The 1st 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 Wednesday, November 2, 2005, at 10:30 AM, in Room 131 of the Capitol Annex. Representative Royce Adams, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Jack Westwood, Co-Chair; Representative Royce W Adams, Co-Chair; Senator Elizabeth Tori; Representatives Carolyn Belcher, Thomas McKee, Don Pasley, Tanya Pullin, Rick Rand, Charles Siler, and Mike Weaver.
Guests: Secretary Erwin Roberts, Personnel Cabinet; Larry Clark, Budget Director, Kentucky Office of Homeland Security; Deputy Directors Joel Schrader and Andrew Cline, Kentucky Office of Homeland Security; Commissioners Mike Inman and Mark Rutledge, Commonwealth Office of Technology, Finance and Administration Cabinet.
LRC Staff: Jim Reynolds, Randy Smith, Frank Willey, Janie Miller, and Matt Ellis.
Chairman Adams invited Secretary Erwin Roberts to come forward and discuss appropriations increases for the Personnel Cabinet. Secretary Roberts introduced Burr Lawson, Executive Director of Personnel Administration, and Walt Gaffield, Fiscal Manager for the Personnel Cabinet.
Chairman Adams asked if the $1.4 million is included in the appropriations increase request. Secretary Roberts replied that the original request was an estimate of $1.85 million for 36 additional positions, but now the estimate is $1.4 million for 25 additional positions. Chairman Adams asked about the Office of Merit System Referrals, and where the funds went that were earmarked for it. Secretary Roberts replied that permission has been granted for that funding to be reallocated toward the Human Resource Information System (HRIS) and the Self-Insurance Program. Chairman Adams commented that the appropriations increase request states $172,500 is listed as the operations cost for the Office of Merit System Referrals, and wanted to know where the money went. Mr. Lawson replied that they were allowed to keep those two positions which had been requested for that office, and will probably be moved over into Health Insurance. He went on to say that the money will probably be swept into the General Fund at the end of the fiscal year by the State Budget Office.
Representative Rand stated that if 25 employees are added, the number would be increased by over 10%, which is a large increase. Secretary Roberts agreed, adding that there is a large increase in responsibility with the self-insurance program, which if not managed well, will lead to many other problems. He went on to say that if the technological staff is pulled away from their current responsibilities to work on the new project, their normal day-to-day duties would not get done. Representative Rand asked if Humana is going to manage a lot of the insurance component, and how much more is the state going to be responsible for, other than the duties they were already doing, such as enrollment, data collection, and providing information to our employees. Secretary Roberts answered that Humana is the third-party administrator, and will help handle claims, but the state will be responsible for making sure claims are reconciled and managed properly. Representative Rand replied that the third-party administrator should be responsible for payment and management of claims, as part of the contract. Mr. Gaffield answered that the state will be responsible for taking in and tracking all the moneys from all the components of the state health group, which amounts to over $1 billion over the course of a year, and balance it back to the actual coverage people have and how much they should be paying, which changes daily. He went on to say that the state also has actuarial and fiduciary responsibilities regarding that whole program. He added that Humana is responsible for the medical component, as opposed to the financial and administrative component of it. Mr. Lawson added that reconciliation of enrollment information to premiums being paid is a big issue and must withstand the test of auditing. Mr. Gaffield added that a large number of Kentuckians smoke and are sedentary, which increases health costs for the entire commonwealth. A wellness incentive program is in process to encourage employees to lead healthier lifestyles in an effort to decrease long-term costs.
Representative Rand asked how the Office of Merit System Referrals will be different that the way those are being handled now. Secretary Roberts answered that the process that is being reviewed, but has not been finalized, is one where all referrals and recommendations would come to a referral center at the Personnel Cabinet, where they will be reviewed by merit employees. He went on to say that after the referrals or recommendations are reviewed, and are found compliant with the laws, they will be forwarded on to the requesting agency to be considered along with the application. The referral will be maintained in the personnel file of the candidate, if hired. If not hired, the referral will be maintained in a separate file within the agency. He went on to say that the Personnel Cabinet's website will have a link to click on for making referrals or recommendations as an electronic submission to the referral center.
