MINUTES OF THE SENATE COMMITTEE ON FINANCE Sixty-eighth Session May 24, 1995 The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:13 a.m., on Wednesday, May 24, 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 GUEST LEGISLATORS PRESENT: Senator Ann O'Connell STAFF MEMBERS PRESENT: Dan Miles, Fiscal Analyst Bob Guernsey, Principal Deputy Fiscal Analyst Jeanne L. Botts, Program Analyst Larry Peri, Program Analyst Sue Parkhurst, Committee Secretary OTHERS PRESENT: Gary Crews, Legislative Auditor, Audit Division, Legislative Counsel Bureau John P. Comeaux, Director, Department of Administration Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association Ken West, Chief Deputy Controller, Office of the State Controller Bob Gagnier, Executive Director, State of Nevada Employees Association Kevin Crowe, Ph.D., Director, Planning, Research and Evaluation, State Department of Education Keith Rheault, Ph.D., Deputy Superintendent, Instructional, Research and Evaluative Services, State Department of Education Thomas W. Klein, Ph.D., Coordinator, Proficiency Testing Program, State Department of Education Ray Bacon, Lobbyist, Nevada Manufacturers Association Wayne Perock, Chief of Field Operations, Division of State Parks, State Department of Conservation and Natural Resources Gene Sullivan, Director, Washoe County Parks and Recreation Department Pamela B. Wilcox, Administrator and State Land Registrar, Division of State Lands, State Department of Conservation and Natural Resources Leonard I. Gang, General Counsel and Executive Director, Commission on Judicial Discipline BILL DRAFT REQUEST 31-1985: Provide exemption for sheep commission from payment of state cost allocations and attorney general costs. SENATOR JACOBSEN MOVED FOR COMMITTEE INTRODUCTION OF BILL DRAFT REQUEST 31-1985. SENATOR RAWSON SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Raggio stated his intention to hear Senate Bill (S.B.) 460 first to accommodate the testimony of Senator Ann O'Connell. SENATE BILL 460: Requires certain agencies to report on whether its system of internal accounting and administrative controls is in compliance with uniform system adopted by director of department of administration. Senator O'Connell, representing Senate District 5 in Clark County, testified in support of this measure. She called attention to background material she had provided the committee, a copy of S.B. 341 of the Sixty-fourth Session (Exhibit C). SENATE BILL 341 OF THE SIXTY-FOURTH SESSION: Requires the director of department of administration to establish a uniform system of internal accounting and administrative control for certain state agencies and officers. Senator O'Connell stated that in 1987 she introduced S.B. 341 of the Sixty-fourth Session, which was intended to require state agencies to adopt a uniform system of internal accounting and administrative controls. The bill was signed into law and was to be implemented by government agencies by January 1, 1988. John Crossley, the former legislative auditor, had assisted the senator in compiling the information for the bill, which was modeled after the Federal Managers' Financial Integrity Act, Public Law (PL) 97-255 of 1982. Senator O'Connell said at the time she requested the bill, similar legislation had been enacted in five states. Continuing, Senator O'Connell testified that in checking with the current legislative auditor to see how the law was working she was informed that during the last biennium, there were audit exceptions totaling $75 million as a result of the failure of agencies to implement the provisions required by S.B. 341 of the Sixty-fourth Session. The bill before the committee, S.B. 460, is intended to strengthen the internal control process. Senator O'Connell deferred to Gary Crews, Legislative Auditor, Audit Division, Legislative Counsel Bureau (LCB), to provide further explanation of the need for this measure. Mr. Crews said since S.B. 341 of the Sixty-fourth Session was enacted into law in 1987, the Audit Division has audited numerous agencies in state government, primarily in the executive branch, and an estimated 50 percent of the agencies have failed to implement this measure. He said it appears agency heads have not placed a high priority on implementing the original legislation. S.B. 460 would require a periodic assessment of a state agency's system, to ensure the system is effective, and reporting of that assessment to the director of the Department of Administration on a biennial basis (in the even year of the biennium, just prior to the start of the legislative session). Mr. Crews said the legislation should help the department to determine the effectiveness of state agencies as well as assisting the LCB in preparing to conduct audits. He said the bill would put agency administrators on notice that if they are filing the certificate, they are attesting to their system's internal accounting controls. He concurred with Senator O'Connell's testimony regarding the $75 million in audit exceptions during the current biennium and said as much as $10 million in cost savings could be realized through S.B. 460, from lost revenues that should have been collected or from inappropriate expenditures. Senator Raggio noted the existing law requires the Audit Division to prepare a biennial report, pursuant to Nevada Revised Statutes (NRS) 218.830. Mr. Crews affirmed this and said the division issues its report at the beginning of each legislative session. Senator Raggio ascertained the proposed legislation would require that the head of each state agency, on or before July 1 of the even-numbered year of the biennium, report to the budget director on the agency's compliance with the statutory requirements regarding internal accounting controls. Senator Raggio invited comment from John P. (Perry) Comeaux, Director, Department of Administration, regarding the administration's position on S.B. 460 after voicing the opinion the measure should be helpful to the department. Mr. Comeaux indicated the measure is endorsed by the administration. He noted the uniform system of internal accounting and administrative controls is provided for in the State Administrative Manual (SAM). He said S.B. 460 would, at a minimum, require agency administrators to review their compliance with that system and report to the administration in this regard at least every other year. He agreed the legislation could be helpful. Senator Raggio observed there is apparently no additional fiscal cost associated with the bill. Mr. Comeaux said the only costs involved would be the paper cost and the staff time required to compile the report, and the costs should therefore be minimal. Senator Jacobsen said one of the failures the Legislature has observed over the years is that while the Audit Division performs its functions well, there is little follow-up after an audit is performed. He said state agencies often indicate the need for such follow- up after receiving an audit report that is critical of their operations. Mr. Crews responded an audit follow-up process currently exists. He said there is definitely a benefit to following up on audit recommendations, and the audit subcommittee of the Legislative Commission does so. He voiced the opinion the auditor is not a substitute for good managers, which he said is a problem the state currently faces. Mr. Crews said the managers need to be properly trained by the executive branch, to make them aware of what constitutes good control systems. Senator O'Connell pointed out the initial bill, S.B. 341 of the Sixty-fourth Session, was intended to help the different agencies to recognize the weaknesses within the agency, to identify them and hopefully to obtain additional training or assistance to strengthen the areas of weakness. She said the legislation was intended to help the agencies focus on their mission statement and what they should be doing and accomplishing, and to provide an actual plan for the conduct of business within the agency. She stated the original bill has not accomplished its intended purpose, and it is hoped S.B. 460 will help accomplish the intent of S.B. 341 of the Sixty-fourth Session. Speaking from the audience, Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association (NTA), indicated the association supports S.B. 460. SENATE BILL 126: Revises limit on balance in fund to stabilize operation of state government. Senator Raggio called on Senator Rawson to comment on this measure. Senator Rawson testified S.B. 126 would simply allow a percentage of the total budget to be used as the balance in the budget stabilization account instead of the arbitrary figure of $100 million. The balance in the fund would therefore increase as the budget becomes larger. Senator Rawson said the premise is there should be a certain amount of reserve in order to stabilize the budget in the event of a significant downturn in the economy. Senator Raggio asked the fiscal analysis staff if S.B. 126 presents a significant change, given the fact that presently the amount of the appropriations to fund state government that the state controller is required to deposit in the stabilization fund applies to the current fiscal year, whereas language in this measure indicates the "fiscal year in which that revenue will be deposited in the fund." Dan Miles, Fiscal Analyst, said he believes the language is merely a clarification that links the revenue for a fiscal year to the appropriations for the same fiscal year. Ms. Vilardo indicated the NTA's support for S.B. 126. Senator Raggio inquired as to the position of the Department of Administration on this measure. Mr. Comeaux said the department supports the bill. Senator O'Donnell voiced concern about the fact the 10 percent reference in section 2 of NRS 353.288 would be determined in the same fiscal year in which the budget is determined. He suggested that changing the language to apply the 10 percent to the budget for the preceding biennium might make it easier to determine "what the new budget should look like, because you would have a fixed amount." Senator Rawson explained that the funds in this account consist of two-fifths of any revenue received by the state in excess of the amount necessary to pay all appropriations for a particular year; they are surplus funds, and this provision does therefore not compete with the normal budgeting process. He further stated, "If