were professionals rather than politicians. Discussions ensued between Mrs. Segerblom and Mr. Seale. Assemblyman Nolan indicated he wished to ask Mr. Seale a question regarding UPD. He asked, if UPD was removed from the Department of Business and Industry, would it be necessary to supplement the administrative costs of the department. Mr. Seale replied some overhead was supplied to the Department of Business and Industry (by UPD) but it was not a significant amount. Assemblyman Harrington asked whether Mr. Seale believed PERS was not handling its investments as well as it might. Mr. Seale responded PERS had done a fine job with its investments. He indicated his desire to sit on PERS' board was prompted by his activities as president of the National Association of State Treasurers. He said he wished to "...make Nevada look like some of the other states who are very successful." He said he believed making the state treasurer a member of PERS' board could enhance some of PERS' decision making processes. Mr. Harrington asked how much time would be taken from his other duties if Mr. Seale were a member of PERS' board. Mr. Seale indicated there would be some additional demands on his time but said he did not believe he would be overburdened. Mr. Neighbors asked what expertise Mr. Seale believed he could bring to PERS' board which it did not have. Mr. Seale replied he invested Nevada's state portfolio of $1.4 billion dollars and believed he could bring his investment expertise to the board. Assemblyman Williams asked how the Department of Business and Industry felt about UPD being transferred to the treasurer's office. Mr. Seale replied he did not believe the Department of Business and Industry supported the proposed transfer. Mr. Williams asked if Mr. Seale had discussed the proposed transfer of UPD with representatives of the Department of Business and Industry. Mr. Seale replied he had. Mr. Williams reiterated his previous question regarding how the Department of Business and Industry felt about removing UPD from its jurisdiction and placing it under the jurisdiction of the treasurer. Mr. Seale replied representatives of the Department of Business and Industry were present and would address Mr. Williams' question. Mr. Williams asked whether Mr. Seale had observed something about the manner in which UPD performed its functions, while under the jurisdiction of the Department of Business and Industry, which made him believe the treasurer could cause those functions to be performed better. Mr. Seale responded he believed, because of the closeness of the treasurer's office to banking institutions, the treasurer could locate more unclaimed properties and distribute them to their appropriate owners. Chairman Bache commented Mr. Seale had indicated the presence of the state treasurer on the board of PERS could enhance the board. Chairman Bache suggested, if the state treasurer were someone similar to Mr. Seale's predecessor, his presence on PERS' board could bankrupt PERS. Mr. Seale replied, during the four years his predecessor had served as state treasurer, his predecessor did not bankrupt the state of Nevada. He contended, as a member of the board, neither the treasurer nor any one member of the board would have enough authority to "...jeopardize the good thoughts of the balance of the board." Chairman Bache asked whether Mr. Seale did not believe having the treasurer as a member of the board would tend to invest the board with a political nature and cause other political officials to seek membership. Mr. Seale replied he hoped it would not do so. Mr. Gary Crews, Legislative Auditor, Audit Division, Legislative Counsel Bureau, State of Nevada, testified. He advised, in April, 1994, an audit of the state treasurer's office was completed and said Section I of A.B. 407 pertained to that audit. He provided an excerpt from the audit report pertaining to the state treasurer's office (Exhibit E) and said it was determined the manner in which the treasurer's compensating balance worked was not in the state's best interest. He advised it was estimated, if the treasurer had the flexibility provided by A.B. 407, the treasurer could save approximately $1.1 million over the next two years. He advised the Audit Division of the Legislative Counsel Bureau supported Section 1 of A.B. 407. He advised the Audit Division was not in a position to address any other sections of A.B. 407. Assemblyman de Braga referred to line 10 and to subsection 2 of Section 1 of A.B. 407 and asked whether there would be a cost to the state to change its present policy. Mr. Crews replied there was presently a cost to the state (for banking services), which cost was absorbed through maintenance of a compensating balance. He advised, if the treasurer paid directly for banking services, the cost of those services would be $600,000, while the interest which could be earned on the $20 million maintained in the compensating balance would more than offset that cost. Mr. Neighbors asked whether the average yield on the state's investment portfolio of 4.67 percent was based on current or past investment rates. Mr. Crews replied, "This is the rate that was in effect during that period of time, so this is going to move and be flexible." Mr. Neighbors asked, "How far back