MINUTES OF THE SENATE COMMITTEE ON FINANCE Sixty-eighth Session February 2, 1995 The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:00 a.m., on Thursday, February 2, 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 Raymond D. Rawson, Vice Chairman Senator Lawrence E. Jacobsen Senator Bob Coffin Senator William R. O'Donnell Senator Bernice Mathews COMMITTEE MEMBERS ABSENT: Senator Dean A. Rhoads (Excused) STAFF MEMBERS PRESENT: Dan Miles, Fiscal Analyst Bob Guernsey, Principal Deputy Fiscal Analyst Larry Peri, Program Analyst Pamela Jochim, Committee Secretary OTHERS PRESENT: Don Hataway, Chief Assistant Budget Administrator, Budget Division Rebecca Ward, Budget Analyst, Budget Division Frankie Sue Del Papa, Attorney General, Office of the Attorney General Brooke Nielsen, Assistant Attorney General, Office of the Attorney General Marietta Grass, Chief Financial Advisor, Office of the Attorney General Margaret Stanish, Deputy Attorney General, Consumer Protection/Telemarketing Fraud Unit, Office of the Attorney General Jon Hansen, Manager, Tort Claim Fund, Office of the Attorney General Kevin Higgins, Senior Deputy Attorney General, Fraud Control Unit for Industrial Insurance, Office of the Attorney General David Sarnowski, Chief Deputy Attorney General, Criminal Justice, Office of the Attorney General Frederick Schmidt, Consumer Advocate, Office of Advocate for Customers of Public Utilities, Office of the Attorney General Carol Widmer-Hanna, Executive Director, Private Investigators Licensing Board, Office of the Attorney General Charlotte Crawford, Acting Director, Department of Human Resources Mark Roberts, Administrative Services Officer IV, Department of Human Resources Chris Thompson, Chief, Health Care Financial Analysis Unit, Department of Human Resources Janet L. Gilbert, Lobbyist, Progressive Leadership Alliance of Nevada Senator Raggio opened the meeting and noted Dan Miles, Fiscal Analyst, Legislative Counsel Bureau, would be distributing 1995-1997 Legislative Fiscal Report (Exhibit C. Original is on file in the Research Library.). Mr. Miles explained the report is a summary of the Governor's budget recommendations for the next biennium. He pointed out the report includes historical revenue and expenditure trends, projections made by the Economic Forum for the next 2 years, information on the Stabilization Fund, an overview of taxes, and a section on General Fund appropriations and total budget. In addition, the report contains budget summaries for each state agency. Senator Raggio urged the committee to review the report before next week's joint budget hearings. Attorney General - Page 23 Frankie Sue Del Papa, Attorney General, Office of the Attorney General, came forward and testified from prepared text (Exhibit D) regarding the duties and responsibilities of the agency. In addition, she distributed a booklet (Exhibit E. Original is on file in the Research Library) outlining the budget proposals for the agency. Ms. Del Papa pointed out because of economic growth in the state, the agency has experienced increased workloads and demands for legal services. The agency serves as legal counsel to nearly all state agencies, boards and commissions and prepares legal opinions requested by state agencies, district, and city attorneys. The attorney general's office handles approximately 5,000 administrative hearings and court cases a year. The agency employs 219 people statewide and has had considerable growth since 1991 with the addition of the Medicaid Fraud Control Unit, the Telemarketing and Consumer Fraud Control Unit, the State Industrial Insurance System (SIIS) Fraud Unit, and additional personnel in the Consumer Advocate's Office. Ms. Del Papa pointed out the agency has grown by 34 employees, if the new fraud units are excluded. She stated the budget proposal, "not only attempts to address . . .future demands, but also reflects a need to catch up with our past growth as well." Ms. Del Papa referred the committee to the Administrative Account Budget shown in Exhibit E. She noted most of the work done by the attorney general's office is civil in nature, but the day-to-day criminal responsibilities have increased over the last 4 years in the fraud unit area. Senator Raggio interjected: Our staff has analyzed the budget accounts and when considered together with the administrative budget, special fund, crime prevention, medicaid fraud unit, telemarketing fraud unit, workers' compensation fraud unit, and the insurance fraud unit, the attorney general function has grown from $7.7 million in Fiscal [Year] 1990 to over $15.7 million in Fiscal [Year] 1997, which is the proposed budget. That constitutes a 105 percent increase and General Fund requirements for that same period, which is about the only real comparison we utilize in that connection, will grow from $2.4 million to $8.3 million, a 254 percent increase, in that budget. Staff has grown from 127 « positions to 248 positions over this same 7 year period. There were some responsibilities added, but even considering that is the largest growth in state government and particularly with respect to General Fund of any agency. . . .This is substantial growth, particularly for a General Fund agency. Ms. Del Papa responded 60,000 people have moved into Clark County in the last year which has caused a strain on all governmental services. In referring to the Administration Budget, she noted if the fraud units were discounted, then the agency had an increase of only 34 positions. Furthermore, she commented some of the responsibility transferred to the agency, such as the workers' compensation fraud unit, was not requested by the attorney general's office. Responsibility for the fraud units was given to the agency by the 1993 Legislature. She said the statistics presented by the fiscal staff have to be viewed in light of the growth the state has experienced. Ms. Del Papa informed the committee judgments collected by the state totaled $2 million in 1991-1992 and increased to $7 million in 1993-1994. Also, judgments against the state decreased from $22 million in 1991-1992 to $4 million in 1993- 1994. In the area of administrative activity, 542 new cases were opened in 1991- 1993 as compared to 2,451 in 1993-1994. Senator Raggio asked what types of cases were included in the 2,451 figure. Ms. Del Papa explained the figure represented administrative law cases dealing with boards, commissions, and juvenile matters. Senator Raggio requested a report on the breakdown of the agency's administrative caseload. Senator Rawson noted Joan Buchanan, Administrator, Real Estate Division, had testified before the Senate Committee on Finance regarding the number of legal cases in the Real Estate Division which were not being addressed by the attorney general's office. The senator questioned if the attorneys being transferred from agencies into the central office were reassigned to different duties or if the attorneys continued to handle the duties of the agencies to which they were originally assigned. Ms. Del Papa commented the caseload in the area of consumer fraud and telemarketing has grown tremendously. The deputy attorney general assigned to work on consumer fraud and telemarketing complaints has been working on a complex case, which has been time consuming. The director of the agency's civil division has consulted with the director of the Real Estate Division and the