The 2nd meeting of the Budget Review Subcommittee on General Government, Finance, and Public Protection of the Interim Joint Committee on Appropriations and Revenue was held on Thursday, November 29, 2001, at 10:30 AM, in Room 125 of the Capitol Annex, Chairman Royce Adams called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Royce Adams, Chairman; Senator Albert Robinson; Representatives John Adams, Carolyn Belcher, Charles Siler, Roger Thomas, Jim Thompson, and Jim Wayne.
Guests: Jack Couch, KYCADD; David Norat, Ernie Lewis, Judy Campbell, and Ruth Schiller, Department of Public Advocacy; David Cox, KYBOELS; Sarah Nash, Government Strategies; Johnathan Pruitt, Governor’s Office of Policy Management; Randy Smith, Kentucky Racing Commission; Brenda Crabtree, Lee Ann Brewer, Greg Smith, and Bob Nickel, Office of the Petroleum Storage Tank Environmental Assurance Fund.
LRC Staff: Karen Hilborn Crabtree, Sharon Cantrell, Marla Lewis, Jerry Bailey, Bettina Abshire, and Cassaundra McNeil.
Chairman Adams directed the members attention to the staff assignment sheet in their folders.
Ernie Lewis, Public Advocate, was asked to discuss issues concerning the Department for Public Advocacy (DPA). He discussed the crisis in 1999 when public defender salaries were among the lowest in the nation ($23,388 entry level), cost per case was among the lowest in the nation ($187.00 in FY 1997-98), and the cost per capita was among the lowest in the nation ($4.90 per capita in FY 1997-98). During this period, the Blue Ribbon Group (BRG) study concluded that the DPA ranked at, or near, the bottom of the public defender agencies nationwide in indigent defense cost-per-capita, cost per case, and public defender salaries. Predicted consequences included the failure of the full-time plan, departure of lawyers/support staff from DPA, caseloads rising to the breaking point, especially in cities such as Louisville, inability of the DPA to serve some defendants/courts, retrial of cases due to findings of ineffective assistance of counsel, frustration by other criminal justice agencies, especially courts by inadequate indigent defense, and the inability of the Commonwealth of Kentucky to defend a statewide systemic lawsuit. The BRG created a blue print for avoiding the crisis. The criminal justice counsel endorsed 11 of the 12 recommendations made by the BRG and the General Assembly provided $10 million to implement some of the recommendations. The funding improved salaries for experienced attorneys which were raised 9.6 percent in July, 2001 and the average DPA Attorney II salary is now $46,186. The turnover rate has improved and caseloads for the individual, full-time trial lawyer, has been reduced by approximately 12 percent since 1999. In the Spring of 2001, a poll by the University of Kentucky Survey Research Center found that approximately 79 percent of Kentucky citizens support balanced resources for prosecutors and defenders.
Mr. Lewis explained that a portion of the DUI service fee, recoupment fees from the defendant, and an administrative fee ($52.50) are the three sources of receipts for the Public Defender. Only about 15 to 20 percent of these fees are collected. Representative Thomas questioned the percentage of cost for a capital case versus the cost of other cases. Mr. Lewis explained that it was hard to determine the exact impact but $4 million of a $28 million budget, has been spent for capital defense. The resources for this defense are spread throughout several budget units.
Chairman Adams requested the committee to take action on the minutes of the October 25, 2001 meeting. A motion was made by Representative Siler and seconded by Representative John Adams to approve the minutes.
Bob Nickel, Office of the Petroleum Storage Tank Environmental Assurance Fund (PSTEAF) presented general issues. He stated that PSTEAF is not requesting additional funds over the two percent growth allowance for FB 2002-2004. In 1990, the General Assembly passed legislation to assist storage tank owners to comply with the federal requirements. PSTEAF allows facilities to continue operating businesses and pay their insurance. An actuarial analysis was completed in July 2001, which projected future liabilities based on 2,438 active sites (clean-up ongoing), and 543 sites where releases have been granted. The total liability for all sites listed is $319 million. The funds has a $107 million cash balance, and an additional $212 million is needed to reach the clean-up goal. It is estimated that by 2006 the fund will collect enough revenue to reach this goal, assuming all money remains in the fund. The FY 2001-02 General Fund Budget Reduction order reduced the fund by $50 million. The revised estimate to have a fully funded system is in FY 2007-08.
