MINUTES OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS Sixty-eighth Session January 26, 1995 The Committee on Ways and Means was called to order at 8:04 a.m., on Thursday, January 26, 1995, Chairman Morse Arberry, Jr., presiding in Room 352 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Morse Arberry, Jr., Chairman Mr. John W. Marvel, Chairman Mrs. Jan Evans, Vice Chairman Mrs. Sandra Tiffany, Vice Chairman Mr. Dennis L. Allard Mrs. Maureen E. Brower Mrs. Vonne Chowning Mr. Jack D. Close Mr. Joseph E. Dini, Jr. Mr. Thomas A. Fettic Ms. Chris Giunchigliani Mr. Lynn Hettrick Mr. Bob Price Mr. Larry L. Spitler COMMITTEE MEMBERS ABSENT: None STAFF MEMBERS PRESENT: Mark Stevens, Fiscal Analyst Gary Ghiggeri, Deputy Fiscal Analyst Larry Peri, Program Analyst Chairman Arberry noted the budgets would be taken out of order, starting with Motor Pool. MOTOR POOL - PAGE 519 Mr. Tracy Raxter, Chief of Administrative Services Division, Department of Administration, introduced Lyn C. Callison, accountant for the Motor Pool Division. Mr. Raxter explained Mr. Dennis Colling, who normally would be presenting the Motor Pool budget, had taken a position at the Public Service Commission and would not be available to testify before the committee. Mr. Raxter presented the committee with background information on the Motor Pool Division. He stated the Motor Pool Division operates three motor pool facilities, one each in Carson City, Las Vegas and Reno, and is staffed by 11 full- time employees, two half-time student positions and three inmates. The goals, objectives and major functions of the Motor Pool Division as mandated by statute included the following: To ensure an economical utilization of state-owned vehicles, to eliminate the unauthorized use of state-owned vehicles, to provide a ready means of transportation for state employees and officers on state business, to reduce the need for state employees to use private cars on official state business, and to provide a central administrative facility for the maintenance, care and operation of selected state-owned vehicles. Mr. Raxter noted the Motor Pool budget included a change in the rate structure. There was a 50-mile minimum on daily vehicles, an 800-mile minimum on monthly vehicles and a per-mile charge after the minimum was reached. This structure resulted in a defacto cap; instead of a minimum, it was a maximum for certain state agencies, which did not provide for efficient utilization of vehicles. In response to a Legislative Counsel Bureau audit on the Motor Pool, the rate structure was reanalyzed and changed to a fixed and variable cost separation. From a fixed cost, a base rate was developed for every vehicle. The total of the variable cost was divided into expected total mileage for the year and a per-mile rate was developed to be applied to each and every mile from mile zero. The overall rate structure was expected to be revenue neutral, although it might have a minimal impact on some agencies with many monthly vehicles versus some agencies using vehicles on a daily basis as needed. Mr. Raxter pointed out, other than the revenue section, the base budget was in line with the FY 1994 actual. Mr. Raxter explained decision unit E-125 would provide funding for a new Program Assistant I position. Staff at the Motor Pool Division felt a need for the position in two areas: 1) There were only two clerical positions for the three motor pool locations, which meant one location did not have a clerical position. A problem would be caused when one employee was absent or the position became vacant. As an example, one of the garage service workers had to fill in for the front office, which created a disruption in the garage service operation. 2) As a result of the government reorganization implemented during FY 1993, there were personnel relocations affecting the Motor Pool Division and the Administrative Services Division which resulted in removing an accounting position from the Carson Motor Pool office. This position had provided administrative support in the area of answering the telephone. Mr. Raxter pointed out there was a request in the Motor Pool budget for information services, which was a supplement to the existing automated billing system. The request was for an automated reservation system and a paperless requisition system which would tie into the automated billing system. Mr. Spitler pointed out that in the past the committee had requested information on home storage on several occasions, and the information had not been provided to the committee. The request was made through Interim Finance and also outlined to the Motor Pool what Senate Finance and Assembly Ways and Means thought should be guidelines for home storage of state vehicles. Mr. Spitler questioned what the response would be and why a written response was not provided as to how the policy was being implemented. Mr. Raxter replied he was not privy to the request by the committee, although he had a memo from Mr. Comeaux in response to the request to all agencies based on action by the Board of Examiners regarding home storage. Mr. Spitler pointed out the request went back to March 1993 with a follow-up in the spring of 1994, and no response was received by the committee. Mr. Spitler commented four or five criteria were identified and should be met before a state vehicle could be taken home. His concern was the nonresponse of the Motor Pool Division to the requests and asked what was being done. Mr. Spitler emphasized he did not think the fact there was no acting administrator for the Motor Pool was an excuse, because someone had been responsible for responding to the committee since 1993, which was not done and continued to not be done. Mr. Spitler felt the requests were valid and there was nothing in the requests which could not be answered. He guaranteed the budget would not be put to bed until the questions were answered. Ms. Janet Johnson, Deputy Budget Administrator, Budget Division, agreed with Mr. Spitler's assessment. She pointed out the Board of Examiners took action, as indicated by Mr. Raxter. There was a memo sent in October 1994 to all state agencies, and a new policy was set in direct response to the committee's letter of intent. The new policy required cabinet level agencies to approve home storage in lieu of the Director of the Department of Administration. They were required to report to the Department of Administration in December of each year, and those reports were being received and compiled. As soon as the information was available, it would be provided to the committee members. Ms. Johnson requested the committee call her if they did not receive the report. Mr. Spitler stated he felt the Motor Pool administrator showed a strong sense of arrogance in waiting a year and a half to respond to very valid requests from the Assembly Ways and Means Committee and then hearing that the Department of Administration was looking into the requests. He questioned why the committee had not even been shown the courtesy of being informed that someone else, and not the Motor Pool Division, was looking into the requests. Mr. Spitler requested that Ms. Johnson take his message wherever