MINUTES OF THE SENATE COMMITTEE ON FINANCE Sixty-eighth Session May 31, 1995 The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 7:30 a.m., on Wednesday, May 31, 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 Mike McGinness STAFF MEMBERS PRESENT: Dan Miles, Fiscal Analyst Bob Guernsey, Principal Deputy Fiscal Analyst Steve J. Abba, Program Analyst Jeanne L. Botts, Program Analyst Pamela Jochim, Committee Secretary OTHERS PRESENT: John P. Comeaux, Director, Department of Administration George Pyne, Executive Officer, Public Employees' Retirement Board, Public Employees' Retirement System James T. Richardson, Lobbyist, Nevada Faculty Alliance Rita E. Hambleton, Lobbyist, American Association of Retired Persons Martin Bibb, Lobbyist, Executive Director, Retired Public Employees of Nevada David Drew, Representative, Nevada State Firemen's Association Marvin Carr, President, Nevada Emergency Preparedness Association Paul DeLorey, Representative, Nevada Fire Chief's Association Gene Williams, Acting State Fire Marshal, State Fire Marshal Division, Department of Motor Vehicles and Public Safety Vaughn M. Higbee, Elementary and Middle School Coordinator, Lincoln County Neldon Mathews, Ex-Superintendent of Schools, Lincoln County Joseph Crowley, Ph.D., President, University of Nevada, Reno, University and Community College System of Nevada Carol Vilardo, Lobbyist, Nevada Tax Payers Association Senator Raggio offered Bill Draft Request (BDR) 48-2089 for committee introduction and indicated the time period for notification to appropriate water has been reduced from 4 weeks to 3 weeks. BILL DRAFT REQUEST 48-2089: Reduce number of times notice of application to appropriate water must be published in newspaper of general circulation. SENATOR JACOBSEN MOVED FOR COMMITTEE INTRODUCTION OF BDR 48-2089. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RAWSON WAS ABSENT FOR THE VOTE.) * * * * * Senator Raggio turned the committee's attention to Amendment Number 579 to Senate Bill (S.B.) 369 and related S.B. 369 was voted on and amended by the committee on May 25, 1995. The chairman indicated the amendment revises section 3 of the bill and provides immunity to staff members, employees and independent contractors, or any persons performing services to the Judicial Discipline Commission pursuant to Nevada Revised Statutes 1.450 or 1.460. SENATE BILL 369: Revises provisions governing commission on judicial discipline. Senator Jacobsen commented he received an emergency request from the China Spring Youth Camp regarding the camp's water well. The camp is exploring the possibility the water well failed due to earthquake activity in the area. He asked the committee for approval of a bill draft request for approximately $150,000 to fund a new well. SENATOR JACOBSEN MOVED TO REQUEST A BILL DRAFT REQUEST FOR EMERGENCY REPAIRS TO THE WATER WELL AT CHINA SPRING YOUTH CAMP. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RAWSON WAS ABSENT FOR THE VOTE.) * * * * * Senator Raggio opened the hearing on Assembly Bill (A.B.) 500. ASSEMBLY BILL 500: Makes various changes regarding public employees' retirement system. George Pyne, Executive Officer, Public Employees' Retirement System, came forward and distributed prepared text (Exhibit C) and testified while referencing the document. Mr. Pyne explained A.B. 500 consists largely of technical corrections which have little impact on the funding of the system. He indicated language in section 1, line 3 of the bill cancels charges associated with the deferred protection program. Members have not been allowed to elect the deferred protection program since 1975, due primarily to the survivor benefit program which provides equal or better protection. Senator Raggio commented, presently, the system grants retirees the option to receive less benefits in order to allow a surviving spouse to continue with benefits after the retiree's death. He asked if the bill penalizes retirees or spouses who presently receive benefits. Mr. Pyne responded the bill does not penalize a retiree who has elected the deferred protection program. In fact, he said, the proposal slightly increases a retiree's benefits under this program. Senator Raggio questioned whether a retiree will still have the option to take a reduced benefit. Mr. Pyne replied, "Yes, that is still in effect." Continuing, Mr. Pyne indicated page 8 of A.B. 500 lists repealed sections associated with the cancellation of the deferred protection program. He stressed no retiree has been able to elect the deferred protection program since 1975, and section 1 of the bill eliminates all future charges associated with the program. Section 2 of the bill, Mr. Pyne said, provides for an upgrade of an existing Investment Analyst position to an Administrative Analyst and moves the position to the unclassified service. He said the upgrade is justified due to increased responsibilities and expansion of duties. Senator Raggio inquired if the position was new or an existing position. Mr. Pyne answered the position is an exiting position which is being upgraded from a Grade 37 in classified service to a Grade 41. Mr. Pyne related section 3, page 2, lines 32 through 37, reduces from 180 days to 90 days the period of time the system can submit a complaint to the Department of Taxation to take action against a public employer who is delinquent in submitting retirement contributions. Senator Raggio noted the first reprint of A.B. 500 deletes section 3 of the original bill which addressed retirement benefits for judges and asked why this action was taken. Mr. Pyne responded section 3 was deleted due to an inequity with the judges' system. Presently, judges, who are members of the retirement system at the time of their election, can remain in the system and switch to the judges' retirement system before retirement and the Public Employees' Retirement Board views this as an inequity. He related the federal government has a regulation pending which will not allow highly compensated individuals, such as judges, to receive more coverage or benefits than other public employees. Senator Coffin asked whether there are any municipalities which are currently in arrears with their retirement contributions. Mr. Pyne replied, "No." Senator Coffin questioned if White