you tied it to a different year, a previous year or something, it would have no relationship to what the real spike is in revenues coming in." Senator Raggio said he is attempting to determine which year it is that the revenue will be deposited in the fund, noting the physical deposit is usually made after the budget act is approved. Mr. Miles said in the law as currently constructed, a test is made at the end of each fiscal year to determine whether any funds should be deposited in the stabilization trust fund. At the end of Fiscal Year (FY) 1994, approximately $18 million was deposited in the fund because there was an excess above the required reserve of revenues over the amount required to fund appropriations. Mr. Miles further explained that in S.B. 126, according to his interpretation of the bill, "effective in FY 1996 that would also be the case." He said it is more likely that funds would be deposited in the stabilization account in an even year than in an odd year because the Legislature is in session during the odd year, and surplus funds are generally expended on capital improvements and other needed one-time programs or projects. Senator Raggio indicated the language in S.B. 126 needs to be clarified prior to committee action on the measure. He observed the main thrust of the bill is to allow the $100 million to increase up to a point of 10 percent of the total appropriations and authorizations. Mr. Miles affirmed this. He stated the Governor has recommended appropriations for FY 1996 of $1.183 billion, and therefore the limit on the balance in the stabilization fund would increase to approximately $110 million. Ken West, Chief Deputy Controller, Office of the State Controller, requested clarification of the limit on the balance in the stabilization fund. He asked if the limit is 10 percent of appropriations or 10 percent of appropriations and authorizations. Senator Raggio replied it is the latter (10 percent of the total budget including appropriations and authorizations). Mr. Miles said the question raised by Mr. West arose after the bill was initially approved. He explained that authorizations are funds the Legislature authorizes state agencies to receive and expend. He said the interpretation provided on this point was that the stabilization fund affects only the General Fund. He further stated the reason the word "authorization" is included in the bill is that the State Gaming Control Board is not appropriated, but is authorized to expend from the General Fund at a certain level. Senator Raggio observed the language in the bill needs to be clarified. Discussion ensued regarding the need to change and clarify the language in the bill with respect to authorizations and clarification. Senator Raggio said the language will be changed to address the concerns raised by Mr. West. An unidentified representative of the Las Vegas Chamber of Commerce and Ms. Vilardo (representing the NTA) voiced support for S.B. 126. SENATE BILL 170: Establishes program for payment of bonuses to state employees. Senator Rhoads, speaking in support of S.B. 170, explained the rationale for this legislative proposal. He said the lack of incentive for government agencies to reduce the cost of government has always bothered him. He indicated that as the system currently exists there is in fact a disincentive to generate savings, because the budgets of agencies that have surplus funds at the end of the fiscal year may be reduced. The senator noted S.B. 170 is his second attempt in the last two legislative sessions to provide an incentive to state agencies to effect cost savings. Senator Rhoads said section 3 of the measure contains the provision that if an agency that is funded by appropriation from the state General Fund has a surplus, it is possible for the agency to receive a certain percentage of the surplus for the payment of bonuses, if approved by the interim finance committee (IFC). Senator Rhoads said the bonus funds must be used to pay bonuses to those employees determined by the agency administrator to be the most responsible for the savings achieved by the agency. He noted the bonus allowed in S.B. 170 may not exceed 10 percent of an employee's salary or $2,500, whichever is less. Continuing, Senator Rhoads said in section 4 it is provided the IFC will adopt a form to be used by the agencies to submit for the committee's consideration. He said the bill is an effort to award good agencies and the personnel in those agencies who are responsible for the cost savings, thereby benefiting the taxpayer. Senator Rawson inquired as to the percentage of an agency's surplus funds that would be allocated to bonuses and whether any of the savings would revert to the General Fund. Senator Rhoads replied the original intent of the bill was that a certain amount of the surplus would be allocated to bonuses. He said the measure does not address the specific percentage amount and suggested it would be left to the IFC to determine the type of bonus to be paid. Referencing the language in the bill that pertains to NRS 353.225 (page 2, line 43 in S.B. 170), Senator O'Donnell presented a hypothetical scenario in which an administrator of an agency that serves the public directly and has a high attrition rate can refrain from filling vacancies to effect a vacancy savings, thereby enabling a person to qualify for a bonus at the expense of service to the public. Senator Rhoads responded the IFC would be responsible for determining the validity of the agency administrator's request for a bonus and would identify abuses of the program. Senator O'Donnell suggested excluding vacancy savings from the budget savings that would qualify for a bonus. Senator Rhoads indicated this would be acceptable to him. Senator Raggio pointed out language in section 4, subsection 2 (page 2) that specifies the kinds of money realized by an agency that would not qualify for consideration as savings. For example, the language in (h) on page 3 specifies that "[a]ny money realized from reducing the amount or quality of services provided by the agency" would not qualify. Also subsection (f) on page 3 specifies that "additional money realized from the failure of the agency to fill a position which is not eliminated." Senator Raggio inquired if S.B. 170 is a model bill or is derived from suggestions from another jurisdiction. Senator Rhoads replied no. He said he has been working with the Nevada Taxpayers Association on this proposal for 4 years. He deferred to Ms. Vilardo to provide additional information. Ms. Vilardo testified that similar legislation (Senate Bill 196 of the Sixty-seventh Session) passed in the Senate Committee on Finance and in the Senate in the 1993 legislative session. She said the measure resulted from Senator Rhoads' concern with reorganization. SENATE BILL 196 OF THE SIXTY-SEVENTH SESSION: Establishes program for payment of bonuses to certain state employees. Ms. Vilardo commented that probably the best line of defense in any organization, whether in the private sector or in government, is the employees, who work in the day-to-day operations and can therefore readily identify areas where efficiencies can be achieved. Noting that S.B. 196 was amended the previous legislative session, Ms. Vilardo said there had been concerns similar to those expressed by Senator O'Donnell. The concerns include the possibility agency administrators might achieve "savings" by not filling needed positions, thereby reducing the quality of service to the public, and that the funds to be used for payment of bonuses are normally considered for reversion to the state General Fund. To address these concerns, Ms. Vilardo and another representative from the NTA met numerous times with Mr. Miles and Judy Matteucci, former state budget director, to resolve the problem areas. Continuing, Ms. Vilardo said the original bill was proposed at the time the state government reorganization was being considered, and included the intention to facilitate a smooth transition and to maximize taxpayer dollars by including agency managers and employees in the process. It was the general consensus that the language in the beginning of the bill, through section 3, attempts to create a partnership between state agency administrators and employees through the incentive of qualifying for bonuses through agency savings. The reason for including the IFC in section 4 in the current measure, Ms. Vilardo explained, is to provide that if an agency achieves a legitimate savings, this is something the IFC should know and something that should be known by other agencies because it might be determined when the budgets are reviewed the savings are applicable to other agencies. The standardized form accomplishes two things: (1) It ensures the criteria identified in the bill are met, and (2) it would allow the Legislature to learn where the savings and recommendations for savings might be made to other agencies. Section 4 also identifies monies that cannot be considered for savings, Ms. Vilardo pointed out. She said the most important item with respect to the benefit to taxpayers is item (h), which specifies the quality of services provided by the agency or required to be produced by the agency would not suffer as a result of the savings mechanism used to qualify for the bonus program. The provision precludes eliminating positions in service-intensive agencies to achieve the savings. Concluding, Ms. Vilardo said a great deal of effort was expended in the preparation of this legislation. She said she contacted the director of the Department of Administration after Senator Rhoads indicated his intention to submit S.B. 170. She noted that parallel legislation is currently in the Assembly. Ms. Vilardo said it is believed the language in the bill pertaining to the amount of savings and the reversion aspect would maintain the integrity of the legislation's intent. She stated the Nevada Taxpayers Association supports the bill. Senator Raggio suggested subsection 6 of S.B. 170 (page 2) would probably require a provision that in the event the stabilization fund is fully funded, the excess savings would revert to the General Fund. Senator O'Donnell said he was reassured by Ms. Vilardo's testimony, but he had further questions relating to scenarios that might arise under S.B. 170. He posed as one possible situation the realization of savings by an agency as a result