The 2nd meeting of the Interim Joint Committee on Licensing and Occupations was held on Friday, August 11, 2006, at 10:00 AM, in Room 171 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; Senators Tom Buford, Julian M Carroll, Perry B Clark, Julie Denton, Carroll Gibson, Robert J (Bob) Leeper, Ernesto Scorsone, Dan Seum, Robert Stivers II, and Damon Thayer; Representatives Tom Burch, James Carr, Larry Clark, Ron Crimm, W Milward Dedman Jr, Jon Draud, Dennis Horlander, Joni L Jenkins, Dennis Keene, Stan Lee, Paul H Marcotte, Reginald K Meeks, Charles Miller, Ruth Ann Palumbo, Jon David Reinhardt, Ron Weston, and Susan Westrom.
Guests: Van Cook, Executive Director, David Reichert, General Counsel, Office of Housing, Buildings and Construction; Jamie Haydon, Director of Kentucky Breeders Incentive Fund, Kentucky Horse Racing Authority; Lisa Underwood, Deputy Commissioner, Department of Public Protection; Edward Cunningham, Executive Director, Kentucky Higher Education Assistance Authority; and Mary Harvell, General Counsel, Rick Kelley, Controller, and Chip Polston, Vice President of Communication, Kentucky Lottery Corporation.
LRC Staff: Vida Murray, Bryce Amburgey, Tom Hewlett, and Susan Cunningham.
The first item on the agenda, was approval of the minutes from the July 14, 2006, meeting. A motion was made, and with a second, the minutes were adopted by voice vote.
Next on the agenda Van Cook, Executive Director of the Office of Housing, Buildings and Construction asked David Reichert, General Counsel, to explain how Senate Bill 224 had been implemented. Mr. Reichert said that the purpose of the legislation was to ensure that the view of the applicable advisory committees within the office was made a part of the administrative regulations review process. He said specifically, the bill required that any time the office or the Board of Housing proposed an administrative regulation that affected a particular trade that the appropriate committee or board has an opportunity to review the regulation and make comments on it. He said the bill gives the committee 60 days to offer comments. Any comments by the committee or board would then be submitted with the regulation. He said that emergency or new administrative regulations had a 30-day comment period. Mr. Reichert said that there was minimal effect on the agency because the regulations generally originate from the respective committee or board. Mr. Reichert said the office was still working with LRC staff about filing regulations with comments. He said that the intent of Senate Bill 224 was good and that in general there would not be a change in the time it took for the office to get regulations approved.
Van Cook briefed members on proposed statutory changes. He said that there was a problem with the electrical licensing statute. He said that many applications were being received late and the applicants are being fined. He said that the office was receiving a lot of complaints and felt that the statute should be changed to determine whether an application is timely based on the date the application was postmarked rather than the time the applications were received by the office. He said that the current language was very specific and could not be changed by regulation. Mr. Cook said that the Home Inspectors program would need a clean-up bill. He told the committee that there have been 200 people licensed. Mr. Cook said that the office only inspected passenger elevators. However, out in the state and in some factories people were riding freight elevators and handicapped people were riding in freight elevators. Therefore, the office proposes that legislation be introduced to regulate the inspection of freight elevators. Mr. Cook said that the Fire Marshal wanted to start a coalition for safe cigarettes. Mr. Cook said that Kentucky was the leader of deaths by fire due to smoking in bed. He said that at no additional cost to the tobacco companies, cigarettes could be made with a type of paper that self-extinguishes when not continuously puffed. He said that other states had adopted legislation to require cigarettes sold in their states to use that paper.
Senator Tapp asked if the boiler inspectors currently had a continuing education requirement that would be increased. Mr. Cook said no and that several members of that committee had expressed concern because some inspectors had not kept up with recent. He said it would not generate money; however, it would be a way to make sure that out-of-state inspectors knew the Kentucky regulations for inspection.
Next on the agenda, Lisa Underwood, Deputy Commissioner, for the Department of Public Protection told committee members that a Breeder's Incentive Fund had been established in 2005 from the sales and use taxes on stud fees. She said that 80 percent goes to the thoroughbred program, 13 percent goes to the standardbred program, and seven percent to the non-race program. Mark Guilfoil, Director of Standardbred Racing, said that the Authority, the Standardbred breeders, and the Kentucky Harness Racing Association met approximately one year ago and decided to use their 13 percent to revitalize the sire stakes program. The Kentucky sired horses would be eligible to win money from races held at the Red Mile. He said that it was felt that this would also help increase the yearling sales. As a result of the incentive fund, six new horses had been brought into Kentucky and have covered a full book. Mr. Guilfoil said he expected there would be more new stallions coming to Kentucky for the next breeding season.
