MINUTES OF THE SENATE COMMITTEE ON FINANCE Sixty-eighth Session January 27, 1995 The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:00 a.m., on Friday, January 27, 1995, in Room 223 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator William J. Raggio, Chairman Senator Lawrence E. Jacobsen Senator Bob Coffin Senator William R. O'Donnell Senator Dean A. Rhoads Senator Bernice Mathews COMMITTEE MEMBERS ABSENT: Senator Raymond D. Rawson, Vice Chairman (Excused) STAFF MEMBERS PRESENT: Dan Miles, Fiscal Analyst Bob Guernsey, Principal Deputy Fiscal Analyst Jeanne L. Botts, Program Analyst Dee Crawford, Committee Secretary OTHERS PRESENT: Tracy Raxter, Chief, Administrative Services Division Thomas Wilson, Chairman, Commission on Ethics Joan Kerschner, Director, Department of Museums, Library and Arts Susan Boskoff, Executive Director, Council on the Arts Cheryl Miglioretto, Grants Analyst, Council on the Arts John P. Comeaux, Director, Budget Division, Department of Administration Jere Schultz, Budget Analyst, Budget Division, Department of Administration David Thomas, Chief, Risk Management Division, Department of Administration Bob Gagnier, Executive Director, State of Nevada Employees Association Michelle Gamble, Program Assistant, Nevada Association of Counties Randy Waterman, Insurance and Loss Prevention Specialist, Insurance and Loss Prevention, Risk Management Division, Department of Administration Robert R. Loux, Executive Director, Agency for Nuclear Projects, Department of Conservation and Natural Resources Senator Raggio opened discussion on budget 101-1343 relating to the Ethics Commission. Ethics Commission - Page 13 While Tracy Raxter, Chief, Administrative Services Division, indicated there were no major changes sought in the base budget, he acknowledged additional funds were being requested for the commission to hold six more meetings per year. He attributed the necessity for those funds to a significant increase in the number of opinion requests filed, as demonstrated by the narrative and chart included in Exhibit C. The budget request would provide for 18 meetings per biennium instead of 12. He added the request included funding for postage and printing to cover costs for extra meetings. Mr. Raxter stated the commission felt a need for an increase in office space from 100 square feet to 600 square feet, for which funds were also being sought. He asked for more funds for Out-of-State Travel to enable two commission members to attend the National Conference on the Council of Government Ethics Laws. He declared the commission needed more funding for redesigning and reprinting financial disclosure forms and to print a booklet on ethics in Nevada for candidates and office holders. Thomas Wilson, Chairman, Commission on Ethics, acknowledged neither he nor any other commission member had attended an out-of-state conference during his tenure on the commission dating back to 1989. He explained the national association would like to hold a future conference in Nevada and wanted representatives from Nevada to attend the next conference. He said ethics commission members Jud Allen and Helen L. Chisolm had volunteered to attend. Mr. Wilson distributed copies of a letter (Exhibit D) written on January 24, 1995, and pointed out a request for supplemental funds to cover expenses for the balance of the present biennium. Mr. Raxter called attention to a request for purchase of transcribing equipment as well as funds for the extra meetings. Mr. Wilson reported on the activities of commission meetings. He cited the necessity for speed to resolve election queries as well as controversial and adversarial disputes related to basketball contracts at the University of Nevada, Las Vegas. As he observed there had been a substantial increase in volume, he reminded the senators that the work of the commission is pro bono. He noted that while the commission must operate under a rule of confidentiality, candidates who file with the commission inform the media first of the grievance to be filed. He concluded the matter of confidentiality enforcement needs further study. He asserted the commission needs a clear understanding of legislative intent. In response to a question by Senator Raggio, Mr. Wilson described the current membership of the commission, which includes three attorneys. He avowed the commission has worked well and has been sensitive to its responsibilities. Senator Raggio commended the commission members for their efforts and the high quality of the opinions they have rendered. Senator Jacobsen asked if the commission would recommend a minimum fee be charged for each request in order to cover the costs of materials. Mr. Wilson responded it might be helpful to charge a fee in order to cover postage and material costs. Senator Raggio inquired what the policy was regarding distribution of opinions. Mr. Wilson replied copies of the opinions are distributed to all public officers, including county commissioners, city councilmen, state officers, members of the legislature, libraries, and to some of the media. He voiced the opinion there should be wide distribution of opinions in order for the public to understand how the law is applied. He opined it is difficult for laymen to understand how the statutes apply. He admitted the opinion of the commission tends to be judgmental in its application of standards. Senator Coffin noted some of the opinions are lengthy and thus expensive for staff time and publication. He wondered if a one-page memo indicating each general opinion and number of pages would suffice, and then those who wished copies could make specific requests. He suggested that would be one cost-saving solution. Mr. Wilson agreed that was a good idea and added it could be helpful to develop a digest of cases. They