The third 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 Monday, November 16, 2009, at 10:00 AM, in Room 131 of the Capitol Annex. Senator Jack Westwood, 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; Senators Julian M. Carroll and Joey Pendleton; Representatives Charlie Hoffman, Adam Koenig, Tom McKee, Brad Montell, Tanya Pullin, Steve Riggs, Charles Siler, and Wilson Stone.
Guests: Trey Grayson, Secretary of State; Allen Eskridge, Assistant Secretary of State; Sarah Ball Johnson, Executive Director, State Board of Elections; Jack Conway, Attorney General; Dana Mayton, Deputy Attorney General; Bonnie Howell, Executive Director, Office of Administrative Services, Office of the Attorney General; Todd Leatherman, Executive Director, Office of Consumer Protection, Office of the Attorney General; Chris Cohron, Warren County Commonwealth’s Attorney; John Estill, Mason County Attorney; Mack Bushart, Executive Director, Property Valuation Administrators; Jason Scriber, President, Property Valuation Administrators Association; and, Karen Bushart, Chairperson, Property Valuation Administrators (PVA) Budget Committee.
LRC Staff: L. Bart Hardin, Tom Willis, Randy Smith, Katherine Halloran, and Spring Emerson.
Representative Royce Adams indicated that he had received a message from Representative Denham expressing his regret that he would be unable to attend due to a previously scheduled surgery appointment.
Chairman Westwood asked for a motion to approve the minutes of the October 22, 2009 meeting. A motion was made by Representative Hoffman, seconded by Representative Koenig, and the minutes were approved without discussion.
Chairman Westwood invited Secretary of State Trey Grayson and Sarah Ball Johnson of the State Board of Elections to come forward and discuss their budgetary needs. Secretary Grayson gave a brief overview of the Secretary of State’s office budget, followed by Ms. Johnson, who gave an overview of the budget for the State Board of Elections.
Senator Carroll asked what percentage of their budget was supported by fees collected by the Secretary of State’s office. Secretary Grayson replied that their fees were on the lower end as compared to other states. He added that they have projected approximately $961,000 in Restricted Fund money from the collection of fees, with the rest being swept out to help cover other state operating expenses. Senator Carroll requested a comparison of existing fees versus what might be reasonably charged. Secretary Grayson stated they would update the information and provide it to the committee. Senator Carroll commented that the General Assembly should take a look throughout state government to see whether fees are being collected commensurate with services provided. Secretary Grayson commented that if fees were increased, one recommendation would be to increase the paper filing fee to encourage more online filing in order to reduce operating expenses.
Senator Carroll asked if any administrative overhead was allowed in the federal funds for the State Board of Elections, or would it all be used for technology. Ms. Johnson replied that overhead and administrative costs were not included in the Help America Vote Act (HAVA) funds. She said federal money appropriated through the Military Overseas Voter Empowerment (MOVE) Act does allow for the payment of some administrative costs; however, since the legislation was recently enacted, the details had not been distributed. Also, she indicated she was unsure what costs would be associated with the MOVE Act, but would keep the committee posted.
Representative Pullin expressed a complaint from many of her constituents regarding the new voting machines not allowing the voter to change their choices once the straight ticket was chosen. Secretary Grayson said the newer machines have been programmed to have a summary screen, so that if the voter chooses the straight ticket but wants to vote for a candidate representing a different party, they would have the opportunity at that time to go back and make a change before finalizing their vote.
Representative Siler commented that the federal effort to make all votes count, particularly those of deployed military personnel, was very good. He asked if the amount of money expected for the effort would be adequate to do the job. Ms. Johnson replied probably not. She added they might receive $1.4 million, and combined with existing HAVA funds would be approximately $6 million, most of which was earmarked by the Board to upgrade the voter registration database from a mainframe system to a web-based system. Secretary Grayson added that it is expected for Congress to appropriate some amount for that purpose. He said they had participated in a pilot program developed by the federal Department of Defense to deliver ballots electronically via email to soldiers and overseas citizens; however, there are no plans to continue that program in 2010. Representative Siler agreed that it should be a recurring program for the funding aspect.
Representative Adams asked if online absentee ballots are limited to overseas citizens or would it apply to all absentee ballots. Ms. Johnson replied that it was for military personnel, their dependents, and overseas voters only.
Attorney General Jack Conway came forward and provided information regarding the budget of the Attorney General’s office. With him were Deputy Attorney General Dana Mayton and Bonnie Howell, Executive Director, Office of Administrative Services.
Representative Siler stated that there are three electrical providers in his district; Cumberland Valley RECC, Kentucky Utilities, and the Tennessee Valley Authority (TVA). He said the TVA provides service to approximately one-third of his district, and their rates are significantly higher than the other two providers, which are fairly consistent. He commented that he receives more constituent complaints on that than almost any other subject. He said that recent news had indicated that the TVA would be held responsible for the slurry spill in Tennessee, which enraged his constituents in that area because Kentucky rate payers would have to pay for a disaster that occurred in Tennessee. He asked if the rate intervention process in the Attorney General’s office would have the ability to influence those disparities. He expressed the seriousness of the issue, indicating that businesses and industries would change locations to avoid the higher rates. General Conway stated that the TVA is a federal corporation and therefore they would have limited ability to influence TVA’s rate structure. He said he was now aware of the problem and would look into the issue and get back with Representative Siler on the subject and the possibility of intervention in his district.
