MINUTES OF THE SENATE COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session March 23, 1995 The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 2:00 p.m., on Thursday, March 23, 1995, in Room 227 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Ann O'Connell, Chairman Senator Randolph J. Townsend, Vice Chairman Senator Jon C. Porter Senator William J. Raggio Senator William R. O'Donnell Senator Dina Titus Senator Raymond C. Shaffer GUEST LEGISLATORS PRESENT: Assemblywoman Marcia de Braga Senator Michael McGinness STAFF MEMBERS PRESENT: Dana Bennett, Senior Research Analyst Teri J. Spraggins, Committee Secretary OTHERS PRESENT: Kurt Weinrich, P.E., Director, Regional Transportation Commission, Clark County Robert Hadfield, Executive Director, Nevada Association of Counties Kurt Fritsch, Assistant City Manager, City of Henderson Marvin Leavitt, Legislative Coordinator, City of Las Vegas Carole Vilardo, Lobbyist, Nevada Taxpayers Association David Pursell, Chief, Division of Assessment Standards, Department of Taxation Ande Engleman, Executive Director, Nevada State Press Association Tom Grady, Lobbyist, Nevada League of Cities BILL DRAFT REQUEST 27-1869: Makes various changes concerning purchasing by local governments. Kurt Weinrich, P.E., Director, Regional Transportation Commission, Clark County testified this bill draft request (BDR) proposes changes in the local government purchasing act to mirror several federal regulations that are part of the federal procurement integrity act. He explained since the Regional Transportation Commission has been actively using federal funds in the past to purchase various things (like buses), they have had the opportunity to compare Nevada's purchasing laws with federal purchasing laws. He stated there have been instances where the state law has not shielded the decision makers from unwanted or unnecessary pressure or soliticitation from interested parties during the bid evaluation process. He commented federal laws are more stringent. He requested the committee introduce this bill. Senator O'Connell asked if language in the bill will codify federal regulations? Mr. Weinrich responded the codification will prohibit improper contacts between an interested party and will provide penalties if an interested party initiates a contact. He added there is a definition of proprietary information which is not completely included in Nevada law. SENATOR RAGGIO MOVED TO INTRODUCE THE BILL DRAFT REQUEST. SENATOR SHAFFER SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS TITUS AND TOWNSEND WERE ABSENT FOR THE VOTE.) ***** Senator O'Connell opened the hearing on Senate Bill (S.B.) 152. SENATE BILL 152: Requires certain state agencies to allow classified employees to select working schedules on basis of seniority. (BDR 23-324) Senator O'Connell drew the committee's attention to the letter sent to Governor Miller and Robert Gagnier, Executive Director, State of Nevada Employees Association, on behalf of the committee regarding (S.B.) 152 (Exhibit C). There was no discussion regarding the letter. SENATE BILL 84: Increases compensation of various public officers. (BDR 17-1078) Senator O'Connell drew the committee's attention to the letter sent by Mr. Virgil Getto to the committee regarding S.B. 84 (Exhibit D). There was no discussion regarding the letter. SENATE BILL 56: Revises provisions relating to collective bargaining between school districts and certain employee organizations. (BDR 23-651) SENATE BILL 82: Provides that unlicensed employees of school districts have sufficient community of interest to negotiate as separate bargaining unit. (BDR 23-650) Senator O'Connell informed the audience and the committee that S.B. 56 and S.B. 82 will not be discussed during this work session because the committee has not received a report from the subcommittee yet. Senator O'Connell asked the committee to open their work session document (Exhibit E). She stated during work sessions, the standard operating procedure will be to begin with the lowest numbered bill and work to the highest number bill. She explained if they do not discuss a bill during one work session, they will include it in the next work session. She added, for the committee's information, this will be the policy for the committee so they can adjust their work accordingly. Senator O'Connell opened the discussion on S.B. 262. SENATE BILL 262: Authorizes public agencies to delegate authority to ratify interlocal contracts. (BDR 22-745) Senator Raggio asked for an overview of the bill, since he was absent when they heard it. Senator O'Connell replied Bob Dickens and James Richardson from the University of Nevada, Reno, spoke in favor of the bill and Ande Engleman, Lobbyist, Nevada Press Association, spoke against the bill. Senator Raggio commented he does not understand the new language. Dana Bennett, Senior Research Analyst, recapped some testimony presented regarding S.B. 262. She explained it appears that an employee can ratify a contract without going through a governing board. Senator O'Connell stated it is a concern that an employee can ratify a contract which should be done by a person in a higher position of authority. She added it would take interlocal contracts out of the public forum. Senator Raggio asked if there was