The 2nd meeting of the Interim Joint Committee on Licensing and Occupations was held on Friday, October 12, 2001, at 10:00 AM, in Room 129 of the Capitol Annex. Senator Brett Guthrie, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Brett Guthrie, Co-Chair; Senators Charlie Borders, David Boswell, Marshall Long, R.J. Palmer, II, Richard Roeding, and Jack Westwood; Representatives Carolyn Belcher, Tom Burch, Larry Clark, Ron Crimm, Dennis Horlander, Joni Jenkins, Paul Marcotte, Reginald Meeks, Charles Miller, Jon David Reinhardt, and Jim Stewart.
Guests: Caleb Cooley, Dennis Boyd, and Mike Stone, Kentucky Council on Compulsive Gambling; Ray Franklin, Carla Arnold, Scott Jones, Cheryl Wainscott, and Leah Cooper, Department of Charitable Gaming; Michael Noel, Public Protection and Regulation Cabinet; Gay Dwyer, Kentucky Retail Federation; Bernard J. Hettel, Kentucky Racing Commission; Chris Nolan, MMLK&K; David Vance, KFDBA; Scott Wegenast, Catholic Conference of Kentucky; Jack Nienaber, The Catholic Cemeteries; Chuck Glaser, Knights of Columbus; and Robert Hooker Phillips.
LRC Staff: Vida Murray, Jack Jones, Ann Seppenfield, Cyndi Galvin, and Susan Cunningham.
Chairman Guthrie noted Representative Denver Butler’s absence due to the illness of his wife and Representative Reinhardt made a motion for a moment of silence.
Chairman Guthrie welcomed Senator R.J. Palmer to the committee and then made a motion with a second to approve the minutes of the September 14, 2001 meeting. The motion was passed by voice vote.
Bernie Hettel of the Kentucky Racing Commission requested approval of four Administrative Regulations. He explained that they would raise the losing mount jockey fees across the board, reduce the time a winning ticket can be held from two years to one, up-date regulations for pari-mutual wagering at harness tracks, and clarify the Standardbred Development Fund.
Senator Guthrie said there was an amendment that also needed to be addressed. Mr. Hettel said the amendment for 811 KAR 1:125 deleted Section 2 in its entirety and renumbered subsequent Sections accordingly to be in compliance with statute.
Senator Roeding moved for passage with a second from Representative Burch and the administrative regulations were adopted.
Representative Meeks gave a presentation from the Cemetery Task Force regarding a survey that had been sent to cemetery owners and operators around the state asking them for information about their cemeteries. He said approximately sixteen thousand surveys were returned. Results from the survey showed that access to cemeteries was a major problem because many cemeteries are on private land. When the land is sold, new owners tend to deny family members access to visit. Desecration of graves and graveyards is another major issue. He said commercial property and houses are being built over graves. The issue of ongoing care or how the cemeteries will be cared for in the future, and whether the perpetual trust funds were adequate or even required was another problem. Finally, he said the issue of historical records is a major concern and what records are required to be kept by whom, and whether the records are adequate.
Representative Meeks said that he, along with Todd Leatherman from the Attorney General’s Office, made visits throughout the state, and the task force had originally intended to make recommendations in September. However, because the issue was much more involved than first thought, the time had been moved to December.
Todd Leatherman from the Consumer Protection Division of the Attorney General’s Office explained that the primary duty of his office was to regulate the perpetual care funds as well as the cemetery companies. He said the majority of cemeteries are neither regulated, nor required to maintain perpetual care funds. He said there are 272 regulated cemeteries in the state in contrast to the tens of thousands that are unregulated based on the information received from the surveys. Cemeteries that are owned and controlled by lot owners which do not sell pre-need merchandise and do not have salaried employees other than maintenance workers are not regulated by the Attorney General’s Office. However, when a new cemetery opens it is required to deposit a minimal amount, depending on the population of the county, to create an initial perpetual care fund.
Mr. Leatherman said regarding the issue of access brought up by Representative Meeks, common law or court case authority gives descendents a right of reasonable access to property owned by someone else for proper purposes regarding the cemetery. He said a number of states have clarified this issue by making statutory law regarding those rights.