attorney general's office has moved resources out of the Las Vegas office to address the backlog of cases. Senator Rawson said he was concerned certain agencies were not getting the legal help needed, since the deputy attorneys were reassigned to the central office. The senator proclaimed complaints in the Real Estate Division were taking up to 2 years to investigate and litigate. Ms. Del Papa indicated the agency makes a concerted effort to service all state agencies and when a backlog is discovered, resources are moved as quickly as possible. Problems arise when major complex cases develop and resources must be pulled from other areas to respond to litigation demands. Senator Raggio asked how many attorneys the office employed. Ms. Del Papa responded the office presently has 106 attorneys. Senator Raggio commented it was clear from the testimony given to the committee by the Consumer Affairs Division and the Real Estate Division that the two divisions were frustrated because complaints were not being addressed and cases were not being filed. The senator stated the attorney general should explore the possibility there is too much specialization among the attorneys in the agency. The attorney general's office should have more flexibility in reassigning attorneys when backlogs exist. Ms. Del Papa explained attorneys are reassigned to address backlog problems, but some attorneys cannot be reassigned, because of restrictions placed on the funding. Senator Raggio asked who is responsible in the attorney general's office for monitoring caseloads and attorney reassignments. Ms. Del Papa stated the chiefs of each division in the attorney general's office were responsible for carrying out those duties. She referred the committee to page 3 of the Administration Account budget listed in Exhibit E. Ms. Del Papa told the committee the Consumer Protection Telemarketing Fraud Unit has responded to over 12,800 written and telephonic complaints, since the office was established in 1993. She contended: I don't think that those complaints that they have are so much against this office. Certainly our office has worked with those people to meet the general responsibilities that they have and the work load that all of us have to address in that particular area. Senator Raggio commented: I'm relating to you what these people said before this committee, there were cases they wanted to file that they were unable to file because they didn't have an attorney general available to do that....That is why we are bringing it to your attention....The question is, wasn't there some flexibility, weren't any of these attorneys available to back them up and help them. Ms. Del Papa introduced Margaret Stanish, Deputy Attorney General, Consumer Protection Telemarketing Fraud Unit, Office of the Attorney General, and stated Ms. Stanish is responsible for overseeing the legal affairs of the Real Estate Division and the Consumer Affairs Division. Ms. Stanish explained her unit would be willing to handle deceptive trade cases, but the unit is understaffed and must rely on the Consumer Affairs Division to investigate complaints. If the Consumer Affairs Division does not investigate the claim and prepare the case for litigation, the Consumer Protection Telemarketing Fraud Unit cannot litigate it. Ms. Del Papa noted, in reference to the Consumer Protection Telemarketing budget, the attorney general's office is asking for the creation of a separate budget for the unit. Creating a separate cost center for Consumer Protection Telemarketing would be consistent with the treatment of other fraud unit budgets. Senator Raggio questioned if the creation of a separate budget for the fraud unit would cost the state additional funds. Ms. Del Papa replied if the senator wanted to review the Consumer Protection Telemarketing Fraud Unit budget out of sequence she would be happy to do so. Senator Raggio answered in the affirmative. AG-Consumer Protection Telemarketing Fraud Unit - Page 43 Ms. Del Papa explained the budget is funded in the following manner: 40 percent General Funds; 39 percent Cost Allocation funds; and 21 percent recovery funds. Senator Raggio asked: Is that going to solve the problem? Ms. Stanish is saying they don't have the investigators to work up the cases. She would file them if they had the investigators. Ms. Standish clarified the telemarketing unit is within the attorney general's jurisdiction, but complaints regarding deceptive trade practices are under the jurisdiction of the Consumer Affairs Division. The responsibility to investigate and process deceptive trade practice complaints lies solely with the Consumer Affairs Division. Senator Raggio interjected, "If this budget is approved, and that is a considerable increase in General Fund dollars, how is that going to deal with this problem....Are we going to be able to serve the public more efficiently in the deceptive trade practices area?" Ms. Del Papa replied: Senator, we certainly hope to. I think that certainly there needs to be a larger emphasis on deceptive trade practices....If you recall I sat before you 2 years ago....[and] indicated to this Legislature 2 years ago that the funding mechanism that they had put in place with reference to the telemarketing unit would not work, because it was based on the registration fees of telemarketers....When we go out .... and run the telemarketers out of business the registration fees went down just as we had predicted....There have obviously been problems...we have tried to deal with those problems internally, by under-filling, by not filling positions, and by trying to get through the biennium until we could come back to this Legislature to address the problem. Senator Raggio noted the Consumer Protection Telemarketing Fraud Unit is requesting $500,000 in General Funds over the next biennium. The senator questioned how the funds in the category of Other - Non-State were generated. Mr. Hataway indicated the category of Other - Non-State derived its funds from civil restitution and license fees charged to telemarketing firms. He stated funds listed in the category were generated and submitted to him by the Consumer Affairs Division. General Fund revenue was not allocated to the budget 2 years ago when the budget was approved. Because of a projected shortfall in revenues, the Governor requested funds from the General Fund. Medicaid Fraud - Page 47 Ms. Del Papa related the Medicaid Fraud Control Unit (MFCU) was established during the 1991 session. The unit is charged with investigating and prosecuting Medicaid provider fraud, patient abuse or neglect, and misappropriation of patient trust funds. Over 121 investigations have been opened, since the unit's inception. As with the Telemarketing Consumer Fraud Unit, the creation of a separate budget is being requested to maintain consistency with the other fraud units. Senator Rawson asked for a caseload breakdown and questioned if there had been any patient abuse cases reported. Ms. Del Papa answered the unit has handled some patient abuse cases. She noted there is no breakdown listed in Exhibit E on the types of cases the unit has examined, but a breakdown could be provided to the committee. Senator Rawson said he had the impression the MFCU primary duty is to address provider fraud. Furthermore, he questioned whether the issue of patient abuse is being identified and if there have been any Medicaid fraud