MINUTES OF THE SENATE COMMITTEE ON FINANCE Sixty-eighth Session June 28, 1995 The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:15 a.m., on Wednesday, June 28, 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: Assemblyman Joseph E. Dini, Jr., Assembly District No. 38 STAFF MEMBERS PRESENT: Dan Miles, Fiscal Analyst Bob Guernsey, Principal Deputy Fiscal Analyst Jeanne L. Botts, Program Analyst Judy Jacobs, Committee Secretary OTHERS PRESENT: Rose McKinney-James, Director, Department of Business and Industry Larry D. Struve, Chief, Office of Industrial Development and Planning, Department of Business and Industry Stephanie D. Licht, Rural Services/Agriculture Cluster Leader, Department of Business and Industry Nancyann Leeder, Nevada Attorney for Injured Workers, Department of Business and Industry Senator Raggio reminded the committee they had taken action on the Mineral County request for construction of a new school for the Walker River Tribe at Schurz, Senate Bill (S.B.) 444, and on a measure regarding the increased cost of the Alamo School, S.B. 274. SENATE BILL 444: Makes contingent appropriation to Mineral County School District for portion of costs of construction of school to replace Schurz School. SENATE BILL 274: Makes appropriation to Lincoln County school district for increased costs of construction of elementary school in Alamo. He stated it now appears there is some difficulty in processing the bills in the form of loans, even though the loans were not substantial, which could lead to federal litigation. Because the Legislature will not meet again until 1997, he suggested it may be appropriate to reconsider the action, and to consider appropriation of $250,000 to the Alamo School, and appropriation of $250,000 to the Schurz School, contingent upon obtaining additional funding from public or private sources. He noted the tribe has indicated it has nearly $700,000 to contribute. He invited discussion on the matter. SENATOR O'DONNELL MOVED TO RESCIND THE PREVIOUS MOTIONS ON S.B. 274 AND S.B. 444. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Jacobsen voiced support for both projects, but proposed a letter of intent be included to avoid setting a precedent. He expressed astonishment that no representative from Mineral County had appeared in regard to the matter. Senator Raggio agreed the action must be predicated upon exceptional circumstances in both cases. In regard to the Schurz School, he declared the Legislature cannot ignore the potential for litigation, whether it is a state requirement or deals with the equality of school facilities. He concurred an accompanying letter of intent will be appropriate to indicate that neither project is to be considered as setting a precedent due to the serious and exceptional circumstances. He repeated his suggestion to make the amounts equivalent. SENATOR JACOBSEN MOVED TO AMEND AND DO PASS S.B. 274 TO PROVIDE $250,000 FOR INCREASED COSTS, WITH A LETTER OF INTENT WHICH WILL EXPRESS THE REASONS WHY THE APPROPRIATION IS BEING MADE. SENATOR MATHEWS SECONDED THE MOTION. Senator Coffin explained he will oppose the motion based upon his doubt that serious and exceptional circumstances actually exist in Lincoln County. He noted the county still has taxing ability and has failed to take responsibility locally. THE MOTION CARRIED. (SENATOR COFFIN VOTED NO.) * * * * * SENATOR JACOBSEN MOVED TO AMEND AND DO PASS S.B. 444 TO PROVIDE $250,000 WITH THE CONTINGENCY THAT ADDITIONAL FUNDING BE OBTAINED FROM PUBLIC OR PRIVATE SOURCES, AND TO INCLUDE A LETTER OF INTENT WHICH WILL SPECIFY WHY THE APPROPRIATION IS BEING MADE. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Raggio invited discussion or questions regarding S.B. 574, the authorization bill, explained on the previous day in detail. SENATE BILL 574: Authorizes expenditures by agencies of state government. SENATOR RAWSON MOVED TO DO PASS S.B. 574. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * The next bill to be considered was Assembly Bill (A.B.) 581. ASSEMBLY BILL 581: Makes various changes concerning department of business and industry. Rose McKinney-James, Director, Department of Business and Industry, testified many of the provisions of A.B. 581 are necessary to implement the budget, and several aspects of the bill clarify the authority of the director with respect to administrative supervision of the department relative to establishing uniform policies and coordination of other activities. Ms. McKinney-James provided an outline of the major sections of the bill (Exhibit C), along with a directory of agencies comprising the Department of Business and Industry (Exhibit D. Original is on file in the Research Library.) and a brochure on the industrial development revenue bond program (Exhibit E. Original is on file in the Research Library.). Also provided was a memorandum prepared by the Fiscal Analysis Division of the Legislative Counsel Bureau (LCB) regarding amendments to the bill (Exhibit F). According to Ms. McKinney-James, section 2 of A.B. 581 will provide the director with the opportunity to establish special projects to assist in the development of services for business and industry. It will provide authority to create an office of business, finance and planning and a center for business advocacy and services. Ms. McKinney-James stated section 4 will allow the authority to use an alternative dispute resolution (ADR) process within the department when funding and staff are available. Sections 5, 9 and 10 of the bill, she said, transfer the Office for Hospital Patients from the Division of Insurance to the Consumer Affairs Division. Sections 6, 7 and 8 clarify the composition of the department and the authority of the director to provide supervision of administrators. She added those sections also allow establishment of a trust account in the Office of the State Treasurer for the industrial development bond program as proposed through an audit. Ms. McKinney-James acknowledged some debate took place in the Assembly with regard to certain measures of the bill, hence the reprint which she declared represents a series of technical amendments. She pointed out a variety of boards and commissions and other entities which once had independent status were placed within the department when it was created. She said A.B. 581 attempts to establish administrative authority to match her responsibility. Ms. McKinney-James singled out the Nevada Attorney for Injured Workers as an operation which holds a unique position within the department and which could have a potential for conflict. She called attention to page 5, section 2, line 27, which she called most important. She read: Nothing contained in this subsection may be construed as allowing the director to preempt any authority or jurisdiction granted by statute to any division or other entity within the department, or as allowing the director to act or take on a function that would be in contravention of a rule of court or a statute. Senator Rawson asked if any part of the bill is still contested. Ms. McKinney-James replied there is no portion of the bill that is contested. Senator O'Donnell indicated he is troubled by section 2 which allows the director to accept gifts, grants, donations, bequests, or other sources of money, and then allows the director to spend those funds as she sees fit without legislative or Interim Finance Committee (IFC) oversight. He asked her to explain the necessity for the