Program Review and Investigations Committee




<MeetMDY1> September 10, 2009


The<MeetNo2> Program Review and Investigations Committee met on<Day> Thursday,<MeetMDY2> September 10, 2009, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Senator John Schickel, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator John Schickel, Co-Chair; Representative Reginald Meeks, Co-Chair; Senators R.J. Palmer II, Joey Pendleton, Dan "Malano" Seum, and Katie Kratz Stine; Representatives Dwight D. Butler, Rick G. Nelson, Ruth Ann Palumbo, Rick Rand, Arnold Simpson, and Ken Upchurch.


Guests:  Connie M. Payne, Executive Officer, Drug Courts; Patrick Yewell, Executive Officer, Department of Family and Juvenile Services; Administrative Office of the Courts.  Honorable Anthony W. Frohlich, Chief Circuit Judge and Conducts Drug Court for Boone and Gallatin Counties.  Mike Burnside, Executive Director, Kentucky Retirement Systems.  Gary L. Harbin, Executive Secretary, Teachers’ Retirement System of Kentucky.


LRC Staff:  Greg Hager, Committee Staff Administrator; Rick Graycarek; Christopher Hall; Colleen Kennedy; Van Knowles; Lora Littleton; Jean Ann Myatt; Rkia Rhrib; Sarah Spaulding; Katherine Thomas; Stella Mountain, Committee Assistant.


Connie Payne, Executive Officer of Drug Courts, Administrative Office of the Courts, updated the committee on adult drug court programs. She said that since September 2007, 14 new drug courts have been implemented; participants in the adult programs increased from 1523 to 2308; 29 team trainings were provided across Kentucky; and the Management Information System was modified to comply with Recommendation 2.1 of Program Review’s 2007 report.  In response to other recommendations from the report, she said the program has applied for a grant with the National Center on State Courts to assist in developing performance measures, and treatment funding increased from $2.3 million to $3.7 million. 


Representative Meeks asked about the increased number of individuals in drug courts, the number of drug courts, what counties do not have drug courts, and what the plan is for those counties.


Ms. Payne said the increase in participants in the adult programs is due, in part, to the 14 new programs that were implemented with funding from the General Assembly in 2006.  She said two jurisdictions, Boyle/Mercer and Carroll/Grant/Owen, do not have drug courts. She said some judges and prosecutors have concerns about the court system changing from an adversarial system to the more problem-solving system used in drug courts. In the counties without drug courts, judges have expressed these concerns – a concern she respects. She said the program will work with new judges to see if they do accept the drug court philosophy and would be interested in pursuing the program.


Senator Schickel said that he agrees with the concern about the blending of social work and the judiciary.  He said that he is supportive of the programs, but it is important that the rule of law and the traditional adversarial role of the court system are respected.  He asked what Ms. Payne would say to those who have this concern.


Ms. Payne said that all drug court participants are post-plea, and the legal issues that are normally attached to cases have all been resolved.  In FY 2009, 70 percent of the participants entered through probation and 30 percent through diversion. Sentencing is postponed until drug court is completed.  Once drug court is completed, or if a participant has not been successful and is terminated from the program, the participant receives a normal probation revocation hearing. If a participant entered through felony diversion and is not successful, the participant returns to a regular criminal court process for the full sentencing to occur.


Senator Schickel asked whether there is any incentive for a person to participate in the program rather than pleading not guilty.


Ms. Payne said that when someone enters drug court through probation and completes the program successfully, they encourage that probation time left be on conditional discharge status rather than requiring the participant to return to the probation officer on a regular basis.  Those on diversion who successfully complete drug court have their cases dismissed.  She said other incentives are an alcohol- and drug-free life and not being in and out of the criminal justice system on a regular basis.


Upon motion made by Representative Meeks and seconded by Senator Seum, the minutes of the August 13, 2009 meeting were approved by voice vote, without objection.


Patrick Yewell, Executive Officer of the Department of Family and Juvenile Services, Administrative Office of the Courts, said Family and Juvenile Drug Courts provide resources, oversight, and judicial leadership to families.  He said there are 8000 children in Juvenile Justice, of which 6000 were involved with child welfare before.  He said 71 percent of all child abuse cases result from substance abuse; 80 percent of children in foster care have parents involved in substance abuse; and 95 percent of the families of juveniles in Juvenile Drug Court have been involved with the child welfare system.


Mr. Yewell said only 5 percent of the juveniles who have been involved with Juvenile Drug Court over the last 3 years have re-offended with substance abuse charges. He said the Family and Juvenile Drug Courts are successful because participants are being held accountable and have judicial leadership.


Representative Meeks asked how they collect the data that shows that only 5 percent of juveniles who have been involved with Juvenile Drug Court re-offend.


Mr. Yewell said they collect that data through their own court data system. 