Pine County is current with their contribution. Mr. Pyne answered, "I believe so." Referring the committee to section 4 of the bill, Mr. Pyne indicated, this section addresses reemployment restrictions for a retired member who returns to work in an eligible position with a public employer. He said, currently, all retirement benefits are suspended for an individual during the duration of employment and the retired member may reenroll in the system and accrue additional benefits. Senator Raggio inquired if the present system requires a retiree who has left the system and returns to work after 18 months to reenroll in the system and accrue new benefits. Mr. Pyne responded: If an individual goes back to work within the first 18 months of retirement, and reenrolls in the system and is reenrolled for a 2-year period, he can then pay us [Public Employees' Retirement System] all the benefits he received up to that 18 month period, plus interest. A new benefit will be calculated based on his average he has in the newer job which pays more, but will apply to all the previous service in his career. It is a significant enhancement to this particular person's benefit at the end of the second period of employment. The Board feels there are several things which need to be corrected in that regard. Senator Raggio asked: Does this allow someone who has retired, who was under the system and has been out for 10 years, to come back into the system and if that persons stays for 5 years, then to have it all recomputed so he is then covered as if he had always been in the system? Mr. Pyne replied, the new language does allow this to happen, but the employee is required to be reemployed for 5 years before becoming eligible for enhanced benefits. Senator Raggio questioned if the retiree's new benefits will be calculated on the highest 3 wage-earning years. Mr. Pyne answered, "Exactly." Continuing, Mr. Pyne indicated section 5 of A.B. 500 addresses certain provisions of the Internal Revenue Code applied to public pension plans. Because certain individuals in the plan exceed the $150,000 annual compensation allowed by the Omnibus Budget Reconciliation Act of 1993, the plan could lose its tax exempt status unless the proposed language in this section is adopted. Referring to Exhibit C, Mr. Pyne reviewed the proposed changes outlined in sections 6, 7, 8, and 9. He noted revisions to sections 13 through 18 pertain to "cleanup" language associated with other sections of the bill. Mr. Pyne, speaking on behalf of the Public Employees' Retirement Board and the Public Employees' Retirement System, urged the committee to support A.B. 500. Rita E. Hambleton, Lobbyist, American Association of Retired Persons (AARP), came forward and indicated AARP supports passage of A.B. 500. Martin Bibb, Lobbyist, Executive Director, Retired Public Employees of Nevada, commented the members in his organization also support A.B. 500. James T. Richardson, Lobbyist, Nevada Faculty Alliance (NFA), urged the committee to support A.B. 500. Senator Raggio closed the hearing on A.B. 500 and turned the committee's attention to page 1237 of the Executive Budget. Senator Raggio turned the gavel over to Senator Rawson at 8:15 a.m. Energy Assistance - Welfare - Page 1237 Steve J. Abba, Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, distributed a Budget Closing Action Packet (Exhibit D) and referred the committee to page 26 of the packet. Mr. Abba explained adjustments have been made to the salary budget category due to reclassification of four Program Assistant positions from a grade 27 to a grade 29. In addition, Mr. Abba pointed out the federal funding for this program may be eliminated due to actions taken by the House of Representatives. SENATOR O'DONNELL MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE JOINT SUBCOMMITTEE ON HUMAN RESOURCES/K-12 AS LISTED ON PAGE 26 OF EXHIBIT D. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS COFFIN AND RAGGIO WERE ABSENT FOR THE VOTE.) * * * * * Petroleum Overcharge Rebate - Page 1241 Mr. Abba stated the closing adjustments reflect the transfer of unobligated Stripper Well funds to the Aging Services Division to continue the division's Senior Transportation Program. SENATOR O'DONNELL MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE JOINT SUBCOMMITTEE ON HUMAN RESOURCES/K-12 AS LISTED ON PAGE 27 OF EXHIBIT D. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS COFFIN AND RAGGIO WERE ABSENT FOR THE VOTE.) * * * * * DOE Weatherization Program - Page 1243 Mr. Abba indicated Sierra Pacific Power Company (SPPC) has notified the Welfare Division the company will no longer contribute $160,000 per year to the Weatherization Program. He explained the SPPC cosponsor funds, in the past, were distributed to nonprofit organizations to provide energy conservation measures for low- income housing. SENATOR JACOBSEN MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE JOINT SUBCOMMITTEE ON HUMAN RESOURCES/K-12 AS LISTED ON PAGE 28 OF EXHIBIT D. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS COFFIN AND RAGGIO WERE ABSENT FOR THE VOTE.) * * * * * Program for Homeless Nevadans - Page 1247 SENATOR O'DONNELL MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY THE GOVERNOR. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS COFFIN AND RAGGIO WERE ABSENT FOR THE VOTE. * * * * * Homeless Grants - Page 1249 Mr. Abba stated adjustments have been made to the budget to reflect additional funds the Welfare Division will be receiving from the Department of Housing and Urban Development (HUD) for Fiscal Year 1996. SENATOR RHOADS MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE JOINT SUBCOMMITTEE ON HUMAN RESOURCES/K-12 AS LISTED ON PAGE 31 OF EXHIBIT D. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS COFFIN AND RAGGIO WERE ABSENT FOR THE VOTE.) * * * * * Safety Seat Program - Page 1253 Mr. Abba stated it has been recommended that a classified position for the Safety Seat Program be established in lieu of an independent contractor. Senator O'Donnell asked if the program rents child safety seats to consumers. Mr. Abba replied the Welfare Division purchases the safety seats and then supplies the seats to consumers free of charge. Currently, funds are transferred from the Department of Motor Vehicles and Public Safety (DMV&PS) for program costs, however, these funds will be eliminated after the next biennium, so the program must find a way to become self-sufficient, remarked Mr. Abba. Senator Mathews proclaimed, "It's a crime the Governor stopped the program because some people are not able to buy those expensive seats. If you want children to be safe in a car, you need to provide them with something to make sure they are safe." Senator Rawson commented nonprofit organizations may have an interest in pursuing this project. SENATOR RHOADS MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE JOINT SUBCOMMITTEE ON HUMAN RESOURCES/K-12 AS LISTED ON PAGE 32 OF EXHIBIT D. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Refugee Program - Page 1257 Mr. Abba pointed out the program was phased out and transferred to the Catholic Community Services of Nevada on May 1, 1994. SENATOR MATHEWS MOVED TO CLOSE THE BUDGET AS RECOMMENDED BY THE GOVERNOR. SENATOR RHOADS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Hospital Tax Account - Page 993 Mr. Abba said the joint subcommittee recommended approval of the administration's Intergovernmental transfer proposal which was submitted in April of 1995. He indicated the administration's latest proposal does not include a Health Maintenance Organization (HMO) tax which was originally recommended in the Executive Budget. The latest Intergovernmental transfer proposal provides for an estimated state benefit of approximately $15.8 million for each year of the biennium. The participating public entities in the program will receive an estimated net state benefit of approximately $21 million for each year of the biennium. He said the proposed program provides for Intergovernmental transfers of $52.5 million each year of the biennium and the state will maximize the federal capitation on Disproportionate Share (DSH) payments through the program of $73.6 million. In addition, Mr. Abba related the unobligated provider tax revenues at the close of FY 1995 are estimated to be $4 million more than what was projected. The increase in these revenues is a result of decreased caseloads for Aid to Families with Dependent Children (AFDC) and Child Health Assurance Program (CHAP) and lower utilization rates. Mr. Abba pointed out the Health Care Financing Administration (HCFA) has notified the department the state's hospital and noninstitutional tax program administered in 1993 has been disallowed. The department has appealed the notification, but as yet, the department has not received a response from HCFA. He said the budget includes a contingency reserve of $1.6 million in the event the disallowance is upheld. Senator Raggio noted the estimated hospital benefits listed on page 40 of Exhibit D are illegible and asked Mr. Abba to read the figures so the amounts can be placed in the record. The amounts are as follows: University Medical Center, $15,203,000; Washoe Medical Center, $3,250,000; Carson-Tahoe Hospital, $1,025,000; Elko General Hospital, $449,000; Churchill Community Hospital, $168,000; Nye Regional Medical Center, $181,000; Humboldt General Hospital, 152,000; William Bee Ririe Hospital, $154,000; Mount Grant General Hospital, $140,000; South Lyon Medical Center, $129,000; and Lake Mead General Hospital, $116,000. Mr. Abba enumerated the hospitals participating in the program are all public hospitals because federal regulations only allow intergovernmental transfers from public entities, so private institutions can no longer participate in the program. Senator Coffin asked why private hospitals cannot participate in the program. Mr. Abba replied: A private hospital could participate in the program, but it would have to have a real tax and because of the number of indigents that some of the private institutions would serve they would most likely pay their tax and not receive a benefit in return and would actually lose money on the program. Senator Coffin questioned whether private hospitals will be allowed to refuse care to indigent patients. Mr. Abba responded, no, but the private hospitals can still receive a Disproportionate Share payment, but the DSH program is separate from this program. Continuing, Senator Coffin inquired whether private hospitals will be able to collect for services provided to indigents. Mr. Abba answered the hospital will be paid at Medicaid rates. Senator Rawson advised the committee the budget authorization act should contain a clause allowing the Interim Finance Committee (IFC) to make adjustments to the Hospital Tax Account if the Intergovernmental Transfer program is disallowed by the federal government or if federal regulations are modified. Mr. Abba explained a bill is presently being drafted which eliminates the hospital tax and an "unbundling" clause will be included within the legislation to allow for any necessary modifications. Senator Rawson asked if the repeal of the hospital tax and the "unbundling" clause could be added to the budget bill instead of being drafted as separate legislation. Mr. Abba responded, due to the repeal of the hospital tax, a number of current statutes must be modified and it is preferable to address these changes in separate legislation. SENATOR RHOADS MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE JOINT SUBCOMMITTEE ON HUMAN RESOURCES/K-12 AS LISTED ON PAGES 34-35 OF EXHIBIT D. SENATOR O'DONNELL SECONDED THE MOTION. Senator Raggio revealed his law firm represents Mount Grant General Hospital and West Hills Hospital. In addition, he indicated he serves on the board of Sierra Health Services and will abstain from voting on this budget. THE MOTION CARRIED. (SENATOR RAGGIO ABSTAINED FROM THE VOTE.) * * * * * Nevada Medicaid - Page 1215 Referring the committee to pages 41-58 of Exhibit D, Mr. Abba noted there were numerous adjustments made to the budget, but he will highlight only the most notable adjustments. He indicated the subcommittee approved the administration's latest Intergovernmental Transfer Program and increased the carryforward funding by $2.6 million. The actions taken regarding the Hospital Tax Account will reduce the overall state appropriation to Medicaid by approximately $5.2 million in FY 1996 and an additional $5.3 million in FY 1997. Senator Rawson interjected the IFC will also