MINUTES OF THE SENATE COMMITTEE ON FINANCE Sixty-eighth Session June 8, 1995 The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 4:00 p.m., on Thursday, June 8, 1995, in Room 223 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator William J. Raggio, Chairman Senator Raymond D. Rawson, Vice Chairman Senator Lawrence E. Jacobsen Senator Bob Coffin Senator William R. O'Donnell Senator Dean A. Rhoads Senator Bernice Mathews STAFF MEMBERS PRESENT: Dan Miles, Fiscal Analyst Bob Guernsey, Principal Deputy Fiscal Analyst Gary Ghiggeri, Principal Deputy Fiscal Analyst Debbra J. King, Program Analyst Marion Entrekin, Committee Secretary OTHERS PRESENT: Don Hataway, Chief Assistant Budget Administrator, Budget Division, Department of Administration Public Works Board Administration - Page 547 Dan Miles, Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, discussed the recommendations of the Joint Subcommittee on Higher Education/C.I.P reflected in the budget closing action sheets (Exhibit C) for this account. He explained the State Public Works Board (SPWB) has an administration as well as an inspection budget account. The administration account 101- 1560 is funded through the General Fund and the inspection account 401-1562 is funded through assessments from the projects, Mr. Miles said. All of the adjustments reflected in Exhibit C relate to corrected costs between the two accounts. Mr. Miles pointed out decision module E-900 as suggested by the agency and approved by the subcommittee will transfer approximately $795,000 from this budget account to the SPWB inspection account, and is the major change reflected in Exhibit C. The approval of this decision module as proposed by the SPWB results in the transfer to the inspection budget account (401-1562) those positions that are totally involved in projects, and include an engineer, four architects, a supervising construction coordinator, an architect drafter and two accounting clerks. The approval also includes the transfer of a deputy manager and accounting specialist back to the administration budget account (101-1560) since the positions relate to administrative rather than project-oriented performance. The recommended transfers will result in a General Fund reduction of approximately $400,000 in the administration budget because the inspection account will pick up the cost of the positions. Don Hataway, Chief Assistant Budget Administrator, Budget Division, Department of Administration, indicated he has followed this budget account and concurs with the recommendations proposed for the transfer of the positions. SENATOR RAWSON MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF STAFF AND THE JOINT SUBCOMMITTEE REFLECTED IN EXHIBIT C. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR O'DONNELL WAS ABSENT FOR THE VOTE.) * * * * * Public Works Board Inspection - Page 552 Mr. Miles reiterated the positions recommended for transfer from the administration account were transferred to this account resulting in an increase of approximately $400,000 each year for inspection fees from the projects. He said the other major change is in decision unit 201 which adds six additional positions due to the increase in size of construction for the proposed 1995 - 1997 Capital Improvement Program (CIP). He explained the SPWB requested the additional staff, and the subcommittee has agreed with their request for two Architect/Engineers, two Building Inspectors, a Building Inspector-Roofing/Asbestos, and an Account Clerk. Senator Raggio asked where the information with respect to the six positions originated. Gary Ghiggeri, Principal Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, replied when the Senate Committee on Finance and the Assembly Committee on Ways and Means first reviewed the CIP program in February, 1995, the SPWB testified at that time the revisions made by the Governor necessitated the addition of staff. SENATOR RAWSON MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF STAFF AND THE JOINT SUBCOMMITTEE REFLECTED IN EXHIBIT C. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR O'DONNELL WAS ABSENT FOR THE VOTE.) * * * * * Child Care - Page 661 Mr. Miles indicated although this budget was not originally recommended by the Governor, it is now contained in the Governor's Executive Budget under the Department of Personnel. It pertains to child care for state employees and in no way involves welfare child care provisions. SENATOR RAWSON MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE GOVERNOR'S RECOMMENDATIONS. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR O'DONNELL WAS ABSENT FOR THE VOTE.) * * * * * Department of Prisons - Pages 1535 - 1675 Mr. Ghiggeri provided an overview of the actions taken by the Joint Subcommittee on Public Safety/Natural Resources/Transportation concerning the numerous budget accounts for the Department of Prisons (DOP) which are driven by the number of inmates housed over the biennium. He said there are a number of adjustments included in the overall prison budget that are based on the change in the inmate population projections. The recommendations contained in the budget closing action sheets (Exhibit D) proposed by the joint subcommittee will increase the General Fund support by approximately $1.5 million in Fiscal Year 1996 and $3 million in Fiscal Year 1997. (Exhibit D. The exhibit is on file in the Research Library.) Mr. Ghiggeri repeated that increase is primarily driven by the increase in the average number of inmates projected to be housed in the prison system over the 1995 - 1997 biennium. Mr. Ghiggeri said the increased population projections received in March 1995 indicated there will be an excess of 420 inmates in Fiscal Year 1996, and 457 inmates in Fiscal Year 1997, that will be housed by the DOP over the 1995 - 1997 biennium that were not included in the Governor's Executive Budget. Mr. Ghiggeri pointed out Exhibit D assumes the Assessment and Lifeskills Program as proposed and approved by the joint subcommittee for the Division of Parole and Probation (P&P), and the provisions of Assembly Bill (A.B.) 317 for the Residential Confinement Program, will be operational in the 1995 - 1997 biennium. ASSEMBLY BILL 317: Makes various changes related to juvenile courts, sentencing, crimes and punishments. The joint subcommittee has recommended that approximately $8 million be placed in the Interim Finance Committee (IFC) Contingency Fund to enable the DOP to contract for housing inmates out-of-state, Mr. Ghiggeri said, and to address other unknown needs related to the inmate population growth in the 1995 - 1997 biennium. He said this includes not only the DOP, but any increases that may be realized by the Division of Parole and Probation who have experienced significant increases in work load and Pre-sentence Investigation (PSI) reports over the past 12 to 18 months. Mr. Ghiggeri reported that the joint subcommittee recommended the privatization of a women's 400-bed multilevel custody facility in southern Nevada that will commence operation on or about January, 1997. He said the joint subcommittee has requested this facility be designed, constructed, and operated by a private contractor, and that the contract be provided on a sole-source bid to ensure the facility is operational within the designated time frame. The privatization of the new southern Nevada women's facility will open up approximately 432 beds that can be used to house male inmates, Mr. Ghiggeri reported. This will provide an additional 260 beds at the existing Carson City, Nevada Women's Correctional Center (NWCC), 112 beds at the Jean Conservation Camp (JCC), and 60 beds at the Southern Nevada Restitution Center (SNRC). He indicated the privatization of the multilevel facility will enable the DOP to house minimum, medium, and maximum security inmates at the facility in southern Nevada. It is also envisioned the minimum security inmates will be able to work in the community, similar to those inmates that are currently housed in the restitution centers. Mr. Ghiggeri related the joint subcommittee has also recommended the existing women's correctional facility be renovated, and that towers and additional fencing be provided. The Governor's CIP provided for the addition of a 60-bed housing unit at the existing women's facility, but the joint subcommittee opted to increase the housing unit to approximately 125 beds. It is anticipated the additional 125-bed housing unit will be on-line in October 1997. Mr. Ghiggeri said the renovations recommended by the joint subcommittee will cost approximately $7.6 million, but the Governor has advocated that the facility in Carson City be renovated and a housing unit be added at a cost of approximately $3.6 million. The Governor has also recommended the construction of an addition to the boot camp program in southern Nevada that will cost $617,000, Mr. Ghiggeri reported, and a subsequent budget submitted by the Governor in March 1995 provided for a 150-bed "non-Division of Forestry" camp in southern Nevada. Mr. Ghiggeri pointed out the camp construction is not recommended in the subcommittee's budget closure at this time because it is felt the addition of the housing unit at the current women's facility, plus the conversion of the "female beds to male", will provide sufficient space. The inmate-driven costs that are being incurred by the department based upon the current population projections equate to approximately $941,000 in Fiscal Year 1996, and approximately $680,000 in Fiscal Year 1997, Mr. Ghiggeri said. He stated the costs would be higher if not for Assembly Bill (A.B.) 389 that gives the prison director the authority to charge inmates or the Offenders' Store Fund budget account for certain medical treatment as well as other items such as inmate release funds. ASSEMBLY BILL 389: Revises provisions governing payment of certain expenses of offender