MINUTES OF THE
SENATE Committee on Finance
Seventy-second Session
May 22, 2003
The Senate Committee on Finance was called to order by Vice Chairman Raymond D. Rawson, at 8:10 a.m., on Thursday, May 22, 2003, in Room 2134 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Raymond D. Rawson, Vice Chairman
Senator Dean A. Rhoads
Senator Barbara K. Cegavske
Senator Sandra J. Tiffany
Senator Bob Coffin
Senator Bernice Mathews
COMMITTEE MEMBERS ABSENT:
Senator William J. Raggio (Excused)
GUEST LEGISLATORS PRESENT:
Assemblyman John C. Carpenter, Assembly District No. 33
Assemblyman Peter J. Goicoechea, Assembly District No. 35
Assemblyman Thomas J. Grady, Assembly District No. 38
Assemblyman Roderick R. Sherer, Assembly District No. 36
Senator Mike McGinness, Central Nevada Senatorial District
Assemblyman Richard D. Perkins, Assembly District No. 23
Assemblyman David E. Goldwater, Assembly District No. 10
STAFF MEMBERS PRESENT:
Gary L. Ghiggeri, Senate Fiscal Analyst
Bob Guernsey, Principal Deputy Fiscal Analyst
Pamela Carter, Committee Secretary
OTHERS PRESENT:
Charlotte Petersen, Superintendent, Humboldt County School District, Humboldt County
Curtis Jordan, Superintendent, Esmeralda County School District, Esmeralda County
N. Lorell Bleak, Superintendent, Lincoln County School District, Lincoln County
Don Lindeman, Assistant Superintendent, Business and Operations, Churchill County School District, Churchill County
Antoinette Cavanaugh, Superintendent, Elko County School District, Elko County, Elko County
Dr. Robert Smith, Superintendent, Lander County School District, Lander County
Arantxa Kovis, Student, Battle Mountain Junior High School
Jenna Mariluch, Student, Battle Mountain Junior High School
Amy Kester, Principal, Battle Mountain Junior High School
Lorrie Sparks, Principal, Battle Mountain Elementary School
Bradley J. Kelley, Board of Commissioners, Lander County
Jane A. Nichols, Chancellor, System Administration Office, University and Community College System of Nevada
Daniel G. Miles, Vice Chancellor, Finance and Administration, System Administration Office, University and Community College System of Nevada
Paul V. Townsend, Legislative Auditor, Audit Division, Legislative Counsel Bureau
Dennis Colling, Chief, Administrative Services Division, Department of Motor Vehicles
Joyce Haldeman, Lobbyist, Clark County School District
Dorothy L. Merrill, Lobbyist, Washoe County School District
Kenneth B. Lange, Lobbyist, Nevada State Education Association
Anne K. Loring, Lobbyist, Nevada Association of School Boards/Reno
Mary Pierczynski, Superintendent, Carson City School District, Carson City
John P. Comeaux, Director, Department of Administration
Gary L. Ghiggeri, Senate Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, presented an update on the status of bills in committee.
Mr. Ghiggeri referenced Assembly Bill (A.B.) 122.
ASSEMBLY BILL 122 (1st Reprint): Revises provisions governing calculation of basic support for school districts with declining enrollment. (BDR 34-963)
Mr. Ghiggeri explained A.B. 122 was introduced by the Assembly Committee on Ways and Means. He pointed out the legislation, as amended, modifies the enrollment count used for apportionment purposes in the distributive school account (DSA) for those school districts with declining enrollment. He said it is commonly called the “hold harmless” provision for the DSA. He indicated the apportionment would be based on the preceding year for those school districts with less than a 5 percent decrease in enrollment. He added the apportionment would be based on the larger of the two preceding years for those school districts with more than a 5 percent decrease in enrollment.
Mr. Ghiggeri noted A.B. 122 states the “hold harmless” provisions are applied at the district level rather than the school level.
Senator Rawson commented that with A.B. 122, policy would be decided.
Assemblyman John C. Carpenter, Assembly District No. 33, spoke in support of A.B. 122. He indicated the schools in his district, Elko County and portions of Humboldt County, are experiencing a decline in enrollment. He said his district would like to have the “hold harmless” for 2 years. He said if “hold harmless” is not possible, his district would like to have a 2 percent decline in enrollment apportionment.