Mr. Leatherman said there is also a maintenance statute requiring the legal owner to maintain the cemetery with the exception of family cemeteries. He said cities are required to protect the cemeteries located within the city limits. However, since the definition of “protection” is not defined, it is not presumed that cities are required to maintain such cemeteries. He said there are desecration statutes making it a felony if a grave is desecrated for the purpose of selling human remains or something buried with the remains. It is a misdemeanor if a grave is intentionally mutilated. He said if a city decides to relocate a grave so that the property could be used for another purpose there is a process they must follow.
Representative Crimm commented that the statute needed to be changed so that land owners could not bury people on their property when there was the potential for the state becoming caretakers of it in the future. He asked if the task force had found many cemeteries that had been abandoned by companies that had promised perpetual care.
Representative Meeks said the study was started because there were three abandoned cemeteries in Louisville. He said 150,000 people were buried in these cemeteries and some graves were three and four caskets deep. These were plots that people had paid for and later found that they could not be buried in that spot.
Representative Crimm then asked if he bought an acre of land to begin a cemetery was there a law to require a deposit be made with any state facility. Todd Leatherman said there is a law that requires an amount of money, gauged by the population of the county, to be put in a perpetual care fund. In addition 20 percent of each grave sale is to be deposited in that account. He said Kentucky’s statute is one of the strongest compared to other states in terms of percentage to be deposited.
Senator Boswell asked Todd Leatherman what kind of working relationship the Attorney General’s Office had with the Historical Society or with the Heritage Council. Mr. Leatherman said the Attorney General’s Office routinely referred calls they received regarding heritage to the Heritage Council or the Historical Society.
Senator Long asked if there was anything in the task force recommendations that would require funeral directors who where holding cemetery records to release information to family members. Mr. Leatherman said that was one issue that the task force was looking at to make recommendations.
Senator Roeding said he felt that the permanent cataloging of cemeteries should be moved from Kentucky State University to the Historical Society Museum to better facilitate people coming to Frankfort to look up records.
Representative Reinhardt asked who was in charge of managing the perpetual care funds and where the deposits were kept. Mr. Leatherman said there is a statute requiring that funds be placed in a trust account maintained by a licensed financial institution and that the cemetery has access to the income generated by the trust for ongoing maintenance, however, the cemetery cannot remove the principal.
Karla Nicholason from the Kentucky Historical Society spoke to the committee about the Kentucky Cemetery Preservation Program. Ms. Nicholason said there are people across the state organizing groups to locate, clean, and mark lost cemeteries. In 1976, Governor Carroll started a Cemetery Records Project as a Bicentennial Program. The result of this program is a data base that will soon be on-line that currently has 3,300 cemeteries cataloged from across the state with 200,000 individual records of who is buried there. The Historical Society also has publications available as well, holding records that have been compiled by local citizens in their counties. She said all information was taken from the tombstones for genealogical information. Ms. Nicholason said she is hopeful that the Historical Society can merge their data with that compiled by the Attorney General.
Ms. Nicholason said in 1996, the legislature enacted a law requiring the Historical Society to take care of Governors’ gravesites. There were 43 such graves in Kentucky, two sites in Indianapolis and Ohio, and one in Montana. In 1998, the legislature amended the statute to increase funds and to include care of the graves of the spouses of Governors, three US Vice Presidents and Kentucky Pioneers. Ms. Nicholason said she felt that establishing lines of responsibility would help local officials understand how the laws pertain to them and how they should handle them. She agreed with the Attorney General’s Office that training seminars for local government and county officials would be beneficial.
Senator Boswell said laws could be enacted to take care of regulations for commercial and for-profit funeral homes, as well as cemeteries located on public land. However, there should be an educational maintenance program for people who have small family plots. He said there is a problem with property that had been sold numerous times and the current owners being held responsible for the cemetery’s maintenance. Representative Crimm concurred with Senator Boswell’s comments.