an incident that occurred which requires legislation? Senator O'Connell responded, "No." Senator O'Donnell remarked he understands the rationale behind the bill is the excessive amount of small, interlocal contracts between state agencies and the University and Community College System of Nevada. He explained if an officer or employee could do the negotiations and signatures, then it would not be a burden upon the Board of Regents. He admitted the bill was open-ended in how much money the employee could authorize. He stated an employee could negotiate and sign the contract for any amount if they are authorized to do so. He explained it is contract agreements between municipalities. Senator Townsend asked if this legislation means two government entities would appoint someone and that they would negotiate and ratify contracts with one another. Senator O'Donnell replied, "Yes." Senator Townsend asked if this means the public might never see the contract. Senator O'Donnell replied, "Yes." Senator Raggio expressed to the committee that "ratified" in the language of the law means "more than just signing a contract. It means approving it." He stated this would allow an officer to do this if the governing body authorizes the officer to do it. Senator O'Connell asked Robert Hadfield, Executive Director, Nevada Association of Counties, to explain the bill. Mr. Hadfield responded he thinks it means the governing body does not have to be involved in these agreements. He explained he understands it could be delegated to a staff person. He explained there are governing bodies which prefer to not do that. He commented his interpretation of the law is that it could remove the governing body from approving or seeing an agreement by delegating it to someone else. Senator Raggio responded the language states the governing body would authorize the person to conduct this business. Mr. Hadfield agreed, but explained many entities review and approve the document, and then authorize one person to sign the document. Senator Raggio asked if the Clark County Board ratifies all of its interlocal contracts? Kurt Fritsch, Assistant City Manager, City of Henderson, explained it is not Henderson's bill, but he told the committee the city council of Henderson does ratify all interlocal agreements. He stated staff negotiates the contracts, and brings them to the council. He remarked they could see "real difficulties in this." He stated it is not their position to support or oppose the bill, but there is "mischief that could go on with this particular bill." The committee discussed the language of the bill. Senator Townsend stated he has not read any headlines regarding this. He emphasized it "is not a burning public issue." Senator O'Connell said the only reason proffered for the bill is that it would help the system, according to the people requesting it, to work more efficiently for them. She explained if the bill is passed, local contracts would not have to go through the public steps through which they currently must go. Senator Shaffer explained the part that bothers him is "not limited to." He said this has no end. SENATOR TOWNSEND MOVED TO INDEFINITELY POSTPONE S.B. 262. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RAGGIO ABSTAINED FROM VOTING. FOR THE RECORD, HE STATED HE WAS ABSENT AND DID NOT HEAR ARGUMENTS FOR OR AGAINST THE BILL, AND THEREFORE WOULD ABSTAIN FROM THE VOTE.) Senator O'Connell closed the hearing on S.B. 262 and opened the hearing on Assembly Bill (A.B.) 53. ASSEMBLY BILL 53: Authorizes municipalities to issue refunding bonds for improvement districts under certain circumstances. (BDR 21-407) Marvin Leavitt, Legislative Coordinator, City of Las Vegas, gave the committee an overview of the bill. SENATOR O'DONNELL MOVED TO DO PASS ASSEMBLY BILL (A.B.) 53. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Senator O'Connell closed the hearing on A.B. 53 and opened the hearing on Assembly Bill (A.B.) 145. ASSEMBLY BILL 145: Makes various changes relating to county and city parks. (BDR 20-364) Senator Raggio expressed his concerns regarding the bill to the committee. He asked the committee if they had adequately discussed the section on cultural facilities? Senator O'Connell responded she requested information regarding the uses of park revenue. She stated Irene Porter, Southern Nevada Homebuilders Association, provided an explanation regarding the uses of park revenue. She told the committee the money is widely used and she cannot see the need for expanding the definition. She announced she is opposed to it. Senator O'Donnell questioned the validity of the bill. Senator Titus stated she has no problem adding the terminology, "cultural activity." However, she emphasized she could not support increasing the board from 9 members to 11 members. Senator O'Connell commented the committee was never given a reason for increasing the membership from 9 to 11. She told the committee page 2, subsection 5 of the bill is the only part of the bill which has merit. She explained this section as increasing the park's ability to refund paid deposits from $100 to $1000. She suggested to the committee there can be large deposits which need to be refunded, and she supports this portion of the bill. Carole Vilardo, Lobbyist, Nevada Taxpayers