Program Review and Investigations Committee


Minutes of the<MeetNo1> 10th Meeting

of the 2001 Interim


<MeetMDY1> July 12, 2001


The<MeetNo2> 10th meeting of the Program Review and Investigations Committee was held on<Day> Thursday,<MeetMDY2> July 12, 2001 at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Senator Katie Stine, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Katie Stine, Chair; Representative Gippy Graham, Co-Chair; Senators Charlie Borders, Brett Guthrie, Paul Herron Jr., Dan Seum, and Ed Worley; Representatives Adrian Arnold, Sheldon Baugh, Dwight Butler, Jack Coleman, Charlie Hoffman, Ruth Ann Palumbo, and Dottie Sims.


Guests:  Roger Recktenwald, Executive Director, Kentucky Infrastructure Authority; Secretary Ronald B. McCloud, Public Protection and Regulation Cabinet; Linda F. Frank, Executive Director, Crime Victims Compensation Board; Mitch Mattingly, General Counsel, Crime Victims Compensation Board and David Richardson, Administrative Branch Manger, Public Protection Cabinet; Commissioner Ella Robinson, Department of Financial Institutions, Rick Jones, General Counsel, Department of Financial Institutions, Art Freeman, Harrodsburg First Financial Bank and John O. Morgan, Jr., PSC, Attorney.


LRC Staff:  Ginny Wilson, Ph.D., Committee Staff Administrator, Lowell Atchley, Judy Fritz, Greg Hager, Ph.D., Tom Hewlett, Alice Hobson, Joseph Hood, Margaret Hurst, Dan Jacovitch, Susan Spoonamore, Committee Assistant, and Karen Hilborn-Crabtree, CPA, LRC Budget Review Office.


Minutes of the July 12, 2001 meeting were approved, as corrected, by voice vote upon a motion made by Rep. Baugh and seconded by Sen. Borders.


Sen. Stine asked that Jerry Bailey, Committee Staff Administrator of Budget Review attend the August 30th meeting of Program Review to clarify points made at the June 14th meeting. Specifically, she would like a discussion of whether or not the legislature has adequate information regarding the budget making process.


Sen. Stine introduced Karen Hilborn-Crabtree, CPA, of the LRC Budget Review staff and Roger Recktenwald, Executive Director of the Kentucky Infrastructure Authority. Ms. Crabtree presented a follow-up to the report of the Kentucky Infrastructure Authority which was adopted by the Committee on October 14, 1999 (a copy of Ms. Crabtree’s memorandum can be found, in its entirety, in the LRC Library file).


Sen. Guthrie asked if some of the incentives of SB 409, such as the loan forgiveness, did not apply to groups who had regionalized prior to the passage of SB 409.


Mr. Recktenwald stated that Funds A and F could not be forgiven because of federal government stipulations.


Rep. Baugh asked if there were clearinghouses for all other state projects such as web sites to list bid requests. 


Mr. Recktenwald stated that there are other clearinghouses. The Department for Local Government is the state clearinghouse for Kentucky with the responsibility for centralizing information, as required under the federal executive review process.


Rep. Baugh stated that he had received numerous complaints from contractors who were unable to find one central clearinghouse in order to bid on projects, and the same problem also existed for entities trying to seek funding assistance for water and sewer projects. It was his understanding that the projects were posted on the individual agency’s web site, but not a centralized clearinghouse web site.


Mr. Recktenwald stated that the bid process was a completely different issue. He also stated that there was not a web site for projects on a community-by-community basis, but he would definitely look into the possibility of having one centralized clearinghouse web site.


Sen. Stine asked if the Environmental Protection Agency (EPA) was actually telling a community that they had to charge more or less than what they would realistically charge.  Mr. Recktenwald stated that the EPA will allow the state to loan funds to a community as long as all persons being served with the funded facility are charged equitably.


Rep. Baugh asked what would happened if a city annexed an area and did not provide the infrastructure to the residents. Mr. Recktenwald explained that if a city annexed a community that did not have basic utility services, and if a portion of that tax base had traditionally gone to either subsidize the water and sewer system or to pay for the water and sewer system, then the citizens in the newly annexed area would have an issue of equity in that regard. If the city had traditionally developed and expanded its services strictly on the basis of the consumer’s ability to pay and if the city had accessed federal grant and loan assistance or state grant and loan assistance,  then it would become a difficult issue to resolve. 


