The 5th meeting of the Program Review and Investigations Committee was held on Thursday, November 9, 2000, at 10:00 AM, in Room 131 of the Capitol Annex. Senator Katie Stine, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Katie Stine, Chair; Representative Gippy Graham, Co-Chair; Senators Brett Guthrie, Ernie Harris, Paul Herron Jr, Dan Seum, and Ed Worley; Representatives Adrian Arnold, Sheldon Baugh, Dwight Butler, Charlie Hoffman, Susan D. Johns, Ruth Ann Palumbo, and Dottie Sims.
Guests: Marcia Morgan, Office of the Secretary, Cabinet for Health Services; Famane Brown, acting Contracts Manager, Cabinet for Health Services; Anne Gordon, Legislative Liason, Office of the Secretary, Cabinet for Health Services; Jim Ramsey, Ph.D., State Budget Director, Kevin Flannery, Finance and Administration Cabinet; Mary Lassiter, Deputy Director for Policy Management, Office of State Budget Director, Governor’s Office of Policy Management; Margaret Plattner, Executive Director, Office of Transportation Delivery, Transportation Cabinet; Geri Grigsby, General Counsel, Transportation Cabinet.
LRC Staff: Ginny Wilson, Ph.D., Committee Staff Administrator, Lowell Atchley, Judy Fritz, Greg Hager, Tom Hewlett, Alice Hobson, Joseph Hood, Doug Huddleston, Margaret Hurst, Dan Jacovitch, Susan Spoonamore, Committee Assistant, Program Review staff and Perry Nutt, LRC Economist’s Office.
Minutes of the October 12, 2000 meeting were approved by voice vote upon motion made by Rep. Adrian Arnold and seconded by Sen. Paul Herron.
The Addendum to the Analysis of Economic Development Programs study proposal was approved by voice vote upon motion made by Sen. Ernie Harris and seconded by Rep. Sheldon Baugh.
Famane Brown, acting Contracts Manager, Cabinet for Health Services, stated that in June 2000, Secretary Jimmy Helton convened a Contracts Work Group to review the Cabinet’s contracting processes. The main objective of the Group is to develop clearer, more concise, and effective contract procedures for the Cabinet. The goals of the Group are to improve contract management and administration provide best-value purchasing for Kentucky’s citizens, promote high quality human services, and ensure accountability for Kentucky's human service dollars. To achieve the objectives and goals, the Contracts Work Group adopted the following recommendations: (1) Implementation of a shared services model contracts process; (2) Development of standard procurement guidelines to include acquisition planning, checklists and hard copy versus electronic copy files; (3) Development of a process designed to attract the best contractor for the best available price and (4) Centralized Contracting. Ms. Brown also stated that a Contracts Branch was established within the Office of Program Support whose primary function is to approve and process all contracts.
Sen. Stine asked for more a more detailed description regarding the transition to performance-based contracting and also for further explanation of being friendlier to electronic businesses.
Ms. Brown responded that the rating criteria is more pronounced in that performance is now considered an important part of the criteria. Bidders will have to submit prior documentation regarding work they have performed that would fall within the guidelines of the RFP. As to the electronic friendly world – the Cabinet would like to put more RFP’s out on the website, which would reach more people outside of Kentucky.
Sen. Stine asked if the RFP contains a requirement for bidders to provide information as to the different ways that a task could be done more efficiently.
Marcia Morgan, General Counsel, Cabinet for Health Services, stated the Cabinet will require potential bidders to demonstrate how successful they have been in performing work in other arenas. In addition, once the contract is awarded the Cabinet would put into place monitoring guidelines to make sure that the performance criteria is being followed.
Sen. Stine asked if the Cabinet had any discussions with Auditor Hatchett or Dr. Ramsey regarding the performance based budgeting.
Ms. Morgan stated that the Cabinet had met with Dr. Ramsey and members of his staff on performance based budgeting.
Sen. Stine asked if doing regular backups of the electronic versions would dispense with the need for hardcopies and wanted to know to what extent the Cabinet is able to reduce some of the paper.
Ms. Brown stated that the hard copies contain original signatures, which can be used in a court of law if necessary. The reason that the Cabinet has both paper and electronic copies is that the Mars system is relatively new and may not be reliable enough for legal documentation.
Sen. Stine asked if the hard copy could be scanned electronically and maintained in the event of litigation and, if it was anticipated that Mars would have the capability in the future of loading more information.
Ms. Morgan responded that it could be scanned, but the Cabinet is not there yet.
Ms. Brown stated that currently on the Mars system all you see is the face of the contract. At this time Mars does not have the capability to load extensive information.
Sen. Stine asked for an example of a competitive and a non-competitive contract and how the category was selected for a particular service.