need authorization to adjust this budget due to possible Congressional actions and if the state pursues an 1115 Waiver. SENATOR MATHEWS MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE JOINT SUBCOMMITTEE ON HUMAN RESOURCES/K-12 AS LISTED ON PAGES 43-58 OF EXHIBIT D AND WITH THE UNDERSTANDING THE IFC HAS THE AUTHORITY TO REVIEW THIS BUDGET DURING THE INTERIM AND ADJUST THE BUDGET ACCORDINGLY. SENATOR JACOBSEN SECONDED THE MOTION. Senator Raggio abstained from voting on this budget due to his law firm's representation of two of the above-referenced hospitals and his position as board member for Sierra Health Services. THE MOTION CARRIED. (SENATORS COFFIN AND O'DONNELL WERE ABSENT FOR THE VOTE. SENATOR RAGGIO ABSTAINED FROM VOTING.) * * * * * Senator Rawson thanked the fiscal staff for all the time and effort spent on the Welfare Division's budgets and turned the gavel over to Senator Raggio. Senator Raggio complimented Senator Rawson on the excellent job he did with respect to the welfare budgets. He also thanked the joint subcommittee members and the fiscal staff for their fine efforts. The chairman opened the hearing on Senate Bill 426. SENATE BILL 426: Create fire service standards and training committee. Senator Jacobsen stated he sponsored the bill and indicated it has taken 25 years to organize this effort. He stressed the importance of firemen throughout the state receiving uniform training and equipment. David Drew, Representative, Nevada State Firemen's Association, came forward and stated the bill creates a fire service standards and training committee which will develop and promulgate voluntary fire service standards for fire service agencies within the state. The committee will determine whether a proposed training program constitutes the standard for state certification of fire service personnel. Additionally, Mr. Drew explained the committee will help develop fire service standards which will be tailored to Nevada's needs. He distributed a packet of letters (Exhibit E) written by various fire service organizations throughout the state supporting the passage of S.B. 426. Senator Raggio, referring to sections 4 and 5 of the bill, asked if the regulations developed by the committee will apply to full-time fire departments as well as volunteer departments. Mr. Drew answered the regulations developed by the committee will only apply to fire service agencies which apply for state certification because some fire departments may choose to apply with a national organization. Senator Raggio noted the bill contains an appropriation of $5,760 for the payment of per diem allowance and travel expenses incurred by the committee members. He questioned if the committee will require additional funding and if a budget will be required for the committee. Mr. Drew responded, "Not that I am aware of." Marvin Carr, President, Nevada Emergency Preparedness Association (NEPA), stated the association is composed of numerous individuals and organizations who respond to emergency situations within the state. He distributed a list (Exhibit F) of the organization's membership and indicated that NEPA supports S.B. 426. Paul DeLorey, Representative, Nevada Fire Chief's Association, testified the association also supports the development of a certification program, however, the association recommends language modifications in three areas of the bill. He referred the committee to lines 12-16 of page 1 of the bill and indicated the association would like the language to read "two chief officers, or persons of equivalent rank, or persons approved by their agency chief." He explained the language modification is requested in order to ensure that the most experienced individuals are considered for committee membership. Continuing, he requested the language on page 2, line 5 be changed to read "Washoe County Fire Chief's Association. Mr. DeLory stressed the certification program will be beneficial in helping local fire service agencies achieve a higher level of competency. Senator Jacobsen expressed his gratitude to Mr. Carr for helping the various fire agencies in the state over the years in their efforts to obtain federal funds for equipment. Gene Williams, Acting State Fire Marshal, State Fire Marshal Division, Department of Motor Vehicles and Public Safety (DMV&PS), stated the division supports the bill and explained the proposed committee will parallel the existing Peace Officers Standards and Training (P.O.S.T.) committee. The division will supply administrative support, personnel and budgetary consideration for the committee. He related the division's budget will cover any unforeseen minor expenses. Senator Raggio inquired if the administration had any concerns with making the program a responsibility of the State Fire Marshal. John P. Comeaux, Director, Department of Administration, replied, "No." Senator Raggio closed the hearing on S.B. 426 and opened the hearing on Assembly Bill (A.B.) 210. ASSEMBLY BILL 210: Makes various changes regarding preparation of governmental budgets. Dan Miles, Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, stated A.B. 210 modifies a number of procedures currently utilized in the Executive Budget process. He explained the term "proposed budget" has been inserted throughout Nevada Revised Statutes (NRS) 353 to described the Governor's budget. The first substantive change occurs in section 3 of the bill and requires state agencies to submit their budget requests by August 15, which is 2 weeks earlier than what is currently required, remarked Mr. Miles. Section 4 expands the language in NRS 353.211 requiring the Budget Division to provide the Fiscal Analysis Division with computerized budget files of the agencies' requested budgets for the next 2 fiscal years. Furthermore, section 4 provides that the Budget Division must furnish the fiscal division a copy of each agency's adjusted base budget by budgetary account for the next 2 fiscal years before December 15 of each even-numbered year. Mr. Miles related the Budget Division voluntarily provided the fiscal division with this information before the 1995 Legislative Session began and the provisions in the bill make it mandatory that the Budget Division share certain information regarding the budget with the fiscal division. Referring