MINUTES OF THE SENATE COMMITTEE ON FINANCE. Seventy-fifth Session April 29, 2009

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1 MINUTES OF THE SENATE COMMITTEE ON FINANCE Seventy-fifth Session The was called to order by Cochair Bernice Mathews at 8:09 a.m. on Wednesday,, in Room 2134 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 5100, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file in the Research Library of the Legislative Counsel Bureau. COMMITTEE MEMBERS PRESENT: Senator Bernice Mathews, Cochair Senator Steven A. Horsford, Cochair Senator Bob Coffin Senator Joyce Woodhouse Senator William J. Raggio Senator Dean A. Rhoads Senator Warren B. Hardy II GUEST LEGISLATORS PRESENT: Senator Michael A. Schneider, Clark County Senatorial District No. 11 STAFF MEMBERS PRESENT: Steven J. Abba, Principal Deputy Fiscal Analyst Brian M. Burke, Principal Deputy Fiscal Analyst Michael J. Chapman, Senior Program Analyst Jeffrey A. Ferguson, Program Analyst Gary L. Ghiggeri, Senate Fiscal Analyst Cynthia Clampitt, Committee Secretary OTHERS PRESENT: Kim R. Wallin, State Controller, Office of the State Controller Andrew Clinger, Director, Department of Administration Bruce Breslow, Executive Director, Agency for Nuclear Projects, Office of the Governor Martin Ramirez, Consultant, Nevada State Office of Energy Ross Miller, Secretary of State Dennis K. Neilander, Chair, State Gaming Control Board Colonel Michael J. Carlson, Chief of Staff, Nevada Army National Guard, Department of the Military Robert Buonamici, Chief Game Warden, Nevada Department of Wildlife Ira Hansen John Radocha Jonathan Friedrich Robert Robey Robert Chisel, Assistant Director, Administration, Nevada Department of Transportation

2 Page 2 Richard J. Nelson, P.E., Assistant Director, Operations, Nevada Department of Transportation Tom Wolf, Deputy Director, Department of Information Technology Lorne J. Malkiewich, Director, Legislative Counsel Bureau We will begin with budget closings. JEFFREY A. FERGUSON (Program Analyst, Fiscal Analysis Division, Legislative Counsel Bureau): The Subcommittee has been provided a document, Senate Committee on Finance, Closing List #4, (Exhibit C, original is on file in the Research Library). The first budget is that of the State Controller, budget account (B/A) ELECTED OFFICIALS Controller's Office Budget Page ELECTED-120 (Volume I) Budget Account There are no major closing issues in this budget. Two items that were not recommended by the Governor in the Executive Budget were requested by the State Controller. Decision unit M-160, on page 14 of Exhibit C, recommends the elimination of one administrative assistant I position. This action would provide General Fund savings of $36,923 in fiscal year (FY) and $37,443 in FY This position has been vacant since March The Office has testified the duties of this position have been absorbed by other staff. This action should not significantly impact the operations of the Office. M-160 Position Reductions Approved in Page ELECTED-121 Decision unit E-710 requests General Funds of $98,437 over the biennium for replacement computer hardware and software. Upon review, Staff believes the request appears reasonable. E-710 Replacement Equipment Page ELECTED-124 Decision unit E-252 recommends General Funds of $960 in each year of the biennium to provide a cell phone for the State Controller. The State Controller currently uses her personal cell phone for State business. During the budget hearing, the State Controller indicated her willingness to forego the cell phone request in lieu of a revenue-generating item such as a LexisNexis subscription, not included in the Executive Budget. E-252 Working Environment and Wage Page ELECTED-122 In decision unit E-674, the Governor recommends deferring a salary increase for the State Controller. Staff notes legislation would be needed to enact this request. A bill has been requested under Bill Draft Request (BDR) Actions taken on this issue are also present in other elected official budgets and may result in adjustments for this decision module in those budgets and may have a General Fund impact.

3 Page 3 E-674 Temporarily Defer Elected Official Salary Increase Page ELECTED-124 BILL DRAFT REQUEST : Reduces salaries of constitutional officers. (Later introduced as Senate Bill [S.B.] 420.) Does the Committee wish to approve the other items as recommended by the Governor, with the exception of decision unit E-252? Are all of the E-710 decision units replacing desktop computers, surge protectors, switches and similar items in all budgets? These items are usually replaced on a schedule. Is it possible, over all the budgets, to extend the replacement schedules to generate budget savings? MR. FERGUSON: Staff reviews these types of items and discusses them with the agencies to identify whether alternatives can be found. However, in many cases the equipment is past the Department of Information Technology (DoIT) replacement schedule. These items are not inexpensive and add up across the entire budget. Wherever equipment life could be extended, it would create much-needed savings. KIM R. WALLIN (State Controller, Office of the State Controller): Before we submitted our budget requests we reviewed our equipment needs and reduced the amount of our budget proposal to those my information technology (IT) manager felt was essential. The check printers and advice printers are nearly seven years old. Repair service has been called numerous times already on the existing equipment. Perhaps the Department of Administration can provide information about this decision unit in other budgets? ANDREW CLINGER (Director, Department of Administration): The replacement policy specifies equipment replacement after four years of service. Where possible, we extended the time frame to five years. In addition, an option was placed in the budget for replacement of computers without monitors due to newer flat screen technology life spans and significant savings. GARY L. GHIGGERI (Senate Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau): Mr. Michael Chapman, Fiscal Analysis Division, reviewed the replacement of servers in closing the mental health budgets and instead of replacement recommended funding an extended warranty on the servers. Staff is closely monitoring this decision unit classification. MR. FERGUSON: Does the Committee wish to take action on the other items in B/A ? We will consider Other Item Nos. 1, 2, and 4 on pages 14 and 15 of Exhibit C. Item No. 3 will be considered in a separate discussion.

