The 1st meeting of the Budget Review Subcommittee on Economic Development and Tourism, Natural Resources and Environmental Protection of the Interim Joint Committee on Appropriations and Revenue was held on Monday, November 19, 2007, at 10:00 AM, in Room 169 of the Capitol Annex. Representative John A. Arnold Jr, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative John A. Arnold Jr, Co-Chair; Representatives Tim Firkins, Jim Gooch Jr, Dennis Keene, Lonnie Napier, Ruth Ann Palumbo, Marie Rader, and Susan Westrom.
Guests: Susan Bush, Tommy Greenwell, Environmental and Public Protection- Division of Natural Resources; Cordell Lawrence, David Coyle, Jim Strode, Keith Talley, Office of Financial Institutions.
LRC Staff: Jeffery Hancock, Kevin Mason, Perry Papka, and Christina Lee.
Chairman Arnold called the meeting to order at 10:11 A.M. The first presentation was provided by Cordell Lawrence, Executive Director, Office of Financial Institutions, Environmental and Public Protection Cabinet. Mr. Lawrence was assisted in his presentation by David Coyle, Director Division of Financial Institutions; Jim Strode, Director of the Division of Securities and Keith Talley, Deputy Executive Director, Office of Financial Institutions.
Chairman Arnold asked how many examiners were planning to retire. Mr. Lawrence responded that 16 of 69 or 23.2% of the examiners are planning to retire. Mr. Lawrence further stated that a need to replace the examiners will exist. Chairman Arnold asked if someone has to be a certified public accountant in order to qualify for an examiners job and if not what are the qualifications. Mr. Lawrence responded that no, a person does not have to be a certified public accountant but that they do have to be a college graduate with a degree in finance, accounting, or a business related degree. Chairman Arnold asked if someone with 30 or so years of experience in the banking business qualifies them to become an examiner. Mr. Lawrence responded that yes, experience in banking can qualify someone. Chairman Arnold checked with Mr. Lawrence that the entry level pay grades start at 11, then to 16 and then someone must be there for 5 years before they can move up to pay grade 17. He stated that this was correct and that even if someone has reached the level of a certified examiner and has successfully passed the exam that they may or may not be qualified to go into the management ranks. Chairman Arnold asked dollar wise what a pay grade 11 pays. Mr. Lawrence responded that it pays $36,000 per year and that amount is a special entry rate that is higher than the standard pay grade 11 within the state government system.
Jim Strode then gave a presentation. Chairman Arnold asked that if in fact the 5 out of 13 examiners that are eligible for retirement next year, if in fact do retire, is that a concrete fact or a maybe? Mr. Strode responded that he was uncertain for sure, but that under present circumstances that they expect that amount will be retiring. Chairman Arnold then asked how they would go about filling those positions. Mr. Strode stated that it would be difficult to find people to fill the slots without some needed background and finding people with the necessary skill set. As far as the enforcement area is concerned that they would look for someone out of law enforcement and the securities and examinations business that they would look to the industry to see if they could find someone. Chairman Arnold asked what a branch manager job would pay. Mr. Strode stated that it was a pay grade 17 and that the entry level pay would be $50,000 and at midpoint it would be $66,000 per year based on a 40 hour work week. Chairman Arnold asked the investigation that they do on the brokerage firms is for brokerage firms that are licensed to do business in Kentucky or some of them. He responded that it is for all of them. Chairman Arnold then asked about the firms that are for retirement purposes and don't actually sell stocks or bonds. Mr. Strode stated that those people fall under their definition of investment advisor and that they do supervise those as well.
Representative Keene asked if the retirees are allowed to come back and work again. Mr. Strode stated that they would be able to do that but that the laws require that there must be a separation of 30 days in order to be eligible for rehire, but it depends on the policy of the administration if that is allowed. Representative Keene asked if they retire and decide to come back and if they were a top pay grade if they were allowed to come back at that pay grade. Mr. Strode stated that they could come back at that pay grade but that they could only come back at the most at mid-point in pay grade 16 which is $60,000 per year.
