Officials from Gov. Joe Lombardo’s administration described Nevada’s government Wednesday as slow and rife with inefficiencies, with outdated systems that make recruiting and retaining state workers difficult.

But Lombardo is hoping to eliminate those issues and boost state services through a wide-ranging government administration bill, SB431.

“Lombardo believes that, at its core, state government is a service organization. As such, we as state employees provide service to the people and businesses in Nevada, and we should do so at the lowest cost and with the greatest efficiency,” Ben Kieckhefer, Lombardo’s chief of staff, said during the bill’s first hearing Wednesday. “Unfortunately, over the years, the operations of state government have grown stale. There are too many restrictions on how we operate.”

He pitched the bill as a salve to myriad issues affecting the state’s ability to serve its residents, including a cap on state worker salaries blamed for making hiring difficult, disincentives for seeking federal grants, disconnected approaches to workforce development and the need to save more state funding.

But Democratic lawmakers on the Senate Government Affairs Committee were highly critical of several provisions of the bill, including portions that would limit the power of the Legislature’s Interim Finance Committee (IFC) — a group of lawmakers responsible for approving many federal grants and reviewing most budget changes made outside of legislative sessions — and grant the governor control over a pot of potentially hundreds of millions of dollars with broad flexibility to use in support of infrastructure and economic development projects.

Sens. Skip Daly (D-Sparks) and James Ohrenschall (D-Las Vegas) expressed concern that those provisions — including a broad statement in the bill that would prohibit IFC from taking any action “that interferes with or intervenes in the execution of the operations of the state government” — could lead to more special sessions by disrupting the existing structure of interim budget activity.

Ahead of the hearing, the governor’s office already abandoned one major proposal included in the bill’s original version, which sought to establish a cabinet of five secretaries within the executive branch. The decision came after the Legislature’s budget committees did not approve full funding for those positions.

Proponents of the bill argued that other major changes in the bill, including an overhaul of the Department of Employment, Training and Rehabilitation (DETR), which would become the Department of Workforce, would help modernize a state government limited by redundancies and laws that have not kept up with the state’s growth. 

Joining Kieckhefer, several former high-level state government employees — including Marlene Lockard, who served as the state’s chief information officer under two governors from 1995-2000, and Daniel Stewart, who served as chief strategy officer to Gov. Steve Sisolak and chief counsel to Gov. Brian Sandoval — highlighted issues with the existing structure of the executive branch.

“Too often, the senior staffers spend their days dealing with HR complaints, interagency feuds, jurisdictional blind spots and a total lack of staff resources and many other immediate problems,” Stewart said. “Our most marginalized communities, or anyone else that can't afford a lawyer or a lobbyist to help them, are most hurt when our government misfires.”

Stewart said the problems discussed Wednesday have “plagued state government” for decades and that “many of the ideas that are in this bill were discussed and developed in the previous administration.”

Lockard argued in favor of a provision to establish an independent information technology office within the governor’s office, which would replace the Enterprise IT Services Division within the Department of Administration. She said that would “better facilitate and coordinate collaboration among state agencies, aligning IT projects.”

Kieckhefer described the two proposed cabinet positions — chief information officer and chief innovation officer — as focused on long-term strategic planning, with the information officer focused on IT and the innovation officer focused on HR.

Kieckhefer said existing understaffing prevents the governor’s office from spending time on strategic thinking, but some Democratic senators questioned the need to spell out those roles in state law given that the governor’s office already has broad authority to hire the staff they need.

State employee management

Supporters of the bill emphasized that lifting a cap on state employee wages — set at 95 percent of the governor's annual salary, which is roughly $170,000 — would help attract workers, from water engineers to accountants, who can generally find higher pay for similar jobs in the private sector and local governments.

Officials with the governor’s office described the cap as creating salary “compaction,” making it difficult to provide raises to many employees without having their pay bump up against the pay level of their supervisors.

Jim Wells, Lombardo’s deputy chief of staff, said that under the governor’s proposal to provide state workers with raises, some employees, such as department heads, would hit the pay cap,  leading to supervisors and subordinates reaching the same level of pay — despite a desire to maintain a gap between such employees.

Beyond removal of the cap, the bill proposes streamlining the hiring process for state workers.

Kieckhefer said that during Lombardo’s transition into office, every state agency listed vacancies among their top issues. 

He added that the changes in the bill broadly shift the system “to an evaluation of experience and education, rather than an examination process.” State law governing hirings includes a slew of provisions about competitive examinations to test the fitness of applicants for state jobs.

Jack Robb, director of the Department of Administration, tied the 24 percent state employee vacancy rate to “the cumbersome process we have of getting people through the system.”

“We could cut our vacancy rate down if we simplified the process,” he said. “It's archaic, and it doesn't match modern society. And we need to put the decision back into the hands of the subject matter experts instead of HR determining what engineering criteria is required for the job or what biology or what accounting, whatever it may be. Let the agencies and subject matter experts weigh that.”

The bill also includes proposals to double the limit on the number of days an employee can accrue in annual leave from 30 to 60, and allow employees to take leave within the first six months of working, which Kieckhefer said is currently not allowed.