it needed to be taken, because the Motor Pool budget would go nowhere until the response was provided. Ms. Johnson replied the oversight was not a matter of arrogance, but rather was a matter of taking time to comply with the request. She pointed out action had been taken by the Department of Administration, and the approval process for home storage had been placed with cabinet members. She emphasized the policy itself was not put off on someone else. Mr. Spitler asked what the Department of Motor Vehicles' role was in home storage. Ms. Johnson replied the Department of Motor Vehicles allowed home storage of vehicles; they did not set policy. Mr. Spitler maintained the Department of Motor Vehicles was the agency which had the arrogance to tell the committee if they wanted the information, to come get it. He asked Ms. Johnson to communicate the message that a friendly request was made over a year and a half ago and the committee saw no cooperation in terms of providing the information. He felt the lack of response was an insult to the committee, and a department head did not have the right to sit back and not respond to requests from the committee, whether it met as Assembly Ways and Means or Interim Finance. No follow-up was inexcusable. Mr. Marvel commented he was a member of the Legislative Commission's Audit subcommittee, and the subcommittee requested the same information. He pointed out Mr. Mark Stevens had written several times regarding the number of vehicles authorized for home storage and had never received a definitive response. Mr. Marvel confirmed the validity of Mr. Spitler's comments and encouraged Ms. Johnson to inform the Department of Motor Vehicles of the need to respond immediately to the committee's requests for information. Ms. Johnson assured the committee members she would follow through with the requests. Ms. Tiffany pointed out she was on the Audit subcommittee in FY 1994 and wanted to echo the sentiments of Mr. Marvel and Mr. Spitler. Ms. Tiffany asked what had happened to the emphasis placed on issues of inventory control, internal control and administrative costs in light of the Motor Pool Division's current budget request for an automated billing system. Ms. Callison replied a billing system had been in place for almost three years and was part of a five-year plan. Part of the new computer system would bring inventory on line so there would be a complete package to enable information to be entered one time instead of being entered several times in different computer programs. The current package took care of fleet information, inventory, and maintenance. Ms. Tiffany asked if the inventory issue would be addressed through the billing system. Ms. Callison replied yes and that they had been working on the inventory issue. Ms. Tiffany mentioned the billing system was a component of a larger system. Mr. Raxter agreed and pointed out one of the findings in the audit report regarded fuel cards and fuel inventories at the Motor Pool facilities. The fuel cards were addressed by having staff spot check the cards on a monthly basis. Because of the large number of fuel cards, a full accounting each month would not be cost effective. Mr. Raxter explained the Carson City Motor Pool's fuel pump did not have a meter, but measurements by stick were taken periodically to determine how much fuel was in inventory, and the Reno and Las Vegas facilities had pump meters which were being monitored. Ms. Tiffany expressed concern that problems with internal control, administrative costs, fuel tracking, and other issues would not be taken care of and the Motor Pool would skip to the billing issue. Mr. Raxter voiced appreciation for Ms. Tiffany's concern and stated each audit issue would be properly addressed. Ms. Giunchigliani asked whether the memo sent out by the Department of Administration addressed the four items in the Assembly Ways and Means letter of intent. Ms. Johnson did not recall the specifics of the policy but emphasis was placed on Motor Pool vehicles being operated for state use only and not being used as a perquisite. Ms. Giunchigliani requested a copy of the policy be provided to the committee members so they could determine whether the intent had been met. Ms. Giunchigliani inquired of Mr. Raxter how many miles were on each vehicle before they were rotated. Mr. Raxter replied 80,000. Ms. Giunchigliani asked if trucks had the same standard for rotation. Ms. Callison answered trucks were about the same, depending on the condition of the vehicle. Ms. Giunchigliani questioned whether the vehicles were then sold to the public. Mr. Raxter responded they were and pointed out the Purchasing Division holds a yearly auction of excessed vehicles in Reno and has started the same practice in Las Vegas. Ms. Giunchigliani suggested exploring the idea of doing the same type of thing for state- owned furniture. Regarding measurement indicators, Ms. Giunchigliani requested information on actual inventory, vehicles in home storage, agencies utilizing Motor Pool vehicles and the number of vehicles used by those agencies. With this information, the committee could determine if the policy was being implemented. Ms. Giunchigliani inquired whether the required 10% and 15% purchase of alternatively fueled vehicles had been reached. Mr. Raxter stated he believed 10% had been achieved. He pointed out with the addition of ten alternative-fuel vehicles, the Motor Pool would be over 15%. Ms. Giunchigliani questioned whether a Motor Pool facility was being added to the new Las Vegas office building. Mr. Raxter stated the original budget request included a full-time position, shared by Buildings and Grounds, to handle the mail room, assist people at the counter and also to fuel vehicles. However, Mike Meizel, head of Buildings and Grounds, could not justify an additional half-time position in the mail room, resulting in the request being put on hold. Ms. Giunchigliani suggested Motor Pool and Buildings and Grounds look at the concept and reintroduce the request at a future time. Mr. Close asked if the Motor Pool Division was functioning without an administrator. Mr. Raxter stated Mr. Perry Comeaux had appointed an acting administrator. Mr. Close questioned why the acting administrator did not appear before the committee and stated he had questions on the measurement indicators. He called attention to a change in personnel and suggested it would be helpful for that person to hear what the committee's concerns were as opposed to Mr. Raxter being the messenger. Mr. Raxter replied he and Ms. Callison had played an integral part in preparing the measurement indicators. Mr. Close reiterated it would be helpful for the acting administrator to hear the concerns of the committee. He asked if N/A under actual FY 1994 total cost of outside rentals meant the report was not back. Mr. Raxter explained the Motor Pool Division was a pilot agency for reevaluating the measurement indicators. The N/A's were new indicators which had not been previously monitored. Mr. Close asked if FY 1995 indicators could be projected. Mr. Raxter offered to provide FY 1995 projections. Mr. Close pointed out 99% of agency requests for vehicles is