Representative Napier stated that because many retirees have come back to train employees, and it costs $75,000 to $100,000 over the span of their career or about $25,000 over the first 5 years, that if they had ever thought about asking the people 6 months ahead of time if they were going to retire and if they were ,would they like to go ahead and train their replacement. Representative Napier stated that this may be a cheaper way of going about things. Mr. Coyle stated that it was his understanding that they are only allowed to hire within a 2 to 3 month overlap or they would be violating their job cap and that 2 to 3 months does not really even begin to scratch the surface of the training needed. Representative Napier stated that maybe they should be allowed to go over the 2 to 3 month overlap and that if he were to start working for them that he would be grateful if the person he was replacing was allowed to train him. He asked if all the institutions get examined at least once a year. Mr. Coyle responded that they are examined every 12 to 18 months depending on the institutions cycle.
Mr. Arnold asked how long Mr. Coyle has been employed with financial institutions. He stated he has been there for 23 years.
Mr. Keith Talley gave a short presentation concerning selection of bringing back retirees.
Commissioner Susan Bush gave her presentation. Representative Keene asked what the qualifications were to be a mine inspector. Commissioner Bush replied that a person has to have 5 years of experience as a coal miner, miner certification, Forman certification and mine inspector certification and that there is no college degree required. Representative Gooch asked if the requirements for a surface mine inspector were any different. She stated that it was slightly different in that it was 5 years surface mining experience and that they do have to be a surface foreman as well.
Executive Director Tommy Greenwell gave a presentation.
Commissioner J.T. Miller gave a presentation regarding the Department of Parks operating budget. He stated that in the past eight years, revenues have remained constant while expenses have increased approximately 4% to 7% per year. Representative Westrom stated that she was stunned by how often golf courses are being utilized and the cash flow they generated. She asked if the courses were struggling or building more clientele. He stated that in total they have about 13 eighteen hole courses and about 7 nine hole courses and of those 20 courses, 3 or 4 will have a positive cash flow. He stated that Kentucky golf is getting a reputation as being a destination place even though nationwide playing of golf has decreased approximately 3% to 4%. He further stated that golf in Kentucky has decreased 1% to 2% as far as rounds being played. Representative Westrom asked if he thought that advertising would help increase utilization. He responded that it would make a difference in the rounds of golf played but uncertain of the cash inflow it would cause.
Chairman Arnold referred to the section in Mr. Miller's presentation "How Parks are Operated" where $1 million dollars in unredeemed checks was picked up. He asked if everything was solvent in those areas and if anyone was owed anything. Mr. Miller stated that that was correct and that no one was owed money in that area. He stated that other than Kentucky Proud vendors and Kentucky Craft marketers that they were holding work bills 30 days, the maximum the agency is allowed before they become passed due.
Representative Keene asked if the $2.5 million land acquisition at Big Bone Lick State Park will be expiring in the next two months. Deputy State Budget Director Allen Holt stated that the money, in accordance with House Bill 380, will not expire at the end of this biennium as long as it is under a plan of finance. Mr. Miller stated that he had explained to Representative Santoro and others in that area that the funds do not have to be spent if land cannot be found, but that it could not be used for anything other than on Big Bone Lick.
Representative Keene asked how property is acquired. Commissioner Miller stated that the department is required to follow a strict process and that the Finance and Administration Cabinet buys all properties.
With regard to the $35 million Parks Renovation Pool and the $60 million Parks Development Pool, Representative Palumbo asked if Mr. Miller could share the date he expects Lake Cumberland to be completed. She requested he discuss each item on the list and specify the dates of completion. He responded that he did not have definite dates for all, but that Lake Cumberland, Pumpkin Creek is essentially complete. Mordecai Lincoln, which is a historic home on Lincoln Homestead State Park is substantially complete also. Grayson Lake clubhouse is 80% complete and will be open for golf season next year. Mr. Miller stated that Kentucky Dam Village was completed in late April and early May, 2007.