prosecution cases. Ms. Del Papa explained the program received 90 percent of its funding from the federal government the first 3 years of its existence. Presently, the program is 75 percent federally funded. The federal government has strict regulations regarding Medicaid fraud units' duties. The primary mission of the unit, as dictated by the federal government, is provider fraud and patient abuse. Senator Rawson asked who handled Medicaid recipient fraud. Ms. Del Papa explained Medicaid fraud complaints are handled by the Department of Human Resources. Senator Rawson asked if a deputy attorney general is assigned to the Department of Human Resources. Ms. Del Papa noted the attorney general's office does not have investigators housed in the department, but attorneys within the attorney general's office are assigned to the Department of Human Resources. Ms. Del Papa referred the committee to page 49 of the Executive Budget and reviewed equipment and personnel requests. Ms. Del Papa indicated the attorney general's office has requested a salary increase and title change for the Senior Deputy Attorney General in charge of the unit. The salary would be increased from $64,755 to $69,000. Senator Raggio observed the MFCU budget is requesting $380,000 from the General Fund and questioned if the amount represents matching funds required by the federal government. Don Hataway, Chief, Assistant Budget Administrator, Budget Division, explained the federal government requires the state to provide 25 percent in matching funds and "for the most part" the $380,000 represents the state's portion. Senator Raggio asked where court ordered repayment funds are indicated in the budget. Mr. Hataway answered the Budget Summary indicates recovery funds total $14,000 for each year of the biennium. Senator Raggio questioned why General Fund revenue is needed for matching funds. Marietta Grass, Chief Financial Advisor, Office of the Attorney General, stated: When we built the budget, we considered 2 percent of the budget to be considered recovery, simply because there is no way of determining what we will be able to come up with. We have asked that 23 percent of the state's match funding come from the General Fund, but what happens is that the recoveries more than offsets the General Fund and whatever is left reverts to the General Fund. We would not use General Fund [monies] unless it was absolutely necessary. Ms. Del Papa pointed out the MFCU recoveries have more than covered the state's portion of matching funds. Senator Raggio stated the committee wants to be assured the recoveries are sufficient to provide the matching funds. Mr. Miles stated the MFCU budget does not show a significant amount in recovery funds and the committee would like an up-to-date accounting on the funds. Ms. Del Papa said she would be happy to provide the committee with an accounting of the recovery funds. She reiterated that recovery funds have totaled more than the state's portion of matching funds. Attorney General Administrative Fund - Page 23 Ms. Del Papa said the administrative fund budget requests the following reclassifications: three reclassifications from Deputy Attorney General to Senior Deputy Attorney General; Senior Deputy Attorney General to Assistant Solicitor General; Senior Deputy Attorney General to Deputy Chief Attorney General; Information Specialist II to Computer Operations Manager; and Legal Research Assistant (classified) to Legal Researcher (unclassified). Ms. Del Papa explained most of the reclassifications are due to increased responsibilities and duties. Additionally, she noted all of the reclassifications are supported by state agencies. She pointed out the Solicitor General position is being moved to the Las Vegas area and the Assistant Solicitor General would be based in the northern part of the state. Senator Raggio noted the narrative of the adjusted base budget on page 23 of the Executive Budget suggests the reclassifications are based on length of service. The chairman pointed out length of service is not normally a factor taken into account for reclassification. Mr. Hataway explained he supplied the terminology and related it to: As an individual gains knowledge and experience in a particular function, they can be assigned additional duties and responsibilities that equate to another classification in the unclassified pay bill. Maybe length of service is the wrong terminology, but it relates to the person's ability to do the job. Ms. Del Papa said under the category of Demographics Caseload Changes the attorney general's office has requested two new Data Entry positions. The Data Entry positions are justified because of increased reporting and cost allocation documentation. In addition, it is more cost effective to hire Data Entry personnel for these duties rather than legal secretaries. Ms. Del Papa stated because of consolidation in the Las Vegas office a new Administrative Aide has been requested. Presently, a legal secretary handles receptionist's duties and the agency maintains the position should be held by someone with less technical skills. The attorney general's office has also requested two Micro Computer Specialists, one for Carson City and one for Las Vegas. The Carson City attorney general's office has one Micro Computer Specialist responsible for 165 computers located in Carson City and Las Vegas, plus three area networks. An Accounting Technician is requested to assist in processing 350 invoice documents, 53 agency, board, and commission billings, 25 deposits documents, and 14 adjustment documents each month. Two Supervising Legal Secretaries are also being requested. Senator O'Donnell commented the Department of Information Services (DIS) indicated in its budget hearing a need to consolidate the Micro Computer Specialist positions. He asked why the Micro Computer Specialist position needs to be located in the attorney general's office instead of the DIS. Ms. Del Papa contended the attorney general's office works very closely with the DIS, but because of privacy issues and the need to track litigation, the agency needs its own Micro Computer Specialist. She stated the issue has been discussed with the Budget Division and DIS and both agencies have agreed to allow the attorney general's office to maintain its own computer specialist staff. Senator O'Donnell asked if the agency has any qualms joining the network planned by the DIS. Ms. Del Papa explained the attorney general's office would like to remain separate because of the confidential records the office handles. The agency cooperates and shares information with DIS and tries to parallel actions taken by DIS. Mr. Hataway interjected the attorney general's computerization plans still would be submitted to DIS for their review and approval. Senator Rawson observed a number of state agencies deal with confidential records and he suggested the computer specialist positions should be in the DIS budget and assigned to designated agencies. Mr. Hataway stated the Budget Division, when reviewing the Micro Computer Specialist position, made a distinction between legal confidentiality and operational confidentiality. Senator Raggio observed in category M200 of the budget the attorney general's office is requesting five new attorney positions. The senator asked if the request is being made because of increased workload. Ms. Del Papa answered in the affirmative and noted there