Association, explained funding sources for parks to the committee. Mr. Leavitt told the committee this bill is an enabling statute for the types of projects which they can build. He explained the funding mechanisms are found in other statutes. He stated general obligation bonds, tax levies, or use fees could fund projects of this type. Senator O'Connell said some use fees are substantial. Senator Townsend asked if the portion regarding the fees is acceptable. Senator O'Connell responded she feels the parks need that portion of the bill, section 4, lines 30 through 32 of the bill. SENATOR TOWNSEND MOVED TO AMEND BY REMOVING SECTIONS 1, 2, AND 3 AND DO PASS A.B. 145. SENATOR O'DONNELL SECONDED THE MOTION. Senator Porter asked the committee to explain why there is a problem with increasing the number of board members. Senator O'Donnell stated that finding nine people to serve on the park board is difficult at times. He said now there are two additional people who want to be on the park board, but there is no current position for them. He questioned if the committee raises the number of board members to 11, would there be future compounded problems trying to fill 11 positions instead of nine? THE MOTION CARRIED. (SENATORS RAGGIO AND TITUS VOTED NO.) ***** Senator O'Connell closed the hearing on A.B. 145 and opened the hearing on two bill draft requests (BDRs) to rectify the budget situation in White Pine County. BILL DRAFT REQUEST S-1875: Provides for preliminary review and audit of White Pine County School District. David Pursell, Chief, Division of Assessment Standards, Department of Taxation, stated the Nevada Tax Commission asked the White Pine County School District if the meeting on March 22, 1994, could be used as the hearing for the financial difficulty position in which the Department of Taxation has placed the school district. He testified the White Pine County School District has scheduled a meeting to discuss this issue. Mr. Pursell explained the Nevada Tax Commission directed him to contact the chairman of the school board to get a list of what discretionary expenditures there may be in this fiscal year. He further outlined items which the Nevada Tax Commission had considered for White Pine County. Senator O'Connell asked if the school district had determined to return any of the new items. Mr. Pursell replied they stopped the grand piano order to eliminate that bill. She asked if they had discussed the band uniforms or buses? Mr. Pursell explained there will be a school board meeting on Monday, March 27th. He told the committee he has not seen the agenda, so he cannot verify what is on it. He commented to the committee that the chairman of the Nevada Tax Commission has a list of items to be agendized. Mr. Leavitt testified to the committee the first bill draft request deals with the cash flow problem in White Pine County. He explained the basic idea is to provide a final cash flow number designed to identify fiscal needs through the end of the year to pay salaries and other required bills to enable the school to continue to operate. He stated the school obviously has severe financial problems and cannot operate through the end of the fiscal year without help. Senator McGinness asserted he does not understand why a bill draft is necessary to perform a fact-finding task. Senator O'Connell explained it is a special act to identify the areas the school district must examine and report on to the Legislature by April 10, 1995, regarding steps taken to affect the cash-flow situation. Senator McGinness stated that identifying this is appropriate so everyone is aware of exactly is happening. Mrs. de Braga asked if the school district is looking at goods and services which they could cancel. She asked if they would disband extracurricular activities in an effort at cost-cutting? Senator O'Connell stated they have canceled none of these to date and the school district has not taken the initiative to do anything about the problem. She stressed to the committee that White Pine County has known about the problem for some time. She asserted the committee wants White Pine County to know that someone is aware of the problem and has control of the situation and is watching. She explained it as a motivational factor. Mr. Leavitt discussed the need for the White Pine County School District to obtain a loan to get through this problem, the guarantee which would have to be given to a financial institution, and his concern that the White Pine County School District has misspent loan payment revenue on operating costs. Senator O'Connell expounded there is nothing in the law now that requires the Legislature to address situations such as this. She explained they must put a mechanism in the law to address future situations. She told the committee that it is not a "receivership" but something analogous to it. Mr. Leavitt responded this bill would ensure that payment is made when payment is due. He told the committee this surfaced 2 years ago and they were assured it would be handled. He stressed it is now 2 years later and the situation is worse, not solved. He explained there is no money to pay the debts or operating costs. He said they need this mechanism to enable the White Pine County School District to borrow the money. Senator O'Connell