MINUTES OF THE SENATE COMMITTEE ON FINANCE Sixty-eighth Session May 8, 1995 The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:00 a.m., on Monday, May 8, 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 Dean A. Rhoads Senator Bernice Mathews STAFF MEMBERS PRESENT: Dan Miles, Fiscal Analyst Bob Guernsey, Principal Deputy Fiscal Analyst Debbra J. King, Program Analyst Pamela Jochim, Committee Secretary OTHERS PRESENT: John P. Comeaux, Director, Department of Administration David R. Thomas, Chief, Risk Management Division, Department of Administration Bruce Dane, Consulting Actuary, W.F. Corroon Robert Gagnier, Lobbyist, State of Nevada Employees Association James J. Jackson, State Public Defender, Office of the State Public Defenders, Department of Human Resources Michael Pescetta, Executive Director, Nevada Appellate and Postconviction Project, Inc. Brooke Nielsen, Assistant Attorney General, Office of the Attorney General Rita C. Gubanich, Ph.D., Truckee Meadows Community College, University and Community College System of Nevada James T. Richardson, Lobbyist, Nevada Faculty Alliance Joseph Crowley, Ph.D., President, University of Nevada, Reno, University and Community College System of Nevada Patricia Miltenberger, Vice President for Student Services, University of Nevada, Reno, University and Community College System of Nevada Senator Raggio opened the meeting and asked John P. Comeaux, Director, Department of Administration, to provide an explanation of Bill Draft Request 43-1834. BILL DRAFT REQUEST 43-1834: Split Department of Motor Vehicles and Public Safety into two separate departments. Mr. Comeaux explained an alternate plan was submitted to the Senate Committee on Finance and the Assembly Committee on Ways and Means last week and it is not necessary at this time to go forward with the bill. Senator Raggio noted, at Senator O'Donnell's request, the Legislative Counsel Bureau has provided a legal opinion (Exhibit C) regarding the constitutionality of the proposed department division. The chairman indicated the division of the department would cost the General Fund $1.2 million. Senator O'Donnell commented the legal opinion indicated the Highway Fund could not be utilized for funding the proposed separation. Senator Raggio stated, at the request of the administration, BDR 43-1834 will not be introduced. The chairman indicated Senate Bill (S.B) 153 has been amended and requested Dan Miles, Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, to review Amendment No. 308. SENATE BILL 153: Makes various changes to provisions governing planning for health care. Mr. Miles explained S.B. 153 abolishes the state health coordinating council which is consistent with the Executive Budget and the recommendation of the joint subcommittee. The bill also revises the Certificate of Need Program, but the Rural Hospital Alliance has requested the provisions pertaining to rural hospitals be retained within the bill. SENATOR RAWSON MOVED TO AMEND AND DO PASS S.B. 153. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Benefit Services - Page 482 David R. Thomas, Chief, Risk Management Division, Department of Administration, stated the joint subcommittee on General Government requested the division to revisit the trend assumptions utilized for the budget, as well as, make the necessary adjustments to the budget regarding the executive director's position. Mr. Thomas distributed a revised budget (Exhibit D) detailing the proposed changes. He noted contract costs and claim costs in the Self-Insured Program are shown separately to provide a clearer understanding of costs related to the two categories. In addition, the Reserve account is divided into two categories: Incurred But Not Reported (IBNR) and Contribution Rate Stabilization. Senator Raggio asked for an explanation regarding rate stabilization. Bruce Dane, Consulting Actuary, W.F. Corroon, stated the rate stabilization reserve is a reserve of funds which allows the Committee on Benefits to operate the benefit fund on a year- to-year basis without cutting benefits or increasing costs. Historically, the Reserve account has been referred to as a surplus, but the funds are set aside for a specific purpose. Senator Raggio questioned how the reserve amount was determined. Mr. Dane explained the 1995 figure was determined by calculating the amount in excess of the IBNR claims. Senator Raggio noted the original budget indicated the IBNR reserve for Fiscal Year (FY) 1996 was $24 million and $17 million in FY 1997, but the revised budget indicates the account decreases in 1996 to $12.8 million and $14.2 million in 1997. The senator asked how the figures in the account were determined. Mr. Dane replied, "In order to arrive at the rate stabilization, we have simply gone forward from the 1995 rate stabilization reserve and looked at the revenue in and the expenses out. Any increase or shortage in that amount impacts the rate stabilization reserve." Mr. Miles asked for a briefing on the new actuarial study and if the study affects the the contribution rates for the group insurance. In addition, Mr. Miles questioned if the Governor is recommending a change in the contribution rates. Mr. Thomas responded the original budget incorporated state contribution increases of 11.74 percent in 1996 and 8.46 percent in 1997; however, the revised trend