incarcerated in state prison. Senator O'Donnell joined the meeting at 4:45 p.m. Mr. Ghiggeri reported the joint subcommittee has requested that a Letter of Intent be issued to be the DOP instructing them to pursue the privatization of medical services at the Ely State Prison (ESP). The DOP has progressed through the Request for Proposal (RFP) phase, Mr. Ghiggeri said, but must still finalize contract negotiations and align their expenditure authority. It is believed it will take the DOP approximately 90 days to complete the endeavor, at which time they will come before the IFC to adjust their work program to facilitate the privatization issue. Senator Raggio remarked it is his understanding privatization of medical services at the ESP was recommended by the department's medical director as well as the director of the DOP, and the Governor has agreed with their recommendation. Mr. Ghiggeri pointed out additional costs are being added to the budget due to the conversion of the existing NWCC to a male facility. He explained the conversion will require additional guards to be stationed at an additional post, and at the two towers that will be needed when it becomes a male facility. Mr. Ghiggeri stated there is also a provision in the closing sheets (Exhibit D) to provide for additional guards at the Northern Nevada Correctional Center (NNCC) for a 4-month period when the capacity at that facility exceeds the rated capacity by 144 inmates in units one, two, and three. He explained due to the (Stickney) consent agreement at the NNCC, additional guards have to be provided. In conclusion of his summary of the DOP budgets, Mr. Ghiggeri stated there are a few recommended Letters of Intent included in the budget closing action sheets (Exhibit D) that are intended to "shore up" some of the DOP's accounting practices to provide for reliable statistical data. Referencing the privatization issue involving the NWCC, Senator Coffin speculated it is a "foregone conclusion" the facility will be converted and privatization will take place. He inquired about the status of the female employees who live in the Carson City area and work at the NWCC, and asked about the condition of their employment once the facility is converted. Mr. Ghiggeri responded the conversion to the male facility requires the addition of 22 guards, five lieutenants, and one sergeant. He opined with the additional posts and positions needed for the new male facility, the existing female staff should be able to retain their positions either in the new facility or in another institution in the north. He pointed out the ESP employs female guards in certain areas within the facility. Because the issue of privatization has been controversial in the past, Senator Coffin inquired if the joint subcommittee has recommended a means of monitoring the performance indicators that should be used in the new facility to ensure the state will have sufficient control. Senator Raggio responded privatization will be a part of the negotiated contract, and there are standard provisions in place in other states where privatization has been used. He stressed the state will have the ultimate control and authority over the facility that will remain under the overall supervision of the director of the department. Senator Raggio pointed out the facility will be fully designed, constructed, and operated by a contracting company who will be required to meet all of the standards mandated by the state and the DOP. Mr. Ghiggeri said there are a number of checks and balances that are built into the contract. Additionally, he theorized the DOP will actively monitor the performance of the contractor to ensure the contractor provides the services the DOP intends to receive. Senator Coffin asked if the medical fund has been adjusted. Mr. Ghiggeri replied the recommendations made by the Governor pertaining to medical care were not deleted for the purpose of reducing medical care for the inmates. He stated there was an adjustment to the inmate-driven medical costs for the female facility with the assumption the private contractor will provide a level of medical care. He stated the exact level of medical care that will be required by the inmates, and the level of medical care the contractor will provide, is unknown at this time. Senator Coffin questioned whether or not the Governor took into account all of the contingencies that may exist regarding the converted NWCC. Mr. Ghiggeri replied: There are a number of contingencies that may arise. The way the budget for the NWCC is recommended is based upon a blend of a rate I have been made aware of. I have seen an unofficial proposal that equates to approximately $43 per day. I know a company in Arizona that is providing services at $55 per day. I have built in a rate of about $52 or $53 per day assuming that the minimum security inmates will not require the same level of supervision that you will have at other levels of