Program Review and Investigations Committee




<MeetMDY1> October 17, 2003


The<MeetNo2> October 17, 2003 meeting of the Program Review and Investigations Committee was held <MeetMDY2> at<MeetTime> 1:00 PM in<Room> Room 131 of the Capitol Annex. Senator Katie Stine, Co-chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Katie Stine, Co-chair; Representative Charlie Hoffman, Co-chair; Senators Charlie Borders, Ernie Harris, David K. Karem, Vernie McGaha, and Dan Seum; Representatives Adrian Arnold, Sheldon Baugh, Dwight Butler, Ruth Ann Palumbo, Tanya Pullin, and Dottie Sims.


Guests: Kyna Koch, Associate Commissioner, Kentucky Department of Education; Eric Friedlander, Executive Director, Commission for Children with Special Health Care Needs, Cabinet for Health Services; Mike Burnside, Director of Material and Procurement Services, Finance and Administration Cabinet; Ken Houp, Commissioner for the Department of Administrative Services, Finance and Administration Cabinet;† Pat Patterson, Director of Employment Standards, Apprenticeship and Training, Labor Cabinet; and Robin McQueary, Office of Employment Standards, Labor Cabinet.


LRC Staff: Greg Hager, Committee Staff Administrator, Lowell Atchley, Lynn Aubrey, Kara Daniel, Tom Hewlett, Joseph Hood, Margaret Hurst, Erin McNees, Stacie Otto, Cindy Upton, and Susan Spoonamore, Committee Assistant.


A moment of silence was held in remembrance of former Governor Edward T. Breathitt.


The minutes of September 11, 2003 were approved upon motion made by Rep. Sims and seconded by Sen. McGaha.


Cindy Upton, Program Review staff analyst, presented the staff follow-up on the Support Education Excellence in Kentucky (SEEK) report (a copy of the follow-up report can be found in its entirety in the LRC Library file). She stated that the report contained eight recommendations dealing with a risk-based audit approach and quality assurance. Some recommendations focused on the need to emphasize the districts and schools that would be more likely to have effects on statewide SEEK funding. One recommendation dealt with the calculation of the SEEK formula. She stated that of the eight recommendations, one had been implemented, four had been partially implemented, and three had not been implemented.†


Rep. Sims asked who was responsible for performing the attendance audits. Ms. Upton stated employees of the Kentucky Department of Education did the attendance audits.


Sen. McGaha asked what would be described as a significant error. Ms. Upton stated that there was no definition for a significant error.† She said that a significant error would be up to the Department and/or the individual auditorís† discretion.† For example, she said that she would not consider a five percent error rate to be horrible, but it would be significant enough for her to look at something more closely, compared to finding a one half of a percent error rate.† She said that sometimes it was not the number of errors that caused concern, but the result of those errors.


Sen. McGaha asked if adjusting the average daily attendance (ADA) upward or downward for SEEK funding as an incentive to ensure accuracy would be based on district-wide ADA. Ms. Upton stated that was the intention of the recommendation, but staff had not discussed it with the Department yet.†


Sen. McGaha stated that it might be better to make the adjustments for the school and not the district as a whole.†


Ms. Upton stated that once all the classrooms have the STI module in place with the ability to transmit attendance information electronically, recommendation five may be unnecessary.

Sen. Stine asked if the SEEK calculation process was so complicated that it would take a year or two years before the Department could fully implement the recommendation that the Department assign a knowledgeable employee not involved in the SEEK calculations to review the work of the employees who performed the calculations. Ms. Upton stated she did not know how long it would take since most of the employees being trained had other duties, but KDE indicated that the quality control function should be in place by the 2004-2005 school year.


Rep. Sims asked if the SEEK formula was calculated on attendance for a whole day or a half day, and was a school penalized if a student missed a half day. Ms. Upton stated that being absent a half day or a whole day did affect the formula.†


Sen. Stine asked Kyna Koch, who was in the audience, if she would like to respond.


Ms. Koch, Associate Commissioner, Kentucky Department of Education, requested that the Department be given until the next meeting in order to respond to the findings of the follow-up report.†


Sen. Stine asked that the Department of Education be placed on the November agenda.