outlined her concerns to the committee: I do not feel they were absolutely truthful with us. Especially from what has happened. I do not want to put anyone on the record except myself as saying that. I know for a fact the county is certainly having problems and that is not what was told to us during the hearing yesterday. We know the hospital is having major problems and he skirted the issue and was not as up front [as he could have been]. I think they need some direction from the state to let them know this is a very serious problem. Unfortunately, they are going to be used as the example to the other counties that they have to pay attention to what the law dictates. It is as simple as that, that you do have a responsibility to the taxpayers. Senator O'Donnell stated it is clear to him there is no one person in charge in White Pine County on the county level to represent the taxpayers. He suggested White Pine County should hire a county manager or somebody to take charge of administering the funds and watching the budgets. Senator O'Connell explained there is a Local Government Advisory Committee (LGAC) and asked Mr. Leavitt to explain their function. Mr. Leavitt responded with an explanation of the committee and its tasks. He said the committee serves as a liaison between the local governments and the Nevada Tax Commission and the Department of Taxation. He stated any issue that relates to financing local governments will come before that committee. He explained they make recommendations to the Department of Taxation and the Nevada Nevada Tax Commission on the drafting of provisions of Nevada's administrative code. He concluded his explanation by telling the committee that the Local Government Advisory Committee is a statutory committee with responsibilities relating to incorporation of cities, accumulation of debt information, and a whole range of finances within local governments. He noted the members are appointed to the committee and are finance oriented. Mr. Leavitt told the committee the LGAC had asked White Pine County School District to appear before the LGAC and requested information from them. He reported White Pine County School District had promised to provide that information in January and the LGAC still does not have all the information they requested. He related LGAC could provide technical assistance to the Legislature and to White Pine County in the resolution of this situation. Senator O'Connell asked if a task force was created, could they draw on expertise from the LGAC? Mr. Leavitt responded, "That is correct." Senator O'Connell asked the committee for input on the first bill draft request. Senator Porter asked what is the responsibility of the Department of Taxation in this situation? Mr. Pursell responded he understands the statute which the Department of Taxation has invoked and that the White Pine County School District has stipulated to start the process of the Department of Taxation monitoring everything associated with the financial structure of the school district. He stated it does not take into consideration the curriculum and that part of it. He explained he interprets the statute to say approval and denial of everything associated with the budget of the school district. He commented the LGAC would provide more expertise in the group that will be deciding whether the requests from the school district are appropriate or not. Senator Porter stated he feels the Department of Taxation should be providing direction, not the Senate Committee on Government Affairs. He asserted they should have handled it months ago. Ms. Vilardo told the committee she feels the statute is incomplete. She explained the Nevada Taxpayers Association has been monitoring White Pine County since before last session. She stated the county commissioners have no place in this issue nor do they have the opportunity to oversee the entities. She asserted there have been multiple problems in the county. She said the biggest problems have come out of the school district and have been compounded because of a "flagrant violation of law. The Nevada Tax Commission, literally, went as far as it could. I do not think there is any other involvement with the Nevada Tax Commission. It is on the tax department now." Senator Porter commented there is a system of checks and balances which was missed in the equation. He said White Pine County came before this committee 2 years ago and was given direction. He stated they did not follow this direction. He asked "Who should have followed up from that point to today; 2 years have gone by and it is now $4 million." Ms. Vilardo responded, "I am mad enough that I would like a grand jury on it. I mean that is how serious I think it is. From my perspective and what we have watched and the laws I am familiar with, the debt management bill that has been addressed here was passed last session. Let me go back. The taxation committee had to arrange for a buy-down of rates. When government affairs addressed the debt management bill and the taxation committee addressed the buy-down that the school district would be required to do for the first year of last biennium; and this year that we are in right now of the biennium, the school district personnel were told that they should not be doing x, x, and