to section 6 of the bill, he indicated, the new language requires the agencies of the Executive Branch to meet with the budget director to discuss budgetary requests and requires that budgetary requests of each department be shared with the Fiscal Analysis Division. Senator Raggio asked when the meetings will occur between the Budget Division and the fiscal division. Mr. Miles responded the meetings will be held throughout the fall before a legislative session. Senator Raggio questioned how the language in section 6(2) changes the way information is exchanged presently between the Budget Division and the fiscal division. Mr. Miles explained the language does not change the situation as it exists today, but the proposed language strengthens the statutory language. Senator Raggo inquired, at what point in time will the fiscal division have full access to all state agencies' budgetary information. Mr. Miles said the fiscal division will have access to the initial agency information by August 15, and thereafter, information will be provided as it is developed by the agencies. Referring to section 6(5), Mr. Miles pointed out, the language requires the Governor, by the nineteenth day of the regular legislative session, to submit to the legislative counsel all the legislation required to implement the budget. He related the Budget Division would have met this provision for the 1995 session, except two bills were not submitted by the designated time. Mr. Comeaux interjected the Budget Division did attempt to comply with the proposed deadline this session, however, two bills were submitted 1 week late. He indicated the deadline requirement in section 6(5) is a reasonable time frame for the Budget Division. Senator Jacobsen noted, presently, the Governor is not required to submit the proposed budget to the legislature until the tenth day of the session and stressed this procedure needs to be changed because the legislators need the budget before the session begins. Senator Raggio remarked a joint resolution is being processed which will address Senator Jacobsen's concern. Continuing with the overview, Mr. Miles pointed out section 10 creates a new budget subcommittee of the Legislative Commission. He explained the Legislative Commission, prior to the 1995 session, appointed a subcommittee which consisted of both the members of the Senate Committee on Finance and Assembly Committee on Ways and Means to meet in advance of the session to review the Economic Forum report and information submitted by the Budget Division regarding the base budget. Section 10 of the bill permanently establishes the subcommittee and designates its membership, remarked Mr. Miles. The subcommittee's duties include reviewing a synopsis of the state budget prepared by the fiscal division and consideration of fiscal issues which may require consideration by the Legislature at the next session. Senator Rhoads questioned when the subcommittee will begin its meetings. Mr. Miles responded the Budget Division is required to submit its information by December 15, so the subcommittee will meet between the fifteenth and the time the session begins. Mr. Miles explained, in order for the budget time lines in the bill to be met, the reports from the school districts to the Department of Education must be changed from November 1 to October 15. In addition, the Department of Education's compilation of each school district's report must be submitted by November 10 of each year and the class size report must be submitted by November 15 of each year. Senator Rawson stated it is vitally important that the Senate Committee on Finance and the Assembly Committee on Ways and Means receive a finalized budget at the beginning of each session. Senator Raggio contended a finalized budget should be transmitted to the Legislature at least 2 weeks before the session is scheduled to begin. He said the proposed joint resolution would amend the state constitutional requirement the Legislature must open the session the first week of February. The chairman explained this date was chosen in order to allow the Executive Branch to submit its budget at an earlier date. He has discussed this proposal with previous budget directors and it was indicated during these discussions the budget could be submitted 2 weeks prior to session, if the session does not begin until the first week in February. In addition, Senator Raggio said, there is a policy issue of whether the Governor wishes to reveal the finalized budget before the State-of-the-State Address. He noted the State-of-the-State Address in other states addresses other matters, besides fiscal issues. Senator Rawson related the legislature is in session at least 10 days longer than necessary because the Senate Committee on Finance and the Assembly Committee on Ways and Means do not have access to the budget until the State-of-the-State Address. Senator Raggio commented: In some states, such as Colorado, there are members who are involved in the budget process even though they are up for election, and certainly those who serve on the money committees. Immediately after the election, and before committees have been determined, there is ongoing discussion with the fiscal staff in working toward a legislative budget. When the committee assignments are firmed up, they begin their participation immediately, even before December 15. When they are formalized, they continue the process and by the time the legislature convenes...they have put together a legislative budget, independent of whatever the Governor is going to submit. That is what this interim committee will be working toward and is something I would endorse....This does entail new members meeting for this purpose before the legislature begins.... Mr. Comeaux related the Budget Division cannot deliver the Executive Budget 2 weeks before the session begins, unless the session's starting date is moved to February. He said the only other alternative is for the Budget Division to hire more staff because the time frames do not allow for any other options. An agreement needs to be reached with the Executive Branch regarding the release of the finalized budget before the State-of-the-State Address is delivered, remarked Mr. Comeaux. He related, traditionally, the budget has not