Interim Joint Committee on Agriculture


Minutes of the<MeetNo1> 6th Meeting

of the 2013 Interim


<MeetMDY1> November 13, 2013


Call to Order and Roll Call

The<MeetNo2> 6th meeting of the Interim Joint Committee on Agriculture was held on<Day> Wednesday,<MeetMDY2> November 13, 2013, at<MeetTime> 1:00 PM, in<Room> Room 149 of the Capitol Annex. Senator Paul Hornback, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Paul Hornback, Co-Chair; Representative Tom McKee, Co-Chair; Senators Carroll Gibson, David P. Givens, Sara Beth Gregory, Stan Humphries, Dennis Parrett, Dorsey Ridley and Whitney Westerfield; Representatives Lynn Bechler, Jim DeCesare, Mike Denham, Myron Dossett, C.B. Embry Jr., Derrick Graham, Richard Heath, Richard Henderson, Kim King, Martha Jane King, Michael Meredith, Terry Mills, David Osborne, Ryan Quarles, Tom Riner, Steven Rudy, Jonathan Shell, John Short, Rita Smart, Tommy Turner, and Susan Westrom.


Legislative Guests: Senator Jimmy Higdon, Senator John Schickel and Representative Leslie Combs.


Guests: Roger Thomas, Executive Director, Governor’s Office of Agricultural Policy; Commissioner James R. Comer, Kentucky Department of Agriculture; Mark Haney, President, Kentucky Farm Bureau; Hood Harris, State President, AT&T, and Brad McLean, Director of Government Affairs, AT&T.


LRC Staff: Tanya Monsanto, Lowell Atchley, Kelly Ludwig, and Susan Spoonamore, Committee Assistant.


Upon motion made by Representative Richard Henderson and seconded by Senator Whitney Westerfield the October 9, 2013 minutes were approved, without objection, by voice vote.


Upon motion made by Representative Mike Denham and seconded by Representative Richard Henderson the report of the Subcommittee on Horse Farming, and the report on Rural Issues were approved, without objection, by voice vote.


Legislative Issues for 2014 Session

Mr. Thomas, Executive Director, Governor’s Office of Agricultural Policy, said that Agriculture Development Funds helped to fund programs that have been valuable to Kentucky agriculture and rural communities. He said that in the near future, the federally funded programs for agriculture will be diminishing. Direct payments are probably going to be a thing in the past. Tobacco farmers will receive their last tobacco transition payments in January 2014. The funding for programs through the GOAP and the Kentucky Agricultural Fund has been dependent on tobacco settlement funds.


Mr. Roger Thomas explained that the budget for programs through the GOAP and Agriculture Development Funds have been dependent upon the amount of funding received from tobacco settlement funds. Kentucky has been involved in arbitration, along with other states, opposing a claim that Kentucky failed to enforce a clause that was part of the 1998 Master Settlement Agreement. Recently the Court ruled that Kentucky was non-diligent in the 2003 enforcement of the model statute. If that ruling stands, it will have an adverse affect on Kentucky’s budget.


In response to Senator Humphries, Mr. Thomas said that funding for the Breathitt Diagnostic Laboratory in Hopkinsville is a priority for the Governor if funds are available.


In response to Senator Givens, Mr. Thomas said that any penalties resulting from the lawsuit will depend upon Kentucky being successful at vacating the order that was previously rendered.


In response to Senator Givens, Mr. Thomas said that in fiscal year 2016, the state’s portion of the Agricultural Development Funds to support debt service for bond payments would be approximately $28 million. He said that besides the debt service portion for bond payments, the money received from the MSA is divided between Rural Development Fund, Early Childhood Development Initiatives and Health Care Improvement Fund initiatives. The MSA payment is expected to total $92 million for fiscal year 2015 and $86 million for 2016.


In response to Senator Gibson, Mr. Thomas said that the MSA payment is a 25 year agreement, but in reality the MSA payment is based upon domestic tobacco product sales in the United States. Keep in mind that the MSA payments are decreasing because the domestic product sales are declining, he said.


In response to Senator Givens, Mr. Thomas said that the money placed in a 2003 escrow account was money that participating manufacturers withheld. Mr. Thomas said that if Kentucky does not win the appeal to have the order vacated, then the penalty assessed would be taken from Kentucky’s future payments.


In response to Senator Hornback, Mr. Thomas said that it is true that if only one state is found to have been non-diligent in the 2003 enforcement of the model statute, then its entire amount payment could be withheld.


Commissioner James Comer, Kentucky Department of Agriculture, stated that Agriculture Development Funds help to support the Kentucky Proud programs within the department. For the 2014 Legislative Session, the department will be looking to clean up the hemp bill that was passed in 2013 and will introduce an egg bill that will allow repackaging of eggs by trained retail personnel. The Livestock Care Standard regulations are in the regulatory process. The department would support legislation engaging the private business sector to solve public problems.


Mark Haney, President, Kentucky Farm Bureau (KFB), said that it had been a good year for agriculture. KFB supports maintaining MSA funds, the expansion of the Breathitt Diagnostic Center, the expansion of sales and use taxes for the equine industry, and supports private property rights. KFB does not support changing the rural road fund distribution formula.