provision. Ms. McKinney-James responded approval will be sought if the gifts or donations fall within the purview of either a requirement from the State Board of Examiners or IFC. She explained the provision is an attempt to place into statute the ability to supplement what has historically been a limited budget with respect to some of the innovative projects of the department. According to Ms. McKinney-James, when she first came to the department it was apparent the industrial development revenue bond program was one of the more significant aspects of the department, but there was no way to provide information to businesses that might take advantage of the program. She pointed out funding to support Exhibit E was provided by private sector entities listed on the back of the brochure. In order to accept the funding, she said, a special agreement provided by the Office of the Attorney General was necessary in order to print the brochure. She reiterated the request to give her the ability to seek a variety of resources to assist in program development or to work on special projects. She explained the funds will be placed in a special account which will be available for review and accountability. Senator O'Donnell inquired if the department has licensure and regulatory authority over the businesses. Ms. McKinney-James answered the banks are regulated as financial institutions, but she has no authority over the others listed. Senator O'Donnell expressed concern with the provision that allows the director to make requests for donations from a company that may fall under her authority. Ms. McKinney-James concurred that she might be in violation of another statute or code of ethics if she did make such requests. She clarified: This was a voluntary donation. There was no affirmative step taken on my part to request that funding be made available. I simply indicated that we needed to have some ability to market this program, and it was based on the response from these entities that this brochure was developed. I appreciate your concern. I think the reference to a request for donations, though, relates more to outside entities and certainly not entities that would be overseen or regulated by the Department of Business and Industry. Senator O'Donnell suggested making a change so she would be unable to make such a request, which he noted would also be for her own protection. She agreed to the proposal. Senator O'Donnell questioned putting the Nevada Athletic Commission under the aegis of the Department of Business and Industry as provided on page 4. He asked if it was being moved from the control of the Governor. Ms. McKinney-James replied the commission has been under her authority for 3 years, and for which they have expressed approval. Senator Rhoads called attention to page 5, subsection 2, which he opined gives the director a lot of authority. He suggested the insertion of a provision that will require the director to obtain approval from the board or commission after the word "he" on line 21, in order to provide checks and balances. Ms. McKinney-James interjected there are 12 boards and commissions in the department. She drew attention to language on page 4, section 8 at line 45, which she opined may provide assurance regarding approval. Senator Rhoads suggested that language might be incorporated into subsection 2 on page 5. Ms. McKinney-James responded most of the boards are part-time entities and if she requires emergency action she would like clarity from the Legislature regarding her ability to intervene and take action. She acknowledged it is not likely she would do so without contacting the chair of the board or commission. As an example, Ms. McKinney-James stated both the legislative auditor and the internal auditor worked through the director of the department for the recent audit of the Division of Agriculture with the understanding she would coordinate the information with the board or entity. She said: To the extent that I have a responsibility for maintaining oversight for administrative matters and budgetary matters, I would like to maintain that clear line of authority. If I am faced with a situation where my responsibility is in place, and somehow that responsibility is frustrated because the authority is not clear because of language that's in this bill, I'm not sure that I can carry on my responsibilities in an efficient and effective way. Ms. McKinney-James offered to defer to Senator Rhoads' proposal, although she declared that is not her preference. Senator Rhoads pointed out other agencies work with boards and commissions under similar statutory language. Senator Raggio acknowledged that is a major departure from existing language which allows the director to be considered a member of the staff of a division if the director deems it necessary in budgetary matters. He assumed the new language will include the boards within the purview of the department, which is not the case with boards in other departments. He agreed the statute for the Department of Business and Industry should be consistent with other statutes. He asked why such authority over boards should be necessary for the department when it is not present in other departments. Ms. McKinney-James responded, "I'm certainly not interested in asserting any power over the board." She explained the reference to "other entities" includes not only boards and commissions, but also other entities created by executive order, and the diverse number of agencies within the department. Senator Raggio asked why the wording should not specify "except for boards," assuming she is not requesting authority over the boards. He asked if that will disturb her. Acknowledging that it will disturb her, Ms. McKinney-James said, as an example, the State Board of Agriculture establishes the policy for the division, but she has responsibility for the day to day operations of that division. Senator Raggio interjected she would have the authority over the Division of Agriculture in any case, but the concern is why the director of her department should be given authority that other departments do not have over boards within their purview. Noting her concern regarding policy, Senator Coffin asked if Ms. McKinney-James is disturbed that she has no part in setting that policy and if she is concerned the division policy may be contrary to the department's overall policy. Ms. McKinney-James acknowledged that is possible. She stated, "I have no desire to be a member of a board or commission. The reference to the staff, I think, relates to the division itself." As an example, she said recently the insurance commissioner resigned and since the statute declares the position cannot remain vacant, as director she took over as the de facto administrator. Ms. McKinney-James interpreted Senator Rhoads' proposal to mean she must seek their approval, or at least provide knowledge, where there is a board or commission. She stated that would be satisfactory. Regarding dispute resolution in section 4, Senator Raggio inquired in what areas or divisions matters might occur which would fall under the broad authority of that section. Ms. McKinney-James replied there are a variety of smaller agencies within the division that are required to mediate consumer complaints and disputes. Some of them are required to use the provisions of the Nevada Revised Statutes (NRS) chapter 233B and hold administrative hearings, she said, but when that process is not successful, or because