4 Page 4 SENATOR RAGGIO MOVED TO APPROVE OTHER ITEMS IN B/A INCLUDING DECISION UNITS M-160, E-710, AND E-674 AS RECOMMENDED BY THE GOVERNOR. SENATOR COFFIN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR HORSFORD WAS ABSENT FOR THE VOTE.) Please elaborate on the situation in Item No. 3 on page 15 of Exhibit C. MS. WALLIN: Item No. 3 requests a cell phone for my position at an annual cost of $960. I provided testimony earlier stating I would forego the cell phone if we were allowed a subscription to Lexis/Nexis which was not included in the Executive Budget. What is the cost of that subscription? MS. WALLIN: The subscription cost is $1,560 annually. The subscription is used in the Debt Collection Unit to find the debtors for collection of funds owed to the State. I recommend approval of the LexisNexis subscription. I concur; however, a department administrator should not have to pay for her own cell phone service. SENATOR RAGGIO MOVED TO APPROVE ITEM NO. 3, DECISION UNIT E-252; INCLUDING BOTH THE CELL PHONE FOR THE CONTROLLER AND A SUBSCRIPTION TO LEXISNEXIS. SENATOR COFFIN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR HORSFORD WAS ABSENT FOR THE VOTE.) MR. FERGUSON: The major item, not included in the Executive Budget, requests General Funds of $293,105 in FY and $24,278 in FY of a technology investment request for an extensible Business Reporting Language (XBRL). This would allow the Office to manage information collection, collation and workflow processes related to the State s debt collection efforts.

5 Page 5 The Office has provided responses to Committee questions. Staff noted the responses assume the passage of Assembly Bill (A.B.) 87 which has been amended and passed out of the Assembly. ASSEMBLY BILL 87: Revises provisions concerning the collection of debts owed to the State. (BDR ) Among other provisions, it would require State agencies to turn over debt to the Controller after 60 days of delinquency. The amendment removed fiscal notes attached to the bill with one exception. The remaining fiscal note is from the Office of the Controller for approximately $53,000 in each year of the biennium to cover postage costs. Staff has summarized some of the Office s answers to the Committee s questions on page 16 of Exhibit C. Are the postage costs an absolute amount, or can some of the information be sent electronically? MS. WALLIN: The amount is an absolute because, by law, certified letters must be sent to the debtors. MR. FERGUSON: State agencies turn over approximately $7 million in debt annually. Scope I debt, under $25,000, is collected at a rate of approximately 11 percent. Scope II debt, over $25,000, is collected at a rate of approximately 4 percent. The Office of the Controller indicates that with the XBRL System and passage of A.B. 87, the collection rates could increase to approximately 45 percent for Scope I debt and 15 percent for Scope II debt. The Office estimates it will collect an additional $1.92 million in FY with the XBRL System and the implementation of A.B. 87, and an additional $2.62 million in FY These amounts do not include what would be collected without these provisions. Please explain the current percentage rate of collections. MS. WALLIN: Debts under $25,000 are collected at 11 percent on average, because the debt is so old. The age of the debt is typically one year old before it is turned over to the Office. That is why the Legislation has been requested. MR. FERGUSON: The Office indicates, based on historical data, $1.12 million of the additional $4.54 million in debt collection would be reverted to the General Fund. Currently the funds are reverted to the originating agency whenever the Office collects debt. If the agency budget consisted of General Funds in its budget, the percentage of collected funds would revert to the General Fund. Based on information provided by the Office, allocation for General Funds of $317,838 for the XBRL System and General Funds of $106,296 for the implementation of A.B. 87 is estimated to result in a net additional statewide General Fund revenue of $699,866 in the biennium.

6 Page 6 The options for consideration by the Committee are: Not to approve the request resulting in no effect on the Executive Budget; or To approve the request from the Office of the Controller for $317,838 for the XBRL System. When the Assembly closed this budget, they requested the Office to research the possibility of establishing an assessment fee paid by debtors and collected by the Office, to help offset these costs and perhaps repay the General Fund for the cost of the System. Page 18 of Exhibit C is a memo from the State Controller indicating the amounts of revenue that could be generated if a 2-, 3- or 4-percent assessment was added to the debt collected. If the assessment fee were 2 percent, it would generate $116,000 over the biennium and so on. The last column of the memo indicates the number of years it would take for each percentage to recover the costs of the System. It is calculated on the costs of the XBRL System and postage costs related to A.B. 87 in the first year of the biennium. Currently, the debt collection firm, one of the three contracted to the Office for debt greater than $200, adds a fee from 11 to 35 percent to the collected debt. This decision unit would add another 2-, 3-, or 4-percent fee to that amount. The Office indicates their recommendation is for a 2-percent additional fee to offset the cost of the System and postage to the General Fund. It is the least burdensome to the debtors. That amount would be added to the debt assessment collected by the debt collection agency. Is all debt collection contracted to outside agencies? MS. WALLIN: We collect certain debts. The Office has changed certain procedures resulting in direct collection of a greater portion of debts. When the certified letter is sent to a debtor they are offered three options: Pay in full in 30 days; or Request an installment plan; or Be turned over to collection. The option of an installment plan has resulted in an increase in debt payments. MR. FERGUSON: The Committee may wish to approve General Funds for this purpose and direct the office to explore the addition of an assessment fee to repay the General Fund. The Controller has indicated that A.B. 87 could be amended to authorize the assessment fee. At that point, if the Legislation is passed, Staff would add that component to this budget or it could be added through the Interim Finance Committee (IFC). It would authorize the revenue line item to collect the assessment and establish a category to transfer those funds to the General Fund.