projections indicate only a 4.5 percent increase will be needed in each year of the next biennium. The contribution rate for active state employees will increase $10.19 for the first year of the biennium and $10.65 in the second year. Senator Raggio questioned what the contribution cost will be per employee. Mr. Thomas answered, presently, the state's contribution rate is $226.60 per employee and the 4.5 percent increase will raise the 1996 rate to $236.79 per employee. The current state contribution for retirees is $127.61 and will increase to $133.35 in 1996. Mr. Dane explained the 4.5 percent trend rate was determined by reviewing the initial experience study from June, 1991 to May, 1994 and the revised experience study from 1993 to 1994. The revised study indicated a decrease in paid claims due to a decrease in utilization. He said the process used for developing the trend rate involved reviewing the national Consumer Price Index (CPI) for health care items, which was tracking 4.8 percent as of April, 1995. In addition, the health care contracts were reviewed and it was determined renewable rates will increase from 8 to 10 percent. Senator O'Donnell inquired if the Reserve funds are utilized for benefit increases or only for cash-flow problems. Mr. Dane replied the purpose of the rate stabilization reserve is to handle unforseen or unbudgeted expenses such as a large increase in utilization rates or an increase in large claims. Senator Raggio asked if the administration favors the proposed budget changes. Mr. Comeaux responded the reduced trend rates lower the state's contribution amount for active employees by $7.6 million and approximately $1.1 million for retirees. It is estimated the General Fund portion will amount to $3,476,000 for active employees and $662,000 for retirees. The balance of the funding will be provided by the Highway Fund and various other sources. Mr. Comeaux commented the information submitted by W.F. Corroon to the Committee on Benefits suggested the low trend rate is a temporary situation and possibly could double within several years. He stressed the rate stabilization reserve account should be maintained to prevent an increase in dependent premiums and a decrease in benefits should the trend rates increase dramatically. Senator Raggio questioned whether Mr. Comeaux and Mr. Thomas feels comfortable with the new IBNR figures of $12.8 million for FY 1996 and $14.2 million in FY 1997. Mr. Dane, Mr.Thomas, and Mr. Comeaux answered affirmatively. Senator Raggio asked for an explanation regarding Budget Account 1330. Mr. Thomas responded Budget Account 1330 is a new proposed budget to establish an account for the new position of Executive Director. In March, the Committee on Benefits received and adopted the recommendations of the Operations Audit completed by Ernst & Young Company. One of the principal recommendations within the audit was the creation of an Executive Director position which would direct the activities and staff of the state health plan. He noted the budget is being proposed to provide the funding for the position. The salary for the position was determined by examining several state government positions with comparable duties and responsibilities. The position would be funded as of October 1, 1996. Senator Raggio asked how the position will be funded. Mr. Thomas explained the funding will be provided by a reduction to the rate stabilization reserve account in Budget Account 1338. Senator Raggio noted the position will only serve the Committee on Benefits and inquired if support personnel will be needed. Mr. Thomas said the support personnel will be provided by the Risk Management Division. In addition to the above revisions, Mr. Thomas indicated the Retired Employee Group Insurance account has also been adjusted to reflect the new trend rate projections. Robert Gagnier, Lobbyist, State of Nevada Employees Association (SNEA), stated he is encouraged by the trend rate projections. He related on Friday, May 5, 1995, he provided Mr. Miles with some proposed changes to Senate Bill (S.B.) 301 which are supported by the State of Nevada Employees Association. SENATE BILL 301: Establishes for next biennium amount to be paid by state group insurance for state employees and their dependents. Mr. Gagnier explained one of the proposed changes requests a direct contribution towards dependent coverage. The lower trend rate projections will provide the necessary funds for dependent coverage. He asked the committee, before it closes the budget, to consider the proposed changes to S.B. 301. Furthermore, Mr. Gagnier cautioned the committee regarding the lower trend rate projections because the SNEA believes the rates will be rising more rapidly in the next several years. The SNEA supports the addition of the rate stabilization fund. Senator Raggio closed the budget hearing on the Benefit Services Fund and opened the hearing on Senate Bill (S.B.) 398. SENATE BILL 398: Makes appropriation to Nevada Appellate and Postconviction Project, Inc. James J. Jackson, State Public Defender, Office of the State Public Defender, Department of Human Resources, came forward and distributed a report (Exhibit E. Original on file in Research Library.) detailing the activities and funding sources of the Nevada Appellate and Postconviction Project. Mr. Jackson related his office