would this go -- I mean years-wise -- on some of those investments?" Mr. Timothy Brown, Principal Deputy Legislative Auditor, Legislative Counsel Bureau, State of Nevada, testified in response to Mr. Neighbors' question. Mr. Brown replied the yield being discussed was the average yield earned by the treasurer's portfolio during fiscal year 1993. Mr. Crews interjected the yield changed from month to month. Mr. Bennett asked whether the way the state presently did business always earned less interest than would be earned by its doing business in the manner proposed by Mr. Seale. Mr. Crews replied, at times, it might be beneficial to conduct business in the manner it was presently conducted and the Audit Division believed the treasurer needed to have the flexibility to conduct business in either manner. Mr. Bennett asked whether A.B. 407, as written, provided the flexibility of which Mr. Crews spoke. Mr. Crews replied it did. Ms. Rose McKinney-James, Director, Department of Business and Industry, State of Nevada, testified. She advised the Department of Business and Industry opposed A.B. 407. She suggested transferring UPD from the Department of Business and Industry to the treasurer's office would disrupt an arrangement which was working well. Ms. McKinney-James advised UPD generated substantial monies for the state's general fund. She said UPD performed two functions, consumer protection and regulatory oversight, which were consistent with the mission of the Department of Business and Industry. Ms. McKinney-James referred to Mr. Seale's testimony regarding the budgetary impact of UPD and advised, over a two year period, that impact was relatively small. She said, however, the budget for the office of the director of the Department of Business and Industry was based on cost allocation. She likened the budget to a house of cards and said, if any card was removed, its removal had an impact on the entire department. She advised UPD would generate approximately $6,500 in fiscal year 1996 and $5,800 in fiscal year 1997. She said, "There are some agencies in the department who are small, and we would have to find a way to fill that hole, and it would either be through a general fund appropriation or through asking for an additional percentage of allocation from those other agencies." Ms. McKinney-James said Mr. Seale had identified two primary sources of unclaimed property, insurance companies and financial institutions. She advised the gaming industry was also a source of a substantial amount of unclaimed property. She stated both the Division of Insurance and the Division of Financial Institutions were part of the Department of Business and Industry and provided the opportunity for an exchange of information and for oversight regarding the audit function of UPD. She contended, with respect to the reorganization of government which had taken place, there was a basis for placing UPD within the Department of Business and Industry. Ms. Constance Longero, Administrator, Unclaimed Property Division, Department of Business and Industry, State of Nevada, testified. She said, to date, UPD had contributed $32 million to the state's general fund. She stated, "...we don't feel that our department is broken in any manner, so we don't think that it needs to be fixed somewhere else." She indicated UPD had some problems but advised a bill had been proposed to correct some of those problems. Mr. Bennett asked Ms. Longero whether UPD' function was to cause assets obtained from unclaimed property to be placed in the state's general fund or, rather, was to locate the rightful owners of unclaimed property. Ms. Longero replied her job was to "...relocate owners with their money." She indicated only a small percentage of unclaimed property was returned to its rightful owners. She explained one reason only a small percentage of unclaimed property was returned was because banks, insurance companies and other business held unclaimed monies for a period of five years and, by the time the money was turned over to UPD for UPD to locate its rightful owners, "...the trail is pretty cold." She indicated UPD was anticipating utilizing electronic means to locate owners of unclaimed property. Mr. Harrington asked the nature of the unclaimed properties with which UPD dealt. Ms. Longero replied 95 percent of unclaimed properties was cash in the form of bonds, checking accounts, savings accounts, utility deposits, wages and vendor refunds. She said the only tangible unclaimed property received by UPD was that which it received from banks' safety deposit boxes. She advised those items were sold at auction and the owners of those items were credited with the amount of money UPD received from their sale. Chairman Bache asked Ms. McKinney-James whether she had discussed the proposed transfer of UPD with the governor and, if so, whether the governor had expressed his opinion of the proposed transfer. Ms. McKinney-James replied she had not had an opportunity to discuss the proposed transfer of UPD with the governor but had discussed it with the governor's staff. She advised the governor's staff supported her position with respect to A.B. 407. Mr. Marty Bibb, Executive Director, Retired Public Employees of Nevada (hereinafter referred to as RPEN), testified. He