7 Page 7 Is the percentage of successful collections increased with referral from the State agencies within 60 days to the Office of the Controller? MS. WALLIN: That is correct. Would the earlier referral, without approval of the XBRL System, be sufficient to increase the debt collection? I am concerned with spending the amount of funding required for the System. What is the total amount needed? MR. FERGUSON: The amount would be approximately $318,000. MS. WALLIN: Because agencies currently choose when to submit debt to the Office, my staff can manage the workload. If A.B. 87 is enacted and agencies are required to submit the debt in a more timely manner, the workload will increase resulting in the need for three additional full-time equivalent (FTE) positions. Please clarify your testimony. MS. WALLIN: The XBRL System would automate the additional workload created by passage of A.B. 87 without the addition of staff positions. Other organizations, such as the University of Nevada, Las Vegas (UNLV), have requested our Office to also collect its debts. With the discussions around A.B. 87, the Office has added 300 accounts from the U.S. Environmental Protection Agency (EPA). Our staff is currently buried under the workload. Please explain what is meant by other organizations. MS. WALLIN: We are now collecting debt for the Western Nevada College and the Great Basin College. The UNLV just requested debt collection by our Office. The workload has greatly increased significantly. Do those collections return funds to the General Fund? MS. WALLIN: No, when we collect for the UNLV, the funds are returned to the UNLV. My previous testimony concerned the portion of collections that are allocated to the General Fund and the portions that are allocated to other budget accounts such as the Highway Fund. With the proposed amendment to A.B. 87, more revenue will be generated for the General Fund.

8 Page 8 I am not convinced the expenditure of $318,000, coupled with the provisions of A.B. 87, will generate $1.9 million and $2.6 million in additional collections over the biennium. What kind of assurance is there that those collection estimates are accurate? MS. WALLIN: If the debt is submitted to the Office within 60 days, we estimate an improvement in the collection percentage from 11 percent to 45 percent because of younger debts. Currently, agencies complete a spreadsheet and send it to our Office through encrypted . From those 71 spreadsheets with 18 tabs per spreadsheet, my Staff extracts data and enters it into another spreadsheet and sends it to our three collection agencies. The collection agencies send the collection results back to us in a spreadsheet from which we extract data. We paste the information back into the Office spreadsheets and to the spreadsheets for each agency. With the XBRL automated System, the process will be Web-based with more security features and placed into a debt repository. The Office Staff can extract reports for the State and collection agencies. Staff time can be used to address debt more quickly and the processing of certain claims before they are submitted to collection agencies. Without the System, three additional positions would be needed. Will additional staff be needed if the XBRL System were approved? MS. WALLIN: No additional staff would be needed if the System were approved. Over the years, this Committee hears about projects that will return revenue or save money in the long run. I have not lived long enough to see that happen. MS. WALLIN: I am confident, with the XBRL System, we will achieve the results. The System is widely used in international governments. The United States has been slow to adopt it, because it is an open source. The software vendors do not like it because it is not expensive or proprietary. Will the Office still require the services of the three collection agencies? MS. WALLIN: We are required to contract for the implementation, but after that point my Staff can cope with the workload. How long will the implementation process take? MS. WALLIN: It is a four-month implementation process. Assembly Bill 87 has not yet been heard in the Senate so we will hold this budget item at this time.

9 Page 9 MR. FERGUSON: The other item in this budget request, not included in the Executive Budget, was for the LexisNexis subscription which was $1,560 in each year of the biennium, as included in the earlier motion. The Committee may approve the XBRL System, with direction to the Controller to amend A.B. 87 to add a 2-percent assessment, which would authorize it to be added in the budget, or the budget could be held. MR. GHIGGERI: The budget could be closed as indicated, giving Staff the authority to make the technical adjustments after A.B. 87 is heard. Any funding necessary to implement A.B. 87 could be included in that Legislation. What additional action is necessary if the Committee is awaiting the outcome of A.B. 87? Staff recommended the budget could be closed with the authority to move the funding if A.B 87 is passed. Where does that leave the XBRL System? MR. GHIGGERI: When A.B. 87 is heard and the Committee chooses to fund it, the XBRL System can be authorized at that time. SENATOR RAGGIO MOVED TO CLOSE BUDGET ACCOUNT WITH THE PREVIOUS ACTIONS OF THE COMMITTEE AND WITH AUTHORIZATION TO STAFF FOR TECHNICAL ADJUSTMENTS TO INCLUDE THE XBRL SYSTEM DEPENDENT ON THE ACTION TAKEN ON A.B. 87 WHEN IT IS HEARD. SENATOR COFFIN SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS HORSFORD AND HARDY WERE ABSENT FOR THE VOTE.) BUDGET CLOSED. We will close the hearing on B/A and open the hearing on B/A High Level Nuclear Waste Budget Page ELECTED-13 (Volume I) Budget Account BRUCE BRESLOW (Executive Director, Agency for Nuclear Projects, Office of the Governor): I am present to answer questions as needed on this budget.