projected to be accommodated in 1996. He questioned whether $66,000 under total outside cost of rentals took care of the remaining 1%. Mr. Raxter replied it did and pointed out that was the same amount incurred in FY 1994. Mr. Close asked if 99% was covered in previous years. Ms. Callison responded affirmatively. Mr. Close expressed concern that the cost per mile to the state was 35.7 cents, yet employees using their own vehicles were reimbursed 27 cents per mile. Mr. Spitler questioned whether the Program Assistant I position under E-125 was a result of losing the position during reorganization. Mr. Raxter indicated reorganization played a minor role in the request. The new position would provide some telephone answering support. Mr. Spitler inquired whether the position was an increase of one person, to which Mr. Raxter replied it was. Mr. Spitler asked where the requested ten alternatively fueled vehicles would be assigned. Mr. Raxter indicated he did not have the information but would provide it to the committee. Mr. Spitler indicated the vehicles could be assigned to many places; and should enhancements not be approved in other areas, all the vehicles would not be needed. He asked where the associated expenses of the additional vehicles were in the budget. Mr. Raxter explained the expenses were for replacement vehicles and there were no additional costs. Mr. Spitler questioned why the expense for maintenance did not decrease. Mr. Raxter commented Motor Pool vehicles were at different stages of the 3-year, 80,000-mile replacement cycle, so maintenance expenses continued on an even basis. Mr. Spitler asked why the 84 vehicles in the one-shot appropriation were not in addition to the existing vehicles. Mr. Raxter explained of 84 vehicles in the one-shot appropriation, ten were requested by the Motor Pool Division as alternative-fuel vehicles. The remaining 74 vehicles were requested by several state agencies and would be owned and maintained by those agencies. Mr. Spitler requested detailed information on the one-time appropriation be provided to the committee. Mr. Spitler asked where the maintenance for the ten alternative-fuel vehicles was located in the budget. Ms. Callison explained the Motor Pool Division purchased 125 vehicles in 1988 and 1989. It was time to replace those vehicles, and maintenance would level out. Mr. Spitler reiterated maintenance would remain as projected, to which Mr. Raxter replied affirmatively. Mr. Raxter explained the Enhancement 175 request was originally for the Motor Pool Division to provide out-of-state travel funding for the administrator of the Motor Pool Division to serve as the president-elect in FY 1996 and president in FY 1997 of the National Association of State Fleet Administrators. Mr. Marvel asked if the request was still valid in light of the personnel change. Mr. Raxter replied it was not. Mr. Raxter noted the Enhancement 850 request for information services was based on a needs assessment performed by the Department of Information Services. The benefits of providing an automated reservation system and an on-line paperless requisition system which tied into the existing automated billing system would reduce the number of times duplicate information would be entered. The on-line requisition system would allow larger agencies to have access to the on-line reservation system and would allow maintenance tracking of non-Motor Pool Division vehicles. Mr. Spitler asked where in the budget he would find the revenue for the 15 leased vehicles mentioned in A34. Mr. Raxter said he was not sure why that particular wording was in the appropriation. Ms. Johnson noted the revenue should be reported in the budget but she did not know if it was. Mr. Spitler requested, with the permission of the Chair, information on the number of one-shot vehicles leased, to whom leased, the amount of the lease, and where the revenue was included in the base budget. Mr. James W. Manning of the Budget Division offered to supply a spreadsheet listing all 74 vehicles. Mr. Spitler asked why the ten alternative-fuel vehicles were not leased. Mr. Manning indicated the Motor Pool Division intended to purchase the ten alternative-fuel vehicles for daily rentals from the Motor Pool. The 74 vehicles were to be purchased because of agency requests. Mr. Spitler questioned whether the spreadsheet would identify details regarding revenue in the one-shot appropriation. Mr. Manning indicated he was not sure how the revenue was reflected in the budget but would provide the information. Ms. Tiffany inquired whether the Motor Pool Division developed their own software or bought it off the shelf. Mr. Raxter noted the needs assessment by the Department of Information Services (DIS) indicated there was sufficient off-the- shelf software to meet the needs of the Motor Pool Division. Ms. Tiffany asked if the computer system was a mainframe or PC. Mr. Raxter indicated PC. Ms. Tiffany inquired as to the manufacturer of the software. Mr. Raxter indicated he was unsure. The automated billing system in place was developed in-house by DIS staff. Ms. Tiffany asked if the existing software would cease to be utilized or a module would be added. Mr. Raxter stated DIS recommended the existing system would interface with an off-the-shelf package and DIS would likely develop the interface. Ms. Tiffany commented the software issues would be addressed with DIS. Ms. Giunchigliani, in follow-up to Mr. Spitler's comments, requested information regarding where the funding for the 15 agencies that were to lease the new vehicles was shown. Mr. Close asked if charges were assessed for services provided to vehicles in the Motor Pool fleet. Mr. Raxter replied charges were assessed. Mr. Close asked where he would find those charges. Mr. Raxter indicated charges were listed in the base budget under other nonstate resources, which consisted of three different revenue sources. Mr. Close requested information be provided to the committee, with the Chairman's permission, regarding a breakdown of revenue from other nonstate sources. MOTOR POOL VEHICLE PURCHASE - PAGE 525 Mr. Raxter pointed out budget account 1356 received funding from three sources: 1) Cumulative vehicle depreciation realized from the Motor Pool fleet; 2) Salvage sales after the 3-year, 80,000-mile replacement cycle was reached; and 3) General Fund appropriations. Requested were 46 vehicles consisting of 35 sedans, 3 utility vehicles, 4 pickups, and 4 minivans the first year of the biennium and 73 vehicles consisting of 63 sedans, 4 utility vehicles, 5 pickups, and 1 van the second year of the biennium. In addition to the replacement vehicles, the one-shot appropriation contains ten alternative-fuel vehicles which were requested by the Motor Pool Division. ADMIN ADMINISTRATIVE SERVICES - PAGE 577 Mr. Raxter noted the Administrative Services Division provides support to divisions in the Department of Administration in areas of accounts payable and receivable, personnel, payroll, billing, financial reporting, budgeting, contract administration, and management analysis. In addition to providing services to the Department of Administration, fiscal and personnel services are provided