been delivered to the legislature before the State-of- the-State Address, so the impact of a Governor's budget initiatives are not diminished. Senator Raggio noted if the Legislature creates a parallel budget, then the diminishment of the Governor's proposals becomes less of an issue. He said the state budget books have grown from one volume to three volumes and it has become impractical to do justice to the budget within the limited amount of time the Legislature is in session. Senator Rawson asked whether the committee has adapted to the budget format or if the committee would like to see more line-item details. He remarked, "I find it a budget where the staff still works harder on and we work a little less on." Senator Raggio indicated the proposal he outlined regarding the budget subcommittee will deal with the "back material" the committee does not have time to address. Senator Rawson voiced his concern with the placement of the budget subcommittee under the auspices of the Legislative Commission. Senator Raggio explained the only responsibility the Legislative Commission has regarding the budget subcommittee will be to appoint the members of the Senate Committee on Finance and the Assembly Committee on Ways and Means to the committee. Senator Jacobsen stated the budget highlight pages developed and distributed by the fiscal division were extremely helpful in the joint subcommittee, however, he complained, since the highlights were not distributed until the morning of the meeting, little time was allowed for review of the material. Senator Raggio complimented the fiscal staff for their work on the budget highlights and indicated it would be helpful to have the highlight pages earlier, but acknowledged the fiscal staff's work load precludes earlier distribution. Senator Raggio closed the hearing on A.B. 210 and opened the hearing on Senate Bill 274. SENATE BILL 274: Makes appropriation to Lincoln County school district for increased costs of construction of elementary school in Alamo. Senator McGinness came forward and testified the Lincoln County school district has done everything possible to avoid requesting funds from the Legislature. He explained the school district bonded $1,525,000 for the construction of an elementary school, however, construction costs totaled $1,986,000. Senator Raggio deferred further testimony on the bill until later in the meeting and referred the committee to the University and Community College System budgets. University of Nevada System Administrator - Page 283 University System-Special Projects - Page 289 System Computing Center - Page 291 University Press - Page 295 University of Nevada - Reno - Page 299 School of Medical Science - Page 305 Intercollegiate Athletics - UNR - Page 309 Statewide Programs - UNR - Page 313 Agriculture Experiment Station - Page 317 Cooperative Extension Service - Page 321 Radiation Safety Board - No. Nevada - Page 325 University of Nevada - Las Vegas - Page 329 Intercollegiate Athletics - UNLV - Page 335 Statewide Programs - UNLV - Page 339 Radiation Board - So. Nevada - Page 343 Community College of Southern Nevada - Page 347 Northern Nevada Community College - Page 353 Truckee Meadows Community College - Page 359 Western Nevada Community College - Page 365 Business Center North - Page 371 Business Center South - Page 375 National Direct Student Loan - Page 379 Desert Research Institute - Page 381 Senator Raggio noted the Joint Subcommittee on Higher Education/CIP held a number of hearings on the University and Community College System budgets and indicated the adjustments and decisions made regarding the above budgets are outlined in the Closing Actions document (Exhibit G). The chairman related the adjustments to these budgets have been agreed upon by the members of the joint subcommittee, the administration, and the representatives of the University and Community College System. In reviewing Exhibit G, Mr. Miles pointed out the joint subcommittee recommended adding additional funds for the group insurance rate increase which is proposed in Senate Bill 301. SENATE BILL 301: Establishes for next biennium amount to be paid by state for group insurance for participating officers and employees. Continuing, Mr. Miles explained additional funding was recommended by the joint subcommittee in the following areas: increase state match for National Student Loan Program by $30,000 per year; add a new Data Processing auditor position to the System Administration's Internal Audit staff; provide additional funding of $224,000 in each year of the biennium to finance Family Practice Medical Program; increase funding by $450,000 per year for part-time faculty salaries at the community colleges; and provide $200,000 in one-shot funds to support the Desert Research Institute (DRI) operation and maintenance for new buildings during the next biennium. Senator Raggio interjected funding for a one-shot has been recommended with the understanding it was approved on a onetime basis without any future obligation for continued support. Senator Mathews asked how the DRI budget was built without the inclusion of maintenance funds. Mr. Miles explained the state funds DRI's administrative costs, but grant funding covers the remaining expenses. Senator Raggio indicated two budget requests were introduced by the university system after the budgets had been submitted to the Budget Division. The chairman said one of the requests dealt with a distance learning network, however, the joint subcommittee recommended the budget be closed without this item, but the subject will be revisited if additional funding is available. In addition, Senator Raggio explained, a decision has not been made regarding the use of medical residents in an outpatient setting for a portion of their medical training due to the proposed changes to the Medicaid system. Senator Rawson said the closing actions of the joint subcommittee on Human Resources/K-12 transferred $2.6 million to the General Fund to offset the funding for the medical residency program. Senator Raggio noted, if action is not taken on this issue, there will be no funding available to continue the medical residency program. Senator Rawson stated changes proposed in the Medicaid program will have a critical effect on the medical