agreed a summary might encourage better review. Senator Coffin said he would like to work with the commission to make some practical suggestions regarding a method whereby candidates could handle their own forms rather than hiring accounting firms. Mr. Wilson agreed, "These forms are a bane for us to .... administer ...." He admitted there is much room for improvement. Senator Coffin suggested there should be a $5 or $10 flat charge, or per page charge, for reproduction of those forms, some of which run as long as 20 pages. Nevada Council on the Arts - Page 456 Joan Kerschner, Director, Department of Museums, Library and Arts, introduced Susan Boskoff, Executive Director, Council on the Arts, and Cheryl Miglioretto, Grants Analyst, Council on the Arts. Ms. Boskoff distributed copies of the 1994 annual report of the Nevada State Council on the Arts (Exhibit E). Ms. Boskoff read from prepared remarks attached as Exhibit F. She added there are community and professional development services which provide assistance to arts organizations, institutions and artists in all phases of development through research, referral, technical assistance, workshops, conferences and publications. Ms. Boskoff told the committee the council is working with other states nationwide in a campaign called Save Outdoor Sculpture. She said the purpose is to identify, document and protect all "publicly acceptable" outdoor sculpture in Nevada, and the campaign is funded by the Getty Grant Program and two charitable trusts from Time- Warner. Ms. Boskoff reminded the committee the Council on the Arts sponsors a series of exhibitions, rotated every 2 weeks, on the walls of the first floor of the legislative building while the legislature is in session. She stated those exhibitions highlight Nevada artists, 48 of which have been presented to date. She said the council publishes a newsletter which is distributed nationwide as well as throughout Nevada. Ms. Boskoff pointed out the Council on the Arts moved its offices to Carson City and has been working in conjunction with agencies for museums and libraries in the spirit of reorganization. She distributed a list (Exhibit G) of those receiving grants in the various cities and counties throughout the state. She acknowledged the staff and board members have participated in retreats for strategic planning and have begun a review of data collection and statistical analyses which should assist in clarifying performance indicators. Ms. Boskoff said there have been a series of workshops for local arts agencies, and her agency is coordinating an arts and education conference to be held in Las Vegas on March 19 and 20, 1995. She stated she is most proud of the redesign of the grants program to make it "a kinder and gentler program" which will be easier for grantees and will cut out some paperwork. Upon questioning by Senator Raggio, Ms. Boskoff called attention to some requested changes to the budget set forth in a letter dated January 26, 1995 (Exhibit H). Ms. Miglioretto explained the changes were made in response to inquiries made at a hearing before the Assembly Committee on Ways and Means. Pointing out an item on page 458, she said a request was being made to increase operating expenses from $7,800 to $17,222 each year. She noted an entry on page 456 which would decrease $51,924 in operating expenses by $5,968 to a total of $45,956 for rent. She said the director had taken measures to reduce other expenses as outlined in Exhibit H. Senator Raggio asked why a previously proposed move to the state library building had not been found suitable. Ms. Boskoff replied the space was unsuitable for the arts council staff because it consisted primarily of workrooms and a conference room more suitable for the Office of Historic Preservation or for library agencies. She indicated the decision had been made by the entire Department of Museums, Library and Arts. The Council on the Arts, she said, moved into a privately owned building directly behind the Nevada State Museum. Ms. Kerschner confirmed the original plan to move the Council on the Arts into the State Library Building was made with the expectation it would be a temporary situation. She agreed space problems had been rectified with the move to the building behind the museum, and concurred in the budget request. John P. Comeaux, Director, Budget Division, Department of Administration, endorsed the recommendation to augment the budget as requested. Ms. Miglioretto continued to explain the changes set forth in Exhibit H, saying the savings in utilities expenditures would go toward rent. She called attention to page 457 of the Executive Budget and explained recommendations were being made to reduce operating expenses for demographics caseload changes to zero. She explained the amount of the reduction, $3,091, had been committed to a new Cultural Resource II position for office supplies, telephone and printing, a position the director no longer felt viable due to a lack of office space. Senator Raggio asked if this budget had been discussed with the Budget Division. Jere Schultz, Budget Analyst, Budget Division, Department of Administration, confirmed it had been discussed and a recommendation had been made to forward those funds. He admitted there was a problem because the money had been obligated under a 3- year challenge grant and there was some question as to whether the budget office had the authority to balance forward such funds. He concurred it might be useful if a bill draft were presented making such authorization. Dan Miles, Fiscal Analyst, interjected there could be a clause included in the appropriation act regarding the problem. Senator Raggio concurred specific language should be included in the appropriation bill to permit challenge grants to operate without