10 Page 10 STEVEN J. ABBA (Principal Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau): This budget begins on page 2 of Exhibit C. The Governor s original budget eliminated five of the seven existing positions in decision unit E-606. Coinciding with the Work Session held by the full committees on April 1, 2009, the Department of Administration has submitted Budget Amendment No. 59 requesting two of the five eliminated positions be restored. The two positions requested for restoration are the technical division administrator and the planner/researcher. The positions that will be eliminated include the accountant, the management analyst and the planning division administrator. E-606 Staffing and Operating Reductions Page ELECTED-15 In addition to the restoration of the two positions, the budget amendment requests $50,000 each year to be used for contract services for the incumbent in the planning division administrator position. Although the incumbent has retired, he is still the most knowledgeable person in the Agency concerning its history over the past 20 years. The Executive Director felt it was important to retain continuity of that experience in working with the Nuclear Regulatory Commission. The total cost of Budget Amendment No. 59, as proposed, would add General Funds to the budget of $340,514 in FY and $342,885 in FY The middle of page 3 of Exhibit C outlines duties and responsibilities of the two positions being requested for restoration. Exhibit C, pages 6 and 7 contain a conceptual scope of work and proposed contract with the former incumbent in the planning division administrator position. The duties listed in the conceptual scope of work are similar to the duties currently performed by the individual with the exception of managing the office and oversight of other contractors. Staff feels the request for elimination of the management analyst and accountant positions is reasonable. The accounting responsibilities will be transferred to the Division of Administrative Services and the Agency will pay a cost allocation for that service. The management analyst has been vacant since July 2007, and the duties have been transferred to other staff. Page 4 of Exhibit C provides 3 options for closing this budget. Option No. 1 is to approve the Governor s original recommendation to eliminate the five positions at a savings of $632,003 in FY and $636,426 in FY Option No. 2 is to approve Budget Amendment No. 59, restoring the two positions and adding $50,000 annually for contract services with the retired planning division administrator. Option No. 3 is the Staff recommendation to approve Option 2, without the additional $50,000 annually for contract services from the General Fund. Instead, funding would be moved from the Highway Fund contract category and the Nevada Protection Services category in the amounts of $20,000 and $30,000 respectively, to the State-funded contracts category providing the expenditure authority to contract for the proposed contract position. The result would be a General Fund savings of $50,000 in each year of the biennium.

11 Page 11 We want to ensure the authorization to transfer funds within the categories is included. SENATOR RHOADS MOVED TO CLOSE B/A WITH OPTION NO. 3 FOR DECISION UNIT E-606 AS RECOMMENDED BY STAFF, INCLUDING THE AUTHORITY TO TRANSFER FUNDS WITHIN THE CATEGORIES FOR THE CONTRACT WITH THE FORMER PLANNING DIVISION ADMINISTRATOR. SENATOR WOODHOUSE SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR HORSFORD WAS ABSENT FOR THE VOTE.) MR. ABBA: Decision unit E-806 proposes to place the executive director and the executive assistant position in the unclassified service. Those positions are currently in the nonclassified service. Senate Bill 412, which is the vehicle to make the classification change, is currently in Committee. That bill must be enacted for this action to occur. E-806 Unclassified Position Salary Increases Page ELECTED-16 SENATE BILL 412: Revises provisions governing the employment of staff for the Office of the Governor. (BDR ) The executive director has requested the planning division administrator position be retained in the budget without funding at this time, in case the Yucca Mountain issue exacerbates. Staff agrees with the executive director. Staff proposes the position be included in the Unclassified Pay Bill, pending the approval of S.B The position would not be funded and the Agency would need to appear before the IFC if the position became necessary. The proposal would reduce the amount of work required by the Department of Personnel (DOP) to establish a pay level. It requires no action today. Senate Bill 412 is on the hearing agenda today. MR. ABBA: There are technical adjustments reducing the U.S. Department of Energy (DOE) funds that have historically come into this account which were utilized for litigation costs. These funds are now allocated directly to the Office of the Attorney General. Staff has made the technical adjustment to reduce the funds in this account. When the Committee closes the Attorney General s Special Fund account, B/A , there will be a corresponding action to include the funds in that account. AG - Special Fund Budget Page ELECTED-66 (Volume I) Budget Account

12 Page 12 That budget was closed previously. SENATOR COFFIN MOVED TO CLOSE B/A , DECISION UNIT E-806 AS RECOMMENDED BY STAFF; WITH AUTHORIZATION FOR TECHNICAL ADJUSTMENTS. SENATOR RHOADS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR HORSFORD WAS ABSENT FOR THE VOTE.) BUDGET CLOSED. We will now hear B/A , the Energy Conservation Office budget. Governor's Office Energy Conservation Budget Page ELECTED-34 (Volume I) Budget Account MR. ABBA: The first issue in this account concerns the use of the Petroleum Overcharge Rebate (POR) funds. This is a source of funding in a budget account that is not a part of the Executive Budget. The budget, as submitted, does not include those funds to support the Nevada State Office for Energy Conservation (NSOE) and does not recommend using those funds to provide for the historic transfer of $20,000 annually to the Division of Aging Services (DAS), Department of Health and Human Services, for use as a State match for rural transportation programs under decision unit E-325. When this was discussed in the initial hearing for this budget, the Committees requested Staff to work with the Agency to identify the amount of POR funds that were available and to fully utilize those funds for the operations of this Office. E-325 Services at Level Closest to People Page ELECTED-37 Utilizing those funds would provide for the continuation of the transfer to the DAS for rural transportation and to reduce the need for General Fund support of the NSOE. Staff has worked with the Agency and recommends the utilization of approximately $180,000 of POR funds which will deplete the availability of those funds in the future. This action will save $140,000 in General Funds in NSOE and Title XX funds in the DAS budget that was used to backfill the POR funds that were not transferred in the Executive Budget. This source of funding will be depleted after the biennium. The funds do not have a specific use and can be utilized for the purpose recommended by Staff. Additionally, the State Energy Program (SEP) Grant this organization receives has not increased for the past several years. That has resulted in a General Fund backfill to cover costs previously covered by the SEP Grant. After the biennium, unless the SEP Grant increases, there is a possibility the Agency may need to consider downsizing activities or staff.

