MINUTES OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS Sixty-eighth Session January 31, 1995 The Committee on Ways and Means was called to order at 8:02 a.m., on Tuesday, January 31, 1995, Chairman Marvel 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 Ms. 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 Chairman Marvel requested committee introductions of five bills: a bill making a supplemental appropriation to the Department of Taxation to offset revenue shortfalls and for additional data processing expenses; a bill making a supplemental appropriation to the Division of Agriculture for additional veterinary medical services; a bill making a supplemental appropriation to the Division of Forestry for certain expenses relating to helicopters for use during fire season; a bill making a supplemental appropriation to the Division of Forestry for additional staff and equipment; and a bill revising provisions governing the Agency for Nuclear Projects and the Department of Conservation and Natural Resources. MRS. EVANS MOVED FOR COMMITTEE INTRODUCTION OF A BILL MAKING A SUPPLEMENTAL APPROPRIATION TO THE DEPARTMENT OF TAXATION TO OFFSET REVENUE SHORTFALLS; A BILL MAKING A SUPPLEMENTAL APPROPRIATION TO THE DIVISION OF AGRICULTURE FOR ADDITIONAL VETERINARY MEDICAL SERVICES; A BILL MAKING A SUPPLEMENTAL APPROPRIATION TO THE DIVISION OF FORESTRY FOR CERTAIN EXPENSES RELATING TO HELICOPTERS FOR USE DURING FIRE SEASON; AND A BILL MAKING A SUPPLEMENTAL APPROPRIATION TO THE DIVISION OF FORESTRY FOR ADDITIONAL STAFF AND EQUIPMENT. MR. ARBERRY SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * MRS. EVANS MOVED FOR A COMMITTEE INTRODUCTION OF A BILL REVISING PROVISIONS GOVERNING THE AGENCY FOR NUCLEAR PROJECTS AND THE DEPARTMENT OF CONSERVATION AND NATURAL RESOURCES. MR. ARBERRY SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * DEPARTMENT OF INFORMATION SERVICES - DIRECTOR'S OFFICE - PAGE 609 Ms. Karen Kavanau, Director, Department of Information Services, introduced Ms. Pam Case, Deputy Director, and Mr. Dave Lawson, Chief Accountant. She testified the Department of Information Services provided a wide spectrum of services to state agencies, including providing guidance in system planning, procurement and development review, system design and development, system operation, maintenance, enhancement, and repair, and contracting for outside assistance. She explained the Department's mission was to provide information technology leadership, including services and advice, to enable Nevada state agencies to maximize productivity, minimize cost and continuously improve service to the citizens of Nevada. Ms. Kavanau noted as she presented each of the Department's budgets she would identify items associated with the Strategic Plan for Information Resources and Information Technology (SPIRIT). She noted a number of debits and credits located in the enhancement budgets were not new costs but reflected internal transfers of existing staff within the Department. She explained the Department was proposing an internal reorganization reducing the number of divisions within the agency from five to two and reducing the number of division chiefs from three to two. She distributed to the committee copies of the Department's existing and proposed organizational charts (Exhibit C). She noted a bill draft request had been submitted to support this organizational change. Ms. Kavanau acknowledged there was some opposition to SPIRIT, but she was convinced the opposition was due to a lack of understanding because information about SPIRIT had not yet reached all employees. Ms. Kavanau referred to page 609 of the Executive Budget. She indicated the Director's Office provided agency oversight and included the agency's accounting, clerical, and contract administration functions. She explained personnel expenses in the proposed base budget were approximately $75,000 greater than in the Fiscal Year 1994 budget because no vacancies were reflected and because it included the cost of one new position authorized by the Interim Finance Committee for Fiscal Year 1995. Ms. Kavanau reported operating costs in the proposed budget were higher than in the 1994 budget because rent and telephone expenses had increased. She explained the rent increase was a function of the office's move to the Kinkead Building. The proposed budget included an additional $500 for telephone service expenses since no position vacancies were assumed. Ms. Kavanau stated the Department had requested no maintenance items. Ms. Kavanau then explained the enhancement budget. She noted decision unit E- 125 represented the cost of one trip per year for the Director and one member of the Information Technology Advisory Board to attend meetings in Washington, D.C. She stated the reasons for this item included working with the federal government to attempt to improve funding mechanisms for information systems and attending workshops with representatives from other states on current topics such as telecommunications and intergovernmental projects. She said decision unit E-125 also covered the cost of obtaining maintenance on personal computers and software currently included in the base budget but which would be coming off warranty. Ms. Kavanau reported decision unit E-126 was to enable the Department to increase its reserve fund. She explained the Department was a chargeback agency which used reserves to pay bills in the first few months of each fiscal year. If reserves are insufficient to pay bills the agency is forced to pay dunning charges. Chairman Marvel asked Ms. Kavanau if she was aware the agency could borrow funds. Mr. Lawson responded the agency was aware of its ability to borrow and had done so once in the past five years. Chairman Marvel pointed out this was a cash flow problem and by not borrowing, the Department then had to assess agencies at higher rates than necessary. Ms. Kavanau stated rates had been decreasing significantly in recent months. She said the Department would investigate the issue of financing. Chairman Marvel directed the subcommittee to address this issue. Ms. Kavanau stated decision unit E-800 represented the agency's request to reduce the number of division chiefs from three to two and address unclassified salary issues. She explained she had been advised this was not part of the budget process. Mr. Fettic noted decision unit E-800 did not appear in the Executive Budget. Ms. Kavanau stated it was an agency request that did not belong in the budget. Ms. Kavanau explained one division chief position was eliminated and salary increases were proposed for the two remaining division chiefs. She stated this would result in a significant cost savings. Chairman Marvel asked Ms. Kavanau to address the issue of direct billing versus overhead charges. He questioned whether the Department was charging overhead or direct billing for services provided to state agencies. Ms. Kavanau replied the Department did direct billing but overhead was built into the billing rates. Chairman Marvel inquired about the equity of the billing system. Ms. Kavanau stated the Department had proposed to the Budget Division that the manner in which some services were billed be altered. Time constraints had not allowed for the proposal to be included in the Executive Budget although the Governor and the Budget Division