the kind of difficulty posed in the aforementioned matter. He asked staff to take note of his remarks. Senator Raggio opined the list of grants set forth in Exhibit G indicated they were being used to advantage. Senator Mathews asked why California agencies were being given grant funds. Ms. Boskoff replied the Nevada Council on the Arts has historically supported organizations around Lake Tahoe that provide services to both Nevada and California. She explained citizens from Nevada have taken part in both the programs listed. Senator Mathews remarked the sum was sizeable. Ms. Miglioretto responded a specific grant of $100,000 was received from the National Endowment for the Arts for rural and under served areas, which includes the area around Lake Tahoe. She said one of the grants in question was distributed to the Douglas County School District at Lake Tahoe because most of the children residing in South Lake Tahoe, California, attend Douglas County schools. She stated the other grant in question was used to fund a feasibility study regarding building an arts coalition for the entire Lake Tahoe basin for year-round arts programming and marketing, called Arts Vision Lake Tahoe. She repeated it would cover all the arts organizations around the lake for both states. Senator Raggio noted the budget contains an enhancement for grants. Ms. Boskoff explained the Governor had recommended an increase of $100,000 to the Grants programs, the Folk Arts program, and the Arts in Residence program. She said the funds would help the state meet its obligation to match funds from the National Endowment of the Arts. Senator Raggio asked for an explanation of the total expenditures of $8.4 million depicted on page 9 of the annual report (Exhibit E). Ms. Boskoff said the information, collected from applicants for the grants programs, indicated the total funding was from all sources, of which the state pays less than 10 percent. Ms. Boskoff testified one new Community Development Coordinator position is being recommended by the Governor. She explained all budget requests stem from increases in program services, a 26 percent increase in the mailing list, a 32 percent increase in grant applications, a 14 percent increase in requests for arts in education residencies, a 116 percent increase in requests for folk arts, and a more than 20 percent increase in requests for technical assistance from local communities. She added there had been five new community arts councils developed during the past year. There being no further testimony, Senator Raggio closed the hearing on the budget. He opened the hearing relating to various Department of Administration budgets. Benefits Services Fund - Page 482 Mr. Comeaux informed the committee he wished to make changes in several of the budgets. He called attention to the Benefit Services Fund beginning on page 481 of the Executive Budget. He explained a portion of the self-insured program costs and related revenues had been moved from the base budget to the M101 maintenance decision unit. In the process of doing so, he said there was a duplicated amount because of a failure to reduce the base budget by a like amount. He distributed a letter (Exhibit I) with information regarding the adjustment, which he said would amount to $6.8 million in Fiscal Year 1996 and $12,581,757 in Fiscal Year 1997. He noted it would affect the other non-state revenue item and the reserve item in the expenditure section. He offered to prepare and provide a new budget page with the revised figures. Mr. Comeaux cited concerns expressed during a hearing before the Assembly Committee on Ways and Means earlier in the week. One concern dealt with the manner in which the budget items had been prepared, he said, and another concern dealt with the reserve level reflected in the budget. He pointed out the reserve amounts to about $17 million, but the actuaries have recommended a minimum reserve of $13.5 million. He acknowledged that when adjustments had been made to a balance forward or an expenditure item, those figures were "washed through" the reserve, whereas they should have been reflected through adjustments to the insurance premium or revenue items. He reiterated his intention to redo the budget. David Thomas, Chief, Risk Management Division, Department of Administration, distributed two summaries with corrected information on the Benefit Services Fund budget (Exhibits J and K). He concurred that changes would appear in the reserve and revenue figures, while expenditures would remain the same. According to Mr. Thomas, the funding for the entire budget comes from several sources, such as the Employee Health Benefits program, including 24 legislatively approved contributions by state and local agencies. Funding also is derived, he said, from premium payments for dependents paid by participants, and from direct transfers from the Department of Prisons to cover the Prison Medical Administration program. Additional funding comes from the Workers' Compensation Safety and Loss Control program which is identified as Health Cost Containment Fee. Regarding the line item Out-Of-State Travel in Exhibit K, Mr. Thomas said a request was being made for additional funds each year to reflect costs associated with different site locations of annual conferences. He stated additional funds were being requested for In-State Travel for per diem and travel costs to attend Committee on Benefits meetings held four times per year in Las Vegas and eight times per year in Carson City, and for staff travel to sites throughout the state. Senator Mathews commented the In-State Travel request appeared to be high. Mr. Thomas agreed to provide her with a detailed list of those costs. Mr. Thomas acknowledged the largest sum for expenditures went to the Self Insured