Senator Tapp commented that none of these stallions would have been coming to Kentucky had it not been for the incentive fund. Mr. Guilfoil responded that Valley Victor, the leading Illinois Trotting stallion for the past five years, came to Kentucky after the incentive fund was in place.
Ms. Underwood told the members that in their handout was a Red Mile racing schedule. She told members that there had been discussions with members of thoroughbred constituencies on how their money could be distributed to maximize economic development. She said the consensus was that one of the main qualifications would be to keep the mare in Kentucky during the entire gestation period from this breeding season forward. Ms. Underwood said the authority also wanted to begin payouts for racing in the 2006-racing season. Therefore, the authority wrote an emergency regulation to allow the races run in January to qualify for the funds. Ms. Underwood said there was discussion on how to evenly distribute funds for both Kentucky and non-Kentucky races since some horses sold were raced out-of-state. She said the regulation went into effect on July 7, 2006. Jamie Haydon, the Director of Kentucky Breeders Incentive Fund, told members that the authority had posted an overview of the incentive fund for thoroughbreds on their website. He said that the projected total for mares registered for the fund was approximately 10,500 in the program. He said that the Authority was still processing paper work because they had received approximately 5,000 paper forms three days before the August 1st deadline.
Senator Tapp asked if the authority knew how many mares would have left the state if there was no incentive fund. Mr. Haydon said that the Jockey Club reported 9,943 Kentucky-sired and Kentucky-foaled horses in 2005 and that the authority expects to see 10,000 plus live foals in 2006. He said that in the coming years, Kentucky would see an increase in mares staying in Kentucky to foal. Senator Gibson asked if the authority expects the incentive fund to increase from year to year. Mr. Haydon said the anticipated revenue collected from stud fees was $15 million; divided $12 million for thoroughbreds, $2 million for standardbreds and $1 million for non-race breeds. He said if there were more mares coming to Kentucky there would be more sales tax collected, adding that Kentucky has the majority of quality stallions. Senator Thayer noted that the Racing Authority was doing a good job of following the legislative intent. Representative Clark asked the authority to provide a quarterly report to the committee on the in-state and out-of-state participation to determine what percentage of money was going to out-of-state winners.
Mr. Haydon said that 10 race breeds had contacted the authority asking how they could earn part of the $1 million set aside for non-race breeds. He said he is meeting with each breed representative to set up a plan on how to disburse that money to affected members.
Senator Tapp asked if the saddle horse group had been in contact with the authority. Mr. Haydon said that they had applied.
Next on the agenda was an update on the Kentucky Educational Excellence Scholarship (KEES) program. Edward Cunningham, Executive Director of the Kentucky Higher Education Assistance Authority (KHEAA), told the committee that the KEES program was different from other state programs. He said that the KEES program was a merit-based program that was based on a student's GPA and that students can receive up to $2,500 per year for four years of post-secondary education. The program provides incentive for students to improve their academic performance. He said that KEES was a very successful program for the state with 165,000 students being awarded over $365 million since its inception. Mr. Cunningham said that in the academic year 2004-2005, eighty percent of the freshman going to college received KEES awards. In 1998, the Kentucky General Assembly made a commitment to the scholarship by designating proceeds from the Lottery to fund KEES and Kentucky's need-based programs. He said that KEES received 45 percent of net Lottery proceeds. In addition to net Lottery sales, KEES also receives money from unclaimed Lottery prizes. Mr. Cunningham said that for FY2006, KEES was funded $75,150,000 from net lottery sales and $11,311,000 from KEES reserve (unclaimed lottery prizes), adding that $5,625,000 of the net lottery funding received was above the initial projection. Mr. Cunningham said that since FY2005, KHEAA has paid administrative costs totaling $2.3 million for KEES. Mr. Cunningham said that, according to the state budget office forecast, net lottery proceeds were not sufficient to sustain the program in future years without support from the General Fund. Mr. Cunningham questioned the impact of increased tuition on the KEES program.