has been growth in the areas of Department of Business and Industry, Department of Human Resources, Nevada Department of Transportation, and the Nevada Department of Prisons. Ms. Del Papa pointed out a bill is being proposed by the Clark County district attorney and other county district attorneys asking the attorney general's office to assume responsibility for labor commission cases. If the bill passes, it would add one and one- half positions to the attorney general's budget Senator Raggio questioned why the agency should assume responsibility for labor cases when that has traditionally been a function of the county district attorney's office. Ms. Del Papa said the attorney general's office did not request the change. The county district attorneys requested the change, so the cases would be handled in a more uniform manner. Senator Raggio asked why the new position requests are scheduled to begin July 1, 1995 and not October 1, 1995, which is the hiring date for all other state agencies. Mr. Hataway said he reviewed past budgets and found new positions in the attorney general's office had always been budgeted for July 1. Ms. Del Papa stated the agency would be happy to wait on a number of the positions, but if funding was already available, such as federal funding, she would like to go forward with the hiring process as soon as possible. Another area she would like to address sooner than Oct 1, 1995, is placement of a deputy attorney general in Las Vegas for the Department of Business and Industry. Ms. Del Papa asked for restoration of state bar dues which were deleted by the Budget Division. Most public law firms pay their attorneys' state bar dues. Senator Raggio questioned if any state agency pays bar dues for its employees. Mr. Hataway responded the State Administrative Manual requires dues to organizations be in the name of the state and not in the name of the individual. The state does not pay individual professional dues for any profession. Ms. Del Papa explained the salaries earned by attorneys in the attorney general's office are less than what were paid by county governments. When surveying attorneys in the agency, it was brought to her attention the issue of dues is a "sore point" among the staff. Senator Raggio requested fiscal staff to look into the matter and asked how much the dues would cost. Ms. Del Papa replied, "$25,000." Senator Mathews stated she does not believe state bar dues should be paid out of state revenues. The senator noted most employees in the private sector are responsible for paying their own professional dues. Ms. Del Papa reported the attorney general's budget is requesting increased funding in the category of Legal Research. The request would allow for more research time on WESTLAW and to update the CD ROM library. Senator Raggio observed the additional funding totaled $75,000 and asked what is included in the request. Ms. Del Papa explained instead of purchasing expensive hardback legal reporters for the Las Vegas office, the agency would access information on CD ROM. In addition, funds would be used to purchase more on-line time for WestLaw research. The chairman asked Ms. Del Papa to consult with Senator O'Donnell regarding the funding request. Senator Raggio asked Mr. Hataway to explain to the committee how the cost allocation process works with respect to the Office of the Attorney General. Mr. Hataway replied: The attorney general's office is very similar to the statewide cost allocation plan. There are certain costs of the attorney general's office that are considered governmental in nature, her salary as an example. Those costs have to be deducted out from the total and then the total remaining costs that is represented in the attorney general's budget is allocated out to the agencies based upon the hour-time records that the attorney general people have maintained. . . .Once the hours are identified and once the costs are identified, it then becomes a mathematical process to determine what agencies are billed what. . . .If it is a 100 percent General Fund agency, we don't collect anything on statewide cost plan. If it is100 percent non-General Fund. . . we collect 100 percent and then those agencies that have the pro rata relationship between federal and state, we collect a percentage. Senator Raggio, referring to page 31 of the Executive Budget, noted there are two one- shot appropriation requests; one in the amount of $224,000 and the other for $20,000. The chairman asked for a detailed explanation on the two requests. Ms. Del Papa said the $224,000 request includes: telephone headsets, CD ROM library, Paradox 10, WordPerfect upgrade, 220 DOS upgrade, secretarial chairs, Heros Memorial Building telephone system, 24 printers, file server enhancement, four network servers, CD file server for Las Vegas CD library, computer upgrades from the current 286's, 6 laptop computers, 12 filing cabinets, 18 book cases, fax machine, scanner, and 14 acoustical panels. The Governor has asked the attorney general's office to request the $20,000 one-shot appropriation in order for the attorney general to serve as "point agency" for the crime bill. The crime bill would provide each state with $400,000 - $500,000 to be used for domestic violence programs. Mr. Hataway interjected the $20,000 would pay for writing grant applications for federal funds related to domestic violence programs. Senator Raggio noted the committee would consider the two one-shot appropriation requests at a later date. Tort Claim Fund - Page 31 Ms. Del Papa explained the Tort Claim Fund was transferred from the Department of Administration, Risk Management Division, to the Office of the Attorney General by the Governor's reorganization of 1993. The fund was established for the payment of claims which the state is obligated to pay. Claims against the state include automobile accidents, injuries on the state's premises or highways, and damages claimed for violation of civil rights of convicts, state employees, or the general population. Senator Raggio noted liability claims cost per vehicle were $1,938 in 1994, but the budget indicates the figure would decrease to $153 in 1996. The senator asked if the fund would have sufficient reserves with the decreased projection. Ms. Del Papa answered there would be sufficient reserves because the figures are based on actuarial projections. She indicated it is difficult to estimate the amount of reserves needed because of the uncertainty regarding the types of cases the agency would be called upon to litigate. Senator Raggio questioned why funding has been requested for an audit. Mr. Hataway explained the Budget Division felt it is good management practice to have a financial audit done. Senator Raggio asked why the Internal Audit Division could not perform the audit. Mr. Hataway responded the Internal Audit Division does not conduct formal audits. Jon Hansen, Manager, Tort Claim Fund, Office of the Attorney General, stated Kafoury Armstrong & Company has performed an audit on the fund for the last 3 years. The funding request is to provide for a financial audit and an actuarial study. The actuarial study would determine the amount of funds needed to cover future expenditures for claims. Ms. Del Papa indicated one of the established goals of the agency is to resolve 40 percent of all claims in 50 days. The actual result achieved was 25 percent. Senator Raggio questioned why