MINUTES OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS Sixty-eighth Session February 2, 1995 The Committee on Ways and Means was called to order at 7:44 a.m., on Thursday, February 2, 1995, Chairman John 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 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: Mr. Mark Stevens, Fiscal Analyst Mr. Gary Ghiggeri, Deputy Fiscal Analyst Mr. Ronald Steele, Program Analyst Chairman Marvel deferred to Mark Stevens, Fiscal Analyst. Mr. Stevens said Expanded Program Narratives had been placed in the binders in the bookcase at the back of the committee room. He indicated committee members should have received a memorandum regarding the Human Resources/K-12 and Public Safety Subcommittee meetings in Las Vegas on February 10. The Joint Senate Finance/Assembly Ways and Means meeting on Thursday, February 9 would end by 3 p.m. to allow enough time for travel to Las Vegas. The Human Resources/K- 12 Subcommittee was scheduled to meet in Room 2609 of the State Office Building beginning at 8:30 a.m. on February 10; public testimony on Human Resources issues related to the Executive Budget would be heard from 8:30-11:30 a.m. with public testimony on K-12 issues from 1- 4 p.m. The Public Safety Subcommittee would leave the parking lot of the Excalibur Hotel at 7 a.m. on February 10 for Southern Desert Correctional Center and the Conservation Camp at Indian Springs, returning to Las Vegas for lunch and then on to Jean to tour the Southern Nevada Correctional Center and Jean Conservation Camp. Committee members not assigned to either subcommittee could attend either the Human Resources/K-12 meeting or the Public Safety tour of the prisons. Mr. Stevens requested a decision be made soon so hotel reservations could be made and vans reserved. Members were asked to make their own flight arrangements, but staff would arrange lodging at the Excalibur Hotel for those members requiring hotel rooms on Thursday evening. Transportation by van would be provided from the airport to the hotel and to subcommittee hearings and the prison tour. Gary Ghiggeri, Deputy Fiscal Analyst, said dress for the prison tour would be casual, but he indicated no blue jeans were allowed as that was part of prison inmates' uniforms. Chairman Marvel stressed any questions or change in plans should be addressed to Mr. Stevens or Mr. Ghiggeri immediately so appropriate arrangements could be made. OVERVIEW OF STATE COST ALLOCATION PLAN Chairman Marvel yielded to Don Hataway, Chief Assistant Budget Administrator. He distributed a document entitled "State of Nevada Statewide Cost Allocation Plan, Information Guide for 1995 Legislature" (a copy of which is on file in the Research Library of the Legislative Counsel Bureau.) Mr. Hataway said he served as coordinator for preparation of the Statewide Cost Allocation Plan and the Attorney General's Cost Allocation Plan. Mr. Hataway said the Statewide Cost Allocation Plan had been developed since 1985, or at least based upon 1985 costs. He indicated this was the first formal presentation the Executive Branch had given the Legislature since 1989. Mr. Hataway referred to the first page of the Statewide Cost Allocation Plan and indicated he would emphasize the indirect cost portion of the document. He said the Plan is a means of allocating direct and indirect costs of services provided by central service agencies to user agencies throughout state government. The Plan focuses on proprietary functions the agencies provide. Indirect costs can include: services provided that are not easily directly billed, such as processing of financial transactions by the Controller's Office; overhead costs such as building and equipment depreciation; and support costs, such as library services. Direct costs are easily quantifiable and identifiable, such as attorney general charges, building rent, motor pool charges and printing charges. Mr. Hataway pointed out three reasons for attempting to recover indirect costs: nearly all central services agencies are in the General Fund and this provides a way to obtain reimbursement from non-General Fund agencies for services they receive from the government; the federal government under certain conditions has agreed to pay its fair share of the cost of state government for performing those services; management information is generated which helps determine the actual and true cost of government services. Mr. Hataway stated since the 1989 Authorization Act, the Legislature has directed the Department of Administration and State Budget Director to prepare an annual statewide cost allocation plan based on federal regulations and guidelines. The most recent reference would be Section 10, Chapter 353, 1993 Statutes of Nevada. Mr. Hataway explained OMB Circular A-87 regulates the Statewide Cost Allocation Plan. This document has been in existence for at least twenty years, starting in the 1960's when federal funding was being infused into state and local governments and state and local governments began charging the federal government for indirect services. Mr. Hataway said he would not discuss the regulations line-by-line, but the basic guidelines of A-87 were included in the Statewide Cost Allocation Plan and he would be available to answer any questions committee members might have regarding it. He emphasized the A-87 program applies to all state, local and tribal governments, to all grants, contracts, cooperative agreements, and any other program attempting to collect indirect costs from the federal government. The Division of Cost Allocation, Region 9, from San Francisco with the U.S. Department of Health and Human Services reviews the Nevada Statewide Cost Allocation Plan. The plan is done on an annual basis, so the plan for the upcoming year must be submitted six months after the end of the last fiscal year. The allocation is based upon a fair and equitable distribution of cost. Mr. Hataway discussed basic guidelines of A-87 which stipulate costs must: be necessary and reasonable costs of state government; be authorized and not prohibited by state law; be uniformly applied to all programs; be given consistent cost treatment; comply with Government Accepted Accounting Practices (GAAP); be net of applicable credits; and be adequately documented. Mr. Hataway discussed two unique concepts of the Plan. One is multiple level cost allocation. The cost allocation plan is statewide with dollars provided to individual agencies that deal with the federal government; these agencies also do their own indirect cost plan and are reimbursed not only for the costs charged from the state level but also for their own internal administrative services. The Department of Education, Human Resources and Environmental Protection have their own cost allocation plans, resulting in multiple relationships throughout state agencies. The second, most unique part of the Plan is the over-under carry forward. As an example, Mr. Hataway said for the 1996 plan an agency would be charged for services provided by central services agencies based on the most recent year of actual cost, 1994. For 1998, actual 1996 costs would be used. Actual 1996 costs would then be compared with what was projected, an over-under credit-debit situation. For example, State Purchasing was under billed last time, resulting in a large roll-forward. Mr. Hataway said a "reasonableness test" also guides the Plan. Costs must be generally recognized as ordinary and necessary; must comply with sound business practices, arms length bargaining, laws and regulations and terms of award; and must reflect market price or cost, whichever is less. He indicated the state uses actual costs which are usually less than market prices. Mr. Hataway reviewed the definition of the Plan: a cost allocation plan that identifies the cost of supporting service units and allocates them to benefiting departments and agencies on an equitable basis. A cost allocation plan is the documentation supporting the rationale to distribute allowable costs of services to users. Chairman Marvel asked Mr. Hataway to discuss sanctions associated with the Plan. Mr. Hataway said if a federal auditor found a claimed item to be inappropriate, that money would have to be returned. Mr. Hataway