has benefited greatly from the project and supports S.B. 398. In just one case, the Nevada Appellate and Postconviction Project saved the state public defender's office 300 hours of employee time in developing case issues, brief preparations, and jury instructions. The project helps speed up death penalty litigation because the attorneys handling the litigation are becoming better qualified and prepared in their knowledge to handle such cases. Michael Pescetta, Executive Director, Nevada Appellate and Postconviction Project, Inc., stated the main objective of the project is to eliminate the errors made in capital cases. Litigating capital cases is extremely complex and the legal issues arising in these cases are varied and difficult. A task force was developed in 1988 to explore the possibility of starting a death penalty resource center and, in 1991, the Legislature appropriated funds for the project, with operations beginning in 1992. In addition to the General Fund appropriation, the project also receives a grant from the federal administrative office of the United States courts. The project's efforts have been devoted to training capital case litigators in the public defender's office and in the private sector. Mr. Pescetta said the project has also provided representation in specific cases. It is difficult for Nevada lawyers to participate in a capital case because of the lack of resources available to them. Nevada does not have a law school, nor any publications devoted to criminal justice issues or the death penalty. Defense lawyers receive almost no institutional training regarding the handling of capital cases. He said a significant amount of time and funds can be saved by providing defense attorneys with the expertise and tools needed to try a capital case. Efficient and cost effective case litigation will help eliminate constitutional errors which will speed up the case in the federal court system, remarked Mr. Pescetta. Senator Raggio asked if prosecutors and defense attorneys participate in the program. Mr. Pescetta replied the program is exclusively for defense attorneys and technical assistance is provided to judges. Senator Raggio questioned how many attorneys have participated in the program since its inception. Mr. Pescetta responded 68 post-conviction cases have received the project's services and he estimated between 50 and 100 pretrial cases have consulted with the program. Senator Raggio inquired if the program or its participants support the abolishment of the death penalty. Mr. Pescetta answered, "No, Mr. Chairman, we do not have a political agenda." He said the program furnishes only legal services or technical services. He indicated legislators also utilize the project for legal analysis of bills. Senator Raggio noted the project is endorsed by the Nevada Supreme Court, the Office of the Attorney General, and the Nevada Bar Association. Mr. Pescetta stated a letter in section 4 of Exhibit E indicates the judges in the United States District Court, District of Nevada, also support the continuance of the project. Senator Mathews asked whether the National Judicial College carries publications which could be utilized by defense attorneys. Mr. Pescetta answered there are no publications specific to Nevada criminal law or death penalty law. Senator Coffin indicated he understands, in 1991, the funding for the center would be utilized to provide training to attorneys handling death penalty cases. He stated the post-conviction project should not be handling the entire defense for individuals. He commented Exhibit E indicates only two seminars have been organized since the project was established and voiced his concern the project is providing a defense team to the defendant instead of training attorneys. The senator asked how many attorneys have the skills to handle a death penalty case on their own due to the training they have received from the project. Mr. Pescetta responded it was always contemplated the project would provide some direct representation, but it was never intended the project would take over the representation in a majority of cases. The project has provided direct representation on a number of occasions such as: retirement of lawyer, litigation of a specific issue, and litigation in a specific court. The training seminars are directed to the broadest audience of lawyers who are providing defense services. The majority of the centers staff's time is spent consulting with lawyers who have cases in litigation. If an issue has been litigated before, the center provides the attorney with a copy of the argument, which saves time and funds. Senator Coffin inquired if the post-conviction project was involved in the Patrick McKenna case. Mr. Pescetta answered, no, but the project does try to prevent the type of situation which has occurred in Mr. McKenna's case. Presently, Mr. McKenna's case is delayed in the U.S. Court of Appeals, Ninth Circuit on a procedural issue of whether a defense attorney properly raised an issue in state court. Senator Jacobsen related the cases today are not more complex, but the system has made the cases more complicated. He stated his constituency does not want any more funds going to the justice system, but would like the system to function as intended. Mr. Pescetta replied the factual complexity of the cases has not