Lynn Aubrey, Program Review staff analyst, presented the staff follow-up report on the Kentucky Early Intervention System (First Steps) (a copy of staffís follow-up can be found in its entirety in the LRC Library file). She stated that the report contained six priority recommendations and seven secondary recommendations. She said that of the six priority recommendations, two had been implemented, two had been partially implemented, and two had not been implemented. Of the seven secondary recommendations, she stated that one recommendation had been implemented, two had been partially implemented, and four had not been implemented. She said that the priority recommendations had been aimed at improving the efficiency and accountability of the program; the secondary recommendations focused on improving program services.† She stated that most of the original recommendations had been directed to the Commissioner for the Division of Mental Health and Mental Retardation, but in December 1993, First Steps moved to the Commission for Children with Special Health Care Needs (CCSHCN). She stated that staffís follow-up information was based on information obtained from the CCSHCN.


Sen. McGaha asked if new employees who had been hired to maximize Medicaid and KCHIP funds and access third-party billing had been able to achieve more than the $97,530 collected from the Family Share program.† Ms. Aubrey stated that First Steps had not been able to collect more through third party billing because of coding problems with the Centralized Billing and Information System (CBIS).† She said she would find out about any additional Medicaid or KCHIP funds.


Sen. McGaha asked if the money being collected through the First Steps Family Share program and the money being obtained from federal grants was enough to pay for the salaries of the new employees. Ms. Aubrey stated that because the employees were relatively new to their positions, the First Steps program was likely getting more money from collections and grants than the amount of their salaries.


Sen. McGaha asked for additional information regarding the transition resource center. Ms. Aubrey stated that the center would be located in Louisville.† She said she would ask staff at First Steps for its mission statement.


Mr. Friedlander stated that the Commission was trying to work with Neighborhood Place in Jefferson County.† He said the goal was to have a one-stop shop for individuals with disabilities.


Sen. McGaha asked for clarification that this is not First Steps recipients only. Mr. Friedlander stated that was correct.


Sen. McGaha said that the appearance is that an extra $100,000 from a federal grant is for First Steps only.† Mr. Friedlander stated the grant would be used for all transitions.


Sen. McGaha asked what percentage of the $100,000 would be for First Steps. Mr. Friedlander estimated that it would be one-third.


Sen. McGaha said that this means about $33,000 for First Steps. He asked if the person hired to search for new avenues of funding is paid solely from First Steps funds. Mr. Friedlander stated that her salary comes mainly from general funds, some from First Steps, and some from Title V. He said he could provide a more precise breakdown.


Sen. McGaha asked what percentage of her salary was coming from First Steps funds. Mr. Friedlander stated that he thought the figure would be half, or possibly three-quarters since she spends more time on the First Steps program.


Sen. McGaha asked what type of services would the transition center offer to these children. Mr. Friedlander stated that the transition center is designed to make sure the children will have access to all the other resources that the community offers.† The Center would help in getting children signed up for KCHIP and Medicaid and provide information for group resources such as the Downsí Syndrome Parents Association.


Sen. McGaha stated that he thought it was the responsibility of the primary service coordinator to provide that information to the families. Mr. Friedlander stated that was correct, but everybody needed help in knowing what resources were available.


Sen. McGaha said there appeared to be overlapping of services.


† Sen. McGaha asked who served on the professional team outside First Steps that evaluated and decided what services the children received. Mr. Friedlander stated that the professional team is formed under Part C of the Individuals with Disabilities and Education Act (IDEA). He said the team consisted of the primary service coordinator, the parent, and other individuals who might be providing services. He explained that the team identifies outcomes and services, and then makes a decision about the services to be provided to the child.


Sen. McGaha asked if it would be correct to say that this outside team designates the service that the client will receive, and that the reasonableness of those services are monitored by the primary service coordinator and team of people currently providing the service. Mr. Friedlander stated that was correct.


Sen. McGaha asked if the providers were actually monitoring themselves. Mr. Friedlander stated because of that problem, the program had increased the number of monitors. He explained that if the providers are found to be consistently providing services that are beyond what they should be, then they are asked to leave the system.


