MINUTES OF THE
	ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS

	Sixty-eighth Session
	May 31, 1995


The Committee on Government Affairs was called to order at 8:10 a.m., on 
Wednesday, May 31, 1995, Chairman Lambert 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
Mrs. Vivian L. Freeman
Mr. William Z. (Bill) Harrington
Mr. Dennis Nolan
Mrs. Gene Wines Segerblom
Ms. Patricia A. Tripple
Mr. Wendell P. Williams

GUEST LEGISLATORS PRESENT:

Assemblyman Morse Arberry

STAFF MEMBERS PRESENT:

Denice Miller, Senior Research Analyst

OTHERS PRESENT:

Dale Erquiaga, Chief Deputy, Secretary of State; Dean Heller, Secretary of 
	State; Brooke Nielsen, Assistant Attorney General; Rose McKinney James, 
	Director, Department of Business and Industry; Larry Struve, Dept. Of 
	Business and Industry

Chairman Lambert said the committee would take the bills out of order to 
accommodate the Secretary of State, Dean Heller.

SENATE BILL 83 - Makes various changes to provisions governing office of 
Secretary of State. (BDR 18-929)

Dean Heller, Secretary of State, spoke on S.B. 83.  He was accompanied by Mr. 
Dale Erquiaga, his Chief Deputy.  Mr. Heller walked the committee through the bill. 
 He had a handout of the amendments and prepared testimony for the committee 
to follow along (Exhibit C). 

Section two of the bill attempted to define "filed with the Secretary of State" so 
that records from that department will be managed more efficiently by the State 
Library and Archives.

Section three creates an elections division in statute and would give the Secretary 
of State the option of using independent counsel or the Attorney General.  Mr. 
Heller stated they have had an elections division in his office for a couple of years 
and this just makes it official.  It allows them to appoint a deputy which they 
already have, to be unclassified in addition to two other unclassified positions.

Section four allows up to 15 pages of copied documents to be given free by the 
elections division.  It would delete a fee for trademarks which appears elsewhere 
in the statutes.  Finally, it would allow the office to charge the actual cost for 
electronic and microfilm records.

Section five repeals a section dealing with old documents no longer stored in Mr. 
Heller's office.

Mr. Heller went back to section three to elaborate on a few points.  He went over 
the main points in (Exhibit C), Option for Independent Counsel.  Mr. Heller explained 
 in 1975 and again in 1993, his powers were broadened and he was named Chief 
Officer of Elections.  In spite of this expanded responsibility, no authority to back 
it up was given to the office.  This bill would give the Secretary of State the 
necessary authority to exercise his expanded powers.

There would be no additional cost for this as any independent counsel would be 
hired under contract and would have to undergo the normal approval procedures.


The Secretary of State already has the option of independent counsel for the 
Securities Division.  The language of this bill is almost an exact copy of that 
statute.  According to the Legislative Counsel Bureau, 11 other boards and 
agencies in state government have the authority to use independent counsel.  
Further, 26 other Secretaries of State have either the option of independent counsel 
or have full-time counsel in their offices.  Other election officials have reported they 
often have a staff of independent lawyers separate from their district attorneys. 
 The current Attorney General told Mr. Heller if he prepared the members-elect roll 
the way she had done, she would not defend him in court.  Mr. Heller did not want 
to wonder if any decision he made would be supported by the Attorney General; 
he wanted to be able to execute the powers of his office on his own.

Brooke Nielsen, Assistant Attorney General and Jonathan Andrews, Chief Deputy 
Attorney General and former counsel to the Secretary of State, spoke against the 
bill.  Mrs. Nielsen said the original S.B. 83 was a bill to revise fees for copying 
documents and they were not aware the Secretary of State intended to amend it 
to allow him to appoint his own legal counsel or contract with private legal counsel. 
 The bill was amended in the Senate to limit outside counsel to election matters, 
not only to ensure consistent legal advice, but also to reduce the cost of providing 
legal services.