the attorney general's main budget did not include performance indicators. Ms. Del Papa said it is difficult to anticipate litigation needs. The chairman countered it would be helpful if the attorney general's office would draft performance indicators and include them within their budgets. Mr. Hataway related the Budget Division would be addressing the matter over the next biennium. He pointed out the information furnished in Exhibit E provides performance measurements. Senator Rawson commented it was better for an agency to develop their own performance indicators than to enlist the assistance of the Legislative Counsel Bureau staff. Special Fund - Page 35 Mr. Hataway explained the Budget Division made an error in calculating the Special Fund budget. The amount for telemarketing litigation was duplicated in the base budget and the 850 Special Projects account. He stated the revenue should be reduced by $18,995 in decision unit 850. Ms. Del Papa testified the fund is established for the payment of expenses directly related to the investigation, preparation, prosecution and defense of suits unknown at the time the budget is prepared. She indicated Nevada's litigation account is much smaller than a number of sister states. Because the litigation account is underfunded and litigation is becoming increasingly complex, the attorney general's office is requesting restoration of Fiscal Year (FY) 1994 funding for general litigation and restoration of FY 1994 funding for nuclear waste litigation. Senator Raggio questioned why litigation is anticipated on the nuclear waste issue. Ms. Del Papa responded there is ongoing litigation in the nuclear waste area and the budget needs to be prepared for the litigation costs. Senator Raggio asked why the Budget Division denied the agency's restoration request for litigation funds. Mr. Hataway noted the Budget Division sympathized with the attorney general's concerns, but stated, if litigation expenses exceed what was recommended then the agency could approach Interim Finance Committee (IFC) for assistance. Senator Raggio inquired why the attorney general objected to coming before the IFC for additional funds. Ms. Del Papa responded she would have to reveal information regarding the state's case to the IFC, which places the state at a legal disadvantage. She maintained it is not always wise public policy to let the state's legal position be known. Workers Compensation Fraud - Page 37 Ms. Del Papa distributed a handout (Exhibit F) outlining statistical information, budget requests, and proposed legislation regarding the Workers' Compensation Fraud Unit (WCFU). The WCFU went into effect August 16, 1993, and since that time has received 2,110 referrals, made 132 arrests, opened 162 prosecutions and sustained 101 convictions. The total money saved and imposed includes $4,040,286 in fines, fees, and premiums, plus State Industrial Insurance System (SIIS) reserves savings of $1,168,414 for a total of over $5,208,700 as of the end of December 1994. The unit is split between Reno and Las Vegas, with investigators located in Carson City and Elko. Senator Rawson asked, "Is this going after providers, workmen who are not qualified, who are the people we prosecute?" Ms. Del Papa responded the mission of the unit is to prosecute all workers' compensation fraud committed by employers, claimants, and medical providers. Senator Rawson questioned if the attorney general's office has a breakdown designating the types of cases the agency has investigated and prosecuted. Ms. Del Papa said that information was not available in Exhibit E, but she would compile a list for the committee. Ms. Del Papa commented there would not be many provider cases listed in the breakdown because the cases are still making their way through the system. Provider cases are much more complicated to investigate and process. Ms. Del Papa referred the committee to the adjusted base budget and noted the attorney general's office is seeking reclassification for the following positions: Micro Computer Specialist III to Information System Specialist I; Management Assistant I to Legal Secretary II; and Senior Investigator to Deputy Chief Investigator. The position reclassifications are being requested because of increased responsibilities and work loads. In the M200 portion of the budget, the agency requested nine new positions to address increased work loads throughout the state. Specifically, the following positions are being requested: Deputy Attorney General - Las Vegas; three Investigators, two for Las Vegas and 1 for Reno; Computer Network Technician I - Reno; Legal Secretary II - Las Vegas; Management Assistant I - Las Vegas; Management Assistant II - Reno; and Management Assistant I - Elko. Senator Raggio, referring to the category of Enhancement 720, asked where the proposed surveillance vans would be located. Kevin Higgins, Senior Deputy Attorney General, Fraud Control Unit for Industrial Insurance, Office of the Attorney General, stated the vans would be utilized statewide. Presently, the unit has no surveillance vans. Senator Rawson asked if the attorney general's office uses Capitol Police for security. Ms. Del Papa said the attorney general's office in the north has a Capitol Police security guard assigned to it, but none are assigned to the southern Nevada office. She did note, in the southern Nevada office, in order for an individual to go into the work area, they must be "buzzed in." Senator Jacobsen questioned if the Las Vegas attorney general's office has enough room to accommodate all the new requested positions. Ms. Del Papa explained she has been able to place all employees in the main office except the Colorado River Commission deputies. If all the requested positions are funded, the agency might be required to double up some offices. Because the Medicaid fraud unit is federally funded, the unit would be a likely candidate to move out of the new Las Vegas office. Senator Raggio stated because of time constraints, the budget for the State Industrial Claimants' Attorney would be rescheduled. Ms. Del Papa related the attorney general's office has requested cellular phone equipment in several of its budgets and the Budget Division has not included funds for the purchase of the equipment. Senator Raggio asked her to provide the committee with a report listing the specific budget and the equipment requested. Insurance Fraud - Page 51 Ms. Del Papa said the adjusted base budget recommends one Legal Secretary II position be transferred to the main attorney general's budget account because the position supports staff assigned to the Insurance Division rather than Insurance Fraud. Senator Raggio questioned how many new cases the unit handled and how many cases were closed. Ms. Del Papa indicated she did not have the information with her, but would certainly provide it to the committee. Mr. Hataway explained the Insurance Fraud budget is in transition. A bill draft request has been submitted to transfer the responsibility of the program from the Commissioner of Insurance to the Office of the Attorney General. Senator Raggio asked why the Budget Division is recommending the transfer. Mr. Hataway said the Insurance Fraud unit is similar to the other fraud units and it is the Budget Division's goal to consolidate all the fraud units into the attorney general's office. Mr. Hataway noted the original budget for Insurance Fraud was