apparently were in support of the proposal. Ms. Kavanau pointed out the Planning Division budget was currently funded by five or six major users of the data center. The Department's position was that the functions performed by the Planning Division were actually done on behalf of all state agencies. Therefore, all agencies should share in the cost of the Planning Division, rather than placing the entire burden on five or six agencies. She stated this proposal would be recommended for inclusion in the 1997-1999 budget. Ms. Kavanau noted the remainder of the enhancement items did not reflect new costs. Rather they reflected the internal transfer of positions from other budget accounts within the Department to this budget account. Chairman Marvel asked Ms. Kavanau to elaborate on decision unit E-905. Ms. Kavanau replied decision unit E-905 represented the internal transfer of three clerical positions from the Systems & Programming Division to pool clerical support in the Director's budget. She noted the four remaining enhancements reflected pooling clerical support. It had been determined pooling clerical support was more efficient in serving the agency than having one clerical position assigned to each small group of employees. Chairman Marvel questioned whether one of the clerical positions was a direct charge position which would now become an overhead position. Ms. Case stated none of the clerical positions had ever been direct bill positions. They had always been overhead positions for the Department as well as for individual charge centers. The internal transfer would not change this situation. The proposal was to regroup positions and reduce the amount of services required to support the agency. Mr. Stevens inquired whether the Information Services Specialist II position had been a direct charge position in the past or currently and if it would become an overhead charge position if the Governor's recommendation was approved. Ms. Case responded the Information Services Specialist II position had been a direct bill position in the past. It was a Programmer Analyst position which billed for hourly services. That position was transferred to contract services for purchasing and acquisition oversight and was authorized by the Interim Finance Committee earlier this year. The position would now become a part of the Planning & Research Division. Ms. Kavanau said Ms. Case's statement was incorrect. The Interim Finance Committee had nothing to do with the Information Services Specialist position. The position was transferred to the Planning Division because there existed a large backlog and state agencies were complaining. The Department had now changed the manner in which it reviewed purchase acquisitions. With the exception of the University and the NCIC application, the Department, in cooperation with the Budget Division, was reviewing all technology procurement and acquisition requests. Chairman Marvel questioned whether the transfer of the position was authorized. Ms. Kavanau answered it was her impression she could move the position. Chairman Marvel asked the subcommittee to look at this matter. Ms. Kavanau added the committee had been sent a memo from the Budget Director (Exhibit D) revising incorrect figures in the budget. She explained the Director's Office was funded through assessment of its five other divisions. Expense items in the budget accounts for the five divisions were incorrect. Mr. Stevens stated the subcommittee would have to examine the impact of this change on other budgets. Ms. Kavanau noted this was not a request for new monies. Existing monies were not reflected correctly in the appropriate budgets. Ms. Tiffany stated she was uncertain about overhead billing versus direct billing and how billing was relative to pooling clerical staff and adding a microcomputer specialist position. She asked that clarification of those issues be provided to the subcommittee. Ms. Kavanau agreed. DEPARTMENT OF INFORMATION SERVICES - RESEARCH & PLANNING DIVISION - PAGE 615 Ms. Kavanau testified the Department was requesting the internal consolidation of its five divisions to two divisions. She said the proposed reorganization was more representative of how the Department actually responds to its customers than was the current organization and required less management. The Department also recommended the elimination of one unclassified chief's position for a cost savings of approximately $65,000 per year. Ms. Kavanau stated the new budget format required presentation of the base, maintenance, and enhancement proposals for the Research & Planning Division budget account and to show them transferred to the enhancement portion of the Systems & Programming Division budget. Ms. Kavanau reported the Planning & Research Division was responsible for reviewing acquisition requests, developing policies, standards, and regulations, evaluating emerging technologies, security and disaster recovery planning, updating the SPIRIT document, and responding to agencies in the initial stages of planning information systems. She noted the personnel expenses item in the base budgets for Fiscal Year 1994 and as proposed were different since no vacancies appeared in the proposed budget and the chief's position would be eliminated in the consolidation with the Systems & Programming Division. Chairman Marvel asked if the Budget Division could verify that sufficient assessments would be made to guarantee the revenue. Mr. Jim Manning, Budget Analyst, Budget Division, responded other budgets had been reviewed across the board. Chairman Marvel asked that Fiscal Division staff be provided with information reflecting which agencies would be assessed. Ms. Kavanau resumed her presentation. She said the reduction in the base budget for operating expenses reflected the elimination of a contract item. In Fiscal Year 1994, a staff member temporarily accepted a position in the Governor's Office. On concurrence from the Departments of Personnel and Administration and review of the statutes the temporary transfer was supported and the temporary vacancy was filled with contractual labor. The staff member had since returned to the Department. Ms. Kavanau pointed out there was an error in the budget document under director's assessment which, as she noted previously, had been corrected by the Budget Director's memo (Exhibit D). Ms. Kavanau explained data processing expenses in the base budget were higher than in the Fiscal Year 1994 budget because it reflected a full year of services provided by a contract research firm. The Fiscal Year 1994 budget did not reflect costs for a full year. She noted the contractor provided technology research services and given the changes proposed by the Department, the value of this research resources continues. She expressed the opinion it was less expensive to rely on unbiased research material compiled by nationally renowned professionals than to attempt to gather the information in-house. Chairman Marvel asked if a key position was being eliminated from the budget. Ms. Kavanau answered a division chief position was being eliminated because the Department could manage adequately with two chief positions. Chairman Marvel referred this matter to the subcommittee for review. Ms. Tiffany asked for clarification on the number of positions to be filled and new positions