went on to say documentation required by the federal government included: organizational charts; fiscal statements (the controller's comprehensive financial plan); certification by the Budget Director; a description of each service; identifications of units rendering and receiving service; items of expense in cost and distribution method; and summary allocation schedules for each service. Mr. Hataway pointed out a sample of the certification page. He indicated Mr. Perry Comeaux, State Budget Director, would sign the document to certify the Plan was based upon A-87 standards and represented a reasonable and fair allocation of costs by central service agencies. Mr. Hataway indicated pages 27 and 28 summarized the elements comprising the Plan and the basis of allocation for each element. Mr. Hataway said Schedule 1.001, 2.001 and 3.001 were sample chapter cover pages from the Plan document, describing the nature and extent of services and on what basis costs were allocated. Section 1.001 is the Building Use Allocation. The state does not depreciate buildings; however, in the Statewide Cost Allocation Plan the federal government allowed allocation of a reasonable value of the buildings agencies occupy as a cost of their services. Schedule 2.001 is Equipment Use Charge. The cost of equipment purchases is unallowable; however, the federal government does allow the depreciated value of all of an agency's equipment per a fixed asset inventory list to be charged. Section 3.001 discusses Controller's Office costs which are allocated based upon the number of accounting transactions the office processes each year. Mr. Hataway referred to Detail Page 30, Statewide Cost Allocation Plan, State Controller, which displays five columns entitled 1st Allocation, 2nd Allocation, 3rd Allocation, Subtotal and Total. In the 1st Allocation column, the first line is "Expenditures per financial statement: $2,269,072." He indicated the dollar amount came directly from the comprehensive cost plan. The second line is Deductions; in this case only equipment acquired during the fiscal year was deducted. Mr. Hataway explained before allocation to user agencies, cost allocation must be made between the central service agencies themselves. For example, the Budget Office provides services to the Controller's Office and Treasurer's Office which in turn provide services to the Budget Division and Treasurer's Office. The first allocation includes building use and equipment allocations as legitimate costs of eligibility. The Controller's Office then allocates out to the other central service agencies. Mr. Hataway explained allocations could continue until every dollar was exhausted; however, this is not cost-effective so the Plan stops after the third allocation. Mr. Hataway emphasized that allocation is made first among central service agencies and then to user agencies. On the example page, Detail Page 30, actual costs per the financial statement were $2,269,072, but when unallowable costs as well as allocations from other central service agencies were taken into consideration, the total allocation to user agencies was $2,396,377. Mr. Hataway said Detail Pages 31 and 32 were summaries of Detail Page 30 but provided more detail as required by the federal government, with costs broken out into categories such as salaries, fringes, travel, operating and data processing. Mr. Fettic asked what role the federal government took in this process and where the federal money came from. Mr. Hataway explained in addition to actual direct grants, the federal government paid the costs of overhead for indirect services provided by state government. He indicated there was a $4 million cost allocation line item in the general revenue section of the General Fund, the majority of which came from the federal government reimbursing the state for the costs of service. Mr. Hataway referred to Detail Page 35. He reiterated the Controller's Office costs were allocated based on the number of financial transactions processed in one year. The first column shows the Controller's Office processed 1,526,178 financial documents in 1993. Of that total, line one shows Employment Security processed 40,800 documents through the Controller's Office, representing 2.673 percent of the total, resulting in an allocation of $64,064. Mr. Hataway referred to Detail Page 40. This roll forward section compares actual costs to estimated costs. The first line, Attorney General, shows actual costs of $15,464 for 1993 with estimated costs of $10,501, resulting in a roll forward charge of $4,963. He explained the largest part of Purchasing's roll forward is the number of documents processed through the Controller's Office as Purchasing was under billed two years ago by $152,000. Mr. Hataway referred to Summary Page 1, Allocated Costs by Department, explaining the roll forwards from Detail Page 40 are combined into a summary document. Mr. Hataway then turned to the last page of the Statewide Cost Allocation Plan, discussing changes occurring since 1993. The current Plan recommends to the federal government that State Library costs of providing services be allocated on an FTE basis up to a maximum of 100 FTE. In the past, Law Library costs were allocated 25 percent to the Attorney General's budget with the other 75 percent of their costs treated as a public benefit. Now Law Library costs are being allocated 25 percent to the Attorney General's Office, 25 percent to the Supreme Court and 50 percent for the general public. Mr. Hataway discussed the Statewide Cost Plan in relationship to the state budget. He explained Gaming is funded 100 percent from the General Fund. If Gaming were charged the state cost plan, the Gaming appropriation would need to be raised in order to reimburse the General Fund. Agencies that are supported 100 percent by the General Fund are not charged for the costs in the Statewide Cost Allocation Plan. NDOT receives no funding from the General Fund and is charged 100 percent of identified costs. In the Welfare budget, 50.77 percent of the revenue stream is federal funds so Welfare is charged 50.77 percent of identified costs. Finally, a policy was made not to charge agencies where cost allocation would compete with program dollars. The Arts Council is an example of an agency with this type of finite revenue source. If the Arts Council were charged indirect costs, available funds for local grants would be decreased by the amount of indirect costs. Mr. Hataway then discussed interest earnings. NRS states interest earned on investments accrues to the benefit of the General Fund except as specifically identified by the Legislature in the statutes. An example would be the Fund for Class Size Reduction where interest earned accrues to that fund. The federal government does not allow internal service funds to accrue interest on retained earnings. The Controller's Office has submitted a BDR requesting a change in the statutes to allow internal service funds to accrue interest. However, a potential liability does exist for the state. If a central service agency has retained earnings, what the interest would have been must be calculated and added to retained earnings and it is possible the federal government may request their share of the interest. Ms. Giunchigliani asked where the roll forwards showed in the base budget. Mr. Hataway indicated roll forwards were in a specific line item called "Statewide Cost Allocation." She then inquired if carryovers were included in this amount. Mr. Hataway indicated they were. Ms. Giunchigliani asked if fiscal staff had a list of which agencies were 100 percent General Fund. Mr. Hataway said a spreadsheet had been provided to fiscal staff with that information. When the 1996 Plan was received, an updated document outlining agency charges would be provided. Mr. Close requested information regarding the vacancy savings factor in reference to salaries. Mr. Hataway said as related to the Statewide Cost Plan vacancy savings was part of the roll forward credit and debit process. INSURANCE REGULATION - PAGE 709 Chairman Marvel said a mission statement had not been submitted for this budget and asked that one be prepared and submitted. Rose McKinney-James, Director of the Department of