Chairman Adams questioned the collection of annual fees and the percentage of collection. Mr. Nickel explained the Division of Waste Management Underground storage Tank Branch handles the collection of fees. Chairman Adams commented that it would benefit the committee to have these people make a presentation in the near future. He questioned Mr. Nickel on the status of the ATI suit. Mr. Nickel explained the settlement to the committee.
Senator Robinson expressed support of the program and questioned if the budget reductions would cause a loss of federal funds. Mr. Nickel explained that no federal funds were involved, but the more money taken from the budget results in a longer period to recoup/pay estimated expenses. Senator Robinson expressed concerns regarding savings by relaxing regulations. Mr. Nickel said he would have to refer the issue of relaxing standards to the Natural Resources and Environmental Protection (NREP) Cabinet. He feels some standards could be relaxed without endangering health/safety issues and some sites could be closed. Senator Robinson advised the Chairman to review how some of the regulations are written. Chairman Adams concurred and recommended that the committee needs to address this issue.
Representative Siler questioned a sunset clause in 2008. Mr. Nickel explained that there was not a sunset clause, and that the fund does not end, rather, KRS chapter 224 states participants must register tanks by July 10, 2002, in order to be eligible to participate in the fund. Representative Belcher questioned how many cases are left. Mr. Nickel explained that the last estimate showed 46,000 tanks located in Kentucky and approximately 15,000 facilities with 15 tanks each. In addition 12,600 have applied to the fund for assistance and over 3,000 have received closure.
Chairman Adams asked if there is a mechanism to track receipt of fee payments before payments are made. Mr. Nichols explained that before payment is made they check with NREP to make sure the participant has paid their fees. Commissioner Miller, KY Access; discussed the success of the program and noted that the 2000 General Assembly established the KY Access program for high-risk/ high-cost insurance clients. In January 2001, the program was on target with the projected number of enrollees. Growth rate projections are on target and estimated at approximately 100 enrollers per month. The economy is a factor in setting rates. The program’s rate is at 115 percent of the industry’s standard markup. The current rate set for KY Access is 142.5 percent. People move in and out of this program. The Program has not been in operation long enough to estimate/project future expenditures. The program is currently using actuarial data.
Chairman Adams questioned how many people are turned down. Commissioner Miller explained that no one has been turned down until last month (October 2001). Some applicants have withdrawn their applications and about two a month are classified as non-eligible. Approximately 65 percent of all applicants are assisted by an independent agent which aids in keeping the rejecting number low. Chairman Adams questioned if the coverage was statewide. Commissioner Miller explained the program is statewide, but the majority of the applications are from Louisville and Lexington due the population of these areas. After reviewing county level data, it has been determined that some counties have no participation. Plans have been made to target these areas, but from a regional perspective the program has a good coverage record. Representative John Adams commended Commissioner Miller on the success of the program and the distribution of information.
Representative Thomas questioned how the program was dealing with the three percent increase in insurance premiums. Commissioner Miller explained that she does not want the risk pool to have to compete with the market, but that there will have to be an increase. A decision was made for a moderate relationship with market place. The three percent was to keep the current relationship of 115 percent of the industry’s standard markup. Rate increases are currently trending at 12 to 14 percent per year. Representative Thomas commented the reason the General Assembly created KY Access was to make the market more attractive for more people to come into the Kentucky market, and ask about the status of insurance carriers coming into the state. Commissioner Miller responded that Kentucky now has seven carriers in the market. This is a big improvement, but not the 42 carriers that were in Kentucky in the past. The program hopes to see an increase but it is not possible to change legislation each year and expect an increase in the market place.
Chairman Adams recommended that Commissioner Miller send a list of carriers to legislators. Commissioner Miller explained that due to significant growth, assistance was needed to handle general public awareness and complaints, noting three additional staff position are needed for this task.
There being no further business before the subcommittee, the meeting adjourned at 12:10 p.m.