MINUTES OF the ASSEMBLY COMMITTEE ON WAYS AND MEANS Sixty-eighth Session MAY 1, 1995 The Committee on Ways and Means was called to order at 8:00 a.m., on Monday, May 1, 1995, Chairman Assemblyman 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 STAFF MEMBERS PRESENT: Mr. Mark Stevens, Fiscal Analyst Mr. Gary Ghiggeri, Deputy Fiscal Analyst Assembly Bill 132 Revises provisions governing crimes relating to federal food stamps. Gary Stagliano, Chief of Investigations and Recovery, Department of Human Resources, Welfare Division, testified A.B. 132 is a housecleaning bill to bring Nevada law into compliance with federal Food Stamp Program statutes. (Exhibit C) He noted A.B. 132 was amended in the Assembly Judiciary Committee to soften the criminal penalties suggested by the Nevada Division of Investigations in the original bill draft. Chairman Marvel questioned the fiscal impact of this bill. Mr. Stagliano said there is not a fiscal note. He clarified the bill was sent to Ways and Means because of the concern that the stipulation of aggregation of multiple misdemeanor violations to allow for felony prosecution would increase the prison population. Typically, however, when someone is convicted of a food stamp related crime, especially a first offense, the normal sentencing would be 3 years probation and restitution to the agency in the amount improperly obtained. Chairman Marvel asked how many fraud cases are prosecuted per year and what is the typical sentence. Mr. Stagliano responded the Welfare Division prosecutes an average of 150 cases of criminal fraud per year. The sentence is typically 3 years probation, a gross misdemeanor conviction and full restitution to the agency. Chairman Marvel questioned the rate of repeat offenders. Mr. Stagliano stated there are a few repeat offenders. Chairman Marvel referred to the recent mail fraud case and asked if it had been resolved. Myla Florence, Administrator of the Welfare Division, noted there has been no resolution to that case. Ms. Giunchigliani asked for clarification of what language was proposed by the Welfare Division, the Nevada Division of Investigations and amended by the Judiciary Committee. Mr. Stagliano responded the Nevada Division of Investigations requested the aggregation of multiple misdemeanor violations to allow for felony prosecution. Additionally, they requested the language on line 15, "...sells and purchases". Ms. Giunchigliani asked if someone purchases food stamps that were not issued to them or sells food stamps issued to them would they be charged. Mr. Stagliano answered affirmatively. She referred to subsection 6 of section 1 and asked if this provision allows a "comfort level" for people who sold or transferred their food stamps to buy certain necessities. Mr. Stagliano said this section is in direct conflict with the federal regulations. Chairman Marvel asked for an estimate of the dollar value lost annually on food stamp fraud. Mr. Stagliano noted approximately $500,000 annually is identified as incorrectly dispersed benefits. Mr. Close inquired how many of the approximately 150 fraud cases annually are above the amount of $250 cited in subsection 2(b). Mr. Stagliano explained the average food stamp benefit is approximately $90 per month for a single person. Currently, absent of the aggregation clause, each month is charged as one individual misdemeanor crime. This bill allows the Welfare Division to take those months of continuous misrepresentations to aggregate together and call it a felony. Chairman Marvel asked if the Welfare Division is satisfied with the amended bill. Mr. Stagliano answered affirmatively. Mr. Fettic referred to earlier testimony and asked what dollar amount of incorrectly paid benefits is actually fraud. Mr. Stagliano explained if there is insufficient evidence to enter into the criminal arena, there are lesser methods of prosecution such as administrative penalties. Chairman Marvel asked what is the percentage of recovery by restitution. Mr. Stagliano responded approximately 10 percent. Mrs. Chowning wondered when the electronic benefits transfer program could be implemented in Nevada. Mr. Stagliano noted it has been introduced nationally and some states are experimenting with the program. Ms. Florence said the Welfare Division has had some discussion with both the Controller's and the Treasurer's offices regarding the electronic benefits transfer program but it is years down the road to actual implementation. She noted the division is engaged with NOMADS right now. Martin Roberto, Criminal Investigator with the Nevada Division of Investigation testified he has been working with food stamp fraud cases involving stores that purchase food stamps from recipients. His testimony is contained in (Exhibit D). The intent of this bill is to allow law enforcement to prosecute food stamp fraud as a felony. Local store owners purchase the