Business and Industry, indicated she would provide a mission statement. Chairman Marvel observed mission statements and performance indicators were required of all agencies and requested the Budget Office notify other agencies before they appeared before the committee. Deborah A. Erickson, Budget Analyst, Department of Administration, Budget and Planning Division, indicated she would inform the agencies this information was required. Ms. McKinney-James introduced Alice Molasky, Insurance Commissioner, and David Hall, Deputy Insurance Commissioner. Chairman Marvel called attention to a misprint in program indicators: program indicator No. 5 under Projected FY 94 should be $3.5 million and program indicator No. 6 under Projected FY 94 should be $480,000. Ms. Molasky said the agency protects the rights of consumers and the public in the business of insurance; regulates the insurance industry, certifies insurers and authorizes them to do business in the state; licences agents and brokers; and conducts a medicolegal screening panel. Ms. Molasky noted Insurance Regulation is the Division's main operating account and includes federally funded Health Care Finance Administration (HCFA) for the Medicare Health Information Counseling and Assistance Program. Prior to the 1993 fiscal year, Insurance Regulation was funded by the General Fund. The 1993 Legislature directed the agency to use reserve funds in the Examination Fund, budget account 3817, as the main funding source for Insurance Regulation. For the 1995-97 biennium, the agency requests General Fund support as the Examination Fund reserve will have been reduced to a minimal level. The Governor recommended approval of the base budget; however, the base budget does include continued funding from the Examination Fund which would require a raise in the Administrative Service Charge to 100 percent from the present level of 50 percent. Also included in the base budget is the transfer out of the Consumer Advocate for insurance customers. Ms. Molasky referred to page 710 of the Executive Budget. The M100 decision unit requests inflationary increases for postage and insurance. On page 711, the M200 decision unit requests funding for one Management Assistant in the Las Vegas office to assist with an increasing volume of public walk-ins and telephone calls. Chairman Marvel noted the Legislative Audit showed 50 percent more claims were filed in the Las Vegas area and were handled more expeditiously than in Northern Nevada. Ms. Molasky indicated a solution to this problem was being developed and a plan of action would be submitted to the Legislative Counsel Bureau on February 16. Chairman Marvel asked why consumer complaints, measurement indicator No. 3, were under projected. David Hall, Deputy Commissioner of Insurance, responded the projections were based on the caseload that existing staff could handle. Chairman Marvel noted staff had increased. Mr. Hall said one staff member was being added in Las Vegas to handle telephone calls and explained at the time the budget was put together, all the necessary statistics were not available. Chairman Marvel requested updated measurement indicators be provided before this budget is closed. Ms. Giunchigliani asked if consumer complaints listed in the measurement indicators included all types of insurance complaints and if complaints were separated by type. Ms. Molasky responded all types of complaints were included in measurement indicators and were tracked by the type of insurance involved as well as by the basis for the complaint. Ms. Giunchigliani asked for additional information on the transfer of the Consumer Advocate. Ms. McKinney-James said the transfer was an administrative action as the Consumer Advocate for auto insurance would be better positioned within the Division of Consumer Affairs. The position is retained in the base budget for Insurance Regulation though the office has been physically moved; however, the Governor's recommended budget does not include continued support for the automobile advocate. Ms. Giunchigliani remarked the creation of the automobile advocate's position had been a major issue in 1991. Ms. McKinney-James indicated a significant number of complaints had been received from the insurance industry suggesting a duplication of responsibilities between the Insurance Commissioner and the Automobile Insurance Advocate. The decision to withdraw support for the Automobile Insurance Advocate was based on the fact that funding for the budget comes out of the cost stabilization fund within the Insurance Division to which both automobile insurers and other insurers contribute. If automobile insurers were segregated, their contribution would not be sufficient to support the budget for the Automobile Insurance Advocate. Ms. Giunchigliani asked if consumer advocacy was under the Department of Business and Industry and what agencies were contained in Consumer Affairs. Ms. McKinney-James said in addition to the general consumer advocate, the advocate for automobile insurance and the Office of Hospital Patients had been transferred at her request from the Insurance Division to Consumer Affairs through an interagency agreement. The Department had been prepared to offer bill drafts to formalize that arrangement for both agencies; however, the Governor's budget did not recommend funding the Consumer Advocate for Automobile Insurance. Ms. Giunchigliani asked if the automobile advocate's position was backed out of the base budget. Ms. Erickson pointed out the narrative for adjustments to the base budget on page 709 which indicates the position has been deleted; the summary of positions on page 710 also reflects this. Ms. Giunchigliani asked Ms. McKinney-James if a policy decision should be made not to have consumer advocates for specific areas. Ms. McKinney-James responded she felt all consumer advocacy should probably be centralized but with some distinction made for different consumer groups. Chairman Marvel asked if a BDR would be introduced to eliminate the office of the automobile insurance advocate. Ms. Erickson indicated the Budget Office was processing a BDR. Mr. Close indicated he concurred with Ms. Giunchigliani's comments regarding reporting complaints by types of insurance and suggested information be included relating to self-insurance. In addition, he suggested quality indicators be added to the measurement indicators, such as a time line for complaint resolution and restitution. Ms. McKinney-James clarified his request and agreed to do this. Chairman Marvel expressed concern that the budget transfer would not result in enough money to fund the operation with the change in funding mechanism. Ms. Erickson referred to page 712, where there is a request to change the funding mechanism back to the General Fund. During the budget cuts reserve funds from the Insurance Examiners Fund were used to fund a portion of the Insurance Regulation budget. She then referred to page 726 which shows money being returned to the Insurance Examiner's fund. Chairman Marvel asked how much the reserve was projected to be on June 30, 1995. Ms. Erickson indicated the Insurance Regulation budget would not have a reserve, but the Insurance Examiner's budget had a reserve of approximately $500,000 for both years of the biennium (page 727). The reserve is expected to be maintained at this level. Mr. Price asked why the Consumer Advocate was not present at the committee meeting to discuss the dissolution of the office of the automobile insurance advocate. Ms. McKinney-James indicated John Wiles, Advocate for Auto Insurance, would be present the next day when the Consumer Advocate's budget would be heard. Ms. Giunchigliani raised questions regarding the Insolvency Fund which Mr. Stevens indicated would be heard in subcommittee. She confirmed the Insurance Commissioner's office still performed examinations for TPA certification to represent businesses and groups in worker's compensation, noting last session moving that function out of the Insurance Commissioner's office had been considered. Ms. Giunchigliani asked if fees were collected into the Insurance Regulation budget for that purpose and when Mr. Hall said no, she observed that moving TPA certification would not impact