Representative Belcher asked if the additional 25 employees will be in the area of health insurance, or if they will be in different areas. Secretary Roberts replied that 12 of the additional employees will be in the Department of Employee Insurance, eight will go to the HRIS project, two will go to the Diversity Initiatives Office, two to the Deferred Compensation Program which is self-funded and administratively attached to the Personnel Cabinet, and one will go to the Workers' Compensation Program which is also separate. Representative Belcher inquired about the source of funds in agency receipts. Mr. Gaffield replied that it comes from several different sources: one, administrative procedures have been changed in order to collect money monthly rather than quarterly; two, the size of the state health group has increased slightly, resulting in the collection of more money than budgeted; and, three, the full budget has not been spent over the last two years; and, four, the General Assembly budgeted the Wellness Initiative in FY 2005, which wasn't started right away.
Representative Belcher inquired about the current budget for the Office of Human Resource Planning and Diversity, and what the funds will be used for. Mr. Gaffield replied that it is a small office and is not budgeted as a separate component. Representative Belcher asked how many people are in that group. Mr. Gaffield replied that there are four at this time.
Senator Tori asked if consideration has been given to the turn back of funds from the flexible spending accounts of state employees being directed into the self-insurance plan. Mr. Gaffield replied that some of it is used for the administration of the flex plans, and went on to say that a portion of it has been used in the current biennium to fund a capital project for online health enrollment. Senator Tori asked if the requested amount is all restricted carryover funds. Mr. Gaffield replied in the affirmative.
Senator Westwood inquired about the current budget for the Office of Human Resources Planning and Diversity. Secretary Roberts replied that it is a newly formed office and is currently being staffed. Mr. Lawson added that the total budget for the office is approximately $300,000 or $400,000 annually. Senator Westwood stated that the request is for only about $122,000. Mr. Gaffield said the reason for that is it is a partial year. Senator Westwood asked if there will be a budget request for that office in future years. Secretary Roberts replied in the affirmative, adding that due to moving two employees into that office from other areas, there will be only two new positions rather than four.
Chairman Adams asked why there is a $555,000 difference in the request now compared to funds requested previously. Secretary Roberts replied that it was originally thought that the amount requested previously would staff and implement the project, but have since learned that we cannot use bonded funds to hire people and as a result, another method of staffing the project must be found. Chairman Adams asked where that was learned. Mr. Gaffield replied that they have been working with the Office of Financial Management and the Finance and Administration Cabinet. Chairman Adams asked if this will be a continuation on the next budget. Mr. Gaffield replied that there will be a time period of two or three years for implementation of the project, and thereby could be extended into the next budget cycle. Mr. Lawson added that the full amount will be in the budget request for the next biennium. Representative Pasley asked for an estimate of future project costs. Mr. Gaffield will provide that information at a later date.
Next on the agenda, Deputy Director Joel Schrader, Office of Homeland Security, came forward and introduced Deputy Director Andrew Cline and Budget Director Larry Clark. He stated that he is speaking today on behalf of Director Alicia Webb Edgington, who sends her apologies for her absence today. He then provided an overview of agency operations for the Office of Homeland Security.
Chairman Adams asked about the amount designated for Louisville and the vulnerability of the national airport in Northern Kentucky. Deputy Schrader replied that the $13.9 million flows through them to Louisville because it is designated as an Urban Area Security Risk, and went on to say that Northern Kentucky does well with discretionary funds.
Chairman Adams asked when the temporary communications system is anticipated to be made permanent, and if it will be federally funded or if requests will be made from the state. Deputy Director Schrader answered that all possible federal funds will be acquired, and requests will be made for funds from the state as well.
Representative Pullin asked why there is a Homeland Security Grant for bingo parlors. Mr. Schrader replied that absolutely no officers have been funded to go to bingo halls to look for Osama Bin Laden. He went on to say that a grant was received for $35,000 from the Office of Charitable Gaming in order to send 10 or 15 of their officers to Atlanta, Georgia to receive training on the detection of money laundering. He added that when the application was received, it was brought to their attention that Charitable Gaming in Kentucky is a $600 million per year all-cash business. It was decided to bring those instructors from Atlanta to Kentucky and train 100 to 200 law enforcement officers, including the Charitable Gaming officers, for the same amount of money. Representative Pullin asked if the article in the Lexington Herald-Leader on the subject was incorrect. Mr. Schrader replied in the affirmative.
