The 4th meeting of the Interim Joint Committee on Licensing and Occupations was held on Friday, September 9, 2005, at 10:00 AM, in Room 129 of the Capitol Annex. Senator Gary Tapp, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Gary Tapp, Co-Chair; Representative Denver Butler, Co-Chair; Senators Tom Buford, Julian M Carroll, Ray S Jones II, Ernesto Scorsone, and Dan Seum; and Representatives Larry Clark, Ron Crimm, Jon Draud, Dennis Horlander, Joni L Jenkins, Dennis Keene, Stan Lee, Paul H Marcotte, Reginald K Meeks, Charles Miller, and Jon David Reinhardt.
Guests: T. Wesley Faulkner, Faulkner Law Offices; Jason Baird, Kentucky Malt Beverage Council, Inc.; Gene McClean, Kentucky Beer Wholesalers' Association; Dan Meyer, Wine & Spirits Wholesalers of Kentucky, Inc.; Norman Brown, Executive Director and Lee B. Harris, General Counsel, Kentucky Real Estate Commission; John Reed, Attorney, Reed Weitkamp Schell & Vice, PLLC; and Beth Jurek, Deputy Director, Office of State Budget Director.
LRC Staff: Vida Murray, Ann Seppenfield, Bryce Amburgey, and Susan Cunningham.
Senator Tapp called the meeting to order and told members present that when there was a quorum, a vote on the minutes from the August meeting would be taken.
First on the agenda, was Representative Ron Crimm, who showed the committee a taped story from WHAS about a family whose child had been electrocuted due to faulty wiring. The tape included interviews with a building contractor and an electrical inspector involved in building a garage where the incident occurred. Representative Crimm told the committee that electrical inspections were not being done on renovation projects in Jefferson County. He said that he had prefiled legislation to: 1) enable electrical inspectors to perform more efficiently; 2) raise fines; and 3) shorten the time a journeyman electrician from a neighboring state could work without applying for licensure. Under existing law, an electrician from another state may work in Kentucky for 30 days without being licensed. T. Wesley Faulkner, who represented the family in court, told committee members that during a taped deposition, the electrical contractor explained that getting an electrical permit in Jefferson County was considered a technicality. Mr. Faulkner said that giving the city the ability to increase the penalties to $1,000 for the first offense and $2,000 for each subsequent offense would encourage electrical contractors to get the proper permits.
Senator Seum said if the inspector doing the final inspection did not stop the work until an electrical permit was posted, he did not do his job. Mr. Faulkner said that the building inspector did tell the department that there was no electrical permit and that he was aware of electrical work being done. Representative Clark said the 10-day window in Representative Crimm's bill for out-of-state electricians was too short. Representative Crimm said he would work with the Office of Housing, Buildings and Construction (HBC) on the time frame. Senator Buford said the building inspector should look for an electrical license during the final inspection. Van Cook, from HBC, said no final inspections were done unless the required stickers were in place. Senator Tapp said a bill was passed two years ago so that Jefferson County could license inspectors and the committee should look carefully before giving inspectors the ability to shut down an entire job for an electrical permit. Ralph Hammed stated that he had been an electrical inspector for 15 years and that this bill would help Jefferson County Metro Government enforce the electrical code.
Senator Tapp acknowledged that there was a quorum. Having asked for a motion and a second, the minutes from the August 26, 2005, meeting were adopted by voice vote.
