MINUTES OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS Sixty-eighth Session April 17, 1995 The Committee on Ways and Means was called to order at 9:08 a.m., on Monday, April 17, 1995, Chairman Jan Evans 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: Mrs. Jan Evans, Vice Chairman Mr. John W. Marvel, 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: Mr. Morse Arberry, Jr., Chairman (Excused) STAFF MEMBERS PRESENT: Mr. Mark Stevens, Fiscal Analyst Mr. Gary L. Ghiggeri, Principal Deputy Fiscal Analyst Chairman Evans requested Mr. Arberry be marked excused. Chairman Evans stated the Committee on Ways and Means would be meeting for joint budget closings at 10:00 a.m. with the Senate Committee on Finance. The agenda before the committee covered two items, one being the joint closing sheets to enable the committee members to become familiar with the format and also to address previously heard bills. Chairman Evans requested Mr. Stevens to address the format of the closing sheets. Mark Stevens, Fiscal Analyst, explained the closing sheets were what is called a difference report and reflected only those budgets which had been closed differently between the Assembly Committee on Ways and Means and the Senate Committee on Finance. The difference report did not reflect subcommittee closings. Mr. Spitler inquired if the committee would vote again once the budgets were closed the same way by the Committee on Ways and Means and the Senate Committee on Finance. Mr. Stevens replied the budgets would be closed unless reopened by a 2/3 vote of a committee. Mr. Stevens stated the meeting today was an effort to resolve differences between the two committees. Separate votes would be taken for the Assembly and the Senate, and a majority vote must be obtained both on the Senate side and the Assembly side for any resolution of differences in budget accounts which were closed differently. Mr. Stevens pointed out the Special Litigation Account would not be discussed as the Senate had not yet closed the budget. OFFICE OF EXTRADITION COORDINATOR - PAGE 61 Mr. Stevens called attention to the Office of Extradition Coordinator which the Senate closed as Governor's recommendation and the Assembly reduced the general fund and the out-of-state travel by $947. At the time of closing $947 was built into the base budget in each year of the biennium to allow staff from the program office to attend the national meeting of the organization. An amount of $947 for support staff to attend the meeting in the first year of the biennium was eliminated by the Assembly. Mr. Fettic asked if a bracket meant a negative number. Mr. Stevens explained a bracket meant a negative number and no brackets meant the amount was added to the budget. Mr. Marvel commented it was hoped the motion would be to go with the Assembly. Chairman Evans pointed out most of the time the motion would be to go with the Senate. However, sometimes there is a heated debate, in which case the budget is held until the differences are resolved. COMMISSION ON POSTSECONDARY EDUCATION - PAGE 279 Mr. Stevens pointed out the Assembly had closed this budget account, but he requested Dan Miles, Fiscal Analyst, to include it on the Senate closing sheets as a discussion item. The issue was deferring the annual maintenance charges on computers. There was $1,600 built into the budget for maintenance costs for four personal computers in each year of the biennium. The Assembly side voted to eliminate from the budget the $400 charge on personal computers for maintenance costs, pool the money, and fund it at 50%. Some mechanical problems needed to be resolved. In some cases the $400 was charged on new machines, some cases it included existing machines, and some it was not included at all. If $400 on each machine was removed from the budget, a funding source must be determined to fund the pool. The only remaining funding source is from the general fund. If the funding source is cut in half, the general costs still remain, and the nongeneral fund costs are eliminated from the budget. To recoup the nongeneral fund money, $200 could be left in the budget, then extracted and pooled, and the pool used for maintenance. However, there would be federal funds in the pool, and an agreement would be required with the federal government on how the funds would be used. Mr. Stevens commented the budget was dealing with new and existing personal computers. Any equipment repair or maintenance agreement funds for existing machines was built into the base budget. One option is to have the analysts determine what the amount is for each individual budget so the funds can be extracted from the base and included in the overall pool for maintenance funds. Another option is to assess $200 per personal computer without regard to how much money is spent on