requested. She inquired what would happen to the staff member who currently held the chief's position which was proposed to be eliminated. Ms. Kavanau responded the position was currently vacant. The incumbent, Jim Dunn, had recently retired. She indicated all other positions were currently filled. The Department was requesting two new positions. Ms. Kavanau reported decision unit E-125 in the enhancement budget represented two new Planning Analyst positions, including salary, fringe benefits, and minor support costs. She stated the Department was requiring a higher degree of coordination between its staff and customer agencies as they begin to plan their information systems. The Department was requiring all agencies to document their needs and develop detailed specifications so installed systems would actually meet those needs. Planning Analysts were responsible for ensuring these steps were taken and to ensure systems and/or data were not duplicated and agencies maximized resources by sharing wherever possible. Additionally, Planning Analysts were required to assist in developing requests for proposals, vendor evaluation and selection, writing contracts, and participating in business process reengineering. Ms. Kavanau commented in the past agencies had resisted involving the Department because they could not pay for services. She noted the Department's oversight was required by law. The cost of the Planning Analyst positions would be assessed to certain agencies, not directly billed. Ultimately, the costs would be assessed to all agencies across the board. Vice Chairman Tiffany asked Ms. Kavanau to provide clarification to the subcommittee on how revenue was being generated. Ms. Kavanau said she had requested the Budget Division to provide that information. Ms. Giunchigliani requested that the subcommittee be provided with a breakout of the original assessments, including how they were originally generated, and proposed assessments so it could review the impact on other budgets. Ms. Kavanau agreed to provide a report to the subcommittee. DEPARTMENT OF INFORMATION SERVICES - SYSTEMS & PROGRAMMING DIVISION - PAGE 621 Ms. Kavanau reported the proposed internal reorganization would consolidate this budget account with the Research & Planning budget account. The new division would be renamed the Customer Services Division. In the base budget the difference between proposed personnel costs and Fiscal Year 1994 personnel costs reflected no vacancies. She stated the Department had difficulty recruiting qualified professional programmers. In Fiscal Year 1994 it had been particularly difficult to fill vacancies in this Division. Ms. Kavanau indicated proposed operating costs were increased over Fiscal Year 1994 due to additional rent expenses resulting from the move into the Kinkead Building. Again, Ms. Kavanau pointed out there was an error in the budget document under director's assessment which, as she noted previously, had been corrected by the Budget Director's memo (Exhibit D). Ms. Kavanau reported the proposed costs for information services were significantly lower than in the Fiscal Year 1994 budget since principal and interest payments for the state's mainframe computer would end in December 1995 and the Division's share of the facility costs would be reduced accordingly. Vice Chairman Tiffany noted the performance indicators included in the budget did not supply much information to the committee. Ms. Kavanau responded the Department believed the five performance indicators were responsive to the questions and suggestions provided by the Fiscal Division staff. Vice Chairman Tiffany encouraged the Department to expand the performance indicators to provide more information. Ms. Giunchigliani asked for clarification on the corrected figures for Director's Assessment expenditures shown on Exhibit D. Mr. Lawson explained the Director's Assessment included the amount rolled into this account from the Research & Planning Division budget. Ms. Kavanau stated the correct amount should be $324,094 plus $34,115 in the first year of the biennium and $349,126 plus $34,913 in the second year. Mr. Spitler noted a transfer to the Planning Division did not appear in the Planning Division budget. Mr. Lawson explained the Systems & Programming Division was one of the four prime fiscal supporters of the Research & Planning Division. The $180,000 expenditure in the Systems & Programming Division budget was included in the revenue of the Research & Planning Division base budget. Mr. Spitler requested a flow chart explaining how funds moved from division to division and from other agencies. Vice Chairman Tiffany questioned why $75,000 was refunded to the Department of Taxation. Ms. Kavanau responded the Department of Taxation ACES project to write a new sales tax and automated collection program was the first project in which the Department put into practice its new relationship with customers whereby the Department served as technical advisor and outsourced actual development activities. When the Department of Taxation was budgeting money for this project, it neglected to include funding to cover the costs of on-line development which would be incurred by the contractor. In May 1994 the Department of Taxation informed the Department of Information Services it had run out of funding. Since the Department of Information Services probably should have provided the Department of Taxation more information about potential contractor costs during its budgeting process, the Department of Information Services agreed to split the additional costs with the Department of Taxation. It was estimated the total costs would be $150,000, and actual costs were within $6,000 of that estimate. The Department of Information Services paid those costs from its reserve fund. Vice Chairman Tiffany asked why the refund was not included in overhead. Mr. Manning indicated he would provide information regarding the refund to the subcommittee. Ms. Giunchigliani requested a report from the Department be provided to the subcommittee explaining if any additional credits were anticipated to be given to other agencies. She also asked the Budget Division to report to the subcommittee regarding whether a precedent had been set which would allow extending similar credits to other agencies in lieu of those agencies appearing before the Interim Finance Committee to request additional funding and if statutory requirements allowed or precluded such credits. Ms. Giunchigliani inquired whether the additional costs had been passed on to the Department's customers. Ms. Kavanau stated while costs had not been passed on to customers, the Department was funded by all other agencies. Ms. Kavanau referred to the maintenance portion of the budget. She stated decision unit M-200 represented additional expenses related to supporting the caseload increases projected by customers. She noted NOMADS-related expenses had been separated from other customer expenses. NOMADS expenses were reflected in decision unit M-581. Ms. Kavanau noted the Governor recommended adding four Programmer Analyst positions to support the customer base. She indicated the Division had not requested additional programmer positions for four years and current staff was forced to work overtime to support ongoing programs. The four positions were originally