MINUTES OF THE MEETING OF JOINT SUBCOMMITTEE ON GENERAL GOVERNMENT ASSEMBLY COMMITTEE ON WAYS AND MEANS AND SENATE COMMITTEE ON FINANCE Sixty-eighth Session May 25, 1995 The joint subcommittee on General Government was called to order at 7:45 a.m., on Thursday, May 25, 1995, Chairman Chris Giunchigliani presiding in Room 352 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. ASSEMBLY COMMITTEE MEMBERS PRESENT: Ms. Christina Giunchigliani, Co-Chairman Ms. Sandra Tiffany, Co-Chairman Mrs. Jan Evans, Vice Chairman Mrs. Maureen Brower, Vice Chairman Mr. Bob Price Mr. Dennis Allard SENATE COMMITTEE MEMBERS PRESENT: Senator Lawrence E. Jacobsen, Chairman Senator William R. O'Donnell, Vice Chairman Senator Bernice Mathews COMMITTEE MEMBERS ABSENT: None STAFF MEMBERS PRESENT: Robert Guernsey, Principal Fiscal Analyst Debbra J. King, Program Analyst Ronald T. Steele, Program Analyst Brian Burke, Program Analyst Yhvona Martin, Secretary ENFORCEMENT FOR INDUSTRIAL SAFETY - PAGE 743 In highlighting the Budget Closing Action forms (Exhibit C), Ms. Debbra King, Program Analyst, Fiscal Analysis Division, noted the only recommended change staff proposes to budget account 210-4682 is to record vacancy savings. The subcommittee should note Module M-200 recommends increases in staffing in response to increases in the number of employers and the backlog of mandatory inspections. In addition, one Mechanical Section Supervisor and one Management Analyst are being recommended. The agency has provided revised performance indicators which show what can be accomplished with the additional staff. Since there were no comments or questions from the subcommittee on this budget, Chairman Giunchigliani called for a motion. MS. TIFFANY MOVED TO AMEND THE ENFORCEMENT FOR INDUSTRIAL SAFETY BUDGET TO INCORPORATE THE RECOMMENDATIONS OF THE FISCAL ANALYSIS DIVISION STAFF. MR. ALLARD SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * SENATOR O'DONNELL MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * PREVENTATIVE SAFETY - PAGE 749 It was Chairman Giunchigliani's understanding this budget had undergone a title change. In responding to Chairman Giunchigliani's comments, Mr. Ronald Swirczek, Administrator, Division of Industrial Relations (DIR), told the subcommittee the title of the agency had been changed to Safety Consultation and Training Section. In reviewing the budget adjustments being recommended by the Fiscal Analysis Division (Exhibit C), Ms. King noted the majority of the adjustments were technical in nature to reflect salary savings, correct a typographical error in the Executive Budget, and eliminate funding for computer maintenance in accordance with standard practices. Ms. King also explained Module M-201 reduces the contract inspectors in budget account 210-4685 in response to the additional staff in the Enforcement for Industrial Safety budget account. Module E-325 recommends additional programming for the Department of Information Services (DIS) to develop a computer program which will allow for the evaluation of the effectiveness of the safety program. Module E-425 recommends additional funding from $150,000 to $350,000 for the multimedia campaign. Module E-426 recommends funding for physicals for inspectors. In addition, the agency has requested to transfer the purchase of a four-wheel drive vehicle from FY 1997 to FY 1996 because the mining inspectors are no longer able to share the vehicle with the safety trainer due to increases in workload. Module E-720 provides for computer expenditures to allow access to the Integrated Management Information System (IMIS) for remote areas. Ms. Tiffany inquired about the development of the computer program. Federal regulations require the Safety Consultation and Training Section to report all inspections to the IMIS in Washington, D.C., Mr. Swirczek noted. The computers will not only be linked with the federal system, but with the Occupational Safety and Health Enforcement Section as well in order to monitor the effectiveness of the safety program. To respond to several questions from Ms. Tiffany, Ms. Mary Keating, Administrative Services Officer, DIR, indicated all of the information sits on the server and each PC has the capability to access it. The four lap top computers being requested in Module E-720 will be used by field personnel, allowing access to the IMIS from remote areas. Ms. Keating noted $30,000 was being requested in the first year and $3,000 in the second year for computer programming. MS. TIFFANY MOVED TO CLOSE THE SAFETY CONSULTATION AND TRAINING SECTION BUDGET AS RECOMMENDED BY THE FISCAL ANALYSIS DIVISION STAFF. MR. ALLARD SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * SENATOR O'DONNELL MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * MINE INSPECTION - PAGE 755 Since the Fiscal Analysis Division staff is not proposing any adjustments to budget account 210-4686 (Exhibit C), Ms. King said the budget could be closed as recommended by the Governor. MRS. EVANS MOVED TO CLOSE THE MINE INSPECTION BUDGET AS RECOMMENDED BY THE GOVERNOR. MRS. BROWER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * SENATOR MATHEWS MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * COMMITTEE ON BENEFITS - NEW BUDGET This new budget, Ms. King explained, is being requested by the Committee on Benefits and has been recommended by the Department of Administration (Exhibit D). This new budget account will contain one unclassified position called the Executive Director who would be responsible for reporting directly to the Committee on Benefits on the day-to-day operations of the employee group insurance program. The Committee has requested this position in response to an operational audit which was completed in February of 1995. It was Ms. King's concern that the responsibilities of the Executive Director and the responsibilities of the Risk Manager would be duplicated since the Risk Manager currently spends about 80 percent of his time supervising the Employee Benefits Services Fund, which pays for state employees' health and life insurance. Continuing her testimony, Ms. King suggested the subcommittee consider four options, which are: Option 1--Have the Risk Manager report directly to the Committee on Benefits. The Risk Manager would have hiring and firing authority with approval of the Director of the Department of Administration. This would allow the Committee on Benefits to hold the Risk Manager accountable for supervising the employee health insurance program and would save the administrative costs for the proposed new position. Option 2--Have the Risk Manager report directly to the Committee on Benefits. The Risk Manager would have hiring and firing authority. This would save the administrative costs for the new position; however, the Committee on Benefits would have sole control over a position which performs other general state duties, including supervision of the Property and Contents Program and the State Employees Workers Compensation Program. Option 3--Authorize the new position and eliminate current Risk Manager position. The Insurance and Loss Prevention Specialist (budget account 1347) is being recommended for an upgrade to a Deputy Risk Manager, who could supervise the Property and Contents Program and the State Employees Workers Compensation Program; or, Option 4--Authorize new position and retain current Risk Manager position, which would result in two positions being responsible for the same function. To respond to Ms. Tiffany who wanted to know why the operations' audit was recommending a change in the structure of the Committee on Benefits, Mr. Howard Barrett said he would be speaking both as a retired state employee and a member of the Committee on Benefits, not as a representative of the Nevada Taxpayers' Association (NTA). Mr. Barrett told the subcommittee the Committee on Benefits was extremely frustrated because, although it was responsible for administering the state group insurance program, it is required by Nevada statutes to contract with the Department of Administration to administer the program. The Committee on Benefits also contracts with a number of vendors and suppliers of services who report to the Risk Management Division. The operations' audit report, Mr. Barrett said, recommends the Committee on Benefits have at least one employee who answers directly to the Committee and who can be depended upon to provide quick and reliable information on program operations. Ms. Tiffany questioned how one new costly position could be expected to correct what she perceived as a communication and responsiveness problem. Since the Committee on Benefits is responsible for administering the state group insurance program, Mr. Barrett said the Committee did not believe the $70,000 to $80,000 annual salary being proposed for the unclassified position was significant when