The second meeting of the Interim Joint Committee on Local Government was held on Wednesday, September 25, 2002, at 10:00 AM, in Room 149 of the Capitol Annex. Senator Albert Robinson and Representative Riggs, Co-Chairs, jointly chaired the meeting. Senator Robinson, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Albert Robinson, Co-Chair; Representative Steve Riggs, Co-Chair; Senators Walter Blevins, Charlie Borders, Ernie Harris, Ernesto Scorsone, Elizabeth Tori, and Johnny Ray Turner; Representatives Adrian Arnold, Scott Brinkman, Ron Crimm, Mike Denham, J. R. Gray, Charlie Hoffman, Reginald Meeks, Marie Rader, William Scott, Brandon Smith, Roger Thomas, and Jim Wayne.
Guests: Bob Arnold, Denny Nunnelley, and Tim Sturgill, Kentucky Association of Counties; Secretary Carol Palmore and Burr Lawson, Kentucky Personnel Cabinet; Joe Ewalt, Bert May, and Phil Huddleston, Kentucky League of Cities; Bill Hanes, Lauren Stewart, Gerri Miller, and Shawn Sparks, Kentucky Retirement Systems; Paris Hopkins, Governor’s Office; Lyle Cobb, Smokeless Tobacco Council Inc.; Richard Tanner, Kentucky Magistrates and Commissioners Association; Shellie Hampton, Kentucky County Judge/Executive Association; Kathy Marshall, Governor’s Office for Policy and Management; Dan Walton, Kentucky Manufactured Housing Institute; and Jim Carloss, Home Builders Association of Kentucky.
LRC Staff: Jamie Franklin, Donna Gaines, Mark Mitchell, Joe Pinczewski-Lee, Alice Carter, Bobby Sherman, David Thomas, and Cheryl Walters.
Upon the motion of Representative Gray, seconded by Representative Crimm, the minutes of the August 21, 2002 meeting were approved.
Senator Robinson welcomed everyone and then turned the meeting over to Representative Riggs.
Representative Riggs stated that the first item of business would be to discuss the 2003 legislative platform of the Kentucky Association of Counties (KACo). He introduced Mr. Bob Arnold, Executive Director of KACo. Mr. Arnold announced that appearing with him were Mr. Tim Sturgill, General Counsel for KACo and Mr. Denny Nunnelley.
Mr. Arnold told the Committee that KACo’s main issue of concern was health insurance, but he wanted to discuss some other issues first. He said animal control was a major concern for KACo and that the current dog laws, which are from the 1950’s, needed to be repealed. Mr. Arnold stated that KACo is suggesting that a one percent tax be placed on the wholesale cost of pet food to help fund animal control facilities in counties to relieve some of the counties’ burden.
Representative Crimm stated that there were no state regulations in force regarding animal control. He said this needs to addressed.
Representative Riggs asked if it would be easier to collect the tax at the retail level. Mr. Arnold replied no, because cash registers would have to be changed, clerks would have to be educated on the tax, and it would just be more complicated to collect at the local level and politically difficult to pass. He said putting the tax at the wholesale level would make it easier to collect. Representative Riggs commented that a lot more needs to go into the thought process regarding this tax. Mr. Arnold agreed. Representative Riggs stated that he was going to conduct a survey to see if the general public would be in favor of that tax.
Representative Thomas commented that he sponsored HB 576 during the 2002 session which, had it passed, would have raised the dog license fee from $1.50 to $5.00. He asked Mr. Arnold if he thought a license fee would be easier to pass as opposed to a tax. Mr. Arnold replied that it would not be easier to pass because dog licenses are not being purchased. He said if the fee is raised to $5.00, the licenses still will not be purchased. Mr. Arnold noted that currently, only ten percent of dogs in each county are licensed. He said he was not sure if the new fee is needed at the state level. However, Mr. Arnold noted that KACo would support raising the dog license fee.
Representative Thomas stated that this issue needed to be handled and resolved at the county level. He noted that the watered down version of HB 576 would have required the Department of Agriculture to develop new standards for animal shelters.
Mr. Arnold stated that the one percent tax was just a suggestion. He agreed that it should be handled at the county level.
Representative Gray stated that there are problems in the state that run deeper than the disposal of dogs. Mr. Arnold agreed. He said most counties do dispose of animals humanely, but it is not just about that, it is the cost to run the facilities.
Representative Riggs commented that the problem still needs to be resolved.
Referring to other animals, Representative Arnold said increasing the license fee would help with cats as well. He asked if the problem was the control of other animals or was it limited to only dogs and cats. Mr. Arnold replied their proposals are just for dogs.
Representative Meeks asked what was the most humane way to euthanize animals. Mr. Arnold answered that he doesn’t know whether or not it is humane, but the acceptable way is by lethal injection. Representative Meeks also asked if there were central locations around the state that several counties could use to euthanize animals. Mr. Richard Tanner, Executive Director of the Kentucky Magistrates and Commissioners Association, told Representative Meeks that grants toward regional centers have been issued. Representative Meeks said he hoped the idea of regional centers would be considered.
Representative Wayne asked Mr. Arnold if he had any suggestions to resolve counties’ revenue situation. Mr. Arnold stated that there needs to be tax reform on the state and local level. He said counties need to look for alternative sources of funding, and they need to be able to raise the cap on the occupational license tax in counties over 30,000 in population. Mr. Arnold noted that these counties do not have the opportunity to raise it themselves. He said it only affects about 40 counties because the other counties are under 30,000 in population. Mr. Arnold pointed out that only about ten percent of the revenue from property taxes goes to counties, that it mostly goes to schools. He stated that HB 44 also limits their ability to raise taxes.
Senator Robinson stated that counties can raise their property taxes above four percent but it must be approved by referendum. He noted that many counties are not taking advantage of HB 44.
