Call to Order and Roll Call
The 2nd meeting of the Interim Joint Committee on Appropriations and Revenue was held on Thursday, July 27, 2017, at 1:00 PM, in Room 154 of the Capitol Annex. Senator Christian McDaniel, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Christian McDaniel, Co-Chair; Representative Steven Rudy, Co-Chair; Senators Ralph Alvarado, Danny Carroll, Morgan McGarvey, Dennis Parrett, Wil Schroder, Brandon Smith, Robin L. Webb, and Max Wise; Representatives Rocky Adkins, Regina Bunch, Myron Dossett, Ken Fleming, Jeff Greer, David Hale, Brian Linder, Donna Mayfield, Suzanne Miles, Jason Nemes, Ruth Ann Palumbo, Phillip Pratt, Jody Richards, Sal Santoro, Arnold Simpson, James Tipton, Ken Upchurch, Jim Wayne, Russell Webber, Susan Westrom, and Jill York.
Guests: Secretary Vickie Yates Brown Glisson, Cabinet for Health and Family Services; Jamie Ennis Bloyd, President, Kentucky Pediatric Cancer Research Trust Fund; Katie Anne Doggett Lester, Mother of Bennett Lester; Dr. Lars Wagner, M.D., Chief, University of Kentucky Hematology/Oncology; Dr. Ashok Raj, M.D., Interim Chief, Division of Hematology/Oncology and Bone Marrow Transplant, University of Louisville School of Medicine and Norton Children’s Cancer Institute; John E. Chilton, State Budget Director; Janice Tomes, Deputy State Budget Director; Kevin Cardwell, Deputy State Budget Director; Greg Harkenrider, Deputy Executive Director, Governor’s Office of Economic Analysis.
LRC Staff: Jennifer Hays, Cynthia Brown, Amit Shanker, Hannah Walker, Charlotte Quarles, and Jennifer Beeler.
Approval of the Minutes
Representative Rudy made a motion, seconded by Senator Alvarado, to approve the minutes of the November 21, 2016 and June 7, 2017 meetings. The motion carried by voice vote.
Pediatric Cancer Research Trust Fund
Secretary Glisson gave brief remarks regarding the Pediatric Cancer Research Trust fund as an active board member of the Pediatric Cancer Trust Fund Board. She explained that the board had held four quarterly meetings in the past year, elected officers, hosted a Pediatric Cancer awareness event, and developed regulations to establish a competitive grant program.
Katie Anne Lester, mother of Bennett Lester, who died of a pediatric brain tumor, shared her story and described the critical importance of pediatric cancer research. Without pediatric cancer research, doctors will not have adequate knowledge of the many forms and differences of pediatric cancer as compared to cancers in adults.
Dr. Ashok Raj explained that childhood cancer is the leading cause of death due to disease in the United States. On average, 2,275 children per year die due to some form of childhood cancer. There are several forms of childhood cancer, but in Kentucky brain cancer is the leading form of cancer diagnosed.
There has been extraordinary progress in survival rates for childhood cancer. In the 1960s, a child three to five years of age diagnosed with leukemia had no chance of survival. In 2016, the survival rate of leukemia is approximately 90 percent.
The goal in precision cancer medicine is to improve cure rates and decrease toxicities by identifying the specific genes, proteins, and pathways responsible for malignant transformations or progression of individual cancers, utilizing therapies to target these features that distinguish cancer cells from normal cells, and reducing the number of side effects that a child could develop due to the types of cancer treatments.
Dr. Raj hopes to build a strong and innovative pediatric hematology/oncology/stem cell transplant and cellular therapy program through compassion and teamwork, and with the help of emerging technologies.
The plan to reach that goal is to enhance clinical excellence in pediatric hematology/oncology/stem cell transplant therapy for children, expand participation in new clinical trials and bring in innovative cellular therapies, establish a cutting-edge cellular therapy laboratory to support clinical mission, and embrace emerging technologies to develop novel cellular therapies for tomorrow.
Dr. Lars Wagner explained that in Kentucky brain tumors are the leading cause of childhood cancer death. Even patients who are successfully treated are at high risk for chronic life-affecting complications, such as academic, physical, and psychosocial limitations. Astrocytomas are the most common type of pediatric brain tumor. There has been an increase in Appalachia, where the incidence of astrocytoma is greater than in the rest of the state.
There has been some investigation as to why there is an increased rate of pediatric astrocytomas. The research has found that spatiotemporal assessment has identified a zone of 40 contiguous counties in which the incidence of pediatric brain tumors is far higher than what would be expected by chance. This will be investigated further by looking within individual counties for higher concentrations of tumors, and looking at more specific subtypes of pediatric brain tumors. This work is ongoing with the University of Kentucky in conjunction with the Kentucky Cancer Registry.
