Call to Order and Roll Call
The 2nd meeting of the Interim Joint Committee on Appropriations and Revenue was held on Thursday, September 23, 2010, at 1:00 PM, in Room 154 of the Capitol Annex. Senator Bob Leeper, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Bob Leeper, Co-Chair; Representative Rick Rand, Co-Chair; Senators Tom Buford, Denise Harper Angel, Ernie Harris, Jimmy Higdon, Ray S. Jones II, R.J. Palmer II, Joey Pendleton, Brandon Smith, Robert Stivers II, Gary Tapp, Elizabeth Tori, and Jack Westwood; Representatives Royce W. Adams, Dwight D. Butler, Jesse Crenshaw, Mike Denham, Bob M. DeWeese, Danny Ford, Derrick Graham, Keith Hall, Jimmie Lee, Reginald Meeks, Harry Moberly Jr., Fred Nesler, Sannie Overly, Don Pasley, Marie Rader, Jody Richards, Arnold Simpson, Tommy Thompson, Tommy Turner, Jim Wayne, Alecia Webb-Edgington, Ron Weston, and Brent Yonts.
Guests: Mr. Revis James, Director, Energy Technology Assessment Center, EPRI; Secretary Nikki Jackson, Kentucky Personnel Cabinet; and Commissioner Fred Nelson, Department of Employee Insurance.
LRC Staff: Pam Thomas, John Scott, Charlotte Quarles, Eric Kennedy, Jennifer Hays, and Sheri Mahan.
Representative Lee moved to adopt the minutes from the previous meeting as written. The motion was seconded by Representative Simpson. The motion carried by voice vote.
The agenda consisted of testimony regarding the Electric Power Research Institute (EPRI) prism/MERGE study concerning CO2 emissions. Also the Personnel Cabinet provided an update concerning state employee health insurance for 2011, and the status employee reductions and furloughs.
EPRI Prism/MERGE study of the economic impact of CO2 emissions
Mr. Revis James, Director of the Energy Technology Assessment Center for EPRI presented an energy and economic analysis of carbon storage and creating a low carbon future. Mr. James explained the study, stating that the Prism study analyzed the effects of potential reductions in electric sector CO2 emissions, based on assumptions of feasible technology performance and deployment of advancements. Regional economic impacts were also studied and reported under various scenarios. The MERGE study analyzed the impact of expected CO2 policy, technology costs, and future technology on the United States economy.
In the Prism study various strategies and technologies were analyzed, including implementing energy efficiencies, and the increased use of alternatives such as renewable, nuclear, carbon storage, electric vehicles, and emerging electro-technologies. The basic results showed that as additional alternatives are implemented, carbon emissions decline. The Prism 2.0 model looked at the energy production blend from 2010 through 2050, based upon future carbon emission standards. The model showed a growth in efficiencies and renewable generation sources, and it also illustrated the need for a managed transition for the existing coal generators. This time frame also shows slow growth in wind generation, while nuclear generation and carbon capture and storage technologies expand. He discussed regional generation mixes, stating that in the model the south region, of which Kentucky is part, showed a significant decrease in coal usage and an increase in new nuclear generation capacity.
The MERGE energy-economic analysis model focused on the effects of greenhouse gas regulation, and costs of energy resources and technologies on the United States’ economy. Mr. James discussed several different scenarios which show the probable decrease in coal consumption to meet future CO2 emission standards.
In response to a question from Representative Wayne, Mr. James stated that EPRI is funded by almost all investor owned, cooperative, and public electric companies, and he emphasized that EPRI is not a lobbying group. He also discussed the costs related to utilizing solar energy.
In response to comments and a question from Representative Hall, Mr. James discussed all elements that effect electricity costs to the consumer. The MERGE model reflected a 50% increase in electricity production costs between 2012 and 2050. Cost to the consumer should also be expected to rise.
In response to a question from Senator Jones, Mr. James stated there are no supply difficulties for uranium and that most of the imports of uranium into the United States come from Australia and Canada. He also discussed various methods of nuclear energy production using uranium as fuel stock.
Personnel Cabinet: Furloughs and Biennial Personnel Reductions/Restrictions
Secretary Nikki Jackson of the Kentucky Personnel Cabinet discussed state employee furloughs and personnel reductions and restrictions which are being implemented by the Cabinet. She stated the furlough implementation goals are to achieve budget savings to avoid layoffs, to honor HB 1 obligations, to provide equitable and transparent administration, and to minimize the impact to the public. She discussed the Cabinet’s legal obligations as set forth in HB 1 and the actions being taken by the Cabinet to comply. She stated that the three designated furlough days have been planned in conjunction with existing state holidays. Also, non-designated days are expected to be staggered which will allow for limited closures of state offices. Secretary Jackson then discussed personnel restrictions and reductions. She stated that the Cabinet will meet the required expenditure reductions of $131 million, which will include an estimated $5 million reduction of non-merit personnel costs.
In response to a question from Representative Webb-Edgington, Secretary Jackson explained the Block 50 process. Managers are being asked to encourage employees approaching Block 50 eligibility to take compensatory time if possible.
Several members voices their displeasure that the administration has allowed the public to believe it was the legislature that conceived the furlough budget reduction scheme.
In response to a question from Representative Graham, Secretary Jackson stated that the Cabinet will provide the committee with the number of state employees who can be classified as “double dippers”.
Representative Meeks asked for the Cabinet to provide a number of all classified, non-classified, merit and non-merit employees that will be involved in the furloughs.
In response to a question from Representative Rand, Secretary Jackson stated the Cabinet has not yet produced a furlough plan for 2012.
Kentucky State Employee Health Insurance for 2011
Commissioner Fred Nelson of the Department of Employee Insurance addressed the committee regarding changes in the 2011 health insurance plan. He discussed various challenges faced while developing the 2011 plan, which included the state’s budget shortfalls, continued health plan inflation, and federal health care reform mandates. He discussed the plan year 2011 principles and goals as approved by the Kentucky Group Health Insurance Board, then he provided a basic outline of the employee health insurance plans to be offered for 2011. Commissioner Nelson next discussed the 2011 plan year open enrollment, set to begin October 11, 2010. Employee benefit fairs will be held throughout the state, along with health fairs to be held in seven locations statewide. One change in open enrollment is that employees will be required to use the Kentucky Employees Health Plan (KEHP) Benefits Analyzer, which is an online tool designed to help members select the appropriate insurance for them based on their healthcare needs and finances. He also discussed various wellness efforts implemented by KEHP.
In response to a question from Representative Graham, Commissioner Nelson described how the benefit analyzer will be used by employees during open enrollment.
In response to questions from Senator Westwood, Commissioner Nelson replied that to comply with federal law, the actually premium for coverage is the smoker rate. Non-smoker rates are the actual cost of the coverage minus the non-smoker incentives. He stated that the 2012 insurance plan has not been finalized, and with the new federal requirements, the plan will need to be analyzed again before rates can be set.
Being no further business, the meeting was adjourned at 3:20 p.m.