Call to Order and Roll Call
The 3rd meeting of the Interim Joint Committee on Appropriations and Revenue was held on Thursday, August 23, 2012, at 1:00 PM, in Room 154 of the Capitol Annex. Representative Rick Rand, 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 Walter Blevins Jr., Joe Bowen, Tom Buford, Jared Carpenter, Denise Harper Angel, Jimmy Higdon, Paul Hornback, Gerald A. Neal, R.J. Palmer II, Joey Pendleton, Brandon Smith, Jack Westwood, and Mike Wilson; Representatives Royce W. Adams, John A. Arnold Jr., John "Bam" Carney, Ron Crimm, Mike Denham, Bob M. DeWeese, Danny Ford, Derrick Graham, Jimmie Lee, Reginald Meeks, Marie Rader, Sal Santoro, Arnold Simpson, Jim Stewart III, Tommy Turner, Jim Wayne, and Brent Yonts.
Guests: John Nicholson, Executive Director, Kentucky Horse Park; Secretary Joe Meyer, Education and Workforce Development Cabinet.
LRC Staff: Pam Thomas, John Scott, Charlotte Quarles, Eric Kennedy, Jennifer Hays, and Sheri Mahan
Representative Yonts moved for the approval of the minutes as written. The motion was seconded by Representative Simpson. The motion carried by voice vote.
Kentucky Horse Park business plan
Mr. John Nicholson, Executive Director of the Kentucky Horse Park, presented the Horse Park’s business plan to the committee, which the legislature mandated during the last Regular Session. He discussed the primary revenue generators for the park, which include equine events, attendance at the equine theme park, campground use, National Horse Center events, and food service sales. In 2012, there will be 87 major equine events held at the park, generating $2.8 million in revenues. He discussed the economic impact of the park, stating that during the 2010 – 2012 biennium the park had contributed $49.7 million in tax revenues to the General Fund.
Mr. Nicholson discussed the governance structure for the Horse Park, which is shared by the Kentucky Horse Park Commission, the Kentucky Horse Park Foundation, and the Tourism, Arts and Heritage Cabinet. He also discussed the human resources structure, stating that there are currently 72 full-time employees. Temporary labor is used primarily in the food service area, and inmates from the Blackburn Correctional Complex facilitate trash pickup, stall cleaning and landscaping. The park has an active volunteer program, with 160 volunteers donating 11,000 hours of work time to the park during 2011.
Mr. Nicholson discussed the park’s future revenue and expenditure strategy. He anticipates growth in revenues of $345,000 in FY 13 and $593,000 in FY 14. This growth is expected to derive from increases in sponsorships, park visitation, fees, food service sales, and equine events at the park. Also, expenditure efficiencies will enhance the revenue growth over the biennium.
Mr. Nicholson outlined the three critical components to the business plan which will allow the Kentucky Horse Park to be self sustaining over the long term. These components are expansion of the park campgrounds, construction of a hotel on premises, and additional local support.
In response to questions from Chairman Rand, Mr. Nicholson stated that the cash balance in May and June 2012 was much better than projected revenues. He stated that litigation regarding the cancellation of the contract to build a hotel on the premises is now in the Kentucky Court of Appeals. He also said that there is continued interest in building a hotel on the park grounds.
In response to questions from Representative Simpson, Mr. Nicholson replied that the park is licensed to sell liquor, beer and wine in its facilities. Revenues from those sales are included in general agency receipts. Mr. Nicholson stated the equine events are the primary revenue generator, and the tourism aspects of the park support its ability to attract the equine events to the facility.
In response to a question from Senator Bowen, Mr. Nicholson stated that the horse park foundation has few unrestricted funds available for use, but the foundation has funded several major construction projects for the park.
Update regarding Kentucky’s unemployment insurance program and trust fund
Secretary Joe Meyer of the Education and Workforce Development Cabinet updated the committee regarding Kentucky’s unemployment insurance program and trust fund. He stated that Kentucky’s unemployment rate is currently 8.3 percent, which is at the national average. Kentucky has steadily added jobs since 2010, and the growth rate is increasing.
Secretary Meyer discussed the Unemployment Insurance Administration Fund loan which the General Assembly authorized during the 2012 Regular Session. The loan has been obtained from J.P. Morgan Chase in an amount up to $76 million at a 1.95 percent fixed interest rate. These funds will be obtained in two draws, with the first taken in June, 2012. The second infusion of funds will happen in September of 2013. A dedicated state surcharge, imposed by 2012 RS HB 495, will provide the funds necessary to repay the loan. The maturity date for repayment of this loan is September 1, 2018.
Secretary Meyer discussed the impact the economy has had on the trust fund. Prior to the recession, the trust fund paid $423.9 million in benefits in 2007, and payments reached a high in 2009 of $1,071.4 million. Payments have since decreased, and were at $553.3 million for 2011. The trust fund is intended to carry a significant balance to make payments when there is an economic downturn. In 2000, the trust fund had $700 million in reserve. However due to decreases in taxes and increases in benefit payments, the trust fund reached $70 million at the end of 2008. The trust fund was required to borrow funds from the federal government to meet payments. On January 1, 2011, the trust fund owed the federal government $948.7 million. The projected year-end balance for 2012 is $915 million and $768.8 million for 2013. It is expected that the trust fund will have the loan paid off by 2017 and operating at that time with surplus funds.
Secretary Meyer outlined current operations for unemployment insurance, stating that initial claims have fallen to 33,716, from a high in January of 2009 of 61,438. There are currently 81,690 recipients of benefits, which is down from the January 2010 high of 157,162. The total federal benefits paid to Kentucky recipients from January 2009 through July 2012 has been $3,026 million. This amount is in addition to Kentucky unemployment insurance benefits paid to recipients.
Secretary Meyer discussed unemployment insurance operational changes implemented by 2010 SS HB 5. These changes include a taxable wage base increase, imposition of a waiting week for initial receipt of benefits, lowering of the wage replacement rate, freezing of the maximum wage replacement rate, and tax rate schedule trigger adjustment. Additional operational changes have been made including direct deposit, state income tax withholding, technology changes, and customer service improvement initiatives.
Being no further business, the meeting was adjourned at 2:55 p.m. All meeting materials and a cassette tape of the meeting in full are available in the Legislative Research Commission Library.