Ralph Divine, Director of the Division of Right-of-Way and Utilities in the Transportation Cabinet spoke to the committee about the Transportation Cabinet’s policy regarding relocating graves and cemeteries. He explained the five specific issues that involved the Transportation Cabinet and the relocation process. He said if the project involved federal funds, then the procedures followed federal regulations. Mr. Divine said when the Cabinet is preparing plans for highway projects they try to avoid disrupting graves. However, if that cannot be done, the Cabinet tries to minimize the number of graves that will have to be relocated. Procedures to notify the next of kin and re-interment are given priority. If the next of kin cannot be located, there are guidelines for going through the proper court for permission to move the grave. Additionally, when graves are moved it must be done by a licensed funeral director. Mr. Divine said that every effort is made to limit contact with cemetery sites; however, they feel that the procedures the Cabinet follows are appropriate.
Representative Miller asked if the state was responsible for the maintenance of a cemetery located next to a highway. He said there is a cemetery in his district that is located on the state right-of-way. He wanted to know what the footage was that determined what the right-of-way was. Mr. Divine said the state’s right-of-way varied from location to location and from roadway to roadway. He said there should not be any graves located on the state’s right-of-way and that he was unaware of any cemetery that was owned by the Cabinet.
Representative Stewart asked if there was a statute or regulation setting out how the highway department is to provide for continued access to cemeteries when the cabinet builds a new road or adds a new lane to a road that changes the right-of-way. Mr. Divine responded that the Cabinet is required to leave reasonable access which is as good or better than what was originally there.
Ray Franklin, Commissioner of the Department of Charitable Gaming gave an update on charitable gaming. He said charitable gaming in Kentucky is a $585 million dollar cash industry. He said this figure was nearly identical to the gross revenues from pari-mutuel racing and the Kentucky Lottery. He explained the department’s implementation of the “40% rule.” He said since 1996, the legislature had amended the statute regarding this rule to give more flexibility regarding penalties. During the 2000 Regular Session, legislation was enacted to lessen the penalties imposed on organizations that fail to retain 40% of their adjusted gross receipts. Specifically, the only way to lose a license for a 40% violation now is if the percentage retained is lower than 25% or if the licensee does not retain 40% in consecutive years. Mr. Franklin cited counties that in previous years had a high number of violators, but who now had very few. He said some violators have administrative appeals pending and continue to participate in gaming until a final decision is handed down. Mr. Franklin said in 1999, 72 percent of all licensees retained a higher percentage than the state-wide average, which was more than 49.6 percent of their adjusted gross receipts. He said most organizations are able to exceed the retention standard by a wide margin.
Mr. Franklin said the effect of the 2000 amendments has softened the penalties for 40% violators and has increased department oversight for the organizations at the lower end of the retention scale. This helps the department keep more groups involved in charitable gaming.
Mr. Franklin also gave the committee an update on the department’s staff positions. He said prior to the reorganization in 1998, there were 44 authorized positions, with an additional 22 positions authorized by that Act. The reorganization authorized new positions in the enforcement department, enabling the department to hire more auditors and investigators. Also, new positions were created in the Commissioner’s office for a Deputy Commissioner and a Principal Assistant to act as legislative liaison and a network analyst.
Mr. Franklin also updated the committee on the legislation that gave the department law enforcement power. He said the department has five investigator positions and that all five are sworn law enforcement officers. All investigators are required to complete training established by the Department of Criminal Justice Training. Currently there are 22 cases being investigated. Because of the complexity of the cases several other agencies including the Kentucky State Police and the Internal Revenue Service have been involved in the investigations. Mr. Franklin said several indictments have been handed down as a result. He said the agency gets its information from people who want to keep gaming honest.
Mr. Franklin explained the breakdown of gross receipts and expenses from 1996 to 2000. He said gross receipts have continued to rise since 1996. He said net receipts are the statistic most closely watched as this percentage provides a benchmark to measure statewide success.
Senator Boswell complemented the department on a job well done. He also said that he thought the legislature may need to look into a joint entity to handle the charitable gaming, pari-mutuel racing, and the lottery.