stamps for 50 cents on the dollar and in turn redeem them for full value. Chairman Marvel asked how prevalent is this fraud statewide. Mr. Roberto said there is a higher percentage of fraud in Las Vegas. Nationally, food stamps are considered an underground currency. Ms. Giunchigliani asked if fraud above $250 is considered a felony. Mr. Roberto said currently it is $250 or more. However, this bill allows law enforcement to aggregate within a 6 month period and if it does go over the $250 minimum then the crime can be charged as a felony. Ms. Giunchigliani asked for further clarification of subsection 6. Mr. Roberto said the intent is to target the store owners not the recipients. Ms. Giunchigliani referred to subsection 2 and asked for further explanation why the language was amended to include "sells or purchases". Mr. Roberts explained currently the law states any person who "uses, transfers, or acquires...." and prosecutors needed the wording "sells or purchases" because of the gray area with the term "acquires". Mr. Close asked why people were coming from California to redeem the stamps in Nevada. Mr. Roberto said California does have a law regarding food stamp fraud but people were redeeming their stamps in Reno at a specific market because it was so blatant and word had spread. The U.S. Department of Agriculture is the overseer of the Food Stamp Program and monitors 300 programs with only 300 investigators nationwide. Because of that nobody is really working food stamp fraud at a state level. However, the Division of Investigation is hoping to pick it up on a state level in Nevada and go after this type of fraud and the people purchasing the stamps. Chairman Arberry asked what is the involvement of major food chain markets in purchasing food stamps. Mr. Roberto said it is the little "mom and pop" type of stores that purchase the stamps rather than the large chain markets. Assembly Bill 338 Removes certain restrictions governing disposition of certain fees imposed by justices' courts. Woody Thorne, Deputy Executive Director of the Department of Taxation, testified A.B. 338 modifies the provisions of NRS 4.065 concerning the use of justice court fees for the funding of the State Demographer contract costs. Currently the language provides for the use of the additional $1 fee for the incremental cost of the township population estimates. The recommended change is to remove the restriction since the work of State Demographer currently being provided forms the basis for the township population estimates and therefore it is logical the fee should be applied to the entire cost. The offset for utilizing the fees from the justice courts for the entire State Demographer's cost is a reduction in the add on to the cigarette tax administrative fee which will increase the distribution back to the local entities. Chairman Marvel asked what is the impact on the State General Fund. Mr. Thorne said there is no impact. It implements the Department of Taxation budget but it is an offset because of the utilization of the justice court fees on the one hand but the decrease of the add on to the cigarette tax administrative fee on the other. Mr. Thorne continued the second portion of the bill removes the permissive refund provision. The current level of the reserve refunds will make up the gap between the justice court fees and the State Demographer cost. The way the fees and the State Demographer costs are projected, the reserves should be sufficient until the fees rise to meet the State Demographer costs on an ongoing basis. Assembly Bill 390 Entitles classified state employees to receipt of retention bonus. Bob Gagnier, Executive Director of SNEA/AFSCME, testified A.B. 390 is a bill requested by SNEA that would provide for a retention bonus for classified state employees who have worked without a pay raise since October 1991. The bonus would be a flat dollar amount of $25 for each month of continuous state service back to October 1991. A precedent for the retention bonus was set under exactly the same set of circumstances. In 1983, there was a fiscal emergency and state workers agreed not to ask for a pay raise during the 1983 session. The 1983 legislature adopted a small triggered pay raise for 1984 but the threshold was so high an increase was difficult. As a result of the actions taken during the 1983 session, there was a surplus for the 1985 session. During the 1985 legislature, a retention bonus was negotiated at 6.5 percent of the salary earned during the 12 months ending June 30, 1985. That amounted to considerably more than what is requested in A.B. 390. In 1985, a percentage bonus was proposed; A.B. 390 calls for a flat dollar amount in order to benefit the lower paid state employees more than the upper level employees. Mr. Gagnier continued part of the reason for the large state surplus is there have been no pay raises nor has the