residency program and on the medical school in general. He commented program funding will decrease $1 million in FY 1996 and $2 million in FY 1997 and explained if this occurs, the medical school might lose its accreditation. Senator Raggio asked, if the state makes an appropriation to the medical residency program, what action can the state take to ensure it is reimbursed if any funds become available. Senator Rawson replied the state can require an accounting of the funds and demand that any funds received by outside providers be used to reimburse the state. The federal government currently reimburses hospitals, but not the medical school, remarked Senator Rawson. Senator Raggio suggested a reimbursement clause be placed in the proposals submitted by the outside medical provider. Senator Rawson responded this request is reasonable and should be easy to implement. Senator Raggio commented the appropriate action on this budget would be to authorize an appropriation of $3 million, but require the medical school to approach the Interim Finance Committee for the funds which will be disbursed as needed. In addition, he said, a provision should be made to reimburse the General Fund from funds received by outside providers. Senator Mathews asked for clarification regarding how the proposed changes to Medicaid affect the medical residency program. Senator Raggio explained: The action of the joint subcommittee did make some cuts in the General Fund. But the funds do not flow to the university, the money would be a savings from the Executive Budget. As I understand it, the proposal to use managed care was expected to also save $3 million over the biennium, but that is in essence a wash now, because of the additional costs for money to sustain the residency programs in those areas. Senator Rawson stated he is concerned regarding the requirement to have the medical school report to the IFC because the types of programs the school sponsors may become a political issue. He maintained if the residency program becomes politicized, then the school's accreditation is in jeopardy. Senator Raggio agreed with Senator Rawson, but stated his main concern is that there be some effort on the part of the medical school to obtain funding from other sources and if this occurs, the General Fund will be reimbursed. SENATOR O'DONNELL MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE JOINT SUBCOMMITTEE ON HIGHER EDUCATION/CIP AS LISTED IN EXHIBIT G AND TO AUTHORIZE ADDITIONAL FUNDING OF $1 MILLION IN FY 1996 AND $2 MILLION IN FY 1997; WITH THE FIRM UNDERSTANDING SOME EFFORT WILL BE MADE TO REIMBURSE THE GENERAL FUND AND REPORTS WILL BE SUBMITTED PERIODICALLY TO IFC REGARDING SPENDING AND REIMBURSEMENT EFFORTS. SENATOR RHOADS SECONDED THE MOTION. Senator Raggio asked if any of the representatives from the university system had any concerns regarding the above motion. Joe Crowley, Ph.D., President, University of Nevada, Reno, University and Community College System of Nevada, replied the action taken is acceptable. Senator Rawson indicated, due to his employment with Clark County Community College in Las Vegas, he will abstain from voting on these budgets. Senator Coffin revealed his wife works for the university system, however, the actions taken by the committee do not specifically benefit his spouse, so he will be voting on the budgets. THE MOTION CARRIED. (SENATOR RAWSON ABSTAINED FROM THE VOTE.) * * * * * Senator Raggio closed the hearing on the university system budgets and reopened the hearing on Senate Bill 274. Vaughn M. Higbee, Elementary and Middle School Coordinator, Lincoln County, came forward and distributed two handouts (Exhibit H - letter detailing reasons for appropriation request; Exhibit I. Original is on file in the Research Library - Lincoln County School District Physical Facilities Survey) for the committee to review. Mr. Higbee related the school district is requesting $186,000 to help alleviate increased costs associated with the construction of a new elementary school and for the purchase of books and materials for the 1995-1996 school year. Senator Rawson pointed out the Lincoln County school district has been extremely frugal with the design and materials utilized in the construction of its new elementary school. Senator Raggio asked for clarification regarding the construction bonding amount and a subsequent loan taken out by the county. Mr. Higbee replied the county passed a $1.5 million bond in 1992 for the construction of a new elementary school and the low bid on the project was $1,986,000. The school district felt the community would not support another bond issue to cover the remaining costs, so the district determined it would provide the funding for the additional costs. In order for the district to fund the additional costs, the construction plans were downsized and cost-cutting measures had to be applied to many areas of the project. Mr. Higbee indicated, due to the cost- cutting measures, the school does not have a playground or any landscaping. Mr. Higbee explained costs for the construction project increased from the original projections of $1,490,000 because the existing school could not be demolished due to actions taken by the Nevada Historical Society. Because the school district could not build on the existing site, acreage was donated by the town of Alamo. The land donated by Alamo was patented but not deeded, therefore, the Bureau of Land Management had to complete an impact study. Neldon Mathews, former Superintendent of Schools, Lincoln County School District, related, since negotiations with the Nevada Historical Society were not fruitful, the district approached Union Carbide to ascertain if they were willing to sell the district property. However, the selling price of the Union Carbide property was not within the district's budget, so the district began to investigate the possibility of purchasing BLM property. Mr. Mathews indicated the district discovered the BLM had donated a piece of land to Alamo which was earmarked for recreational and other community uses. The school district approached the town of Alamo regarding purchasing the property, but town officials donated the land to the school district. In order for the district to build on the land, it had to apply to