Senator Thayer asked if the KEES scholarship was a merit- or need-based program, adding that if the scholarship was based on performance, the GPA should be raised to 3.0 and the ACT score should be eighteen. Mr. Cunningham said the scholarships were merit-based on a student's GPA or ACT score with the minimum GPA being 2.5 and the ACT score of fifteen. In response to Senator Thayer's questions as to whether higher standards should be imposed Mr. Cunningham said that KHEAA would support any program that the General Assembly provided. Representative Crimm asked if a student that left the Commonwealth for college but came home during the summer and took a college course in Kentucky could apply for KEES money to pay for that course. Mr. Cunningham replied that the student must be in a Kentucky program unless the program is not available in Kentucky. Senator Seum asked if a student who worked and took fewer classes was still eligible for KEES money and if the parents and students were told that their scholarship money came from the lottery. Mr. Cunningham said taking less than a full load reduced the amount of money available and that there was information on where the money came from in the brochure students received. Mr. Cunningham said that the money was not given to the student but sent to the college for the student. He said KHEAA was developing a brochure for the universities to hand out detailing how the money was received. Representative Reinhardt asked if the students who went to the technical schools received scholarships and if there were statistics comparing the success of students who completed two versus four-year programs. Mr. Cunningham said the program was too new for those statistics to be available; however, staff will check for data now to project that success. Senator Buford said there was a benefit to allowing students with a 2.5 because it helps a lot of students who need financial help. Representative Clark said that the Governor's Scholars program was available for the brightest and the best. Senator Leeper asked if the statute still contained the original language referring to awards being pro-rated if there was not enough money in the fund. Mr. Cunningham said the original legislation had not changed and that an award letter is sent to families each year to notify them of the amount their children had earned.
Mary Harvell, General Counsel for the Kentucky Lottery, introduced Chip Polston, Vice President of Communication, Government and Public Relations and Rick Kelley, Controller. Mr. Polston gave a PowerPoint presentation on Lottery Sales and Dividends, the challenges for continued growth, and the projected sales and dividends through 2010. He said that 2006 had been a record breaking year with $742 million in sales giving $200 million back to Kentucky. He said that 2005 saw a slight loss due to the Tennessee Lottery going on-line. Mr. Polston said there are three basic products the Lottery offers; scratch-off tickets, pull-tab tickets, and on-line game tickets. The on-line game tickets should not be confused with Internet sales as the Lottery does not sell tickets on the Internet. On-line games include Powerball, Pick 3, and other numbers games. He said that overall growth in the U.S. Lottery industry showed that states with traditional games saw an annual growth of about 2.4%. while states where the lottery also offered Keno and Video Lottery Terminals (VLTs) saw growth of 11.3% annually. He said that Indiana has 24-hour dockside riverboat casinos and is building a land-based casino in French Lick, scheduled to open in November of this year. He said that West Virginia was considering expanding to table games and that Illinois and Ohio were considering VLTs at racetracks. Mr. Polston said that it appeared that Ohio River casino boats gross handle has leveled out, although admission seems to be steady. Mr. Polston said that expansion of other types of gaming in surrounding states is a challenge for the Lottery's growth.
Mr. Polston said that research conducted by the University of Louisville's Urban Studies Institute in 2005, revealed that few people were aware of how Kentucky Lottery proceeds were distributed. He said that the study showed that 92% of the people surveyed support allowing the Kentucky Lottery Corporation to advertise where proceeds are spent. Mr. Polston said that during the last session there was legislation to change current statute; however, it had failed. Mr. Polston said that in order to offset sales losses the Lottery was adding new scratch-off tickets and looking for new on-line game opportunities. He said that projections for sales included prize expenses for payouts. Mr. Polston said that the Lottery's operating expenses have remained the same in recent years.
Representative Draud asked if the Tennessee Lottery had impacted the Kentucky Lottery sales. Mr. Polston said that counties on the Tennessee border have seen significant sales decreases, up to seventy percent; however, he said that the strength in Powerball sales the past year have helped offset those losses. Representative Weston asked if expanded gaming in Kentucky would affect Lottery sales. Mary Harvell said that should that legislation ever pass in Kentucky, the Kentucky Lottery Corporation would like to be the entity to oversee the operation of the expanded gaming. She said that by assuming the oversight role, the Lottery would protect the scholarships, adding that the corporation had experienced staff familiar with oversight responsibilities. Representative Meeks asked if there were statistics on the money lost due to expanded gaming in surrounding states. Mr. Polston said that, looking at the player base, 10% of the active lottery players are spending less in Kentucky because they are going across the river to play the casino boats. In response to Senator Gibson's question, Mr. Polston said the total dividend transfers overall were 25 to 27 percent and that prize payments were comparable to other states. Senator Leeper asked if there was data from other states on how the state lottery was affected when expanded gaming came into play. Mary Harvell said that in states with expanded gaming and lotteries there was the expectation that there would be negative impact; however, was uncertain because of the different forms of gaming measuring the impact.
There being no further business to come before the committee, the meeting was adjourned at 11:30 a.m.