requested in the budgets of four customer agencies--Water Resources Division, Aging Services Division, Department of Taxation, and Department of Education. In light of the SPIRIT project the Governor supported placement of those four positions within the Department of Information Services rather than within the requesting agencies. Ms. Kavanau added the four positions would be cross-trained to enable them to support other customers as well. Chairman Marvel asked why rent expense was increasing so dramatically. Ms. Kavanau replied the agency would be requesting permission from the Interim Finance Committee to assume 7,200 square feet of leased office space on Curry Street. She indicated the current work space was filled to capacity. Chairman Marvel asked the subcommittee to address this issue. Ms. Kavanau pointed out programming services in decision unit M-200 was strictly a pass-through expense and was directly related to a line item in the base budget and proposed an increase to the line item authority to contract for outside assistance for customers. She explained any requests for proposal for customer agencies go through the Department of Information Services in order to ensure use of proper contract language to protect the agency and the state. The Division was budgeted $1 million in 1994 and 1995 and was requesting the $1 million authority be reinstated. She explained while Fiscal Year 1994 actual expense was only $250,000, Fiscal Year 1995 experience would be much higher, and the $1 million was being requested so the agency would not have to submit additional requests for funding. She reiterated this was a pass-through item to the vendor from the various customer agencies. Mr. Arberry asked Ms. Kavanau to explain why a contract employee was hired from Prodata Corporation in lieu of filling a position vacancy. Mr. Arberry stated it appeared the Department had circumvented the contracting process if this individual was an independent contractor who was being given the use of state office space, furniture, equipment, access to telephone, etc. Ms. Kavanau responded this individual was hired to fill a position whose incumbent was temporarily reassigned to the Governor's Office. The temporary contract hire was approved by the Departments of Administration and Personnel and was done according to statute. She indicated the permanent employee had now returned to the Department and the contract employee was no longer on staff. Mr. Arberry noted at the time there were two vacant positions in the Division. He questioned why one of the vacancies was not filled rather than hiring contract labor. Ms. Case explained it was difficult to find qualified individuals who were willing to fill professional positions for the salary offered. The Department had been forced to fill in with contract personnel in many areas over the past year and one-half. State salaries were not competitive with most other organizations in the area and, in fact, two or three of the most qualified professional employees had taken higher paying positions at other organizations. Mr. Arberry reiterated it appeared proper hiring procedure had been circumvented. Ms. Kavanau responded while it might appear that way, that was not the case. Chairman Marvel noted the committee was having difficulty with many budgets in trying to distinguish contractors from employees. He suggested much of the contract hiring could be in violation of the statutes. Ms. Kavanau stated emphatically the Department had not violated any statute and it was not the Department's intent to do so. Chairman Marvel inquired whether the contract labor had been approved by the Board of Examiners. Ms. Kavanau stated all of the Department's contracts were approved by the Board of Examiners. Chairman Marvel asked why, then, was this individual treated as an employee. Ms. Kavanau explained this had been a special instance and the Department was now writing contracts requiring contractors to provide their own work space and supplies. Ms. Giunchigliani asked what other organizations the Department had lost professional staff to. Ms. Case responded staff had been lost to other local governments, including Douglas County and Washoe County, who were paying significantly higher salaries for the same job. She stated this was also the case in the private sector. Ms. Giunchigliani questioned whether the agency's requested budget reflected appropriate funding for salaries which could attract professional employees for open positions. Ms. Kavanau responded salaries were set by the classification series, but a recent occupational study proposed adjusting the salaries, and the Governor's recommendation included the salary adjustment. Ms. Giunchigliani asked if the Master Services Agreement expense category was a pass-through item. Ms. Kavanau said it was the $1 million pass-through item she had referred to earlier. She said it covered the cost of whatever services the customer needed but the Department could not provide. Ms. Giunchigliani asked if the customers were billed directly for the services. Ms. Kavanau stated the customer agency was billed directly. Billings were required to pass through the Department of Information Services to ensure accountability. Ms. Giunchigliani inquired whether any overhead was utilized to finance expenditures from this fund. Ms. Kavanau stated overhead was not utilized. Ms. Giunchigliani stated the subcommittee would look at the issue of master service agreements more thoroughly. Vice Chairman Tiffany inquired how the contract with the DMR Group for the business process reengineering study had been issued. Ms. Kavanau stated the cost of the study was included in another agency's budget. She asked if the matter should be deferred to the subcommittee. Mr. Arberry stated since he was not a member of the subcommittee, he would like Ms. Kavanau to address this issue. He said he understood this to be a sole source contract and the committee needed to know the rationale for issuing it. Ms. Kavanau acknowledged that the DMR Group contract was a sole source contract. She explained the DMR Group had recently completed the initial phases of a similar study in Oregon. A Department of Information Systems staff member as well as several members of the Department of Motor Vehicles and Public Safety staff became aware of the gains being realized in Oregon through business process reengineering efforts. Ms. Kavanau stated the Department of Information Services recommended to the Department of Motor Vehicles and Public Safety that it contract with this particular vendor based on its successful work in Oregon on the same type of application. She said the issuance of the sole source contract was based on the unique expertise of this contractor. Mr. Arberry said he understood it was not appropriate to issue sole source contracts. All contracts were required to be bid. He pointed out if the Department of Information Services was allowed to issue sole source contracts, then other agencies would want to do the same. He stated the committee could not allow contracts to be issued in this manner. Ms. Kavanau said she understood Mr. Arberry's concern. She stated the Department's understanding of the purchasing laws was a request for proposal was not required to procure a service, and this study was a service. She said the Department's usual