Program Cost, used primarily for claim expenses associated with the self-funded employee benefit program. He added there are other costs, including contract services and insured benefit programs such as life insurance. He noted there had been a slight reduction in life insurance rates for the year, amounting to $176,000. Of the $85.9 million requested for the Self Insured Program Cost, Mr. Thomas attributed $59.5 million to medical, dental and vision claims. He explained the actuary used the figures for Fiscal Year 1994 and projected inflation to arrive at the 1995 figure. He said the 1994 figures were inflated from 5 to 8 percent. In the second year of the biennium, he said, of $91.8 million, the total projected claims would be $63.9 million. He pointed out $1.6 million and $1.7 million were included in both years of the biennium to restore the co-insurance threshold level in the self-funded plan to its 1992 level. Mr. Thomas distributed a list of plan design changes implemented by the Committee on Benefits (Exhibit L) over the past 2 years. He claimed the changes reflected in the paper had been significant, and they had been instrumental in restoring the fund to a fiscally sound position in spite of the volatility of health care costs over that period. He made special note of the co-insurance threshold level and said there had been a request for funding to restore it to the previous level. Mr. Thomas pointed out additional costs were attributable to charges for life insurance premiums, Coresource, the three Health Maintenance Organizations (HMOs) available in the plan, the actuarial consultant, and other similar health vendors. Mr. Thomas gave a history of the Wellness Program, provided originally for state employees in the capitol city by the Carson-Tahoe Hospital, now administered by Washoe Medical Center. He stated the funding in recent years has been expanded and the program, primarily health fairs, extends to employees throughout the state. Senator Mathews asked how many employees take advantage of the program. Mr. Thomas replied a report should be out within a couple of weeks giving the numbers and types of services provided. Mr. Thomas told the committee the Prison Medical Administration program is a direct pass-through from the Department of Prisons. He averred inmates in the prisons receive the "best medical benefits of anybody" because the state has the responsibility to provide them with 100 percent medical care, free of charge, regardless of the type of medical problem. He noted since 1993 there has been a savings of over $2 million in prison medical costs since the prisons commenced using Preferred Provider Organizations (PPOs) for health services. Mr. Thomas called attention to the decrease in the Information Services line item. He ascribed the reduction to usage of the Benefits Information System of Nevada (BISON). He explained BISON is a system developed over the past 3 years that tracks eligibility which has resulted in a reduction in the contract with the third-party administrator. He explained it allows control over the system for over 23,000 employees and their 25,000 dependents. In response to a request by Senator Coffin for details on claims, Mr. Thomas indicated the figures are included in the actuarial report. Mr. Thomas reported he had split the reserve figures into three categories, Required Reserve, Change in Required Reserve, and Surplus (Deficit) Reserve. He stated Required Reserve was the amount the actuary felt should be maintained, and it fluctuates based upon claims histories. It is anticipated to amount to $13.6 million in Fiscal Year 1996. Senator Raggio announced there would be a bill forthcoming on the recommended premium payment and asked for comment. Mr. Thomas responded it is important to remember that the state is the same as any other employer that pays into the Benefits Services Fund. Senator Raggio asked how long the contract had to run with Coresource as the third- party administrator. Mr. Thomas answered the original contract terminated on December 31, 1994, and the new contract went out to bid last year with the result that Coresource again won the bid against two other bidders. The bids for administration per employee per month were $14.00 by Western States Administrators, $9.15 by Coresource, and $7.00 by Cost Containment Concepts. Although one bid was lower than the Coresource bid, the committee rejected it, he declared, because it was made by a one-man operation with no current clients. They felt the bidder was not competent to handle the tens of thousands of claims made per month. The new contract was made for a period of 4 years. Senator Raggio queried the performance of Coresource. Mr. Thomas replied they were prompt and accurate, and had a performance clause included in their contract. He reported 70 percent of claims have been paid within 14 days. The new contract provides that 85 percent of claims be paid within 14 days. He said the annual audit performed by Kafoury Armstrong indicated Coresource failed once to meet their contract and were subsequently penalized. When asked about requests for two new positions, Mr. Thomas explained the statewide PPO network contracts through Sierra Health Services, which in turn subcontracts with Northern Nevada Health because Sierra Health Services does not have a network in the northern part of the state. He said participants and the medical community have expressed many concerns over the past couple of years regarding the operation of the network, especially in the north, and most particularly in Carson City. He indicated there are four health communities with four distinct medical practice patterns in the state, those being Las Vegas, Reno, Carson City and the rest of the state. He declared costs are higher in Carson City due to