the budget. Ms. Erickson said the fees were reflected in the Self-Insured Worker's Compensation budget on page 721 which was funded from the worker's compensation fund. Ms. Giunchigliani inquired whether the Governor's recommended budget for the Insolvency Fund reflected the proposed moratorium on small group insurance. Ms. Erickson responded she understood three budgets would be affected, including Insurance Insolvency, one budget from DIR and Self-Insured Workers' Compensation. She went on to say she understood a BDR was being introduced to delay the moratorium and so the Governor's recommended budget reflects the situation if the BDR were to pass. Ms. Giunchigliani confirmed if the BDR did not pass, enhancements to the budget would have to be considered for that area. Ms. Erickson said data was available to rebuild the budget if necessary. Ms. Molasky continued her discussion of the Insurance Regulation budget. An occupational group study resulted in the fringe benefits adjustments included in decision unit M300. This would represent a savings in FY 1996 and an increase in FY 1997. Decision unit E859 incorporates cost allocation expenses for the Director of Business and Industry. Chairman Marvel asked if the Insurance Commissioner's office had been accredited. Ms. Molasky responded no and Chairman Marvel then asked what was planned regarding accreditation. Ms. Molasky said the Division had submitted the accreditation package in the form of a bill draft request. Chairman Marvel asked why a BDR was necessary. Ms. Molasky said statutes needed to be implemented in order to achieve accreditation status. Chairman Marvel questioned what advantages or disadvantages were involved in being accredited. Ms. Molasky said accreditation would give the Insurance Commissioner greater tools for regulating the business of insurance; accreditation was basically an organized method to ascertain the financial solvency of insurers through statute and regulation. Chairman Marvel inquired if any extra costs would be associated with accreditation to which Ms. Molasky responded the original budget request included two positions. Mr. Hall added the positions were a Management Analyst III and an assistant to that position to help in reviewing financial statements. He noted the Insurance Commissioner would be reviewed by the NAIC in February and a better cost estimate could be made at that time. Chairman Marvel asked what happened if accreditation was not received. Mr. Hall responded there would be some impact on the examination fund as being one of the few states not accredited would limit the office's ability to participate in examinations and audits, thereby reducing revenue from the Insurance Examiner's office. Chairman Marvel noted the same issue had been under discussion two years ago and asked why accreditation took so long. Ms. McKinney-James reported the accreditation package is supported by the National Association of Insurance Commissioners and includes a variety of model acts developed to create uniformity in the manner in which states deal with solvency of insurers. The package is very comprehensive and has been delayed by industry groups who have taken issue with certain aspects of the model acts, questioning the need for statutory revisions when the current statutory structure incorporates the ability to meet some goals of the model acts. Ms. McKinney-James indicated two bill drafts were being processed which dealt with accreditation. One bill draft was prepared by the Insurance Division and drafted by Ms. Molasky; the other reflected the more comprehensive measure introduced last session and would be introduced through the Senate Commerce and Labor Committee. Ms. McKinney-James indicated a main consideration was the ability to deal with issues through regulation without major statutory revision. She said the lack of accreditation might limit the Division's ability to participate with other accredited states in multi state examinations. Chairman Marvel asked if a projection had been made of the costs of accreditation versus revenues. Ms. McKinney-James indicated that had not been done. Mr. Hall reported a fiscal note had been included in one of the BDR's regarding additional costs for staff; however, a projection had not been made for possible loss of revenue. Chairman Marvel asked if the Governor had recommended accreditation. Ms. McKinney-James said he had not, a decision based on the way the budget was built for the Insurance Division and the costs associated with accreditation. Chairman Marvel noted last session the Division had been given two positions for the purpose of reviewing financial statements for accreditation. Ms. Molasky concurred. Chairman Marvel asked if the positions were filled and if so why were additional positions required. Mr. Hall responded the positions were filled but growth necessitated the additional positions. Mr. Spitler observed he had not heard a compelling argument for becoming a member of NAIC. He noted membership in NAIC was not necessary for the Legislature to enact laws to enable the Commissioner to better serve the consumer or the industry; membership in professional organizations can generate additional costs for travel, meetings and staffing requirements; and no reason had been given to go beyond the Governor's recommendation not to fund accreditation. Ms. Molasky responded the Division was already a member of NAIC and accreditation would not affect that. Mr. Spitler further observed the Legislature could enable the Commissioner through statutes and questioned what benefit the NAIC could offer the citizens of Nevada. Ms. Molasky said the bill draft request included statutes necessary to strengthen regulation and establish objective standards in ascertaining the solvency of an insurer, which was basically the purpose of accreditation. She added the Division received far more benefits from NAIC membership than costs paid to NAIC as part of an assessment imposed by law. Mr. Spitler asked what accreditation would provide. Ms. Molasky responded accreditation would establish stronger measures for determining whether an insurer was solvent. Mr. Spitler asked if that could not be determined today. Ms. Molasky said it could be determined but some of the standards used might be considered subjective and the Commissioner might be challenged on the basis of an abuse of discretion in determining standards of solvency. Mr. Spitler then asked if those standards could not be adopted without accreditation. Ms. Molasky said if those standards were adopted, the Commissioner would be accredited. Mr. Spitler responded that accreditation should not require additional positions or funding. Ms. Molasky said NAIC reviewed each Division to determine whether it was prepared by statutes and staffing levels to address matters of solvency in reviewing financial statements of insurers. Mr. Spitler reiterated whatever justification might exist for accreditation was not being explained. Mrs. Evans asked if Ms. Molasky was saying that accreditation was needed statutorily to provide the Commissioner the necessary authority, and that staff was needed to provide the enforcement resulting from that authority. Ms. Molasky concurred. Chairman Marvel asked if the Commissioner did not currently have the authority. Ms. Molasky said in some areas the Commissioner did not have the necessary authority. Chairman Marvel indicated this had all been discussed last session and so far nothing been accomplished. He asked when the BDR would be delivered. Ms. McKinney-James responded accreditation would require approval from the Legislature and from an NAIC accreditation team. The NAIC team was expected in the next week to review current statutes and regulations and provide advice on what would be required to achieve accreditation. She indicated the accreditation package submitted last session was not the one being submitted this session. Mrs. Brower noted it would be helpful if after the review a report was produced detailing the findings, projecting costs and any additional information. Ms. McKinney-James indicated the Division would be happy to provide this information. INSURANCE EXAMINERS - PAGE 725 Ms. Molasky explained insurance examiners inspect the