13 Page 13 The second major item in this budget is that the Agency is expected to receive a significant amount of American Recovery and Reinvestment Act of 2009 (ARRA) funds. The ARRA legislation contains an ability to utilize indirect charges for administrative costs. We are unsure, at this time, how that would apply to this Agency. Staff proposes the Committee approve the cost allocation maximizing the use of POR funds and issue a letter of intent to require the NSOE, the Budget Office, and the Fiscal Analysis Division to work, during the interim, to identify other funding from the ARRA funding that may be used to offset the General Funds. CHAIR RAGGIO: I will temporarily assume the Chair of the Committee. Is a motion in order for the first decision item in B/A ? A quorum is present. SENATOR COFFIN MOVED TO APPROVE DECISION UNIT E-325 OF B/A AS RECOMMENDED BY STAFF; INCLUDING A LETTER OF INTENT FOR USE OF SEP OR ARRA FUNDING IF AVAILABLE. SENATOR HARDY SECONDED THE MOTION. SENATOR HARDY: Are we creating a hole in this budget for future biennia? MR. ABBA: That is a possibility. That source of funding was not being utilized and is available for the biennium; however, it will not be replenished unless future settlements occur. SENATOR HARDY: It will not be the first hole we have created in this budget. THE MOTION CARRIED. (SENATORS HORSFORD AND RHOADS WERE ABSENT FOR THE VOTE.) MR. ABBA: We will move to the Other Closing Items. The first item is decision units E-606 and E-800 requesting the elimination of an accountant II position. Staff agrees with the request. The accounting functions for this program will be provided by the Division of Administrative Services. There is funding in the budget to cover the cost allocation. During the first hearing on this budget, concern was expressed regarding the vacancies in this Agency, especially a vacant position that had been approved from the General Fund during the 2007 Legislature. The position is a renewable energy analyst. The concern is the agency had not filled the position which had been a priority in the 2007 Legislative Session. Typically, when positions remain unfilled in that manner, they are eliminated from the budget. In discussions with the Agency, Staff considers this to be an important position. In light of the ARRA funding that will become available, Staff recommends a continuation of funding for the position. The Agency would make focused efforts to fill the vacancy as quickly as possible. E-606 Staffing and Operating Reductions Page ELECTED-37

14 Page 14 E-800 Cost Allocation Page ELECTED-39 Item No. 3, under Other Closing Items, is the Agency s request to move its office, currently located in Carson City, to Reno. There was concern regarding the request because the executive director for the NSOE is part of the Governor s staff. Since that time, Staff has learned the executive director has an office in the Capitol Building which would be maintained. The other office in Carson City is too large for the NSOE. The rent cost, per square foot, is too expensive and the landlord will not renegotiate the lease; therefore, the Agency needs to move regardless. Staff has no recommendation on whether she should be allowed to move the office to Reno as she prefers or to remain in Carson City. Staff requests authority to make technical adjustments based on the assumption the rent costs would be lower. Staff recommends the space in the Capitol Building be maintained for the executive director. The plan is for the executive director to work in Carson City two or three days each week and spend the remainder of her time in the Reno office if the NSOE is moved there. There are two decisions for the Committee. The first is to allow the Agency to move and the second part of the decision is whether to allow them to move to Reno or require them to stay in Carson City. CHAIR RAGGIO: The Staff recommendation appears reasonable. Does someone from the Agency wish to discuss this item further? Staff has stated there would be a small office for the executive director near the Governor s office; the current lease is ending and that space is much larger than necessary. If the primary office is relocated to Reno, the executive director would not be authorized per diem expenses for her travel between the offices. MR. ABBA: The executive director would have two site locations, one in Reno and one in Carson City. SENATOR COFFIN MOVED TO APPROVE THE STAFF RECOMMENDATIONS FOR MOVING THE OFFICE TO RENO WITH NO PER DIEM FOR THE EXECUTIVE DIRECTOR S TRAVEL BETWEEN OFFICES; TO APPROVE DECISION UNITS E-710 AND E-805 AS RECOMMENDED BY STAFF; AND AUTHORIZATION OF TECHNICAL ADJUSTMENTS. E-710 Replacement Equipment Page ELECTED-39 E-805 Classified Position Reclassifications Page ELECTED-40 MR. ABBA: The technical adjustments include redistribution of a grant between the two fiscal years. The Executive Budget had placed all grant funding in one fiscal year. SENATOR MATHEWS SECONDED THE MOTION.

15 Page 15 SENATOR HARDY: Does the motion include the recommendation to provide the flexibility to maintain office sites in Reno and the Executive Director s office in Carson City? SENATOR MATHEWS: That is correct. The result would be downsizing of the office space. THE MOTION CARRIED. (SENATOR HORSFORD WAS ABSENT FOR THE VOTE.) BUDGET CLOSED. MR. ABBA: Item No. 2, on page 11 of Exhibit C, does not require a Committee closing action; however, it is new information. The ARRA funding included $3.1 billion to the DOE to be used through the SEPs. Nevada will be eligible for $37,714 million through the SEP Grant. There is no match funding required. Exhibit C includes information on how the Grant would be distributed and broad descriptions of the purposes for which the Grant may be used. The NSOE has provided preliminary information in its application. Staff would like the NSOE to address requirements they must meet prior to May 12, The NSOE drafted a work program to bring before the IFC, but withdrew the request because they had not yet received the Grant award. CHAIR RAGGIO: The Agency may present the information. MARTIN RAMIREZ (Consultant, Nevada State Office of Energy): I will keep my comments general because significant amounts of guidance are still missing from the DOE. The application has not yet been approved and there are several pieces of Legislation that may impact the ARRA funding. Nevada is scheduled to receive $34.7 million for the SEP. The funds must be allocated no later than September 30, 2010, and spent by March 31, We have recently received notification that the initial application for 10 percent of these funds has been approved; however, the funds have not yet been drawn. The initial 10 percent is to be used to establish an administrative infrastructure for reporting, project oversight and management of the balance of activities. In consult with the Governor, the Agency has determined six primary areas that constitute allowable projects under the ARRA provisions: To retrofit selected State-owned buildings with certain technologies to achieve annual savings of at least 10 million-source British Thermal Units for every $1,000 of total investment. The Agency has requested information from other State agencies. The information will be reviewed with the State Public Works Board to rank and prioritize which buildings

16 Page 16 should be retrofitted. Allocation of $7 million has been recommended for this project. Increase energy efficiency to reduce energy costs and consumption for certain utility consumers while working with Nevada retail electric utilities. A working group has been established, comprised of NV Energy, Southern Nevada Water Authority and other municipal agencies that meet regularly with the NSOE to determine how ARRA funds could be leveraged with its funds to improve energy efficiency in areas such as weatherization or rebates. Establish a rebate program for certain new hybrid car purchases. They will work with the Department of Motor Vehicles (DMV) and serve customers on a first come, first serve basis to pay the first year of registration fees for the hybrid car s registration. The automobile dealers will be notified and they will work with consumers. They can advertise this advantage. One million dollars will be allocated for this purpose. Establish a revolving loan fund to support renewable energy projects in Nevada for reduction on reliance of imported energy. This would target large-scale projects, such as power plants, for each renewable type of energy such as wind, solar, geothermal, biomass or biofuel. The allocation for these projects is $11 million. Create a renewable energy transmission infrastructure. An allocation of $3 million will be made for environmental impact studies. Adoption of the 2009 International Energy Conservation Code regulations to achieve 90-pecent compliance. An allocation of $1 million will be authorized for this required item. Other considerations include $2 million for third-party verification which will monitor the activities of these projects. Approximately $2.7 million has been set aside for administration, project management and monitoring functions over the three-year period of these activities. Nevada is also scheduled to receive $31.9 million in energy efficiency conservation block grant funds. Seventy percent of those funds will be allocated directly to the ten largest cities and the ten largest counties in the State. The remaining 30 percent will be received by the NSOE. An application must be submitted prior to May 26, 2009, to receive these funds. Ten percent, or $959,000 of these funds, is allowable for administration. Of the remaining funds, 60 percent will be allocated for small counties and cities that were not included in the 70 percent of funds for energy efficiency programs. Applications for funding will be submitted to the NSOE for proposed projects locally. The NSOE is collaborating with the Nevada Association of Counties and the Nevada League of Cities to schedule workshops. The first workshop will be held on May 15, 2009, to provide guidance and technical assistance for application submittals. The remaining 40 percent of the funding will be reserved for programs under the SEP. The NSOE are considering augmenting the revolving loan program or applying the funds to retrofit State buildings.

17 Page 17 Nevada has two other possibilities to receive additional energy-related funding under the ARRA program. Approximately $300 million is dedicated to an appliance rebate program, but no guidance has been provided to date. Another $400 million is allocated to a competitive block grant for energy efficiency and conservation on which we are also awaiting guidance. CHAIR RAGGIO: Is this a preliminary plan for the ARRA funding? Do all the activities have to be reported to the DOE? MR. RAMIREZ: This is a preliminary plan. There is an application for both the $34.7 million and the $9.5 million allocated directly to the NSOE. Two milestones must be achieved for the $34.7 million in order to receive the second half of the funding. The NSOE has been approved for the 10-percent allocation. An application will be submitted for the other 40 percent. For receipt of the final 50 percent, the NSOE must report they have allocated at least 50 percent of the funding already received, and that they have met the reporting requirements. Secondly, the State must report on its progress and comply with the DOE requirements. None of these funds have been included in the Executive Budget; therefore, the NSOE will present work programs to the IFC to receive authorization for those expenditures. CHAIR RAGGIO: There is no action for the Committee to take at this time. During the interim, the IFC will want progress reports on these funds. I will now relinquish the Chair. The next budget account is B/A , the Office of the Secretary of State (SOS). Secretary of State Budget Page ELECTED-127 (Volume I) Budget Account BRIAN M. BURKE (Principal Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau): This budget begins on page 20 of Exhibit C. Staff has identified five major closing items. Decision unit E-325 concerns the replacement of Special Services revenues with General Fund revenues. The SOS currently charges fees from $125 to $1,000 for expedited document processing. One-half of the revenues are deposited with the State Treasurer for credit to the Special Services account of the SOS. The other one-half is deposited directly into the General Fund. E-325 Services at Level Closest to People Page ELECTED-130 The Committee has discussed throughout the interim, and during this Session s budget hearings, that Special Services revenues have decreased significantly. The decrease is caused by economic conditions and enhanced online filing capabilities within the Office.

18 Page 18 Page 21 of Exhibit C contains a chart reflecting the decreasing revenues between FY and projected through FY As requested by the SOS, the Governor has recommended a statutory revision that would eliminate transfers to the Special Services account and remove them as a funding source in the primary account. Under this plan, 100 percent of Special Services revenues would be deposited directly into the General Fund. The lost revenue in the primary account would be replaced with General Fund appropriations. These transfers are included in the Executive Budget. The first decision for the Committee is whether to approve the Governor s recommendation as requested. Senate Bill 53 is currently being processed and would make the statutory changes for this request to deposit 100-percent of the Special Services revenue into the General Fund. SENATE BILL 53 (1st Reprint): Makes various changes relating to the Office of the Secretary of State. (BDR ) SENATOR RHOADS MOVED TO APPROVE DECISION UNIT E-325 TO TRANSFER 100 PERCENT OF THE SPECIAL SERVICES REVENUE INTO THE GENERAL FUND AND REPLACE THE FUNDING IN B/A WITH GENERAL FUNDS AS RECOMMENDED BY THE GOVERNOR. SENATOR RAGGIO SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS HORSFORD, COFFIN AND HARDY WERE ABSENT FOR THE VOTE.) MR. BURKE: Secondly, the SOS announced the Office received a $1.62 million settlement from the Auction Rate Securities negotiated by the North American Securities Administrators Association. The SOS has deposited the settlement proceeds in the Investigations and Enforcement Revolving Account pursuant to the Nevada Revised Statutes (NRS) The unobligated balance in the Revolving Account is approximately $1.7 million. The SOS has proposed a number of uses for the settlement and unobligated reserve funding. The SOS provided correspondence to the members of the Committee last night on this item. Several addbacks have been proposed. The most significant item would fund the supplemental appropriation recommended by the Governor for the Special Services revenue shortfall in FY Funding the supplemental appropriation with revenues allocated from the Auction Rate Securities settlement would result in General Fund savings totaling $942,006 in FY as compared to the Governor s recommended budget. Page 22 of Exhibit C contains a list of the adjustments suggested by the SOS, in order of priority, for Committee consideration. Each of these items will be described in greater detail as we work through Exhibit C. The Auction Rate Securities settlement is a one-time funding source and the list includes a mix of one-time and ongoing expenditures.

19 Page 19 Staff would suggest the Committee take action to revert the settlement proceeds and unobligated revolving fund reserves in FY to the General Fund. Staff requests authority to submit a bill draft request to process this transaction, if necessary. The individual add-back decisions in the table can be made as the items are discussed throughout the closing process. Staff requests authority to revert the funds into the General Fund and pursue any legislation that might be necessary. SENATOR RAGGIO MOVED TO GIVE STAFF THE AUTHORITY TO REVERT THE AUCTION RATE SECURITIES SETTLEMENT FUNDS AND UNOBLIGATED REVOLVING FUND RESERVES TO THE GENERAL FUND AND PURSUE LEGISLATION FOR THIS ITEM AS NEEDED. SENATOR RHOADS SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS HORSFORD AND HARDY WERE ABSENT FOR THE VOTE.) MR. BURKE: Item No. 3 is a supplemental appropriation included in the Executive Budget. The Legislatively-approved budget for FY anticipated the Special Services revenues would total $5.63 million. That amount was built into its operating account. The SOS projects actual receipts of approximately $2.84 million which resulted in an estimated $2.79 million shortfall. The Office has taken a number of actions to address the shortfall internally. They have eliminated positions in FY , reduced expenditures, reallocated costs to other accounts and balanced forward the remaining cash of $717,000. These actions have not fully erased the shortfall. The supplemental appropriation request in the Governor s budget of $942,000 has two components. The first component is the primary funding shortfall. The second is $42,000 that was approved by the IFC on February 3, 2009, to match a Help America Vote Act (HAVA) Grant. No bill draft request has yet been submitted to process the supplemental request. The Office staff has advised the Legislative Counsel Bureau (LCB) Fiscal staff that it may begin experiencing cash flow problems toward the end of May Does the Committee wish to approve the Governor s recommendation for a supplemental appropriation? If so, Staff needs authority to process a BDR to implement the action. If the Auction Rate Settlement proceeds are diverted as described, the resulting General Fund revenues could be used as a funding source as proposed by the SOS. It would result in General Fund savings of $942,006. If the BDR is introduced, there is a small amount of time to revise the estimates so the amount requested in the bill can be changed based upon salary adjustments and Special Services revenue estimates. Would that mean perhaps more savings?