maintenance or equipment repair. A third option is to have the Executive Branch provide an integrated plan in the next biennium which would be built into the budget from the beginning. Mr. Marvel commented the maintenance charges were a mechanical nightmare. If the Senate did not agree with what the Assembly arrived at, a great deal of the time will have been wasted. He inquired if Mr. Stevens had a better alternative in dealing with the maintenance charges. Mr. Stevens stated the $400 could be left in the budget, it could be cut by 50%, it could be eliminated completely with instructions to the agencies to purchase an extended warranty to the end of the biennium and then integrate maintenance into a pool two years from now. Mr. Hettrick suggested discussions be held with the Senate to determine if there is common ground for agreement before directing staff one way or the other. He stated the computers could probably be purchased with extended warranties and that pooling was the remaining issue. Mr. Dini pointed out the only reason the Assembly had moved in this direction was because they were trying to micro manage every budget. Pooling would allow a request to be made of the Department of Administration for funding. Mr. Marvel expressed his concern with the mix of money, what was federal, what was general fund and what was fee money. He suggested the purchase of new computers include extended warranties. Ms. Tiffany inquired if it was easy to determine which computers were new. Mr. Stevens said staff could determine many times which computers were new, but not in 100% of the cases. Ms. Tiffany inquired about the cost and time involved with extended warranties. Mr. Stevens responded he would need to research the information. Ms. Tiffany commented extended warranties could cost up to $400, so purchasing extended warranties might not be a good solution. She recommended computers be purchased with a 12-month warranty, pooling of funds, going to the Senate with a solution, and a letter of intent be sent to the Department of Administration or the Department of Information Services. Chairman Evans inquired what was generally covered by extended warranties. Ms. Tiffany said the warranties depended on profit margin and what the person from whom you are buying the system paid for the system. A 12-month warranty with parts, service, and labor should be a minimum and included in the cost of the hardware. The extended warranty would be the next 12 months, which is variable in price. Mr. Allard stated he thought the original idea was to remove all the funding for maintenance from the budget, put it in an account, and if a warranty was not included, money could be drawn from the account. Mr. Stevens noted there were two or three ways that could be done as had been previously described. Chairman Evans inquired how easy it would be to determine what was included in general fund, highway fund, or other kinds of sources. Mr. Stevens remarked if a determination could be made on how much was included in the budget, staff could calculate how the money was funded. The larger problem was determining how much money there was. Mr. Marvel stated he agreed with Mr. Hettrick's recommendation that the committee discuss possible solutions with the Senate. If the chair was willing, he would make a motion to rescind the action of April 13, 1995. * * * * * MR. MARVEL MOVED TO RESCIND THE ACTION OF APRIL 13, 1995. MS. TIFFANY SECONDED THE MOTION. * * * * * Mr. Close agreed with the motion and encouraged the committee members to consider maintenance agreements during the next biennium and urged staff to send a letter of intent regarding the issue. Chairman Evans called for a vote on the motion. * * * * * THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE WITH MR. ARBERRY ABSENT AT THE TIME OF THE VOTE. * * * * * Don W. Hataway, Chief Assistant Budget Administrator, Budget Division, commented the Budget Division staff and the Legislative Counsel Bureau staff would meet during the biennium to work out the details of how the maintenance costs should be addressed in the budget. Mr. Stevens requested direction from the committee regarding the maintenance costs for personal computers. NEVADA STATE MUSEUM - PAGE 401 Mr. Stevens remarked the only difference in the base budget was increased admissions revenue and a corresponding difference in the general fund by the same amount. The Senate would either go with the Assembly or would reopen the budget and close to match the Assembly. HISTORIC PRESERVATION AND ARCHEOLOGY - PAGE 431 Mr. Stevens pointed to a couple of differences in the budget closings. The first one was in decision unit M-300 where the Executive Budget was funded 100% by general fund dollars as closed by the Senate. The federal Historic Preservation grant would pay for 60% of decision