to the Office of the Governor, Office of the Lieutenant Governor, and the State Ethics Commission. The Administrative Services budget is funded 100% by an administrative assessment to each division in the department and other agencies served, based upon the time involved in serving each agency. Mr. Raxter explained the base budget reflected a decrease in the number of authorized positions from 18 to 16. The decrease was realized as a result of two positions which were targeted for reorganization savings in response to the Executive Branch reorganization approved by the 1993 legislature and consolidated administrative support personnel for the new Department of Administration. All of the administrative support personnel were combined in the Administrative Services budget account which resulted in a reduction of the authorized positions. Mr. Raxter pointed out the M-200 decision unit provided for expansion of current office space to allow for relocation of certain Administrative Services Division personnel from other divisions. Mr. Raxter explained decision unit E-125 provided funding for modernization and computer networking of the existing Administrative Services PC-based computer system, as Administrative Services was very paper intensive and was always seeking ways to automate different processes. In conjunction with statewide BPR studies, Administrative Services was also doing internal analysis to determine how improvement could be made in different functions. Mr. Spitler requested an explanation of the request in decision unit M-200 for additional space in light of the reduction of two employees. Mr. Raxter responded five Administrative Services Division personnel were located in other divisions of the department. It was anticipated some personnel would be moved to the central office. Mr. Spitler asked how many personnel would be moved to the central office. Mr. Raxter said they were projecting four personnel would be moved. Mr. Spitler requested written rationale be provided to the committee for the additional space and an explanation of how the vacated space would be utilized. STATE PRINTING OFFICE - PAGE 501 Mr. Donald L. Bailey, Sr., State Printer, of the State Printing and Micrographics Division, introduced Jennifer S. Galentine, Management Assistant. He explained the Nevada State Printing Division, Department of Administration, provides printing and reproduction services for all state agencies and entities. Products include reports, circulars, books and stationery. The State Printing Office also operates copy centers and provides technical oversight in the purchase of copiers by state agencies. During the preparation of the 1995-97 Executive Budget, every effort was made to adhere to the Governor's recommendations regarding conservative spending. The State Printing Office achieved the recommendation and was able to finalize budget requests at a 3.3% increase over the 1993-95 Executive Budget. It is the goal of the State Printing Office to provide state agencies cost effective and high quality printed material. Statutory authority is provided by NRS 344. Mr. Bailey pointed out average turnaround time on printed jobs was three to six weeks. There were 4,800 printing orders; 3,500 quick-print orders; 71 returned jobs out of 84 projected; and 35,630,000 printing impression, which showed a difference from the 51,000,000 projected. The 52,000,000 projected for FY 1996 and FY 1997 is based on 1991, 1992 and 1993 actual impression counts. The reason for the decline in FY 1994 was the flow through the State Printing Office had been streamlined in the offset department. A significant amount of material had been printed 2 up and 4 up but was increased to 6 up and 16 up on a form. Chairman Arberry requested an explanation of two up and four up. Mr. Bailey explained 2 pages printed at one time or 4 pages printed at one time, up to 16 fronts and 16 backs with one pass through the press, resulting in a decrease of impression counts. Mr. Bailey noted higher figures were projected in 1996-97 based on more work coming into the State Printing Office from agencies. Chairman Arberry called attention to a Legislative Counsel Bureau (LCB) audit describing slow turnaround time and asked if steps were being taken to improve the turnaround time. Mr. Bailey responded yes and added the State Printing Office had been selected by the Governor to spearhead a Total Quality Management leadership program. As a result, a survey was sent to all user agencies, boards and commissions. The response indicated a need for better turnaround time, number one, and lower costs. The LCB audit indicated the average turnaround time was 21 days, with one job taking 76 days. Mr. Bailey agreed with the audit, but explained there were 489 moving jobs in the State Printing Office, not counting legislative work, being performed by 37 personnel over 3 shifts. Mr. Bailey pointed out NRS was considered one job and could take three months to complete once the legislature adjourned. He did not know what the 76 day job for which they were penalized was, but it could have been a Supreme Court opinion where they had waited several months to acquire the rest of the opinion from the court before the actual opinion was assembled. The 21-day turnaround time for average work included turnaround time of 2 or 3 days to 2 weeks, the average being 3 to 6 weeks. Mr. Bailey felt the State Printing Office turnaround time was better than most in commercial industry. Mr. Spitler indicated the State Controller testified there was a substantial increase in the amount of money spent for printing forms. He requested Mr. Bailey provide to the committee, with the permission of the Chair, what quantity was formerly provided to the State Controller and what quantity was currently being provided, along with previous cost and present cost. Mr. Marvel asked if the billing rates had been restructured. Mr. Bailey responded the billing rates had been restructured and had not been raised since 1991, for which he took full responsibility. He indicated the State Printing Office should have raised rates in FY 1993 but did not. Rates were raised 12% in July 1994 and a recovery rate has been shown. Mr. Marvel inquired whether the increase was reflected in the current budget revenue authority, to which Mr. Bailey replied it was not. Mr. Marvel requested the committee be supplied with the adjustment. Mr. Dini pointed out cash was not transferred to the replacement account for equipment, which put the State Printing Office in a weak position as far as buying new equipment in the upcoming biennium. He asked if there was a plan to purchase new equipment. Mr. Bailey indicated new equipment purchases were included in the Printing Office Equipment Purchase budget. He speculated with the transfer of $133,987 in FY 1996, the request would be $297,500. In FY 1997 the State Printing Office was requesting to spend $84,500. With transferred and current revenue in the depreciation account, Mr. Bailey projected the State Printing Office would come out solidly in the black in FY 1996 and FY 1997. Mr. Dini expressed disappointment that losses in the print shop were offset by overcharging customers for