Assemblyman Peter J. Goicoechea, Assembly District No. 35, spoke in support of a 2-year “hold harmless”. He said he represents seven rural counties, and all of the schools in his district are experiencing a decline in enrollment with the exception of Washoe County. He requested support for either a 5 percent or a 2 percent reduction for his district.
Assemblyman Thomas J. Grady, Assembly District No. 38, spoke in support of a 2-year “hold harmless”. He said schools in his district, Lyon and Storey Counties and portions of Carson City and Churchill County, are experiencing a decline in enrollment. He requested support for either a 5 percent or a 2 percent reduction for his district.
Senator Rawson commented if the 2 percent reduction is not approved, layoffs would become a major concern.
Assemblyman Goicoechea indicated if the 2-year “hold harmless” is not approved, there will be layoffs. He said existing budgets guarantee layoffs.
Assemblyman Roderick R. Sherer, Assembly District No. 36, spoke in support of the 2-year “hold harmless”. He said his district includes Esmeralda, Lincoln, Mineral, Nye Counties, and portions of Churchill County. He said $4 million or $5 million in the budgets for the schools in his district mean everything.
Senator Rhoads asked for the Assembly vote on A.B. 122. Senator Rawson replied the Assembly vote was 41 in favor and 1 absent. Senator Rhoads requested information on the amendment to A.B. 122.
Assemblyman Goicoechea replied the major additions to the amendment are the 2-year “hold harmless” and the 5 percent decline in enrollment.
Senator Rawson commented the issue is not only the 5 percent decline in enrollment but the number of years used in the calculation.
Senator Tiffany commented on consolidating the school districts. She asked whether anyone has looked at consolidating or merging rural school districts.
Assemblyman Carpenter replied consolidation would not be practical in his school district because there was some consolidation several years ago. He commented everything is being done in his district to provide quality education.
Assemblyman Sherer said Esmeralda County does not have a high school. He commented students attend high school in Nye County.
Senator Cegavske asked how the rural school districts budget. She said she has some concern about the 2-year “hold harmless”.
Assemblyman Goicoechea replied there is only one day when enrollment is submitted. He said school districts have already adopted their budgets when enrollments are submitted. He commented on consolidation of school districts by saying there may be 250 miles between schools in rural Nevada.
Senator Coffin asked whether the assemblymen present are supporting the tax package to fund education.
Assemblyman Carpenter replied he has supported full funding of the Governor’s basic budget. He said he believes there will be monies available in the Governor’s basic budget to fund “hold harmless”.
Assemblyman Goicoechea replied he is on record as supporting funding for education. He said he believes there will be monies available in the Governor’s basic budget to fund “hold harmless”.
Senator Coffin said there is one “pot of money” from which education draws. He said if education is funded, monies are taken from something else that needs to be funded.
Senator Coffin asked whether the assemblymen are supporting the tax bills that fully fund the state budget.
Assemblyman Goicoechea replied yes, he is.
Assemblyman Grady replied he supports the mechanism to fund education. He said everyone knows education needs to be funded.
Assemblyman Sherer explained he looks at the whole picture because there are some issues in education he does not support. He said he believes educators cannot have full funding at one time. He emphasized there should be constraints on how education monies are spent.
Senator Coffin reiterated there is one “pot” from which education draws. He said legislators and educators cannot selectively fund one area. Senator Coffin voiced his support for A.B. 122, adding he would like to know assemblymen and educators are helping to support A.B. 122.
Senator Rawson said a supplement for the rainy day fund needs to be decided.
Senator Mike McGinness, Central Nevada Senatorial District, stated he brings a proxy from Senator Amodei, chairman of the Senate Committee on Judiciary. Senator McGinness said all of Nevada counties are represented between himself, Senator Rhoads, Assemblyman Carpenter, Assemblyman Goicoechea Assemblyman Grady, and Assemblyman Sherer.
Senator Coffin commended Senator McGinness for leading the charge in the reestablishment of the authority and integrity of the Senate Committee on Taxation. He said the taxation committee has been very active in trying to find ways to fund education. He noted Senator McGinness has been at the forefront in taking the risk to fund education through increased taxes.
Charlotte Petersen, Superintendent, Humboldt County School District, Humboldt County, referenced “Nevada School District Applicability of Changes to ‘Hold Harmless’ Provision—NRS 387.1233(2)”, (Exhibit C), explaining Humboldt County School District enrollment has declined over 20 percent during the past 4 years. She said the change from a 2-year to a 1-year “hold harmless” will be extremely difficult for the Humboldt County School District. She commented the district has laid-off 70 staff members and 5 administrators during the past 4 years.