Sen. McGaha asked if the monitors employed by the Commission were allowed to override the outside teamís decision if mistakes were discovered in the services being provided to the client. Mr. Friedlander stated that the monitors who are employed by the Commission cannot override that teamís decision. Mr. Friedlander stated that he also wanted to clarify that the Family Share figure of $97,530 was collected during the previous† fiscal year. He said that First Steps had increased its Medicaid reimbursement by approximately 10 percent, which was significant in increasing federal funds.


Sen. McGaha asked if the 2003 salaries for the primary service coordinators were up to date or projected annual costs. Mr. Friedlander stated that the salaries were up to date.†† He also stated that it would be difficult to determine how much a primary service coordinator would make because the data would not allow them to separate part-time and full-time employees.†


Sen. McGaha asked Mr. Friedlander to provide to the Committee the number of full-time providers and what their salaries are. Mr. Friedlander stated that he would provide that information.


Rep. Sims asked if First Steps was going to be located in the main office in Louisville and would other services be combined. Mr. Friedlander stated that First Steps was located in the Commissionís central office in Louisville.†


Rep. Sims asked why it was located in Louisville. Mr. Friedlander explained that in the 1930s, the Commission was a part of Kosair Childrenís Hospital, and the offices are still located on its grounds.


Rep. Sims asked if Kosair Childrenís Hospital provided people with information about service programs. Mr. Friedlander stated that there were 15 points of entry across the state, with most being located in the local comprehensive care centers.


Rep. Hoffman asked if recommendations 2 and 4 were not implemented because the Commission disagreed. Ms. Aubrey stated that recommendation 2 was not implemented because the Commission disagreed.


Rep. Hoffman asked Mr. Friedlander why the Commission disagreed. Mr. Friedlander stated that a program could have best practices but still not have good outcomes.


Rep. Hoffman asked that if the Commission did not implement the recommendation, would it affect the usefulness of the information or the program. Ms. Aubrey stated that she did not know.


Sen. Stine asked† Mr. Friedlander to explain why the other recommendations had not been implemented. Mr. Friedlander stated that the short answer would be cost and time.† He said that the Commission did not disagree with recommendation 4,† but felt that it needed to focus first on eligibility and eligibility determinations.


Sen. Stine asked about the status of the fiscal improvement plan that had been recommended. Mr. Friedlander stated that fiscal issues in the program had been addressed, but they had not developed a plan.


Tom Hewlett, Program Review analyst, presented the follow-up report on Contracting for Services (a copy of which can be found in its entirety in the LRC Library). He stated that the report highlighted four major problems in the area of contracting for services:† (1) Key aspects of the system had not been formalized in statutes or regulation, existing statutes and regulations were often vague or inconsistent. (2) Analysis and documentation of the need for contracted services were often inadequate. (3) The advertising of contract opportunities was often insufficient to ensure full competition.† (4) There was inconsistent and often inadequate monitoring of the work performed on contract, particularly sole source contracts. He said that since the issuance of the reportís recommendations, there seemed to be marked improvement in all of the areas.


He said that Chapter 2 dealt mainly with systemic issues such as the stateís electronic contracting system and the formalization of the contracting system in statute and regulation. He stated that most of the concerns surrounding those issues had been resolved.† He said that recommendation 2.6 had been partially implemented. He said that the Finance Cabinet disagreed with recommendation 2.3 to revise the criteria by which services should be designated as professional, and therefore the recommendation was not implemented.† He stated that recommendation 2.5 had not been implemented because the General Assembly took no action to revise the definition of memoranda of agreement.