x (sic)." Senator Porter said, "And they did it?" Ms. Vilardo further explained: The first thing that happened, we checked on the debt management bill because (as with a number of the local governments who are looking at this as a good management tool) we looked at it as a protection for the taxpayer. First thing we find is White Pine County School District has not filed a debt management plan or a capitol [improvement] plan. We then get budget documents and there is nothing in the law. We provided the mechanism, but we did not do anything for sanctions if you [White Pine County] do not do it. We then turned around, and they should not have been able to sell their debt. The next thing we see on one of the sheets that we get, that is listing debt,...we know they have financial problems...Magna has not come on-line...they are planning on selling $1.2 million worth of debt in January. There are no sanctions in law to stop them from them from doing it if someone will issue the debt. Senator Porter stressed, "Carole [Vilardo], what troubles me is that this was pointed out 2 years ago and there are a number of problems in place. We have the initial problem for the kids, the taxpayers, and the community. But we also are here, now, at the state level, initiating action. I am wondering where we dropped the ball." Ms. Vilardo noted, "The Nevada Tax Commission had no ability to stop the sale of that debt. [There is] nothing in statute to stop the sale of that debt. It was approved by the voters in November, 1990 for $14 million. They sold part of it. They still have some $6 million of it that they can sell because the law allows a 6-year window and has no mechanism to go back in and see if the situation that existed when the debt was approved still exists, so you can continue selling the debt." Senator Porter stated, "But after our chairman and her committee made it very clear not do certain things, certain things happened. From that point, then what happened?" Mr. Leavitt responded, "First of all we got word there was a problem in the way the assessment property was being done." Senator Porter asked, "When was that?" Mr. Leavitt answered, "That was last summer some time." Mr. Pursell agreed. Mr. Leavitt continued, "Last summer sometime we got word there was an assessment problem. We had received rumors that the school district was having problems. When contact was made with them directly, they said there was no financial problem, other than the one that had been identified." Senator Porter queried, "So they were asked, and they said 'Everything's great'." Mr. Leavitt stated: With the payment of the debt. They indicated everything was all right. So Dave [Pursell] spent a considerable amount of time (he and his people) to try to resolve exactly what the problem was with the assessor and the assessment of property. One of the excuses that has been used all the time was the reason the debt could not be paid was that the assessments were so far off that this was causing problems on payment of the debt. So that was probably the first problem that had to be resolved. Dave [Pursell] and his staff spent considerable amount of time and eventually reached a partial solution to that problem. Then we received notification that the department was not receiving the required reports coming from the school district. The Local Government Advisory Committee asked that Dave contact them to get the reports and to try to find out some other information because we had been hearing rumors. Senator Porter asked, "Was this last fall?" Mr. Leavitt responded, "That was last fall, like in September. Dave [Pursell] made numerous requests of this group and essentially received nothing until he sent someone into the field to try to get the information back. In a way they [the county] were their own worst enemy because they would not provide the information." Senator Porter stated, "It appears to me that they were intentionally withholding information from your group, but what other steps could we, should we, are we going to take to prevent this from happening again? It seems to me that something fell through the cracks. Does not the Department of Taxation have some authority here at all?" Mr. Leavitt responded, "The problem here is we are dealing with this financial difficulty statute and it is possible for a local government to, by the way they act, to obscure a little bit. Dave [Pursell] mentioned yesterday there are reports due which have not been filed." He expressed the problem has accumulated over time. He explained they were dealing with rumors until the Department of Taxation sent someone into the field. Senator Porter asked when someone was sent into the field. Mr. Pursell responded they did not send anyone to the central office at the school district until February. He said he decided to do that because that is when the school board went public and said they had a problem. Senator Porter reiterated the committee knew there was a problem 2 years ago. Mr. Pursell stated the problem is that the Department of Taxation has the responsibility of reviewing the budgets for all local entities. He explained a budget can be reviewed, but it does not mean that is actually what is going to happen. If the entities do not update the Department of Taxation with