Call to Order and Roll Call
The 1st meeting of the Capital Planning Advisory Board was held on Tuesday, June 20, 2017, at<MeetTime> 10:00 AM, in Room 129 of the Capitol Annex. Representative Daniel Elliott, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Stan Humphries, Co-Chair; Representative Daniel Elliott, Co-Chair; Senator Whitney Westerfield, Representative DJ Johnson, Charles Byers, Carole Henderson, Stephen Knipper, William Landrum, and Mark Overstreet.
Guests: Mark Bunning, Deputy Secretary, Finance and Administration Cabinet; Chris Reece, Executive Director, Office of Finance, Tourism, Arts and Heritage Cabinet; Mark Bowman, Executive Director, Martha Workman, Deputy Executive Director, and Stacy Woodrum, Budget Director, Department of Veterans Affairs; Michael Jones, Executive Director, Colonel Steve King, Federal Facilities Maintenance Officer, and Brian Simons, Project Coordinator, Department of Military Affairs; Jessica Castenir, Deputy Executive Director, Office of Budget and Fiscal Management, Heather Stout, Executive Director, Information Technology, Terry Denny, Deputy Executive Director, Office of Support Services, Transportation Cabinet; Jeff Abshire, Fiscal Officer and Treasurer, Kentucky Infrastructure Authority; and Sandy Dunahoo, Commissioner, and Vernon Brown, Executive Director, Department for Local Government.
LRC Staff: Shawn Bowen, Julia Wang, and Jennifer Luttrell.
Welcome New Members
In January 2017, the Speaker of the House appointed two new members to the board: Representative Daniel Elliott, who will also serve as co-chair, and Representative DJ Johnson. The new members were appointed to four-year terms.
Approval of Minutes
A motion to approve the minutes of the September 20, 2016 meeting was made by Representative Johnson, seconded by Mr. Landrum, and approved by voice vote.
Information Items
Ms. Bowen discussed two information items which included a document outlining the board’s tentative meeting schedule for the remainder of the year, and a document identifying state agencies that are not scheduled to testify at capital planning meetings this year. Most of the agencies not scheduled to testify are boards and commissions that do not have capital projects in their agency plans, or do not utilize state funding sources.
Presentation – Commonwealth Office of Technology
As part of the capital planning process, the Commonwealth Office of Technology (COT) is responsible for the review and evaluation of information technology (IT) projects submitted in the agency capital plans. The evaluations were conducted over a one-week period by an eight-member review panel, with each cabinet represented. Mr. Mark D. Bunning, Deputy Secretary, Finance and Administration Cabinet, discussed the results of the review, and presented the IT project recommendations.
For the 2018-2020 biennium, agency capital plans included 25 IT projects. The COT review panel scored nine of the 25 projects as high in value (seven general fund projects and two restricted fund projects). The high value projects had a total dollar value of $222.2 million, comprised of $173.2 million general funds, $38.3 million federal funds, and $10.7 million restricted funds. The COT review panel also identified four additional projects valued at $125 million that would enable the commonwealth to achieve its strategic IT goals. Although the projects were deemed important, these projects fell short mathematically of receiving a high value designation.
Mr. Bunning recommended that COT develop an enterprise-wide document management solution that would satisfy the needs of these projects and similar initiatives by other agencies. With the conclusion of the COT infrastructure consolidation project in the previous biennium, the evolution of enterprise technology in state government has entered a new phase, one in which significant new opportunities exist to identify cost savings opportunities through reductions in duplicative efforts and expenditures. He said as agency IT siloes are broken down, shared services will be made available, and technical solutions can be obtained in the cloud or 'off the shelf' rather than built by hand.
Mr. Bunning then discussed two IT projects that were not selected as high value projects, but were still considered important for consideration – the Department of Revenue Integrated Tax System project ($92 million general funds) and the COT Legacy System Retirement project ($20 million general funds). The Integrated Tax System project will integrate over 120 Department of Revenue applications that manage the state tax system. Mr. Bunning said he realized there was an attempt in the past to integrate Kentucky’s various tax systems, and the project did not go as planned. He said the cabinet will focus on selecting a firm that has a proven track record of success with these kinds of projects.