the way doctors practice and because there are not as many specialists available in Carson City, where the bulk of state employees are concentrated. He explained local physicians perform more tests within their offices and make fewer referrals to specialists, and thus feel they are entitled to higher reimbursement, with which he expressed agreement. Mr. Thomas said Sierra Health Services negotiated contracts based upon Reno rates, which were unacceptable to Carson City physicians. He indicated the committee asked the Carson City medical community to stay within the network, which resulted in development of a new network in Carson City. He opined a reasonable contract can be negotiated with doctors in the capitol in order to maintain a fiscally viable plan. He said a medical advisory group of respected providers throughout the state has been established to work out a network proposal for Carson City providers which may be in operation by summer. He asked for additional staff in order to establish the new network. If the network does not seem workable, he promised, the new positions will not be needed. Another new position is needed, declared Mr. Thomas, to assist in the administration of the State Employees Workers' Compensation Safety and Loss Control Program for all state agencies as listed on Executive Budget page 484 under E-125 as mandated by a senate bill in the last legislature and by executive order of the Governor. SENATE BILL 316 OF THE SIXTY-SEVENTH SESSION: Makes Various changes to provisions governing industrial insurance. Mr. Thomas asserted a savings will be effected of $3 to $6 million in this calendar year due to the implementation of the program. In response to a query by Senator Raggio, Mr. Thomas explained the actuary bases his figures on the time for a claims turnaround over a rolling 12-month period. He pointed out there may be claims which have not yet been submitted by attending physicians or employees because they have 15 months in which to turn in claims incurred, but not reported (IBNR) for which the fund has liability. He said the figures typically are based upon claims for a period of 2 1/2 to 4 months. Senator Coffin commented that was a low IBNR time compared to industry which generally uses a longer period of time. He opined industry's time may be due to the potential for more shifting of clients from one provider to another. Mr. Thomas interjected the state does not experience much shifting from HMOs to self-funded providers. Bob Gagnier, Executive Director, State of Nevada Employees Association (SNEA), read remarks regarding the budget set forth in Exhibit M in which a request was made for an increase in health insurance benefits for state employees. He compared Nevada employees' benefits to those in other states and to those for teachers within the state. There being no further testimony, Senator Raggio closed the hearing on the Benefits Services Fund budget and opened the hearing on the next budget on the agenda. Retired Employee Group Insurance - Page 490 Mr. Comeaux declared there was an error in the budget for which corrected budget pages would be provided later. He stated the figures $6.3 million for Fiscal Year 1996 and $6,328,000 in the summary on Executive Budget page 490, under Other Non- state Revenue, were incorrect. He said the correct numbers were $5,359,103 for the first year and $6,190,949 for the second year of the biennium and there should be a corresponding adjustment on the expenditure side to the line item, Retired Employee Group Insurance. Mr. Comeaux called attention to items on Executive Budget pages 489 and 490 regarding fringe benefit assessments. He estimated that assessment may reflect around $3 million too much for the biennium. He admitted he could not make a statement as to how much that would affect the General Fund until more information can be collected from the Department of Information Services. He explained the original calculation from which his department determined a rate was made from total gross payroll. Adjustments were made using only figures from the university, he said, so further adjustments are necessary. He guessed the rate would eventually be nearly the same as it is during the present biennium, approximately .0085 in the first year and .0095 in the second year of the biennium. Mr. Thomas added the purpose of the budget was to collect state agency contributions to the State Employees Group Insurance benefit program for all retired state employees. He said the revised figure for the maintenance portion of the budget should appear in the M200 category. Testimony concluded on the Retired Employee Group Insurance hearing. Senator Raggio turned to the next budget. Supplemental Fund - Indigent - Page 492 Mr. Comeaux advised the committee of a necessary revision in the budget. He said: If you use the forecast and assessed valuation numbers that are included in the front section of the budget on page A12, and multiply it by the tax rate that fuels this budget account, you would come up with a different revenue number, which is the Other State Revenue that's listed in this account. Mr. Comeaux explained instead of using that approach to calculate the amount of estimated revenue that would flow into the Supplemental Fund - Indigent on Executive Budget page 492, budget account 3244, during the biennium, another method was used. He stated he would like to submit revised pages on the budget using the described calculation. Mr. Comeaux said the same would apply to the next budget, the Indigent Accident Account on Executive Budget page 494, budget account 3245. Speaking to budget accounts 3244 and 3245, Mr. Thomas called attention to a balance forward and subsequent reserve in each case, $577,644 in budget account 3244 and approximately $3 million in budget