affairs, transactions, accounts, records and assets of authorized insurers. Currently a 50 percent overhead fee is charged based on costs incurred by the examiners. This fund was also used as a source of operating revenue during the 1993-1995 biennium. Ms. Molasky referred to page 725 of the Executive Budget. Included in the base budget is a continuation of transfers to the Insurance Regulation operating budget. She indicated the transfers were removed in an enhancement decision unit to enable the Division to continue the 50 percent overhead fee. If the transfers were continued, the overhead fee would have to be increased to 100 percent. Ms. Molasky referred to the M100 decision unit which reflects inflationary increases. This decision unit also includes projected increases in NAIC rates from $216 to $221 for financial examiners and from $216 to $220 for market conduct examiners. Per diem has also increased from $233 to $245 for financial examiners and from $233 to $244 for market conduct examiners. Chairman Marvel noted in the fall of 1993, the Budget Division and Fiscal Division met with the Division's examiners about the loss of insurance premium tax on surplus lines businesses. He inquired as to the outcome of these examinations and if any examinations were conducted. Ms. Molasky responded examinations were made of one, possibly two, surplus lines insurers. She indicated the examinations were ongoing and fines, penalties and premium taxes were being pursued. Chairman Marvel asked for an estimate of the amount of money involved. Ms. Molasky deferred to Mr. Hall who reported 2,738 receipts were processed in 1994 and $94,870 dollars in fees were collected. Taxes collected for surplus lines were $1,109,887. Fines and penalties were $47,199. Filings processed were $6,371. Three broker education seminars were held to train surplus lines insurers with fifty- three people in attendance. Chairman Marvel requested this information be provided to staff. At this point, Chairman Marvel recognized Senator Dina Titus who wished to testify on behalf of the Insurance Advocate for Automobile Insurance. Senator Titus read from a prepared statement (see Exhibit C.) Mr. Price thanked Senator Titus for presenting the side of the Automobile Insurance Advocate who was not present at the hearing. Ms. McKinney-James said the automobile advocate budgets were to be heard by the committee on Friday, February 3, and the Automobile Advocate had been asked to be present at that time. Mr. Price referred to a bill draft request which would make it a violation of law for any person to discourage a public employee from appearing before a legislative body. He indicated public employees had a citizen's right under the Constitution to appear before a legislative body. Chairman Marvel noted the committee also had the authority to subpoena witnesses. Ms. Molasky discussed decision unit E908 to the Insurance Examiner's budget which requests a reduction in funding of the agency from reserves. Only actual chargeable overhead costs would be transferred to the Insurance Regulation budget. The balance of operating funds would come from the General Fund; this would allow the reserve in the Examination Fund to rise to a sufficient level for nonchargeable work and working capital. Chairman Marvel indicated these budgets would be further reviewed in subcommittee. FINANCIAL INSTITUTIONS - PAGE 761 Scott Walshaw, Commissioner of Financial Institutions, offered some general background on the agency. The Office of Financial Institutions is the equivalent of banking divisions in other states and is responsible for regulating banks and other types of financial institutions, such as mortgage companies, escrow companies and small loan companies. Mr. Walshaw indicated the budgets were based on a revenue-neutral concept: the General Fund appropriation would be used during the fiscal year; at the end of the year total expenditures would be calculated and the General Fund would be reimbursed based on a formula involving assessments on financial institutions, licensing and other fees. Mr. Walshaw pointed out the M200 decision unit which includes an additional funding request of $24,135 for half the cost of a new attorney general position to be shared with Financial Institutions and two other agencies within the Department of Business and Industry. Mr. Walshaw said this decision unit also contains a request for two new positions, pointing out this was a reinstatement of two existing examiner positions that were reclassified this year by the Interim Finance Committee in order to fill two secretarial positions. Ms. Tiffany asked how many positions were vacant. Mr. Walshaw said two examiner positions were currently vacant. He explained ten years ago it had been decided to increase flexibility by placing several vacant examiner positions in the budget; the positions could then be filled if necessary without requiring approval by the Interim Finance Committee. If the positions were not required, the money reverted to the General Fund. Ms. Tiffany questioned the need for additional positions when existing positions were vacant. Mr. Walshaw said the proposed change would merely return two positions that had been reclassified. Ms. Tiffany clarified two positions are still vacant and this would be an additional two positions. Mr. Walshaw concurred, stating the four positions would represent a cushion to allow the agency the opportunity to hire for an anticipated increased work load due to new financial institutions which are expected to open in the near future. He reiterated the additional positions provided flexibility to hire without having to appear before the Interim Finance Committee. Ms. Tiffany asked Mr. Walshaw how many positions he planned to fill. He said based on current projections for new bank openings, two examiner positions were expected to be filled in the next biennium. Mr. Walshaw stressed that revenues raised would cover any expenditures associated with hiring. Mr. Close complimented Mr. Walshaw on measurement indicators related to work load but commented indicators showing the quality of performance were needed, such as the results of examinations and time lines for problem resolution. Mr. Walshaw noted the results of the examinations were highly confidential due to statute and because information is shared with various federal regulatory agencies with strict requirements on who receives information. Mr. Spitler indicated he understood the rationale for adding positions to be filled only when needed, but said there are usually additional travel and operating costs associated with a position. He inquired what happened to the additional travel and operating funds if a position is not filled. Mr. Walshaw said travel and operating monies not used reverted to the General Fund and ultimately the General Fund was reimbursed for monies expended by a combination of licensing fees and examination fees proscribed by statute and regulation. Mr. Spitler asked the Budget Office if these transactions were checked to be sure support costs for personnel who were not hired were reverted to the General Fund. He noted support costs were rolled into general operating money and any amount up to $25,000 or 10% of the budget could be transferred without approval of the Interim Finance Committee. Ms. Erickson indicated reversions were balanced to the penny; however, costs were not tracked to specific vacancy savings positions. Ms. McKinney-James mentioned the possibility of creating a specific budget category to track costs associated with unfilled positions. Mr. Spitler supported this idea and requested the Budget Office look at other positions based on vacancy savings to calculate what should be reverting to the General Fund in salary and full support costs. Ms. Janet Johnson, Deputy Budget Director, indicated the Financial Institutions budget was unusual as positions were built in strictly for contingency purposes. She agreed in order to track costs associated with vacancy savings, a separate budget category would be required. Mr. Walshaw noted in asking to reinstate the two positions, associated travel and training funds have been allocated so detail of associated costs is available. Mr. Spitler indicated operating costs