Rep. Palumbo asked why applicants would withdraw after having been approved for funding. She also asked what the average timeframe was for water and waste water projects. Mr. Recktenwald stated that there are other funding sources, such as grants that some governments are awarded after they applied to KIA. He also stated that the timeframe for projects depended upon the complexity and type of project. A water project moves much more quickly than a waste water project. For an example, a large project could take up to two years, while a small project could take anywhere from six to eight months.


Sen. Stine asked that staff be apprised of the results KIA Board meeting which was scheduled for July 12th.


In closing, Mr. Recktenwald pointed out that SB 409 had significantly restructured the Kentucky Infrastructure Board by expanding the Board to include agencies and entities across the Commonwealth that deal routinely with community water and waste water issues.  He also stated that KIA was focusing more on the planning process, which is critical to the way that the Infrastructure Authority does business. He also stated that KIA was requiring, through SB 409, that there be a water management plan, and that the plan contain information as to the source of the water – ground water, pond water or lake water. Previously the focus had been on water resources and drinking water facilities, but KIA was now focusing more on waste water facilities. Mr. Recktenwald further stated that in order to expedite and simplify the application process,  KIA is developing a single form application which could be reviewed by all funding agencies. 


Rep. Graham asked if  the areas and regions were co-terminus with the Area Development Districts. Mr. Recktenwald stated that would be correct for the planning process, but the management areas were different because they followed the lines of the water and sewer systems. 


Rep. Coleman asked if the small connections  service areas that serve small groups of people could be grouped together.  He stated that it appears that the cost per customer is excessively high for some areas which have been annexed.


Mr. Recktenwald stated that, generally, if the area was easy to serve then it was served.  KIA was in the process of dealing with the areas across the Commonwealth that were not easy to serve, and the cost per customer served could be anywhere from two to three times higher than it was three years ago. As to small connections being grouped together, KIA now defines those connections as scattered-site projects which are put together and looked at as a project.


Sen. Stine introduced Secretary Ronald B. McCloud of the Public Protection and Regulation Cabinet, and Linda F. Frank, Executive Director of the Crime Victims Compensation Board.


Ms. Frank explained that the Crime Victims Compensation Board serves a public purpose in order to indemnify those persons who are innocent victims of criminal acts and suffer bodily or physiological injury or death as a consequence thereof. For victims of crime, the state provides aid, care and support by way of  reimbursement for certain expenses or the payment of certain expenses for crimes that have happened within the boundaries of the Commonwealth of Kentucky. Some of the eligible expenses include routine medical expenses from hospitals, doctors, radiologists, anesthesiology, mental health counseling, funeral and burial expenses, lost earnings and loss of support. There is a $25,000 cap for each claim filed; however, it should be noted that there are two caps within the expenses. There is a cap of $5,000 for funeral and burial expenses which would leave $20,000 for other expenses and lost earnings and loss of support are limited to $150 per week. The Crime Victims Compensation Fund is funded by a $20 assessment added to the fine of those offenders who are found guilty of, or plead guilty to, a felony or misdemeanor crime. The assessment cannot be suspended or probated and must be collected in its entirety. (A copy of Ms. Frank’s presentation can be found in its entirety in the LRC Library file).


Sen. Seum asked if a victim would be entitled to money available from the Crime Victims Compensation Fund if they had personal insurance coverage that would cover up to $25,000.  Ms. Frank stated that the Board had voted unanimously at their December meeting to eliminate the caveat regarding the eligibility for compensation. After insurance had paid, the Crime Victims Compensation Fund would be the payer of last resort.


Sen. Seum asked who really receives  the compensation money since it appears that very few victims are actually being paid. He also asked if  the money is being paid to hospitals and other providers, and how do the victims know if the claims had been paid. Finally, he asked, How victims obtain information about, or referrals to, the Crime Victims Compensation Board.


Ms. Frank stated that if there is a debt owed then Kentucky pays the claim directly to the medical service provider. Ms. Frank also stated that the Board has continuous outreach efforts for hospitals, victims advocates and police departments, who refer the victims. She further stated that the Board sends a letter to the victim stating that he/she has received an award of up to $25,000. The letter also lists the names of the service providers and the amount that they have been paid.