declared RPEN strongly opposed A.B. 407 and specifically opposed Section 25 of A.B. 407, which dealt with the proposed change in the board of PERS. He indicated RPEN believed Mr. Seale had considerable background and skill in making investments but did not believe the same was true of some of Mr. Seale's predecessors. Mr. Bibb pointed out A.J.R. 19 of the 67th session placed a distance between both elected officials and the executive branch of government and the PERS fund. He advised RPEN's members did not believe any elected official should have proximity to that fund. Mr. Neighbors asked whether Mr. Bibb had any comments to make on A.B. 407 other than as to Section 25. Mr. Bibb replied RPEN was only concerned about that portion of A.B. 407 which dealt with PERS. Ms. Rita Hambleton, Vice Chairman, Nevada State Legislative Committee, American Association of Retired Persons (hereinafter referred to as AARP), testified. She provided a document setting forth the position of the Nevada State Legislative Committee with respect to retirement benefits (Exhibit F). She advised AARP specifically opposed Section 25 of A.B. 407. She stated one of AARP's primary goals was to protect retirement benefits. Ms. Hambleton said, personally, she believed Mr. Seale had been an excellent treasurer. She stated, however, there had been state treasurers of Nevada to whom she would not choose to entrust her personal funds, much less entrust the $6 billion in PERS. Ms. Hambleton advised she was a member of PERS. She contended the members of PERS felt very secure with PERS and with the investments made by PERS and indicated those members would not like to see the present structure of PERS` board changed. She asked, hypothetically, what would happen, with respect to a tie vote, if an eight member board was created. Mr. George Pyne, Executive Officer, Public Employees Retirement System, testified by reading from prepared text (Exhibit G). He introduced Laura Wallace, PERS' investment officer, and Dana Bilyeu, PERS' systems operations officer. Mr. Pyne advised PERS' board had not taken a position with respect to A.B. 407 but said PERS' staff would recommend to the board that it oppose Section 25 of A.B. 407. He declared the staff believed the potential risk to the PERS fund which the proposed change to its board would create was significant. Mr. Pyne reiterated the testimony of prior witnesses with respect to A.J.R. 19 of the 67th session. He declared the catalyst for the protections provided by A.J.R. 19 of the 67th session was the blatant misuse of (retirement) assets and investment assumptions which occurred in other states. He stated, in California, $1.6 billion of retirement fund assets were used to balance the state's budget. He said, in many states, the state treasurer served on the board of the state retirement system. He suggested those state treasurers had been known to influence actuaries to adopt unrealistic investment return assumptions. He advised, in the state of New Jersey, the state treasurer was instrumental in the manipulation of important investment assumptions and funding methods used to decrease (the state's) contributions to the retirement system as part of a plan by the governor of New Jersey to reduce taxes. Mr. Pyne pointed out statute provided that no member of PERS board could be an elected official. He suggested governmental oversight of the retirement system was provided by the legislature and by the fact all members of the retirement board were appointed by the governor. Mr. Pyne contended the investment philosophy of PERS did not depend on the expertise of any single individual. He suggested the retirement board had the knowledge necessary for deciding how to allocate PERS' assets in order to fund the retirement system. He quoted a story in the Bloomberg New Service, regarding the investment performance of the 30 largest pension funds in the United States, as saying, "The best performing fund in 1994 was the $5.9 billion Public Employees Retirement System of Nevada." He advised PERS investment performance had not always been that good and provided some background of past restrictions and control of PERS' investment practices by the State Board of Finance. Mr. Pyne explained the retirement board hired an investment consultant to advise it with respect to asset allocation, risk management and monitoring of investment performance. He advised the board also retained investment managers who had expertise in specific areas. Mr. Pyne said PERS urged the committee to remove Section 25 from A.B. 407. Mrs. de Braga asked whether the retirement board solicited the assistance of individuals who had expertise in (financial) areas which the members of the board did not have. Mr. Pyne replied affirmatively. He explained the board had an investment consultant and 17 professional money managers to advise it. Mr. Robert Hadfield, Executive Director, Nevada Association of Counties (hereinafter referred to as NACO), testified. He said county government had a large investment in PERS. He advised there were 11,300 employees of county government who were active members of PERS and 3,000 employees of county government who were retired members of PERS. Mr. Hadfield stated NACO participated in the process of appointing members to