account 3245. He explained there was some question regarding the historical practice of allowing reserves to accumulate in the two funds. His department agreed the funds should be made available to pay claims. Mr. Thomas related the Risk Management Division had been instructed over the years to put any remaining funds into the balance forward. He explained the National Association of Counties (NACO), which pays the claims, had not been aware that practice had been utilized, and could have requested the funds for claims-paying purposes. He said a program had recently been submitted to transfer the existing reserve amounts of both budgets into the claims account so they would be available for claims-paying purposes. Senator Raggio asked if the figures indicated that about $2.5 million was being made for claim payments to the counties for expenses over a certain amount according to a funding formula. Michelle Gamble, Program Assistant, Nevada Association of Counties, responded approximately $12 million was billed in 1994 for the supplemental fund to pay for catastrophic claims. She explained after each county subtracted its obligatory $25,000 per claim, out of budget account 3244, Supplemental Fund - Indigents, the counties were reimbursed about 35 percent of the remaining claim amounts above the first $25,000 in hospital charges which the counties must pay. Indigent Accident Account - Page 494 Mr. Thomas reiterated there were revisions in the Indigent Accident Account budget account 3245 similar to those in the previous budget. He reminded the committee the account was set up to pay for care exceeding a cost of $3,000 per claim for indigents hurt in automobile accidents. The account is funded through a 1.5 cent property tax levy on each $100 of assessed valuation remitted to the state, he said, whereas the previous account, number 3244, is funded by a 6 cent levy, 5 cents of which goes to the county and 1 cent to the state. Ms. Gamble interjected the fund covers both residents and non-residents who are injured in vehicle accidents on publicly maintained roads. Senator O'Donnell pointed out the negative balance forward of $1 million and asked for an explanation. Mr. Thomas replied it was just an "anomaly." He explained the balance forward from the previous year was $2,029, 337, but the fund ended the year with a reserve of $3,062,999. In response to a question by Senator Raggio, Ms. Gamble stated 95 percent of claims were paid at allowable charges. She explained at urban hospitals, where most claims occur, the rate is discounted 15 percent less than billed charges less Medicaid disallowable items. She said the Indigent Accident Account is the payer of last resort, that hospitals must exhaust all other pay sources before requesting payment. She acknowledged there are times when payments are reimbursed to the state from other sources. Senator Raggio turned from the discussion of budget account 3245 and turned to a discussion of budget account 1347. Insurance and Loss Prevention - Page 496 Mr. Thomas noted the state had an obligation to protect all the personal and real property belonging to the state. The base budget, he said, generally reflects actual costs for Fiscal Year 1994 with some exceptions. He voiced pride that revenues in the Other - Non-state category reflect a reduction as a result of decreased insurance premiums due to the successful placement of property insurance at significantly lower rates commencing in July 1994. Mr. Thomas pointed out the request for an increase in Out-of-State Travel to enable the Insurance and Loss Prevention Specialist to attend the Public Risk and Insurance Management Association annual conferences to be held in the next 2 years. Other expenditure items reflect minor adjustments, notably a reduction of $2,500 in the assessment from the Administrative Services Division. Mr. Thomas said paid premiums in Fiscal Year 1994 were $974,000, in addition to which $24,000 was paid in 1995 for coverage in 1994, thus adjusting the actual base to $998,089. He gave the committee two charts, one depicting the value of insured properties in the state over the last 4 years with projections for the next 4 years (Exhibit N) and one portraying premiums (Exhibit O). The first chart demonstrates the insured value of state-owned property went from $900 million in 1990 to nearly $1.3 billion today, he said. He observed the premium for that coverage has fluctuated, especially in the past 2 years when it rose dramatically. He explained the carrier being used at that time withdrew from the market, and thus a new carrier was retained at a significantly lower rate with an improved program. Calling attention to automobile collision claims, Mr. Thomas noted the change from 1994 was due to an accounting change requested by the controller in the Budget Division. He said recovery received for claims had been used in the past as an offset against expenses, but now recoveries will be shown as revenues. Mr. Thomas said property claims also reflect actual 1994 figures. Randy Waterman, Insurance and Loss Prevention Specialist, Insurance and Loss Prevention, Risk Management Division, Department of Administration, elaborated on the reserves. He advised the committee under the current excess insurance policy the state self-insures the first $250,000 of any occurrence. He explained there is cap within the policy so after $500,000 in insured losses have been paid out, the deductible per occurrence goes down to $50,000. He stated the largest percentage of the reserve amount was used within the first $500,000 as well as for additional claims subject to the $50,000 deductible. Mr. Waterman indicated there are two types of losses that do not fit into the aggregate $500,000. He said those include claims resulting from earthquakes and