Mrs. Nielsen read from prepared testimony (Exhibit D), extolling the virtues of the 
Attorney General's preeminent legal position.  She said if each constitutional officer 
 were free to select his own attorney, it could cause state officers to follow 
conflicting and contradictory legal advice. An Attorney general is often of a 
different political party than the constitutional officers he or she represents.  A 
hired counsel who is not answerable to the people would be less likely to consider 
the legal interests of all Nevadans.  Mrs. Nielsen was not sure why the Secretary 
of State felt the bill was necessary.  Thus far, there have been no significant 
complaints about the way the legal services have been provided by the Attorney 
General's office.  Finally, Mrs. Nielsen stated, there is already a mechanism in place 
should a true, legal conflict arise.  NRS 41.03435 and 288.110 allow for hiring of 
private legal counsel where there is a conflict of interest or where the Attorney 
General is disqualified from acting.  Mrs. Nielsen said S.B. 83 was ill-advised and 
unnecessary.


Assemblyman Bennett questioned what alternatives were available to constitutional 
officers if the Attorney General failed to act.  Mrs. Nielsen responded that was a 
decision left up to the Attorney General.  Mr. Bennett has heard testimony in other 
committees that the Attorney General has refused to represent state interests.  In 
some cases, Mrs. Nielsen reiterated, that was a decision the Attorney General must 
make, though rarely.  So, Mr. Bennett emphasized, a mechanism for private legal 
counsel was needed for just such disturbances.  Mrs. Nielsen said when the 
decision was made not to act, it was done because the Attorney General believed 
there were no legal grounds.  Every attorney had to make that decision prior to 
filing or defending any action.  

Chairman Lambert closed the hearing on S.B. 83.

ASSEMBLY BILL 631 - Revises distribution of revenue received from lease of 
federal land. (BDR 26-497)

Mrs. Lambert said the sponsor of A.B. 631 did not have all the information he 
needed to present testimony today and the bill would be rescheduled.

ASSEMBLY BILL 615 - Provides for state assistance in pooling loans for small 
business. (BDR 30-395)

Assemblyman Arberry, Assembly district 7, was the sponsor of A.B. 615.  He said 
the bill would provide state assistance for pooling loans for small businesses.  The 
Department of Business and Industry is directed to develop and conduct, program 
and promote the financing of small business in the state through the pooling of 
loans or a portion of loans made or guaranteed through the program administered 
by the federal agencies.  These loans may then be resolved to investors to a 
secondary market.  The purpose of this action is to enhance the availability of 
credit to small businesses.  This measure is significant in light of the growing 
importance of small businesses to our economy.  In 1990, the small businesses 
comprised 96% of the 26,000 businesses in Nevada.  Small businesses employ 
48% of Nevada's workers.  To assist in development of the loan pooling program, 
the act creates an advisory committee including at least two representatives of 
small businesses and one-fifth of the members of the committee may be 
represented by the rural counties.  The goal is to target the small business and rural 
businesses in those areas.  Currently, 17% of all businesses in the state are in rural 
areas.  Also, Mr. Arberry concluded, A.B. 615 provides an effective method to 
assist in the financing of small businesses in Nevada.

Assemblyman Bennett questioned how many members would be on the advisory 
committee.  Mr. Arberry said he did not have a number at this time.  That would 
be worked on.  Mr. Bennett asked how much money would be in the loan pool to 
begin the program.  Mr. Arberry was not sure at the present time.  This bill would 
open the door for the program to emerge.  The details would have to be worked out 
by the advisory committee and the Director of the Department of Business and 
Industry.


Assemblyman Segerblom queried if having five members from a small county would 
limit the loan to small counties. No, Mr. Arberry replied.  The whole intention was 
to make sure small areas were represented and their concerns were addressed.

Assemblyman Tripple asked if this bill would enable the state of Nevada to capture 
some federal money.  Mr. Arberry said his intention was to capture some federal 
funds and that issue would be better addressed by Rose McKinney-James.  Ms. 
Tripple indicated there was no fiscal impact stated for this measure, but the money 
had to come from someplace.  Mr. Arberry mentioned the only time there would 
be a fiscal impact was if the agency had to hire extra help for administration of the 
program; otherwise, there would be no fiscal impact.