unit M-300. The Assembly closing reflects a 60%/40% split between federal and state governments, with a savings of $9,931 in the first year of the biennium and $11,131 in the second year of the biennium from the general fund. The Senate and the Assembly closed the historic marker program as reflected in decision unit E-475 by removing $1,000 in each year of the biennium. The Senate utilized tourism dollars in the amount of $10,000 in each year of the biennium to fund the historic marker program. The Assembly closed the budget by removing $1,000 in each year of the biennium and funding $20,000 through a one-shot appropriation. DEPARTMENT OF PERSONNEL - PAGE 653 Mr. Stevens indicated the budget was forced to be printed by changing the balance forward on the Assembly side by $1.00. In essence, the budget was closed the same by the Senate and the Assembly, but there were outstanding issues on the Assembly side which needed to be addressed. The Assembly removed the Business Process Reengineering (BPR) from the Department of Personnel budget. It was recommended all BPR's be removed from all budgets in order that they be prioritized at a later date. The result would be that the BPR might be added back into the Department of Personnel budget if it was included in the prioritized list of BPR's. A 2/3 vote would be required by the Assembly and the Senate in order to reopen the budget if it were closed without the BPR issue being addressed. Mr. Marvel indicated he had informal discussions with the Senate Committee on Finance, and he felt they would want to prioritize the BPR studies. Chairman Evans pointed out there were lengthy discussions in the Joint Subcommittee on General Government regarding BPR issue. Ms. Tiffany stated Ms. Kavanau prioritized the BPR studies and a decision needed to be made whether there would be one, two or a number of studies. Mr. Stevens stated after the Department of Personnel is closed jointly by both committees and the expenditure level is determined, the committees need to review the assessment rate to decide if the reserve is too high. The closing shows the reserve level to be in excess of $1 million by the second year of the biennium, which is probably excessive. OFFICE OF THE MILITARY - PAGE 2031 Mr. Stevens indicated the Senate provided additional federal receipts for increased utilities in the amount of $174,588 in the first year of the biennium and $180,106 in the second year of the biennium. Mr. Stevens requested calculations to justify the additional utilities, and it was determined after the Senate closed the budget that the increased utility funds were not needed. The Assembly closed the budget without the additional funds, and the Senate would probably close with the Assembly. PUBLIC EMPLOYEES RETIREMENT SYSTEM - PAGE 2043 Mr. Stevens noted the Assembly reduced the Police and Fire Advisory Board out-of-state travel in decision unit E-125 by approximately $4,500 and reduced the number of members traveling from five to three. The operations office and investment analyst salaries were reduced from levels requested by the agency to 4% in the first year of the biennium and 3% in the second year of the biennium in decision Unit E-800, which resulted in a $2,705 reduction in the first year of the biennium and $4,166 reduction in the second year of the biennium. The Senate budget closing complied with the request from the retirement system that the out-of-state travel be increased. The Executive Budget includes one trip by each member of the retirement board in each year of the biennium. The amended request would provide for two out-of-state trips per year for each retirement board member, which adds approximately $13,000 to the budget. The actual expenditures for out-of-state travel were $19,726, and the Governor recommended $29,444, a 49% increase. The Assembly actions would result in a 32% decrease and the Senate action would result in an 86% increase over actual. ASSEMBLY BILL 135 Revises provisions governing repayment of financial support received by students from Western Interstate Commission for Higher Education. Mr. Stevens stated A.B. 135 involved the WICHE program and provided authority 1) for the WICHE director to negotiate repayment agreements for funds due the WICHE program, 2) to discharge the financial obligation upon the death of a student, and 3) to place in statute the starting date for when interest begins to accrue. There were issues raised by the committee and amendments requested by the agency as depicted in a handout provided by Mr. Stevens (Exhibit C). The suggested amendment for section 13 would allow the commission to accept grant funds from private sources to provide additional contract places in the WICHE program over and above the ones funded in the Executive Budget. The suggested amendment for section 14 would require students who graduate from accredited physicians' assistants programs to fulfill their requirements by practicing in rural areas only. There were two additional issues raised by the committee: 1) Was the 8% interest rate assessed on student loans adequate or should it be modified. The agency felt the 8% interest rate was adequate and was easier for them to administer versus a sliding scale which would change every 6 or 12 months. 