state properly funded the health plan since 1991. He requested the committee consider to allow the employees who "stuck it out" during the bad times to share in the good times. Mr. Gagnier clarified the fiscal note for A.B. 390 is actually under the fiscal note for A.B. 379. Chairman Marvel asked how many state employees would be affected by the retention bonus being proposed. Mr. Gagnier stated the Department of Personnel estimates 8,000 employees in the regular state services and approximately 1,000 in the university system would be eligible to receive the $1,125 bonus. Whether those employees are funded through the general fund is not known because the Department of Personnel in preparing the fiscal note lumped them all together. Mr. Dini commented on the importance of finding a formula to bring state employees pay up to parity. Maybe the state cannot afford the 12 percent requested, but a retention bonus is a good idea to reward the dedicated state employees. Ms. Giunchigliani asked if the retention bonus to state employees in 1985 was based on a percentage or a flat rate. Mr. Gagnier said in 1985 state employees were granted 6.5 percent of the gross salary for the preceding 12 months. Mr. Gagnier concluded the proposal is a one-shot appropriation that does not affect the base salary of state employees. Assembly Bill 392 Increases salaries of classified state employees. Bob Gagnier, Executive Director, SNEA/AFSCME, testified A.B. 392 provides for a 12 percent pay raise for classified state employees. The 12 percent proposal is a result of a report from a labor economist based on the increase in the cost of living since July 1, 1991 through June 30, 1995, minus the 4 percent state employees received in October 1991. In responding to questions from the Senate Finance Committee on how the administration arrived at their proposed 4 percent and 3 percent, the Budget Director agreed the cost of living had gone up 12 percent. Unlike previous sessions, he noted the request is only for the first year of the biennium based on the 12 percent. If the legislature does not approve the 12 percent, then an additional cost of living increase the second year is in order. Mr. Gagnier summarized state employees have not received a pay increase since October 1, 1991; the cost of living has gone up 12 percent; and the Department of Personnel salary survey shows Nevada State employees are paid on an average 13.5 percent less than similar positions in public and private employment within the state of Nevada. Mr. Gagnier reviewed a survey conducted by SNEA showing jobs in state government are consistently paid less than comparable jobs in local government entities. Mr. Gagnier pointed out state government employees take home pay was cut due to the increase in dependent health insurance. Regardless of the pay raise this session, it will be reduced by larger contributions to the retirement system. He continued 32 percent of state employees are classified as professional and 16 percent are in protective services. Approximately 100 correctional personnel leave state service annually. Las Vegas Metro pays a correctional officer $5.10 more per hour. Washoe County pays correctional officers $3.67 more per hour. Mr. Gagnier summarized a letter from a state employee detailing her difficult situation financially but also how state employees are feeling unappreciated. Chairman Marvel asked how many state employees have reached the top of the pay grade. Mr. Gagnier said 40 percent no longer qualify for step increases. Mr. Gagnier read a quote from Governor Miller: "It is my opinion that state employees salary increases should remain a priority. If later in the session revenue forecasts increase, we should consider additional compensation for these dedicated public employees." Mrs. Evans commented she is aware of several state employees who had to drop their dependent coverage because of the high cost. Additionally, she commented on the need to review the step increment system in state government. Mr. Gagnier said 1975 was the last time the number of steps was increased. He added the spread from step one to the top step takes seven years. Mrs. Evans noted she was not suggesting increasing the steps an alternative to a pay increase, but rather the time has come to re-examine the step increment formula. Chairman Marvel asked what is the basis for a step increase. Mr. Gagnier said the employee must receive an evaluation of "standard" or better in order to receive the step increase. Ms. Giunchigliani asked what is the pay ratio for the step increases. Mr. Gagnier said the steps are approximately 4.4 percent apart. Originally there was a 5 percent differential between each grade and step but that was changed because in July 1, 1970, all state employees received a $50 across the board raise and in 1981, there was an increase of 8 percent plus $100 across the