Ms. Petersen noted the fiscal year (FY) 2005 enrollment forecast indicates not one county in Nevada would be eligible for the 2-year “hold harmless” provision. She said the financial impact on the Humboldt County School District, by implementing a 1-year “hold harmless” rather than a 2-year “hold harmless” is $535,000.
Ms. Petersen indicated consolidation is not feasible because the nearest school to her district office is 110 miles away. She said by law, children can be bussed only 1.5 hours in the morning or in the afternoon. She noted children in Humboldt County are currently at the 1.5-hour limit.
Ms. Petersen expressed her opposition to A.B. 122.
Curtis Jordan, Superintendent, Esmeralda County School District, Esmeralda County, expressed his opposition to A.B. 122 because the Esmeralda County School District needs the 2-year “hold harmless”. He said the Esmeralda County School District has cut its budget by 10 percent. He indicated if the 2‑year “hold harmless” is not granted, his school district will cut its budget by another 10 percent, and 13 percent of the school district staff will be laid off.
N. Lorell Bleak, Superintendent, Lincoln County School District, Lincoln County, spoke in opposition of A.B. 122. He said the 2-year “hold harmless” instills stability in the school district. He said the existing law is adequate and guarantees stability in times of declining enrollment. He said other counties opposing A.B. 122 are Pershing County, White Pine County, and Eureka County.
Senator Cegavske asked how many students will be affected by A.B. 122. Mr. Bleak replied 31 students.
Senator Rhoads commented student enrollments are declining in the rural counties. He said there are no increases in student enrollments.
Ms. Petersen commented 852 students have left the Humboldt County School District from 1998 to date.
Don Lindeman, Assistant Superintendent, Business and Operations Churchill County School District, Churchill County, pointed out enrollments are estimated at the time education budgets are submitted. He said student enrollments have declined steadily at the rate of 1.5 percent each year over the past 4 years. He explained his last budget was approved utilizing a 2-year “hold harmless”, and if a 1-year “hold harmless” is implemented and enrollments continue to decline, an additional $350,000 will have to be cut from the budget. He added if A.B. 122 passes, there will be additional cuts.
Antoinette Cavanaugh, Superintendent, Elko County School District, Elko County, explained the Elko County School District is experiencing the same budget constraints as other rural county school districts.
Ms. Cavanaugh pointed out the 2-year “hold harmless” provision permits the school district to respond to declining enrollments. She said enrollment has declined by 60 students in Elko County over the past 5 years. She indicated enrollment in Elko County would have to decline by 500 students to meet the proposed 5 percent decrease in enrollment as a result of A.B. 122. She voiced her opposition to A.B. 122.
Dr. Robert Smith, Superintendent, Lander County School District, Lander County, thanked the committee for entertaining opposition to A.B. 122. He introduced two students from the Lander County School District.
Arantxa Kovis, Student, Battle Mountain Junior High School and Jenna Mariluch, Student, Battle Mountain Junior High School spoke in opposition to A.B. 122 by reporting the number of faculty and staff from Battle Mountain Junior High School that have been laid off. Miss Mariluch said if positions continue to be cut, students will lose a promising education. Miss Kovis added every student deserves a proper education.
Mr. Smith reported the Lander County School District budget, approved on May 21, 2003, reflects a 17 percent cut over last year. He noted if A.B. 122 is approved, an additional 3 percent will be cut from the budget. He voiced his opposition to A.B. 122.
Senator Coffin commented that Senator Rhoads is lucky to have educators such as these in his district. He said legislators must support funding for the entire state, and the larger Nevada counties must support the rural counties.
Amy Kester, Principal, Battle Mountain Junior High School, spoke in opposition to A.B. 122. She said the impact of A.B. 122 on her school will be significant. She noted there has been a 60 percent decrease in her school budget, and Battle Mountain Junior High School is having a difficult time operating within the current budget. She urged support from the larger counties in defeating A.B. 122.
Lorrie Sparks, Principal, Battle Mountain Elementary Schools, voiced her opposition to A.B. 122 by saying her schools, kindergarten through third grade, do not have programs in physical education, music, art, or computers. She said the librarian and counselor positions have been cut. She urged the defeat of A.B. 122.