prepared by the insurance commissioner's office and not the Office of the Attorney General. Senator Raggio inquired if the investigators in the different fraud units could be utilized in other areas. David Sarnowski, Chief Deputy Attorney General, Criminal Justice, Office of the Attorney General, responded the insurance fraud investigator's primary function is to investigate insurance fraud perpetrated against private insurance companies operating in the state. Insurance fraud investigators occasionally investigate other types of cases. Deputies in the Special Prosecution Unit prosecute insurance fraud cases in northern Nevada when the caseload is too heavy for the half- time deputy assigned to insurance fraud cases. Mr. Sarnowski said he would provide the committee with caseload statistics. He pointed out the deputies assigned to the Insurance Fraud unit also file and prosecute Employment Security fraud cases on a contract payback basis. Senator Raggio stressed performance indicators need to be developed for the unit. Crime Prevention - Page 57 Ms. Del Papa pointed out the Crime Prevention program was restructured in the 1993 Legislative session. The program addresses not only crime prevention, but also includes the Nevada Missing Children and Exploited Children Clearinghouse unit. In order to structure the unit similarly to the other units within the attorney general's office, it is requested that the positions of investigator and senior deputy attorney general be transferred from the main attorney general's budget into the Crime Prevention budget. In addition, a title change of a senior attorney position to "Children's Advocate" has been requested. Senator Raggio asked if the senior deputy attorney and investigator work exclusively for the Crime Prevention program or if they are assigned other duties. Ms. Del Papa said the investigator's and attorney's duties are specifically within the Crime Prevention program. The Children's Advocate position also assists staff assigned to the Department of Human Resources. Senator Raggio questioned if the budget would still include two positions. Ms. Del Papa responded the budget includes a deputy attorney general, a crime prevention coordinator, a special projects administrator, and an administrative aide. Extradition Coordinator - Page 61 Ms. Del Papa testified the attorney general's office has made a concerted effort to work with local law enforcement to try and curtail expenses and expedite services. The base budget includes a reclassification of the Coordinator's position from Program Officer I to Program Officer III. Reclassification of the position is justified due to the increased responsibilities bestowed on the position because of changes in state statutes. Senator Raggio noted the reclassification would be a four grade increase and asked for justification of the increase. The attorney general explained a number of statutory changes were made in the area of extradition which have caused the position to take on more responsibility. In the category of Out-of-State Travel, the base budget does not provide sufficient funding for the Program Assistant to attend the National Association of Extradition Officer's annual meeting, stated Ms. Del Papa. Senator Raggio asked why two people were budgeted to attend the convention. Ms. Del Papa explained the Program Assistant acts on behalf of the Program Officer during her absence. The convention provides an excellent opportunity for the Program Assistant to receive additional training. Consumer Advocate - Page 65 Frederick Schmidt, Consumer Advocate, Office of Advocate for Customers of Public Utilities, Office of the Attorney General, testified although there are no performance indicators listed in this budget, his staff does collect statistics on caseload, hearing time, and dollars saved. Senator Raggio suggested performance indicators should be made a part of all of the attorney general's office budgets. Mr. Schmidt noted the Consumer Advocate's Office requests an additional Assistant Staff Counsel position. The position is needed to handle increased caseloads experienced in recent years. Senator Raggio observed the salary for the new position would be $60,000, while the salary for the existing Assistant Staff Counsel is $51,500. The chairman asked why the salary for the new position is higher than the salary for the existing position. Mr. Schmidt explained the Consumer Advocate's Office has requested a salary increase for the position the last two legislative sessions. The salary currently being paid to the Assistant Staff Counsel is below comparable positions in other state agencies. He indicated the Consumer Advocate's Office has lost five attorneys in the last 6 years because of the position's low salary level. Mr. Schmidt noted the salary increase would not change the mill assessment level. Senator Coffin questioned if the Consumer Advocate's Office addresses the concerns of the small business community. Mr. Schmidt stated, "I think if there is any category of people who are not necessarily represented in the utility process in the state today it's probably small businesses." The Consumer Advocate's Office has aggressively represented small businesses in rate design cases in the past because cost allocation for small businesses is similar to residential customers. However, the office does not have adequate resources to represent small business organizations in complex rate hearing cases, such as the hearings taking place regarding telecommunication regulations. Mr. Schmidt pointed out the Budget Division has not funded the Out-of-State Travel request. He stated: My budget has a fairly large Out-of-State Travel budget compared to other agencies. This year it was $13,000. I only spent half of that. When I am given the signal that if I do not spend all of that I will be cut back to the level that I actually spent, it sends an inappropriate signal I think to a government official to go out and spend all your money. I have not spent those travel budgets when it was not necessary. This year I need that $13,000 because all of the important things that are happening with utilities are happening at the FCC [Federal Communications Commission] and the FERC [Federal Energy Regulatory Commission] with regard to deregulation and changed regulation. Senator Raggio questioned if Out-of-State Travel funding was higher prior to 1994. Mr. Schmidt replied prior to 1994 the office had spent approximately $10,000 to $12,000 for Out-of-State Travel. Senator Raggio requested Mr. Schmidt to submit a breakdown on what Out-of-State Travel would cost for the next biennium. The chairman turned the gavel over to Vice-chairman Rawson. Private Investigators Licensing Board - Page 69 The Attorney General testified the private investigator's board is requesting reclassification of a Program Officer III (classified) position to Executive Director (unclassified) due to increased responsibilities associated with the board. Ms. Del Papa stated the private investigator's board will meet March 7, 1995, and recommend the salary for the Executive Director position. The board is requesting an increase in the categories of In-State Travel and Litigation due to the new "unlicensed activity citation" law approved by the 1993 Legislature. The "unlicensed activity citation" and the "notice of violation" fine laws have caused additional costs to be placed upon the board. The