of the violation of a law or regulation. He cited as an example the failure of an agency administrator to produce a report that is required by administrative code, which would generate a savings. He asked if such savings should be considered as part of the savings that would qualify an agency's employees to receive bonuses. Ms. Vilardo replied such a situation should not occur because a provision in the bill (line 33 on page 2, subsection 5 of section 4) specifies that one of the criteria to be identified by the IFC is "the manner in which the program improved the efficiency of the agency or the services provided by the agency, or both...." Senator Jacobsen inquired as to the time frame involved in terms of the due date for the report to the IFC and the period of time covered by the report. Ms. Vilardo said the original intent of the bill was that the report would be made each fiscal year of the biennium. She said the effective date would be July 1, and the savings achieved in the first year would probably be addressed in the second year of the biennium due to the analysis and review process required to determine an agency's qualification for bonuses. Senator Raggio noted the bill calls for a report within 90 days after the end of the fiscal year. Senator Jacobsen asked if the savings realized during a given biennium would be utilized for the coming biennium; that is, would the budget take the savings into account in funding the agency's budget for the next biennium? Ms. Vilardo suggested this would need to be resolved between the IFC and the administration in terms of the manner in which the budget is presented. She said if an ongoing savings is achieved by an agency, such an occurrence should be considered in the budget discussion and formulation process. Senator Jacobsen noted the legislators rely on information regarding an agency's budget activity during the previous 2 years in their budget deliberations during the current legislative session. Senator Raggio suggested that with the new budget format, if the savings can be identified as a means of reducing the base budget, that budget would be adjusted accordingly in the Executive Budget for the next biennium. He said the new format enhances the opportunity to deploy a cost savings program such as the one proposed in S.B. 170. Senator Mathews remarked that the City of Reno implemented, on a trial basis, a program similar to the one proposed in S.B. 170. She said in Reno there are departments that are severely underfunded and those that are substantially over funded, and she asked if such disparities have been taken into consideration with regard to the proposed legislation. Ms. Vilardo said the question raised by Senator Mathews, along with the fact the program applies to General Fund agencies only, arose earlier with regard to this bill. She said the proper level of funding cannot be easily determined because it is, to some degree, a matter of perception, but she suggested the bill will facilitate the identification of savings patterns among the various agencies. Senator Rhoads remarked he has heard many secondhand reports of agencies spending their remaining funds toward the end of the fiscal year to avoid budget reductions in the next biennium or reversion of their fund balances. He suggested S.B. 170 might change this pattern of sometimes unnecessarily expending funds, by rewarding agencies with surpluses at the end of the fiscal year. Senator O'Donnell predicted agencies that are "fat" (overfunded) will realize there are additional dollars to be garnished by "reverting back in the `savings' fund," and their own greed will be their downfall. "Their own fatness will be [what determines] how much money is going to be left in their reserve for allocation for salary bonuses," the senator remarked, but the Legislature might decide to reduce the agency's budget for the next biennium based on the level of savings achieved during the current budget period. Senator O'Donnell further commented that state employee suggestions have led to significant savings for the state, and "these are the types of actions that should be rewarded." He said agency savings should be passed on to the agency as a mechanism for good government. Bob Gagnier, Executive Director, State of Nevada Employees Association (SNEA), came forward to testify in opposition to S.B. 170. He stated the association is not fully opposed to the measure but has concerns and questions about it. As a technical issue, he suggested the language on lines 7 through 9, page 2, should be changed to indicate that only persons employed by the agency during the period in which the savings were achieved, and not those employed merely as of the date on which the bonuses are to be paid, would qualify for the bonus. Otherwise, employees who did not participate in the savings would be allowed to reap the benefits of someone else's efforts, Mr. Gagnier noted. With reference to SNEA's concerns and questions regarding S.B. 170, Mr. Gagnier said the association has raised some of the same questions in past legislative sessions. He noted the bill applies only to agencies within the state General Fund, which represents less than half of state government and state employees; the bill provides no incentive for employees of other state agencies. SNEA regards this as unfair because an employee of one state agency could benefit through an idea that leads to agency savings while a person from a state agency outside the General Fund might have exactly the same idea, but could not derive financial benefit from it. Secondly, Mr. Gagnier continued, SNEA has serious concerns about whether the head of an agency who has submitted a budget to the Legislature can then personally gain from not expending the funds the Legislature has authorized. He questioned the appropriateness of a situation wherein the agency administrator would come before the "money" committees to request funds that are "absolutely, positively necessary," then later would personally qualify to receive a bonus for not expending those funds. Mr. Gagnier noted the commitment of SNEA to total quality management (TQM), which the association believes can save considerable state funds "by finding new and better ways to do things." He said the State of Nevada is in the very infancy of the TQM era, and it is hoped that much can be gained from the program in terms of improving efficiency and achieving savings for the state. Senator Raggio asked which state it is that has implemented TQM. Mr. Gagnier said the program has been partially implemented (approximately 45 percent) and has been in effect in Ohio state government for about 5 years. He said Ohio officials have indicated the TQM program has achieved millions of dollars in savings, although the initial goal was not to save money but to provide better services to the public in the most economical fashion possible. Continuing, Mr. Gagnier said the kind of program proposed in S.B. 170 has a good basis and is well intentioned, but as testified earlier in the current legislative session and as referenced by Senator O'Donnell, there is currently an incentive program for state employees which merely requires proper funding by the Legislature and the administration to be effective. This is the merit award program, which applies to employees of every agency in state government and wherein an independent third- party committee can make the determination as to the persons responsible for achieving the savings and therefore eligible to receive the benefits, rather than such determination being made by an agency head who can determine a benefit for himself or herself and the administrator's executive staff. SNEA regards the latter approach as flawed, Mr. Gagnier said. Mr. Gagnier noted that legislation has been introduced (A.B. 44) to address the fact agency heads have been getting paid for their annual leave, a practice viewed by the Assembly Committee on Ways and Means as simply a mechanism to increase the administrators' salaries. Assemblyman Marvel sponsored the measure and it was introduced by the ways and means committee. ASSEMBLY BILL 44: Revises provisions governing forfeiture of annual leave by state employees. Mr. Gagnier said the purpose of A.B. 44 is to curtail the administrators' opportunities to claim they could not take their annual leave and therefore are entitled to be paid for the leave at the end of the year, recognizing that it is the administrators themselves who make the determination as to whether or not to take their annual leave. He said his point is that there are abuses by state agency administrators. He referred to a list prepared by Mr. Marvel for the Assembly Committee on Ways and Means that reveals one agency administrator has been paid for unused annual leave for 6 consecutive years, yet the law specifies it must be indicated in writing that the administrator has been denied the opportunity to take annual leave by his or her appointing authority in order to be paid for the leave. He said the question was posed in the ways and means committee hearing as to whether those on Mr. Marvel's list have been denied annual leave in writing, and in his opinion it is doubtful this is the case. Continuing, Mr. Gagnier said it appears S.B. 170 would present yet another instance of agency administrators having advantages not available to most state employees. He repeated the bill is well intentioned and commended Senator Rhoads for introducing it, but he said it is necessary to find a better way. He urged the legislators to support the merit award program as the appropriate mechanism to accomplish the goals intended with S.B. 170. Senator Rhoads acknowledged the validity of the points made by Mr. Gagnier, but he maintained a check and balance system would be provided in S.B. 170 through the IFC, which would be aware of any violations and abuses by the agency administrators and could therefore refuse to award bonuses as warranted. He said changes could be made in the next legislative session to correct problems that are detected. Senator Mathews asked if the bonus would become part of the base salary. She was informed this would not be the case. SENATE BILL 470: Makes appropriation to department of education to develop and carry out new high school proficiency examination. Kevin Crowe, Ph.D., Director, Planning, Research and Evaluation, State Department of Education, presented