Bradley J. Kelley, Board of Commissioners, Lander County, reported that Lander County has the highest unemployment rate in the state of Nevada. He said Lander County has lost approximately 59 percent of its employment due to mining closures. He explained within several years, Lander County has experienced a decrease in mining revenue from $52 million to approximately $35 million due to mining closures. He voiced his opposition to A.B. 122.
Senator Rhoads asked staff for new funding amounts allocated to the rural counties if A.B. 122 is passed.
Senator Cegavske questioned the funding disparity in the rural counties if A.B. 122 is passed.
Senator Rawson closed the hearing on A.B. 122 and opened the hearing on Assembly Bill (A.B.) 148.
ASSEMBLY BILL 148: Requires Legislative Auditor to conduct audit of University and Community College System of Nevada and Board of Regents of University of Nevada. (BDR S-808)
Assemblyman Richard D. Perkins, Assembly District No. 23, spoke in support of A.B. 148 saying the last audit of the University and Community College System of Nevada (UCCSN) and the Board of Regents was in 1996. He pointed out the objective of the 1996 audit was to determine whether UCCSN budget and expenditure controls ensured that resource use was consistent with priorities established by legislators and the Board of Regents. He indicated the legislative auditor was denied access to critical records, and the audit was not a thorough evaluation of controls.
Assemblyman Perkins explained the 1996 legislative audit report found that responsibility for expenditures rested with the seven institutions rather than the Board of Regents. He said there were seven different methods to manage and control the expenditure of funds, and many were inconsistent and ineffective practices. He emphasized the Board of Regents has a constitutional responsibility to manage public funds.
He indicated the 1996 audit also revealed the Board of Regents reviewed only 80 percent of the UCCSN revenues and related expenditures. He reported Nevada Revised Statutes 396.380 requires the board to control the expenditure of all monies for the support and maintenance of the system and all monies received from any other source. He noted items for analysis in the next audit include capital construction projects, the cost of athletic programs, the cost of administration, the utilization of host accounts, the validity of enrollment data, the generation and distribution of investment income, and programs with a statewide impact.
Assemblyman Perkins explained contracting and bidding procedures have been added in A.B. 148, including construction, retrofit, and repair projects aimed at utility cost and energy conservation. He added A.B. 148 provides for a performance audit rather than a financial audit. He said a performance audit covers economy, efficiency, and effectiveness of programs.
Senator Rawson asked whether the next audit will fit into the schedule of the legislative auditors. Assemblyman Perkins replied yes, it will.
Senator Coffin asked whether the faculty workload will be addressed.
Assemblyman Perkins replied it is the issue of the day. He agreed faculty workload should be addressed.
Jane A. Nichols, Chancellor, System Administration Office, University and Community College System of Nevada, referenced the proposed amendment to A.B. 148 (Exhibit D) and voiced her support for A.B 148. She said UCCSN has not been audited since 1996. She agreed that a performance audit should be conducted in the near future covering economy, efficiency, and effectiveness of programs. She explained the formula taxonomy will be addressed in the audit. She said UCCSN will be able to bring a recommendation to the Legislature on the formula taxonomy upon completion of the audit.
Dr. Nichols pointed out the proposed amendment to A.B. 148 addresses Section 1, subsection 2(f), line 12 stating “policies and procedures for” will be added prior to “the generation of investment income and its distribution.” She noted the second change deletes Section 2 of A.B. 148. She said if adopted, the amendment removes language from the bill that requires UCCSN to transfer $90,000 from its budget to the audit division of the Legislative Counsel Bureau upon request for performance of the audit.
Senator Coffin asked for a definition of faculty workload.
Dr. Nichols replied UCCSN will look at faculty workload reporting. She said this issue needs clarification and a clear definition.
Senator Coffin commented there have been incidences in which a faculty member has been credited with teaching three classes but who actually taught one class that included both graduate and undergraduate students.
Dr. Nichols reiterated the need for clarification in reporting.
Daniel G. Miles, Vice Chancellor, Finance and Administration, System Administration Office, University and Community College System of Nevada, commented on a technical issue in the proposed amendment to A.B. 148. He said UCCSN would like the legislative auditors to look at its policies and procedures for fiduciary responsibility.
Senator Rawson closed the hearing on A.B. 148 and opened the hearing on A.B. 162.