Mr. Arnold stated that another issue KACo is concerned about is the cost for county jails due to their housing of state prisoners until sentencing, which is costly counties.
Mr. Arnold also mentioned that if the issue of gaming comes up during the next session, local governments should be included in any of these discussions or any proposed legislation.
Mr. Arnold stated that the main issue of concern for KACo this session is health care for county employees and health insurance fairness for local governments. He said city and county employees that are in CERS and do not participate in the state retirement health insurance, do go into the state health insurance plan upon retirement (when older and less healthy). Mr. Arnold noted that over half of the retirees are school board employees with lower salaries. He also stated that hazardous duty retirement requirements need to be looked at because it has been abused. Mr. Arnold stated not just one part, but the entire issue of health insurance for local government employees needs to be reviewed.
Senator Robinson next introduced Mr. Joe Ewalt, with the Kentucky League of Cities (KLC). Mr. Ewalt told the Committee that KLC shares KACo’s concerns. He stated that the proposed mandate calls for all local government employees to be put into the state health insurance program. Mr. Ewalt noted that non-certified school employees were also included in this particular insurance “pool.” He also noted that local governments are paying a large subsidy to pay for these school employees ($47,000) which traditionally have lower salaries and greater medical expenses. This in turn will cause higher costs and reduced benefits for everyone in the “pool.” He said we need to proceed with caution.
Representative Riggs lastly introduced Ms. Carol Palmore, Secretary of the Kentucky Personnel Cabinet. Secretary Palmore told the Committee that in 2000, the legislature created a health policy board to study and report back on the issue of health insurance and report back. Secretary Palmore noted that there is an inequity in agencies with active employees and retired employees. She said there needs to be younger employees to offset the older retirees. Referring to a handout provided to the members, Secretary Palmore pointed out that for the calendar year 2000, the average annual healthcare claims cost per covered life for CERS and regional university pre-65 retirees and their covered dependents for whom the corresponding active employee group does not participate in the Commonwealth's Public Employee Health Insurance Program, was $3,095. She explained that for all other individuals of the Commonwealth Group, including KERS and KTRS retirees and their dependents, the average annual healthcare claims cost for calendar year 2000 was $1,978. Based on these figures, Secretary Palmore stated that the 5,790 CERS and regional university retirees and their 3,072 covered dependents that participated in the Commonwealth Group in 2000, for whom the corresponding active employee group did not participate, added roughly $9.9 million in excess cost that was absorbed by the Commonwealth and other Commonwealth Group members. She noted that by mixing active employees with the retirees, the active employees bring down the cost. Secretary Palmore stressed that it is an issue of fairness. She added that it should not be mandated to bring employees in, that they should have a choice.
Senator Harris asked if the dramatic increase in retirees was due to the “high three” retirement factor. Mr. Bill Hanes, Director of the Kentucky Retirement Systems, replied that the “high three” had created a slight increase in the number of pre-65 employees but it was not entirely the reason for the increase in cots in the system. He noted that the Kentucky Retirement System had 17,000 plus retired members who were under 65 years of age as of last year.
Representative Thomas stated that 00 HB 846, which he sponsored, was a compromise to study the issue of health insurance. He noted that 00 HB 846 provided that LRC contract with an actuary to conduct the study. Representative Thomas asked if that had been done. Secretary Palmore said LRC had an actuary and that the state, KLC, and KACo also had an actuary.
Regarding self-insurance, Representative Wayne commented that there are enough Kentucky employees to self-insure, and that it could be set up similar to KEMI. He asked if KACo would be open to that idea if it were shown that it would save money. Mr. Arnold stated that some counties are successfully self-insuring now. He said they would be open to anything that would save money and not compromise health care. Representative Wayne also commented that the insurance companies are taking advantage of the current situation and laughing all the way to the bank.
Senator Robinson announced that the health insurance issue would be discussed at the Interim Joint Committee on State Government’s meeting later in the day and also by a special committee made up of State Government and Banking and Insurance Committee members.
Representative Crimm commented that no one has shown him where the insurance companies are making a profit off of the Commonwealth. He asked if we should be permitting active employees over age 65 to participate in the state’s health insurance program who are Medicare eligible. Secretary Palmore replied that federal law requires this option for active employees over 65 to participate or else the state could face age discrimination lawsuits.
Senator Tori asked if retiring by August 1 would have an impact on the retirement system. Mr. Hanes replied that the “high three” multiplier affects final pension benefits, but there has been no significant impact on the stability of the retirement system. Senator Tori also asked Mr. Hanes if he saw the necessity to change the law. Mr. Hanes answered that would be something the legislature would have to decide.
Regarding the relation between the costs of the medical procedures to health insurance premiums, Representative Gray asked if there is information available on the costs of medical procedures in our state versus other states. Secretary Palmore stated that there are figures for Kentucky, but not for other states. She said she could obtain those figures from the other states.
Senator Robinson stated that every aspect has to be looked at. He also said the competition between the cities, counties, and state needs to be removed.
Regarding self-insurance for local governments and school districts, Representative Riggs asked if the administration would be against giving them flexibility to opt in or out. Secretary Palmore replied yes, because there are already so many of their retirees in the system that, we need the younger members to balance things out.
Senator Blevins commented that he met with some people who had gotten their insurance elsewhere and did not use the state’s allotment. He said they thought it was unfair that the leftover funds were going into the general fund instead of going back into the insurance fund. Secretary Palmore replied that the reason leftover funds were going into the general fund was because there is no current state budget.
Senator Robinson announced that the last meeting of the Committee would be held on October 3 in Northern Kentucky in conjunction with the Kentucky League of Cities’ annual convention.
There being no further, the meeting was adjourned at 11:40 a.m.