overtime, material and photocopy services. He asked if additional rate changes would be made to overcome the deficiencies. Mr. Bailey explained basic hourly rate structures had been set up in the late 1980's based on printing industry procedure of using square footage and overhead items. The legislative auditors set up new guidelines, and recommendations were implemented in July 1994. Full written procedures were also provided to the Audit subcommittee. Mrs. Brower asked if specified Franklin catalog or time and material was used for pricing. Mr. Bailey replied the pricing system, called the Covalent system, was utilized by people in the printing industry throughout the United States. Nevada State Printing was the first state to apply the Covalent system in the 1980's. The system allowed for hourly rates to be billed from the system, as well as inventory tracking. Mrs. Brower requested the committee be provided, with the permission of the Chair, a list of press types, ages and sizes. Mr. Spitler asked if the new rates took into consideration depreciation so the account would be fully funded and would avoid a situation where needed equipment could not be bought. Mr. Bailey responded affirmatively. Mr. Spitler inquired if problems came about as a result of the depreciation account not being funded. Mr. Bailey said that was correct and explained because the hourly billable rates were low, the agency was losing money on some jobs. Mr. Spitler asked if prices were benchmarked from private enterprise. Mr. Bailey answered the National State Printing and National Association of Printers benchmarks were used, which were run every two years. Mr. Spitler inquired where Nevada State Printing prices fell when compared nationally. Mr. Bailey indicated approximately 70% of state printing jobs were produced for less money than those produced by commercial printers. Mr. Allard asked if a penalty was assessed when the State Printing Office was in violation of NRS 344 as a result of cost of material and labor not being covered. Mr. Bailey indicated there was no penalty, except the legislative audit. Mr. Bailey stated the number of requests for technical services was projected at 10,505 in FY 1994, but was down 24%, due in part to the Total Quality Management program being instituted in July 1994. The Total Quality Management program consisted of State Printing Office employees and the management team working together. Three teams worked on policies and procedures, offset and bindery. Mr. Bailey indicated the employees worked with managers to make things work for the state. Total sales dollars projected in 1994 was $3.4 million and actual was $3.2 million, a difference of 4.8%. Mrs. Evans requested a percent of completed printing jobs within the estimated time frame be included in the performance indicators. Mr. Close pointed out the turnaround time of three to six weeks could be off 50% and still be on target. He requested the turnaround figure be more refined and requested some quality control indicators on product satisfaction. Mr. Bailey stated the State Printing Office was doing ongoing quality control checks with user agencies. A slip would go out with deliveries for the user agency to fill out regarding performance, job quality and job delivery. Mr. Close requested those quality control checks also be supplied to the committee. Mr. Allard asked if total resources were from dollar sales. Mr. Bailey indicated resources were based on sales to agencies. Mr. Allard inquired why there was a discrepancy in the measurement indicator for actual FY 1994 and total resources of approximately $150,000. Mr. Bailey responded projected FY 1994 excluded micrographics sales, as the Records Management-Micrographics budget was being recommended for transfer to the Department of Museum, Library and Arts in FY 1996. Mr. Bailey drew attention to budget 1330 expenditures for personnel expenses and pointed out $1,663,781 in FY 1996 and $1,672,927 in FY 1997 were for labor expenses from the State Printing Office. Operating expenses in the amounts of $379,779 in FY 1996 and $376,388 in FY 1997 were for insurance expenses, outside services, equipment repair, vehicle maintenance, vehicle operation and Buildings and Grounds Division services. Equipment expenses in the amounts of $79,364 in FY 1996 and $52,544 in FY 1997 were for ongoing leases and present equipment. Raw materials expenses in the amount of $773,192 for both years of the biennium were for paper, raw material, skid stock, carton stock, envelopes and direct and indirect supplies. Approximately $500,000 worth of raw material was housed for inventory. Depreciation expenses of $133,987 in FY 1996 and $163,443 in FY 1997 were based on 40 items. The fund was set up to enable State Printing Office equipment purchases. Copy center operating expenses in the amount of $159,984 in both years of the biennium were to keep the copy center in operation. Quick print had two pieces of equipment which provided overnight service to agencies with small copy jobs. Mr. Hettrick asked two questions of Mr. Bailey: 1) Was there increased demand for raw materials during the legislative session; and 2) Was the $500,000 inventory figure high for interim service. Mr. Bailey responded raw material was enhanced during the creation of the budget but was later deleted by administration. Raw material was expected to increase during the biennium. Administration felt if raw material needs did increase, it could be approved through a work program revision by the Interim Finance Committee. Regarding the $500,000 inventory, Carson City was not in the overnight delivery range of vendors, particularly during snowy weather conditions. Keeping raw material on hand became necessary when agencies demanded delivery overnight or within two or three days. Inventory also increases two months prior to the start of the legislative session for two reasons: 1) Paper must cure before going through the printing process, and 2) A large portion of the stock was paid for in advance so it would be available when the legislative session convened. However, inventory was reduced from 1,500 to 700 products during the previous six years. Mr. Hettrick expressed concern for the $500,000 average inventory compared to $773,192 total usage for the year. He felt two-thirds of the total inventory in stock at all times was too high. It would appear an order could be placed, be warehoused by the vendor, and be delivered as needed. Mr. Hettrick inquired if the $70,000 difference in raw materials between the 1993-94 actual and the 1994-95 work program was the cost of supplies for the legislative session and was pushed through for the biennium or was an increase in cost of materials altogether. Mr. Bailey replied the agency request was the figure he would like to have seen pushed through for the biennium. The actual figure was the actual cost figure for 1994. Mr. Bailey acknowledged the inventory figure was high but did include material for the legislative session. Mr. Allard asked if the total amount of dollar sales for FY 1994 actually went into the State Printing Office account, and Mr. Bailey responded it did. Mr. Allard inquired if micrographics was