board. Ms. Giunchigliani asked how many classified employees have been reclassified since 1991. Mr. Gagnier said he did not have that answer. He referred to an interim personnel study chaired by Mr. Dini which recommended the Department of Personnel do occupational studies on a periodic basis on all classifications. The report is near completion. Ms. Giunchigliani asked for a percentage equivalent on the salary increase request and the retention bonus in A.B. 390. Mr. Gagnier said he would provide that information. Mr. Allard asked how Nevada state employees' salaries compare to state employees' salaries in other states. Mr. Gagnier referred to a Department of Personnel survey of public and private employment distributed to legislators recently. Mr. Allard recalled that survey revealed Nevada state employees' salaries were above average. Mr. Gagnier said that survey was distorted because California was omitted. Mr. Allard questioned if a study had been done on actual earning power, considering the cost of living and state income tax in California. Mr. Gagnier said he was not aware of such a study. He noted the cost of living in California is higher but the correctional officer in California is paid $1,300 more a month than in Nevada. Mr. Hettrick asked if the incremental steps were a cumulative 4.4 percent per step or 4.4 percent of the original salary. Mr. Gagnier said the percentages are cumulative per step. Galen Mitchell, representing the State of Nevada Peace Officers Association, said he is a retired State of Nevada officer and introduced Art Rader, an officer with the Department of Parole and Probation. Mr. Mitchell said state workers have sacrificed in the past and they are due for a salary increase. Mr. Dini drew attention to a recent survey showing a first step deputy sheriff in Elko makes a higher salary than a Nevada highway patrolman. Mr. Mitchell said local law enforcement agencies are "stealing" trained highway patrolmen. Mr. Rader pointed out the Department of Parole and Probation is the third largest police force in the state. It is common for officers within the Department of Parole and Probation to leave state service for higher salaries with local entities. Additionally, Parole and Probation officers are prohibited from outside employment because of the possibility encountering an offender. He asked that the restriction from outside employment be lifted if the officers do not get a raise. Mr. Rader also noted the disparity in wages is compounded because the pension payment for state employees is deducted from the salary where other local government entities the retirement is over and above the salary. Gary Yoes, Political Action Coordinator for SEIU Local 1864, testified although SEIU chose to work within the confines of the budget process rather than submit a bill for salary increases, he added his support to A.B. 392. He pointed out more than 500 families had to drop their dependent coverage because of skyrocketing premiums. He added his support to A.B. 390 but pointed out a bonus should never take the place of a salary increase. His testimony is included in (Exhibit E). DIVISION OF CHILD AND FAMILY SERVICES - SUBCOMMITTEE REPORT Mrs. Evans presented the Subcommittee on Human Resources/K-12 report on the Division of Child and Family Services. The report is included as (Exhibit F). Chairman Marvel asked about the collection of Title XIX monies. Mrs. Evans responded the subcommittee endorsed the collection of Title XIX monies by encouraging the agency to vigorously pursue those collections. Ms. Giunchigliani referred to the Youth Community Services (Child Welfare) budget and requested further clarification if a Medicaid shortfall should occur. Larry Peri, Fiscal Division, stated currently the expenditure authority in Category 17 is lumped into a $400 million plus expenditure category in the Welfare Division. It is proposed that a separate expenditure category within the Welfare Division's Medicaid budget be created solely for the Division of Child and Family Services. If a shortfall does occur, the Children's and Welfare Division would need to approach the Interim Finance Committee. This would provide IFC the opportunity to receive a report on the shortfalls and examine the issue more closely. It provides more control. It does not change amounts or the type of expenses but simply isolates the Medicaid authority for the Division of Child and Family Services. Ms. Giunchigliani asked if there is a cap on the expenditures. Mr. Peri responded there is no cap other than the amounts currently recommended in the budget - FY 1996 $16, 422,379 and FY 1997 $17,208,410. Those would compare with projected expenditures of almost $19 plus million in the current fiscal year. Chairman Marvel referred to the Nevada Youth Training Center budget and asked if the subcommittee was aware of a new detention facility being planned for