procedure in acquiring services was to issue requests for proposal even in cases where they were not mandated by State Purchasing. This was the one exception to that procedure. Mr. Arberry stated it was not good policy to issue contracts without bidding them. He questioned whether the statute required revision. Ms. Kavanau said she agreed with Mr. Arberry's position that all contracts should be put to bid. Mr. Hettrick asked where the four Programmer Analyst II positions would be used. Ms. Kavanau stated the positions were originally requested by four different agencies--Water Resources, Aging Services, Department of Taxation, and Department of Education. The positions would also be cross-trained to assist in supporting all other customers. Mr. Hettrick noted the Aging Services Division was also requesting an Information Services Specialist in its budget. He questioned whether both positions were required. Ms. Kavanau responded she was unfamiliar with the Aging Services budget. Mr. Hettrick suggested this matter be examined by the subcommittee. Mr. Manning said the Aging Services position should be in lieu of the Department of Information Services position. Ms. Kavanau stated the position should be located in the Department of Information Services, not in Aging Services. Ms. Giunchigliani questioned whether state employees would be able to maintain systems developed by outside experts. Ms. Kavanau replied continuity would be provided through management. She explained the former developer of the existing sales tax system was now part of the management staff and was overseeing the project with the Department of Taxation. Ms. Case added system standards would be developed and staff would be trained to use those resources. Ms. Giunchigliani noted the statutes provided for sole source contract opportunities for the State Industrial Insurance System. She suggested this issue be looked at in reviewing the purchasing statutes. Mr. Spitler expressed the expectation that witnesses appearing before the committee be familiar with the budget document and be able to account for requested positions which may also appear in other budget accounts. He stated at this point Fiscal Division staff would have to review the budgets to determine where positions were actually located. He said witnesses should be prepared to provide information regarding positions appearing in their budgets. He suggested the Budget Division as well as the agencies should be able to justify the appearance of positions in their budgets and provide information regarding where the position may have been transferred from. Chairman Marvel suggested Budget Division staff meet with agencies prior to their scheduled budget hearings to ensure the agencies are prepared to testify. Vice Chairman Tiffany asked Ms. Kavanau to continue with her budget presentation. Ms. Kavanau stated two items comprised the information services category: a one-time cost for PC networking for the four Planning Analyst positions and this budget account's share of the Facility Management Division's decision unit M-200 decision unit. She explained the Systems and Programming Division was one of five major customers of the facility. Ms. Kavanau stated the training category represented training costs of the four new positions. Ms. Kavanau explained NOMADS costs were identified as decision unit M-581, which represented NOMADS' share of costs to support the Facility Management Division's request for additional funding in the maintenance budget. Chairman Marvel inquired whether this was a 60/40 share. Ms. Kavanau said based on experiential data, it was estimated NOMADS utilized 40 percent of the resources being requested in the facilities budget. Ms. Case said Welfare Division utilization had been projected at 40 percent of the mainframe capacity. Chairman Marvel asked if there would be 29 programmer positions dedicated to NOMADS by 1997. Ms. Kavanau responded affirmatively. Chairman Marvel asked how this number compared to the number of staff required by Rhode Island to maintain a similar system. Ms. Kavanau said she was not familiar with Rhode Island's staffing levels. She stated Idaho had 60 Programmer Analysts. Ms. Case indicated Rhode Island had a staff of approximately 60 to 70. Chairman Marvel asked Ms. Kavanau to provide that information to the subcommittee. Chairman Marvel questioned whether the NOMADS project would be in compliance with federal mandates. Ms. Kavanau said she hoped the project would be in compliance. Ms. Kavanau referred to the enhancement portion of the budget. She stated decision unit E-125 represented the budget account's share of the Facility's E-125 request and simply reflected a pass-through. It would be discussed under the Facility Management Division budget. Decision unit E-126 represented an increase in the reserve fund to improve cash flow. Decision unit E-127 represented the budget account's share of the Facility's E-126 costs and would be explained in the presentation of the Facility Management Division budget. Decision unit E-730 represented this budget account's share of the Facility's requested building improvements and would also be discussed as part of the Facility Management Division budget. She stated the next four enhancements were not new costs but simply represented the internal transfer of personnel from one division to another within the Department. Vice Chairman Tiffany asked for an explanation of decision unit E-912. Ms. Kavanau reported decision units E-909 and E-912 reflected the Governor's support of the SPIRIT project. Decision unit E-909 transferred two technical positions from the Welfare Division NOMADS support team. Ms. Kavanau indicated the Welfare Division Administrator was in agreement with the transfer. The transfer reflected the consolidation of all technical staff supporting the NOMADS program into one managed unit. Ms. Giunchigliani asked that a spreadsheet explaining decision units E-909 and E- 912 be provided to the subcommittee. Mr. Manning said he would provide the information to the subcommittee. Vice Chairman Tiffany asked Ms. Kavanau to describe the methodology used to determine Programmer Analyst position transfers. Ms. Kavanau said all Programmer Analyst positions in Northern Nevada had been rolled into the Department of Information Services. She explained all Programmer Analysts were located in Northern Nevada. The SPIRIT project recommended Programmer Analyst positions be managed by the data centers serving their agencies. It was recommended single Programmer Analysts supporting individual agencies be consolidated if their agencies were served by the Department of Information Services data center. The data center serving the agency was the determining factor in transferring positions. She stated Decision unit E-912 reflected the transfer of seven non-NOMADS professional information technology positions from other agencies to the Department of Information Services (one from Risk Management, one from Waste Management, one from Health, three from Welfare, and one from Real Estate). DEPARTMENT OF INFORMATION SERVICES - FACILITY MANAGEMENT DIVISION - PAGE 631 Ms. Kavanau reported the Department was proposing the consolidation of the Telecommunications Division budget and the Communications Division budget and renaming the division Information Systems Delivery