going to be transferred to Museums, Library and Arts, to which Mr. Bailey responded it was. Mr. Allard commented he did not see an agency transfer reflected in the budget and questioned if the funds were transferred to Museums, Library and Arts. Mr. Bailey indicated the funds were in the micrographics budget. Mr. Stevens drew the committee members' attention to the Records Management - Micrographics budget account on page 509 and pointed out the budget account was being recommended for transfer to the Department of Museum, Library and Arts in FY 1996. Chairman Arberry asked if the State Printing Office was going to submit a revised budget to the committee, and Mr. Bailey said a revised budget would be provided. Chairman Arberry requested an explanation of how Total Quality Management relates to out-of-state travel. Mr. Bailey responded out-of-state travel allowed State Printing Office staff to attend the National Printing Association meeting and included one trade show, which allowed staff to keep up on the latest technical equipment. Total Quality Management training would be provided during the National Printing Association meeting. Chairman Arberry asked if Total Quality Management was included in all the proposed travel. Mr. Bailey noted only for the National Printing Association meeting. Chairman Arberry inquired whether there was a time frame when benefits from the Total Quality Management (TQM) program would be realized or whether the program would be ongoing. Mr. Bailey stated he felt TQM would be ongoing in the State Printing Office and should be included in all divisions of state government. Chairman Arberry asked what factor was used to determine if the program was working. Mr. Bailey replied the success measure was nearly invisible. For example, the Policy and Procedure team streamlined and simplified the specification sheet resulting in less cost to user agencies because of reduced time spent in filling out the specification sheet. Chairman Arberry asked if the turnaround time had improved as a result of the audit and TQM. Mr. Bailey pointed out turnaround time had already been improved with the user agencies. Chairman Arberry questioned how the committee would know if the TQM program was working if there was no report. Mr. Bailey pointed out the State Printing Office planned to prepare a report by the end of the fiscal year. Chairman Arberry requested a copy of the report be supplied to the committee members. Chairman Arberry inquired when the TQM program was instituted, and Mr. Bailey responded July 1994. Chairman Arberry inquired what expenses were involved in the TQM program. Mr. Bailey stated outside training had been provided through the community college system and the National Guard. Ms. Giunchigliani asked if the micrographics transfer involved issues stemming from FY 1991 regarding purchased equipment and the union wage scale. Mr. Bailey responded the micrographics transfer was a separate issue. The issues mentioned by Ms. Giunchigliani involved desktop publishing. Mr. Spitler pointed out TQM usually resulted in fewer grievances, quicker turnaround as a result of streamlined management, lower cost overall, and lower staff requirements because of reduced inefficiencies, and it would be helpful to the committee to see those types of issues addressed in the upcoming report. Mr. Spitler inquired what the special equipment expense in the amount of $1,251 represented in decision unit E-125. Mr. Bailey stated the expense was for the Governor's safety policy needed to meet some ADA and OSHA programs. Mr. Spitler asked what special equipment was involved with the safety program. Mr. Bailey replied eye wash units and back braces. Mr. Spitler asked if the special equipment would be located in the copy center. Mr. Bailey stated the special equipment would be used throughout the building. Mr. Spitler remarked the line item marked "copy center operating" was then mislabeled, and Mr. Bailey responded that was true. Mr. Hettrick pointed out decision unit E-850 Special Projects recommends $130,000 in FY 1997 for overtime expenses during the legislative session but does not request additional costs for supplies. Of the recommended amount, $59,000 represents overtime and, when added to the base budget amount of $146,000, totals $206,000. Mr. Hettrick commented there seemed to be a huge increase for the legislative session but no allowance for raw materials. Mr. Bailey stated of the four seasonal employees requested in decision unit E-850, two proofreaders had been added for legislative work. Two additional people would be added to the bindery as the session progressed. Mr. Hettrick requested a breakdown of the $120,000 budgeted for overtime for FY 1994 and $146,000 budgeted for FY 1996 in the base budget for personnel and the additional $130,000 recommendation in decision unit E-850. PRINTING OFFICE EQUIPMENT PURCHASE - PAGE 507 Mr. Bailey commented the equipment purchase fund was referred to as the depreciation fund. Decision unit E-710 recommended expending $297,500 for four pieces of printing equipment. The major portion of the expenditure in FY 1996 included replacement of older equipment but also included purchase of one piece of new equipment for padding. The expenditure in FY 1997 included replacement of two processors purchased in the mid-1970's and the addition of one Imagesetter. Mr. Marvel inquired what equipment was being eliminated from the State Printing Office as a result of equipment purchases. Mr. Bailey replied a Muller Martini Saddle Stitcher was being eliminated. Mr. Marvel asked if any of the equipment being eliminated could be utilized by Prison Industries. Mr. Bailey indicated a small press would fit the guidelines set for Prison Industries. Mr. Allard asked if old equipment could be traded in on new equipment purchases. Mr. Bailey stated equipment had been traded in if the dollar value was sufficient for the return. If the old equipment had no trade-in value, state surplus would either sell the equipment or it would be scrapped. Mr. Allard inquired whether the trade-in value was determined by the new purchase price of equipment which was then factored into the budget. Mr. Bailey responded affirmatively. RECORDS MANAGEMENT - MICROGRAPHICS - PAGE 509 Mr. Bailey pointed out the micrographics budget was essentially the same as the last biennium, including one piece of equipment previously requested. Funds generated were not sufficient to obtain the requested equipment. A request was being made to transfer micrographics laterally to Museums, Library and Arts, under the direction of Joan Kerschner. Mr. Bailey remarked the Federal government had used museums, archives and micrographics to maintain hard-copy records for use by the Library of Congress. Mr. Spitler commented measurement indicators projected for FY 1994 were significantly higher than actual FY 1994, and projected FY 1995 were considerably higher than FY 1994. He asked what occurred to create the wide variation in figures. Mr. Bailey stated the projections were determined by historic figures. The low actual FY 1994 figure was a result of low sales to user agencies. One reason for the transfer of micrographics would