four points to illustrate "the crucial importance" of this legislation to the education department. Dr. Crowe said the condition of the proficiency examinations is well known and has subjected both the agency and the Legislature to criticism. He said the bill would put into place the cornerstone of fulfilling legislative intent, which was originally designed to assure exit standards for every high school graduate. The bill would affect every student in Nevada's schools. It meets the state's responsibility to assure a solid, systematic core of standards and assessments which would be applied to all students, Dr. Crowe stated. He said this is a core of academic expectations which must be in place before any flexibility in academic standards can be afforded. Continuing, Dr. Crowe said the examinations themselves are critical to both the post- secondary institutions, which have been concerned about the basic academic skills of their incoming students; and employers, who raise concerns about the same basic academic skills of their new employees. He further stated the 4th and 8th grade program, as well as these exit examinations, must be soundly supported to continually update the examinations before the scope of statewide testing can be expanded into other subject areas, grade levels or alternative assessments. He urged the committee's support of A.B. 470. Dr. Crowe introduced Thomas W. Klein, Ph.D., Coordinator, Proficiency Examination Program, State Department of Education. He said Dr. Klein is an expert in testing measurements and statistics. Dr. Klein read from written text (Exhibit D) in presenting his testimony on S.B. 470. During his presentation he referenced Senate Bill 386 (page 2, Exhibit C), summarized below. SENATE BILL 386: Makes various changes concerning program of accountability of public schools and statewide achievement and proficiency testing of pupils. Senator Raggio requested Dr. Klein to make available to the committee members and the staff a copy of the test that is currently being utilized. Dr. Klein agreed to provide the test materials later the same day. Senator Raggio said one of the reasons for his request is that he has not been impressed with the level of difficulty of the proficiency tests. He said the tests he has examined do not appear to adequately measure the proficiency that should be displayed by a graduating high school student. He further elaborated on his views regarding this subject. Senator Raggio said he takes exception, for example, to the suggestion the amount of credits required for graduation should be reduced because of the high school drop-out rate. He said this would be a step backward and he opposed lowering the standards to allow graduation with minimal effort. He pointed out that when the proficiency test requirement was initially established, the intention was to ensure insofar as practical that upon graduation from high school, students would have met some minimum requirements. He remarked he often hears complaints that students are being graduated and given a diploma they cannot even read. Continuing, Senator Raggio asked if the development of the new proficiency test will recognize the need to make the examination more meaningful by increasing the level of difficulty in order to provide a true measurement of what a student should have learned by the end of the 12th grade in high school. He indicated he disagrees with an argument he has heard that "we just want to establish a minimum," because the minimum must include having learned something by the 12th grade. Referencing a statement in Dr. Klein's testimony that the proficiency test needs to be defended legally, Senator Raggio inquired as to the legal requirements entailed. Dr. Klein responded that with regard to the standards represented in the test he would include, along with the current examinations requested by the senator, copies of the frameworks that have been approved by the State Board of Education. He said the frameworks for the new examinations are essentially the same as those used for the National Assessment of Educational Progress (NAEP) and are the product of national consensus projects that have solicited the input not only of legislators but also of the broad community, including educators as well as citizens, to determine what students should learn. Dr. Klein said there are two differences in the new proficiency examinations that should promote higher standards. The first is that within each examination there are three domains within the subject matter to be tested. For example, in reading, students will be assessed on their ability and their skills in reading to gain information, reading for literary experience, and (new to this test) reading to perform a task. Dr. Klein said citizen panels indicated great dissatisfaction with the level of ability displayed by graduates to read a manual and then to act upon the information they have read. It has also been found this form of reading is not extensively represented in the state's current course of study in language arts; however, that course of study is currently under revision within the department, Dr. Klein noted, and it is expected that as the course of study is revised, the functional purpose of reading will be more heavily represented. Continuing, Dr. Klein said for each test it will be required that a student receive a passing grade in each of the three domains of reading in order to pass the examination. A student with excellent skills in one area of reading will not be able to use those skills to compensate for a lack of achievement in reading for the other two purposes, he stated. Dr. Klein noted the same principle would apply to the area of mathematics, with students being required to pass the examination in each of three separate domains to receive a passing score in mathematics. This is one manner in which the department believes the new test will require a higher standard of academic achievement for a student to pass the test, he stated. With regard to the legal requirement, Dr. Klein called attention to the fact that ours is a very litigious society, and lawsuits are brought to court for any imaginable reason. Concerning exit examinations, he said there have been a number of lawsuits filed against states for denying students a high school diploma. Courts have held that a high school diploma is a property right, and as such there must be a legal basis for denying the diploma. Dr. Klein said one of the major questions considered by courts in these cases has been whether or not the student has had the opportunity to learn the material on which he or she is being tested. He said one reason the education officials do not feel the department can adopt a ready-made examination to satisfy this requirement is that the examination must be tailored to the state course of study. The state course of study provides the assurance that students have had the opportunity to learn the material that is being tested by the examination, he stated. Dr. Klein said the other consideration that courts have not directly answered, but have accepted, is the length of time the student has had to master the material contained in the exit examination. He said to his knowledge, courts have not set a minimum number of years in this regard. Senator Raggio suggested the student has had 11 years to learn the material. Dr. Klein answered that in some cases this is true; for example, with regard to the current mathematics curriculum, by the time students are tested on that curriculum they will have had at least 4 years to learn that material. As the new reading course of study is adopted and comes into use throughout the state, he continued, it will be safest to wait at least 3 years before testing on the content of the new course of study. Courts have ruled that 3 years is a sufficient time to prepare for an examination of this type, Dr. Klein stated. He said it would have to be decided in court whether 2 years would be a sufficient length of time. Regarding the legal requirements associated with the test, Dr. Klein continued, the education department is sensitive about this issue and would rather spend the funds to develop a good test that will provide the safeguards requested by the Legislature when the proficiency testing legislation was originally enacted, than to defend a weak test in court. Keith Rheault, Ph.D., Deputy Superintendent, Instructional, Research and Evaluative Services, State Department of Education, expanded on the legal requirements entailed in developing a proficiency test. He said the department agrees that the public's perception of what a proficiency test should be surpasses what is currently in place. As far as the legal aspect is concerned, Dr. Rheault continued, if the standards increase and the number of students capable of passing the test decreases, legal action can be anticipated unless the test has been thoroughly validated in terms of reliability and validity. He cited as an example of what can be expected is the fact that a lawsuit was filed during the past year that challenged the validity and reliability of a teacher competency testing program implemented by the State Department of Education. He said there is currently not a problem because 98 percent of senior high school students pass the proficiency examination, but if that level were to decline significantly, many parents and others would undoubtedly question the increased requirements. He said this would present a challenge to the attempts to raise the standards until the requirements have been generally accepted as necessary for graduation from high school. Senator Jacobsen voiced agreement with comments made by Senator Raggio on this subject. He said it upsets him when requests are made for supplemental or outside assistance to perform functions that are the responsibility of the state's education administrators. He suggested the state's personnel are as capable as anyone to prepare the tests, and it is their responsibility to do so. He commented the essential product of the education system is no different now than it was in years past. Directing his remarks to the State Board of Education, the senator said he has observed over the years that the board has attracted the best personnel from the educational system in Nevada, and he depends upon these education professionals to establish the necessary criteria to