In regard to the Legacy System Retirement project, Mr. Bunning said the project will focus on removing legacy systems that are no longer needed, and at the same time, will allow for the movement of historical data from replaced legacy computer applications to a modern, open system to facilitate greater interoperability.
Responding to a question from Senator Westerfield concerning the Legacy System Retirement project, Mr. Bunning said the $20 million project scope is not sufficient to remove all the legacy systems in state government. COT has a subcommittee focused on finding duplicate or unused applications that need to be eliminated, and that process is not yet completed. He estimated that the state would save $20 million by implementing this project.
In response to another question from Senator Westerfield, Mr. Bunning said he did not know how much it would cost if the state were to eliminate all its legacy systems at once. There are over 2,400 legacy applications in state government.
In response to a question from Representative Elliott regarding the use of cloud-based computing, Mr. Bunning said the commonwealth could save a lot of money by utilizing cloud-based computer applications. Cloud computing or “software as a service” is the practice of using a network of remote servers hosted on the Internet to store, manage and process data. With cloud-based computing, agencies would only pay for the IT services they use. There are, however, some concerns with this technology. The main concern is security because the applications are saved at another location. Additionally, certain Kentucky statutes prohibit data from being stored outside of the state.
In response to questions from Mr. Knipper, Mr. Bunning stated that the commonwealth needs to implement easier to maintain enterprise-wide business solutions that would allow executive branch agencies to share and manage data. In regard to the Legacy System Retirement project, he explained that the project will develop an enterprise-wide solution to eliminate legacy operating systems that are no longer needed. The costs associated with maintaining legacy systems are included in the agency’s operating budgets, and eliminating these systems will reduce agency operating budgets by reducing costs associated with maintaining the systems. Mr. Bunning said he was not advocating that COT manage each agency’s IT systems, but this project will develop an enterprise-wide business solution and save the state some money.
Consideration of Agency Plans
The Capital Planning Advisory Board received testimony regarding seven state agency capital plans: Tourism, Arts, and Heritage Cabinet; Finance and Administration Cabinet; Department of Veterans Affairs; Department of Military Affairs; Transportation Cabinet; Kentucky Infrastructure Authority; and the Department for Local Government. The testimony included discussion of capital construction, information technology, grant/loan programs, and equipment needs for the period 2018-2024.
Tourism, Arts, and Heritage Cabinet
Chris Reece, Executive Director of Finance, presented the cabinet’s capital plan. The following agencies within the cabinet submitted capital plans: Department of Fish and Wildlife Resources, Department of Parks, Kentucky Center for the Arts, Kentucky Heritage Council/State Historic Preservation Office, Kentucky Historical Society, Kentucky Horse Park, Secretary's Office, and the State Fair Board.
Senator Humphries asked Mr. Reece to update the board on Department of Parks’ projects associated with the “Refreshing Kentucky’s Finest” campaign. During the 2016 Session of the General Assembly, the Department of Parks received $18 million bond funds from House Bill 10 and House Bill 303. Mr. Reece said $11.5 million has been allocated for various parks improvement projects. The projects generated $1.27 million in new revenue and have resulted in 8,870 more rooms at Kentucky state parks.
In response to questions from Senator Humphries about the possibility of initiating public-private partnerships (P-3) at state parks, Mr. Reece said P-3 projects have been well received so far. The department has issued a Request for Information for a P-3 project at Kentucky Dam Village for a camp ground on the peninsula of Gobbler’s Knob. Mr. Reece said the speed at which P-3 projects are initiated are based on whether the project is a safety issue.
Finance and Administration Cabinet
Mark Bunning, Deputy Secretary, Finance and Administration Cabinet, discussed the cabinet’s capital needs. Agencies within the cabinet submitting capital plans included the Commonwealth Office of Technology, Department for Facilities and Support Services and the Department of Revenue.