Elko, Eureka and White Pine Counties. Mrs. Evans said Senator Rhoads told the subcommittee about the proposal. Mr. Hettrick commented the information the subcommittee received on the proposal is the facility would be a true detention facility and would have no bearing on the China Spring Youth Camp. Ms. Giunchigliani asked if offenders are assigned by classification. Mr. Peri said certain felonies would elevate the offenders to adult status and on to the prison system. Currently, the most violent and chronic youth offenders are being sent to Tennessee. In the budget proposed, there is funding for 15 beds for each year of the biennium. Chairman Marvel asked if the subcommittee heard any discussion about converting the Pioche facility to accommodate youth offenders. Mrs. Evans said there was no testimony in that regard. Mr. Price said he received information that the Pioche facility was not suitable for youth offenders. Ms. Giunchigliani asked if the subcommittee heard testimony on Title XX money being diverted. Mrs. Evans responded there is a resolution being drafted that instructs the Department of Human Resources to review the procedure for the grants in Title XX, the non-state agency contracts. Also, the subcommittee instructed the Department of Human Resources to develop a formula to increase incrementally the amount budgeted for non-state agency contracts. Ms. Giunchigliani asked if there was, in fact, a policy set by the subcommittee. Mrs. Evans said the subcommittee did not want to impact the budgets proposed. It would take an enormous amount of work to extract funds from all the budget accounts where Title XX is currently used. The plan is to see if additional Title XX money is available and rather than use it in existing programs it would be diverted to non-state agency contracts for the 1995-97 biennium. The formula to gradually increase that amount would be implemented for the budget planning for the next biennium. Ms. Giunchigliani asked what is the cost involved in opening and maintaining the satellite clinics in Battle Mountain and Pahrump proposed by the subcommittee. She additionally asked about the request from foster parents for an increase in clothing amounts. Mr. Peri referred to page 9 of (Exhibit G) detailing the establishment of the Battle Mountain office. The subcommittee reduced the positions from 3 full time to 1.5o FTE positions, a full time professional position and a half-time clerical position. The total cost is $56,638 in FY 96 and $67,256 in FY 97. Page 12 contains the narrative for the support of the Pahrump office. The cost is $55,356 in FY 96 and $65,834 in FY 97. Mr. Peri responded the enhancements to the foster parent program are in budget account 3229. Enhancement 400 - Self-Sufficiency through Social Services has been termed the foster parent package. The total recommended amounts for the biennium are approximately $745,000. Enhancements are recommended by the Governor in payment rates to foster parents for clothing allowances, respite care, liability insurance, burial fees and money for additional training and recruitment. Mrs. Chowning said it was her understanding the increase in the clothing allowance for foster parents was included in a separate bill. Mr. Peri said he was not aware of the bill. In the Executive Budget, the substitute foster care category represents a 10 percent increase in the clothing allowance - $198 per year ages 0 to 4; $352 per year for ages 5 through 12; $468 for ages 13 and above. Ms. Giunchigliani said the foster parents testified that while the 10 percent increase was appreciated, it would not cover the cost of clothing. Nevada is only reimbursing 51 percent of the cost to provide foster care. Mrs. Evans summarized by reiterating the subcommittee did remove the boot camp from the budget for the Elko Youth Training Center budget. Chairman Marvel asked for a motion on the subcommittee report. MS. TIFFANY MOVED TO ACCEPT THE HUMAN RESOURCES/K-12 SUBCOMMITTEE REPORT ON THE DIVISION OF CHILD AND FAMILY SERVICES. MR. ALLARD SECONDED THE MOTION. MS. GIUNCHIGLIANI MOVED TO AMEND THE MOTION BY HOLDING BUDGETS NO. 3145, 3229, AND 3646. MR. PRICE SECONDED THE MOTION. Mrs. Evans asked for specific direction on what areas need to be revisited. Ms. Giunchigliani said she would provide what information she needs. MOTION CARRIED. MR. FETTIC, MS. TIFFANY, MR. ALLARD AND CHAIRMAN MARVEL VOTED NO. **************** Chairman Marvel asked for a motion on A.B. 132. MS. GIUNCHIGLIANI MOVED DO PASS. MR. CLOSE SECONDED THE MOTION. MOTION CARRIED. *************** Chairman Marvel asked for a motion on A.B. 338. MR. HETTRICK MOVED DO PASS. MS. GIUNCHIGLIANI SECONDED THE MOTION. MOTION CARRIED. ***************** There being no further business, the committee adjourned at 10:50 a.m. RESPECTFULLY SUBMITTED: Linda Corbett, Committee Secretary Assembly Committee on Ways and Means MAY 1, 1995 Page