Next on the agenda, Gene McClean, Kentucky Beer Wholesalers' Association, told the committee that when prohibition was repealed, the Twenty-First Amendment was adopted to regulate the sale of alcohol at the state level rather than the federal level. He said that the Twenty-First Amendment addresses three specific issues: temperance (whether or not people wanted alcohol sales); an orderly market that prohibits alcohol suppliers or wholesales from having a financial interest in a licensed retail establishment, and that requires a licensed wholesaler to hold products purchased from suppliers 24 hours before selling the products to retailers; and tax collection. Collecting taxes at the wholesale level provided the state with a more consistent method than collecting from retailers. He said that most states use the three-tier system. However, recently Michigan's and New York's laws were challenged in the U.S. Supreme Court. The U.S. Supreme Court in the Granholm ruling reaffirmed the Twenty-First Amendment and the state's right to govern the sale and distribution of alcohol products, and under that ruling, the three-tier system is permissible. The decision merely holds that states cannot discriminate between in-state wineries and out-of-state wineries engaged in shipment of their products. Mr. McClean said that if there was no three-tier system, there would be no way to stop the shipment of alcohol to minors. He added that eliminating the three-tier system places Kentucky jobs at risk. Dan Meyer, Wine & Spirits Wholesalers of Kentucky, Inc., told the committee that the U.S. Supreme Court decision did not apply to Kentucky because Kentucky statutes do not discriminate regarding wine shipments. Jason Baird, Kentucky Malt Beverage Council, Inc., said the Twenty-First Amendment protects states using the three-tier system from sales occurring in dry territories and to minors.
Senator Scorsone asked for clarification on what a Kentucky winery could ship and what an out-of state winery could ship. Dan Meyer said the only distinction was that the amount of wine sold by out-of state wineries is not limited. The wine must be purchased face-to-face and shipped back to one's home address. In contrast, an in-state small or farm winery can ship 2 cases of wine, purchased face-to-face, to one's home address. Mr. McClean said that the shipping laws were enacted in different sessions, stating that the out-of-state issue was dealt with in administrative regulation after the out-of-state shipment law was passed. Both, require a face-to-face transaction. Senator Carroll asked if the three-tier system required the wineries to distribute only through Kentucky wholesalers, and reported that the owners of small farm wineries in his district have told him they could not afford to add the wholesale cost to their wine. Dan Meyer answered that some wineries sold directly to retail stores if they "offer" the wine at the wholesale price. He said that out-of-state wineries must go through a wholesaler and cannot sell to a retailer directly. Mr. Meyer said that wholesalers offer services that make the sale, marketing, and paying of taxes easier for small farm wineries. Mr. McClean said that there is a cost to distributing one's products, whether distribution is done by the winery or through a wholesaler; however, in most cases, the small farm wineries do not have the capital to hire truck drivers and trucks to transport their products, thus making it cheaper to sell through a wholesaler. Representative Reinhardt said he would like for the committee to invite the small farm winery owners to come to the committee and explain the industry's needs.
Next on the agenda, Norman Brown, Executive Director of the Kentucky Real Estate Commission (KRC), told the committee about the civil lawsuit the Department of Justice (DOJ) filed against the KRC. He said the Commission and the DOJ had worked out a consent decree and explained the effect the decree would have on Kentucky statutes and regulations. John Reed, attorney for the KRC, told the committee that last spring the DOJ filed a lawsuit against KRC alleging that its administrative regulation to ban rebates and inducements was a violation of antitrust laws. He said that the empowering statutes for the KRC prohibit it from enacting regulations that affect the price or commission charged by a licensed real estate agent; however, there was a regulation promulgated that limited the inducements a licensee could offer. Mr. Reed said the KRC negotiated an agreement with the DOJ and presented it to the court. In October, the Department will ask the court to approve the consent agreement. He said that in the meantime, as agreed to in the judgement, the ban on inducements is no longer enforced. Mr. Reed told the committee that the section of the statute that sanctions those giving prizes and inducements should be repealed. Lee Harris, General Counsel for KRC, told the committee that two emergency regulations had just been promulgated to conform with the consent decree and that the Commission was working to finalize the ordinary regulation. She said that the only regulation the KRC will place on inducements is that they be disclosed in writing.