Mrs. Lambert pointed out there were various ways to define small businesses; did 
Mr. Arberry have a particular one in mind?  Mr. Arberry had to assume there was 
 a standing definition of small business for the state as well as a federal definition 
and he would get back to the committee with that information.  Mrs. Lambert 
thanked him and mentioned she thought small businesses were defined as pretty 
large.

Rose McKinney-James, Director of the Department of Business and Industry, 
offered her support of the measure.  She said this was a program modeled after 
 a similar one in Washington state.  From one perspective, it would provide an 
additional financing tool devoted to assist small businesses, a significant aspect of 
the state's economy.  The Department of Business and Industry, through its current 
budget proposal, includes an office within the Director's office that would deal with 
business finance and planning.  Ms. McKinney-James envisioned this would be a 
program that would be housed within that entity with the emphasis placed on 
section two of the bill which would allow the Director to develop this program.  
The federal programs referenced are likely to come from the Small Business 
Administration and perhaps the U.S. Department of Commerce through their 
minority business development programs.  The advisory committee will explore the 
best way to implement this program.  Ms. McKinney-James asked Mr. Larry Struve, 
Chief of Business Finance and Planning, to join her at the table to contribute his 
experience with programs and bond issues and how that would relate to the 
proposed program.

Ms. McKinney-James indicated there would be some technical difficulties with the 
implementation of the bill.  There is the need to identify the revenue stream to 
assist in getting to the secondary market.  She said this was a technical flaw, one 
that could be overcome.  She wanted Mr. Struve to share his perspective on that 
particular aspect of the bill.


Mr. Bennett questioned what was meant in the last sentence in section two "may 
resell participation in the loans acquired to investors through the secondary 
market".  Ms. McKinney-James answered the original loan is considered to be in 
the primary market; that is whoever has underwritten the loan has the primary 
responsibility for it.  In financial settings, there is a secondary layer; those who are 
willing to purchase those loans at a competitive price, shifting that loan from one 
portfolio to another.  The transaction includes a favorable interest rate and the 
secondary markets collect that paper and hold on to it for an additional term.  

Mr. Bache wondered if she would want to have a more defined committee as the 
advisory committee.  Ms. McKinney-James felt it would be helpful to have the 
input of the committee with respect to any thoughts on the composition of the 
advisory board.  Certainly a minimum aspect of participation has been identified 
already, but beyond that Ms. McKinney-James would welcome all ideas.  She 
imagined a letter of intent would be needed to accompany this measure so that 
once the advisory committee has been identified and assembled, they could come 
back to Interim Finance with a proposal to define more accurately the 
implementation of the program.  She felt it would be helpful for Mr. Struve to 
explain the mechanics of the program.

Mr. Bache asked if small business was defined in statute or would it be defined in 
this bill.  Ms. McKinney-James was not aware of any statutory provision that 
defined small business within her purview, however, the Small Business 
Administration (SBA) does have a definition of small business based on their net 
worth and how many employees they have.  Since the federal standards were 
being looked at for comparison, Ms. McKinney-James preferred to use the SBA 
guidelines as a measure of consistency in their program.  

Assemblyman Harrington questioned section eight regarding the issuing of bonds 
and asked if they were intending to issue bonds anywhere near the 50 million dollar 
bond limit.  


Mr. Larry Struve, Chief of Business, Finance and Planning, answered Mr. Harrington 
was referring to existing law in section eight.  NRS 349.700 was passed in 1985 
to promote exporting in the state of Nevada.  The revenue bond provision was 
authorization for the Director to go into the market and sell revenue bonds.  There 
was no impact on the state's general fund.  The only source of repayment to those 
who buy the bonds is the activity in the program and the payback by those who 
borrowed money made available from the bond proceeds.  Because the Director 
issues the bonds in the name of the State Department of Business and Industry, 
the hope is to obtain a tax exemption.  Unfortunately, the Congress did not allow 
tax-exempt revenue bonds to be used to support export loan guarantees, which 
was the original purpose when this bill was enacted.  That was the result of the 
many tax reform acts that came out in the 1980's.  The fact is, for a program like 
this to work, bonds would have to be sold in the public market.  That was why 
there was no fiscal impact for this bill.  No state money would be involved in 
providing the purchase of the loans for resale in the secondary market or in the 
case of export loan guarantees, providing guarantees to banks that are processing 
export loans.  The challenge to both the advisory committee that would be set up 
and the existing authority for an advisory committee in NRS 349.800 would be to 
figure out how to make it feasible to sell these bonds.  After ten years in the export 
arena, Mr. Struve said they still have not been able to do so.  The people in the 
market who would provide the money want to know if there is an adequate 
demand so they will be assured the bond proceeds will be put to use and they want 
to know if there is some reliability they will be paid back.  So far, they have not 
been able to satisfy those two concerns.