He explained that Chapter 3 dealt with contracting and the state personnel system.† He stated that recommendation 3.1 had only been partially implemented due to the budget difficulties and hiring freeze.† He said that recommendation 3.2 had been partially implemented with the establishment of the Finance Cabinetís E-Procurement Internet site.† However, there is concern that agencies seem to be relying more on the Internet site and less on announcements in the local newspapers, which could disenfranchise some smaller vendors not well versed in e-procurement. He said that the status of† recommendations 3.3, 3.4, and 3.6, dealing with the concept of common-law employees, was unknown.† He said that the Finance Cabinet was now routing all contracts with individuals through the Department of Social Security for review. Recommendation 3.5 was not implemented because the General Assembly did not address this recommendation.† He stated that the Cabinet initially disagreed with recommendation 3.7, but the Secretary of Finance and Administration did sign a memorandum in April 2003 directing agencies to provide full explanations as to why agency staff could not perform the service in question.


Sen. Stine asked if the agencies were giving thorough explanations. Mr. Hewlett stated that the Government Contract Review Committee was seeing lengthier explanations, but sometimes it was just lengthier boilerplate. A true cost-benefit analysis was not being done for each contract. The memorandum that the Secretary of Finance signed in April 2003 included a provision requiring a full explanation on the Proof of Necessity form for each contract.†


Mr. Hewlett continued his presentation by stating that Chapter 4 had dealt primarily with contract administration and monitoring practices. He said that sole source contracts were of a particular concern, and recommendations 4.1 and 4.2 addressed the ease of issuing sole source contracts. He stated that recommendation 4.1 had been partially implemented. He said that the Cabinet insists that it closely reviews all sole source requests, but no reports on the award of sole source contracts has been delivered to the Government Contract Review Committee. He said that recommendation 4.2, along with provisions in House Bill 269 regarding the yearly renewal of sole source contracts, had not been implemented. He stated that the Cabinet had not provided the Government Contract Review Committee any summary reports on the number of sole source contracts by agency and cabinet. He stated that recommendations 4.3 and 4.4 regarding a centralized web site to advertise contract information had been developed. He said that the Cabinet disagreed with recommendation 4.5, proposing that an independent ombudsmanís office be created, because KRS 45A.285 provided contractors with a right to protest. He stated that Recommendation 4.7, asking for a periodic survey of contractors in order to help the Cabinet and the Agencies to develop a more effective, efficient and fair monitoring system, had also not been implemented. The previous survey conducted by Program Review staff found that 24 percent of contractors reported that they were not given any feedback or evaluation of their work performed during their most recent contract activity. He said the Cabinet had instructed agencies to solicit contractor comments during the evaluation of contractor performance, but it still lacked the systematic approach of surveying all contractors periodically. He stated that monitoring of contractor performance had been addressed by recommendations 4.6 and 4.9. He said that the Cabinet had developed an electronic contract monitoring system that can be accessed through the Internet. He stated that Program Review staff had not had the opportunity to evaluate the effectiveness of the system or the extent to which agency officials are making use of the system. He said that recommendation 4.8 had not been implemented because the Cabinet disagreed that sole source contracts should be monitored more closely than competitively awarded contracts. Mr. Hewlett stated that recommendation 4.10 had been partially implemented. He stated that the Government Contract Review Committee had been receiving more information on the largest pre-qualified contracts, and the number of the pre-qualified contracts had decreased in the last two years. He said that the Finance Cabinet had reported that new procedures were in place in the awarding of contracts.


Rep. Arnold asked if staff had been able to look at the costs of personal service contracts versus the hiring of state employees. Mr. Hewlett stated that staff did not look at those costs because of the different types of contract work, which would make it hard to compare the two. He said it was probable that in some circumstances it would be cheaper to hire someone on contract for eight months to a year, than hire a state employee. Mr. Hewlett said that staff did recommend that agencies do a cost-benefit analysis to look at whether it would be cheaper to contract for a particular service or hire a state employee.†


Sen. Stine stated that the full report had mentioned a concern about women and minorities being able to compete. She asked if staff had seen a continuation of that concern. Mr. Hewlett said that there had not been enough analysis to answer that question.


Sen. Stine introduced Mike Burnside, Director of Material and Procurement Services, Finance and Administration Cabinet, and Ken Houp, Commissioner for the Department of Administrative Services, Finance and Administration Cabinet.†


Sen. Stine asked why some of the recommendations in the report had not been implemented. Mr. Houp stated that the Cabinet had been in a continual process to address all the recommendations. He explained that even though the Cabinet may not have agreed with some of the recommendations, it was not an indication that the Cabinet would not work toward making improvements based on the recommendations. He stated that the report was a good report and it provided guidance and focus on areas that needed attention.