associated with vacancy savings should be more closely examined by the Budget Office to make sure the ancillary money is returned to the General Fund when positions are not filled. Ms. Tiffany asked if regulation of escrow companies was improving. Mr. Walshaw responded it was, indicating recommendations from the audit report had been instituted. FINANCIAL INSTITUTIONS INVESTIGATIONS - PAGE 765 Mr. Walshaw said this budget was created as the result of an interim study committee by the Legislative Commission in 1985. It provides a mechanism for the agency to perform investigations of changes of control and new applications for various licenses issued. Through an interagency agreement with the Gaming Control Board, a Gaming Control Board Investigator is now assigned to Financial Institutions. This budget account receives funds from application fees which are then used for a portion of the Gaming Control Board Investigator's salary and expenses. This budget account also provides funds for receiverships and special investigations of companies that may not be licensed. Ms. Tiffany requested a mission statement be provided and asked for clarification of projected and actual numbers of investigations performed. Mr. Walshaw indicated the discrepancy between the 50 investigations projected and 120 actually performed was the result of a significant number of mortgage bankers moving to Nevada from Southern California. This influx was expected to slow with the decline in mortgage refinancing and increase in interest rates, resulting in the projection of 100 investigations for FY 96 and FY 97. Ms. Tiffany asked which investigations had been turned over to the Gaming Control Board. Mr. Walshaw said information regarding the types of investigations conducted was available and Ms. Tiffany requested this information be provided and added to performance indicators for the next biennium. Ms. Giunchigliani referred to a BDR dealing with mortgage companies and asked if it was requested by Financial Institutions. Mr. Walshaw responded no. Ms. Giunchigliani asked if any additional statutory authority was necessary to deal with the influx of companies. Mr. Walshaw said it was not. FINANCIAL INSTITUTIONS AUDIT - PAGE 767 Mr. Walshaw indicated this budget account was the result of an interim study committee in 1985 which created a program to hire staff certified public accountants; an assessment would be levied on all licensees subject to review by the agency to pay a pro rata share of the cost of employing certified public accountants. The Certified Public Accountant position would review financial statements of all licensees and perform special audit investigations. Mr. Walshaw said the budget was based on FY 93-94 actual expenditures, pointing out in-state travel and operating were very low that year and this formed the base budget for the current request. However, as a contingency, $3,000 had been set aside for in-state travel in the event it was needed. The agency requests this amount be put into the budget to form the basis of the annual fee assessments to licensees. Chairman Marvel asked how many credit unions were doing business in the state and Mr. Walshaw responded there were nine state chartered credit unions. CONSUMER AFFAIRS - PAGE 811 Patricia Morse Jarman, Commissioner of the Consumer Affairs Division, reported the Division was headquartered in Las Vegas and had an office in Reno. Staff members total thirteen with eight personnel working on deceptive trade practices and five on telemarketing practices. Ms. Jarman discussed corrections to measurement indicators on page 811: for measurement indicator No. 1, actual for FY 94 should be 6,580 cases opened; measurement indicator No. 3 should read 5,970 for actual FY 94 rather than 4,764; and measurement indicator No. 1 for FY 96 and 97 should read 8,225. Ms. Jarman said Consumer Affairs was created in 1973 by former Governor O'Callaghan to protect the public from deceptive trade practices and to promote fair trade in the business sector. The Division has received over 54,000 phone calls in FY 94, 70% of which relate to automobile issues, repairs, sales or warranties. Chairman Marvel observed this information should be incorporated into performance indicators for the biennium. Ms. Jarman indicated this would be done. Ms. Chowning expressed her appreciation for the Division's help with constituent issues and asked what percentage of the auto related phone calls dealt with auto sales versus mechanical problems. Ms. Jarman responded approximately 60% of the complaints related to automobile repairs; of the remainder, more related to used car sales than new car sales. Ms. Jarman distributed and read a newspaper article entitled "Las Vegan shoots mechanic, kills self" (Exhibit D). Mr. Price asked Ms. Jarman what, if any, provisions the Division had been able to make for the safety of its employees and if any problems with violence had occurred. Ms. Jarman said threats had been made and employees were behind locked doors and glass. Ms. McKinney-James said bomb threats had been received and threats made to employees of various agencies within the Division. The Division trains employees to deal with potentially dangerous situations and emergency procedures have been established with the Metropolitan Police in Las Vegas and the Capitol Police in Carson City. Ms. Jarman reported restitution to consumers for FY 94 was $1,359,251.70. Of this amount, auto restitution was $242,410.89. All other categories totaled $1,116,840.81. Amounts of restitution ranged from $1.50 up to $27,496. An investigation generally takes anywhere from three weeks to four months, but can take as long as a year depending on the complexity of the complaint. Ms. Jarman reported when a business was found to continually practice deceptive trade, the business was brought to a hearing and an Assurance of Discontinuance would be issued. An Assurance of Discontinuance is an agreement between the business and Consumer Affairs to stop the practice in question. If the practice is not stopped, the Division can file suit. Ms. Jarman indicated the Division had no full time attorney general assigned but two were requested in this budget. Chairman Marvel requested Ms. Jarman begin a discussion of the budget. She indicated the base budget on page 811 had been accepted by the Governor and by the Legislative Counsel Bureau. Mr. Arberry expressed concern about the projected 317% increase in Deceptive Trade Fees. Ms. Jarman said a number of cases were settled for over half a million dollars. These settlements were distributed to the FDA, the Attorney General's office and Consumer Affairs, and brought an additional $115,000 into Consumer Affairs which resulted in the projected 317% increase. Mr. Arberry asked what was planned if the projected amount was not collected each year. Ms. Jarman said the Division had been instructed to base future projections on actual collections for this year; she indicated it was possible this amount would not be collected. Mr. Arberry asked why this projection was made when there was no real confidence that amount of money would be collected. Ms. Jarman deferred to Deborah Erickson of the Budget Office who said the increase was not related to caseload or rate increase but to more efficient collection methods. Mr. Arberry asked her if she felt comfortable with this projected amount and Ms. Erickson indicated the issue should be revisited. Ms. Jarman mentioned several cases were pending with the potential of resulting in substantial revenue. Mr. Allard asked if the Governor's recommendation of $239,711 in licenses and fees on page 811 reflected an increase in fees or if it was anticipated more people would be buying licenses and fees. Ms. Erickson said of this amount, $150,000 was deceptive trade fees and $89,999 was administration fees. Mr. Allard confirmed there was no increase in the fee. Ms. Erickson concurred. Ms. Giunchigliani asked what a deceptive trade fee was. Ms. Jarman said fees related to Assurances of Discontinuance and court settlements. Ms. Giunchigliani asked if this related to expenditure line item "Investigation - Recoverable" on page 812. Ms. Joanne Gierer, Program Officer, Consumer Affairs Division, said the investigation