2) Was WICHE a tax-exempt organization. Included in Exhibit C was a copy of a letter from the Attorney General stating WICHE was a tax-exempt organization. Ms. Giunchigliani inquired if there had been any response from Mr. Sparks regarding the commission taking a look at the issue of need. Mr. Stevens remarked if there were two students who had an equal score, financial need is taken into consideration. Ms. Giunchigliani asked where that was stated. Mr. Stevens said he could research the answer. Mr. Hataway stated it came from the WICHE program policy. Ms. Giunchigliani questioned when need was added to the WICHE policy. Mr. Hataway responded right after the last session, so it had been in existence for approximately two years. * * * * * MR. MARVEL MOVED TO AMEND AND DO PASS A.B. 135. MR. HETTRICK SECONDED THE MOTION. * * * * * Mr. Close referred to page 2 of Exhibit C where Mr. Sparks states, "I would like to pursue further the implementation of allowing the commissioners to set the interest rate at the beginning of the fiscal year based on the going student loan rate." Mr. Close inquired if that was planned for this biennium. Mr. Stevens pointed out the WICHE commissioners would like interest set at 8%. Ms. Giunchigliani inquired if Mr. Sparks was suggesting a national comparison of student interest rates should be made. Mr. Stevens stated he was not aware of that suggestion. Ms. Tiffany asked if an insurance policy paid for by the student to cover these costs had been considered. Mr. Stevens replied he was not aware of such a request. Ms. Tiffany inquired what a policy like that would cost. Mr. Stevens stated the price would be determined by the type of policy. Mrs. Chowning noted Exhibit C states at the bottom of page 2, "remove the current interest rate of 8% and add language to allow the commissioners to set the interest rate based on the prevailing rate for student loans." Mr. Stevens pointed out the paragraph above states, "A question was raised concerning the current interest rate of 8% and if it is high enough to give student the incentive to return to practice in Nevada. I believe this interest rate is adequate enough to accomplish the mission and goals of WICHE." Mr. Stevens believed the 8% interest rate is where WICHE would like to be. Mrs. Chowning stated she did not believe WICHE should have free reign to set the interest rate. Mr. Hataway explained it was his impression after talking with Mr. Sparks that the commission wanted to continue with the 8% interest rate. Mrs. Chowning wanted to confirm the amendment said 8%. Mr. Stevens indicated that language was included in the bill on page 2, subsection 3. Mrs. Brower requested the language regarding the possibility of the student dying, leaving payments and discharging the debt be included in an amendment or a letter of intent suggesting that it be policy to require an insurance policy. Mr. Allard remarked he had made the suggestion of setting the interest rate at prime plus 2 points at the beginning of each fiscal year to allow the commission to be in touch with the money markets. * * * * * MR. MARVEL WITHDREW HIS MOTION TO AMEND AND DO PASS A.B. 135. MR. HETTRICK WITHDREW HIS SECOND. * * * * * Chairman Evans adjourned the hearing at 10:02 a.m. At the conclusion of the Joint Budget Closings, the Committee on Ways and Means reconvened at 10:38 a.m. as follows: Mr. Price pointed out there may be a legal problem because the meeting had been adjourned and a new agenda had not been posted. ASSEMBLY BILL 183 Authorizes issuance of revenue bonds for construction of building for applied technology center at Truckee Meadows Community College. Mr. Stevens explained A.B. 183 was a revenue bond in the amount of $1.2 million for the Truckee Meadows Community College. * * * * * MR. MARVEL MOVED TO DO PASS A.B. 183. MR. DINI SECONDED THE MOTION. * * * * * Ms. Giunchigliani inquired if the bill only affected Truckee Meadows Community College. Mr. Stevens replied this bill was only for Truckee Meadows Community College for the Applied Technology Center. There was a separate bill for the student union at the University of Nevada, Reno. Ms. Giunchigliani suggested the impact on the budget should be reviewed as a result of the addition of buildings, and Mr. Stevens agreed. Chairman Evans called for a vote on the motion. * * * * * THE MOTION PASSED BY VOICE VOTE WITH MS. GIUNCHIGLIANI