compared to the $100-million annual cost of the program. Chairman Giunchigliani recognized Mr. Perry Comeaux, Director, Department of Administration, and asked him to provide his comments on the issue. As a member of the Committee on Benefits, Mr. Comeaux said he viewed the situation somewhat differently than Mr. Barrett. It was Mr. Comeaux's belief the main finding of Ernst and Young, the Certified Public Accountant (CPA) firm which performed the operational audit, was that the Committee on Benefits had over the years basically abandoned its responsibility to manage the employee benefits and had abdicated its responsibility not only to the Risk Manager, but to several contract vendors involved with the administration of the program as well. It was Mr. Comeaux's understanding that the Committee on Benefits viewed the Executive Director as an independent individual who would assist the Committee on Benefits in policy development and then work with the contractor who develops the Request for Proposals (RFP) to implement that policy. The position would also monitor the performance of the various contract vendors and report back to the Committee on Benefits. Mr. Comeaux said he would be less than candid if he were to tell the subcommittee no duplication of job duties would occur between the new position and the Risk Manager; however, the new position would also perform other duties which, in the Committee on Benefits' opinion, are not now being done. Ms. Tiffany asked Mr. Comeaux if he supports having the proposed new position of Executive Director report directly to the Committee on Benefits. Mr. Comeaux said he thought the new position could significantly increase the effectiveness of the state group insurance program. It was Ms. Tiffany's belief the problem between the Department of Administration's Risk Management Division and the Committee on Benefits had been a people issue. With the appointment of Mr. Comeaux as Director of the Department of Administration, Ms. Tiffany said she thought the communication and responsiveness problems could be resolved without adding another position. Ms. Tiffany also said she did not want to see the Committee on Benefits micromanage the state group insurance program. Although he agreed with Ms. Tiffany the level of frustration of the Committee on Benefits would diminish if communications with the Risk Management Division were to improve, Mr. Comeaux said the Committee on Benefits would continue experiencing difficulty dealing with the Risk Management Division, as a contract vendor, regarding the provision of services from other contract vendors. It was Mr. Comeaux's belief the Committee on Benefits could either opt to contract with Risk Management or not to contract with Risk Management, but he did not believe the latter was a viable option, especially during a biennium. Ms. Tiffany suggested the central issue to be addressed was whether or not the Committee on Benefits should be autonomous, rather than whether the Risk Management Division should be administering the state group health insurance function. In responding to Ms. Tiffany's comments, Mr. Barrett pointed out the problem was essentially because the governing law had not been amended since the state became self-insured. Prior to becoming self-insured, the state was merely collecting premiums through Risk Management and paying insurance companies through Risk Management. Mr. Barrett suggested an alternative to the current structure would be to make the Committee on Benefits totally autonomous, styling it after the Public Employees Retirement System (PERS). Mr. Barrett said, however, the operational audit report had not recommended that type of restructuring, nor would he. According to Mr. Barrett, all retirement benefits are provided for by law and the Retirement Board has very little discretion as to the premiums and benefits. By contrast, the Committee on Benefits has almost complete discretion in setting the premiums and the benefits. If the Committee on Benefits were to be structured in a manner similar to PERS, Mr. Barrett indicated the complete benefit program would have to be written into the law to make it workable. Chairman Giunchigliani said she would agree with Mr. Barrett that restructuring the Committee on Benefits similar to PERS was not a workable option. She said, however, after having listened to the testimony, she did not think the central issue was whether the work was being accomplished by the Risk Management Division, but rather whether the Committee on Benefits is controlling and directing the activities of the group health insurance program. Chairman Giunchigliani inquired as to whether the Committee on Benefits was satisfied with the job performance of the Risk Manager. Mr. Barrett told the subcommittee the audit report had recommended the Committee on Benefits hire a competent Executive Director. Speaking as a member of the Committee on Benefits, Mr. Barrett said he, as well as other members of the Committee, did not believe the Committee was receiving the level of competence and services it should be getting from the Risk Management Division. Chairman Giunchigliani recognized Mr. Fred Suwe, a member of the Committee on Benefits, who said he thought there were several practical reasons why the Committee desires an Executive Director position. The day-to-day operation of the Committee on Benefits activities, Mr. Suwe explained, is currently done through a vendor contract with the Risk Management Division. There are currently 17 Risk Management Division employees who perform the day-to-day activities of the state's group health insurance program. Mr. Suwe questioned how the Committee on Benefits could cancel the contract with the Risk Management Division and continue the day-to-day operations of the group health insurance program. Also, as a practical matter, while the Committee on Benefits is responsible for the day-to- day activities, the Risk Manager, who is the supervisor of the group health insurance program, works for the Director of the Department of Administration, who works for the Governor. If a change of administration were to occur, the new Governor could replace both individuals without first having to consult the Committee on Benefits. Chairman Giunchigliani said she did not feel comfortable adding a new position this late in the legislative session because she thought the control issue warrants additional discussion. She said, however, the subcommittee could consider a classified position who could be hired and terminated by the Committee, but with the final authority for such decision resting with the Department of Administration; or moving the current Risk Manager as an appointee of the Governor in the Department of Administration so he could become an employee of the Committee on Benefits. In addition, the subcommittee could also authorize a new position and eliminate the current Risk Manager position; or it could authorize a new position with control resting with the Department of Administration, but with the hiring and firing resting with the Committee; or authorize a new position for the Committee, plus maintaining the Risk Manager position. Chairman Giunchigliani asked for comments from the subcommittee members. Speaking in support of the new position, Mr. Price said he could not understand how the Committee on Benefits had been able to function successfully over the years without having an Executive Officer. It was Mr. Price's opinion that operating the state group health insurance program was similar to operating a small insurance company. Since he thought the Risk Manager should be able to handle the job, Senator Jacobsen wondered whether there might be some confusion between the Department of Administration and the Committee on Benefits regarding the responsibilities of the Risk Manager. Although the Risk Manager is currently responsible for the day-to-day activities of the program, Mr. Barrett said the Committee on Benefits does not believe the Risk Manager is performing those tasks in accordance with the policies established by the Committee. While he acknowledged the division had been understaffed in several key areas which resulted in a delayed response time, Mr. Comeaux said he did not believe the Committee on Benefits has had a competence problem with the Risk Management Division. Mr. Comeaux pointed out the Benefit Services Fund, budget account 625-1338 (Exhibit D), which will be discussed later, contains funding for additional staff that should help in key areas. He said, however, one important issue, the area of independence, had not been addressed. It was his belief the Risk Management Division had been placed in the untenable position of having to negotiate with other vendors on behalf of the Committee on Benefits, a situation which he thought needs to be corrected. In Mr. Comeaux's opinion