category was an operating category used by the investigative unit. Deceptive trade fees were assessed by the Attorney General's Office related to assurances assessed to businesses found to practice deceptive trade. Once a business was determined to practice deceptive trade, the case would be turned over to the attorney general who would issue an Assurance of Discontinuance with the fee assessed at that time. Ms. Giunchigliani asked if there was a fee schedule that could be provided to the committee. Ms. Gierer responded she would supply this information. Ms. Giunchigliani asked if the two additional attorney generals were approved. Ms. McKinney-James responded this was not yet determined as those positions were in the Attorney General's budget. Chairman Marvel clarified the two additional attorney general positions would appear in the Attorney General's budget. Ms. Jarman discussed program transfers in the E900 decision unit on page 813. It is recommended three positions, Chief of Consumer Services, one Management Analyst and one Management Assistant, be transferred to the Director of Business and Industry. These positions were transferred to Consumer Affairs during the reorganization but have never performed any functions for Consumer Affairs and work directly with the Director of Business and Industry. This transfer would have no fiscal impact or work load impact on Consumer Affairs. Mr. Arberry asked Ms. Jarman to discuss a request for four new positions and a request to transfer three positions. Ms. Jarman responded four new positions were requested to create an auto unit within Consumer Affairs to deal with the large volume of complaints related to auto issues; however, this was not recommended by the Governor. She indicated the three positions being transferred out have never worked with Consumer Affairs and have always worked with the Director of Business and Industry. Chairman Marvel asked Ms. Jarman to provide the committee with a dollar amount of restituted money and a detailed report on the various complaints. Ms. Jarman responded she would supply this information as soon as possible. Mr. Arberry asked for either Consumer Affairs or the Budget Office to provide the committee with a letter discussing the projected 317% ($150,000 per year) increase in Deceptive Trade Fees. He indicated if this was not a realistic projection, revised figures should be submitted. If the projection was considered to be valid, a contingency plan should be developed in the event this money is not realized. Chairman Marvel asked how much litigation was currently in process. Ms. Jarman deferred to Margaret Stanish, Senior Deputy Attorney General. Ms. Stanish said seven lawsuits related to deceptive trade practices and twenty lawsuits related to telemarketing issues were pending. Chairman Marvel asked when these cases would be heard. Ms. Stanish responded some of the cases had been filed more than two years ago and indicated cases resulting in large amounts of money are rare. Ms. Stanish reported approximately one and a half attorney time was spent on deceptive trade matters and two and two and a half attorney time was devoted to administration and telemarketing law enforcement. Chairman Marvel asked for a written outline of deceptive trade cases that had been filed detailing which had been resolved and which cases were pending. Ms. Stanish said she would provide this information. Ms. Giunchigliani asked what statutes defined deceptive trade and telemarketing. Ms. Jarman replied NRS 598 pertained to deceptive trade and NRS 599B to telemarketing. Ms. Jarman noted the major sources of complaint were auto repairs, auto sales, general sales, mail order chance promotions, telefunders and travel agencies. Ms. Giunchigliani asked if the Division was proposing legislation. Ms. Jarman noted two pieces of legislation: a BDR which would allow consumers to be notified of businesses with a history of deceptive trade practices and a bill proposed by Ms. Chowning which deals with automobile purchases. Ms. McKinney-James noted a change in the funding mechanism for the Consumer Affairs budget and requested Ms. Erickson discuss this change. Ms. Erickson explained the E907 decision unit on page 814 reflects less fee revenue coming into the budget with a request to change the funding mechanism to General Fund. Chairman Marvel asked why this was being done. Ms. Erickson said Telemarketing revenue had decreased so dramatically that the transfer could no longer be maintained at the previous level. Additionally, a transfer of $500,000 each year to the Attorney General would be made. CONSUMER AFFAIRS - RESTITUTION - PAGE 817 Ms. Jarman noted this budget was regulated by NRS 598.0993. It is a pass- through account for deposit and disbursement of restitution payments collected on behalf of consumers. The account has no fiscal impact. CONSUMER AFFAIRS - TELEMARKETING - PAGE 819 Ms. Jarman noted this budget was regulated by NRS 599B. It was created in 1989 in response to an influx of illegal telemarketing. In 1993, the duties of the telemarketing unit were divided between Consumer Affairs and the Attorney General's Telemarketing Fraud Unit. Consumer Affairs currently registers and collects fees for registration of telemarketers. The Attorney General's Office is responsible for enforcement. Ms. Jarman indicated a number of cases were currently being heard that would most likely result in restitution to consumers. Ms. Jarman distributed and read a letter (Exhibit E) which describes a telephone fraud which deprived an elderly woman of her life savings. This fraud involved several companies based in Nevada which were being investigated. Ms. Jarman explained the average age of victims of telemarketing fraud is 68 years old and the telemarketing unit is often the only recourse. Many telemarketing companies sell their list of people who have sent money to so-called "recovery companies" that then call the victims and offer to recover their money for a large fee, which again makes the consumer a victim. Chairman Marvel asked how the Consumer Affairs Telemarketing Unit interacted with the Attorney General's Telemarketing Fraud Unit. Ms. Jarman said complaints would come into the Consumer Affairs Division and would then be turned over to the Attorney General's Office. She said performance indicators reflected the actual number of cases in progress before July 1, 1993, when the unit's function was split between Consumer Affairs and the Attorney General's Office. Ms. Stanish noted over 12,000 consumer complaints had been handled by the Attorney General's office separate from the Consumer Affairs Division. Ms. Giunchigliani asked if statutory changes were required to define "recovery service" or "telefunding." Ms. Stanish responded a bill had been requested to amend NRS 599B to include both charitable solicitors as well as recovery services. She said another significant issue currently being litigated in the Nevada Supreme Court was telemarketers selling magazines which has generated numerous consumer complaints; however, a lower court found them to be outside the purview of the statutes. Ms. Jarman mentioned a loophole in the law which did not require telefunders to register and pay the $6,000 fee which is required of telemarketers. Many times telemarketers would continue their same line of business as a telefunder. Chairman Marvel asked what was planned to close this loophole. Ms. Stanish indicated the bill request by the Attorney General would address this issue. Seven lawsuits had been initiated against telefunders and some criminal actions were pending against telefunders. Mr. Arberry asked how revenue projections would change with the proposed change in the law. Ms. Stanish expressed reluctance to base revenue on expected registration of the industry as the registrants looked for loopholes in the law. The Attorney General is now taking criminal action rather than civil. Mr. Arberry asked how many times criminal action had been taken against telefunders. Ms. Stanish said a telemarketing task force had been formed with herself and another attorney deputized to prosecute in federal court as well as in state court. Twenty-eight criminal prosecutions were currently pending. Mr. Arberry expressed the