Mr. Burnside stated that the Cabinet had made revisions of all the policy and procedure manuals. He stated that the procurement regulation, 200 KAR 5, had been updated and a subsequent set of revisions† will be up for review next month. He said that the measures to train all the agencies on the new requirements had been implemented and changes had been made to the system requiring all agencies to fully document in the PON (Proof of Necessity Form) tab in the MARS system. He said that the Cabinet was working with LRC staff to better understand the management reporting tools needed. The changes requested by LRC staff should be fully implemented by the end of October. He explained that the recommendation regarding the creation of an independent ombudsmanís office had not been implemented. He said that the Cabinet already has a procedure in place for handling complaints or protests from contractors. He said that no funds or positions had been appropriated for the creation of an ombudsmanís office, and to stay in compliance with the budget bill, the Cabinet had not allocated staff to the ombudsmanís office. As to the recommendation regarding sole source contracts, Mr. Burnside stated that the Cabinet Secretary and Commissioner Houp had been scrutinizing sole source contracts up front. He stated that the Cabinet had been turning down sole source requests for personal service contracts unless there were continuing legal requirements.


Mr. Houp stated that the Finance Cabinet had not been approving other cabinetís initial requests, but requiring them to issue requests for proposals to determine if the contract needed to be sole source.†


Rep. Hoffman asked what percentage of the contracts were sole source. Mr. Burnside stated that he did not have that information with him, but thought the number of sole source contracts for 2001 was 503, and then it went down to 501, and then to 498. He stated that several of those contracts were implemented before the moratorium in House Bill 269 went into effect. He said the number of personal service contracts had decreased dramatically in that same time period. He explained that the percentage for sole source contracts would show an increase because the total sample was smaller.


Rep. Hoffman asked what areas would be more likely to have sole source contracts. Mr. Houp stated that other areas for sole source contracts were software related.†


Rep. Hoffman asked if the state paid more on a percentage basis for sole source contracts than competitively bid contracts. Mr. Burnside stated that 98 percent of the money spent for commodities and services contracts last year was through competitive contracts.


In response to Rep. Hoffmanís earlier question, Dr. Hager stated that for the report staff analyzed more than 350 contracts covering the period from July 1999 through September 2000. Based on that sample, staff had estimated that 17 percent of the contracts were sole source.


Mr. Hewlett stated that at the time of the report, Families and Children and Health Services had the highest use of sole source contracts, mainly because they were having a difficult time finding social workers for areas in the northern part of the state.


Rep. Sims asked if contracts had an expiration date. Mr. Burnside stated that the length of a contract did not cross over a biennium (two years) unless the contract includes an exception for a bidding process.†


Rep. Sims asked if any of the contracts contained an option to renew without having to go through the process again. Mr. Burnside said that contracts did not contain an option to renew. He stated that one or two major contracts, which were issued in the later part of the second year, may have been extended for another 3 months or so, due to the expense of preparing RFPs and the expense of bidding them out.


Rep. Sims asked why there was not more than one contractor bidding on certain contracts such as road resurfacing. Mr. Burnside stated that road contracts were bid out by the Transportation Cabinet and were not under the purview of the Finance Cabinet.


Sen. Stine stated that Kentuckyís Constitution prohibits† the General Assembly from encumbering a future General Assembly.


Mr. Houp stated that sometimes the Cabinet may have contracts that are not personal service contracts such as insurance. He said the contract would be for the biennium, but it might contain a clause with the option to renew.†


Mr. Burnside also stated that a renewal option in a contract does not encumber additional funds at the time the contract is issued.


Rep. Sims asked what sort of contracts were used to purchase replacement parts for equipment. Mr. Burnside stated that the Cabinet issues Catalog Master Agreements with vendors for equipment such as computer equipment, medical equipment, and things of that nature. It is a price contract with a guaranteed price over a period of time with no minimum usage guaranteed.† The Cabinet may issue a contract but never use it.