VOTING NO. MRS. BROWER, MRS. CHOWNING AND MR. ARBERRY WERE ABSENT AT THE TIME OF THE VOTE. * * * * * ASSEMBLY BILL 233 Makes appropriation to state department of conservation and natural resources for flat file for Nevada Tahoe regional planning agency to store maps. Mr. Stevens noted A.B. 233 was a small one-shot appropriation in the amount of $1,200 and was included in the Executive Budget. * * * * * MR. DINI MOVED DO PASS A.B. 233. MR. HETTRICK SECONDED THE MOTION. * * * * * Ms. Giunchigliani said it was inappropriate to do little one- shot appropriations when in reality the money ought to be built into the budget. Mr. Hataway explained the bill was for an equipment acquisition, and under the definitions it would be work programmed into the FY 1996 budget after passage and removed from the base budget during the 1997-99 biennium. Chairman Evans called for a vote on the motion. * * * * * THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE WITH MRS. CHOWNING AND MR. ARBERRY ABSENT AT THE TIME OF THE VOTE. * * * * * ASSEMBLY BILL 235 Makes appropriation to division of conservation districts of state department of conservation and natural resources for replacement of office equipment and computer hardware and software. * * * * * MR. MARVEL MOVED DO PASS A.B. 235. MR. DINI SECONDED THE MOTION. * * * * * Ms. Giunchigliani suggested the motion be made pending whatever is done regarding the maintenance issue so Mr. Stevens can clarify the issue and bring it back if necessary. Chairman Evans called for a vote on the motion. * * * * * THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE WITH MRS. BROWER, MRS. CHOWNING AND MR. ARBERRY ABSENT AT THE TIME OF THE VOTE. * * * * * ASSEMBLY BILL 256 Increases penalty for abuse, neglect or endangerment of child where substantial bodily or mental harm results. Mr. Stevens noted A.B. 256 had been heard previously, but the committee did not have the fiscal note at that time. The fiscal note has since been included in the budget books and reflects there will be no fiscal impact as a result of the bill. * * * * * MR. CLOSE MOVED DO PASS A.B. 256. MR. ALLARD SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE WITH MRS. BROWER, MRS. CHOWNING AND MR. ARBERRY ABSENT AT THE TIME OF THE VOTE. * * * * * ASSEMBLY BILL 263 Authorizes issuance of revenue bonds for improvement of student union building at University of Nevada, Reno. * * * * * MR. MARVEL MOVED DO PASS A.B. 263. MR. DINI SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE WITH MS. GIUNCHIGLIANI VOTING NO. MRS. BROWER, MRS. CHOWNING AND MR. ARBERRY WERE ABSENT AT THE TIME OF THE VOTE. * * * * * ASSEMBLY BILL 315 Makes supplemental appropriation to School of Medical Sciences of the University and Community College System of Nevada for certain unforeseen expenses relating to Family Practice Residency Program and Family Medicine Center. Mr. Stevens noted A.B. 315 was a supplemental appropriation to the School of Medical Sciences in the amount of $135,829. During the prior legislative session there was a contingency fund allocation provided to the medical school for approximately $180,000 at the end of FY 1994. There were Medicaid funds built into the medical school budget to finance the medical school for the current biennium. The method for allocating the funds was changed, resulting in a revenue shortfall. A.B. 315 would restore a portion of the funds lost due to the change in funding. * * * * * MR. MARVEL MOVED DO PASS A.B. 315. MR. DINI SECONDED THE MOTION. * * * * * Ms. Tiffany inquired if the bill would be an ongoing expense. Mr. Stevens explained the bill addressed the managed care program currently in place at the medical school. The fee associated with processing was reduced and resulted in a revenue shortfall to the school of medicine. The amount included in the bill was not all of the shortfall but would make the medical school whole for FY 1995. Ms. Tiffany said it looked like this situation occurred in FY 1994 also. Mr. Stevens noted there was a contingency fund allocation from the Interim Finance Committee (IFC) to provide additional state funding to the medical school for the same purpose in FY 1994. Mr. Hataway stated the school of medicine originally requested during IFC an allocation for both years of the biennium, and the Budget Division recommended that further savings could be developed in 1995. As a result, IFC only allocated for FY 1994, and the bill would make the school of medicine whole for FY 1995. The fiscal year budgets for 1996 and 1997 reflect the current rates. The program is an ongoing program to provide residency training as well as a service program. Ms. Tiffany asked what would happen if the program was not funded. Mr. Hataway indicated the school of medicine provided reports which compared what a private provider would