Mr. Haney explained that the United States Department of Agriculture (USDA) was looking to include the Tobacco Transition Payment Program (tobacco buyout) in the federal sequestration. The impact would be felt by 150,000 quota holders and growers in Kentucky. It is disconcerting that the USDA will not uphold contracts signed by quota holders and growers, according to Mr. Haney.


Senator Hornback stated that he did not understand how a private contract could become a part of sequestration.


In response to Senator Parrott, Mr. Haney said approximately $12 million would be taken from the growers’ portion.


Discussion on Telecommunications and Modernization

Mr. Hood Harris, State President, AT&T and Brad McLean, Director of Government Affairs, AT&T, discussed telecommunications and modernization. Mr. Harris explained that AT&T is on pace to invest approximately $230 million in Kentucky by the end of 2013. AT&T is asking for help to pave the way for more investments in broadband and new technology.


 Mr. Harris stated that Kentucky’s telecommunication laws are outdated. Action needs to be taken to ensure that Kentucky does not lag behind in new technology. AT&T is being forced to maintain and invest in two networks, which means that AT&T is not able to fully invest in new technology. New legislation would be the first step in advancing new infrastructure that would allow people in rural areas to keep their basic landline service. Under a new proposal, it would be up to the customer if they want to make a change. The new proposal meets the absolute minimum threshold of starting the process of modernizing Kentucky’s telecommunications law. The technological modernization will bring better cell phone service, broadband deployment, and economic development opportunities while ensuring that rural customers can keep their basic phone service. Mr. Hood stated that the new proposed legislation specifically says that nothing in the legislation adds to or takes away the Public Service Commission’s (PSC) ability to have jurisdiction over interconnection or other disputes between providers.


Mr. Brad McLean discussed various points in the new proposal. He said that the language makes it clear that only those companies that are no longer subject to retail price caps, in accordance with the 2006 legislation, can choose to operate under the new code section. Those companies must file a notice with the PSC indentifying its exchanges that have 15,000 or more housing units.


Mr. McLean gave an explanation regarding existing rural basic services. The customer can continue to keep his or her basic landline service. If the customer decides to order a different service, the provider must inform the customer of the new technology being used and the provider must inform the customer that they have 30 days to notify the provider that they no longer want the new service. If the customer fails to act within 30 days, then the provider is no longer under the obligation to provide basic service but would be under an obligation to provide voice service. In rural areas where a provider has not already installed the facilities needed to provide basic service, the provider is not obligated to provide basic service.


Senator Hornback stated that he wanted to clarify that the proposed bill is a retail bill, not a wholesale bill.


In response to questions from Senator Hornback, Mr. McLean stated that the proposed bill does not deal with interconnection issues. He also said that some cable companies have suggested including language giving PSC oversight with interconnection issues. The Federal Communications Commission (FCC) will probably make a decision next year regarding internet protocol (IP) to IP interconnection. Kentucky could face a lawsuit if PSC is given oversight on interconnection issues before the FCC makes a formal decision.


In response to Representative Riner, Mr. McLean stated that in rural areas, where there are exchanges with 15,000 housing units or less, and the customer already has a landline or the facilities in place that supports basic service, then AT&T will provide service. There is a competitive marketplace in urban areas for consumers to choose from.


Representative Riner stated that he was not comfortable with communities being without a landline. During the last national disaster, people in New York were able to place calls on a landline, but not cell phones.


In response to questions from Representative Bechler, Mr. McLean stated that under the new proposed legislation, AT&T would not be required to provide basic service to a new home even if the houses on either side have landline service. AT&T would still have to provide voice service obligation. Basic service includes directory assistance, white pages and other things. Voice service offers access to local calls and 911. AT&T might provide basic service to the new home if it is economically feasible.


In response to Representative Meredith, Mr. Hood explained that the new IP enabled wire line technology would allow AT&T to do a lot more with the lines such as broadband services and video services. Businesses would have more options to choose from in designing services beneficial to them. He said that over 70 percent of consumers in Kentucky have already changed from the old time division multiplexing (TDM) and are using new technologies. Wire lines still continue but under new technology. Rural consumers can be assured of better and consistent service with the new technology.


In response to Senator Hornback, Mr. Hood stated that there are no regulations on bundled services.


In response to Representative Martha Jane King, Mr. McLean explained that the new proposed language says that customers will be guaranteed the basic service they had before if the customers notify the provider within the 30 day period.


Representative King stated that she would like to see language giving assurances that the consumer is guaranteed to go back to the basic service plan if AT&T is notified within the 30 day period.


Mr. McLean stated that the old service hook-up would still be in the house if the consumer decided to go back with the 30 period.


In response to Representative Combs, Mr. Hood stated members of AT&T would welcome the opportunity to work with members of the General Assembly to address the rights of the consumers and notifying consumers of their right to go back to basic service within the 30 day period. Mr. McLean noted that any notification has to be sent in writing to the consumer.


In response to Representative Shell, Mr. McLean said that he understands the lack of cell service on rural roads but that the new technology and expansion of networks should help increase areas of service.


The meeting was adjourned at approximately 3:00 p.m.