PERS' board by submitting names to the governor and it actively participated in "interim committees" established by PERS. He indicated PERS sought its members input regarding major policies and said he had attended PERS' annual investment sessions to which it brought financial experts from all parts of the United States. Mr. Hadfield declared NACO opposed Section 25 of A.B. 407 because NACO did not believe there was any problem with the retirement board and saw no advantage to increasing the size of the board. He advised NACO had the same concerns as those previously expressed about the state treasurer being a member of the board. Mr. Bennett asked whether the possibility of allowing the state treasurer to be a non-voting member of the retirement board had been considered. Mr. Hadfield replied NACO would also oppose that possibility. He declared NACO did not want any changes made to the current retirement board. Mr. Thomas Grady, Executive Director, Nevada League of Cities, testified. He advised more than 6,000 city employees and retired city employees were members of PERS and declared the Nevada League of Cities opposed Section 25 of A.B. 407. He stated the Nevada League of Cities believed PERS' board did an excellent job and should not be changed. Mr. Robert Gagnier, Executive Director, State of Nevada Employees Association (hereinafter referred to as SNEA), testified. He said SNEA opposed Section 25 of A.B. 407. He indicated SNEA was not opposed to the concept of elected officials being members of PERS' board provided "...they were offset by elected members of the system." Mr. Gagnier stated SNEA also opposed Section 21 of A.B. 407. He advised Section 21 would increase the number of unclassified employees of the state treasurer's office by four. He pointed out NRS 284.140 provided one deputy and one assistant in each department, agency or institution (of the state) could be unclassified employees. He indicated there was currently no exception to that provision provided for the state treasurer. He declared Section 21 of A.B. 407 would increase the number of unclassified employees the treasurer's office was permitted to have far beyond the average number other state agencies were allowed to have. He contended the positions with which A.B. 407 was concerned were positions which could and should be filled through the merit system. Ms. Debbie Cahill, Nevada State Education Association, testified. She said she spoke with the teacher's representative on PERS' board and advised that representative agreed with those concerns about A.B. 407 already expressed. She stated the Nevada State Education Association supported A.J.R. 19 of the 67th session and agreed with Chairman Bache that A.B. 407 appeared to conflict with A.J.R. 19 of the 67th session. Mrs. Lambert asked Mr. Seale to comment on Section 21 of A.B. 407. Mr. Seale enumerated the unclassified positions the treasurer's office presently had and said the only unclassified position which would be added would be that of assistant to the treasurer. He advised those unclassified positions were professional positions and contended it was important for the treasurer to have the flexibility to appoint individuals who could work, specifically, with him. Mr. Lambert asked whether the purpose of A.B. 407 was to make the law consistent with the situation which presently existed. Mr. Seale said, with the exception of the addition of the unclassified position of assistant to the treasurer, that was the purpose. Mr. Gary Yoes, Political Action Coordinator, SEIU Local 1864, testified. He advised SEIU opposed both Section 21 and Section 25 of A.B. 407. He stated SEIU opposed any action which might further politicize the state employees' retirement fund. He reiterated previous testimony regarding what occurred in California with respect to its state employees' retirement fund and regarding the conflict between Section 25 of A.B. 407 and A.J.R. 19 of the 67th session. He indicated SEIU shared the concern about Section 21 expressed by Mr. Gagnier. Chairman Bache closed the hearing on A.B. 407. Chairman Bache informed the committee the Senate had proposed an amendment to Assembly Bill 14 as reflected in reprint number 1 of A.B. 14. He indicated both he and Mrs. Lambert had reviewed the amended bill and believed the Senate had improved the bill and, if there was no objection, would make a motion for concurrence by the Assembly. Chairman Bache informed the committee the Senate amended Assembly Bill No. 145 by deleting Sections I, 2 and 3 and renumbering Section 4 as section 1. He advised A.B. 145 was proposed by Clark County and said Clark County had no problem with the Senate's amendments. He said, if there was no objection, the committee would move for concurrence by the Assembly. Mrs. Freeman announced the subcommittee on A.B. 401, A.B. 402 and A.B. 408 would hold a meeting at the conclusion of the meeting to be held by the Committee on Government Affairs on April 18, 1995. There being no further business to come before the committee, Chairman Bache adjourned the meeting at 9:50 a.m. RESPECTFULLY SUBMITTED: Sara Kaufman, Committee Secretary APPROVED BY: Assemblyman Douglas A. Bache, Chairman Assemblyman Joan A. Lambert, Chairman Assembly Committee on Government Affairs April 13, 1995 Page