floods. The reserve is thus maintained to respond to large claims which, he declared, do not happen very often. He reported the last large claim, $600,000 during 1986, paid for flood damage at the University of Nevada, Reno. Mr. Waterman added the state's automobile fleet is self-funded, for which budgeting is done not only for typical losses, but also for the eventuality of catastrophic losses. Mr. Thomas called attention to items in the Maintenance and Enhancement units. He said no need for additional premiums were anticipated for the M100 Insurance Premiums account in 1995 and 1996 due to the dip in property insurance premiums. He acknowledged there may be increases in Fiscal Year 1997 not only from general market increases, but also due to increased exposure when new capital improvement projects come on line. He anticipated there would be an increase all across the board of approximately 10 percent with the exception of the Employee Dishonesty Bond which could increase at the rate of 30 percent. Mr. Thomas pointed out the request for a new Program Assistant position. He explained the present Insurance and Loss Prevention Specialist has no clerical assistance which limits his ability to go out to the agencies to identify and minimize potential risks. He declared a new staff member would enhance the program and result in lower overall insurance costs. He confirmed Senator Raggio's query that training was included. Mr. Waterman added the division acts not only in response to property claims, but also in the field of prevention. Mr. Waterman said the $5,000 for training was included in Risk Management because of membership in the Risk Management Society and the Public Risk Managers' Association which provide resources for training. Employees from the Nevada Highway Patrol, the university police and the Office of the Attorney General will attend a training session in Washoe County in February. He described previous sessions he had attended as outstanding. There being no further testimony on the matter, Senator Raggio closed the Insurance and Loss Prevention budget and opened discussion on a budget matter under the Department of Conservation and Natural Resources. High Level Nuclear Waste - Page 1893 Robert R. Loux, Executive Director, Agency for Nuclear Projects, Department of Conservation and Natural Resources, gave an overview of the agency created at the same time in 1985 as the Commission on Nuclear Projects. He said the budget supports the Agency for Nuclear Projects comprised of the Division of Technical Programs and the Division of Planning. Mr. Loux stated the Division of Technical Programs is charged by state and federal law to review, evaluate, monitor and oversee the federal governments' efforts to determine the suitability of Yucca Mountain as a high-level radioactive waste repository. He estimated 60 to 65 percent of the funding is devoted to the Division of Technical Programs because it relates to long-term protection for the health, safety and welfare of citizens in the area. The division issues contracts with a number of entities from within and without the state in both the private and public sectors. Mr. Loux said the Division of Planning is principally concerned with determining the social and economic impact upon the state and its residents if the facility does go forward. He described the analysis, started in 1984, as the most comprehensive social and economic impact evaluation the state has ever undergone. He estimated the study is approximately half completed and said continuation of the study is dependent upon the progress of the federal program and the amount of funding that the state receives annually. Mr. Loux declared the agency has the responsibility of representing the state in all matters arising out of the Federal Nuclear Waste Policy Act. Mr. Loux said the budget also supports the Commission on Nuclear Projects which advises the agency, the Governor and the Legislature on state policy. The commission formulates the administrative regulations for the agency. According to Mr. Loux, the budget supports the dissemination of information to the public not only regarding federal activities and plans, but also regarding the agency oversight. Mr. Loux reported a grant was received from the National Governors' Association, funded by the federal government, to assist with coordination with other states to provide input to the federal Department of Energy as it relates to the cleanup of defense waste sites throughout the country, including the Nevada Test Site. The budget supports salary and travel expenses for one employee for those activities. Mr. Loux added the agency receives funds from the Western Governors' Association, also funded by the federal government, to coordinate activities both within and outside the state as they relate to the potential shipment of transuranic wastes to the Waste Isolation Pilot Plant (WIPP) near Carlsbad, New Mexico. He admitted WIPP is still not open although it has been due to come on-line since 1988. Other agencies to be involved with such shipments include the Nevada Highway Patrol, the Division of Emergency Management, and the Department of Transportation and other western states. Mr. Loux reiterated the principal funding comes from the federal government, while a small amount of state funding is necessary to enable the agency to engage in activities prohibited by the federal grant, primarily in the area of lobbying. Mr. Loux called attention to an adjustment to be made to revenue sources under 1995- 1996 on Executive Budget page 1893. He stated the line item of $24,716 should be reduced by $1,886 to bring it down to $22,830, and the figure $5,195,136 should be increased to $5,197,022 in the first year and $5,200,034 in the second year of the biennium. He voiced