determine specific knowledge and skills students are expected to acquire. Responding, Dr. Klein said as a point of clarification the budget that has been proposed is intended to support the agencies' developing their own tests. With regard to outside contractors, a minimum amount has been included in the budget (approximately $75,000) to hire an outside contractor to assist the State Department of Education with some of the technical issues, such as equating different forms of the test, conducting the bias review of items, and particularly sensitive legal issues, so that should the test be challenged, the education department would also have an outside expert who could testify to the process that was followed and to the quality of the examination. Dr. Klein further testified that when the department first considered the cost of developing these tests with contractor assistance, two potential contractors (two professional testing companies) were asked to estimate their charges for performing a major part of the test development. Their estimates just for that part of the work range between $550,000 and $700,000. Dr. Klein said the state's education system does indeed have the intellect, skills and expertise to develop very strong examinations for the intended purpose, and what is being proposed in S.B. 470 is to follow this course rather than relying on an outside contractor to perform the majority of the test development work. Ray Bacon, Lobbyist, Nevada Manufacturers Association (NMA), offered testimony on S.B. 470. He said he had participated on one of the citizens' panels that reviewed the proficiency test, and he has concerns paralleling those expressed by Senator Raggio and Senator Jacobsen. Fundamentally, he stated, what is occurring with respect to the current proficiency test is that the examination is testing the proficiency of students to the high school curriculum and not the students' proficiency with regard to their ability to function in society. Until that difference is resolved, there will continue to be a major gap between what society and the state's employers expect and what the proficiency test is supposedly testing, Mr. Bacon asserted. He voiced the opinion the standards need to be much higher. Continuing, Mr. Bacon said there are testing firms that have what are called "item banks" containing pre-formulated questions that can be extracted for a nominal fee. He cited as an example the firm of Northwest Evaluation in Portland, Oregon, which has 16,000 ready-made test questions that have been "normed," tested, evaluated and probably already legally accepted because they have been used extensively. He suggested if the state's education system cannot locate a sufficient number of questions to prepare an adequate test given the resources available, it is shirking its duty to the students and to their prospective employers. He reiterated the need to substantially and relatively quickly raise the high school proficiency standards. Mr. Bacon acknowledged the potential litigation issues involved but remarked, "We're on thin ice with what we're producing right now." Senator Raggio requested Dr. Klein to explain why the funding requested in S.B. 470 is necessary, given the apparent availability of the test questions sources indicated by Mr. Bacon. Dr. Klein responded the amount proposed for "item writing" is approximately $28,000 to $29,000 out of the $511,000 that has been requested. He noted the amount is a relatively small part of the budget proposal. He commented the education department administrators are not naive about item banks and in fact purchased an item bank 2 years ago for mathematics in junior high schools. However, he continued, the problem with most item banks that exist today is that they have been written for norm-referenced tests, which do not indicate the level of skill attained by a student, but only the student's performance in relation to a referenced group of students. Senator Raggio pointed out that norm-referenced testing for other purposes is being mandated and asked why it is not appropriate in this situation. Dr. Klein replied the appropriate test for the high school exit examination is a test similar to what might be used for a licensing examination. The intent is to verify that students have achieved a particular skill level. A norm-referenced test, by contrast, is a test that provides an indicator of a given student's performance compared with that of other students; that is, it indicates whether or not a student is "keeping up with the Joneses." Dr. Klein remarked, "It's nice to know that you're keeping up with the Joneses, but the possibility exists that the Joneses may be illiterate." He suggested that while there may be some satisfaction in knowing a student is not illiterate by comparison, that does not guarantee the student has the desired level of literacy. Continuing, Dr. Klein said the high school examination should document that the student has attained some level of skill in the conditions measured. With a norm- referenced test, items are not required to be of the same quality as that required for a criterion-referenced test because in a norm-referenced test, if there are item weaknesses they will be revealed in the norm group in the scores achieved by that group. The norm-referenced still provide a valid test, but the quality of information regarding the level of skill attained by a student is not as high, Dr. Klein stated. He said item banks will be exploited to the extent possible for sources of test questions, but it is not believed a sufficient quantity of such questions can be located from this source that directly address the objectives to be measured. Senator Raggio invited comment from the NMA representative. Mr. Bacon voiced complete agreement with the need for a criterion reference. He said relatively high criteria must be established as the standard for obtaining a high school diploma in the State of Nevada. He voiced the opinion this can be done externally and said the use of item banks would probably not be a means of achieving cost savings, but would expedite the test development and substantial closing of the gap between the two different definitions of proficiency. He further stated that generally speaking the employers in the manufacturing sector, which demand a higher level of skill than do some other sectors of the economy, are experiencing fairly dismal results with Nevada high school graduates, and that is the reason for the NMA's concern. Senator Raggio commented this is the concern he expressed initially, that the level of testing or the curriculum should not be adjusted simply to make it easier to obtain a high school diploma for just attending. Mr. Bacon noted as background information the fact that the Grant Thornton accounting firm recently conducted a survey through the NMA newsletter, the results of which indicate 40 percent of the state's employers are seeking employees from out- of-state sources and only 8 percent consider the Nevada high schools as a source of employees. He suggested this is a good indicator of the current situation. Senator Raggio agreed. Senator Mathews remarked, "Sometimes that indicates that you're a prophet except at home." Jeanne L. Botts, Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, called attention to a handout provided to the committee which contains details regarding the budget for the proficiency testing program (Exhibit E). She said the budget includes an evaluation consultant and a secretary to organize and monitor the test development project to ensure the tests are continually updated. Senator Raggio held action on S.B. 470 pending receipt of the requested information. SENATE BILL 460: Requires certain agencies to report on whether its system of internal accounting and administrative control is in compliance with uniform system adopted by director of department of administration. SENATOR COFFIN MOVED TO DO PASS SENATE BILL 460. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR O'DONNELL WAS ABSENT FOR THE VOTE.) * * * * * SENATE BILL 369: Revises provisions governing commission on judicial discipline. Senator Raggio said S.B. 369 was heard in committee on May 1. Senator Rawson noted that with reference to section 3 (explained in a memorandum, Exhibit F, regarding the provision from the Commission on Judicial Discipline pertaining to absolute immunity), the possibility of changing the language to encompass willful misconduct had been discussed at the hearing. Senator Raggio requested Leonard I. Gang, General Counsel and Executive Director, Commission on Judicial Discipline, to address Senator Rawson's query. Mr. Gang told Senator Rawson he had met with Senator Raggio to discuss this issue and was able to show him the established case law that provides that when one acts outside of or in excess of one's jurisdiction, the immunity provision does not apply. He had also shown Senator Raggio the proposed model rules from the American Bar Association (ABA) which stated that in the ABA's opinion, the immunity provision as drafted is essential to the proper functioning of the commission. Senator Raggio said he has also received letters from judges indicating it would be difficult for anyone to serve on the judicial commission if the absolute immunity recommended by the ABA model rules is not provided. Senator Raggio proposed the committee amend section 8 on page 3 of S.B. 369 with a new subsection 4 that would include "any person who performs services." Mr. Gang said the recommended language refers to any person who performs services pursuant to the provisions of NRS 1.450 and NRS 1.460, which provide for the contracting of services by persons who have contracted directly through the attorney general's office as opposed to "contracting directly to the commission." Senator Raggio said it is his understanding the language on absolute immunity does not protect anyone from criminal conduct. Mr. Gang affirmed this. SENATOR RAWSON MOVED TO AMEND AND DO PASS S.B. 369 IN ACCORDANCE WITH THE DISCUSSION ABOVE. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR O'DONNELL WAS ABSENT FOR THE VOTE.) * * * * * Senator Raggio requested Mr. Gang to contact the bill drafter to provide the recommended language for the amendment to S.B. 369. Mr. Gang agreed to do so. SENATE BILL 223: Makes appropriation to channel clearance account. Senator Raggio said this bill was heard by the Senate Committee on Finance on March 30, at which time an amendment was requested. He asked if the amendment has been prepared. Ms. Botts said she had suggested several amendments and had been requested by the chairman to discuss with Brenda J. Erdoes, Legislative Counsel, whether the state would in any way be obligated for a new liability. Senator Raggio recalled the question was whether the obligation would be open-ended. Ms. Botts said she met with Ms. Erdoes as well as with the state engineer and the director of the conservation and natural resources department regarding this issue. They all agree the bill would not open the state to any further liability than that which currently exists, but would simply make it easier for the water resources division to access funds, Ms. Botts stated. As background, Ms. Botts explained the channel clearance account was established in 1973 with a $50,000 General Fund appropriation, and another appropriation was received in 1975. She said there have also been allocations from the IFC contingency fund of $39,000 in 1984 and $50,000 in 1994. Ms. Botts said when the agency requested the $50,000 appropriation through the IFC in May 1994, there was no clear authority to replenish the channel clearance account from the IFC's contingency fund. The state engineer is therefore requesting authority to approach the IFC for replenishment of the fund when the Legislature is not in session. Continuing, Ms. Botts said one of the other proposed changes is that the state engineer could access funds from the State Board of Examiners' reserve for statutory contingency to pay claims resulting from remedial measures employed to protect life or property as a result of dangerous conditions at a dam. Another change would be to allow the channel clearance account "to go to the reserve for statutory contingency" in case channel clearance work needs to be done in the event of flooding, in order to protect life or property. Ms. Botts said the state engineer's authority in this regard is not clearly specified by statute, and because IFC meets infrequently there are sometimes long delays in obtaining the funds. Ms. Botts assured Senator Raggio the proposed measure would not open the state to additional liability. Regarding the additional cost, she said there would be a fiscal impact only in that it makes it easier for the state engineer to access funds during the interim. She said it should be kept in mind that with regard to the channel clearance account, which was established over 20 years ago and has received two appropriations in addition to the $50,000 requested in S.B. 223 as well as two IFC allocations, the funds in the channel clearance account must be matched by a local entity, which provides somewhat of a control. Ms. Botts said the bill simply makes it easier for the state engineer to act in times of crisis without waiting for approval from the IFC, and to access IFC funds during the interim. Noting the committee had previously acted to amend and do pass S.B. 223, Senator Raggio inquired whether committee members were satisfied with the response provided by Ms. Botts to the concerns expressed during the initial hearing on the bill. Committee members indicated affirmatively. Senator Raggio obtained the committee's approval to obtain the formal amendment to S.B. 223. SENATE BILL 333: Requires reimbursement of peace officer employed by state for required clothing and accessories damaged in performance of duties. It was noted this bill was heard in committee on April 17. Senator Raggio recalled the committee had at that time expressed the desire to amend the language in the bill to make the reimbursement provision permissive rather than mandatory by changing the words "shall reimburse" to "may reimburse" on line 10. He asked Mr. Comeaux whether the Department of Administration has any objection to the proposed amendment. Mr. Comeaux replied no. SENATOR RAWSON MOVED TO AMEND AND DO PASS S.B. 333 TO CHANGE "SHALL" TO "MAY" ON LINE 10. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR O'DONNELL WAS ABSENT FOR THE VOTE.) * * * * * Division of State Parks Senator Raggio invited officials representing the State of Nevada and the Washoe County Parks and Recreation Department to present testimony on the final agreement regarding the proposal for Washoe County to relinquish ownership and management of the Washoe Lake park facility to the state. Gene Sullivan, representing the Washoe County Parks and Recreation Department, spoke first. He noted the idea of consolidation is much in vogue, and said that while the Washoe County agency had been contemplating consolidation of some facilities with Reno and Sparks, it appears the agency's first successful effort in this regard may involve the state parks system. He said it is logical there should be only one agency at Washoe Lake managing the recreational facility. He predicted the facility can generate funds for the state. Mr. Sullivan said the park has a good restroom and a wonderful boat-launching facility, which has deteriorated somewhat over the past 8 years but which will be returned to a satisfactory state of repair as part of the agreement. Continuing, Mr. Sullivan said the county will construct a caretaker's pad with utilities and will install a boat docking system. He further stated the county is amenable to maintaining the roads for 2 years and will provide in-kind services for 2 years. It is hoped most of the proposal can be accomplished through an interlocal agreement. Mr. Sullivan said the parties involved are essentially in agreement as to how to accomplish the consolidation and have committed it to writing. Wayne Perock, Chief of Field Operations, Division of State Parks, State Department of Conservation and Natural Resources, said the only area that has not been addressed completely is the cost of title insurance. He said Mr. Sullivan has proposed the state and county share in the costs for this item, which have not been included in the budget. The cost would be approximately $1,500 for each party. Senator Raggio asked if title insurance is needed. He said he had assumed the property involved was state land in the first place and inquired if the actual ownership has been determined. Pam Wilcox, Administrator and State Registrar, Division of State Lands, State Department of Conservation and Natural Resources, said it has been determined the county owns the land, which it acquired from a private party in 1938. Since the land was in the private sector, Ms. Wilcox said, title insurance is recommended. The cost of the title insurance, which depends on the value of the property, is estimated at $2,000 with allowance for other minor closing costs that could increase the total amount to approximately $3,000. It is proposed this cost would be divided between the state and the county. Senator Raggio inquired whether it would be necessary to again adjust the budget to provide for the title insurance and related costs. Mr. Perock said the acquisition of property is normally funded from the capital improvement budget or in a one-shot appropriation. Senator Raggio asked if there is a separate bill to address this proposal. Ms. Botts said it appears a separate bill is not needed, as long as legislative intent has been clearly indicated in the budget, and a line item to provide the $1,500 for transfer costs can be added to the budget when the other items associated with acquisition and management of the Washoe Lake property are added to the budget. Senator Raggio further inquired if it is necessary to reopen the budget to accomplish this. Ms. Botts said the Assembly has not closed this budget, and what is entailed is simply authorizing staff to reopen the budget for the purpose of adding the line item. Senator Raggio requested a motion from the committee to this effect. SENATOR JACOBSEN MOVED TO REOPEN THE DIVISION OF STATE LANDS' OPERATING BUDGET IN THE EXECUTIVE BUDGET FOR THE PURPOSE OF ADDING ONE-HALF THE COST OF THE TRANSFER OF THE WASHOE LAKE PARK FACILITY FROM WASHOE COUNTY TO THE STATE OF NEVADA. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS O'DONNELL AND COFFIN WERE ABSENT FOR THE VOTE.) * * * * * SENATOR JACOBSEN MOVED TO FURTHER AMEND THE BUDGET OF THE DIVISION OF STATE PARKS BY ADDING ONE-HALF OF THE COST OF TRANSFER. SENATOR MATHEWS SECONDED THE MOTION. In discussion prior to the vote, Senator Rawson noted there are parks throughout the state that cannot be opened due to lack of personnel to monitor the parks. He suggested including in the motion a provision for park personnel. Senator Raggio pointed out the budget includes such a provision, and a trailer will be located at the park facility for housing the park attendant(s). He said the revenues anticipated in the budget covers the operating costs and no new General Fund appropriations are being requested. Senator Jacobsen asked if Little Washoe Lake is included in the Washoe Lake project. Mr. Perock replied yes. He said Little Washoe is expected to generate some income and has been included in the budget. THE MOTION CARRIED. (SENATORS O'DONNELL AND COFFIN WERE ABSENT FOR THE VOTE.) * * * * * Senator Rawson suggested a contingency plan be developed to dredge Washoe Lake, to improve the lake as much as possible while it is dry. Senator Raggio said the water level at Washoe Lake continues to rise. Mr. Sullivan told Senator Rawson the county had considered dredging the lake, particularly around the boat landing, and numerous studies have been done on this matter. He agreed the improvements should be made. Senator Rawson said the cost of dredging would be much less when the lake is relatively dry. Senator Raggio remarked a good opportunity to do so has been missed. Mr. Perock said he has heard concern expressed on this issue with respect to possible disturbance of the soils, resulting in the release of mercury and other contaminants into the environment, and the water rights involved. He said the issue needs to be thoroughly studied before action is taken. Department of Human Resources - Administration - Page 987 Larry Peri, Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, reviewed the staff recommendations for this budget. He said the budget has not been heard by a joint subcommittee, but was heard by the full committee on February 2. Mr. Peri said staff recommends the committee consider approving the budget