allow sales to increase through the library system and the Secretary of State. Mr. Spitler inquired whether the State Printing Office did microfilming for the Department of Motor Vehicles, and Mr. Bailey responded it did not. Mr. Spitler asked if the high speed film duplicator would increase volume. Mr. Bailey indicated the high speed film duplicator would replace a very slow, 16-year-old piece of equipment, so the volume would increase. PURCHASING - PAGE 527 Mr. Tom Tatro, Chief of the Purchasing Division, introduced Debra Meizel, Chief of the Commodity Food Program. Mr. Tatro stated employees in the Purchasing Division had been reduced by 42% during the previous biennium, central storage had been transferred to the private sector, delivery times had been improved, direct purchase authority to state agencies had increased, bid distribution to the private sector was being implemented, a multistate contracting program had been established for which an award had been received, a quarterly newsletter had been created, and an online invoicing program for suppliers was being developed. Mr. Marvel asked why inmate labor was no longer available to the Purchasing Division. Mr. Tatro indicated when the Department of Prisons transferred the minimum security population of the prison to the Silver Springs Camp, the prison no longer had inmates in the proper classification to fill the positions at the Purchasing Division. Mr. Marvel inquired whether the Retired Senior Volunteers Program (RSVP) would be used to replace the inmate labor. Mr. Tatro indicated RSVP had been utilized in the past and it was anticipated they would be utilized in the future. Mr. Marvel questioned if the inmate labor budget was sufficient to cover the cost of RSVP, and Mr. Tatro responded he felt it was. Mr. Tatro supplied the committee members with a completed Customer Satisfaction Survey (Exhibit C) and pointed out 89% of the respondents indicated the service provided by the Purchasing Division was either good, very good or excellent. Mr. Tatro explained the internal training program addressed policies of the Purchasing Division while the external training program addressed direct purchasing by state agencies from outside vendors. The Purchasing Division was developing forms with proper terms and conditions which would afford legal protection to state agencies using outside vendors. Mr. Tatro indicated orders on contract were processed the same day as placed. Mr. Tatro commented measurement indicators were generally in line with projections with the exception of two items: 1) Number of requisitions for actual FY 1994 was lower than projected FY 1994 because agencies were asked to purchase several groups of products directly from vendors as a result of the high number of transactions and low number of dollars; and 2) Value of sales for actual FY 1994 was higher than projected FY 1994 as a result of state agencies using the Purchasing Division for all purchases, which had not been anticipated. Mr. Tatro pointed out there were three major changes in the base budget: 1) Ownership of the Reno warehouse was transferred to the Buildings and Grounds Division, and the Purchasing Division would rent the facility back from Buildings and Grounds; 2) Operating costs for the Las Vegas warehouse facility were transferred to the Commodity Food Program, the primary user of the warehouse facility, and the Purchasing Division would reimburse a portion of the costs to the Commodity Food Program; and 3) Under the statewide cost allocation plan, the assessment went from $199,000 to $445,000, roughly 30% of the base budget expenditures. Mr. Marvel asked for an explanation from the fiscal office of the statewide cost allocation plan. Mr. Stevens indicated an independent contractor determined the amount of money paid by each state agency for the state cost allocation plan, which was basically to recover costs from agencies like the Governor's office, the controller's office and treasurer's office which were completely funded with General Fund dollars but were used by all state agencies. Mr. Stevens offered to schedule an interview with a budget analyst to explain how the statewide cost allocation plan was determined. Mr. James W. Manning, Budget Analyst, indicated one of the main drivers for the statewide cost allocation plan was the number of documents processed. Even though the Purchasing Division was not necessarily processing the documents, documents were coming through them from other agencies and the Purchasing Division was being assessed part of those charges. Mr. Marvel asked if each purchase order and bill was counted. Mr. Tatro indicated transactions were counted twice by the time a purchase order was received. Mr. Hettrick inquired about the difference in operating expenses between FY 1994 and FY 1996. Mr. Tatro said the number of telephone lines increased, but the majority of the increased expenses was a result of moving category 10 shipping to 04 operating. Mr. Tatro pointed out there were minor adjustments in the maintenance budget. He said the in-state travel budget was not used in 1994, and the E-125 decision unit would bring that budget back in line. Enhancement 325 would expand in-state travel beyond E-125 to allow a two-day trip to Las Vegas once a month, one trip to Reno every three weeks, and a one-day trip to Las Vegas every six weeks. Enhancement 175 included $4,800 each fiscal year for employee training, for which previously the amount was $600. Enhancement 710 included replacement of computer workstations by purchasing workstations from the legislature at the end of the session. Enhancement 900 was the transfer of the cost allocation and contract expense to the Budget Division. Chairman Arberry asked how the repayment liability to the State General Fund would be handled for the transfer of the warehouse in Reno to the Division of Buildings and Grounds and the warehouse in Las Vegas to the Commodity Food Program. Mr. Tatro stated the repayment for the purchase of the Reno warehouse would transfer to the Division of Buildings and Grounds budget. The amount would be built into the rent charged to the tenants within the warehouse. Chairman Arberry inquired whether that amount was built into the Purchasing Division budget. Mr. Tatro responded affirmatively. Mr. Hettrick inquired if the Purchasing Division handled purchases for the State Printing Office as far as paper and supplies. Mr. Tatro responded affirmatively and further stated there were several types of paper on contract for the State Printing Office which would allow them to order paper directly from the vendor and would reduce lead time. Mr. Hettrick concluded paper was purchased in advance and what remained was scheduling delivery dates. Mr. Tatro replied the contract was not paid in advance; the vendor was identified, the price set, delivery times set, and ordering authority was delegated to the State Printing Office. Mr. Hettrick asked if the Purchasing Division monitored the State Printing Office inventory of raw materials. Mr. Tatro stated the Purchasing Division did not monitor the State Printing Office inventory. Mr. Close complimented the quality control aspects of Mr. Tatro's