ASSEMBLY BILL 162 (1st Reprint): Requires Legislative Auditor to conduct performance audits of certain school districts and provides for formation of Business Advisory Councils. (BDR S-995)
Paul V. Townsend, Legislative Auditor, Audit Division, Legislative Counsel Bureau, referenced the estimated audit division staff requirements (Exhibit E) related to A.B. 162. He said the proposed UCCSN amendment regarding investment income would be performed in the normal course of an audit.
Senator Rawson asked whether the auditors can secure the privacy of the major donors to UCCSN foundations. Mr. Townsend replied he is confident that privacy can be assured.
Senator Rawson inquired about the additional $90,000 cost to perform an audit. Mr. Townsend replied the additional $90,000 cost is needed to perform an audit.
Senator Rawson opened the hearing on Assembly Bill (A.B.) 254 which makes supplemental appropriations to the Department of Motor Vehicles (DMV).
ASSEMBLY BILL 254 (1st Reprint): Makes supplemental appropriations to Department of Motor Vehicles for certain unanticipated shortfalls in money for Fiscal Year 2002-2003. (BDR S-1232)
Dennis Colling, Chief, Administrative Services Division, Department of Motor Vehicles, reported the original request was $1.2 million. He said A.B. 254 requests a supplement of $586,524. He noted $156,500 will cover increased costs associated with the toll-free telephone line. He added $146,800 will cover increased Department of Information Technology (DoIT) charges. He explained there is a $15,000 request to cover a salary shortfall for a DMV employee retiring on June 30, 2003 from the hearings office.
Mr. Colling explained DMV requests $30,419 for Q-matic warranties and $51,880 for state-owned building rent. He noted the requests are for field service operations and were not properly budgeted. He added DMV requests $26,000 for increased costs associated with fingerprinting, $125,925 for security guards in field service offices, and $34,000 for group benefit insurance.
Senator Rawson closed the hearing on A.B. 254 and reopened the hearing on A.B. 162.
Assemblyman David E. Goldwater, Clark County Assembly District No. 10, spoke in favor of A.B. 162. He said A.B. 162 requires a performance audit to look at financial, facility, and personnel management; organization of the district; transportation; and employee health plans in some of the largest school districts in the state. He noted once the audits are performed, increased funding recommendations can be supported.
Senator Rawson asked whether any council members are paid members.
Assemblyman Goldwater replied no, they are not paid members. He referenced the suggested friendly amendment to A.B. 162 (Exhibit F), voicing his support for the revision in Section 2.
Joyce Haldeman, Lobbyist, Clark County School District, spoke in favor of A.B. 162. She asked that the legislative auditors be mindful of the ongoing multiple audit systems already in place and not duplicate services. She said while she is in favor of an outside audit, she feels the school districts should not have to pay for legislative audits.
Dorothy L. Merrill, Lobbyist, Washoe County School District, spoke in favor of A.B. 162. She said, “the performance audits can yield greater knowledge of the internal workings of school districts and can bring to the public a greater knowledge of the many tasks performed internally.”
Senator Rawson asked whether the language in the proposed amendment is sufficient.
Ms. Merrill replied yes, it is sufficient.
Kenneth B. Lange, Lobbyist, Nevada State Education Association, spoke from written testimony (Exhibit G) in support of A.B. 162. He said a performance audit can help identify those practices, policies, and procedures that are working. He urged support of A.B. 162.
Anne K. Loring, Lobbyist, Nevada Association of School Boards/Reno, voiced her support for the inclusion of a business advisory council in A.B. 162. She said it is important for business and education to form a partnership.
Mary Pierczynski, Superintendent, Carson City School District, Carson City, spoke in support of A.B. 162. She said the Carson City School District welcomes the legislative audit and will cooperate with the audit in any way.
Senator Rawson closed the hearing on A.B. 162 and opened the hearing on A.B. 257. He explained A.B. 257 makes an appropriation to restore the balance of the contingency fund.
ASSEMBLY BILL 257 (1st Reprint): Makes appropriations to restore balance in Contingency Fund. (BDR S-1235)
John P. Comeaux, Director, Department of Administration, explained A.B. 257 requests an appropriation to restore the balance of the contingency fund to $12 million. He said the bill has an effective date of July 1, 2003, and he urged the committee’s support of A.B. 257.
There being no further questions or comments, Senator Rawson adjourned the meeting at 9:49 a.m.
Pamela Carter,
Committee Secretary
APPROVED BY:
Senator Raymond D. Rawson, Chairman
DATE: