Gaming regulators surprise lawmakers with unexpected $10M request for technology upgrade
The Gaming Control Board thought it needed almost $3.6 million from the state to finish replacing its decades-old information technology system that oversees all aspects of the state agency.
It turns out the estimate was off by $10 million.
Control Board Chairman Kirk Hendrick, who was appointed to the role in January, said during a Monday Senate Finance Committee hearing on SB490 that the original budget item presented to the governor’s office last September had a $3.6 million cost to complete the migration away from computer software created in the 1980s to a modern operating system.
However, he found out the amount submitted wouldn’t cover the cost that the system replacement required, and without additional funding, the agency would have been forced to return to the Legislature in 2025 to ask for more funds.
“You have to get off of a 40-year-old computer system or bad things could happen,” Hendrick said in an interview Wednesday. “The system is used for running all the board functions. Every single division uses pieces of this system. It's way past its retirement age.”
Senate Finance Committee members were irked during the Monday hearing, given the large budgetary request with little forewarning and with less than a month left in the state’s 120-day legislative session.
“This is like an extra $10 million that we didn't contemplate, and I'm just trying to figure out, how was that overlooked?” asked State Sen. Dina Neal (D-North Las Vegas).
“Unfortunately, I don’t have an honest answer for you,” Hendrick said.
Senate Majority Leader Nicole Cannizzaro (D-Las Vegas) said it was “hard to wrap my mind around” the control board asking for “significantly more [funds]” less than three weeks from the Legislature adjourning.
“[We] tried to do a further deep dive into why that happened,” Hendrick said. “We haven’t gotten a better answer and I apologize for that.”
The committee did not take any action on the bill.
Control board staff took a closer look at the project once Hendrick took over as chairman of the 400-person agency, which is charged with regulating and enforcing the laws associated with Nevada’s largest industry.
He told the committee the agency’s technology division “dove really deep into this,” adding that he was willing to “fall on his sword” for the agency. “I’m not trying to blame anyone, but you're correct. It's $10 million off.”
Hendrick said in an interview the migration project began in 2014. He wanted the agency to work with the vendor to finish installation in order to move the control board away from the antiquated system.
“I don't know why it was represented that we would only need $3.6 million from the Legislature this biennium and then after that, any future maintenance or development could be handled internally,” Hendrick said.
After internal discussions in the agency and with the vendor, and determining the total project would cost $13.6 million, Hendrick said he wanted to go back to the lawmakers immediately and correct the record so the board wouldn’t return and ask for additional funds in two years.
He said the vendor, HTC Global, must complete certain milestones during specific dates under the contract.
“I was telling [the committee] what it would take for this to be done in two years,” Hendrick said. “It makes no sense kicking the can down the road.”
Hendrick said the change in operating system technology by the control board was not part of an overall look at improving the technology division’s testing that was requested by Gov. Joe Lombardo during his State of the State address in January.
“It has to do with them in the sense that they still review all applications submitted through the system,” Hendrick said. “It's management software rather than testing software.”
Jim Barbee, chief of the control board’s technology division, told the committee the new system could last 20 to 30 years.
Hendrick said the system brings modern technology to the gaming industry.
“We started with the most important piece first, which was licensing and taxes. So now the licensees are able to pay taxes online,” Hendrick said.