for the Director's Office of the Department of Human Resources as recommended by the Governor, with consideration of an option that has been presented by the Budget Division. Referencing the packet of budget closing action sheets (Exhibit G), Mr. Peri said the narrative on page 1 summarizes the proposal and more detail is provided in the succeeding pages. Summarizing item 1 on page 1, Mr. Peri said the Budget Division has submitted an enhancement package for this budget account which proposes to create a component in the account "to develop and implement a process and framework for allocating, evaluating and obtaining input from the community on the Title XX Block Grant, as well as other future block grants awarded to the State of Nevada." He said the total amount of expenditures associated with this option is estimated at $84,055 per year in Title XX social services block grant revenue, which would be distributed as follows: $50,000 for the contractor's salary, $23,771 for travel and per diem, and $10,284 for operating costs. Mr. Peri called attention to the note on page 1 which states the adjustment is one of several recommended by the Budget Division for additional Title XX funds that have been identified through a higher grant award and a projected carry forward from FY 1995-1996 into FY 1997. He said the options have been listed in the closing action recommendations for the Purchase of Social Services budget (Exhibit G, pages 9 and 10). Mr. Peri suggested the committee examine all of the options before making a decision on the budget for the Director's Office. Senator Raggio called attention to a memorandum sent to the committee by Mr. Comeaux (page 11, Exhibit G). He directed the committee to turn to page 9 of the budget closing sheets to examine the budget for the Purchase of Social Services account. Purchase of Social Services - Page 997 Mr. Peri said a number of adjustments are recommended with regard to this budget. Directing the committee's attention to the memorandum from Mr. Comeaux (page 11, Exhibit G), Mr. Peri said the memorandum references an earlier memo from March 17 containing suggested adjustments to the Purchase of Social Services budget. He said this budget account provides transfers out to a number of state agencies and an expenditure category entitled non-state agencies. He noted there were a number of items that did not match, with respect to transfers out of this budget account into the receiving budget accounts. Continuing, Mr. Peri said the memorandum on page 11 (Exhibit G) similarly indicates $114, 933 will be available in FY 1996 as an additional grant award, and $194,000 will be added in anticipated carryforward funds from FY 1995 into FY 1996. He said staff has attempted to make the necessary corrections for transfers out to state budget accounts. Staff recommends that the Homemaker Services budget in the Welfare Division be restored to the current amounts and continued in the next biennium at those levels. It had been recommended this budget be decreased, but the discovery of the mismatches in the transfers (resulting in the availability of additional funds) has enabled restoration of the budget's original funding levels. Secondly, Mr. Peri continued, there were funding components within the Northern Nevada Child and Adolescent Services (NNCAS) budget account that were funded with Title XX funds not available in this account until the additional grant award and the carryforward were discovered. Staff therefore proposes that those changes be made to make the affected state agency budgets whole. Mr. Peri said the second paragraph of Mr. Comeaux's memorandum references the increase of $84,055 per year in the Director's Office component of the budget. Any remaining funds are proposed by the Budget Division to be added to the non-state agencies category, Mr. Peri stated. The amounts are estimated at approximately $46,000 in FY 1996 and $39,000 in FY 1997. Mr. Peri said the amounts have been altered slightly because of the discovery of several items that were not on the schedule attached to pages 12 and 13 (Exhibit G), following Mr. Comeaux's memo. Senator Raggio requested further clarification of the proposed transfers itemized on page 9 of the budget closing sheets. Mr. Peri said the adjustments to revenue would provide additional revenue of approximately $309,000 in FY 1996. Staff has incorporated the changes attached to the schedule accompanying the memorandum from the Budget Division (pages 12 and 13, Exhibit G) to ensure the transfers out of this budget account equal the approved revenues in the state agencies that receive Title XX funding. The adjustments would thereby equal the proper amount of approved revenues. Mr. Peri said staff has adjusted all of the affected budget accounts. Mr. Peri reviewed two of the options suggested by the Budget Division for consideration by the Legislature (item 4, options A and B, page 10, Exhibit G) and a third option proposed by staff, option C. Option A is the Budget Division's recommendation that $84,055 be added in each year of the biennium to the Director's Office of the Department of Human Resources to fund the review component of Title XX and other future block grant awards (the enhancement package). Option B is the Budget Division's recommendation that non-state agencies be augmented by $45,949 in FY 1996 and $39,173 in FY 1997. (Mr. Peri described it as "the leftovers after the adjustments to the Director's Office and all other state agencies which suggests that the non-state agencies' expenditure categories be augmented by those amounts...") Mr. Peri said staff figures differed slightly, due to the discovery of $1,739 more available in FY 1996 and $8,026 less available in FY 1997 that were not on the schedule provided by the Budget Division. Mr. Peri said staff is recommending option C, once the budgets of the various state agencies have been made whole. This calls for setting aside a portion of the additional revenue to provide for any cost-of-living salary adjustments approved by this Legislature. Senator Raggio asked if Title XX funds are authorized for such a purpose. Mr. Peri replied yes. He said there are a number of accounts with positions funded entirely by Title XX. If the current Legislature approves a cost-of-living increase for state employees, the salary increases for employees whose positions are funded by Title XX could be funded with Title XX revenue. Senator Raggio asked if there is any reason, from a fiscal standpoint, why all three options should not be adopted. Mr. Peri said the only reason would be insufficient funding to cover the three options. Adoption of options A and B would leave no funds to provide for option C, he noted. Senator Coffin observed that the full committee and the joint subcommittee on human resources have heard testimony that Title XX funds could be better spent if they were to be directly allocated to the non-state agencies. He expressed reluctance to appropriate funds to the Director's Office to create a position for the purpose of "finding out how to do it better" when it is already known by the human resources administration which agencies perform well. He advocated that any extra funds be allocated to the Title XX non-state agencies rather than the Director's Office because it is these agencies that are providing the maximum results. He further stated, "I assume they'll still take off the top some percentage for administration, which probably at this point would not be necessary, but in any event that may be their cut." Senator Coffin reiterated he favors the Title XX nonprofit agencies receiving any extra funds that are available. Senator Rawson noted a substantial amount of funding will potentially be sent to the states by the federal government in the form of block grants and said the state is ill prepared to make the adjustments (in the allocation of Title XX funds) without further study. He called upon Mr. Comeaux to comment on the issue. Mr. Comeaux said when the director of the human resources department presented this request, her intention was to provide for contracting with an outside individual who would be viewed by the local nonprofit agencies as an independent person who would meet with the agencies, gather input and devise a plan for the distribution of block grant funds. Senator Raggio suggested the function to be performed by the outside contractor should have been performed by the department all along, and he questioned the need for an independent contractor to design and implement the process of distributing block grant funds. Mr. Comeaux agreed the function should probably have been performed by the department. Noting, however, the lack of agreement regarding the distribution of funds, he said it apparently was the director's feeling that if the department were to contract with an individual who would be viewed as independent by the non-state agencies, a more workable plan would result. Senator Coffin said it should be assumed the skill exists within the Department of Human Resources to continue doing what the agency has been doing. He noted there are Washington, D.C. lobbyists on the state's payroll who are watching this situation very closely. He reiterated there is probably sufficient expertise within state government to do what it is proposed the outside contractor would do. Senator Raggio asked how the budget would be impacted if the committee were to vote not to approve the requested $84,055 each year of the biennium for outside contractor services. Mr. Peri said the additional funds would then become available to fund options B and C, and there are other options as well. Senator Raggio polled committee members regarding their views on the request for the contractor position. SENATOR COFFIN MOVED TO NOT APPROVE OPTION "A" AS PRESENTED ON PAGE 10 OF EXHIBIT G. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Raggio inquired as to the committee's preferences regarding the other two options. SENATOR COFFIN MOVED THAT THE $84,055 PER YEAR IN OPTION "A" BE ALLOCATED TO THE NON-STATE AGENCIES IN ADDITION TO THE FUNDS ALLOCATED IN OPTION "B." Senator Raggio asked whether, if option C is adopted, all of the funding for cost-of- living salary adjustments that might be approved by the Legislature would be General Fund appropriations. Mr. Peri replied yes. He said it would take time to calculate the amount that would be needed for this purpose. Senator Raggio suggested allocating, in each year of the biennium, $50,000 of the $84,055 from option A to the cost-of-living increases outlined in option C and allocating the balance of the funds to the non-state agencies outlined in option B. Mr. Peri noted the $34,000 per year would be in addition to the amounts recommended by the Budget Division to augment funding for non-state agencies. SENATOR COFFIN MOVED TO ALLOCATE $50,000 EACH YEAR OF THE ADDITIONAL TITLE XX REVENUE TO PROVIDE FOR COST-OF-LIVING SALARY ADJUSTMENTS (OPTION "C"), TO ALLOCATE THE BALANCE OF $34,055 TO NON-STATE AGENCIES (OPTION "B") AND TO AUGMENT THE RECOMMENDATIONS IN OPTION "B" BY THAT AMOUNT. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Mr. Peri commented that item 5 on page 10 (Exhibit G) requests permission from the committee to make any final adjustments to revenues in state agency budgets. He noted this budget has been considered and adjusted twice, and the staff needs to be certain the transfers out equal all of the transfers in of the various state budgets. Senator Raggio indicated this is acceptable to the committee. SENATOR O'DONNELL MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE ADJUSTMENTS INDICATED BY STAFF AND INCLUDING THE COMMITTEE'S ACTIONS REGARDING OPTIONS "B" AND "C" AS STATED ABOVE. SENATOR COFFIN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Department of Human Resources - Administration - Page 987 SENATOR O'DONNELL MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE GOVERNOR'S RECOMMENDATIONS. SENATOR RAWSON SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Health Resources Cost Review - Page 995 SENATOR COFFIN MOVED TO CLOSE THIS BUDGET IN ACCORDANCE WITH THE GOVERNOR'S RECOMMENDATIONS. SENATOR RAWSON SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Community Services Block Grant - Page 999 SENATOR O'DONNELL MOVED TO CLOSE THIS BUDGET IN ACCORDANCE WITH THE GOVERNOR'S RECOMMENDATIONS. SENATOR RAWSON SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Public Defender - Page 1003 Senator Raggio said this budget was heard February 17. Mr. Peri said in the base budget staff recommends two technical adjustments. The first is to increase the salary of the deputy public defender position to the proper level. Mr. Peri pointed out the public defender has the latitude to pay a position any salary he so desires, to the maximum level. This particular position was underfunded, and for the purpose of the unclassified pay bill staff recommends increasing the salary to the proper level. The funding would be provided by the state and the counties in the same proportion as the entire budget is funded. The second adjustment would transfer $14,820 from state owned rent to non-state owned rent to provide for the Carson City Office's planned relocation to leased office space. Continuing, Mr. Peri said the more significant option for the committee's consideration is item 2, a new decision unit (E-127). He drew attention to a memorandum sent to him from the Budget Division (page 16, Exhibit G) and the accompanying backup information (pages 17 and 18) which reflects an interlocal agreement the public defender has entered into with Clark County to provide indigent defense services in conflict cases. Mr. Peri said the total amount of decision unit E-127 is $450,000 in each year of the biennium of revenue that would be paid to the public defender by Clark County. He said the public defender proposes to add seven new FTE (full-time equivalency) employees, operating costs, equipment and the other items delineated on pages 19 through 21 (Exhibit G) to provide these services. Senator Raggio said it his understanding that presently, when the public defender's office in any of the counties has a conflict involving multiple defendants they contract for private attorneys. He said the proposal in decision unit E-127 appears to be a cost effective way to handle such situations. He asked if the interlocal agreement has been executed. Mr. Peri replied yes and referenced the copy of the contract included in the budget closing sheets (pages 28 through 32, Exhibit G). Senator Raggio said the interlocal contract appears to be a good model for other counties to adopt. SENATOR RAWSON MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH STAFF ADJUSTMENTS AND IN RECOGNITION OF THE ADDITION OF DECISION MODULE E-127 TO ACCOMMODATE THE PROPOSED INTERLOCAL AGREEMENT, INCLUDING THE UNDERSTANDING THAT IF THE AGREEMENT CEASES, THE EMPLOYEE POSITIONS ARE DISCONTINUED. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Indian Commission - Page 1009 Mr. Peri explained the adjustments recommended by staff as presented on page 33 (Exhibit G). The first (item 1) involves small changes to Vacancy Savings and similarly to Non-State Owned Rent, which is anticipated to increase in FY 1997. He referenced a memorandum (page 34, Exhibit G) which summarizes the lease agreement and the additional costs necessary. Staff is recommending the addition of $604.80 in the second year. Regarding decision unit M-200 (item 2), Mr. Peri said the staff recommends reducing Board and Commission Pay by $800 in each year of the 1995-1997 biennium. The budget recommended a total of $2,400 in each year of the biennium to provide for a total of six meetings (five members x $80 per day multiplied by six meetings = $2,400). Three meetings were held in FY 1994 ($1,200), and for the year to date only $880 (roughly equivalent to two meetings) has been expended from this budget. Mr. Peri said staff recommends that the number of meetings be set at four ($1,600). Decision unit E-125, In-State Travel, includes the same recommendation of four meetings per year and contains a proportionate amount of funding for administrative and commission travel. If the committee decides to reduce the number of meetings from six to four, the travel cost would be reduced by approximately $1,700 per year. Item 4 pertains to decision units E-805 and E-806. In module E-805 the Education and Information Officer position is deleted and in module E-806 the duties of that position are added to the duties of the unclassified Executive Director position, and the salary of the unclassified position is increased to approximately 5 percent over the Education and Information Officer position level. Mr. Peri said if the committee approves the recommendations in these decision modules, the Unclassified Pay Bill will need to be amended to reflect the salary change in the unclassified director position from $40,000 per year to approximately $44,538 per year. SENATOR COFFIN MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE STAFF ADJUSTMENTS, INCLUDING AMENDING THE UNCLASSIFIED PAY BILL TO REFLECT THE SALARY CHANGE IN THE UNCLASSIFIED DIRECTOR POSITION TO $44,538 PER YEAR. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * SENATE BILL 206: Makes appropriation to budget division of department of administration for enhancements to executive budget system. Senator Raggio noted this bill was heard April 3. Dan Miles said one of the questions that arose during the hearing on S.B. 206 was whether, if there are going to be enhancements to the budget system, the problem that occurs when positions are transferred between budget accounts (that is, the FTE count does not "follow the dollars") can be resolved. He said this situation is apparently a quirk of the computerized system. He referenced a memorandum from Mr. Comeaux to the committee (Exhibit H) indicating the matter was discussed with the Department of Information Services (DIS), and that agency indicated it could resolve the problem at a cost of approximately $200,000. It was generally agreed the proposed solution would not be cost effective. Senator Raggio inquired of Mr. Comeaux if it is the recommendation of the Department of Administration that S.B. 206 be processed in its current form without amending it to add $200,000 (for the purpose indicated above). Mr. Comeaux replied yes. SENATOR RAWSON MOVED TO DO PASS SENATE BILL 206. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * SENATE BILL 135: Makes appropriation to legislative fund for additional equipment and software for information systems for legislative counsel bureau. Senator O'Donnell said the subcommittee advocates revisiting S.B. 135 and adjusting the amounts contained therein to add funding for the wireless system demonstrated earlier in the session. He said this action is warranted and necessary, and noted he has spent a great deal of time studying the issue. He remarked, "I'd like to bring the Legislature into the next generation." Senator Raggio inquired as to the adjustment required in S.B. 135. Senator O'Donnell said it requires an increase of approximately $500,000. Senator Raggio asked the total cost. Senator O'Donnell said it is $1.73 million and would include the wireless system. (A handout pertaining to this bill is attached to these minutes as Exhibit I.) Senator Coffin asked if the additions to S.B. 135 would "bring the Legislature any closer to southern Nevada than the original bill did, as promised earlier by Senator O'Donnell." Senator O'Donnell said there is no doubt additional equipment should be added to bring Las Vegas into closer contact with the Legislature. He said the enhanced budget should facilitate that development. He stated the problem is one of logistics and it is being addressed. Senator Jacobsen inquired whether the new system would be portable, so that the equipment could be used in the regular committee meeting room instead of in Room 119 of the legislative building. Senator O'Donnell indicated portability of the system is currently being developed. SENATOR O'DONNELL MOVED TO AMEND AND DO PASS S.B. 135, THE AMENDMENT BEING TO INCREASE THE AMOUNT OF THE APPROPRIATION TO $1.73 MILLION FOR THE PURPOSE INDICATED ABOVE. SENATOR RAWSON SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR COFFIN VOTED NO.) * * * * * SENATE BILL 136: Makes appropriation to legislative fund for computer equipment and software to allow interaction with legislature through INTERNET. SENATOR COFFIN MOVED TO DO PASS S.B. 136. SENATOR RAWSON SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * The meeting was adjourned at 10:55 a.m. RESPECTFULLY SUBMITTED: Sue Parkhurst, Committee Secretary APPROVED BY: Senator William J. Raggio, Chairman DATE: Senate Committee on Finance May 24, 1995 Page