Ms. Morgan said that initially it would be the Department’s decision. Even though the local health departments provide the same type of services there are some services that are more specialized than others. If a health department can come up with the best proposal then that would be the best competitive source. An example of a non-competitive contract would be an AIDS issue where there are quite a few volunteers on AIDS and they are able to do research and criteria for that type of study. If there is no one else in the area who is proficient in that issue then the contract would be assigned to them.
Sen. Stine asked if the only time the Cabinet would have non-competitive contracts would be in instances where specific expertise is found only in that particular contractor?
Ms. Morgan responded that was correct but, it could also happen if there was an emergency situation where a contractor is ready, willing, and able to do the work under emergency circumstances.
Sen. Stine asked for the definition of an emergency.
Ms. Morgan stated that the most common emergency is when a lawsuit is filed and the Cabinet’s counsel cannot perform the legal services within an allotted time frame.
Sen. Stine asked what safeguards are in place to protect against the appearance of impropriety or patronage in the contracting procedure.
Ms. Morgan stated that the centralized group, who monitors the process, will be able to create firewalls. Individuals who have conflicts will not be talking to any prospective contractors during the pendency of the award process. The Cabinet is committed to having employees trained in executive branch ethics and is committed to building the systems to protect against the appearance of impropriety or patronage
Sen. Stine asked if the awarding of legal services contract is competitive in nature.
Ms. Morgan stated that if the Cabinet has the luxury of time, then yes. If not, then it will be a declaration of an emergency in (a) whatever firm has the expertise to do that particular type of service and, (b) if they can do it immediately.
Rep. Graham asked if specific services would be contracted out which would affect state employees and if so, is the Cabinet aware that legislation was passed that if more than 10 employees are affected, then a series of steps must be followed before anything of this nature is contracted out.
Ms. Morgan stated that the Cabinet is aware of the legislation and is very careful in terms of services that are traditionally performed by state employees, but the Cabinet is in a situation with facilities where the workforce is just not materializing due to low salary rates. The Cabinet is having to supplement the state employee work force with outside contractors, but it is not to replace current state employees only to supplement when new employees cannot be found.
Sen. Stine expressed a concern regarding a situation where the State was unable to retain two employees, who were pharmacists, because their salary was not high enough and then the State contracted with a private entity who hired the same two pharmacists at a higher rate and ended up paying twice as much. Is the Cabinet developing any recommendations to address that issue?
Ms. Morgan stated that the Personnel Cabinet is continually doing comprehensive classification and compensation studies. With the passage of wage equity, the Cabinet was able to improve salaries of some of the lower end employees and the Personnel Cabinet regularly does market studies. Generally, any proposals relative to salaries come out of the Personnel Cabinet. The Personnel Cabinet is being approached daily by agencies saying that they have got to have help, especially with specialized areas and licensed professionals because the State is no longer competitive. (A copy of Ms. Brown’s presentation can be found in its entirety in the LRC Library file)
Jim Ramsey, Ph.D., State Budget Director was asked for give an update on the Performance Budgeting Pilot Project.
Sen. Stine stated that Auditor Hatchett indicated that he was unable to do a thorough job because he was waiting for the Budget Director’s analysis. What are your thoughts on that?
Dr. Ramsey stated that his office is committed to the Strategic Planning and Performance Budgeting and Pilot Project as provided for under House Bill 502. He told the Committee that the goal of the State Budget Director’s Office is to achieve the mandates of HB 502 to ensure clear linkages to the Governor’s strategic agenda and to build on existing strategic planning processes. The starting points for strategic planning, in order to set Kentucky on the path to achieving economic opportunity and a standard of living above the national average in 20 years, is by promoting economic development, improving education product, building self-sustaining families, strengthening efficiency and operations of government, and reducing crime and its costs to society. Kevin Flannery, Finance and Administration Cabinet, stated that there are a number of state agencies already involved in the strategic planning process and the first step was to assess what was already out there. Secondly, the Process Leadership Team has looked at other states who are involved in strategic planning. A copy of the Office of State Budget Director’s presentation can be found in its entirety in the LRC library file.
Mary Lassister, Deputy Director for Policy Management, Office of State Budget Director, Governor’s Office of Policy Management stated that the key to meeting the objectives of strategic planning is communication, so it is an important goal for the team.
Sen. Stine asked if there had been any meetings with leadership of the Senate or the House or the Chairs of the House and Senate A & R Committees.
Mr. Flannery stated that there had not been any meetings with leadership or the Chairs of the House and Senate A&R.
Sen. Stine asked if Auditor Hatchett had sent anyone from his office to attend any of the meetings.
Mr. Flannery stated that he didn’t recall any of the auditor’s staff being at any of the meetings, but there have been conversations back and forth with the Auditor.
Dr. Ramsey stated that he personally has had meetings with the Auditor.
Sen. Stine asked if the 2 year duration was because of concerns that the pilot project may not be up and running within that duration.
Dr. Ramsey stated that was not the case. The pilot project requires three to six budget entities to submit their budgets using performance budgeting.