his understanding there should be a memo coming from the Budget Division reflecting the changes. Senator Raggio indicated that according to custom the committee would like to see a list of the contracts. Jeanne L. Botts, Program Analyst, stated a list of contracts for 1993 and 1994 had been provided along with a list of general categories for the coming 2 years. Mr. Loux agreed to provide the list of contracts for 1995. Senator Raggio remarked there is a bill pending in the United States Congress which may be passed soon. He asked for an update. Mr. Loux replied there are 8 to 10 bills to be introduced in the coming congress to change the overall federal program. He said the bill currently being discussed talks about creating an "interim storage facility" instead of a "permanent repository" in Nevada, and it also mentions a rail line which does not yet exist. He offered the opinion the repository program will be given lowest priority. He explained other provisions will remove the funds from the budget due to deficit considerations. In response to a question from Senator Raggio, Mr. Loux indicated an interim storage site may be located adjacent to or very near the Yucca Mountain site. He commented tunnel boring had closed down between early October 1994 and early January 1995, but had since resumed operation. Other activities had stopped or declined, he said. Senator O'Donnell asked for an approximation of when either project would be built. Mr. Loux responded the Department of Energy indicated the earliest the permanent project could be built would be in the year 2010, while the temporary facility may be completed by 2002 or 2004. He declared the primary obstacle will be funding. He said the Department of Energy projects the cost of a temporary facility, not including the rail line, would add $100 million to the cost. Senator O'Donnell asked what was being done by the agency to protect the citizens of Nevada from construction of a rail line around the city of Las Vegas. Mr. Loux answered that discussions were being held with the United States Department of Energy (DOE) as to their plans for the rail line. Because of institutional obstacles, he said, the DOE believes the only way the rail line can be built is if there is new federal legislation. Mr. Loux told the committee proposals had been advanced to use vehicular transport through parts of southern Nevada. Although he has not received copies of any map, he indicated the road would skirt the northeast side of the city. He stated there would be a problem locating a rail line along State Route 95 outside the Las Vegas Valley because it would entail at least 120 miles of new rail construction, costing around $1 to $2 billion. He said another route has been proposed to come in at Caliente, going north around the Nevada Test Site to Tonopah, through Goldfield and Beatty, which would need 320 to 380 new miles of rail line at a cost of $5 to $10 billion. Mr. Loux assured the senators that his agency was imparting the message to the DOE that the worst case would be to allow those trains to run through the downtown Las Vegas area and any proposals to go through Las Vegas would be unacceptable. He declared proposals have been made to DOE to bypass some areas including Indian Springs Air Force Base and tribal lands. Senator Jacobsen inquired how previous funds were spent and what was being done by lobbyists for the agency. Mr. Loux responded the agency has no lobbyists employed at the present time. He stated in past years the agency received $35,000 for that purpose, but last year only $22,500 was spent to lobby the administration because congress had no serious legislation pending. He asserted the request for additional funds was being made to return to the $35,000 figure. Mr. Loux opined there may be some resolution to the issue within the next 18 to 24 months. He contended if no legislation is passed during that period the entire Yucca Mountain project may not meet environmental health and safety regulations and the site may have to be disqualified. He envisioned a situation in which legislation would go forward for an interim storage facility and a rail line. He suggested the state will have ample opportunity to take legal action if the storage proposal at Yucca Mountain or other proposals go forward. He said legal actions could be based upon state law making storage illegal, upon the "New York low level case that basically declared that the federal government cannot commandeer a state to carry out a federal task," or upon constitutional issues. He referred to a senate resolution being considered. SENATE JOINT RESOLUTION 1: Claims sovereignty of State of Nevada over all powers not enumerated and delegated to Federal Government by Constitution of United States. Mr. Loux proposed that the state not engage in actions that would preclude it from going forward with legal solutions. Senator Jacobsen interjected he had been visited by some Clark County citizens who indicated they would like to have the storage facility in Nevada. The senator declared some firm decisions must be made. Mr. Loux responded under both federal and state law the county could not act on its own, but he reiterated some resolution probably would take place within the next congressional session. He stressed the importance of keeping track of the issues and of making known the view of the people of Nevada. Due to time constraints, Senator Raggio closed the discussion. He announced a joint meeting with the Assembly Committee on Ways and Means on Monday morning to review the strategic plan for information technology. He adjourned the meeting at 10:40 a.m. RESPECTFULLY SUBMITTED: Judy Jacobs, Committee Secretary APPROVED BY: Senator William J. Raggio, Chairman DATE: Senate Committee on Finance January 27, 1995 Page