In response to a question from Senator Humphries regarding the need for potential legislation to amend project thresholds or provide additional transparency, Mr. Bunning said P-3 legislation passed in the last session of the General Assembly provided the cabinet with the flexibility it needed to initiate projects. He said he was not aware of any additional changes that need to be made.
Department of Veterans Affairs
Mark Bowman, Executive Director, Martha Workman, Deputy Executive Director, and Stacy Woodrum, Budget Director, Department of Veterans Affairs, discussed the department’s capital needs.
Mr. Bowman discussed the agency’s top two priorities. He said the department has decided not to pursue a third project included in its capital plan, the Thomson-Hood Veterans Center 2 Unit Renovation ($6,740,000 general funds, priority #3).
In response to a question from Senator Humphries regarding the need for and location of additional veteran’s nursing homes in eastern and western Kentucky, Mr. Bowman stated that the agency conducted a feasibility study which will determine the need and location of additional veteran’s nursing homes. The feasibility study identified Bowling Green, Kentucky as a priority area in terms of future veteran population growth and need.
In response to another question from Senator Humphries, Mr. Bowman said the veteran’s nursing home program is a shared program, with the state and federal government each paying for a portion of the projects, the federal government pays for 65 percent of the project and the remaining 35 percent requires state matching funds. Mr. Bowman added that they do not anticipate any additional federal cost compensation for Medicaid and Medicare.
In response to a question from Representative Elliott concerning the decision to withdraw the Thompson Hood Veterans Center project, Mr. Bowman said the decision to withdraw the project will not affect the current people they provide services to. The project goal was to renovate units to a community living type model, which is required by the federal VA. He said they want to put the project on hold because there might be a better use for the $7 million project budget.
Department of Military Affairs
Michael Jones, Executive Director, Colonel Steve King, Federal Facilities Maintenance Officer, and Brian Simons, Project Coordinator, Department of Military Affairs, discussed the department’s capital needs.
In response to a question from Senator Humphries regarding the Modernization Pool KY National Guard Armories project, Colonel King stated that the pool is 75 percent federally funded and 25 percent state funded. If the state receives a $2 million general fund allocation, the federal government will provide $6 million in matching funds.
Transportation Cabinet
Jessica Castenir, Deputy Executive Director, Office of Budget and Fiscal Management, Heather Stout, Executive Director, Information Technology, and Terry Denny, Deputy Executive Director, Office of Support Services, Transportation Cabinet, discussed the cabinet’s capital needs.
In response to a question from Senator Humphries regarding the Beaver Dam Service Area project on the Western Kentucky Parkway, Ms. Castenir responded that she did not know the status of the project, but she would find out and relay that information to the board.
In response to a question from Representative Elliott concerning several projects to construct new or replacement salt storage facilities statewide, Mr. Denny stated salt is currently stored at the Louisville Caves, but it has been proposed to construct more centrally located salt storage facilities to avoid districts having to go to Louisville each time.
Kentucky Infrastructure Authority
Jeff Abshire, Fiscal Officer and Treasurer, discussed the authority’s capital needs.
There were no questions from board members.
Department for Local Government
Sandy Dunahoo, Commissioner, and Vernon Brown, Executive Director, Department for Local Government, discussed the department’s capital needs.
In response to questions from Senator Humphries concerning the Department for Local Government’s level of involvement with FEMA’s flood mapping process, Ms. Dunahoo said her office has assisted some communities that have questions about the new FEMA flood mapping process. As far as providing assistance for affected facilities in those flood zones, she explained that the Corps of Engineers pays 95 percent for flood projects, and the state pays five percent. The Department for Local Government provides matching dollars for projects funded by the U.S. Army Corps of Engineers, FEMA, and the Natural Resource Conservation Service.
Representative Elliott stated that the last two capital plans in the members’ binders were for the Kentucky River Authority and the School Facilities Construction Commission. The agencies were scheduled to be on the agenda today, but because of previous commitments, the agency representatives could not attend the meeting.
Other Business
The next meeting is scheduled for July 18 at 9:30 a.m. At that meeting, the board will review agency capital plans for the postsecondary education institutions.
Adjournment
There being no further business, the meeting was adjourned at 11:40 a.m.