Division. That consolidation was reflected in the enhancement portion of this budget. Ms. Kavanau stated personnel costs in the proposed base budget reflected no vacancies. Chairman Marvel asked for an explanation of the performance indicators. Ms. Case said the division had attempted to measure the percentage of up time for computer availability to customers, turnaround time for the completion of jobs, response times in key areas of access to the system, and the percentage of unexpected mainframe downtime. Vice Chairman Tiffany said she would be looking at utilization factors. She requested average monthly utilization indicators which would reflect capacity. Ms. Case agreed with Ms. Tiffany that utilization factors would reflect performance. She said revising performance indicators would be part of the SPIRIT project. Chairman Marvel asked what the dollar difference was between the agency request and the Governor's recommendation. Ms. Kavanau stated the difference reflected the roll-in of the Telecommunications Division and Communications Division budgets. Ms. Kavanau moved to the maintenance portion of the budget. She stated decision unit M-200 represented the cost of supporting customer's caseload increases. The information services item included maintenance costs for additional magnetic tapes, paper and forms for laser printers, remodeling the magnetic tape vault to improve efficiency, and the costs of new equipment. Principal and interest for the equipment as well as maintenance costs were all included in the information services category. She noted without additional equipment the Department's ability to respond to customers would be seriously impacted. Vice Chairman Tiffany asked Ms. Kavanau to provide justification for hardware upgrades reflecting their connections to the customer agencies. Ms. Kavanau agreed to provide the information. She noted all budget requests were in support of customer demands. Mr. Spitler noted there was a substantial difference in the agency request and the Governor's recommendation under demographics caseload changes. He asked Ms. Kavanau to explain the difference and what the Governor was giving the agency which it had not asked for. Ms. Kavanau said the agency was not able to determine its full capacity planning until mid-way through the budget process, at which time the Budget Director agreed to move a computer upgrade originally planned for the second year of the biennium to the first year. Mr. Spitler asked Ms. Kavanau to provide to the subcommittee a breakdown of the difference. She agreed to do so. Ms. Kavanau stated decision unit M-581 represented the NOMADS share of the M- 200 costs. Ms. Kavanau next referred to the enhancement budget. She stated decision unit E-125 was the first strategy recommended in SPIRIT. It was the collapsing of all Executive Branch networks into a single infrastructure. She read a quotation from a booklet published by the National Governors' Association entitled Telecommunications; The Next American Revolution: "The initial reaction from many organizations as they envision and plan to use telecommunications for purposes such as distance learning or law enforcement is that each needs its own network. At a time when all levels of government are strapped for resources and business is pursuing increased productivity for each dollar expended, neither government nor business can afford multiple redundant networks that execute roughly the same functions--transmission of voice, data, and video--but for different purposes." Ms. Kavanau said the intent of SPIRIT was to collapse all networks into one managed by the Department of Information Services. The Department did not intend to build a network. Most of the network was in place and the Department would identify a single network. Research had shown it was more efficient for government to purchase services from private providers than to build their own. Ms. Kavanau stated decision unit E-125 represented the costs associated with the statewide communication network and would be needed even if the SPIRIT project was not adopted. She said personnel expenses represented the cost of two new systems programmers to deal with enterprise-wide communications issues. Since agencies were expanding their communications throughout the state the two positions were needed to assist with the network. The positions would also assist the Public Works Board in reviewing and planning wiring and cabling plans and services. Ms. Kavanau reported operating and equipment funding would cover the cost of minimal supplies associated with the two positions. Ms. Kavanau indicated the information services category reflected funding requests of $75,000 in the first year of the biennium and $150,000 in the second year to continue disaster recovery efforts. During the current biennium an assessment of the Facility Management Division environment was completed. Critical applications and requirements for protecting them were identified. In Fiscal Year 1996 a recovery plan would be developed and detailed specifications and requests for proposal for a hot site vendor would be developed. Funding for the estimated cost to contract with a hot site service was requested for Fiscal Year 1997. Ms. Kavanau pointed out this request represented only the cost to secure a hot site and did not assume an actual disaster. In the event of a disaster, the state's insurance would cover additional costs. Vice Chairman Tiffany inquired whether other agencies stored information off-site, and if they would be willing to share their facility. Ms. Kavanau stated the objective of the hot site was to store information as far from the potential disaster area as possible. She reported she was talking to other state governments about the viability of a shared hot site. The pros were reduced costs, the con would be if the disaster occurred at the shared hot site and all the information was destroyed. DEPARTMENT OF INFORMATION SERVICES - TELECOMMUNICATIONS DIVISION - PAGE 641 Chairman Marvel referred presentation of this budget account to the subcommittee. DEPARTMENT OF INFORMATION SERVICES - COMMUNICATIONS DIVISION - PAGE 647 Chairman Marvel referred presentation of this budget account to the subcommittee. DEPARTMENT OF BUSINESS AND INDUSTRY - MANUFACTURED HOUSING FUND - PAGE 787 Ms. Renee Diamond, Administrator, indicated she was newly appointed to her position. She explained the Manufactured Housing Division was established within the Department of Commerce in 1979 and became a part of the Department of Business and Industry in 1993. The Division ensures all manufactured buildings, mobile homes, travel trailers, and commercial coaches sold or installed in Nevada are safe and properly constructed. The Division also investigates landlord-tenant and consumer complaints, issues notices of violation and takes disciplinary action against licensees who violate mobile home construction standards. Division staff reviews and approves plans and specifications for manufactured buildings; inspects and maintains records of mobile home parks; and issues certificates of ownership for all manufactured homes and commercial coaches located in Nevada. The Division administers the trust fund for low-income owners of mobile homes, assisting eligible persons by supplementing their monthly rent for the lot on which the mobile home is