of the costs associated with it, she is seeking some alternative means for resolving disputes. As an example, Ms. McKinney-James cited disputes wherein a worker has questions regarding wages or the working environment in which the Office of the Labor Commissioner has some limited authority. She declared a desire to have the ability when those discussions reach an impasse to at least allow the party to agree to go to mediation or to look to a neutral third party to assist in the dispute. She noted the Consumer Affairs Division, which receives a variety of inquiries from the public, would probably take advantage of alternate dispute resolution. Senator Raggio interpreted the language in A.B. 581 as allowing for the director to authorize dispute resolution unless an objection is made through the Office of the Attorney General. Larry D. Struve, Chief, Office of Industrial Development and Planning, Department of Business and Industry, voiced the understanding an ADR is based upon consent of the parties to the dispute, and you cannot force anyone to accept alternative dispute resolution. He indicated the language in the bill was worked out with the International Center for Dispute Resolution, administered by a gentleman associated with the National Judicial College for a number of years. Mr. Struve agreed that the ability to seek alternative dispute resolution will be useful in making the operations of the department more efficient. Senator Raggio asked for examples of agencies that may use the provision in addition to the Office of the Labor Commissioner. Mr. Struve recalled a specific case which prompted inclusion of the section of the bill. He said a bond was posted in the Consumer Affairs Division that was insufficient to pay all the claims filed with the division. He said all claimants wanted to use an alternative method to reach accommodation as to how to equitably distribute the sum available. He noted a court proceeding would have been very costly and would have reduced the amount left for distribution. According to the Office of the Attorney General, the statutes made no provision to allow for alternative dispute resolution through a voluntary arrangement. Senator Raggio accepted Mr. Struve's opinion the provision will require the consent of both parties. In that case, he asked, why is the Office of the Attorney General being given veto power over the provision. Mr. Struve responded the intent is not to preempt any other statutory procedure or requirement in any way in which an adversarial proceeding is required. He stated that to insure there will be no violation of any other statutes, the provision is written into the bill to seek the advice of the attorney general and to ensure there is no violation. He voiced the assumption the attorney general may oppose the use of ADRs if there is a requirement that a "full-blown" administrative hearing is required through another chapter of NRS. Senator Jacobsen noted he receives many complaints regarding hospital bills and asked if the Office for Hospital Patients receives many complaints. Ms. McKinney-James answered the office receives a tremendous amount of activity regarding billing disputes, and she declared the office has done an outstanding job to date. Stephanie D. Licht, Rural Services/Agriculture Cluster Leader, asked the committee members to turn to a chart on page 4 of Exhibit D depicting the boards that make up the cluster. She stated the pamphlet was prepared to give an overview of the department and to indicate the functions of the department. She pointed out most of the entities listed under Rural Services/Agriculture Cluster are very small boards and commissions. Ms. Licht stated she has worked with the director, the division and the department, and she expressed gratitude that her entities have been included in all the department activities. She declared the director has worked as hard to support bills relating to those in the cluster as she has for "the multi-billion dollar agencies under her." She asked to go on record in support for the director and her efforts, and she voiced understanding for the director's position regarding her need for authority. Nancyann Leeder, Nevada Attorney for Injured Workers, Department of Business and Industry, said her division has functioned as a semi- autonomous entity within the department for the past 2 years. She declared section 8 in A.B. 581 will integrate the Nevada Attorney for Injured Workers into the department, which she views as a problem. Senator Raggio voiced agreement with her concern. Ms. Leeder reported she has held extensive discussions with the director who feels she should have overall authority. Ms. Leeder feared there may be some difference in the future in the treatment of the Office of the Nevada Attorney for injured Workers (NAIW) as a semi-autonomous law firm. Senator Raggio inquired what problems may arise. Ms. Leeder responded the provision under section 2 on page 5 which states that the director may be considered as a member of the staff of any division or any entity may pose a problem of confidentiality. She interpreted the provision to allow the director access to NAIW legal files. She explained it must be ascertained that the bill was actually incurred before payment can be made, so each file must be checked. She asserted that may create a problem with NAIW representation of employees within the Department of Business and Industry. Ms. Leeder noted there is also a potential for conflict with integration of the department because NAIW represents employees of other state entities. She said sometimes those entities are represented by the Office of the Attorney General against the NAIW attorneys. Senator Raggio inquired if Ms. Leeder had raised the point before the Assembly Committee on Ways and Means. She replied she had, and stated she wished to establish a clear legislative intent that such problems will not take place even though the wording may allow them to do so. Senator Raggio asked if Ms. Leeder had suggested any language to alleviate her concern. She responded she had proposed an amendment as set forth in Exhibit G, which she read to the committee. Ms. Leeder acknowledged disputes arise periodically between NAIW and its clients. She stated sometimes they rise to the point where NAIW must withdraw because NAIW cannot maintain a viable attorney- client relationship. She offered the opinion dispute resolution would be inappropriate in such instances, and the proper forum is the appeals officer if there is a conflict between the consumer and NAIW. Senator Raggio asked if Ms. Leeder believes the language in the bill to allow the director to authorize that type of resolution could interfere with the process used by NAIW. Ms. Leeder confirmed his query. She added, "Clearly there would be a dispute between the client and NAIW. The issue is how to resolve that dispute, and is there a double resolution." When asked if she feels the present procedure is adequate without the provisions of A.B. 581, Ms. Leeder responded, "As to dispute resolution, yes." Ms. McKinney-James commented the amending language read into the record had been shared with her and she wondered if it will limit the director's authority for the coordination of certain policies. She noted it does not provide any opportunity for administrative oversight with respect to budgets. She declared she has had some concern with the attorneys who are actively pursuing interests of their clients