concern that the Consumer Affairs Division had been created to be supported by fees and now the General Fund was supporting more of the Division. Ms. McKinney-James observed consumers needed protection in this area and in the last session it had been explained that using fees and penalties as a basis for this budget would not work. Ms. McKinney-James stated the General Fund was the only way for the program to provide its services. Nevada is in a unique situation because the state registers telemarketers who then practice their trade in other states and create a poor image for Nevada. Chairman Marvel said a public policy problem was involved and the joint money committees would need to decide if the vulnerable populations should or could be protected. Mr. Arberry asked if fees could be raised. Ms. McKinney-James said this could be explored; however, the people who registered were not the people who committed the frauds. Raising the fees on those willing to register would still not raise enough money to support the cost of the program. Mr. Spitler indicated he felt the consumer affairs function should not have been split between the Attorney General and Consumer Affairs. He asked if Nevada's liberal incorporation laws made it difficult to find the principals behind these businesses based in Nevada. Ms. Stanish said principals could be found for companies that were incorporated. Currently, most problems were caused by companies that were not incorporated and working out of an unknown location, and by the new forms of telemarketing such as telefunders and recovery services. Mr. Dini commented the reason for maintaining the Consumer Affairs Division was the national reputation of the State of Nevada, as telemarketers based in the state caused problems in other states, creating a negative perception. This affected tourism. He expressed concern that raising the fees too high would discourage legitimate businesses and no fees would be collected. Chairman Marvel reiterated this had to be pursued as a public policy issue. Ms. Giunchigliani concurred and observed the state had an obligation to protect consumers and constituents. She expressed concern that the budget would be based on fees, noting fees should be considered an additional source of revenue. She suggested the creation of a separate account where fees could be deposited and eventually applied back to the budget. Mr. Allard asked if fines could be raised on businesses found to be illegally telemarketing as an alternative to raising fees on legitimate businesses. Ms. Stanish said many times when legal action was taken against a telemarketer, bank accounts could not be located because the money was offshore or in cash. If money was located, the bank account was frozen and usually by court order was eventually returned to consumers. COMMISSION FOR HOSPITAL PATIENTS - PAGE 823 Ms. McKinney-James introduced Lise' L. Wyman, Administrator, Office for Hospital Patients, and indicated this office had been under the Division of Insurance. Chairman Marvel asked if a statutory change was required for this move and Ms. McKinney-James noted a bill draft request had been submitted. Ms. Wyman reported the office is located at 1850 E. Sahara Avenue, Suite 101, Las Vegas, Nevada 89158, and has an 800 telephone number to provide statewide access. The office was created in 1992 because at that time Nevada was first in the nation in hospital health care costs; the state has since dropped to number nine. To date the office has handled 1,133 cases, saving Nevadans over $1.7 million in hospital costs. The office has two staff members and jurisdiction over twenty-four hospitals. Statutory authority from NRS 679B.500 and NRS 439B.260 gives the office the ability to hear and arbitrate billing disputes between patients and hospitals. Typical issues include: accuracy or amount of charges billed to a patient; the reasonableness of payment arrangements; negotiating with hospitals for write-offs on bills for individuals of an indigent status; obtaining federal aid, such as Medicare; obtaining hospital discounts for those who are uninsured and ineligible for any type of state aid. Chairman Marvel questioned measurement indicator No. 3 on page 823, $70,000. Ms. Wyman indicated that was a typographical error and should read $700,000. Ms. Wyman observed the base budget was recommended by the Governor and that the M100 decision unit was standard. The M200 decision unit requests a part-time compliance investigator for increased caseload. Ms. Wyman deferred to Ms. Erickson, who said the E859 decision unit was an assessment to the Director's Office, standard in all Business and Industry budgets. Ms. Wyman distributed information about the Commission for Hospital Patients (Exhibit F). Mr. Spitler expressed his appreciation for help one of his unemployed constituents had received in negotiating reasonable payments with a hospital. Ms. Chowning also expressed her appreciation for help provided for constituents and inquired if hospitals were required to post a sign to inform uninsured patients they qualify for a 30% discount. Ms. Wyman said many hospitals did not notify patients of this right. Mr. Close requested Ms. Wyman add quality measurements to performance indicators. OFFICE OF PROTECTION AND ADVOCACY - PAGE 933 Chairman Marvel discussed a motion passed by the Interim Finance Committee stating that the work programs and budget of Protection and Advocacy remain within the budgetary control authority of the Legislature and retaining the legislative audit function as well. He stated a budget had not been submitted. Ms. McKinney-James indicated there was an expenditure plan for the Office of Protection and Advocacy. She explained the Office is a federally mandated program to provide for advocacy of people with developmental disabilities and for the mentally ill. Ms. McKinney-James introduced Mr. Travis Wall, Executive Director of the Office of Protection and Advocacy. Ms. McKinney-James noted in November, based on her recommendation, Governor Miller redesignated the agency from a state agency to a non-profit organization. Chairman Marvel observed Ms. McKinney-James also received direction from the Interim Finance Committee. Ms. McKinney-James deferred to Ms. Erickson who noted it had been her understanding that the federal granting agency only recognized one entity per state. Chairman Marvel indicated this was understood but the committee still needed a budget. Ms. Erickson indicated this could put the agency in violation of federal regulations. Chairman Marvel said he understood the budget contained state money. Ms. McKinney-James responded there was $62,000 in a General Fund appropriation. Mr. Spitler said his concern in allowing the agency to become non-profit had been that the federal government would not recognize two entities in terms of management of the agency. The state was ultimately responsible for the agency. Ms. McKinney-James provided copies of a letter (Exhibit G) from Governor Miller redesignating the Office of Protection and Advocacy. Chairman Marvel reiterated General Fund money was involved and closed the hearing on this budget pending submission of a budget. Ms. Giunchigliani questioned if the General Fund money could be backed out to make the agency totally non-profit. Ms. McKinney-James said the federal government required that protection and advocacy systems which were redesignated maintain the same level of state funding for the new entity. Ms. McKinney-James distributed an expenditure plan (Exhibit H) showing how the $62,000 General Fund appropriation would be used. Historically this money has been used to support personnel and would be used for the same purpose within the new Nevada Disability Advocacy and Law Center, Inc. Federal funding is also included in the expenditure plan. Ms. McKinney-James reported the expenditure plan was intended to comply with the Interim Finance Committee's requests. MENTALLY ILL INDIVIDUALS PROGRAM - PAGE 937 Chairman Marvel deferred this hearing until a budget is submitted. There being no further business, Chairman Marvel adjourned the hearing at 11:02 a.m. RESPECTFULLY SUBMITTED: Deborah Salaber, Committee Secretary Assembly Committee on Ways and Means February 2, 1995 Page