audits, quarterly reports, etc. there is no way to know until after it happens. He said there is nothing coming to the Department of Taxation in time to react to it. He stated he could not believe the chairman of the school district stated they knew in December that they were having problems and did not say a word to anyone. Senator Porter asserted this appears to be intentional acts of a state subdivision to withhold information. He said, "It is criminal." Mr. Pursell stated when they looked at the files they found an indebtedness report which was due in July. Staff at the central office told him they did not know how to fill it out, so it sat in the file. He reported the Department of Taxation gets calls daily asking for assistance to complete reports. He explained the school district does not consider themselves part of the process and there is nothing the Department of Taxation can do to force a more timely filing of these reports. He noted maybe the Department of Taxation should have been in the field earlier to take a look at the situation. He explained the Department of Taxation has two budget analysts to handle 250 budgets. Mr. Leavitt told the committee the White Pine County School District is getting ready to not pay salaries when the April payroll arrives. He insisted the committee needs to do something to insure that the teachers and students are not the ones who suffer because of the actions of the administrators and board members. Senator O'Connell told the committee, "This is another reason we should seriously consider that open meeting and negotiations. I wonder if we had that at that particular time if we would have any indication as to the problem that is existing today, if anything would have shown up." Senator O'Donnell remarked, "I'll bet it would have." Ande Engleman, Executive Director, Nevada State Press Association, told the committee that the open meeting and negotiations might have given a clue to those who are knowledgeable. She testified she and the Ely Daily Times newspaper started being flooded with phone calls in December about closed meetings. She stated the school district had a concerted effort to meet with legal people and accountants three at a time, in order to circumvent the open meeting law. She declared this was technically legal, but the press was aware something was going on and the school district wanted to hide it from the public. She said no one could have known what was going on with the concerted effort to hide it. She said they begged the attorney general to go in and see what was going on. Senator Porter asked Ms. Engleman to document that they had requested help from the attorney general. Ms. Engleman responded she would research her files and provide the committee with the information. She stated this is common practice for them. Senator Porter stated he wanted to know if a formal request was made. Ms. Engleman replied she would check this for the committee. Senator O'Connell said there are two bills which need to be enforced now. She explained there will be a third bill to take care of the long-range plans. She stated the two bill draft requests before the committee will address the problem. Senator O'Donnell asked what the fiscal note is on the bill draft request. Senator O'Connell replied there is no fiscal note. Senator O'Donnell asked Mr. Pursell if his budget has enough money in it to conduct an audit. Senator O'Connell replied there is a fiscal note on the second bill draft request to cover the task force committee's lodging while there. She noted there is no fiscal note on the first bill draft request. Mr. Leavitt stated when there is such a tight time frame, with the Department of Taxation trying to do everything in the next 10 days, that a legislative auditor is added in the bill draft request as a means to make additional staff available. He asserted the Department of Taxation is in charge and if they do not need the legislative auditor, they will not request it. He reminded the committee there is very little expertise in White Pine County to conduct this kind of audit. Senator O'Donnell asked if there is money available in Department of Taxation to conduct this audit. Mr. Pursell responded, "In our current budget? No." Senator O'Donnell stated the committee is asking the Department of Taxation to prepare an analysis of all cash receipts and dispersement of the White Pine County School District during the current fiscal year. He asked if this would take some time. Senator O'Connell stated Mr. Pursell has been working on this for a while now. Mr. Pursell explained he has been working on it for a couple months. He stated they will need the full cooperation of the White Pine County School District accountant. He commented they will have to take a look at the school district from top to bottom. Senator O'Donnell asked how much this will cost. Mr. Pursell responded he thought it would take a budget analyst at least a week's time in Ely to go through the records to ensure they are getting all of the expenditures they need to examine for each month. Tom Grady, Lobbyist, Nevada League of Cities, agreed there should be an appropriation of some money to assist the Department of Taxation to get the job done in a hurry. He reminded the committee they only have 10 days. Senator