do versus their residency program through the school of medicine. There were several million dollars worth of savings by going through the school of medicine program versus a private provider. If the program was not funded, the residency students would be reassigned to other hospitals and training programs. The people receiving the service would have to seek services at other places. Ms. Tiffany inquired if the allocation was primarily for salaries. Mr. Hataway said the allocation was for a certain number of positions plus the payment to the residents, yes. Mr. Close stated he had no problem with intent, but he expressed an objection to the process of not providing funding through the budget. If the Governor knew the funding would be requested, he should have included it in the Executive Budget. Mr. Hataway stated Mr. Close's assumptions were not correct. The budget was closed two years previously based on a certain rate. The rates were changed after the legislature left. Mr. Marvel noted the rates were cut by half. Mr. Hataway continued by stating the difference was being picked up between what the rate was anticipated to be and what it is now. The subsequent two-year budget is based on what welfare indicates the rates will be. Mr. Close re-asked his question regarding why the Governor did not include those figures in the Executive Budget. Mr. Hataway explained the Governor included the current funding stream received from Medicaid. Ms. Giunchigliani remarked she was not convinced the program was needed. Mr. Spitler inquired if Medicaid could change these things on a very short notice. Mr. Hataway stated the documentation he saw indicated Medicaid started discussions in approximately December and the final decision was not made until roughly six months later. Chairman Evans called for a vote on the motion, noting she would not be voting, as she was an employee of the University of Nevada, Reno, School of Medicine. * * * * * THE MOTION FAILED WITH MRS. BROWER, MRS. CHOWNING AND MR. ARBERRY BEING ABSENT AT THE TIME OF THE VOTE. MRS. EVANS ABSTAINED. * * * * * Mr. Dini indicated the program had saved $10 million to $12 million since its inception, had provided better care for patients in Las Vegas and Reno and had provided great training for the residents. How that was measured in dollars would be difficult to assess, and Mr. Dini did not see how the committee could vote against the bill that was doing what it was intended to do. Ms. Tiffany stated she voted against the bill because the legislature was funding the mismanagement of the school's managed care program. Nevada Care had the same number of patients as the medical school, and they were not supplemented by the legislature. The medical school was under the same requirements as a private sector company and was not successful in their management. Mr. Hataway responded he did not feel this was a case of mismanagement. The program reduced staff, which was why the appropriation was less. All efforts were made to keep the program going in spite of a decision made after the budgets were closed two years prior. Ms. Tiffany noted there was a difference in structure and funding between Nevada Care and the medical school, and it was more than a rate structure. Mr. Hataway pointed out if the bill was not passed, the medical school would have to cut $135,000 from their budget, which would be from the teaching program. Mr. Fettic commented he thought the problem was not mismanagement but a change in the revenue stream, and Mr. Hataway responded that was correct. Chairman Evans inquired who effected the change in the revenue stream. Mr. Hataway replied the Department of Human Resources set the rates based on federal guidelines and availability of funds. Mr. Stevens noted the total shortfall due to the rate change was approximately $208,000. The medical school had projected savings of approximately $73,000, which resulted in the bill figure of $135,829. Mr. Price advised the committee that his wife was a member of the Board of Regents and could provide some outside influence that could affect the budget one way or the other. Chairman Evans requested staff to put together a summary of the events that transpired regarding the bill. Ms. Giunchigliani stated issues had been raised which required answers regarding the need of the residency program, the way the program was being run, a breakdown of the staffing costs for doctors' salaries versus the costs for Medicaid, and why would the teaching budget be the only budget cut. Mr. Marvel requested information on what the cost to the state of Nevada would be without the program. There being no further business, Chairman Evans adjourned the hearing at 11:02 a.m. RESPECTFULLY SUBMITTED: Jonnie Sue Hansen, Committee Secretary Assembly Committee on Ways and Means April 17, 1995 Page