in which there have appeared inconsistencies regarding budgets or fiscal controls. Ms. McKinney-James stated the department has been the subject of nearly a dozen audits in the past 2 years, and the consistent theme appears to be lack of fiscal control and lack of management control as it applies to the Nevada Attorney for Injured Workers. Ms. Leeder pointed out the last audit of NAIW that was unsuccessful occurred several years ago. Senator Raggio inquired, "Have there been significant audit exceptions to the way in which the injured workers office has been conducted?" Ms. McKinney-James replied, "There have been audit exceptions in the past, and through the director's office we have had a significant number of issues related to budgetary concerns." Senator Jacobsen commended Ms. McKinney-James for the completeness of the Nevada Department of Business and Industry Directory (Exhibit D). She attributed its success to assistance from the Nevada Small Business Development Center and the University of Nevada, Reno. In the absence of further testimony on the bill, Senator Raggio closed the hearing on A.B. 581, and asked the committee to consider a bill draft request (BDR) for the appropriation on the class-size issue. BILL DRAFT REQUEST S-2123: Makes appropriation to trust fund for class-size reduction. He commented the BDR meets the decisions made by the joint subcommittee. Jeanne L. Botts, Program Analyst, stated the bill will put into law the budget closed earlier for the class-size reduction program. She gave an explanation of the provisions of the bill, set forth in Exhibit H. She noted the first section sets forth the intent and goal of the legislation. Senator Raggio inquired if the wording stating a ratio of 30 pupils to two teachers should be stricken in order to comply with the existing law which he recalled set a goal of 15 pupils to one teacher. He asked whether the Legislature has ever stated a goal of 30 pupils to two teachers. Ms. Botts responded the preamble in the bill for the past two sessions has stated a goal of 30 pupils to two teachers. Ms. Botts pointed out the second "whereas" in the bill indicates use of available funding to achieve pupil-teacher ratios of 16 to 1 in certain grades and situations to be reached during the biennium. The third "whereas" will allow local school districts to use discretion in the most appropriate manner to effectuate reduction in their respective districts, and the following "whereas" encourages reduction of class sizes when financially possible. She said the next "whereas" states the intention to continue class-size reduction, and the final "whereas" restates the intended goal of the Legislature to continue reduction eventually of classes through grade 12. Ms. Botts stated section 1, subsection 1 appropriates $27,725,925 in the first year of the biennium, and another $15,850,928 from the trust fund financed through estate taxes and interest is authorized for distribution by subsection 2. The remainder of the bill specifies where and how the funding is to be distributed and gives instructions regarding accountability. Senator Raggio interjected the language in section 3, subsection 3 was crafted as a result of requests from a number of school districts to provide sufficient flexibility to address special problems. Senator Jacobsen asked if there are any provisions in the bill regarding facilities. Ms. Botts replied funding for facilities must be provided from the local districts, and the funding in the BDR is limited to salaries and benefits for teachers hired to reduce class sizes. She acknowledged there are no restrictions regarding year-round schools. To review for historical purposes, Senator Raggio stated: Under the Nevada plan for funding schools, it's a shared responsibility of both the local school districts and the state, and when we provided the tax revenue to local governments as part of the process, it was clearly understood that the local school districts were responsible for construction and funding for facilities for schools. He pointed out that has never changed, and that is why the committee was careful to stress the exceptional circumstances regarding appropriations approved earlier for the Schurz and Alamo schools. He added: When we instituted and agreed to the class-size reduction goals and the appropriations that have been put forth, in every case the school districts were asked, can you accommodate by supplying the facilities ... that are necessary if we do appropriate the money for class-size reduction? In those instances they have come forward and each time have indicated, if we provided the money for the teachers and their salaries, they would and could provide the facilities for reducing class size. Senator Raggio acknowledged different districts have departed from a firm commitment to providing actual physical facilities to accommodating that in other ways, mainly through team teaching. He pointed out that was not the original intention, but many have used that method to fulfill their obligations. He said local governments have been provided the authority to impose various taxes as sources of revenue with the understanding they may be used to provide facilities. He recognized some people tend to forget the original conception. Senator Jacobsen concurred that the public has a responsibility and should keep that in mind when bond issues are proposed. Ms. Botts reminded the committee when class-size reduction was first instituted by the Legislature in 1989, and ever since, it has been noted that it is the intent of the Legislature that local school districts should maintain the class-size ratio that existed prior to the start of the program out of the school districts' general funds. She said the program commenced with the 1991 school year. She stated salary increases provided above and beyond what the Legislature has funded must be paid from school districts' local funding. Senator Raggio stated his belief BDR S-2123 accurately reflects the actions of the committee. SENATOR RAWSON MOVED FOR COMMITTEE INTRODUCTION OF BDR S- 2123. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * In order to expedite passage of the bill, Senator Raggio asked the committee to consider committee passage of the bill. SENATOR RAWSON MOVED TO DO PASS BDR S-2123. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Raggio stated the bill will be introduced as a committee bill and recommended for do pass. He opened the hearing on A.B. 181. ASSEMBLY BILL 181: Makes appropriation to University and Community College System of Nevada for support of health service corps. Assemblyman Joseph E. Dini, Jr., Assembly District No. 38, said the Nevada Health Service Corps program supported by A.B. 181 was started in 1990, and since that time approximately 30 doctors have been given assistance to pay off student loans, and scholarships have been granted for doctors and physicians' assistants in under served areas of the state. He provided copies of a list of those who have received assistance and a summary of the funding for the program (Exhibit I). Mr. Dini indicated assistance from the Nevada Health Service Corps (NHSC) has induced doctors and assistants to serve the rural areas and under served communities around Las Vegas. He stated some of the funds are being used for scholarships for physicians' assistants, a growing and important field of medical care. Mr. Dini said the NHSC is administered by the Center for Education and Health Service Outreach at the University of Nevada, Reno, and it provides the ability to obtain matching funds from the federal government. Since the inception of the program, the state has provided $515,000 for the program, $143,868 has been received in federal funds, and communities have donated $114,688 for a total of $774,000 since 1990. Senator O'Donnell called those physicians working in the rural areas "saints." He pointed out many receive no payment for their services. A letter from the administration of the Elko General Hospital in support of A.B. 181 (Exhibit J) was received into evidence. In the absence of further testimony, the hearing on A.B. 181 was closed. SENATOR RHOADS MOVED TO DO PASS A.B. 181. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Rawson made a brief presentation regarding child care facilities for state buildings. He said a proposal was made containing four components, each of which involves the construction and equipping of new facilities, the least expensive of which will cost $312, while the most expensive will cost just over $1 million. Upon research into the viability of remodeling, it was ascertained it requires approximately $20,000 worth of equipment to set up a child-care facility. In her absence, Senator Rawson reported Senator Dina Titus has expressed her desire to have the state lead the way in providing child-care facilities, and she has stated her support for a proposal to appropriate $125,000 during the biennium to be used in state buildings. He noted any funds remaining at the end of the biennium will revert back to the General Fund. He indicated the funding will allow the state to select the most appropriate buildings for installation of such facilities. Senator Raggio opened the hearing on S.B. 204. SENATE BILL 204: Makes appropriation to University and Community College System of Nevada and to department of education for purchase of computers and related communications services to improve access to INTERNET and to increase use of interactive video. Noting the subject of the bill is referred to as the SMART [Statewide Management of Automated Record Transfer] system, Senator Raggio recalled the bill was initially heard on April 10, and continuing discussion has been held between the State Department of Education and the University and Community College System of Nevada (UCCSN). He said the chairmen of both the Assembly Committee on Ways and Means and the Senate Committee on Finance have agreed on a proposal for amending S.B. 204 as indicated in Exhibit K, which he asked the committee to review. Senator Rhoads inquired if the proposal retains the intention for local school districts to pay operational costs of the system and for the state to provide only start-up equipment. Senator Raggio recalled the university system wanted to create a statewide network and to continue their own efforts. He said in the future other state agencies will rely on a statewide network, and the consensus is that there is no need to establish a multitude of networks because one should suffice to serve the various purposes to the degree it is practicable. According to Senator Raggio, the school network has had success with a pilot project. He said the UCCSN has indicated that if the basic appropriation can be provided for the essential elements to establish the network and the hubs for various facilities, they will be able to provide funding for operation of the hub facilities and the system. It would be desirable for the local school districts to tie into the network for distance learning. Senator Raggio pointed out an appropriation for $5 million will be made to the university system to purchase the computer hardware and software, communications services and other services. Another $3 million is to be provided to the State Department of Education to be distributed among the county school districts to connect to the system. He said the bill provides for each school district to submit an application to the superintendent of public instruction as set forth under section 2, subsection 2. He noted there is a provision for a report to be made to the next session of the Legislature prior to February 15, 1997, on the success of the program. Senator Rhoads asked what basis will be used to distribute the funds. Senator Raggio responded the distribution will be made on an application basis, but it is the intent of the Legislature that all school districts and all schools have access to the educational informational network to the extent possible. He acknowledged the specific language in Exhibit K has not been agreed upon, only the concept, and it may require further input. SENATOR COFFIN MOVED TO AMEND S.B. 204 WITH THE PROPOSALS IN EXHIBIT K AND TO DO PASS AS AMENDED. SENATOR O'DONNELL SECONDED THE MOTION. Senator Rawson revealed he is on a leave of absence from the university, although he does not believe the provisions of the bill will directly affect him so he will vote on the matter. THE MOTION CARRIED UNANIMOUSLY. * * * * * Next to be discussed was the language proposed for the appropriations act in BDR S-2151 (Exhibit L. Original is on file in the Research Library.). BILL DRAFT REQUEST S-2151: Makes appropriations for support of civil government of state. Senator Raggio alerted the committee the appropriations act has been introduced in the Assembly, and it is the companion bill to the authorization bill and should reflect the action taken by the joint committees on the budget. Dan Miles, Fiscal Analyst, reviewed the General Fund and Highway Fund appropriations set forth in the act. The first section states the funds enumerated will be appropriated over the next 2 fiscal years, and sections 2 through 27, he said, enumerate General Fund appropriations to the agencies listed as determined by joint action of the Senate Committee on Judiciary and the Assembly Committee on Ways and Means. He indicated the Highway Fund appropriations are listed on page 15 in section 28, while section 29 provides for Wildlife Fund appropriations. Other sections provide how the funds must be appropriated, which accounts may be transferred from one fiscal year to another, and which may be transferred from one account to another. Mr. Miles took note of section 33 which places a limit on funding for welfare spending for certain accounts and is designed to meet concerns regarding potential acts of the United States Congress in those areas. According to Mr. Miles, there are also provisions in section 37 to preserve funds for use in financial emergencies for entities not specifically addressed in the statutes. Senator Raggio questioned the wording and suggested it may need clarification. Senator Coffin wondered if there may be an inconsistency in the provisions of that section. Mr. Miles explained the bill contains appropriations for the legislators' retirement system, provisions regarding which funds carry forward and do not revert to the state, a cash-flow mechanism for the Department of Prisons, instructions to the state controller, approval of fee increases, and appropriations for the contingency fund and the General Fund. Senator Raggio asked how the appropriation made through section 47 to be utilized for unprojected increases in the prison population ties into increases in parole and probation caseloads. Mr. Miles replied the workload of the Division of Parole and Probation rises in direct relation to the rise in prison population. Senator Raggio recalled a discussion that emphasized