Representative Weaver inquired about the Pilot Project for Interoperability, and asked if the Kentucky Office of Homeland Security will have control of it even though it is federally funded. Mr. Schrader replied that a large portion of discretionary funds will be dedicated to that program, and it will be controlled in the Kentucky office. Representative Weaver stated that the Kentucky State Police and the Kentucky National Guard have Intel at the Fusion Center, and asked what other agencies will have part of their Intel there for communication. Mr. Schrader replied there will be representation from the Transportation Cabinet, Kentucky Vehicle Enforcement, as well as various other organizations. Representative Weaver inquired about the Attorney General's office, which includes the Kentucky Bureau of Investigation. Mr. Schrader said that the same offers will be extended to them as to others. Representative Weaver asked if the Fusion Center will have people with recognized security clearances in Confidential, Secret, and Top Secret levels. Mr. Schrader replied in the affirmative. Representative Weaver asked if there will be problems in providing information to the General Assembly due to security requirements. Mr. Schrader answered that it is something that will need to be worked out.
Senator Westwood asked how many local departments are taking advantage of the Kentucky Ops. Mr. Schrader replied that the mobile data infrastructure is online and working in one-third of the state, with the second one-third coming online at the end of November, and the infrastructure should be complete statewide by the end of May 2006. Senator Westwood asked if Louisville is the only Urban Area Security Risk designation in Kentucky. Mr. Schrader replied in the affirmative, adding that it is designated as such by the federal Department of Homeland Security. Senator Westwood asked if there is any indication that Northern Kentucky should be designated as an Urban Area Security Risk as well. Mr. Schrader replied that there is an increasing awareness and some of the funds may be stovepiped through Cincinnati into the Northern Kentucky area, but that is outside the control of the Kentucky Office of Homeland Security.
Senator Westwood asked if measures are in place in the event of a major disaster, such as an earthquake centered on the New Madrid fault. Mr. Schrader replied in the affirmative, adding that they try to make sure there are dual uses for everything funded by their office, partnering very closely with first responding agencies. Deputy Director Andrew Cline added that in 2003 there were 600 to 700 participants in an exercise focusing on earthquake preparedness, testing the plans, policies and procedures in place. It was a joint effort between Emergency Management, National Guard, Public Health, and Transportation. There was another earthquake preparedness exercise last year, and a tabletop discussion exercise is planned for this year to prepare for a full-scale exercise in 2007.
Representative McKee asked how the Department of Agriculture fits in as a coordinating agency in order to ensure the safety of the food supply. Mr. Cline answered that the Kentucky Office of Homeland Security has joined with Richie Farmer, Commissioner of Agriculture, Dr. Stout from the State Veterinarian's office, and Dr. Ed Hall, Homeland Security liaison with the Department of Agriculture. The Kentucky Office of Homeland Security recently completed a five-state exercise with the United States Department of Agriculture (USDA). He added that they are in the process of finding a way to link a biosurveillance capability, allowing veterinarian's animal health data relating to sick animals to be relayed to the state Office of Public Health.
Senator Tori commended the Kentucky Office of Homeland Security for all the work they have accomplished in such a relatively short period of time.
Chairman Adams asked if all Homeland Security moneys are awarded, and if not, where does it go. Mr. Schrader replied that 80% of the money goes back to locals, and that the Kentucky Office of Homeland Security exists on merely 3% for administrative costs, with 17% going to state agencies. He went on to say that part of the 80% that is administered from their office is used for training exercises, etc. Part of the local money was used for the buildup of the mobile data system because the local communities will be the majority of traffic on the system when it is complete. Chairman Adams asked if any money remains, is it carried forward. Mr. Schrader replied that any moneys not used are carried forward, adding that the grants expire after a period of time. Chairman Adams inquired about the fluctuations of the grants. Mr. Clark replied that the numbers will become more refined and more accurate as time goes on and historical data is established.
Commissioner Mike Inman, Commonwealth Office of Technology (COT), Finance and Administration Cabinet, came forward to discuss an appropriation increase for COT of $1,908,700 in Federal Funds. He introduced Deputy Commissioner Mark Rutledge, who accompanied him.
Chairman Adams asked if money is available through the Kentucky Office of Homeland Security for equipping local law enforcement cruisers with communication systems. Mr. Inman replied in the affirmative.
There being no further business, the meeting was adjourned at 12:10 P.M.