Increasing state savings and the Nevada Way Account

During his State of the State address, Lombardo called for significantly increasing the amount of money stored in state savings. SB431 would make good on that promise by raising the cap on the Rainy Day Fund — a savings account used to support state government during financial emergencies — from 20 percent of general fund appropriations in a year to 30 percent.

Under the proposed budget, that could mean boosting the size of the fund from about $1 billion to $1.6 billion. The bill also proposes changing how excess general fund dollars are transferred into the fund by requiring larger transfers into the account if state tax revenue streams overperform.

“We've seen in recent special sessions how quickly we can run through our Rainy Day Fund and still have to make what are incredibly painful cuts to the operations of state government,” Kieckhefer said.

But Democratic senators focused in particular on a proposed new subaccount to be created within the Rainy Day Fund, referred to as the Nevada Way Account. Though it would still act as an emergency savings account when necessary, the funds deposited into the account could be spent on economic development and diversification projects with approval from the governor.

Under the proposal, the Nevada Way Account could hold up to one-sixth of all funds within the Rainy Day Fund (or more than $250 million if the Rainy Day Fund were to max out in the upcoming budget period). Those funds could be used broadly for “transformative projects that can help the state reduce its reliance on its existing tax structure,” Kieckhefer said, adding that it would provide “a flexible bucket of money … to use throughout the interim.”

As one example of such a project, Wells highlighted funding for a water pipeline to the Apex Industrial Park in North Las Vegas.

Any awards from the fund would be reviewed by an advisory committee composed of the governor and four legislative leaders, and ultimately approved by the governor.

Though Wells argued that approval of the bill would effectively mean granting legislative approval to spend the funds, Daly argued that it would run afoul of the Nevada Constitution, which stipulates that the Legislature has the power over state appropriations.

“I do see a problem with giving the executive … that deciding authority,” Daly said.

New workforce agency

DETR Director Chirstopher Sewell said the bill’s move to reorganize and rebrand the agency was an effort to create a one-stop shop for not only workforce and unemployment services, but other social services such as child care.

Stewart pointed to structural issues with how the state is promoting workforce development, with programs in “bits and pieces” spread across “eight different agencies, ​​often with different independent funding streams, different mandates, sometimes competing mandates.”

“This bill will finally combine them all into a single department,” he said.

Sewell said the rebranding was also an effort to move away from the agency’s negative connotations brought on by the pandemic, when it faced an immense backlog of unemployment claims and myriad issues with claims processing. 

“There are certain citizens in this state that think DETR is a four-letter word,” Sewell said. “We need to move on from that.”

Oversight of boards and commissions

Stewart said the bill’s proposed creation of an Office of Nevada Boards, Commissions and Councils Standards was an effort to tackle “structural” problems.

“Right now, many of our agencies in these boards and commissions operate, or at least they think they operate, somewhat independent of the entire state,” Stewart said. “There's no uniformity.”

Wells added that the provisions were meant to address a 2015 U.S. Supreme Court decision holding that state boards made up of market participants (such as occupational licensing boards) could only claim immunity from federal antitrust authority if the boards were subject to “active supervision” from the state. He said creation of the office would extend that “antitrust safety net” to all state boards governed by the office.

Under the bill, the proposed office would be responsible for creating a uniform set of standards for board activities — such as investigations, licensing and discipline, internal controls and legal representation — and a “consistent set of structural standards” for transparency and consumer protection. 

The proposed office would cover not only the state’s dozens of occupational licensing boards, but also any statutory bodies created by the Legislature, including the Commission on Ethics (whose executive director testified against the bill over concerns it could imperil the commission’s independence) and the Tahoe Regional Planning Agency.

Tweaking the Legislature’s Interim Finance Committee

Administration officials also pitched a variety of changes to processes overseen by IFC — an interim body of state lawmakers responsible for approving certain federal grants, gifts, changes to legislatively approved budgets and employee reclassifications outside of legislative sessions.

The changes largely revolved around increasing thresholds for what items require IFC approval, including increasing the threshold for budget amendments from $75,000 to $500,000 and for nongovernmental grants from $20,000 to $100,000. Wells argued those changes are meant to reflect the growing size of the state budget and effects of inflation, as the Legislature is responsible for approval of increasingly larger appropriations.

Wells said that if those changes were applied in the current fiscal year, it would have reduced the number of work programs, or expenditures and grants requiring approval, brought before IFC from around 700 to about 200.

Sen. Edgar Flores (D-Las Vegas), who chairs the Senate Government Affairs Committee, cautioned against changes that might limit transparency and accountability.

The bill separately proposes a change meant to increase the state’s ability to apply for federal grants, as Nevada has historically ranked among the bottom of the nation in terms of its share of federal funding.

Kieckhefer said the bill “contains a legislative pledge not to require state agencies to give back general fund [dollars] when they draw down federal grants.” He noted that under state law, when a state agency receives federal grant funds that align with an objective otherwise funded with state general funds, the agency is required to revert the general funds back to the state.

“It serves as a strong disincentive to applying for federal grants considering the amount of work that goes into that application,” he said.

Though lawmakers on the committee agreed with the intent of the bill to improve the efficiency of state government, Flores foreshadowed continued work on the bill between lawmakers and the governor’s office.

“I think everybody on this committee can appreciate you come in asking for the moon, knowing we'll land somewhere in the middle,” he said. “We all understand how negotiations work.”

Riley Snyder contributed to this report.