O'Connell asked about the fiscal note on bill draft request number two. She asked if any of that money could offset the Department of Taxation's expenses? Ms. Vilardo added the first bill draft needs an appropriation. She stated the 250 budgets which Department of Taxation has to review need to be completed by April 15th by the department (two people). She suggested that additional help is needed. She recommended that a bill should take into account the expenses that have been incurred and to charge White Pine County with those expenses. Senator O'Donnell reminded the committee the bill draft request states no fiscal note and there is a fiscal note. He suggested an amendment to the bill draft request and asked the witnesses how much money is needed. He told the committee this bill draft request is an unfunded mandate. Senator Porter asked if it would be appropriate to request appropriation and have an auditing firm perform the task. Mr. Leavitt maintained the beginning work has been completed by Mr. Pursell and told the committee he feels an auditing firm would be repeating much of the work already completed by Mr. Pursell. He recommended the committee not duplicate efforts. Senator Porter asked Mr. Pursell if he would be able to look at the current auditing firm's information to compare their projections to his projections. Mr. Pursell stated he had been working with Ken Baldwin, CPA, McMullen McPhee and Company. He explained the Department of Taxation did not consult Mr. Baldwin when they first examined the books. He said when the findings of the Department of Taxation closely aligned with those of McMullen McPhee and Company, then they all started working together and sharing information. Senator Porter asked if Mr. Baldwin had any recommendations. Mr. Pursell responded Mr. Baldwin told the school board that they have a serious problem which needs correction. SENATOR SHAFFER MOVED TO INTRODUCE BDR S-1875. SENATOR PORTER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RAGGIO WAS ABSENT FOR THE VOTE.) ***** BILL DRAFT REQUEST S-1874: Directs immediate analysis of cash flow of White Pine County School District. Mr. Leavitt explained the second bill draft request. He told the committee the first bill draft request is a fact-find to discover where the school district stands financially. He stated the second bill draft request would look at all debt, payments, tax rates, etc. He asserted this bill draft request would have someone looking at all of the budgets of all of the entities in White Pine County. Senator McGinness explained to the committee that the board of each entity in White Pine County is autonomous. He reminded the committee that compared to the financial straits of the school district, the county and hospital feel that their financial situation is okay. He told the committee that the county and hospital have been "living close to their checkbook as well. He continued: They have cut services in every direction, but they are still in the black. They have cut positions and services. I think when you look at the big picture, they feel like they're okay. They're not really okay. But with the event of Magna coming on line, they're going to be okay. As far as a grand jury, I would like to see that come from the local level. If the people in White Pine County feel there is need for a grand jury, there is ample opportunity for them to initiate that. Mrs. de Braga explained to the committee the second bill draft request is not an effort to lay blame, but to know what planning, lack of planning, knowledge, or lack of knowledge contributed to this situation. She stated if there is no investigation, the people still need to be aware of their responsibility. She said: It is the "big daddy" mind-set. There is always a mine coming on that's going to take care of all of our problems. The mines run the hospital. The mines control everything. They run the water districts. They are dependent. Their whole focus and their whole attitude is that we can spend. The reason they got into this mess is because they thought the mine would be there 18 months earlier than it was. So there is always that aspect. She asked Mr. Leavitt who he spoke with at the White Pine County School District who said they were okay. She asked who he meant by "they"? Mr. Leavitt stated in January when the Local Government Advisory Committee had their meeting, the school district had representatives there. He told the committee the White Pine County School District Superintendent, Jan Cahill, stated they had solved their problems. He said as the meeting continued discrepancies and rumors began to surface. He explained to the committee that Mr. Cahill was providing them with circular statements. He added Mr. Cahill emphasized White Pine County School District did not have a financial problem. Senator O'Donnell stated these two bill draft requests are putting the Department of Taxation into a fact-finding situation. He reminded the committee the second bill draft request establishes a 5-year budget for White Pine County School District. He asked what happens after the 5-year period? He asserted there should be a county manager in White Pine County to manage all of the budgets of all of the entities. He said these entities are not autonomous when the tax cap