Ray Franklin agreed that the competition from bordering states was causing problems for charitable gaming due to higher payouts outside the Commonwealth. Kentucky’s high payout is $5,000 dollars whereas West Virginia just raised its payout to $7,500 dollars. Consequently, people are driving across the border for charitable gaming. He also said that unless charitable gaming becomes flexible enough to change with the times there are going to be problems.
Representative Susan Westrom, recognized by Chairman Guthrie, asked how many local governments lease out a building for bingo. Mr. Franklin responded that there were very few and offered to do research to get her an answer.
Representative Larry Clark said the legislators need to consider making a change to give the commission some statutory authority to better deal with violations. He concurred with Senator Boswell that gaming, racing, and the lottery may all have to be put together.
Representative Marcotte asked Chairman Guthrie if he could produce a report with up-to-date, accurate figures for charitable gaming, pari-mutuel racing, and the lottery.
Representative Reinhardt asked Mr. Franklin if he was aware of the use of slot machines in Kentucky and questioned the legality when signs were posted “for amusement only.” Mr. Franklin said they are in Kentucky and some citizens of Kentucky think they are legal because they are everywhere. He said they are draining money away from legal gaming. He said if the slots were paying out money for an investment dropped in by the player, then it was illegal.
Senator Westwood asked what the impact of the casinos had been on charitable gaming and if he considered video lottery terminals a solution or competition. Mr. Franklin said there were several ways including adding another form of competition. However, he said people go to the boats at intermittent times and people who attend charitable gaming are more loyal in attending and video lottery terminals would add another form of competition.
Senator Borders said in preparing an economic impact study aimed at determining the dollars being lost to casino gambling, the social costs of compulsive gambling should also be considered.
Mr. Charles Glazer, a member of the Knights of Columbus from Bowling Green and former chairman of charitable gaming for his chapter, spoke to the committee about his concern about the dilution of gaming dollars in the state. While he felt that the casinos and race tracks were forms of competition, he was also concerned about the state lottery because of its advertising practices. He said the lottery’s scratch off games directly compete with charitable gaming's pull tabs. He felt that the lottery’s regulations were more favorable than those for charitable gaming. He said that in the past 18 months charitable gaming attendance has dropped significantly.
Mr. Hooker Phillips, representing charitable gaming in Knox and Laurel counties, spoke to the committee about his concerns for charitable gaming and provided a handout with recommendations that he felt would improve charitable gaming. He said that money from bingo had helped schools, school organizations, and in some cases, has helped individuals pay utility bills.
Caleb Cooley, President of the Kentucky Council on Compulsive Gambling, said the council is gambling neutral, neither opposing nor promoting gambling. The council’s purposes are to educate the public about compulsive gambling and to assist compulsive gamblers who want help through counseling or self help options for the compulsive gamblers. He told the committee that Representative Jack Coleman has proposed legislation to create a Compulsive Gamblers Assistance Fund which takes money from already existing revenue: charitable gaming, the lottery, and racing. He stressed that this was not a measure to fund the Council.
Mr. Cooley said compulsive gambling is a real medical condition that can be treated with counseling, self help groups, and dedication. In 1980, the American Psychiatric Association classified compulsive gambling as a pathological disorder. A Harvard Study showed that one percent of Americans gamble compulsively. There has been an increase in Gamblers Anonymous meetings in Kentucky from 11 rooms in 1999 to 18 in 2001. There are other problems associated with compulsive gambling such as, suicide and family abuse.
Neighboring states have earmarked public funds from gambling revenue to fund programs for compulsive gambling education awareness and treatment. Kentucky has three forms of legal gambling that contribute approximately $171 million dollars to the state budget. Mr. Cooley said it is time for Kentucky to help its citizens.
Senator Guthrie asked Ray Franklin if there is a plan to balance expenses and receipts. Mr. Franklin’s response was that they were trying to not fill personnel vacancies since the commission cannot go to the General Fund.
Representative Crimm moved to adjourn the meeting, the motion was seconded and Senator Guthrie adjourned the meeting.