Senator Buford asked if any realtors or brokers had been fined for giving inducements in the past and if so would those fines be refunded. Ms. Harris said there were some cases where disciplinary action had been taken; however, the consent decree requires that the KRC place a notice in that person's file so that persons viewing that agent's file would see that the action had been nullified. She said that the DOJ did not require fines to be reimbursed. Mr. Reed said that language in exhibit B, on page 8, in article 7, A-3 of the amended final judgement authorized the disclosure in writing. Representative Marcotte asked if the judgement affected any Multiple Listing Services. Ms. Harris said it would not.
Next on the agenda, under Old Business, a follow-up report was given by Beth Jurek, Deputy State Budget Director, on the Committee's Resolution directing the State Budget Director's Office to fill 51 positions in the Office of Housing, Buildings and Construction as authorized in the budget. She said that the Office was experiencing problems with hiring and maintaining staff. She told the committee that the Office personnel was up 34 positions from August, 2004; however, that did not include the 51 positions that the resolution addressed. She said the Personnel Cabinet has just processed a cap increase to allow for the hiring of the new positions. Ms. Jurek said that the HBC had identified the most critical vacancies and that the Environmental and Public Protection Cabinet was in the process of requesting registers for thirteen of those positions from the Personnel Cabinet. She said that the HBC has told her that staff must be hired on a staggered basis in order to have the adequate time required to train a new employee. She stated that typically after the HBC has trained an inspector they are hired away by a local municipality that uses the same type of inspector, for a higher salary. Ms. Jurek said additional start-up costs for hiring more personnel include laptop computers and travel costs.
Ms. Jurek said the committee had also requested information on the restricted fund receipts, specifically, what the receipts were for 2004. In fiscal year 2004, there were significantly higher receipts, $16.8 million compared to fiscal year 2005 receipts of about $13.8 million, as a result of initiating the Electrical License Program in 2004. In 2005, the renewal of those licenses was $2.6 million. Ms. Jurek discussed some of the statutory provisions that limit the hiring of staff. She said that the statutes specify that electrical license fees can be used only for the electrical trade. Ms. Jurek added that some trades with higher revenue could help the smaller trades if the General Assembly could change language in the statutes to permit the use of fees from the programs with greater revenue to support some of the trades that do not generate as many funds. Ms. Jurek said that even if the legislature permitted the flexibility, the HBC would not have enough funds in 2008 to maintain increased staffing. She said that an option was to increase fees.
Senator Tapp asked what the estimated shortage was for 2008. Ms. Jurek said that if flexibility were permitted by the General Assembly and the receipt structure stayed the same, the shortage would be approximately $4 million.
Representative Clark asked for the classifications of the 13 people listed in the report as the first to be hired and reiterated that building inspectors were desperately needed. Representative Clark asked that HBC send the co-chairs the fee structure and the dates the fees were put in place. Van Cook said there would be four Plumbing Inspector I's, immediately hired, three HVAC Inspectors, immediately hired, two Building Code Plan Reviewers, and four Building Code Inspectors. Senator Tapp said that plumbing fees had been raised so inspectors could be hired; however, the money generated from that increase had been used to balance the budget. Senator Buford asked if a plan had been established to keep the inspectors. Also, he asked Mr. Cook to provide a fee schedule for permits from other states for comparison purposes. Mr. Cook said the HBC was working on a tiered system for electrical inspectors and plan reviewers to establish pay equity. Mr. Cook said he would send the committee a list of fees from other states. Senator Tapp asked how long it was taking the Office to process and send out an electrical license. Mr. Cook said currently, on regular renewal, it was taking approximately five weeks. Representative Keene asked if it was possible to reduce the number hired from 51 to 25 and increase the inspectors' salaries in order to keep them from leaving after their training was completed. Ms. Jurek said there were some inspectors currently being hired at mid-point rather than entry level to address this issue.
Senator Tapp told the committee members that there were letters in their meeting folder from the nurse practitioners and the Kentucky Medical Association where each reports on the progress made in resolving the issue concerning expanded prescriptive authority for nurse practitioners.
There being no further business, the meeting was adjourned at 12:15 PM.