the original appropriation was to be used for transfer of prisoners out-of- state. Senator O'Donnell surmised some prisoners may have to be released based upon a Supreme Court decision since there is inadequate prison space, which then places unprojected increases on parole and probation caseloads. He expressed the hope the $8 million appropriation will be utilized to house prisoners, whether in-state or out-of-state. Mr. Miles corroborated the senator's conjecture and indicated the Division of Parole and Probation was included in the appropriation because of a correlation between inmate population and the role of the Division of Parole and Probation. Mr. Miles pointed out the funds are appropriated to the contingency fund, so it cannot be spent without action of the IFC. Continuing his explanation of the bill, Mr. Miles noted section 48 applies to the fire suppression account for the Division of Forestry, pending reimbursement from other agencies. The purpose of section 49, he said, is to instruct the Governor when he should implement provisions regarding financial emergencies, a provision added last session to replace any type of blanket authority which could be overturned in court as unconstitutional. Senator Coffin reminded the committee he had voted against the last budget in protest against the same provisions addressed in section 49. He asked if there has been any change in the language regarding the specific amount of the reserve to be set aside. Mr. Miles voiced the understanding the language is the same, but the reserve threshold has been raised from $35 million to $40 million. Senator Coffin voiced his preference that the Legislature, in special session, be the final authority to invoke the emergency provisions, rather than IFC. He asked if the university will fall under the same protection, or if it is addressed in a separate section. Mr. Miles noted the university is addressed in section 37, but, while acknowledging the question is a legal one for which he has no authority, he opined implementation of emergency funding may come under the aegis of section 49 and have the same protection as any other agency or department. According to Mr. Miles, section 50 was added to resolve a problem regarding grants which extend beyond the normal maximum which mandates anything not expended in 2 years must revert to the state General Fund. He said the proposal is to allow a carry-forward to implement recommendations for any 3-year grant periods by the Nevada State Council on the Arts. Mr. Miles noted the Assembly Committee on Ways and Means added section 51 at the request of the state controller to comply with federal regulations. Section 52 also is new, he said, to monitor the mandatory managed care program under Medicaid. Senator Raggio asked the committee to review S.B. 430. SENATE BILL 430: Revises provision governing regulation of emergency medical services in certain counties. He asked staff to explain Amendment No. 1385 to S.B. 430 (Exhibit M) which was recommended for amend and do pass on June 27 by the committee. Mr. Miles noted the amendment adds an appropriation for the health division to perform the function, and one figure in the original bill needs to be changed from $100,000 to $400,000, which is included in the amendment. There being no objection to the wording of the amendment, Senator Raggio recessed the meeting at 10:22 a.m. and requested the committee return immediately following the floor session. Senator Raggio reconvened the meeting at 2:20 p.m. and opened with consideration of Amendment No. 1358 to S.B. 471. SENATE BILL 471: Authorizes transfer of money from state general fund in lieu of certain payments by counties to carry out state plan for assistance to medically indigent. Mr. Miles explained the amendment will add new sections to allow the Department of Human Resources to pay on behalf of three counties, Lyon, Esmeralda and White Pine, which are unable to make intergovernmental transfer payments up to $150,000 for the balance of this fiscal year (FY) from the provider tax account. He noted that can be done on the authority of the Department of Human Resources and will provide that in fiscal year 1996 an amount of $200,000 may be transferred from the same source with the approval of IFC. SENATOR MATHEWS MOVED TO AMEND AND DO PASS S.B. 471 WITH AMENDMENT NO. 1358. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Next to be considered was the proposed classified pay bill, set forth as BDR S-2150. BILL DRAFT REQUEST S-2150: Increases salaries of certain public employees. Senator Raggio observed the Governor has recommended an increase in salaries for classified employees which will include an additional percentage. He turned to Mr. Miles for an explanation of the bill. According to Mr. Miles, section 1 will provide a 5 percent increase for state classified employees from the General Fund, effective July 1, 1995, while subsection 2 will provide an additional 3 percent effective July 1, 1996, and subsection 3 directs the State Board of Examiners to appropriate the funds. Mr. Miles stated section 2 provides a similar 5 percent increase to those agencies with employees funded through the Highway Fund, including the Department of Motor Vehicles and Public Safety (DMV&PS), with another 3 percent provided in subsection 2, and directions to the State Board of Examiners in subsection 3. Senator Raggio interjected the 5 percent proposal will replace the 4 percent first proposed in the Executive Budget. Mr. Miles said section 3 will provide a 5 percent increase for classified employees of the University and Community College System of Nevada (UCCSN) with a similar provision in subsection 2 for the 1996 raise of 3 percent. Section 3, subsection 3 provides an increase of 5 percent for professional positions in the UCCSN, and increases for them of 3 percent in subsection 4. Subsection 5 of section 3 directs the State Board of Examiners on distribution of funds. Mr. Miles indicated section 4 provides that funds appropriated to the State Board of Examiners will be available for both years of the biennium, and can be transferred between those years upon the recommendation of the budget director and approval of the Governor, and it provides any balances left after June 31, 1997, will revert to the General Fund or the Highway Fund. Section 5, according to Mr. Miles, provides an increase of 5 percent for employees of the Legislative Counsel Bureau, followed by a 3 percent increase, and allows the funding to be moved from year to year. It provides that any excess will not revert to the General Fund but will stay in the legislative fund to provide start-up costs of the next legislative session. Mr. Miles stated section 6 allows those in classified service in medical positions or as listed to receive the salaries designated. He explained there is another provision in state law which indicates no state employee may have a salary greater than 95 percent of the Governor's salary, and those listed have the potential to go above that ceiling. Subsection 2, he noted, provides for the salaries to go up by the 3 percent increase in FY 1996 as provided in the bill. Mr. Miles declared section 7 captures the recommendations of the committee regarding the Tahoe Regional Planning Agency (TRPA) to appropriate funds to pay Nevada's share of salary increases in the same percentage granted classified employees. The next section provides an appropriation from the Highway Fund for a two-grade