Sen. Seum asked if he was correct that the FY 98-99 receipts appeared to be a little less than $2 million dollars and the expenditures for FY 98-99 were $794,042.65. Ms. Frank responded that he was correct.


Sen. Seum asked why there was so much money left over in the Fund at the end of the year and why the money was not being spent on victims. He also asked if it was correct that approximately $2.7 million was turned over to the General Fund. Ms. Frank explained that the large balance was based on the claims processed for that year. Ms. Frank acknowledged that $2.7 million  had been  turned over to the General Fund.


Sen. Seum asked why the funds had been transferred to the General Fund when the statute provides that any unexpended balance remaining in the fund at the end of the biennium shall not lapse and be transferred to the General Fund, but shall remain in the Crime Victims Compensation Fund.


Ms. Frank said it was her understanding that the statute was suspended, but she would defer to David Richardson who is the Administrative Branch Manager of the Public Protection Cabinet.


Sen. Seum stated that the total for program administration appeared to be $515,000 which amounted to approximately 25% for administrative costs. He asked if that was correct. Ms. Frank responded that the Board has been working with the Governor’s Office of Technology (GOT) to develop a tracking system, and so far $66,000 had been invested in the software needed to support the system.


Sen. Stine asked what percentage of the overall budget was spent for administrative costs. Ms. Frank stated that she did not have that information broken down by percentage. 


Sen. Seum asked what happened to the money that was transferred to the General Fund. David Richardson, Administrative Branch Manger, Public Protection Cabinet,  stated that per HB 502, which was passed by the 2000 General Assembly, it suspended the statute  (KRS Chapter 346.185(2)) and directed that $2.7 million be transferred into the General Fund.


Rep. Palumbo asked why the Board would be paying a Jellico Community Hospital ( a Tennessee based hospital). Ms. Frank explained that persons who are injured within the boundaries of Kentucky, may receive their medical care from a Tennessee hospital.


Rep. Palumbo asked if there was a similar program in Tennessee where they could have picked up expenses for their own providers. Ms. Frank stated that if an incident happens in Kentucky, then Kentucky’s Compensation program is responsible for reimbursement or payment of expenses.


Rep. Palumbo asked who was Wobegone , Inc. as listed under FY98-99 Payments to Crime Victims. Ms. Frank said she did not know, but would find out. 


Sen. Stine asked if the small expenditure to victims was because victims were having difficulty in getting the funds, or whether information was not being made available to the public about the Crime Victims Fund. Ms. Frank stated that the Board was continuously educating the victims advocates, but that there could be a problem with the follow-up.  Another problem could be that the offenders are not always arrested, and therefore there would not be a victims’ advocate assigned to a victim.


Rep. Palumbo asked if a victim could receive compensation even if the offender was not arrested. Ms. Frank stated that was correct. 


Rep. Palumbo asked if attorneys or law firms were paid and treated as a service provider, and if so, how many attorneys or law firms had been paid and how much. Ms. Frank stated that the statute allows 15% of an award to be paid to attorneys who assist claimants in filling out the claim form.


Rep. Palumbo asked if that meant that an attorney was being paid $3,750 just to fill out forms.   She also asked Ms. Frank to check on a payment made to Judy, True and Johnson for $3,750. Ms. Frank said she would  check on that information and report back to staff.


Sen. Stine asked what types of conduct could be used for denial of compensation. Ms. Frank stated that it would be conduct which contributed to the offense; for example, someone who instigated a fight.


Sen. Seum asked what the salary of the Board was and how often did the Board meet. Ms. Frank stated that the Board members are paid $1,500 per month and that the Board meets once a month to review all the paperwork. She also pointed out that the five Board members serve on two Boards,  the Crime Victims’ Compensation Board and the Board of Claims.


Sen. Stine asked that the Board submit to Ginny Wilson, in advance of the August 30th meeting of Program Review, the answers to the questions that were asked by the Committee. Sen. Stine stated that she was particularly interested in knowing the administrative costs of the Board.


After a brief recess, Sen. Stine announced that the agenda item regarding the Department of Financial Institutions would be held over until the August 30th meeting.


Meeting adjourned.