Representative Meeks asked for clarification about first dealing with the issues that dysfunctional families face and thereby preventing children from such families of having to deal with issues later.


Mr. Yewell said when dealing with juveniles who have committed an offense, they take a holistic approach with prevention, education, accountability, and treatment.


Representative Meeks asked how much money could be saved by dealing with dysfunctional family issues early versus waiting to deal with juvenile issues later.


Mr. Yewell said their program costs about $3000 per year per juvenile.  It costs the Department of Juvenile Justice an estimated $58,000 per year to house a juvenile.


Honorable Anthony Frohlich, Chief Circuit Judge, who conducts drug courts for Boone and Gallatin Counties, said funding for his program started on July 1, 2007.  He said the word “hope” describes what drug court has meant to participants. He said the criminal justice system at times can be despairing and he compared it to an ongoing, revolving door.  He said that drug court works.  Judge Frohlich mentioned two cases of people who went through the program successfully, had their lives changed by it, and who are now positively contributing to society.


Judge Frohlich said his drug court team consists of the Commonwealth’s attorney, someone from the Public Defender’s Office, his probation and parole district supervisor, a member of the Boone County Sheriff’s Office, the circuit clerk, a member of the Boone County jail team, a treatment advisor, another judge in his jurisdiction, the drug court supervisor, and staff.  He said everybody is treated as an equal on the team and they have a free exchange of ideas with the goal of rehabilitating people.


Judge Frohlich said that funding is a problem.  He said it took 3 years to get funding for his jurisdiction, and they are still underfunded.  He said the Campbell County, Kenton County, and Boone County jurisdictions share services and staff but still have a long waiting list for drug court participants.


He mentioned one person who was eligible to get into drug court but would have had to wait 6 to 9 months to get in.  He chose to wait in jail to get into drug court, even though that meant he was not eligible for other jail programs, because he saw how well the program worked for others and he wanted to be drug-free.


Senator Stine commended Judge Frohlich for his work.  She said dealing with the substance abuse issue could cut down on other problems like prison overpopulation.  She asked for clarification on the programs that people would forfeit if they wait to get into drug court.


Judge Frohlich said they would not be able to get into work programs, be a trustee, or get a better bed.


Representative Simpson asked whether there is any way of removing a Class D felony from a person’s record if that person goes through drug court successfully.


Judge Frohlich said the only expungement of a criminal record is for possession of certain drugs and completing the period of probation, but under KRS218.A, such expungement is only for certain types of drugs and it has to be a possession case.


Representative Simpson asked whether Judge Frohlich continues to have contact with individuals who have successfully completed the program and are drug-free.


Judge Frohlich said once they go into drug court, the 5-year probationary period starts all over again.  It takes about 18 months to get through the program. After they have completed the program, they are still on probation and are usually conditionally discharged for the rest of that period of time.


Representative Simpson asked whether Judge Frohlich had heard of people who successfully completed the program but were unable to reestablish their lives because of their felony records.


Judge Frohlich said their crime follows them; it does not get expunged and it inhibits their ability to get jobs later.


Representative Simpson commended Judge Frohlich and his colleagues in Kenton County and Campbell County for working together across county lines.


Representative Rand asked Judge Frohlich to discuss the burden on other family members who are trying to help the person meet the requirements of drug court. 


Judge Frohlich agreed that drug court is tough, but that participants have to learn to become more diligent, more mentally tough, and more self-sufficient.


Representative Rand asked what percentage of people who are eligible for drug court can be accommodated.


Judge Frohlich said they have a large waiting list and there are many people who should be in drug court that are not getting into drug court because there are no funds.


Senator Seum said legislators ought to address expungement. He mentioned two cases of people who cannot get jobs because of a non-violent crime on their record.


Judge Frohlich agreed with Senator Seum that expungement should be an option.  He said he gets motions to expunge records but he does not have the power to do so.  He added that participants in drug court have to pay all their restitution to complete the program.


Representative Simpson mentioned that he has pre-filed an expungement bill.


Senator Stine said it would be helpful to determine the cost savings of drug courts.  She said drug court works, is saving money, and needs to be funded more.


Ms. Payne said drug court costs $5,100 for a participant to go through the program as opposed to a prison cost of $18,000.  There is a savings of more than $43 million for all of the graduates who have gone through the program.  That number does not take into consideration the $3.8 million in restitutions, fines, and fees that have been collected since the program’s inception. She said one of the recommendations from the 2007 Program Review report was to do another cost benefit analysis but AOC has not received a grant for this.


Senator Stine said they need to find the money and that she would like to have available information for the upcoming session.


Ms. Payne said she would get that information to everyone.


Representative Rand asked Judge Frohlich whether Representative Simpson’s bill on expungement of record would be useful.


Judge Frohlich said drug court judges would love to see such a bill.


Mike Burnside, Executive Director of the Kentucky Retirement Systems, and the System’s Chief Investment Officer, Adam Tosh, updated the committee on investment results for FY 2009.   Mr. Tosh reviewed the systems’ allocations to different categories of investments.  He said the overall return for the pension fund was negative 17 percent for the year.  Other than U.S. Treasury Bonds and cash, returns for asset classes declined worldwide.  He said that given the state of the economy, KRS returns were better than other systems that were down 25 to 30 percent.


Representative Simpson asked for clarification of the performance benchmarks used by KRS.


Mr. Tosh said that they take a weighted average of their holdings such as U.S. and international stocks, fixed income, and bonds. A benchmark is an industry-wide standard that represents that neutral position for a portfolio.


Representative Simpson asked when they establish benchmarks.


Mr. Tosh said the system’s benchmarks have been in place for many years.


Representative Simpson asked whether all pension funds establish their own benchmarks.


Mr. Tosh said there is no uniform measure.  Many organizations use similar benchmarks but there is no one-size-fits-all measure.


Mr. Tosh said the KRS Insurance Fund’s portfolio was structured to take more risk because insurance is less funded than the pension fund.  The insurance portfolio has more risk; about 77 percent of the insurance fund is invested in equity or equity-like instruments.  Because of what has happened in the stock market, the insurance fund has not performed well.


Representative Simpson expressed his concern that both pension funds do not report regularly to any legislative committee. He asked the Chair to note his request for some type of regular oversight of both pension funds.


Senator Schickel said he would take note of it and he agreed that the pension plans should report to a committee regularly.


Representative Rand asked when benchmarks are put in place.


Mr. Tosh said benchmarks are established at the beginning of an investment period and are a carry-over from benchmarks established years ago.  He said the benchmark is established by taking the weights of their expected targets and the published indexes and taking a weighted average of those.  If they make modifications to their investment targets, either by adding a new asset class or by not investing in a class anymore, those modifications need to be taken in and out of the benchmark. Benchmarks are a representation of what the system has invested in and they are a reflection of what happened to those investments.


Representative Rand agreed with Representative Simpson that the pension funds should report to an appropriate committee. He asked what the deficit is at the moment.


Mr. Burnside said at the end of last fiscal year the two pension plans’ combined deficit was approaching $30 billion. He said that probably will grow this year.


Senator Schickel asked whether they are still in a negative cash flow situation.


Mr. Tosh said that is correct.  A negative cash flow situation means that more money is spent on benefits and expenses than is coming in through contributions.


Mr. Burnside said this characteristic in not unique to Kentucky; pension systems across the United States are in this situation.


Senator Stine asked the Chair to invite officials from the Finance and Administration Cabinet to the committee’s next meeting to review their report on Kentucky Retirement Systems’ Holly Hill Land Purchase. 


Representative Simpson asked the chair to consider asking the KRS officials to make their presentation on the Holly Hill purchase at the next meeting as well. 


Mr. Burnside proceeded with his presentation on actuarial projections and how they will impact the upcoming budget cycle.  He said the numbers are preliminary.


Mr. Burnside said that using the phase-in schedule in House Bill 1, KERS non-hazardous contributions from employers would increase from 11.5 percent to 16.04 percent in FY 2011, and in FY 2012 would increase to 18.6 percent, which is paying the 44 percent and 48 percent of the annual required contribution in House Bill 1.  He said the increases are not as dramatic for the KERS hazardous contributions because those systems are better funded; they will increase from 24.69 percent to 25.43 percent in FY 2011.  He said State Police has the most dramatic increase, from 33.08 percent to 51.7 percent, to comply with requirements in House Bill 1.  He said the CERS projections are not available yet.


Senator Schickel asked Mr. Burnside to come back to the next meeting to present his report on the Holly Hill Church transaction. 


Mr. Harbin, Executive Secretary of the Teachers’ Retirement System of Kentucky, updated the committee on the investment performance of the system.  He said the system is now in the top 5 percent of all pension plans in the U.S. over the past year in its investment performance; the top 21 percent over the past 2 years; and the top 23 percent over the past 3 years.  He noted that returns for different asset classes have been outperforming their indices.


He said that since March 31, 2009, the system has added $1.8 billion in value and the market value of assets as of July 31 was $12.4 billion.


Representative Simpson asked whether they have met their benchmarks relative to that time period and how they are performing in comparison to the benchmarks that they have established.


Mr. Harbin said they have exceeded their benchmarks in each of those periods. He said the reason that the system outperformed the other public pension plans and the benchmarks is because of the level of risk that the system has taken. They avoided a number of the major problems that occurred in the market.


Representative Meeks asked Mr. Harbin to identify where they did have losses.


Mr. Harbin said the declines in the market value occurred because the markets declined.


The meeting was adjourned at 12:20pm.