Call to Order and Roll Call
The fifth meeting of the Interim Joint Committee on Local Government was held on Wednesday, November 16, 2016, at 10:00 AM, in Room 171 of the Capitol Annex. Senator Joe Bowen, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Joe Bowen, Co-Chair; Stan Humphries, Christian McDaniel, Dorsey Ridley, and Dan "Malano" Seum; Representatives Linda Belcher, Ron Crimm, Mike Denham, Richard Heath, Adam Koenig, Brian Linder, Tom McKee, Michael Meredith, Phil Moffett, Jody Richards, Arnold Simpson, James Tipton, Jim Wayne, and Susan Westrom.
Guests: House District 70 Representative-Elect John Sims; Henderson County Magistrate Bruce Todd; Union County Judge/Executive Jody Jenkins; Shellie Hampton and Roger Recktenwald, Kentucky Association of Counties; Steve Milby, David Moore, and Tim Coconougher.
LRC Staff: Mark Mitchell, Joe Pinczewski-Lee, and Cheryl Walters.
Approval of Minutes
Upon the motion of Representative McKee and second by Senator Seum, the minutes of the October 26, 2016 meeting were approved.
Kentucky Association of Counties’ Legislative Platform for the 2017 Session of the General Assembly.
Henderson County Magistrate Bruce Todd and President-Elect of the Kentucky Association of Counties (KACo) outlined KACo’s 2017 legislative platform after discussing the makeup of KACo and the process it uses to establish its legislative priorities.
KACo wishes to explore separating the County Employees Retirement System (CERS) from the Kentucky Retirement Systems (KRS). CERS is currently 60% funded and an autonomous retirement system board would focus only on its members and have investment decisions based solely upon the system’s financial needs. Changes in legislation designed to improve the finances of KERS are not always be necessary for CERS. CERS will be in a position to offer its retirees a cost of living adjustment at an earlier date than the Kentucky Employees Retirement System (KERS)
Pension spiking reform was included in 2013 Senate Bill 2. Public employers are invoiced for any increase in creditable compensation greater than ten percent in the final five years of that employee’s employment. While purposefully padding an employee’s compensation to increase retirement benefits is wrong, so is penalizing the employer when a spiking event is triggered from what is considered to be a legitimate circumstance. Many circumstances may be considered spiking when an abuse is not intended. Examples of these are Family Medical Leave Act (FMLA) events; taking sick leave without pay; and workers compensation events. The employers are sent an invoice regardless of the employee’s intent. Since January 2014, county employers have received over $400,000 in spiking invoices. KACo is working with stakeholders and the Kentucky Retirement Systems to identify and redefine events that presently qualify as spiking that are not intended to increase retirement benefits in a manner contrary to the intent of the original legislation.
Union County Judge/Executive Jody L. Jenkins and first vice-president of KACo noted that the transfer of individuals from one department to the other can trigger the spiking provisions. The awarding of overtime in response to the training required by the peace officer professional standards requirements can also trigger the spiking provisions.
Regarding tax reform, Kentucky’s tax code has not kept current with the economy. The local investments for transformation tax should be an option for local governments. It is the most democratic process and would reduce the need for local governments to turn to Frankfort for the funding for local projects. The outdated tax system combined with unfunded mandates pits counties against cities in the competition for limited revenues. Legislators have said that they do not wish to pit counties and cities against each other for limited revenues. Increasing property taxes is an option that is not favored by constituents or governments, but is sometimes necessary by these mandates.
Sometimes mandates passed down to local governments are represented as a tax cut or a savings at some level, but in reality they are passed down and picked up by the local governments. Counties are left with three choices: cut services, lay off employees, or raise revenues to cover those expenses—sometimes counties must use all three.
KACo has asked the Governor to include them in tax reform efforts and makes the same request of the General Assembly.
Jail funding is an issue. Last fiscal year, fiscal courts have collectively transmitted an additional $81 million dollars to jails. People who do not die from heroin laced with fentanyl overdoses are arrested and brought to jail. The number of misdemeanants and pre-trial felons is higher in county jails than ever before. As a state we are not successful in rehabilitating drug addicts. These people end up back in county jails. Drug crimes often involve property crime because of the needs to fuel the habit. Oftentimes, an addict who is returned to jail is charged with a second crime which then triggers persistent felon status which increases jail time. Controlled intake prisoner numbers have doubled than in past years. The state is not classifying prisoners as quickly as in the past which keeps them in the county jails longer. The parole rate has decreased as a result of a crime of a paroled felon. Many judges have stopped the issuance of bail and bond credits. KACo hopes bail and bond credits will again be issued in higher numbers.
Another issue KACo considers a priority is the road fund. Magistrate Todd said that dramatic reductions in gas prices have left the gas tax receipts $130 million below original 2016 estimates. The “Pause-50” plan put in place by the Transportation Cabinet this summer has stopped badly-needed projects until the road funding base can be rebuilt. Counties collectively spent $48 million out of their general budgets for road projects. Counties are responsible for over 40,000 miles of roads. City annexation of tax-lucrative areas should be noted as a challenge. Roads are not the only infrastructure needs, and the conversation should turn to modernizing funding for all these infrastructure needs.
Judge Jenkins noted that construction timing issues may result in road funds allocated to counties being expended in different times of the year and this fact may contribute to the appearance that counties do not expend all the road funds allotted to them. The funds are spent and spent for the purposes for which they are provided. KACo supports measures that contribute to the future integrity of the road fund and distribution of the formula which continues to reflect safety and economic development needs of the counties. KACo remains willing to discuss these measures with the stakeholders.
Senator Bowen commented that the committee knows that counties are challenged as well as cities. He supports removing the CERS from under the KRS umbrella.
In response to a question from Senator Bowen, Judge Jenkins replied that there has been no discussion with KACo’s legislative committee regarding removing the occupation tax and using LIFT instead. Ms. Shellie Hampton, Director of Governmental Relations for KACo, added that the legislative committee would have to see the numbers because not all 120 counties have an occupational tax. LIFT does not work for everyone.
Representative Wayne commented that counties’ options for revenue should be examined. County officials should be cautious who they represent because LIFT hurts the working people and helps the wealthy. An income tax would be fairer. It would be much better if counties had a user fee rather than tapping into the general fund.
Representative McKee commented that he had not heard transport jailers mentioned, which are very important. Be aware of the criticism of transport jailers.
Ms. Hampton agreed that that transport jailers are important.
Representative Koenig told the panel to contact legislators regarding the office of constable.
In response to a question from Representative Koenig, Ms. Hampton said the counties’ “ask” was going to be the same as it has the last three sessions which is some reasonable exemptions regarding pension spiking reform. Counties are not asking to repeal spiking.
Consideration of Referred Administrative Regulations
The committee considered referred administrative regulations promulgated by the Department of Housing, Buildings and Construction: 815 KAR 20:020 (Plumbing: parts or materials list; 815 KAR 20:080 (Plumbing: waste pipe size); 815 KAR 20:090 (Plumbing: soil, waste, and vent systems); and 815 KAR 20:120 (Plumbing: water supply and distribution). Commissioner Steve Milby, David Moore, Director, Division of Plumbing, and Tim Coconougher, Staff Attorney, represented the Department. Mr. Moore outlined the proposed changes to the administrative regulations. Senator Bowen stated that a written report of the review would be submitted to LRC.
Senator Bowen announced that this would be the last meeting of the interim. He recognized the non-returning members and thanked them for their service.
There being no further business, the meeting was adjourned at 10:50 a.m.