board must provide an appeals process and meetings must be held to hear and evaluate all appeals. Senator Rawson noted the attorney general's office requested $17,587 in the category of Litigation for both years of the biennium, but the Governor recommended a total of $4,000 for the biennium. The senator asked if the funding level recommended by the Governor would be adequate. Ms. Del Papa said she felt the funding requested by the attorney general's office was justified and a strong argument could be made for the request. Mr. Hataway interjected the licensing board budget has a substantial reserve and the Budget Division determined, if litigation needs occur, funds could be transferred from the reserve account. Senator Rawson asked if the reserve account is expected to increase. Mr. Hataway answered the reserve account is not out of line with other licensing boards. Ms. Del Papa stated an increase in Out-of-State Travel has been requested to permit an additional staff member to attend the annual Council on Licensure Enforcement and Regulation (CLEAR) conference. Senator Rawson questioned where the CLEAR conference is being held. Carol Widmer-Hanna, Executive Director, Private Investigators Licensing Board, Office of the Attorney General, responded CLEAR conferences are held once a year throughout the United States. Vice-chairman Rawson recessed the meeting at 10:55 a.m. Chairman Raggio reconvened the Senate Committee on Finance meeting at 11:45 p.m. DHR Administration - Page 987 Charlotte Crawford, Acting Director, Department of Human Resources, came forward and distributed a handout providing an overview of the department's budget (Exhibit G). Ms. Crawford noted page 1 of the handout provides a functional organizational chart of the Director's office of the Department of Human Resources as well as the seven divisions under the department's control. The Grants Management section provides supervision and management for the following grants: Community Services Block Grant; Title XX Social Services Block Grant; Child and Adolescent Services System Program; Child Care and Development Block Grant; and the Title IV-A At-Risk Child Care Grant. Ms. Crawford explained the Health Care Financial Analysis Unit (HCFAU) supervises and administers the Tax and Intergovernmental Program, Hospital Cost Containment Program, health care cost analysis, and maintains a Medicaid paid claims' database. The Director's budget has 26 and one-half full-time employees (FTE). Six employees work in the administrative services area, nine and one-half employees work in the Grants Management Section, and 11 are employed in the Health Care Financial Analysis Unit. Ms. Crawford explained page 3 of the handout breaks down each of the positions by the funding source supporting the personnel expenses for the position. The Grants Management Section and the HCFAU are supported by grants, fees, or the tax system they work within. The Administrative Services section has two positions funded by the General Fund. It is proposed that four positions be transferred from the Tax and Intergovernmental Program into the administration budget. Senator Raggio asked if there are any restrictions for administration costs regarding the grant funds. Ms. Crawford replied there are restrictions on the grant funds and many other funds. Most federal grants have an administration limitation cap restriction. Ms. Crawford said the graph on page 5 of Exhibit G, represents the level of state General Funds in the DHR Administration Budget from Fiscal Year (FY) 1992 through FY 1997. The budget cuts in 1992 caused the Director' Office to shift much of the funding for positions to non-General Fund sources and cost allocated many of the positions to grant programs and other sources. The Governor's Executive Budget recommends $195 million in General Funds for FY 1996 and $201 million for FY 1997. Ms. Crawford stated: We cannot support the core administrative services in the Director's Office from state General Funds. The point I am trying to make is we are probably in a transitional phase because the funding sources we have used to support the Director's Office are diminishing with the changes in the Tax Intergovernmental Program and the expiration of SLIAG (State Legalization Impact Assistance Grant) in 1994. Those funds that have accrued and been available in the Director's Office will dramatically diminish in the next biennium. The acting director referred to page 7 of the report and noted the page provides a breakdown of the significant funding sources in the DHR Administration budget. She explained the grant for the Child and Adolescent Social Services Program (CASSP) is expiring in 1995 along with the three positions it funds. Ms. Crawford stated page 8 of Exhibit G demonstrates the source of the grant funds and how the funds were expended. The expenditures are broken down into the following categories: Director's Office, Other State Programs, and Direct Recipients or Non-State Agency. Referring to pages 9-11, Ms. Crawford said this section of the report provides an overview of the five federal grant programs the Director's office administers. Chris Thompson, Chief, Health Care Financial Analysis Unit (HCFAU), Department of Human Resources, referred the committee's attention to page 12 of the report. Mr. Thompson said page 12 describes the purpose of the unit as well as the revenues collected and the expenditures of each program within the Health Care Financial Analysis Unit. Mr. Thompson explained the Cost Containment Program was initiated in 1985 and given the responsibility of compiling information from hospitals and other providers. The program also maintains a data base on all Nevada hospital discharges through the University of Nevada, Las Vegas (UNLV), Center for Public Data Research. In addition, the program provides analysis on health care costs and develops programs to hold down health care costs. Revenues for the Cost Containment Program come from a fee charged to all licensed health insurers. The program employs six staff members and contracts with UNLV for the Hospital Patient Discharge Data. The second program supervised by the HCFAU is the Billed Charge Master Program. The program limits the amount of increase for hospitals on bill charges to the medical Consumer Price Index for the previous 12 month period. The Billed Charge Master Program is scheduled to sunset June 30, 1995, but a bill draft request (BDR) has been proposed to extend the program until June 30, 1999. Revenues are obtained from assessment fees charged to five hospitals based on budgeted costs allocated by patient days. The program has two staff members and contracts with UNLV for computer comparisons of charge masters and sample bills. The third program administered by HCFAU is the Tax and Intergovernmental Transfer Program. The tax program develops programs to maximize federal payments for Medicaid, develops and administers disproportionate share programs, reviews financial aspects of Medicaid initiatives, including managed care, and maintains the Medicaid paid claims database. The program is funded by Title XIX funds, transfers, taxes, and interest earned on the account. Senator Mathews questioned if UNLV provides information to HCFAU on all hospitals in the state. Mr. Thompson replied discharge data is supplied on all general acute care hospitals. The requirement does not include psychiatric