Rep. Arnold asked about an agencyís recourse if a vendor was not fulfilling the obligations as set forth in the contract. Mr. Burnside stated that if a vendor was not performing up to standards, the Cabinet would first notify the vendor in writing of its deficient performance and give a set amount of time in which to make corrections. If the performance was not corrected, then the Cabinet would take steps to cancel the contract.


Rep. Arnold asked what happens if a vendor says that it has fulfilled its contract, and the agency is requesting more than what was agreed to. Mr. Burnside explained that whenever a complaint is received against a vendor, the Cabinet meets with the vendor and the contracting agency to review the terms of the contract.†


Sen. Seum asked if the majority of the contracts with vendors were small investments. Mr. Burnside stated that the typical complaint regarding large personal service contracts is the requirement that the agency or the contractor make a substantial initial investment. In order to perform the contract, vendors cannot amortize those expenses over a two-year period and it may cost the agency more money because it has to pay the start-up fees to be able to get that vendor in place to provide the contracted services.


Sen. Seum asked if it would be helpful if the state was able to do longer contracts. Mr. Burnside stated that in his opinion, it would be helpful.


Mike Clark, Ph.D., LRC Chief Economist, gave an update on the Analysis of Kentuckyís Prevailing Wage Laws and Procedures. He explained that Kentuckyís prevailing wage law requires contractors who employ construction workers on certain types of public construction projects to pay at least the prevailing wage. He said that state construction projects, school district projects, and local government projects that are estimated to cost $250,000 or more are subject to Kentuckyís prevailing wage law. He stated that for 81 counties the Kentucky Labor Cabinet determines the prevailing wage.† He stated that for the remaining 39 counties, the Labor Cabinet adopted the federal prevailing wage.


Dr. Clark stated that recommendations 3.1 though 3.6 were for the General Assemblyís consideration if they wanted prevailing wages to be more representative of local wages, and recommendation 3.7 requested that the Kentucky Labor Cabinet develop a process to validate evidence submitted for prevailing wage determinations.


Sen. Seum asked if there was a statute or regulation requiring that localities be grouped by senatorial districts. Dr. Clark stated that according to statute, grouped localities can be no larger than a senatorial district, and the Labor Cabinet chose to go with the boundaries of the senatorial districts.


Sen. Seum asked if the study looked at grouping counties differently. Dr. Clark stated that the problem would exist regardless of the type of grouping used. He said that using something similar to the area development district boundaries might help to better determine if prevailing wages more accurately reflect the local wages.


Sen. Seum asked if there was a better way than using senatorial districts to group the localities. Dr. Clark stated that there could be a better grouping of counties that would be more representative of local wages.


Sen. Borders stated that understanding the prevailing wage law and SEEK should be continuing efforts.


Sen. Stine introduced Pat Patterson, Director of Employment Standards, Apprenticeship and Training, Kentucky Labor Cabinet, to present the Cabinetís response to the follow-up report of the prevailing wage study. Mr. Patterson stated that the Cabinet is now doing surveys in addition to hearings. He said that the senatorial districts had been modified and it was now 21 localities covering 79 counties. He stated that the Cabinet mails between 200 and 500 surveys to contractors in each locality, but the Cabinet did not have the personnel to follow up with contractors who failed to† respond. He said that the Cabinet does follow up if the wage data form has been completed incorrectly or includes data that seems flawed. He stated that field staff does approximately 1,000 prevailing wage inspections a year and encourages participation in the data collection process.


Sen. McGaha asked if attendance at the public hearings was a balanced representation of both sides. Mr. Patterson stated that the attendance at the hearing was probably still not balanced.


Sen. McGaha asked what kind of responses the Cabinet was receiving from the surveys. He also asked if contractors were responding by survey. Mr. Patterson stated that the response rate was still not good.


Sen. McGaha asked for the percentage rate of responses.


Robin McQueary, Office of Employment Standards, Kentucky Labor Cabinet, stated that the Cabinet receives many calls from contractors asking if they were required by law to complete the survey. She said that even after the Cabinet explained the reason for the surveys, the response rate was still very low ó around one-third in most cases.