the most important function of the new Executive Director would be to become involved in the negotiations with the various vendors and in monitoring their performance. To respond to a question from Chairman Giunchigliani, Mr. Comeaux said there needs to be a separation between the responsibilities of the Committee on Benefits and the Risk Manager because the Risk Manager oversees the implementation of the state group insurance program. Mrs. Brower wanted to know if the Committee on Benefits needs someone to act as liaison to the Risk Manager. Mr. Comeaux said the Committee on Benefits not only needs an individual who could act as liaison to the Risk Manager, but also an individual who has the expertise to assist in developing policy. In responding to a question from Chairman Giunchigliani, Mr. Suwe said the Committee on Benefits had contracted with an independent audit firm to do an operations' audit because it wanted the opportunity to have review completed by experts from within the industry and to receive recommendations on how to improve the program. Mrs. Brower said she had assumed the Committee on Benefits had been developing its own policies patterned after other organizations having similar programs. Mr. Barrett agreed with Mrs. Brower as to the desirability of the Committee on Benefits developing its own policies and he said the Committee on Benefits intends to discuss this issue preliminarily at its next meeting. It was Mr. Allard's understanding the Committee on Benefits envisions the proposed new position as a Chief Executive Officer (CEO), running the day-to-day operations and reporting back to the Committee on Benefits, with the Committee on Benefits making the major policy decisions. In the beginning, Mr. Suwe explained, the Risk Manager was strictly an adviser to the Committee on Benefits. He said, however, since the Committee on Benefits meets only once a month, the contract vendor, or Risk Manager, had assumed the day-to-day responsibility for the insurance plan. As the audit report pointed out, the Committee on Benefits has over the years lost control of the state employee health insurance plan as the plan grew and became more complicated. While she thought the Committee on Benefits could delegate certain task functions, Chairman Giunchigliani cautioned about abrogating too much responsibility to staff. Chairman Giunchigliani recognized Ms. Linda Johnson, representing the State of Nevada Employees' Association (SNEA), who spoke in support of the new position. Ms. Johnson indicated the new position was vital to the stabilization of the operations of the Committee on Benefits. After having reviewed subsections 2 and 3 of NRS 331.184, which pertain to the duties of the state Risk Manager (Exhibit D), it was Mrs. Evans' interpretation that the Risk Manager was precluded from working with the Committee on Benefits to either negotiate or purchase group life, accident, or health insurance; thus, serious consideration should be given to funding an Executive Director for the Committee on Benefits. Ms. Tiffany said she thought Mrs. Evans' point was well taken and she suggested the Committee on Benefits submit the necessary Bill Draft Requests (BDR's) to update the language in the NRS to meet current operating practices. Ms. Tiffany also agreed with Mr. Barrett that the Committee on Benefits should not be structured after PERS and that the law needs to be changed. Ms. Tiffany said she was prepared to make a motion accepting the first proposal; i.e., having the Risk Manager report directly to the Committee on Benefits, and to prepare a Letter of Intent directing the Committee on Benefits to move toward developing a mission statement and goals, including performance standards for the Risk Manager. While she could see the need for independence, Senator Mathews expressed concern about whether one employee would be adequate to operate a $100-million business. In addition, Senator Mathews said she had received a number of complaints from her constituency over the years about the poor service they receive when they call the Risk Management Division for assistance. Speaking from the standpoint of a retired state employee, Senator Mathews said she did not believe people should get the "run around" when they contact the Risk Management Division for assistance. Chairman Giunchigliani apprised Senator Mathews a member benefit service program was included in budget account 625-1338 (Benefit Services Fund) which should address some of her concerns about the type of service being provided by the Risk Management Division. Mr. Allard wanted to know whether Ms. Tiffany's motion would include an amendment to NRS 331.184 and Ms. Tiffany responded affirmatively. MS. TIFFANY MOVED TO ACCEPT PROPOSAL ONE, HAVING THE RISK MANAGER REPORT DIRECTLY TO THE COMMITTEE ON BENEFITS, AMEND NRS 331.184 TO GIVE THE RISK MANAGER THE AUTHORITY TO NEGOTIATE IN THE PROCUREMENT OF INSURANCE, AND PREPARE A LETTER OF INTENT DIRECTING THE COMMITTEE ON BENEFITS TO MOVE TOWARD DEVELOPING A MISSION STATEMENT AND GOALS, INCLUDING PERFORMANCE STANDARDS FOR THE RISK MANAGER. MRS. BROWER SECONDED THE MOTION. Mr. Price said he did not believe it would be a workable organizational structure if the Committee on Benefits were to be given the authority for hiring and firing the positions, subject to the approval of the Director of the Department of Administration. In responding to a request for clarification from Mrs. Evans, Chairman Giunchigliani said the motion before the subcommittee would give the Committee on Benefits the authority for hiring and firing the positions with the approval of the Director of the Department of Administration; amend NRS 331.184 to accommodate the changes and reflect the Risk Manager has direct authority to negotiate for the Committee on Benefits for contracts for employee benefits; and preparation of a Letter of Intent directing the Committee on Benefits to develop a plan over the next biennium and requesting the Committee on Benefits to report back to the 1997 Legislature on whether the new arrangement has worked satisfactorily or whether the Committee on Benefits needs to move toward further autonomy. Mrs. Evans said she viewed this motion as an intermediate step because she thought some very good arguments had been made today for adding the new Executive Director position. Mrs. Evans also agreed an evaluation should be prepared by the Committee on Benefits and presented to the 1997 Legislature indicating whether this new arrangement has been satisfactory. Mr. Suwe expressed his disappointment that the subcommittee had not wanted to resolve the issue. Although the four members of the Committee on Benefits believe the Risk Manager should be replaced, Mr. Suwe said the Director of Administration is not in agreement; thus, nothing will change. Since there were no further comments or questions from the subcommittee, Chairman Giunchigliani called for a vote on the motion. MOTION CARRIED BY VOICE VOTE. MR. PRICE VOTED NO. Speaking on behalf of the Committee on Senate Finance, Senator O'Donnell said he thought the Director of the Department of Administration should make the final decision in determining whether the Risk Manager should be hired or fired. It was Senator O'Donnell's belief that having the Risk Manager report directly to the Committee on Benefits represents a compromise and he was prepared to make a motion to concur with the motion by the Assembly Committee on Ways and Means, then the structure could be reviewed next legislative session. SENATOR O'DONNELL MOVED TO CONCUR WITH THE ASSEMBLY COMMITTEE ON WAYS AND MEANS. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * Speaking as a representative of SNEA, Ms. Johnson recommended a Letter of Intent requiring the Committee on Benefits to report to the Interim Finance Committee rather than waiting two years to report to the next legislative session since the plan affects all state employees and a number of problems could occur within that two-year period. Chairman Giunchigliani thought Ms. Johnson's point was well made. She suggested, however, the Committee on Benefits ought to first develop standards and performance expectations so that an evaluation could be made one year after implementation; then, if problems do arise, the Committee on Benefits could report to the Interim Finance Committee. Since she thought Ms. Johnson's recommendation was both wise and reasonable, Mrs. Evans agreed with Chairman Giunchigliani's suggestion. BENEFIT SERVICES FUND - PAGE 481 Ms. King indicated the majority of the adjustments being recommended by the Fiscal Analysis Division for budget account 625-1338 were the result of a new actuarial study dated April 25, 1995 (Exhibit D). When the budget was originally built, there were some concerns expressed about the projected inflation rates. The proposed adjustments bring the original Executive Budget into agreement with the Revised Executive Budget, which the subcommittee received on May 5, 1995. Ms. King cited several adjustments that the Fiscal Analysis Division are proposing which were not included in the Revised Executive Budget; i.e., transferring $800,000 into the Reserve Category in FY 1997 to correct the contracts portion in the M-200 module, transferring the self-insurance medical, dental and vision cost from Category 10 into Category 12, and transferring the costs for printing, postage and audit from the self-insurance cost to operating costs. This will more closely align the budgetary authority in those categories where the funds are being expended which, she added, would allow for better tracking of expenditures. In addition, Ms. King noted the Fiscal Analysis Division was proposing to transfer the new Program Officer position which will assist in State Employees Workers Compensation issues, and the existing Management Analyst III position from decision unit E-125 to decision unit E-900. This is in accordance with the operations' audit which recommended the positions be transferred into the budget account they are supporting. Decision unit E-126, she explained, increases the reserve to reflect what is actually being projected as a carry forward from FY 1995. Decision unit E-127 funds a move for the Risk Management Division from a state- owned building into a non-state owned building. Decision unit E-128 establishes a new budget titled Committee on Benefits and a new Executive Director position. Decision unit E-129 provides for the allocation of administrative costs from the Benefit Services Fund amongst all of the budget accounts supervised by the Benefit Services Fund. Decision unit E-150 will accomplish two things, Ms. King continued. It will first decrease the coinsurance level from $10,000 to $7,500. The cost of this reduction has been adjusted in response to the revised actuarial report. She said, however, if the subcommittee decides to approve the reduction in the employee coinsurance level, this amount would need to be deducted from reserves rather than premiums unless the premium level were to be increased by $7.25 per month in FY 1996 and $7.57 per month in FY 1997. The second component of decision unit E-150 relates to new staff, Ms. King explained. Three new positions, a Management Analyst III, Management Assistant II and Account Clerk II, were requested in the original Executive Budget to develop a preferred provider network for the state. Since the operations' audit did not recommend proceeding in that direction, an Accountant II, a Group Benefits Administrator, and two Program Assistants, which would form the Membership Services Unit, were alternatively requested. A new Program Assistant position will also be added to the Eligibility Unit to improve services. The Fiscal Analysis Division is recommending these new positions, along with the Program Assistant positions starting on July 1, 1995 and the Group Benefits Administrator and the Accountant II positions starting on October 1, 1995. In discussing decision unit E-805, Ms. King noted funding was being recommended for significant reclassifications of existing accounting staff. Decision unit E-900 transfers the positions to the State Employees' Worker's Compensation account and decision unit E-912 funds the transfer of the Micro-Computer Specialist position to the Department of Information Services (DIS). Since this position was eliminated in the original Executive Budget but no funding to pay DIS was provided, this transfer corrects that oversight. Regarding the second component of decision unit E-150, it was Ms. Tiffany's recollection a decision had been made not to fund a preferred provider network. Although the original Executive Budget recommended staff to develop a preferred provider network, Ms. King noted the Revised Executive Budget had eliminated that staff and instead recommends staffing for the Membership Services Unit. Ms. Tiffany wanted to know whether the additional staff had been justified and Ms. King indicated the Risk Manager had provided justification for the additional positions. To respond to several questions from Ms. Tiffany, Ms. King said the staff in the Membership Services Unit (the second component of decision unit E-150) would handle customer inquiries and complaints. The Unit's staff will include a Group Benefits Administrator, being proposed at a grade 37, who will supervise the Member Services Unit, and two Program Assistant II positions, being proposed at a grade 25. Ms. King reminded the subcommittee, however, the actual pay levels for the new positions would be determined by Department of Personnel when the job descriptions (Form NPD-19's) are reviewed. Since she thought Senator Mathews' previous comments about customer inquiries and complaints were valid, Ms. Tiffany requested the Risk Manager testify as to how he expects to address customer inquiries and complaints in the future. Mr. David Thomas, Risk Manager, told the subcommittee he had been trying to solve customer service problems for four years. According to Mr. Thomas, the Risk Management Division requested additional positions in its last biennial budget, but the request was not approved by the Budget Division. Mr. Thomas said he was pleased to report the Risk Management Division's staffing problem had been identified as a high priority in the operations audit. Currently, there are five staff members whose sole function is to process eligibility documents; however, no one is responsible for answering participant questions and requests for information. During the annual open enrollment period, which starts in August and ends in April, Mr. Thomas noted each of the five eligibility staff receives between 80 to 100 calls per day. According to Mr. Thomas, the eligibility staff do not have the in-depth technical knowledge of the state's insurance plan to answer questions appropriately. In responding to a question from Chairman Giunchigliani, Mr. Thomas said the new Group Benefits Administrator as well as all three of the new Program Assistant II positions will have the necessary expertise to respond appropriately to customer questions regarding the state's insurance plan. Because she thought government tends to create too many bosses to supervise too few employees, Chairman Giunchigliani asked Mr. Thomas if he thought the existing Group Benefits Administrator for the Eligibility Unit could supervise three more Program Assistant II positions and Mr. Thomas answered affirmatively. Instead of adding another supervisor, Chairman Giunchigliani said she would rather have people who could answer questions for the members of the insurance plan. Regarding lowering the employee co-insurance level from $10,000 to $7,500 in decision unit E-150, Mrs. Brower wanted to know who would make the decision to increase insurance premiums and Mr. Thomas responded the Committee on Benefits would make that decision. Since there were no further comments or questions from the subcommittee, Chairman Giunchigliani said she would accept a motion. MS. TIFFANY MOVED TO ACCEPT STAFF RECOMMENDATIONS WITH ONE EXCEPTION; THAT BEING, THE ADDITIONAL STAFF RECOMMENDED IN DECISION UNIT E-150 WILL BE COMPRISED OF THREE PROGRAM ASSISTANT II POSITIONS RATHER THAN A GROUP BENEFITS ADMINISTRATOR AND TWO PROGRAM ASSISTANT II POSITIONS FOR THE MEMBERSHIP SERVICES UNIT, AND CLOSE THE BENEFIT SERVICES FUND BUDGET ACCORDINGLY. MRS. EVANS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * SENATOR O'DONNELL MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * RETIRED EMPLOYEE GROUP INSURANCE - PAGE 489 Ms. King noted the Fiscal Analysis Division was recommending technical adjustments to reflect the revised actuarial report (Exhibit D). Ms. King reminded the subcommittee the amount recommended for the state contribution for retired employees does not fund the reduction in co-insurance and that amount, $153,343 in FY 96 and $170,937 in FY 97, would have to be deducted from the reserve category in the Benefit Services Fund, budget account 625-1338. MS. TIFFANY MOVED TO ACCEPT STAFF RECOMMENDATIONS AND CLOSE THE RETIRED EMPLOYEE GROUP INSURANCE BUDGET ACCORDINGLY. MR. ALLARD SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * SENATOR JACOBSEN MOVED TO CONCUR WITH THE ASSEMBLY MOTION. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * SELF-INSURED WORKERS' COMPENSATION - PAGE 721 After introducing Mr. Ronald Steele, Program Analyst, Fiscal Analysis Division, Chairman Giunchigliani asked Mr. Steele to provide an overview of budget account 210-4684 (Exhibit E). Since this budget was discussed on May 16, 1995, Mr. Steele noted the agency had requested one additional position to handle the increased workload, with an additional request for 2.5 positions if the moratorium on the formation of associations for self-insured employers, effective July 1, 1995, is not stopped. At the May 16, 1995, meeting, Mr. Steele reminded the subcommittee that the Senate members had recommended closing the Self-Insured Workers' Compensation budget based upon the Governor's Recommendations as well as adjustments recommended by the Fiscal Analysis Division conditioned upon the formation of the associations for self-insured employers while the Committee on Ways and Means opted to keep the budget open. After discussion, Chairman Giunchigliani said she would accept a similar motion to concur with the Senate Committee on Finance. MR. ALLARD MOVED TO CONCUR WITH THE COMMITTEE ON SENATE FINANCE'S PREVIOUS MOTION DURING THE SUBCOMMITTEE'S MAY 16, 1995, MEETING, WHICH WAS TO CLOSE THE BUDGET BASED UPON THE GOVERNOR'S RECOMMENDATIONS AS WELL AS STAFF'S RECOMMENDED ADJUSTMENTS CONTINGENT UPON THE FORMATION OF THE ASSOCIATIONS FOR SELF-INSURED EMPLOYERS. MR. PRICE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * INSURANCE EXAMINERS' FUND - PAGE 725 Mr. Steele explained budget account 223-3817 was adjusted to reflect some of the updated projections resulting from the unexpected liquidation of a home warranty company which was previously discussed. The expenses associated with the liquidation ($121,284 in FY 1996 and $67,717 in FY 1997) will be continued into the coming biennium (Exhibit E). SENATOR O'DONNELL MOVED TO ACCEPT STAFF RECOMMENDATIONS, WHICH INCLUDES A LETTER OF INTENT TO DIRECT THE INSURANCE COMMISSIONER TO REPORT QUARTERLY TO THE INTERIM FINANCE COMMITTEE ON THE STATUS OF THE INSURANCE EXAMINERS' FUND, AND CLOSE THE INSURANCE EXAMINERS FUND BUDGET ACCORDINGLY. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * MR. ALLARD MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE COMMITTEE ON SENATE FINANCE. MR. PRICE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * INSURANCE EDUCATION AND RESEARCH - PAGE 729 The adjustments to budget account 101-3824, Mr. Steele explained, reflect new information regarding the Attorney General's Cost Allocation, the Statewide Cost Allocation, and non-state owned rent. Mr. Steele said the subcommittee might wish to consider a Letter of Intent directing the Insurance Commissioner to use a portion of the funds available in the Insurance Education and Research budget for staff training to meet NAIC accreditation standards (Exhibit E). MS. TIFFANY MOVED TO ACCEPT STAFF RECOMMENDATIONS, INCLUDING THE LETTER OF INTENT, AND CLOSE THE INSURANCE EDUCATION AND RESEARCH BUDGET ACCORDINGLY. MRS. BROWER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * SENATOR JACOBSEN MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BUDGET CLOSED. * * * * * * * * * * INSURANCE INSOLVENCY FUND Budget account 210-3802, Mr. Steele said, is fairly straightforward, with the only adjustments being recommended are to increase the reserve as a result of a reduction in the Statewide Cost Allocation Plan from the Governor's Recommendation (Exhibit E). MR. ALLARD MOVED TO ACCEPT STAFF RECOMMENDATIONS AND CLOSE THE INSURANCE INSOLVENCY FUND BUDGET ACCORDINGLY. MRS. BROWER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * SENATOR O'DONNELL MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE ASSEMBLY WAYS AND MEANS COMMITTEE. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * INSURANCE RECOVERY - PAGE 735 The Fiscal Analysis Division is proposing Governor's Recommendation for budget account 101-3821, Mr. Steele advised the subcommittee, with a small adjustment for the Statewide Cost Recovery Plan (Exhibit E). MR. ALLARD MOVED TO ACCEPT STAFF RECOMMENDATIONS AND CLOSE THE INSURANCE RECOVERY BUDGET. MS. TIFFANY SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * SENATOR JACOBSEN MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * SELF-INSURED ASSOCIATIONS' INSOLVENCY FUND - PAGE N/A This new budget account, which was created by Senate Bill 316 (Chapter 265, Statutes of Nevada, 1993), will only be established if the self-insured associations are allowed to form effective July 1, 1995, Mr. Steele explained (Exhibit E). MS. TIFFANY MOVED TO ACCEPT STAFF RECOMMENDATIONS. MRS. BROWER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * SENATOR MATHEWS MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * ADVOCATE FOR INSURANCE CUSTOMERS - NA Mr. Steele indicated the adjustments being proposed to budget account 101-3844, which have been distributed into a number of different accounts, were worked out in cooperation with the Department of Business and Industry staff to reflect the aggregation of the cost required to run the Advocate for Insurance office. Mr. Steele reminded the subcommittee this budget was initially not recommended in the Executive Budget (Exhibit E). Chairman Giunchigliani noted Senate Bill 240, which was first reviewed by the Senate Committee on Finance and is currently in the Assembly, should be amended to transfer the Advocate for Insurance Consumers' budget from the Insurance Division, budget account 3813, to a new budget account 3844 where the program will be supported by transfers from the Department of Motor Vehicles and Public Safety (DMV&PS) Verification of Insurance budget account 4731. To respond to a question from Senator O'Donnell, Ms. Rose McKinney-James, Director, Department of Business and Industry, told the subcommittee she had decided it would be best to leave this position, which is specifically designed to address the needs of automobile customers, in the Insurance Division, although she initially thought the position should be housed within the Consumer Affairs Division. The Insurance Division currently has consumer representatives who deal with a variety of other insurance issues and because of the network of information available with respect to the nature of this position, Ms. McKinney-James said she would recommend the Advocate position be placed in the Insurance Division. Senator O'Donnell disagreed with Ms. McKinney-James' recommendation, noting he was prepared to make a motion placing the Advocate position in the Director's Office of the Department of Business and Industry. Before accepting Senator O'Donnell's motion, Chairman Giunchigliani said she would like assurances from Ms. McKinney-James that the role of the Advocate position would be more advocacy based rather than litigation based. If it is the desire of the subcommittee, Ms. McKinney-James said she could make anything work; however, the resources that are necessary for this position to function are housed within the Insurance Division. It was Senator O'Donnell's recollection the Advocate position was initially eliminated, then reinstated after heavy lobbying. Although he thought both money committees were getting frustrated over whether the position was really needed, Senator O'Donnell said he was willing to fund this position out of DMV's Verification of Insurance budget account 4731, but he was not willing to fund it out of the Insurance Division's budget account 3813 because he thought having the Advocate working under the jurisdiction of the Insurance Commissioner "reeks with a conflict of interest and has a semblance of impropriety." In responding to Senator Mathew's question, Ms. McKinney-James noted the Advocate was currently housed within the Division of Consumer Affairs as a result of internal restructuring shortly after she became Director of the Department of Business and Industry. In speaking to Senator O'Donnell's concern regarding the physical housing of the Advocate for Insurance Customers, Ms. McKinney-James said a separate office was contemplated, but within the space provided for the Insurance Division. Effective July 1, 1995, Ms. McKinney-James noted the majority of the divisions of the Department of Business and Industry, including the Auto Consumer Advocate, will be housed in the Bradley Building. The Advocate would report directly to the Director under the scenario being presented. Mrs. Evans asked Ms. McKinney-James to explain what she meant when she said she was concerned about resources if the position were to be placed in the Director's Office rather than the Insurance Division. Ms. McKinney-James said she was concerned about resources from the standpoint that the Insurance Division has access to certain data bases and technical information on issues related to the insurance industry; whereas, the Director's Office does not. Since the Advocate's function plays a role in the actual examinations of certain companies through the rate-making process, the proposed restructuring would define the extent to which this position is actually involved in rate making, placing far greater emphasis on consumer education and consumer information. She also indicated additional clerical support would be necessary. After listening to Ms. McKinney-James' testimony, it was Mrs. Evans' impression that if the Advocate position were to be placed in the Director's Office it would impede his work to some degree. Ms. McKinney-James responded "I think we can work around it." Chairman Giunchigliani called for a motion. SENATOR O'DONNELL MOVED TO ACCEPT STAFF RECOMMENDATIONS AND PLACE THE ADVOCATE FOR INSURANCE CUSTOMERS IN THE DIRECTOR'S OFFICE OF THE DEPARTMENT OF BUSINESS AND INDUSTRY AND CLOSE THE BUDGET ACCORDINGLY. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * MS. TIFFANY MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE COMMITTEE ON SENATE FINANCE. MR. ALLARD SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * When several of the Insurance Division's budgets were closed previously, Ms. Tiffany recalled discussion about a Letter of Intent regarding reorganizing eight or ten budget accounts and she wanted to know whether any progress had been made in this regard. Because of the need for staff coverage at legislative hearings during the last few weeks of the session, Ms. McKinney-James apologized for not being able to devote time in a comprehensive way to the reorganization; however, she said the Director's Office would be working very closely with the Insurance Division in an effort to work through a plan of reorganization. Besides consideration of staffing, functionality, work flow and duplication of effort, Ms. Tiffany wondered whether Ms. McKinney-James would be considering an automation plan and Ms. McKinney-James responded affirmatively. Since she thought the Insurance Division operates similar to an insurance company, Ms. Tiffany suggested Ms. McKinney-James also give consideration to an imaging system because she did not believe the paper flow was being processed expeditiously. She also thought the Insurance Division's telephone system needs immediate attention because it was not user friendly. Because these two items have an impact on public relations, Ms. Tiffany wanted to know whether the Insurance Division should be moved to the top of the Department of Business and Industry's priority list. Although she agreed the Insurance Division has internal problems which require additional consideration, Ms. McKinney-James opined the Labor Commission should be considered as well for a Business Process Re- engineering (BPR). Ms. Tiffany asked Ms. McKinney-James to state briefly if she thought any of the sections within the Insurance Division were understaffed and Ms. McKinney-James said she was unable to respond to that question without further research. Ms. Tiffany contended the Insurance Division was understaffed and after the reorganization has been accomplished, the Director should request an allocation from the Interim Finance Committee's Contingency Fund for a BPR for the Insurance Division. In responding to Ms. Tiffany's statements, Ms. Deb Erickson, Budget Analyst, Budget Division, Department of Administration, noted the funding in the main budget account in the Insurance Division was mostly General Fund; however, the remaining budget accounts were comprised of various fees and assessments. It was Ms. Erickson's belief the Insurance Division's access to the Interim Finance Committee during the interim for a Contingency Fund allocation would be restricted to proving the existence of an emergency situation. She said, however, the Insurance Division has the potential ability of accessing those budget accounts affected by fees and assessments without seeking an allocation from the Interim Finance Committee's Contingency Fund. CONSUMER AFFAIRS - PAGE 811 CONSUMER AFFAIRS - TELEMARKETING - PAGE 819 Mr. Steele recalled a number of questions were raised at the last meeting regarding the Consumer Affairs' budget (Exhibit E). As a result, a new budget had been submitted by the Director of the Department of Business and Industry in the form of a memorandum dated May 22, 1995, a copy of which is included in the minutes as Exhibit F. Mr. Steele also provided the subcommittee with two organizational charts, which are Exhibit G and Exhibit H. The new budget, Mr. Steele explained, eliminates the Automobile Repair Fraud Unit which was previously requested based on concerns over the possible inference the Consumer Affairs Division was targeting a specific industry. In addition, the revised budget request shows a consolidation of the Telemarketing budget with the main Consumer Affairs budget account 3811. Approximately $830,000 in General Fund dollars in FY 1996 and $847,000 in FY 1997 would be required to consolidate the Consumer Affairs Division's budgets. Mr. Steele said, however, if the fees currently being collected by the Telemarketing Unit are deposited directly to the General Fund, almost $790,000 will be returned and assuming the projected collections are achieved, the net cost in General Fund dollars will be $40,000 in FY 1996 and $57,000 in FY 1997. Ms. Tiffany said she was adamantly opposed to providing General Fund dollars to the Consumer Affairs Division's budgets mainly because it would not provide an incentive to process the fines. Ms. Tiffany wanted to know what type of guarantee the Director could provide that emphasis would continue to be placed on processing the fines. Ms. McKinney-James said she could offer the commitment of the Department of Business and Industry and the Office of the Attorney General as well to vigorously pursue the collection of fines and penalties. With regard to consumer protection, Ms. McKinney-James cited telemarketing and automotive repair as areas of great concern. This proposal, she said, would place emphasis on deceptive trade practices generally and would give the Consumer Affairs Division the ability to pursue all of these issues vigorously. Because she thought the deceptive trade history was not good for processing cases, Ms. Tiffany asked Ms. McKinney-James if she would be willing to have the Consumer Affairs Division provide a report to the Interim Finance Committee on the status of the fraud cases on a six-month basis. It was also Ms. Tiffany's concern that the distinction between the job duties being performed by the Advocate for Insurance Customers and the Office of the Attorney General had not been clearly defined. Ms. McKinney-James said she would be happy to provide a status report to the Interim Finance Committee on a six-month basis. In addition, Ms. McKinney- James said she would be happy to share a copy of the Memorandum of Understanding between the two agencies as well. After recalling a hearing on Assembly Bill 581, which was held yesterday in the Commerce Committee, that placed the Hospital Advocate in the Consumer Affairs Division, Ms. Tiffany said she was confused as to whether the Hospital Advocate was going to be autonomous or would deal with deceptive trade practices and telemarketing as well. Ms. McKinney-James advised the subcommittee the Office of Hospital Patients was a separate and distinct budget with its own statutory authority. According to Ms. McKinney-James, passage of A.B. 581 would formalize the transfer of the Hospital Advocate function along with the existing statutory authority to the Consumer Affairs Division. Ms. McKinney-James viewed the purpose of A.B. 581 as generally addressing consumer protection types of issues, but not to deal with deceptive trade practices specifically. She said she had discussed this transfer with the Governor's Office. Ms. Tiffany said she had no recollection of having reviewed this transfer in the Executive Budget. Although the administrator and one assistant are housed within the Consumer Affairs Division, Ms. McKinney-James said the Office of Hospital Patients has the ability to separately account for its expenditures and revenues. Chairman Giunchigliani recognized Ms. Brooke Nielsen, Assistant Attorney General, who told the subcommittee she was representing Ms. Margaret Standish, the lead attorney for the Office of the Attorney General's Telemarketing and Consumer Fraud Unit, who was out of town at the present time. Ms. Nielsen provided the subcommittee with a handout that shows the activities and the collections of the Fraud Unit from July 1993 through March 31, 1995, and a copy of which is included in the meeting minutes as Exhibit I. This information, which was presented during the Office of the Attorney General's budget hearing, is a one-page summary of the activities of the Fraud Unit in that time period which indicates the Fraud Unit received over 15,000 inquiries from consumers; over 106 formal investigations were conducted; 38 cases were prosecuted; 26 civil lawsuits were conducted; and approximately $1,100,000 was collected through legal action and mediation. This is a combination of both telemarketing fraud efforts and other consumer fraud such as deceptive trade. To echo Ms. McKinney-James' previous statement, Ms. Nielsen said the Fraud Unit was also committed to its mission of fighting consumer