supervision. It is difficult without a contract to know exactly what the rate will be. Senator Raggio asked if the $8 million to be placed in the IFC Contingency Fund will be specifically used to contract for housing inmates out-of-state due to unanticipated inmate population growth. Mr. Ghiggeri said the $8 million will also cover additional costs that may be incurred by the Division of Parole and Probation, and any other costs that may be incurred by the prison. Senator Raggio commented the $8 million may not have to be spent, but will provide the funding for any contingency that may occur. Senator Rhoads asked if the Lovelock Correctional Center (LCC) is still scheduled to be open and operational on July 1, 1995. Mr. Ghiggeri responded the LCC is planned to be open July 1, 1995, and that approximately $1.6 million has been added to the LCC budget account to facilitate the opening on that date. Senator Rhoads asked, "When will we max out, statewide?" Mr. Ghiggeri responded based on current projections the prison system will fill up on or about September 1996, which is when additional staff has been recommended to increase the capacity at the Northern Nevada Correction Center (NNCC). At that time, the NNCC will gradually increase from approximately 1,280 inmates to 1,457 inmates by the end of December 1996. With the planned privatization of the female facility, Mr. Ghiggeri said the population of the NNCC will drop to approximately 1,168 inmates. Senator Rhoads remarked the possibility of housing prisoners out-of-state probably will not occur until sometime in 1997. Mr. Ghiggeri said it will depend upon the parole rate and inmate intake. Senator Rhoads asked when Phase II of the LCC is scheduled to open. Mr. Ghiggeri replied Phase II is scheduled for July 1997 and will increase the LCC's capacity by 754 beds. Senator O'Donnell asked for an explanation regarding the aberration in the prisoner intake that has occurred over the last 4 months. He commented, "One aspect of prison population is the release rate, and the other is the intake. When the intake exceeds the release rate, problems will exist." Mr. Ghiggeri said the intake within the prison system has been significant during the last 7 or 8 months. In the last 5 months the DOP has averaged a net intake, above the release rate, of about 90 inmates per month. However, in April 1995, Mr. Ghiggeri indicated the department's releases exceeded the intake by 17, and was the first downward turn the DOP has had in the last year. Mr. Ghiggeri pointed out the PSIs have increased significantly. He explained depending upon the outcome of the reports, the individuals either end up in prison or go on probation which influences the prison population or the probation caseload. Prison Director's Office - Page 1535 Prison Warehouse Fund - Page 1549 Offenders' Store Fund - Page 1553 Inmate Welfare Account - Page 1561 Destitute Prisoners' Fund - Page 1565 Prison Medical Care - Page 1567 Restitution Center South - Page 1577 Restitution Center North - Page 1581 Prison Industry - Page 1585 Prison Dairy - Page 1589 Prison Industry Capital Projects - Page 1593 Southern Nevada Correctional Center - Page 1595 Southern Desert Correctional Center - Page 1601 Ely State Prison - Page 1607 Lovelock Correctional Center - Page 1613 Nevada State Prison - Page 1617 Northern Nevada Correctional Center - Page 1623 Southern Nevada Private Women's Facility - No Page Number Nevada Women Correctional Center - Page 1629 Stewart Conservation Camp - Page 1635 Pioche Conservation Camp - Page 1641 Indian Spring Conservation Camp/Boot Camp - Page 1645 Wells Conservation Camp - Page 1651 Humboldt Conservation Camp - Page 1655 Ely Conservation Camp - Page 1659 Jean Conservation Camp - Page 1663 Silver Springs Conservation Camp - Page 1667 Carlin Conservation Camp - Page 1671 Tonopah Conservation Camp - Page 1675 SENATOR JACOBSEN MOVED TO CLOSE THE DEPARTMENT OF PRISON'S BUDGET ACCOUNTS INDICATED ON PAGES 1535 - 1675 OF THE GOVERNOR'S EXECUTIVE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF STAFF AND THE JOINT SUBCOMMITTEE REFLECTED IN EXHIBIT D, AND TO INCLUDE ALL SUGGESTED LETTERS OF INTENT. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Industrial Relations - Page 737 Debbra J. King, Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, testified the primary adjustment is to implement decision unit M-201 which the Governor did not recommend. She stated M-201 provides staffing the agency needs to implement the Group Self-Insurance Program on July 1, 1995. Since it does not appear there will be a moratorium placed on the insurance program, the staffing is recommended. Ms. King said the adjustments reflected in the closing action sheets (Exhibit E) recommend an accountant to start October 1, 1995, and to place in Reserve the cost for two auditors. Ms. King remarked the committee may wish to consider a Letter of Intent directing the Department of Business and Industry to