located as well as the education program with respect to manufactured homes, mobile homes, and commercial coaches. The Division has 15 employees located in Elko, Carson City, and Las Vegas. The Division does not receive a General Fund appropriation and is solely dependent on fees received as established by statute and regulation to fund operations. Ms. Diamond stated she was impressed with the team spirit and dedication of the employees in all three offices of the Division. She noted all employees were exemplary but acknowledged particularly Ms. Connie Peacock, who had been serving as acting Administrator. She introduced Ms. Nancy Barnhard, Account Clerk, and Ms. Barbara Braaten, Program Officer. She stated both had worked far beyond the scope of their prescribed duties in creating the Division's budget. Chairman Marvel said in the future the committee would like to see measurement indicators which reflected actual accomplishments of the Division. Chairman Marvel indicated the committee had no questions on the base budget. He asked Ms. Diamond to proceed with her presentation on the maintenance portion of the budget. Ms. Barnhard explained decision unit M-200 recommended funding for one Program Assistant and one Administrative Aid with associated insurance costs and office equipment. The Program Assistant position was recommended to address the increased workload in titling. The Administrative Aid would assist with increased inquiries related to titling, liens, real property, and consumer complaints. Chairman Marvel inquired whether there was a backlog in title processing. Ms. Barnhard responded affirmatively. She stated it currently took approximately 14 weeks to process a title. In the past it had taken one to two weeks to process a title. Ms. Rose McKinney-James, Director, Department of Business and Industry, commented the Division had received a variety of inquiries from individuals and county officials. It was her understanding that as the result of the transfer of this responsibility from the Carson City office to the Las Vegas office the Division experienced some technical difficulties with respect to staffing and recording. She said this budget addressed that concern. Chairman Marvel asked when the backlog would be eliminated. Ms. McKinney- James responded there had been some extraordinary efforts by staff and volunteer assistance might be available. Chairman Marvel noted the decision unit was funded from reserves. He questioned how long it would take to deplete the reserve fund. Ms. Barnhard replied the reserve fund would be exhausted by 1996 if requested fee increases were not approved. Ms. Deborah Erickson, Budget Analyst, Budget Division, reported the Governor had recommended fee increases to address the issue of continued funding. She noted fees were last increased in 1985. Ms. Giunchigliani asked if seals and stamps were the same thing. Ms. Barnhard responded stamps were placed on mobile home windows by the Assessor's Office. Metallic seals were placed by the Division and indicated the home had been properly installed and was safe. Seals were required any time a mobile home or commercial coach was moved. Ms. Giunchigliani inquired whether on-site inspections were done on request or in conjunction with the issuance seals. Ms. Barnhard responded on-site inspections were part of the sealing process. The Division charged a separate fee for the seal and for the inspection. She noted the cost of on-site inspections were not always charged. The seal fee is $30.00; the inspection fee is $40.00 per hour. Ms. Giunchigliani questioned the purpose of the on-site inspection. Ms. Barnhard stated the inspection was done for safety purposes to ensure water, gas, and electric connections were done properly. Ms. Giunchigliani asked if there was any other reason to conduct an on-site inspection. Ms. Barnhard said inspections would be conducted in response to complaints. Ms. Giunchigliani inquired who would be charged for the cost of the inspection in the case of a mobile home park tenant reporting an unsafe utility hookup. Ms. Barnhard explained the complaint investigator would determine cause and assign responsibility for paying for the inspection. Mr. Close noted the Governor recommended a "moderate" fee increase. He requested the definition of a "moderate" increase. He questioned whether the fees were charged to tenants or landlords. Ms. Barnhard replied title transfer fees would be increased from $15.00 to $20.00. Mr. Close requested a breakdown of proposed fee increases be provided to the committee. Ms. Barnhard agreed to do so. She indicated the Division had been in consultation with persons who would be impacted by fee increases. Those persons had agreed in principle the fee increases were reasonable. Mr. Hettrick asked if the Division performed on-site inspections on a statewide basis or if local governments had jurisdiction in some instances. Ms. Barnhard responded where state personnel were not available to perform the inspections the Division contracted with cities and counties to perform the inspections. Chairman Marvel asked if the growth in the reserve fund, as reflected in the budget summary, meant fees were too high. Ms. Erickson explained the Governor's recommendation was intended to fund fee increases at a level which would continue to sufficiently support the budget without being excessive. She noted the Governor's recommendation was substantially less than the agency request. Mrs. Chowning asked for a breakdown of fee increases reflecting whether increases were in proportion to mobile home values. She noted some mobile home residents were living in poverty. Ms. Diamond explained only increases in title transfer fees affected residents. The other fee increases were industry-related. Mr. Close asked if federal funding obligated the state to perform certain responsibilities. Ms. Diamond answered the federal funding was derived from performing out-of-state inspections for the federal government on a contract basis. Mr. Charlie Joerge of the Nevada Manufactured Housing Association expressed support for the recommended budget. DEPARTMENT OF BUSINESS AND INDUSTRY - MOBILE HOME PARKS - PAGE 793 Ms. Braaten testified the Manufactured Housing Division, through the Mobile Home Parks budget, is responsible for investigating, mediating and resolving disputes between mobile home park landlords and tenants. In addition, the Division collects annual economic and demographic data for each mobile home park. Mrs. Chowning thanked the Division for handling the problems of her constituents. DEPARTMENT OF BUSINESS AND INDUSTRY - LOT RENT TRUST SUBSIDY - PAGE 799 Ms. Braaten stated the Lot Rent Trust Subsidy Fund provides assistance for eligible low income owners of mobile homes by supplementing monthly rent for the mobile home lot on which the home is located. She indicated 180 individuals were currently receiving assistance on the program. There were 157 individuals on the waiting list. Ms. Braaten indicated the Division was in the process of adopting a temporary regulation which would allow the agency to restructure the subsidy formula to a percentage basis. She stated proposed legislation was being drafted and the change would become effective on approval. This reformulation would provide subsidies for those people currently on the waiting list. Ms. Diamond