telemarketing fraud. If the legislature approves the General Fund support, Ms. Nielsen said she could assure the subcommittee the Office of the Attorney General would work even harder to combat all of the various types of fraud that have been identified since the last legislative session. She also noted the Fraud Unit had been providing quarterly reports of its activities to the Interim Finance Committee since last legislative session. As a point of clarification, Senator O'Donnell wanted to know how many cases had been submitted from January 1, 1995 until May 31, 1995. Ms. Nielsen said she did not have that information readily available but would be happy to provide it at a later time. During the last biennium, Senator O'Donnell recalled the budget for the Fraud Unit was predicated upon revenues received from fines and penalties that were supposed to be levied against illegal telemarketers; however, those fines and penalties were not received because of the threat of court action, resulting in staff layoffs. It was Senator O'Donnell's belief that if the Fraud Unit were funded correctly, a foundation or base would be established which would compensate for the occurrence of any fluctuations in revenue from fines and penalties. Senator O'Donnell said he would like to be assured that if adequate staff were to be provided to the Fraud Unit it would vigorously litigate illegal telemarketers. Ms. Nielsen said she agreed completely with Senator O'Donnell's statements and stressed that the Office of the Attorney General had been able to participate in establishing the Telemarketing Task Force, bringing together different law enforcement agencies from all over the state to stop fraud, even though there was a shortage of funding. To respond to a question from Chairman Giunchigliani, Ms. McKinney-James said although the Director of the Department of Business and Industry appoints the Hospital Advocate, the Hospital Advocate reports directly to the Governor; thus, is not an integral part of the Consumer Affairs Division's Deceptive Trade Unit. Chairman Giunchigliani thanked the legislative Fiscal Analysis staff and Ms. McKinney-James for their efforts in constructing a workable budget which, she thought, should benefit all of the consumers of Nevada. She also said she shared the concerns expressed by Senator O'Donnell and Ms. Tiffany and was hopeful the Fraud Unit would move forward in capturing all of the fines and penalties possible. MRS. BROWER MOVED TO ACCEPT STAFF RECOMMENDATIONS, WHICH WOULD REPLACE TELEMARKETING FEES, FINES, RECOVERIES, AND DECEPTIVE TRADE SETTLEMENTS WITH GENERAL FUND APPROPRIATIONS AND CONSOLIDATE THE CONSUMER AFFAIRS TELEMARKETING BUDGET WITH THE MAIN CONSUMER AFFAIRS BUDGET; APPROVAL OF DECISION UNIT E-275 TO ENHANCE THE EXISTING CONSUMER COMPLAINT INVESTIGATIONS; AND A LETTER OF INTENT REQUIRING THE CONSUMER AFFAIRS DIVISION TO REPORT TO THE INTERIM FINANCE COMMITTEE ON THE STATUS OF THE FRAUD CASES AS WELL AS THE AMOUNT OF COLLECTIONS AS A PERFORMANCE INDICATOR ON A BIANNUAL BASIS; AND TO CLOSE THE CONSUMER AFFAIRS BUDGET. MS. TIFFANY SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * SENATOR O'DONNELL MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS. IN ADDITION, SENATOR O'DONNELL REQUESTED A BILL DRAFT REQUEST TO REQUIRE THE FUNDS DERIVED FROM TELEMARKETING FINES AND PENALTIES BE DEPOSITED INTO THE GENERAL FUND. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * * * Ms. Tiffany questioned Ms. McKinney-James as to whether the legislation being proposed by Mrs. Chowning, which targets automotive repair, would be in conflict with the Consumer Affairs Division's budget closing. Ms. McKinney-James said Mrs. Chowning's bill would not be in conflict from a budgetary standpoint because the provisions that would have established automotive repair have been eliminated through amendment. The Consumer Affairs Division, however, will be participating in addressing automotive repair issues through its broad deceptive trade responsibilities, she added. Ms. Tiffany wondered if it were necessary to refer Mrs. Chowning's bill to the Assembly Committee on Ways and Means to ensure the bill would not impact the Consumer Affairs Division's budget. Ms. McKinney-James contended amendments to the bill had been crafted in such a manner so as to avoid such conflict. Ms. Tiffany requested that Ms. McKinney-James invite legislative Fiscal Analysis staff to review the final bill. Senator O'Donnell suggested a Letter of Intent was needed to require the Consumer Fraud Unit to compile statistics tracking the dollar amounts of the fines and penalties that are levied in order to determine whether those fines and penalties are commensurate to the General Fund dollars being expended. If they are not, then the fines and penalties should be increased by the next legislature. Senator O'Donnell recommended that the status report be submitted to the Interim Finance Committee semiannually. Ms. McKinney-James offered her thanks to the legislative Fiscal Analysis staff for their efforts because she thought the budget restructuring had been a herculean task. Due to a bill hearing requiring her attendance, Chairman Giunchigliani adjourned the subcommittee meeting at 10 a.m., to be reconvened at approximately 10:30 a.m. Chairman Giunchigliani reconvened the meeting at 10:40 a.m. BUREAU OF ALCOHOLISM AND DRUG REHABILITATION - PAGE 1451 Mr. Brian Burke, Program Analyst, Fiscal Analysis Division, recalled the proposed changes had been previously discussed during the subcommittee's last meeting. To review those changes, Mr. Burke noted BADA would be getting a greater amount of the federal Substance Abuse Prevention and Treatment (SAPT) block grant funding than was reflected in the Executive Budget. Technical adjustments will also be required to state-owned rent, Attorney General costs, and the Statewide Cost Allocation Plan, with the balance placed into federal SAPT grants (Exhibit J). In order to address the concern as to treatment cost and the impact of the caseload, Chairman Giunchigliani noted the subcommittee had heard public testimony on the BADA budget. Chairman Giunchigliani inquired as to whether the subcommittee had a desire to increase that funding, which is included in decision unit 200, above the amount recommended by the Governor. Since she had been told large numbers of people were waiting for treatment, Mrs. Brower wanted to know how many people were currently waiting for treatment. A needs assessment has never been done in Nevada, Ms. Carol Jackson, Director, Department of Employment, Training and Rehabilitation (DETR), apprised the subcommittee; thus, she was uncertain as to the number of people waiting for drug abuse treatment. Chairman Giunchigliani recognized Ms. Dorothy North, Chairman, Governor's Commission on Substance Abuse Education, Prevention, Enforcement and Treatment, who advised the subcommittee there were 1,700 people last year on a waiting list for treatment. Since the first part of 1995, Ms. North said the backlog had increased because it takes 6 weeks to 2 months for individuals to access residential treatment beds. Since the budget was closed with a qualifier that school districts would be required to provide the personnel for the Life Skills Program, Chairman Giunchigliani said she had recently learned that if the budget for K-12 was not properly funded, Clark County School District would have a "budget hold" to provide staff for the Life Skills Program. Although she thought the Life Skills Program was beneficial, Chairman Giunchigliani said funding for the program would have an impact on treatment. Chairman Giunchigliani wanted to know if Ms. North could provide a dollar amount estimate which would be required to reduce the current waiting list for treatment. It was Chairman Giunchigliani's concern there was going to be an impact on the treatment program from those individuals who were released from the Life Skills Program either through pre-sentencing or parole. When the caseload numbers for individuals waiting for treatment were tabulated, Ms. North noted only those individuals being released from prison were included in the list and not the parole and probation caseloads statewide. Since approximately 60 percent of the parole and probation caseload require treatment, Ms. North said approximately 3,500 more individuals would need to be added to the current backlog of 1,700 individuals needing to access treatment services. Ms. North said the diversionary measures included in Senator James' Omnibus Crime Bill would have a tremendous impact on the publicly funded system because the majority of those people would need some type of treatment. Ms. North provided the subcommittee with a handout, which she said she requested and which was prepared by BADA, entitled "Treatment Funding and Cost Benefits," a copy of which