increase for all uniformed positions in DMV&PS, he said, with appropriations from the Highway Fund in subsection 1, and some from the General Fund as set forth in subsection 2. Senator Raggio voiced the understanding the bill will apply to all state classified personnel and professional positions at UCCSN. He pointed out the suggested increase was based upon, and mindful of, the desire of the Legislature to retain the goal of a balanced budget, and the total cost of the proposal amounts to less than $7 million. He acknowledged he has been advised that proposed action may result in a deficit of approximately $7 or $8 million in the second year of the biennium. He recalled the original budget included a shortfall of more than $50 million. Senator Rawson served notice he is on leave from the university, he has not been involved in any deliberations regarding the proposal, and he intends to abstain from voting on the matter. Senator Raggio clarified that the bill will not include those in the university system who are eligible for the 2.5 percent merit pool raise. He noted that is true of teachers who have the ability to negotiate beyond the amounts included in the budget. He stated the bill is an attempt to recognize the fact state employees have had no salary increase for 4 years, and have had no other source, such as a merit pool or the right of negotiation, from which to increase their salaries. Senator Coffin disclosed his wife is an employee of the university system, although he felt he may have no conflict. He asked if the language on page 4 will exclude those eligible for merit pay. Senator Raggio suggested that is included under the term, "professional employees." Mr. Miles interjected the Legislature has not given direction regarding a percentage of increase and it falls within the purview of the Board of Regents who have a schedule they use based upon the funds available. He explained the funds available according to subsection 3 amount to a 4 percent increase. Senator Coffin announced his wife is eligible for merit pay, so she may not be affected by the bill. Senator Raggio opined the disclosure may be sufficient, although he suggested Senator Coffin may wish to obtain a legal opinion. Senator Raggio advised the committee: In addition, the committee recognizes that we have, in the proposed distributive school account bill, agreed in the joint subcommittees and in our joint action to make available something like $19 million that would otherwise have reverted to the General Fund. In addition, it is contemplated that of the $29 million that the Governor has recommended for equipment, supplies, and so forth, that an amount in that will be allowed to be utilized for operating expenditures, so that will be available for negotiation purposes. He reiterated the only group which has not had access to some increase over the proposal made by the Governor has been classified state employees. Senator Mathews asked how longevity fits into the budget. Senator Raggio replied the bill does not apply to longevity. Mr. Miles responded there is statutory provision for longevity pay which commences after a period of years, which he guessed was 8 years, which starts at approximately $150 per year, with annual increases of $25, and the maximum amount an employee can collect amounts to approximately $1,100 per year after 30 years. SENATOR JACOBSEN MOVED FOR INTRODUCTION AND DO PASS OF BDR S-2150. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS RAWSON AND COFFIN ABSTAINED FROM THE VOTE.) * * * * * Senator Raggio requested the committee make a final review of the Schedule of Capital Improvement Projects (Exhibit N. Original is on file in the Research Library.) for 1995-1997 which has been discussed extensively in joint subcommittee meetings. He asked if the list conforms to actions taken by the joint subcommittee with the exception of the legislative building. Mr. Miles confirmed the query. Senator Raggio noted that Senator Rawson did not participate in any of the joint subcommittee hearings with reference to university system improvements. Mr. Miles indicated the first eight pages of Exhibit N lists recommended projects, the ninth page summarizes the projects, and the tenth page summarizes the capital improvements by bills. He asked the committee to turn to the tenth page, where the sources of funding are listed, and recommendations from the Public Works Board, the Governor and the revised proposal for capital improvement projects (CIP) of $223 million are set out. He acknowledged the Governor made further recommendations after the initial budget was proposed, many of which are included. Pointing out the funding sources on the left side of the page, Mr. Miles noted several of the bills have already been processed. Those include bills funding the National Guard Armories, the design of the addition to the prison at Lovelock, and the equipment purchases for two new community college buildings. The expenditures from the General Fund being recommended total $107 million, whereas the Governor's original budget recommended $99 million, he said. Senator Raggio pointed out a major portion of the increase will fund the addition at the Lovelock prison. Mr. Miles interjected the Governor made further requests for approximately $13 million, including the prison addition. According to Mr. Miles, the original request for funding from general obligation bonds amounted to nearly $78 million, whereas the proposal before the committee requests $86 million from bonds. He stated the bond consultants have based their calculations upon $87 million, which they project will fit within the bond capacity in the bond redemption account, and within the existing 15 cent property tax rate. Mr. Miles indicated the final source on the page is federal funds to be used for the armory projects, and the difference from the original recommendation is very slight. Returning to the first page, Mr. Miles pointed out the projects are broken down by functional area or agency of concern, the first being those under the auspices of the Buildings and Grounds Division, primarily maintenance projects. He explained in the figures depicted on the left side of the sheet, "M" indicates a maintenance project, "C" indicates a new construction project, "G" indicates a project recommended by the Governor, "L" indicates a project recommended by the Legislature, and "S" indicates a state- wide project. Mr. Miles drew attention to the third item on the first page which will include the purchase of the Carson City Courthouse and Firehouse across the street from the State Capitol Building. Senator Coffin endorsed the courthouse purchase. The next projects depicted relate to projects for the State Department of Conservation and Natural Resources, according to Mr. Miles, and the following projects are for the Department of Employment, Training and Rehabilitation, including advance planning for a headquarters building in the Capitol Complex. He pointed out the next grouping applies to projects for the Department of Human Resources, including a new juvenile treatment facility in Clark County at a cost of $8.8 million. Turning to page 3, Mr. Miles stated there are a few small maintenance projects for the Department of Information Services as well as advanced planning for a proposed office building. Included on the page are figures for an addition to the legislative building, military expenditures, and funding for the Department of Museums, Library and Arts projects. Mr. Miles said the projects listed on page 4 include appropriations from the Highway Fund. Senator Raggio recalled a requirement is included for IFC approval for the site to be acquired for the Henderson Full Service Facility. Mr. Miles stated the next grouping includes funding for prisons, including the funding for the facility at Lovelock and design for a new men's prison to be constructed in southern Nevada. He noted project 95-G4 was the proposed expansion of the boot camp at Desert Springs which was not recommended by the joint subcommittee and was not included in the budget for the prisons. Also deleted, he said, was the proposal to add prison beds through the non-forestry conservation camp proposed by the Governor, but which is now deemed unnecessary due to the conversion of the Nevada Women's Prison in Carson City to a men's facility. State Public Works Board projects are listed on page 6, according to Mr. Miles, along with statewide projects, such as funding for reroofing 42 buildings throughout the state and for American Disabilities Act (ADA) compliance projects. The next pages depict UCCSN projects, he said, including a number of new construction projects. Senator Raggio interjected part of the funding will come from private sources to help equip 17 classrooms at the University of Nevada, Reno (UNR). Mr. Miles noted part of the funding for UCCSN deferred maintenance comes from the special higher education capital construction (SHECC) account which is derived from 20 percent of the annual $250 slot machine tax. He said the fund was originally set up to redeem bonds for special events projects, but slot machines now generate a little more than required for those projects, so debt for other buildings has been added to the account over the years. He explained the university requested the surplus in the fund be allocated to the deferred maintenance projects which have not been undertaken due to budget cutbacks over the past few years. Senator Raggio noted the joint subcommittee did not take action on the proposal for the legislative building. He requested that committee members indicate their preferences regarding the project and whether there is sufficient committee support to include it with the rest of the CIP proposals. Senator Jacobsen voiced his support for the legislative building addition. He declared the meeting rooms are inadequate to accommodate the public, and spending the funds now would be more prudent than waiting for an emergency expenditure as the Legislature continues to grow. Senator Raggio pointed out the final plans have not been drawn, but he has received commitment that any final plans will be subject to approval of a joint subcommittee comprised of members of both the Senate and the Assembly. He acknowledged the proposed improvements are primarily designed to address needs of the Assembly, but he added the front desk in the Senate chamber also needs to be expanded and that should be included in any bill to enlarge the Legislature. Senator Rawson declared he was opposed to the proposition at the beginning of the session, but since he has attempted to meet with members of the Assembly he has found their offices are too small to accommodate even two or three people. He pointed out the project has been cut in half from the original proposal. He agreed the Senate offices are adequate, but the Assembly offices are not conducive to accomplishment. Senator Rawson noted the teleconference room is being used so often that conflicts in scheduling arise frequently, indicating a need for another such room. On the basis of the problems cited, he stated he is ready to support the proposal. Senator Rhoads declared he cannot support the proposed expansion. He pointed out legislators are only in attendance for 6 months out of every 2 years, and, he asserted, the hearing rooms may not be too crowded more than 20 days out of that period. He recalled his first term as an Assemblyman when he did not feel the space was inadequate. He suggested the building might be redesigned. He opined $16 million could be better used for other projects. Senator O'Donnell stated he is content with his office, the meeting room and the Senate Chambers, but he averred it is unfair for Assemblymen to be forced to continue in such small facilities. He concurred the expansion should go forth. Senator Mathews acknowledged the price of construction will continue to go higher in the future. However, she stated, she hesitates to cast her vote for the addition to the building. She noted she does not spend enough time in her office to warrant the expenditure to expand offices, although she acknowledged the meeting rooms may need to be enlarged. Senator Coffin declared he will not vote for expansion, although he admitted the need for larger offices for members of the Assembly, and for larger meeting rooms. He stated his reason for voting against the bill is because his efforts to have the Legislature meet in southern Nevada have been thwarted. He declared he supports a concerted effort to link the Legislature with southern Nevada electronically, and will support expansion of the present building when significant abilities for such linkage are part of the proposal. Senator Raggio indicated no vote will be taken on the CIPs today, but he asked the committee to continue to reflect on the matter. He requested the committee to consider Amendment No. 1403 to S.B. 274 (Exhibit O) drafted since the vote earlier in the day. The committee approved the wording of the amendment. Senator Raggio called attention to Amendment No. 1384 to A.B. 255 (Exhibit P) which was approved along with the bill by vote on June 21. ASSEMBLY BILL 255: Requires establishment of standardized system of information concerning juvenile justice and makes appropriation to division of child and family services of department of human resources for state automated child welfare information system. He recalled county probation officers expressed concern regarding the mandate to be put upon counties for the reporting requirement. The amendment is one they proposed, approved by the committee, which he reviewed line by line. Senator O'Donnell expressed concern regarding the ability of the counties to seek grants to provide the programming necessary to conform to the standards set forth in the measure. Senator Raggio responded the amendment returns the responsibility for retrieval and analysis of information to the Department of Human Resources. Senator O'Donnell iterated the amendment will require the department to ensure that the counties conform to the standards, but the department will not be able to require the counties to do so without providing the standardized system to be utilized. There being no objection, Senator Raggio announced the amendment will be submitted as written. He turned to A.B. 566, heard in committee on June 21. ASSEMBLY BILL 566: Extends period during which committee on benefits shall review history of claims paid from state's group insurance for certain public officers and employees. SENATOR O'DONNELL MOVED TO DO PASS A.B. 566. SENATOR JACOBSEN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR COFFIN VOTED NO.) * * * * * At 3:30 p.m. Senator Raggio called a recess until the call of the chair. He asked the conference committee to be available. RESPECTFULLY SUBMITTED: Judy Jacobs, Committee Secretary APPROVED BY: Senator William J. Raggio, Chairman DATE: Senate Committee on Finance June 28, 1995 Page