Representative Stone asked if the proceeds from forfeitures acquired from major drug arrests and cybercrimes were available for the use of the Attorney General’s office. General Conway replied that drug-related forfeiture laws were more liberal than cybercrimes laws, and asset forfeitures allowed from cybercrimes cases are limited to cars and computers used in solicitation crimes. Ms. Howell added that the Attorney General’s office had some federal asset forfeiture money, but no state asset forfeiture funds. She also stated that those federal monies include many restrictions on how they can be spent. Deputy General Mayton stated those revenues could not be counted on or budgeted, as it could not be determined when they may be received.
Representative McKee expressed his appreciation for the work performed by the Attorney General’s office. He inquired about the tobacco Master Settlement Agreement (MSA) and asked who would be responsible for moving non-compliant cigarettes off of retailers’ shelves. General Conway replied that the issue of diligent enforcement is very important within the states, and the extent to which the General Assembly is keeping up in keeping the bad products out of circulation is very helpful. Deputy General Mayton added that once the product is contraband, it would be the responsibility of the Revenue Department to seize that contraband. She added that some other states were charging fees for certifying non-participating manufacturers, which may be something Kentucky could consider as a source of funds.
Representative Riggs commented that in 2000 he had passed a comprehensive bill regarding updating the 15 or 20 year-old wording in the statues dealing with computer-related crimes because the terminology was out-of-date and no longer applied. He asked if the wording was in need of another update. General Conway replied that the statutory language had been updated again in the most recent session of the General Assembly.
Representative Riggs asked if a permanent repeal of KRS 48.005 would be necessary. General Conway replied in the affirmative, indicating that it would be a very positive development.
Representative Riggs asked where victims’ advocacy grants come from and if they were a statutory requirement. General Conway replied that traditionally they were contained in their budget request and were a part of the appropriation, not required statutorily.
Representative Koenig asked for an explanation of the term maximum personnel flexibility. General Conway replied that additional budget reductions would require personnel actions such as implementing a layoff plan, furloughs, or a combination of those.
Representative Adams asked if small businesses were not currently included in the no-call list. General Conway replied that small businesses were not eligible because it was for residential customers only. Todd Leatherman, Executive Director, Office of Consumer Protection, answered that business-to-business calls were not regulated. He indicated that the no-call list was being maintained by the Federal Trade Commission and there could be federal issues involved. General Conway said he could not think of any legal impediments, but would look into the issue and respond back.
Chairman Westwood thanked the Attorney General’s office for their presentation and invited representatives of the Unified Prosecutorial System to come forward.
Chris Cohron, Warren County Commonwealth’s Attorney, representing the Commonwealth’s Attorneys, and John Estill, Mason County Attorney, representing the County Attorneys, came forward and provided brief overviews of their agency budgets. Both are members of the Prosecutors Advisory Council (PAC).
Representative Montell expressed his appreciation for the work they perform on a shoestring budget and stated that there were many tough decisions to be made.
Representative Adams commented that Representative Denham could not be in attendance and expressed his appreciation for Mr. Estill’s good work.
Representative Siler asked if the $3,000 office allowance was taken before it was received, or if it was given up by choice to prevent the loss of jobs. Mr. Estill replied that as part of a plan to respond to the budget cuts, PAC voted to take the remaining budgets for that purpose. Mr. Cohron stated that they could not quantify how much money is being spent for operating expenses by prosecutors across the state from their own pockets.
Chairman Westwood then invited representatives from the Property Valuation Administrators (PVAs) to come forward. Mack Bushart, Executive Director, PVAs, Jason Scriber, PVA Association President, and Karen Bushart, Chair, PVA Budget Committee, provided information regarding their agency budget.
Representative McKee asked how the issues of declining property and land values are handled. Ms. Bushart replied that they look at sales and market values, and if there is a major decline in the property values, the values would be decreased according to market values. Mr. Scriber agreed, adding that whether the market was stable or had reduced, the values would be raised or reduced accordingly. He commented that the values are still holding, but it may take longer for a property to sell.
Representative Siler commented that cutting the PVA staff is like a farmer eating his seed corn. He stated that one problem was the closing of auto dealerships throughout many of the rural communities which has a devastating impact on school funding as well as that of other county government agencies. He asked if a county keeps the tax revenues from sales of vehicles to residents even though they have to purchase them in another county. Ms. Bushart replied that would be better answered by the County Clerk, adding that usage taxes are paid in the county of residence where the vehicle is registered, as well as continuing annual property taxes.
Representative Pullin asked how Kentucky property taxes rate versus those of other states. Mr. Scriber replied that Kentucky’s property taxes are significantly lower. Mr. Bushart stated that Tennessee has no property tax on vehicles.
Representative Pullin inquired about real property taxes in Kentucky compared to Tennessee and Ohio. Ms. Bushart replied that they will research that and reply back to the committee. Mr. Bushart commented that some residents of border counties register their vehicles in nearby states in order to avoid paying the property taxes on those vehicles. Mr. Scriber added that, for example, some trucking companies register in Indiana for a tax break.
Representative Stone commented that in comparing property tax rates from county to county or state to state, one should look at how local school districts raise money. He said many of the local districts in Kentucky have higher utility taxes to supplement or offset the relatively lower property taxes. Ms. Bushart said that in Kentucky over 50% of property tax bills go to the schools statewide.
Chairman Westwood asked if more funding were available would it be possible to stop the residents of border counties registering their vehicles in other states. Mr. Bushart replied there was a program being developed in the Revenue Cabinet to address that issue on a statewide basis.
Representative Adams commented that the meeting was very informative, and thanked the presenters and LRC staff for their hard work.
Chairman Westwood announced that this would be the last meeting of the 2009 interim. He expressed his appreciation to the members for their attendance.
There being no further business or discussion, the meeting was adjourned at noon.