approach the IFC once the number of auditors needed is determined. Ms. King provided the committee with a packet (Exhibit F) containing information relative to the impact the passage of Senate Bill (S.B.) 458 will have on the budget account. SENATE BILL 458: Makes various changes to provisions relating to industrial insurance. Ms. King stated Exhibit F contains a copy of a Fiscal Note that indicates the passage of S.B. 458 will amount to an additional $331,779 in Fiscal Year 1995 - 1996, and $301,372 in Fiscal Year 1996 - 1997, and will provide for filling seven positions outlined on page 4 of Exhibit F. Senator Raggio asked if the seven positions are in addition to the positions requested by the attorney general, and Ms. King replied in the affirmative. Ms. King pointed out decision unit M-200 recommends adding five additional audit/compliance staff to process the increased work load from the growth in self-insured employers since the agency is required, by statute, to audit each self-insured employer once every 3 years. The department has not met their statutory responsibility, but have indicated they will review how the audits are completed to develop an efficient audit process. The department indicated the increased efficiency plus additional staff will allow them to meet their statutory responsibilities, Ms. King said. She suggested the committee may wish to provide the department of Business and Industry with a Letter of Intent which would require they report to the IFC on a quarterly basis regarding progress made in auditing self-insured employers, and whether they believe they will be able to complete audits of all employers within the statutory limits. Senator Raggio asked if the suggested budget adjustments are in accordance with the revisions in the State Industrial Insurance System (SIIS) program now contemplated. Ms. King replied the fiscal note pertaining to the impact of the passage of S.B. 458 will have to be included in the budget account that will accommodate the proposed changes in the SIIS program. SENATOR RAWSON MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE RECOMMENDATIONS OF STAFF REFLECTED IN EXHIBIT E, PRIMARILY THE FUNDING FOR THE SELF-INSURED PROGRAM AND THE ADDITIONAL AUGMENTATION TO ACCOMMODATE THE FISCAL NOTE REQUIRED BY THE PASSAGE OF S.B. 458 FOR AN ADDITIONAL AUTHORIZATION OF $331,779 IN FISCAL YEAR 1995 - 1996, AND $301,372 IN FISCAL YEAR 1996 - 1997. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * State Industrial Claimants Attorney - Page 907 Ms. King referenced Exhibit F and said decision module E-276 reflects the proposed impact of the passage of S.B. 458. She said the attorney for injured workers had requested a significant staff increase in response to the elimination of lump-sum disability payments which was later adjusted to a 30 percent increase in staff. She said a Reserve is included which would enable the attorney for injured workers to approach the IFC if the increase in caseload is as large as expected. SENATOR O'DONNELL MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH STAFF AND SUBCOMMITTEE RECOMMENDATIONS REFLECTED IN EXHIBIT E. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * State Industrial Insurance System - Page 2049 Ms. King indicated the budget account has three primary adjustments. The first is to adjust the level of funding in decision unit M-200 to reflect the revised estimates on the impact of the self-insurance groups, since the SIIS budget was prepared before the proposed regulations governing the self-insured were published. Ms. King referred the committee to page 10 of Exhibit E that provides a group self-insured budget impact projection. The second adjustment refers to decision unit E-275, and eliminates the effect of a moratorium on self-insured groups. The third adjustment is to decision unit E-276 to record the impact of the passage of S.B. 458. Ms. King stated page 14 of Exhibit E provides a breakout of the impact of S.B. 458, and page 15 of Exhibit E provides a detailed breakout regarding the impact of the passage of S.B. 458. SENATOR O'DONNELL MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH STAFF RECOMMENDATIONS REFLECTED IN EXHIBIT E, AND IN ACCORDANCE WITH THE POTENTIAL IMPACT OF THE PROVISIONS OF S.B. 458. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RAWSON WAS ABSENT FOR THE VOTE.) * * * * * SIIS Rehabilitation Center - Page 2057 Ms. King indicated there are no recommended adjustments to the budget account that should be closed in accordance with the Governor's recommendations. SENATOR O'DONNELL MOVED TO CLOSE THE BUDGET IN ACCORDANCE WITH THE GOVERNOR'S RECOMMENDATIONS. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RAWSON WAS ABSENT FOR THE VOTE.) * * * * * Senator Raggio adjourned the meeting at 5:30 p.m. RESPECTFULLY SUBMITTED: Marion Entrekin, Committee Secretary APPROVED BY: Senator William J. Raggio, Chairman DATE: Senate Committee on Finance June 8, 1995 Page