changed, but the number of U.S. Supreme Court requirements have increased dramatically in the last 20 years. Senator Raggio stated it is his understanding that presently there is no state funding for the project. Mr. Pescetta replied affirmatively and said the project receives federal funding and funding from two small grants. Senator Raggio noted two funding proposals (Exhibit E - section 5) have been submitted by the Nevada Appellate and Postconviction Project. The first proposal indicates 100 percent state funding and the second indicates a combination of federal and state funding. Mr. Pescetta commented it is not clear at this time whether federal funds will be available, so two budgets were prepared for consideration. Senator Mathews inquired if the program was strictly a defense education program. Mr. Pescetta explained the program provides training, education, dissemination of material, consultation assistance, and some direct representation. Senator Mathews asked why the defense attorneys do not pay for their own education and training. Mr. Pescetta stated, "There is not enough money in this line of work to have the defense practitioner support the project out of their own funds." He noted the project also provides services to both the state and county public defenders. Senator Raggio pointed out in most of the cases where the public defender is not involved the court appoints a counsel to the case and only a small percentage of the cases will have a client capable of paying for attorney services. Brooke Nielsen, Assistant Attorney General, Office of the Attorney General, came forward and distributed a letter (Exhibit F) from Frankie Sue Del Papa, Attorney General. Ms. Nielsen stated the attorney general's office supports the project and asked the committee to consider training funds for prosecutors. The attorney general's office defends the largest number of death penalty cases and their attorneys are presently carrying a caseload of 50 to 80 cases. Senator Raggio questioned if the attorney general's office supports the measure or if the office is asking for more funding for their budget. Ms. Nielsen said the attorney general's office is requesting funding for one attorney and one legal researcher to continue to defend death penalty convictions. Senator Raggio noted funding has already been provided in the attorney general's budget for the defense of death penalty convictions. Ms. Nielsen answered the attorneys in the attorney general's office are already overburdened with a 50 to 80 caseload. The growing death penalty caseload justifies additional positions. Senator Raggio commented the project does not increase the attorney general's caseload, it only provides for more training. Ms. Nielsen said the project does not increase the caseload, but the attorney general's office is asking for funding equity from the Legislature because the same service is not provided to prosecutors. The attorney general's office only has one attorney specializing in death penalty convictions. Senator Raggio related Senator Coffin has raised an issue as to what extent the appropriation would provide funding for direct or indirect participation in the defense of a capital case. Senator Raggio closed the hearing on S.B. 398 and opened the hearing on Assembly Bill (A.B.) 183. ASSEMBLY BILL 183: Authorizes issuance of revenue bonds for construction of building for applied technology center at Truckee Meadows Community College. Dr. Rita C. Gubanich, Interim President, Truckee Meadows Community College (TMCC), University and Community College System of Nevada, stated A.B. 183 refers to the International Gaming Technology (IGT) Applied Technology Center. The building project is a joint project between the college and the Foundation Board. The building will be 35,000 square feet and will house occupational programs for welding, environmental technology, a heavy equipment diesel mechanics program, and a portion of the electronics program. She indicated enrollment in these programs has been limited due to a lack of space and safety concerns. The total cost for the project is approximately $3.5 million and the Foundation Board has raised approximately $700,000 towards the project. A.B. 183 will allow TMCC to finance the college's match of $1.2 million which will be funded by student capital improvement fees. Dr. Gubanich said the college and the Foundation Board will continue its campaign to raise additional funds. TMCC would like to have the building project coincide with the construction of the advanced technology building. Both of the projects will help local businesses by providing trained and educated workers. Senator Rawson asked if both projects are listed in the Governor's Capital Improvement Projects (CIPs). Dr. Gubanich replied the advanced technology building is listed in the CIPs, but the IGT Applied Technology Center is a separate transaction. James T. Richardson, Lobbyist, Nevada Faculty Alliance (NFA), stated his organization supports A.B. 183 and urged the committee to support the measure. Senator Rawson closed the hearing on A.B. 183 and opened the hearing on Assembly Bill (A.B.) 263. ASSEMBLY BILL 263: Authorizes issuance of revenue bonds for improvement of student union building at University of Nevada, Reno. Dr. Joseph Crowley, President, University of Nevada, Reno (UNR), University and