hospitals and rehabilitation hospitals. Senator Mathews asked why the contracts with UNLV for Hospital Patient Discharge Data and computer comparisons for charge masters could not be combined. Mr. Thompson explained the Hospital Patient Discharge Data and computer comparisions are two separate functions provided by UNLV, thus requiring two contracts. Senator Rawson inquired if the Governor recommended continuance of the Billed Charged Master program. Mr. Thompson said a BDR has been proposed to continue the program until June 30, 1999. Senator Rawson noted the hospitals have funded the program and asked if the program would continue with the same funding source. Mr. Thompson responded the hospitals would still be assessed for the program. Senator Rawson mentioned a proposal was made to the Interim Health Care Committee for the establishment of a health care planning commission. The senator asked if the commission would "blend well" with the HCFAU. Mr. Thompson said the two would work well together in the areas of information gathering and data analysis. Senator Rawson questioned if the state is making progress in the "waiver process" for managed care. Mr. Thompson replied testimony on the issue would be taken on February 15, 1995, and a formal waiver proposal would be submitted to HCFAU before the end of February 1995. In the same time period, information would be gathered from the Hospital Managed Care Organizations (HMO). Senator Rawson asked if Mr. Thompson has any concerns regarding tax revenues included in the intergovernmental transfer program. Mr. Thompson answered: Based on the laws as they are today, I am very comfortable that all of the tax revenue that we have collected at this point and everything we have in this budget for intergovernmental transfer is okay. There was a story which came out earlier this week with regard to disallowed taxes. The story was actually over a month old. . . .We have since had discussions with HCFAU National, at which point they gave me verbal assurance that all aspects of that issue have been resolved and there will be no disallowance. We are in the process of securing a waiver approval on the tax program that we currently have in place. The waiver has been in with HCFAU for over a year at this point. . . .I believe that the tests that are in the law are very straightforward and we made sure that when we developed that tax program we were in compliance. Mr. Thompson stated he is "100 percent confident" the intergovernmental transfers proposed for the next biennium are in compliance with federal law as it exists today. Congress will be examining intergovernmental transfers and if changes are made the states are generally given sufficient time to make program adjustments. The Tax and Intergovernmental Transfer Program will receive $112,000 a year for the next biennium which represents the Title XIX funds share of Medicaid-related expenses. The program employs three staff members and contracts with UNLV for Medicaid paid claims' histories. Mr. Thompson explained $258,000 per year is transferred out of the program and into the Director's budget to support administrative staff services. If federal funds are not available in the future to fund the $258,000, then the funds would have to be paid by the General Fund. Senator Raggio stated the remaining budgets listed on the agenda would be taken up by the joint subcommittees. Senator Raggio noted Janet L. Gilbert, Lobbyist, Progressive Leadership Alliance of Nevada, wanted to speak to the committee regarding the budget on Purchase of Social Services. Purchase of Social Services - Page 997 Ms. Gilbert came forward and distributed a report (Exhibit H) on the Title XX Social Services Block Grant. She noted she is a member of the Title XX Advisory Committee and would like to discuss the Title XX funding aspects of the budget. Ms. Gilbert referred the committee to page 9 of the report which depicts the amount of Title XX funds given to community service groups. Two-thirds of the funds were distributed in southern Nevada and one-third to northern Nevada and the rural areas. She pointed out $14 million was going to state agencies and only $560,000 was distributed to community groups. Ms. Gilbert passed out a handout (Exhibit I) listing Title XX funding from 1991 - 1995. She commented the Title XX funding has increased annually, but the percentage allocated to community service groups has decreased, while needs have continued to grow. In addition, as Nevada has made cutbacks in its services, referrals from state agencies to community services groups has grown, but funding has not. Ms. Gilbert stated she has contacted the state of Utah regarding how they allocate Title XX funds. She said Utah distributes 10 percent of its funding to community service groups. Senator Raggio noted the joint subcommittees would be delving into the distribution of Title XX funds in greater detail. Ms. Crawford commented Ms. Gilbert's statements were accurate regarding the limited amount of Title XX funds. The non-state funds were reduced slightly in 1992 along with all other reductions required at that time. Senator Rawson asked if it would be better to use Title XX funds for state agency programs or if it would be better to provide more funds to community service groups. Ms. Crawford stated because of budget cuts, state agencies have been working more closely with community groups. She related the collaboration between the agencies and community groups has been beneficial for both parties. Senator Rawson questioned how efficient community agencies are in providing services. Ms. Crawford responded the issue would have to be looked at "agency by agency." Ms. Gilbert interjected the community services groups seem to be able to address problems more quickly and creatively than state agencies. Senator Rawson asked, "If Congress were to make some significant changes and present a significant amount of our money in the form of block grants, could the non- state agencies respond quickly enough." Ms. Gilbert said the community agencies are already financially strapped and it would be difficult for the agencies to initially handle the increase. Senator Rawson requested committee introduction of Bill Draft Request (BDR) S-1363. BILL DRAFT REQUEST S-1363: Makes appropriation to Life Line Pregnancy Assistance and Vocational Training Center. Senator Rawson explained Senator Neal requested introduction of BDR S-1363, but was unable to make a presentation to the committee. The BDR makes an appropriation to the Life Line Pregnancy Assistance and Vocational Training Center for continuance of its nonprofit pregnancy assistance and education and vocational training center. Senator O'Donnell noted a small amount of funds were given to the program from Title XX grants. Ms. Gilbert interjected the Title XX Advisory Committee did not recommend funding for the Life Line Pregnancy Assistance Center, but the Department of Human Resources determined funding was needed for the center. SENATOR O'DONNELL MOVED TO INTRODUCE BDR S-1363. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RHOADS WAS ABSENT FOR THE VOTE.) * * * * * There being no further business before the committee, Senator Raggio adjourned the meeting at 12:45 p.m. RESPECTFULLY SUBMITTED: Pamela Jochim, Committee Secretary APPROVED BY: Senator William J. Raggio, Chairman DATE: Senate Committee on Finance February 2, 1995 Page