noted the current statute required that a higher percentage of funds be distributed to tenants paying higher lot rent. Ms. Braaten explained the current formula was based on county averages. The statute required the agency to pay the difference between $150.00 and the monthly base rent, i.e., the recipient would pay the first $150.00 of the rent and the agency would pay the remainder. The Division was proposing to reduce the subsidy to 25 percent of the base rent up to a maximum of $100.00. Ms. McKinney-James noted the Division had recently issued a report outlining the difficulties experienced in the program and recommendations for improvement. There was some question regarding whether funds were being delivered to the most needy recipients. She agreed to provide a copy of the report to the committee. She informed the committee a hearing on this matter was scheduled February 7, 1995. Chairman Marvel asked if adjusting the formula would eliminate the waiting list. Ms. McKinney-James responded the proposed formula would substantially reduce the waiting list. Mr. Spitler questioned why there was a reserve in this account if there was a waiting list. Ms. Braaten said if subsidies were provided to the people on the waiting list the reserve fund would be depleted within one year. Mr. Spitler asked if there was a statutory requirement to maintain a reserve balance and what the Division guideline regarding maintaining a reserve balance was. Ms. Braaten stated there was no statutory requirement for a reserve balance. She indicated the reserve account was necessary to fund the subsidy program each year since fees were only collected once per year. Mr. Spitler asked how the reserve balance to be maintained was determined. Ms. Diamond responded it was her understanding the reserve fund was a projection of the amount necessary to keep a sufficient balance at the end of the year to keep existing subsidies ongoing. She pointed out the subsidies were affected by rent increases during the year. Mr. Spitler inquired whether a percentage of liability established the amount of the reserve balance. Ms. McKinney-James answered this standard had been set administratively by the former Administrator based on her concern that the fund would be depleted in light of the tremendous demand. She noted over time the criteria for issuing subsidies had become more and more cumbersome and the waiting list had grown. She suggested a better approach for dealing with the reserve be developed. Mr. Spitler asked for a breakdown of numbers of subsidy recipients by mobile home park. Ms. Erickson pointed out traditionally fee-funded agencies required a reserve to pay for operating costs incurred in the first quarter of the new year. Mr. Close stated this issue represented a societal problem, particularly with senior citizens living in mobile home parks. He said while the state needed to provide assistance to these people, there were ways in which the system could be improved. He noted legislation for a one-shot appropriation for this program was being proposed by Assemblyman Buckley. He suggested the agency discuss this matter with Assemblyman Buckley. Mr. Hettrick noted over one-half of the recommended budget was for the reserve fund. He questioned the need for such a high balance. He pointed out this was the type of agency budget which would appear questionable to the public. Ms. Braaten explained the $257,562 actual 1994 expenditure did not reflect a full- year subsidy. The full-year figure would be $295,000 and subsidy costs would also be affected by rent increases. Mr. Hettrick said the Governor's recommendation for subsidy payments in the Executive Budget remained at $257,562 but the reserve fund was increased. Chairman Marvel asked Ms. Diamond to reconcile the figures and provide them to Mr. Hettrick. Ms. Diamond agreed to do so. DEPARTMENT OF BUSINESS AND INDUSTRY - MANUFACTURED HOUSING EDUCATION/RECOVERY - PAGE 803 Ms. Barnhard stated this account was created to provide a mechanism to satisfy claims against persons licensed by the Manufactured Housing Division. Pursuant to statute (NRS 489.4973), payments may be made only upon court order. Upon reaching the legislative threshold of $500,000 in reserved funds, the Division is to fund education efforts for the manufactured housing industry and to provide appropriate education to the public. Ms. Diamond noted the agency had requested, and the Governor recommended, funding for an additional staff position. Mrs. Chowning questioned why there were no measurement indicators in the budget. She asked that they be provided to the committee. Ms. Diamond indicated the figures would be provided to the committee. DEPARTMENT OF BUSINESS AND INDUSTRY - EMPLOYEE-MANAGEMENT RELATIONS BOARD - PAGE 923 Mr. G. Michael Garmon, Commissioner, explained the function of the Employee- Management Relations Board was to decide complaints of unfair labor practices, decide appeals regarding recognition of employee organizations, determine appropriate bargaining units, determine mandatory subjects of bargaining, coordinate binding factfinding panels, conduct bargaining unit elections, and provide information to help resolve disputes in the public sector insofar as local government employers and employees were concerned. Ms. Tiffany asked that a mission statement and performance indicators be provided to the committee since both items were missing from the budget. Mr. Garmon distributed to the committee copies of an expanded program narrative containing performance indicators (Exhibit E). Mr. Garmon reported any increases in the base budget over actual expenditures were due to built-in increases in personnel expenses. The maintenance budget reflected inflationary increases in postage and insurance expenses. He explained decision unit M-200 in the maintenance budget was moved by the Budget Division to the enhancement budget. In the enhancement budget the agency requested $720.00 over actual expenditures for Fiscal Year 1994 as contingency funding. He said the funding was needed to cover the cost of three additional meetings. Enhancements requested in the in-state travel category were also associated with the additional meetings. The Governor recommended increased funding for operating expenses to restore funding for printing and copying. Mr. Garmon noted $2,500 of operating expense would be for a copier lease. He explained the agency was currently using the Governor's copier at no charge. Additional funding was requested for telephone expenses since the Governor's Office was currently paying most of the agency's telephone expenses. Mr. Garmon stated the agency had requested $1,100.00 in unfunded decision unit E-999 to purchase a FAX machine and two telephones. The Governor recommended funding $700.00 as a one-shot appropriation. Mr. Close asked how many times the Board would be meeting per year if funding for the three additional meetings was approved. Mr. Garmon replied the additional meetings would bring the total number per year to 12. Mr. Close asked if 12 meetings per year were necessary. Mr. Garmon said it had been experience that the Board normally held 12 meetings per year. There being no further business, the meeting was adjourned at 10:05 a.m. RESPECTFULLY SUBMITTED: Dale Gray, Committee Secretary Assembly Committee on Ways and Means January 31, 1995 Page