Community College System of Nevada, stated A.B. 263 will allow UNR to issue revenue bonds for remodeling of the student union. Patricia Miltenberger, Vice President for Student Services, University of Nevada, Reno, University and Community College System of Nevada, explained the Jot Travis Student Union building was built in the late 1950s and has had two rooms remodeled since that time. A.B 263 will provide a $1.4 million revenue bond which will be combined with $1 million contributed by the Associated Students of the University of Nevada. The remodeling will enable the UNR to provide access to disabled students, to conduct asbestos abatement, create a club center for student clubs and organizations, add an open computer lab, add a study lounge, and general renovation of the existing lounges and meeting rooms. Ms. Miltenberger related the fee which will be used to repay the revenue bonds is a student union capital improvement fee. Currently, there is only one encumbrance against the capital improvement fee; however, that debt will be paid off in 1997. Senator Jacobsen asked if he could have a cost breakdown on all the projects the revenue bonds and student fees will encompass. Ms. Miltenberger replied she did not have the information with her this morning, but will provide it to the committee. Senator Coffin stated he supports the measure if the student union capital improvement fund is able to provide its share of the funding. Dr. Crowley said the students continue to pay the fee and there should be no problem with the students' portion of the funding. Senator Coffin questioned whether the Lawlor Events Center is supported by revenue bonds or General Obligation bonds. Dr. Crowley responded the center is supported by a state tax on slot machines. Senator Coffin inquired if UNR receives a share of the profits from events held at the center. Dr. Crowley stated the Lawlor Events Center struggles to break even, so revenue generated from events stays in the center for operational expenses. Senator Coffin expressed his concern regarding G. Gordon Liddy's appearance at the center. He asked what terms and conditions did the university place on Mr. Liddy's appearance. Dr. Crowley indicated the university's major concern with Mr. Liddy's appearance was with public safety. The sponsoring agency, a local radio station, was required to meet all the university's conditions with respect to safety issues. Presently, all the safety conditions have been agreed to, so the program has been scheduled to go forward. Dr. Crowley pointed out the appearance of Mr. Liddy at the Lawlor Events Center is a free speech issue. Senator Coffin said he does not feel this is a freedom of speech issue. The senator pointed out Mr. Liddy is a convicted felon who is preaching felonious acts against the government. He commented Mr. Liddy promotes a cookbook for assassination and should not be given a venue by the university to preach felonious conduct. Senator Coffin questioned if alcohol will be served during Mr. Liddy's appearance. Dr. Crowley responded, no, to the senator's question and stated he takes issue with Senator Coffin's opinion regarding Mr. Liddy's appearance. He indicated the test of the First Amendment is difficult to meet at times like this. During his tenure at the university, many controversial people have spoken at the Lawlor Events Center. Senator Coffin stated he questions whether the university has an obligation to allow a public building to be used by someone who provides a cookbook for the assassination of federal officials. He said there is a big difference in espousing a controversial viewpoint and explaining to people how to kill someone. He stated, "There is not a First Amendment issue here." Dr. Crowley responded, if it was clear and on the record Mr. Liddy was encouraging people to kill other individuals, he would agree with Senator Coffin, but he does not believe Mr. Liddy has demonstrated this intention. Senator Coffin suggested Mr. Liddy should give his presentation in a private beer garden and not in a public building. Dr. Crowley responded he appreciated Senator Coffin's position, but he disagreed with his viewpoint. Mr. Richardson came forward and stated the NFA supports the bill and urged the committee to pass A.B. 263. Senator Raggio closed the hearing on A.B. 263 and introduced Bill Draft Request (BDR) 33-2031. BILL DRAFT REQUEST 33-2031: Creates trust fund for support of division of museums and history of department of museums, library, and arts. Mr. Miles explained the trust fund is modeled after the National Judicial College trust. The bill creates a trust fund and appropriates $300,000 of state funds if an equal match is made by the Museums, Library and Arts Foundation. Senator Raggio asked if the bill contains language which will allow the state to retrieve the $300,000 if the state determines the funds are needed to meet future obligations. Mr. Miles replied section 1(3) of the bill addresses the state's right to rescind the funding if needed for other obligations. SENATOR JACOBSEN MOVED FOR COMMITTEE INTRODUCTION OF BDR 33-2031. SENATOR RAWSON 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 hearing at 9:50 a.m. RESPECTFULLY SUBMITTED: Pamela Jochim, Committee Secretary APPROVED BY: Senator William J. Raggio, Chairman DATE: Senate Committee on Finance May 8, 1995 Page