agency. Mr. Close requested Mr. Tatro describe further the in-state travel budget. Mr. Tatro noted there were conferences scheduled periodically to inspect facilities so vendors understood the physical job requirements. Mr. Fettic expressed concern from a colleague over the cost of a $1,350 fax machine for the Comstock Historic District. Personnel from the Comstock Historic District indicated the Purchasing Division would only consider a fax machine costing $1,350. Mr. Tatro noted fax machines costing less than $1,350 were purchased on a weekly basis and he would not recommend purchasing a thermofax machine. He offered to investigate the matter further. Chairman Arberry requested written information on the cost of fax machines be sent to the committee members. COMMODITY FOOD PROGRAM - PAGE 533 Ms. Debra G. Meizel, Commodity Food Program Chief, outlined the food distribution program in Nevada. USDA commodities were received from the Department of Agriculture and distributed to schools, senior nutrition sites, child care sites, and food banks. In FY 1994, approximately 11 million pounds of food were distributed, for a value of $4.7 million. The Commodity Food Program budget was supported by assessing a handling charge which covered distribution and administrative costs to the school districts based on per-case or pound value. No General Fund dollars were received to support this program. The costs for sites receiving food for redistribution to low-income households were offset by Federal grants. Three Federal grants represented 8% to 10% of the Commodity Food Program budget. Over 53% of the costs in the budget was used for processing USDA food into a more usable form and to purchase commercial foods for rural school districts. Ms. Meizel indicated M-200 requested an additional $592,680 for caseload increases in the food processing program and Administrative Services cost allocation. Food processing had increased 62% in FY 1994 over FY 1993. Ms. Meizel drew attention to E-710 which requested a 40-foot refrigerated trailer. She pointed out E-710 represented 75% of the expenses for the trailer, while Budget 1364 included 25% of the expenses for the trailer. Ms. Meizel indicated the trailer would be paid for by Federal funds and would be used for the Indian Reservation Program and the school lunch program in rural areas. The excess trailer would be turned into a cooler at the Las Vegas warehouse. A 1,500-square- foot cooler would be turned into a freezer at the Reno warehouse. Mr. Spitler inquired about the revenue source for interest. Ms. Meizel indicated the interest was based on the retained reserve funds. She explained, per Federal regulations, the state could not retain interest earnings that were made from Federal assistance. Mr. Spitler asked if the agency could retain the funds. Ms. Meizel indicated the Commodity Food Program could keep the funds. Mr. Spitler requested the committee members be provided a copy of the Federal regulations dealing with this issue. Mr. Spitler asked if a bill had been introduced to allow the retention of interest earnings. Ms. Meizel indicated A.B. 39 had been introduced. Mr. Spitler asked if the Federal government required legislative authority for agencies to collect interest. Ms. Meizel responded yes. Ms. Meizel indicated E-125 requested a $200,000 pass-through cost to purchase commercial food at a discounted price for rural, nonprofit agencies. The request also included $6,000 to support the cost allocation for Administrative Services and a nutrition grant project for targeted low-income population residing on Indian reservations. Mr. Marvel asked why the expenses for the needy family program increased significantly from FY 1993 to FY 1995. Ms. Meizel stated the increase was the result of the truck purchase. Mrs. Evans requested an explanation of the reserve category. Ms. Meizel explained the reserve comprised 16% of the total budget and was needed during the course of the year to pay processing bills. User agencies were then billed for the cost incurred for food processing, and the Commodity Food Program was reimbursed by the user agencies. Mrs. Evans pointed out the reserve budget for FY 1993 actual was zero, while the FY 1994 work program was $494,516. Ms. Meizel indicated the zero figure was not accurate. Mrs. Chowning pointed out M-100 expenditures for FY 1995 agency requests were significantly more than the Governor recommends. Mr. Manning explained agencies requested 6% and 3.5% for inflation during the biennium on all expense items when the budgets were being put together. Toward the end of the budgeting cycle, it was determined funds would not be available for inflation on many operating expense items. PURCHASING - EQUIPMENT - PAGE 539 Ms. Meizel explained Purchasing - Equipment accumulated reserves for warehouse and delivery equipment replacement from the Commodity Food Program, budget 1362, based on a depreciation schedule and prior year monies received from the Purchasing Division. Decision unit E-710, replacement equipment, requested three fax machines, one each for the warehouses in Reno, Las Vegas and Carson City; one laser jet printer for State Purchasing; six chairs; one letter opener; one refrigerated trailer matched 25% by program funds; one compressor; and two replacement calculators. Decision unit E-720 requested $15,585 to provide five microcomputers, one fax modem, cables, five chairs and three workstations. This equipment would allow employees access to workstations without waiting and would increase productivity. Mr. Allard asked who requested the fax machines. Mr. Tatro responded he made the request. Mr. Allard pointed out each year equipment seemed to be outdated and each year requests were made for updated equipment. Mr. Tatro explained some of the older machines were very slow, which resulted in increased telephone time and poor fax quality, and he felt it was prudent to update equipment periodically. SURPLUS PROPERTY - PAGE 542 Ms. Meizel explained Surplus Property administers the acquisition and transfer of military property from the Federal government to state agencies. The state agencies were charged a service and handling fee. Ms. Meizel drew the committee members' attention to two major changes in the budget. The Surplus Property Division was requesting a half-time position as a result of losing 1.5 FTE positions in the prior biennium and funds for a three-year automated software lease purchase for Federal surplus property. Chairman Arberry requested more information regarding the position which had been eliminated in FY 1994. Ms. Meizel responded the position was cut back during the reorganization period. She emphasized the cutback was not because the position was not needed. The position had been filled for more than 25 years. During the prior year intermittent help had been hired to fill the position. Chairman Arberry suggested the reorganization had not worked. Ms. Meizel stated the reorganization had not worked only in the section mentioned. There being no further business, the meeting was adjourned at 10:50 a.m. RESPECTFULLY SUBMITTED: Jonnie Hansen, Committee Secretary Assembly Committee on Ways and Means January 26, 1995 Page