the BLM for permission to change the land use requirement. He said the impact study required by the BLM was originally projected to take 1 to 2 months, but in actuality took 11 months. Due to the length of time it took to handle all the associated problems, construction costs had increased, remarked Mr. Mathews. Senator Raggio questioned why the Nevada Historical Society was interested in preserving the school. Mr. Mathews responded the society, during this time, was canvassing the state to try and renovate and save early examples of educational facilities. Because the society objected to the demolishment of the building, the Farmer's Home Administration would not allocate funds for the project. Senator Raggio asked what is presently being done regarding the older school site. Mr. Mathews answered, "The school is just sitting there. The school district has no money to go in and try and renovate it. I assume eventually it will be turned over to the community for their use. I have no idea what is going to happen." Senator Raggio asked what additional costs did the project incur because of the prevailing wage requirement. Mr. Mathews replied, "At least $750,000." He related the school district has approached the Office of the Labor Commissioner on other projects to receive permission to utilize the prevailing wages in the county, but the requests were denied. Mr. Higbee interjected the school district has questioned how the prevailing wage is established for Lincoln County because the school district is the largest employer in Lincoln County and the district's wages are much lower than what the labor commissioner has determined as the prevailing wage. Senator Coffin inquired about the county's present tax rate. Mr. Mathews responded the bond issue brought the taxable allowance to the maximum limit. Senator Coffin asked if the tax rate is $3.64 throughout the county. Mr. Higbee replied, "No, we are a little below that." Senator Coffin questioned how much more the county could collect if the tax rate was increased to $3.64. Mr. Higbee answered, "$300,000 to $400,000" and related the school district is already above its bonding limit. Senator Coffin questioned if the county was subsidizing the school district rate. Mr. Higbee said, "No, they are not subsidizing it." Senator Coffin commented: I think what we can see here, as the result of this county, as in other counties, the artificially low tax rate and the effect on these small counties, when maybe they ought to be allowed to go to the constitutional rate for just these kinds of crises because this will allow you to go and do everything you need to do....You are permitted by the constitution, all the Legislature needs to do is pass an act allowing you to tax yourselves to provide for the education of your children. Mr. Higbee said this action would encumber the county's ability to bond for other projects. Senator Coffin suggested the option of increasing the tax rate should be explored before the bill is processed. Senator Raggio inquired if the voters in Lincoln County have turned down any tax increases or proposed bonding. Mr. Higbee replied the county denied the school district's attempt to bond for more funds, so the district borrowed $60,000 in order to complete the school. Senator Raggio asked how the district proposes to repay the short-term loan. Mr. Higbee answered the funds will be repaid from the district's general fund. He related it would not be an option for the district to bond for any more funds because of other vital county projects. Senator Coffin interjected the school district does not need to issue more bonds, but the county has the option to increase its taxable rate to the constitutional level. Mr. Higbee replied, "98.6 percent of Lincoln County belongs to a federal or state agency." Senator Jacobsen questioned if the school district had contacted the state's congressional delegation. Mr. Higbee answered he has been in touch with Senators Bryan and Reid and was informed there is legislation which will provide some help, but the measure does not include any funding. Continuing, Senator Jacobsen asked if the military has offered the district any type of assistance. Mr. Higbee responded: The United States Air Force has told the county they are not going to pay assessed taxes to Lincoln County until the lawsuit is settled in Nye County, so we are not even going to receive the revenue that the school normally receives from the air force. Carol Vilardo, Lobbyist, Nevada Taxpayers Association, came forward and stated the association opposes the bill as written because it sets an extremely dangerous precedent. The association recognizes the school district has a problem, but recommends that the funds be loaned to the district. She indicated, if the bill is passed in its present form, then other school districts will be coming before the Legislature and making similar requests. She said the association understands there are specific problems relating to rural areas due to economies which are based on weather-related items or the price of minerals. The association has no objection with the state helping the rural areas, however, the association believes the funds should be loaned to the community. Senator Raggio closed the hearing on S.B. 274 and turned the committee's attention to Amendment Number 684 of Senate Bill (S.B.) 212. The chairman noted the committee amended and passed S.B. 212 on May 29, 1995. He asked the committee to review the proposed amendment and pointed out the amount has been corrected to indicate $1,361,521. Senator Raggio asked if the committee wished to take action on S.B. 426 and A.B. 500. SENATOR JACOBSEN MOVED TO AMEND AND DO PASS S.B. 426. SENATOR COFFIN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * SENATOR JACOBSEN MOVED TO DO PASS A.B. 500. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Rawson requested the fiscal staff to meet with the Lincoln County school district officials to discuss a potential loan in lieu of a direct appropriation. There being no further business before the committee, Senator Raggio adjourned the hearing at 10:00 a.m. RESPECTFULLY SUBMITTED: Pamela Jochim, Committee Secretary APPROVED BY: Senator William J. Raggio, Chairman DATE: Senate Committee on Finance May 31, 1995 Page