Sen. Stine asked if the September 30, 2000 deadline for the evaluation report was too hasty.
Dr. Ramsey stated that the evaluation could have been submitted by September 30, and later, if there was some special nuance with regard to one of the pilots, then at that point the state auditor could revise the report.
Sen. Stine asked if the lack of enthusiasm for previous performance budgeting efforts was attributed to anything specific.
Dr. Ramsey stated that he thought it was because it was mandated top down.
Rep. Arnold asked if other states use this in budgeting.
Mr. Flannery stated that yes they do but it is done in a variety of different ways.
Ms. Lassister stated that two years ago the Governing Magazine gave Kentucky a B+ rating in the area of Managing for Results assessment.
Sen. Stine stated that the Committee would be looking for an updated report from the Auditor with more meat on it than the last report.
Perry Nutt, LRC Staff Economist, presented an update on the Coordinated Human Service Transportation System. Mr. Nutt explained that the Coordinated Human Service Transportation System provides transportation services to three different groups: Medicaid recipients who need non-emergency medical transportation to a Medicaid covered service, TANIF recipients who need transportation to participate in the Kentucky Works program, and Vocational Rehabilitation and Department of the Blind recipients. Staff were asked to examine the anticipated reduction in the rate of growth of expenditures, the quality of services provided to recipients under the new program, and the effect of program changes on transportation providers. Staff concluded that the program had a number of implementation problems and could benefit from improved program oversight. Based on the review and conclusions of staff, the Committee voted to adopt the report along with the recommendations. Following the adoption of the report, the 2000 General Assembly enacted House Bill 488, which was designed to address the most pressing issues associated with the startup, implementation, and operation of the coordinated human services transportation delivery program. Mr. Nutt stated that, in doing the follow-up to the report, staff found that the program seems to have made considerable progress in resolving its problems. (a copy of Mr. Nutt’s presentation can be found in the LRC library file).
Margaret Plattner, Executive Director, Office of Transportation Delivery, Transportation Cabinet and Geri Grigsby, Executive Director of the Office of General Counsel Legislative Affairs, Transportation Cabinet presented the Cabinet’s response to the report and recommendations. Ms. Plattner stated that a brokerage system is currently in place which includes 15 regional brokers across the state. The brokerage system provides better oversight and more efficient use of resources than did the voucher system, which was prone to fraud and abuse. The overall goal of the Human Services Transportation Delivery (HSTD) program is to contain costs, prevent fraud and enhance the quality of services. The HSTD program has provided over 3 million trips and has made transportation accessible in all areas of the state. Due to increased oversight of HSTD trips under the brokerage system, there has been a reduction in fraud. The Cabinet has improved safety standards by conducting 1321 random drug and alcohol tests and 2212 vehicle inspections. Seventy vehicles failed inspections and were taken off the road until the deficiencies could be corrected. The University of Kentucky did an independent assessment of the Human Service Transportation Delivery this past summer to evaluate the progress of the program. The evaluation focused on measuring whether or not conditions of the federal waiver were being met. The three factors under review were recipient satisfaction with services, cost effectiveness, and consistency with the purposes of the Medicaid program. The assessment concluded that a high percentage of recipients are satisfied with services and that the program is more cost effective, showing a reduction in the annual growth in the number and cost of non-emergency medical trips.
Sen. Stine asked how much of the cost containment could be attributed to fraud prevention.
Ms. Plattner replied a lot.
Rep. Arnold asked if the problems allowing for a provider to be a broker, as provided for in House Bill 488, section 2, had been resolved.
Ms. Plattner stated that the Cabinet feels like it has been resolved with implementation of HB 488.
Rep. Sims asked how the Cabinet was getting the bid information out to all areas of Kentucky.
Ms. Plattner responded that the Finance Cabinet would be handling the bid process. The advertisement will be done on the Finance Cabinet’s web page and letters will be sent out to for-profit operators, transportation operators and the non-profit as well.
Rep. Baugh asked how the miles per month were reduced dramatically from 1997 to 1999.
Ms. Plattner stated that it could be attributed to the broker system. The brokers coordinate the trips, schedule the trips and calculate the number of miles. Under the voucher system, the voucher was given to the recipient and it was assumed that the voucher was reported correctly. It shows that the voucher system was prone to abuse.
Rep. Baugh asked if the Cabinet ever checked a voucher for accuracy.
Ms. Plattner responded that the program, at that time, belonged to another Cabinet.
Rep. Baugh asked if a broker could resign during the contract period and if so, what happens to the service. Also, what was wrong with the vehicles that failed to pass inspection.
Ms. Platter stated that a broker could resign. The service continues, but another broker has to be found. There is a lot of wear and tear on a vehicle and it varies as to why the vehicle fails to pass a yearly inspection.
Rep. Baugh asked what the results were for the random drug and alcohol testing.
Ms. Plattner told the Committee that there were seven who failed who can no longer participate in the program.
Meeting adjourned.