Call to Order and Roll Call
The first 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, September 26, 2013, at 10:00 AM, in Room 131 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; Senators Walter Blevins Jr. and David P. Givens; Representatives Dwight D. Butler, Mike Denham, Adam Koenig, Tom McKee, Brad Montell, Tanya Pullin, Tom Riner, and Wilson Stone.
Guests: Senator Katie Stine; Bill Thielen, Executive Director, Kentucky Retirement Systems; Gary Harbin, Executive Secretary, Kentucky Teachers’ Retirement System; Beau Barnes, Deputy Executive Secretary, Kentucky Teachers’ Retirement System; Mark Whalen, Chief Financial Officer, Kentucky Teachers’ Retirement System; Audrey Tayse Haynes, Secretary, Cabinet for Health and Family Services; and Dr. Allen Brenzel, Clinical Director, Cabinet for Health and Family Services.
LRC Staff: Frank Willey, Tom Willis, Linda Ellis, Katherine Halloran, Kem Delaney-Ellis, Jennifer Rowe, Alex Fontana, and Ben Thompson.
Kentucky Retirement Systems Status
Mr. Thielen discussed the Kentucky Retirement Systems.
In response to questions posed by Representative Montell about funding and benefit plans, Mr. Thielen stated the actuaries project KERS Non-Hazardous, as currently funded, would probably bottom out in three to four years. A study would need to be done for more accurate projections. Mr. Thielen clarified that the Cash Balance Plan would not replace the Defined Benefit Plan, but would provide another benefit tier.
In response to a question from Representative Koenig concerning investment performance, Mr. Thielen stated that he would need to confer with the Chief Investment Officer in order to tell precisely how benchmarks are determined. A benchmark is established by a committee based upon recommendations of various investment consultants.
In response to questions from Representative Pullin concerning investments, Mr. Thielen said KRS connects with four different investment consulting firms, and the ultimate decision lies with the KRS Investment Committee. KRS is a valuable client for these houses because of the large membership number and negotiations for investment managers’ rates are significant. Mr. Thielen also clarified that investment consulting firms have expertise in a wide variety of investment types and receive a flat annual fee.
In response to a question from Senator Givens about investment gain/loss, Mr. Thielen said actual incurred losses and gains are smoothed out over a five year period.
In response to a question from Senator Blevins about the percentage of investments in Kentucky, Mr. Thielen said he would need to confer with his staff to provide exact numbers on how much is invested in Kentucky, but KRS always looks to invest in-state.
Chair McDaniel made note that as a result of Senate Bill 2, the General Assembly will contribute $122 million more in the coming fiscal year than last fiscal year.
Kentucky Teachers’ Retirement System Status
Mr. Harbin discussed the Kentucky Teachers’ Retirement System.
In response to questions from Representative Denham about the inviolable contract for medical benefits and Social Security (SS) benefits, Mr. Harbin confirmed that teachers were not included in the inviolable contract for medical benefits when the law was passed. Mr. Harbin informed the members that SS originally excluded teachers, but during a revision to the SS benefits states were allowed to opt-in for teachers. Kentucky chose not to. Kentucky is still able to opt-in with an act of Congress. Though Kentucky teachers can receive SS benefits from another job, those benefits would be greatly reduced.
In response to a question from Representative Montell concerning healthcare liability, Mr. Harbin answered that the legislature covered the unfunded liabilities that fell under their responsibility, but not all of the unfunded liabilities.
In response to a question from Representative McKee, Mr. Harbin stated that the $400 million budgetary payment was a continuing annual payment over the next 30 years, rather than two $200 million dollar payments over the next two fiscal years.
In response to a question from Representative Stone, Mr. Harbin stated that KTRS foresees no immediate impact on healthcare benefits to teachers or retired teachers from the Affordable Care Act.
In response to a question from Chair McDaniel, Mr. Harbin clarified that the dependent subsidy previously provided to retired teachers’ health plan by KTRS is available in the Kentucky Employee Health Plan.
Substance Abuse and Available Treatment Beds
Secretary Haynes and Dr. Brenzel discussed substance abuse in Kentucky, as well as treatments available in-state.
In response to questions from Representative Koenig concerning heroin abuse in Northern Kentucky and the availability of treatment, Secretary Haynes stated that the Affordable Care Act would benefit substance abuse treatment. As more people become insured for substance abuse treatment, more healthcare providers will increase the quality of their treatments. Dr. Brenzel noted that the CHFS had the ability to reallocate resources to the places that needed them most.
In response to a question from Representative Denham concerning the increase in heroin abuse, Secretary Haynes said treatment programs would take time to ramp up as the Affordable Care Act was implemented. She also noted that when people are hospitalized, hospitals can enroll them in Medicaid if they are eligible.
In response to a question from Senator Stine concerning costs, Secretary Haynes said cost analysis would have to be done for Community Mental Health Centers, where there is a medical component, but the cost would be necessarily greater than Recovery Kentucky, which is a therapeutic model. Dr. Brenzel added that for heroin addiction, there needs to be a medical component to get through withdrawals.
In response to a question from Representative Riner concerning faith-based programs, Secretary Haynes stated funds had historically gone to Community Mental Health Centers, but the network will be opening up because of an increase in need.
There being no further business before the subcommittee, Chair McDaniel requested a motion to adjourn. A motion was made by Representative Stone and seconded by Representative Pullin, and the meeting was adjourned at 12:24 PM.