affects all of them. Ms. Vilardo asserted 5 years should provide time to establish laws to prevent situations like this from occurring again. She said the way statute is written right now, the entities are autonomous. She emphasized the school district is the most autonomous of all. She stated there are amendments proposed to the debt management statutes to close the loopholes. She related to the committee that the Nevada Association of School Boards and the Superintendent of Public Instruction have no mechanism to force the White Pine County School District to comply with law. She declared there are provisions in the statute that "have no teeth, no enforcement mechanisms to make sure that these things are identified immediately. That's the problem." She asserted there should be a grand jury investigation. A discussion of past legislation ensued. Ms. Vilardo told the committee 8 to 10 years ago the Nevada State Education Association filed suit against White Pine County School District because of misappropriation of revenue for purchases. She stated she would share all of the information with the committee next week. She emphasized her concern for the taxpayers of White Pine County. Senator O'Donnell responded these bill draft requests will determine how much money the White Pine County School District has, how much money they owe, and establish a budget. He asserted "We are going to be asked to give them some money." Senator O'Connell stated, "No. Oh, no. If you will recall what Marvin [Leavitt] addressed... there is a third bill talking about a loan that does not come from the state." Senator O'Donnell asked, "Madame chairman, where are they going to get the money to make payroll next month?" Mr. Leavitt responded the basic idea is once determination is made by April 10 as to the degree of the financial problems, the third bill would authorize the White Pine County School District to borrow money from a private lender. The repayment of the loan is that the payment would go to the lender from the state, not the school district. The state would take the payment out of the school district revenue. He stated he feels it would be a "bad precedent" to loan them money from the state. He emphasized that the state does not want any entity to spend all of their revenue and depend on the state to bail them out. Senator McGinness and Mrs. de Braga assured the committee that they are comfortable with the actions proposed by the committee. Mrs. de Braga stated, "It is hard for us to say discipline is definitely needed, and getting to the core of the problem." Senator O'Connell requested Mr. Leavitt and Mr. Pursell work on the third bill draft request and submit it to Ms. Needham (Principal Deputy Legislative Counsel). Senator O'Connell asked Mr. Pursell if there has been any auditing of federally funded programs in the White Pine County School District? She specifically mentioned Chapter 1, Chapter 2, Special Education and the nutrition programs. Mr. Pursell responded there was none in the auditing which the Department of Taxation has done. He explained when the Department of Taxation's budget analyst was in White Pine County, there was a auditor from the State Department of Education looking at some information also. He stated he did not know if they specifically audited federal funds or not. Senator O'Connell emphasized there might be an additional shortfall if the federal funds were mismanaged and if there would be repayment of the federal funds. SENATOR TOWNSEND MOVED FOR COMMITTEE INTRODUCTION OF BDR S-1874. SENATOR SHAFFER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RAGGIO WAS ABSENT FOR THE VOTE.) ***** Mr. Pursell stated when he reviewed the records, the chairman of the school board sent a letter to the bank to offset overdrafts. He said this basically used any fund available to cover overdrafts in that banking account. He told the committee this offset was not restricted to any certain fund, it applied to any and all available funds. Senator O'Connell stated it was important to view this, especially if there would be repayment of funds, as it is an additional shortfall. She asked Mr. Pursell to take this concern into consideration when performing the audit of White Pine County School District. Senator O'Connell closed the hearing on the bill draft requests regarding White Pine County and opened the hearing on Assembly Joint Resolution (A.J.R.) 9. ASSEMBLY JOINT RESOLUTION 9: Urges Congress and Unites States Postal Service to provide for delivery of mail in Lake Tahoe Basin. (BDR R-320) SENATOR TOWNSEND MOVED TO DO PASS A.J.R. 9. SENATOR SHAFFER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RAGGIO WAS ABSENT FOR THE VOTE.) ***** Senator O'Connell closed the hearing on A.J.R. 9 and opened the hearing on Assembly Joint Resolution (A.J.R.) 16. ASSEMBLY JOINT RESOLUTION 16: Urges Congress to eliminate inequities in payment of social security benefits to "notch babies." (BDR R-36) SENATOR PORTER MOVED TO DO PASS A.J.R. 16. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RAGGIO WAS ABSENT FOR THE VOTE.) ***** The meeting adjourned at 6:10 p.m. RESPECTFULLY SUBMITTED: Teri J. Spraggins, Committee Secretary APPROVED BY: Senator Ann O'Connell, Chairman DATE: Senate Committee on Government Affairs March 23, 1995 Page