Due to changes in chromosomes and genes that affect the development of tumors, it is logical to look at the genetic makeup of tumors that are occurring more frequently than expected. Identification of new mutations within tumors, or finding a higher rate of known mutations than expected, could provide important cues as to why children in Appalachian Kentucky are more likely to develop these tumors.
To better understand the higher incidence of brain tumors occurring in certain parts of Kentucky, Dr. Wagner has been performing molecular testing on previously stored tumor samples from pediatric brain tumor patients treated throughout the state. There is a hypothesis that this information will provide important clues about why an increased number of Kentucky children are afflicted with this disease. This information will also further the understanding of the genetic causes of pediatric brain tumors, which are now the leading cause of death from childhood cancer.
In response to a question from Senator Wise, Dr. Wagner explained that screening for pediatric cancer has been very difficult and there are few identifiable causes of cancer at this time. Some patients who have underlying genetic syndromes, such as Down syndrome, have a higher incidence of leukemia. Unfortunately, for the majority of patients there are no clear triggers as to the development of childhood cancer, which makes screening a challenge.
Fiscal Year 2016-2017 Close Out
John Chilton, State Budget Director; Janice Tomes, Deputy State Budget Director; Kevin Cardwell, Deputy State Budget Director; and Greg Harkenrider, Deputy Executive Director for Economic Analysis, reviewed the budget and revenues for Fiscal Year 2016-2017 and the financial outlook for Fiscal Year 2017-2018.
Director Chilton said that actual general fund receipts for FY 17 were less than the official estimate by 1.3 percent, with a revenue shortfall of $138,526,126. The shortfall in receipts was driven primarily by the corporate income tax and sales tax. These taxes provide the most elastic sources of revenue.
Mr. Harkenrider reported that many of the remaining general fund revenue sources fell during the year. The underproducing areas included individual income, coal severance, and cigarette taxes.
The overall General Fund revenue growth rate for FY 17, compared to the prior year, was 1.3 percent. Even with that overall growth, the General Fund revenue sources, other than individual income, LLET and sales taxes, fell a collective $62.6 million.
Sales tax growth in FY 17 was 0.7 percent following a 6 percent growth in FY 16 and a 4.4 percent growth in FY 15. Kentucky’s top two revenue sources, sales tax and individual income tax, generate 75 percent of the General Fund revenues. Those two taxes underperformed relative to the last two fiscal years. Individual income tax revenue contributed $111.8 million of the total $138.9 million in nominal General Fund growth. The sales tax contributed $22.5 million of the total $138.9 million in General Fund growth.
Director Chilton explained the FY 17 General Fund revenue shortfall totaled $138.5 million. There were some expenditures that were greater than appropriated at a total of $13.7 million, which created a General Fund budget shortfall of $152.2 million. Adjustments to various accounts were made to cover the shortfall amount and balance the budget.
Director Chilton stated that the beginning balance of the Budget Reserve Trust Fund was $235.8 million, after paying FY 17 NGEs of $85.3 million the ending balance to carryover to FY 18 totaling $150.5 million.
Janice Tomes discussed how in FY 17 the Department of Corrections budget makes up approximately 50 percent of the total NGEs. In FY 17, $42.8 million was spent due to more inmates, higher medical and staffing costs, and local correctional design fees.
Director Chilton discussed tobacco fund revenues for FY 17, which the budgeted amount totaled $87 million and including the current year appropriation and additional receipts the FY 17 total revenue was $93,415,538. The budget bill sets forth how the additional receipts will be allocated, with 50 percent to the agricultural development fund, 36 percent to early childhood, and 14 percent to the healthcare improvement fund.
Mr. Harkenrider testified on FY 17 road fund revenues, which had a surplus of $51.1 million, or 3.5 percent above the revised estimate. The road fund actually increased over the projected estimate of $1,456,900,000 and totaled $1,508,003,421.
Mr. Harkenrider stated that the motor vehicle usage tax receipts were up in FY 17, with revenues totaling $499.8 million. Motor fuels tax came in slightly higher than the estimate at $760 million, and motor vehicle license revenues decreased with actual revenues at $111.9 million.
Kevin Cardwell explained that the road fund had a surplus of $51.1 million, which statutorily is required to be deposited into the state highway construction account.
Director Chilton discussed the outlook for FY 18. The consensus forecasting group in December called for growth of 2.4 percent, but due to receipts not meeting the revenue estimates in FY 17 growth needed to hit the FY 18 estimate, rises to 3.8 percent.
Director Chilton explained that the Kentucky Permanent Pension Fund had 50 percent of FY 16 surplus amount totaling $26.4 million and FY 18 transfer from Public Health Insurance Trust fund totaling $125 million. The funds on the expenditure side are budgeted to be no more than $3 million and to date $1 million has been spent.
With no further business before the committee, the meeting was adjourned.