Mr. Struve indicated the Director had suggested if the bill were processed, the next 
two years would be used to try to develop the program to make it feasible to sell 
revenue bonds.  Apparently, this has been done successfully in Washington and 
other states.  Mr. Struve mentioned it would be advisable to have some financial 
experts on the advisory committee.

Mr. Harrington asked by what kind of oversight was necessary prior to issuing 
bonds and would the state ultimately be responsible should there be a default.  Mr. 
Struve said no, the state would not be responsible.  As far as approval for issuing 
the bonds, the oversight occurs at two levels; at the local government level where 
the project is being constructed, and through the State Board of Finance where 
their approval is required before bonds can be issued.  Mr. Struve believed the 
Board of Finance or the Board of Examiners was inserted in the export financing 
law.  

Assemblyman Williams indicated section one of the bill was permissive in that it 
mentioned the development stage of the project.  Ms. McKinney-James agreed that 
only through development would the program be promoted.  She emphasized the 
need to include as many tools as possible to assist small business.  Some programs 
work better than others.  Many states have a combination of resources that allow 
them to provide better services than others.  Ms. McKinney-James said although 
her department was relatively new, they had acquired a great deal of knowledge 
with respect to their development bond effort and they were trying to enhance their 
ability to provide additional financing opportunities for small businesses in the state.

Mrs. Segerblom asked who has been financing small business loans in Clark 
County.  Ms. McKinney-James replied those had been provided by the banking 
community.  Many of those banks have been certified by the Small Business 
Administration to use some of their products such as equity and capital loans.  
Other than that, there is an apparent gap for financing start-up businesses or 
businesses that have tremendous potential but are under the underwriting 
requirements for commercial lenders.  Ms. McKinney-James mentioned there was 
another bill pending this session that would allow them to develop a capital fund 
which would be a risk capital fund for those businesses.

Assemblyman de Braga questioned if an advisory committee on financing exports 
was in existence or if it ever existed.  Ms. McKinney-James said it was never 
created because of the dilemma Mr. Struve identified, the inability to meet the 
criteria of the market.  This has been very frustrating for her and others in her 
department.  

Mr. Struve added that it was made clear to the Legislature the advisory committee 
would not be activated unless it could be determined it was feasible to issue the 
revenue bonds because that committee's approval would be needed under current 
law before issuance of bonds and set up a loan guarantee program.  He felt there 
was interest in the state to proceed with this program, but they were still 
struggling with the method to make the sale of those bonds feasible.  As the 
competition with other states continues to stimulate growth and development in 
the business sector, they have seen those states use state funds to start-up and 
then through the subsequent payoff, become self-supporting.  The state of Nevada 
is not allowed to consider that because of a strict constitutional provision which 
does not allow the state to loan its money or credit to private enterprise.  Through 
another bill they were trying to target the ability of the Legislature to carve out 
those programs specifically geared to promote economic development.  There has 
been tremendous bi-partisan support for the program.

Ms. McKinney-James said they would be happy to draft an amendment to 
specifically reflect the committee's recommendations for the composition of the 
board and the adjustment of technical aspects that had been raised.  

Mrs. Lambert closed the hearing on A.B. 615.

The meeting was adjourned at 9:00 a.m.    




RESPECTFULLY SUBMITTED:



	
Denise Sins,
Committee Secretary

APPROVED BY:





Assemblyman Douglas A. Bache, Chairman







Assemblyman Joan A. Lambert, Chairman

Assembly Committee on Government Affairs
May 31, 1995
Page