Sen. McGaha asked if response rates were higher in some geographical areas than others. Ms. McQueary stated that response rates did not vary by geographical areas.


Rep. Hoffman asked how the Cabinet validated the information received from surveyed contractors. Mr. Patterson stated that they are required to submit an affidavit along with the information.†


Mr. Patterson also stated that the Cabinet cannot discontinue the use of the majority wage or exclude wages paid to workers on previous prevailing wage projects from the determinations for later projects because of provisions of the statute.


Rep. Baugh asked if the surveys were mailed to contractors and organizations. Mr. Patterson stated that the mailing list included both.


Rep. Baugh asked if the majority of the responses received were from contractors or organizations. Ms. McQueary stated that the responses were mixed.


Rep. Baugh asked if there were any organizations of contractors who responded. Mr. Patterson stated that some were contractor organizations who responded.


Rep. Baugh asked if the responses were primarily from unions. Mr. Patterson stated that since most unions submit their evidence at hearings, the survey responses were mainly from contractors.


Rep. Baugh asked if there was a common reason for the contractors not responding to the survey. Mr. Patterson stated that a lot of the contractors do not do prevailing wage work, and some of it could be apathy.


Mr. Patterson stated that the recommendation asking that the current definition of localities be replaced with definitions that would reduce the number of unrelated counties grouped together would be difficult, and the statute prescribes the restrictions on designating a locality. He stated that the Cabinet had considered using the Area Development Districts definition, but some of those districts were larger than the senatorial districts. He also said that it would not be feasible to do 120 counties individually.††††


Mr. Patterson stated the Cabinet had made improvements in obtaining more accurate data and felt that its data was now as accurate as the federal data. He stated that the most common question asked of the Cabinet was if a response to the survey was mandated by law. He stated that the Cabinet hesitated to put that burden on the contractors.


He stated the Cabinet requires an affidavit on the information submitted and at a hearing it is sworn testimony. He said that most errors on the survey were errors of omission or confusion in understanding the procedures.†


Mr. Patterson stated that since the report, the Cabinet now has Internet postings of the prevailing wage rates, the hearing dates, a list of all prevailing wage projects, the wage survey form, the wage survey instruction form, the wage survey affidavit, and the notification of public works form. He said that the Cabinet has improved the response time for getting the wage determinations issued, from 2 years to 14 months.


Rep. Arnold asked if contractors were supposed to provide the hourly rate information to the Cabinet. Mr. Patterson stated that was correct.


Rep. Arnold asked if the hourly wage rate was based on the number of employees or on the hourly wage rate being charged by different contractors. Mr. Patterson stated that it was based on the number of employees at any given rate. It was not per contractor, but on the number of employees. He said if the majority of workers (51 percent or more)† were being paid the same rate, then that rate becomes the prevailing wage.


Sen. Borders stated that prevailing wage determinations need to be looked at again because of the inequities in the localities within the senatorial districts. He also commented on the use of federal prevailing wage rates in some counties that may not be based on wages paid in the county.


Rep. Butler asked if there was a deadline for responding to the survey. Mr. Patterson stated that they had 45 days in which to respond.


Rep. Butler stated that it would be good if incentives could be given in order to increase the response rate to the surveys.


Sen. Seum asked who would be responsible for adjusting the prevailing wage rate system.† Mr. Patterson stated that the Cabinet was obligated by law to set rates and adjust evidence.


Sen. Seum asked if there was room for adjustments in the system. Mr. Patterson said yes.


Sen. Seum asked if the Cabinet would be proposing legislative changes. Mr. Patterson stated that he was not a proponent of recommending legislative changes to the current system.


Sen. McGaha asked if the Cabinet had a choice of what was used in the 39 counties. Mr. Patterson stated that it was up to the Commission.


Sen. Stine stated that she would like for the Committee to consider adding an additional study topic, which would involve looking at allegations concerning uncollected revenues and improper payments in state government. She stated that she would bring this up for discussion at the next meeting.†


Meeting adjourned at 3:30 p.m.