is included in the minutes as Exhibit K. Exhibit K, she explained, provides the cost of additional treatment as follows: $2 million in additional funding equals 1,054 additional clients served at a cost of $1,897 per treatment; $1.6 million in additional funding equals 843 additional clients served (this cost is based on projected revenues generated by passage of Assembly Bill 90); and $1 million in additional funding equals 527 additional clients served. In concluding her testimony, Ms. North also provided the subcommittee with a handout for informational purposes which compares flow through treatment funding for state FY 1992 through state FY 1996, a copy of which is included in the minutes as Exhibit L. When the Life Skills Program was first presented to the Legislature, Ms. Jackson recalled that it was viewed as a pilot project for Washoe County, with only 14 clients per month expected in the beginning, but increasing 14 clients each month to a total of 168 clients. In addition, the $150,000 that was originally set aside in Parole and Probation's budget was based upon treatment for 168 clients in the pilot project. Senator O'Donnell said there was no doubt in his mind that the Life Skills Program should be adequately funded because "this was the crack in the system." Senator O'Donnell asked Ms. North if she thought $1 million was going to be adequate. Ms. North responded that $1 million would certainly help; however, she reminded the subcommittee 1,700 individuals were currently waiting for treatment. Senator O'Donnell said if substance abuse was not addressed now, the people who never receive treatment would be back in the prison system again and again. It was Senator O'Donnell's position that providing additional funding for substance abuse treatment was preferable to providing additional funding for more prisons. Chairman Giunchigliani said she would accept a motion to amend. MR. PRICE MOVED TO AMEND HIS MOTION BY ACCEPTING THE GOVERNOR'S RECOMMENDATIONS ALONG WITH THE TECHNICAL CHANGES PROPOSED BY THE FISCAL ANALYSIS STAFF AND PROVIDING $1.3 MILLION IN GENERAL FUNDS DURING THE BIENNIUM FOR SUBSTANCE ABUSE TREATMENT AND CLOSE THE BUREAU OF ALCOHOLISM AND DRUG REHABILITATION BUDGET. In expressing her dismay about the enhanced funding, Ms. Tiffany said she did not think it was proper for the subcommittee to "throw $1.3 million at a project at the last moment" without even having a business plan or identifying performance indicators. While she did not disagree with providing additional substance abuse treatment, Ms. Tiffany said she thought it would be preferable to raise the excise tax on alcohol, or raise money through drug forfeiture, grants and other funds, with the money earmarked to pay for substance abuse treatment. Ms. Tiffany said she could not support providing $1.3 million from the General Fund without having additional information. Regarding performance indicators requested by Ms. Tiffany, Chairman Giunchigliani pointed out that substance abuse treatment was not a new program and approval of the motion would provide additional funding to current treatment programs. Ms. Jackson suggested a Letter of Intent which would require treatment providers to provide outcome studies to BADA would be helpful because legislators continually ask about the effect of treatment. Mr. Allard said he shared Ms. Tiffany's concerns. Also, because he had been unable to find actual recidivism rates for FY 1994, but understood 50 percent was being projected for FY 1995, Mr. Allard asked Ms. North to expound on the recidivism rate. According to Ms. North, treatment programs throughout the state were providing good reports on individual outcomes; however, the Assembly Concurrent Resolution 71 Subcommittee had recommended $100,000 for staff and other resources to conduct outcome studies. Ms. North introduced Lieutenant Philip Galeoto, Reno Police Department, a member of the Northern Area Substance Abuse Council (NASAC), a non-profit treatment program funded by BADA which operates in the Washoe County area, who she said could speak to the issue. Ms. North said there was no question in her mind that people do succeed after treatment. While believing in preventive measures, Mr. Allard said he would submit the outcome statistics from the various treatment programs need to be carefully examined before providing an additional $1.3 million into the program if those individuals who have received treatment return to prison anyway. As a member of the Reno City Council for a number of years, Senator Mathews said she was personally convinced of the need for the substance abuse treatment program in Washoe County. Furthermore, Senator Mathews said if the state did not wish to fund substance abuse treatment programs, it would be paying a higher cost either to house and feed more people in the county jail or the Nevada State Prison (NSP). Senator Mathews said she was also familiar with NASAC because she had known a number of clients who needed treatment, but who had to wait for an available bed. Many of these people were on the street, critically needing help, but no resources were immediately available. Because of the critical need for this type of service, Senator Mathews suggested the funding flowing into BADA's budget needs to be specifically earmarked for substance abuse treatment programs. Mrs. Brower suggested it would be helpful to the subcommittee's deliberations if Lt. Galeoto were to briefly address his experience with recidivism. Lt. Galeoto said he was originally a representative on the NASAC Board for four years, but is currently a permanent board member. During the last Board meeting 10 days ago at which a recidivism report was reviewed, Lt. Galeoto said the Board was shocked at the impact the program appears to be having on clients being served by NASAC, which currently serves the entire Washoe County and northwestern Nevada area. If clients are not initially taken to the Washoe County Jail, law enforcement agencies bring to NASAC for treatment all inebriated or under the influence individuals who have not been criminally charged. The refusal rate runs between 20 and 37 percent. Although he was not prepared to speak to the recidivism rate and would be speaking generally, Lt. Galeoto told the subcommittee NASAC had been operating on a "shoestring" for a number of years. Because money has not been available to computerize treatment statistics, Lt. Galeoto noted NASAC's manually prepared records show that once people have been treated through the residential programs, they do not return to the criminal justice system; however, those groups receiving no treatment return anywhere from 2 to 20 times. Lt. Galeoto said he would be happy to provide a written report on the recidivism rate for the subcommittee's information if it so desired. Chairman Giunchigliani said she would appreciate receiving a written report from Lt. Galeoto on the recidivism rate. Chairman Giunchigliani said, however, she did not consider the additional funding as a spur-of-the-moment decision on the subcommittee's part. Rather, the BADA budget was held so appropriate consideration could be given to increasing the funding for treatment; therefore, she thought the motion was in order and she intended to call for a vote. Mr. Allard expressed concern that he had not had the opportunity to review empirical data as to whether the individuals who have received substance abuse treatment still go to jail. While understanding Mr. Allard's frustration, Chairman Giunchigliani said she did not believe Mr. Allard's question could be answered unless adequate funding was provided to BADA so information could be tracked. It was her hope funding would become available within the DETR budget so information could be compiled from the private sector for this purpose. MR. PRICE MOVED TO AMEND HIS MOTION BY ACCEPTING THE GOVERNOR'S RECOMMENDATIONS ALONG WITH THE TECHNICAL CHANGES PROPOSED BY THE FISCAL ANALYSIS STAFF AND PROVIDING $1.3 MILLION IN GENERAL FUNDS DURING THE BIENNIUM FOR SUBSTANCE ABUSE TREATMENT. ALSO TO INITIATE A LETTER OF INTENT REQUIRING THE TREATMENT PROVIDERS TO PROVIDE OUTCOME REPORTS TO THE BUREAU OF ALCOHOLISM AND DRUG REHABILITATION AND CLOSE THE BUDGET. MRS. BROWER SECONDED THE MOTION. THE MOTION CARRIED BY VOICE VOTE. MS. TIFFANY AND MR. ALLARD VOTED NO AND MRS. EVANS WAS ABSENT. BUDGET CLOSED. * * * * * * * * * * SENATOR O'DONNELL MOVED TO CONCUR WITH THE RECOMMENDATIONS OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY VOICE VOTE. BUDGET CLOSED. * * * * * * * * ** There being no further business to come before the subcommittee, Chairman Giunchigliani adjourned the hearing at 11:20 a.m. RESPECTFULLY SUBMITTED: Yhvona Martin, Committee Secretary Joint Subcommittee on General Government Assembly Committee on Ways and Means and Senate Committee on Finance May 25, 1995 Page