Chairman Arnold asked if Kentucky Dam Village received large numbers of visitors and/or business. Mr. Miller responded that it is the most popular in terms of overnight accommodations. Chairman Arnold inquired about the convention center. Mr. Miller responded that renovations were made to lodge rooms and the convention center. He further stated that Kentucky Dam Village had a positive cash flow in Fiscal Year 2006, but, that both Lake Barkley and Kentucky Dam Village were shut down for several months during renovation which caused a reduction in cash flow in fiscal year 2007.
Mr. Miller continued to elaborate on Representative Palumbo's request stating that General Burnside was given funding from each parks pool to renovate and that it would be open by Memorial Day next year.
Chairman Arnold asked Mr. Miller to provide a financial statement showing profit and loss of each of the state parks including golf courses. Mr. Miller indicated he would do so.
Mr. Miller continued with a discussion of the $60 million development pool. He stated that Lake Barkley reopened in May, 2007. He further stated that Kenlake, Cherokee Park had been renovated and construction on infrastructure had been started. Chairman Arnold asked what county Cherokee Park was in. Mr. Miller responded that it was in Marshall County. Mr. Miller said the Department was awaiting bids on the Dale Hollow project. Mr. Miller stated that Lake Cumberland conference center was a line item that was vetoed but the department is now awaiting bids on it as well and expects completion of the work by May, 2008. According to Mr. Miller Dale Hollow pool, fitness center and spa are 50% complete. Benham Lynch is also about 50% complete. Mr. Miller said that the E.P. Tom Sawyer Park is awaiting bids and also needs park improvements such as lights on the tennis courts and that the Lake Cumberland Park improvements project is in the final stage. My Old Kentucky Home park improvements were necessary because next year is the 50th Anniversary of the Stephen Foster story and the improvements are needed by June, 2008. Mr. Miller stated that Greenbo Lake park improvements are needed to construct cottages since it is one of only two state parks not equipped with them and the Dale Hollow lodge room addition will add a third tower of rooms. Mr. Miller stated that the various costs listed on the handout are needed for basic safety at parks and for improving campground sights and other renovations needed in various parks.
Chairman Arnold asked Mr. Miller to provide the committee with a list of Marina's that need upgrades. Mr. Miller responded that he would do so.
Representative Keene asked Mr. Miller if golf courses are currently permitted to sale alcohol. Mr. Miller responded that they do not allow the sale of alcoholic beverages on state parks but that he is not aware of any prohibition on the administrations part. He further stated that there are a few parks in wet areas, and that legally it is possible, but neither he nor any other commissioner has allowed the sale of alcohol on state parks. Representative Keene stated that he has been involved in a couple of different organizations and it seems to him that they tend to have the conventions and then they realize that they cannot have alcohol to drink and then the suggestion is made to move the convention elsewhere for a period of time. Representative Keene asked if the sale of alcohol would help. Mr. Miller stated that from a cash flow standpoint, it would. He further stated that there are also conventions held by religious organizations whose business might be lost if the sale of alcohol were allowed. Mr. Miller indicated that he does not have the market research to say if that circumstance would in fact happen.
Chairman Arnold asked if private developers were working on projects at the various parks. Mr. Miller responded that over the years previous administrations have used public and private partnerships and that they have chosen to go out in the private equity markets and find developers that would use their own money. They have had a number of bids, none of which are compliant, and have reopened the RFP's to make the deals more attractive. Right now the AFLC-IO filed a temporary restraining order against them which was granted by Franklin Circuit Court and that forbids the Department from opening any bids related to private development on state parks.
There were no further questions and Chairman Arnold adjourned the meeting at 11:32 A.M.