20 Page 20 MR. BURKE: That is correct. SENATOR RAGGIO MOVED TO APPROVE THE GOVERNOR S RECOMMENDATION FOR THE SUPPLEMENTAL APPROPRIATION AND TO AUTHORIZE THE BDR THAT WOULD BE NECESSARY TO PROCESS AND IMPLEMENT THE REVERSION OF THE AUCTION RATE SECURITIES FUNDS. SENATOR COFFIN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR HORSFORD WAS ABSENT FOR THE VOTE.) MR. BURKE: Item No. 4 is the transfer of the Investigations and Enforcement account merging it into the main operating account in decision units E-903 through E-911. The LCB Staff supports the proposal to merge the two accounts. E-903 Trans Base from Investigations/Enforcements to SOS Page ELECTED-133 E-904 Trans E710 from Investigations/Enforcements to SOS Page ELECTED-134 E-905 Trans E250 from Investigations/Enforcements to SOS Page ELECTED-134 E-906 Trans M160 from Investigations/Enforcements to SOS Page ELECTED-135 E-907 Trans M300 from Investigations/Enforcements to SOS Page ELECTED-135 E-908 Trans E670 from Investigations/Enforcements to SOS Page ELECTED-136 E-909 Trans E671 from Investigations/Enforcements to SOS Page ELECTED-136 E-910 Trans E672 from Investigations/Enforcements to SOS Page ELECTED-136 E-911 Trans E673 from Investigations/Enforcements to SOS Page ELECTED-137 There are a number of technical issues associated with this merger. First, because NRS includes specific provisions regarding how the funds in the revolving account are to be used, Staff suggests related expenditures be removed from the general categories and Staff be allowed to segregate the expenditures into unique expenditure categories. It would improve the

21 Page 21 expenditure tracking and ensure the nonreverting portion of the fund is appropriately accounted for. The LCB legal counsel has indicated that a statutory change is needed to proceed with the merger. Fiscal Staff suggests, if the Committee wishes to approve the merger, that authorization be given to Staff to request Legislation removing the revolving account provisions of NRS Revenues from the miscellaneous fines assessed by the Security Division fund the operating expenditures associated with investigation and enforcement activities. These revenue receipts fluctuate drastically making it difficult to predict the timing and amount of revenue that will be generated. As a result, it is necessary to maintain a significant reserve to ensure sufficient cash flow is available at the beginning of the year to fund the unique expenditures. While the current statute provides a balance-forward provision, it conflicts with the Authorizations Act. Fiscal Staff suggests language be added to the Authorization Act to allow the balance-forward of fine revenues and allow the Office to receive revenues beyond the Legislatively-authorized amounts, subject to the approval of the IFC. The decision for the Committee is outlined on page 24 of Exhibit C. Staff feels the merger is reasonable. If so, does it wish to allow Staff to create the unique expenditure categories, to draft legislation to enable the merger of the accounts by removing the revolving account allowing revenues to be deposited directly into the main operating account, to add language to the Authorizations Act or whatever statutory provisions are necessary to allow the balance forward of fine revenues and to allow the Office to receive revenues beyond Legislatively-authorized amounts subject to the approval of the IFC? SENATOR COFFIN MOVED TO APPROVE THE MERGER OF THE INVESTIGATIONS AND ENFORCEMENT ACCOUNT WITH THE MAIN ACCOUNT; TO ALLOW STAFF TO CREATE THE UNIQUE ACCOUNTING CATEGORIES FOR TRACKING PURPOSES; TO DIRECT STAFF TO SEEK LEGISLATION TO ENABLE THE MERGER OF THE ACCOUNTS; TO ADD A STATUTORY PROVISION IN THE AUTHORIZATIONS ACT TO ALLOW THE BALANCE FORWARD OF REVENUES SUBJECT TO THE IFC APPROVAL AND TO APPROVE DECISION UNITS E-903 THROUGH E-911. SENATOR RAGGIO SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR HORSFORD WAS ABSENT FOR THE VOTE.) MR. BURKE: The final major item in this budget is the budget reductions in decision unit M-160. The Governor proposes to eliminate FTE positions in the SOS s main operating account. This reflects a continuation of the reductions made during the current biennium. The chart on page 24 of Exhibit C identifies the eliminated positions. The SOS has reported the position reductions impact Office operations. The impact of increased telephone activity and online filing processes are being absorbed by existing staff. The current staffing levels have

22 Page 22 been sufficient to meet the workload due to a decline in filing activities. However, processing times have increased and the Office indicates significant revenue implications could be realized when the economy improves and filings, revenue and workload related to revenue, increase. The SOS has asked for consideration to make two modifications to the Governor s recommendation. They request the restoration of two FTE Elections Division positions including a legal research assistant and a legal secretary II. The addback will be approximately $136,117 in FY and $138,665 in FY The Office indicates if these positions are not restored the staffing level of the Elections Division would be diminished by 40 percent. These positions are Item Nos. 3 and 4 on the SOS s add-back priority list. SENATOR COFFIN MOVED TO RESTORE THE TWO POSITIONS IN THE ELECTIONS DIVISION. SENATOR COFFIN: This Division is the point of access for information on elections by the public and the press. It is the foundation of our State. SENATOR WOODHOUSE SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR HORSFORD WAS ABSENT FOR THE VOTE.) MR. BURKE: The SOS has asked that 6.0 FTE positions, left vacant during FY as recommended by the Governor, be retained on its roster without funding. The affected positions would be four FTE administrative assistant positions, one FTE personnel technician and one FTE accounting assistant. The Office indicates this would allow the SOS to request funding through the IFC for individual positions should the need arise and justification be presented. Staff has no recommendation on this request. If additional staffing needs arise during the interim, approval by the IFC would be required to provide funding for the positions regardless of whether they are on the Office roster or not. We have done this in other situations. What are we doing if we authorize the position without funding authorization? Does the Agency appear before the IFC to make a case that the position now needs to be funded? Is the funding then allocated from the Contingency Fund or from the General Fund? MR. GHIGGERI: Leaving an authorized position in the budget without funding would require the Agency to request funding through the IFC. Historically, when the Committee eliminates a position it is eliminated from the roster. What is the funding source when the IFC approval to fund the position is authorized? MR. GHIGGERI: It would be allocated from the IFC Contingency Fund.