Program Review and Investigations Committee





<MeetMDY1> June 9, 2016


Call to Order and Roll Call

The<MeetNo2> Program Review and Investigations Committee met on<Day> Thursday,<MeetMDY2> June 9, 2016, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Senator Danny Carroll, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Danny Carroll, Co-Chair; Representative Terry Mills, Co-Chair; Senators Julie Raque Adams, Tom Buford, Perry B. Clark, Dorsey Ridley, Dan "Malano" Seum, Stephen West, and Whitney Westerfield; Representatives Tim Couch, David Meade, Ruth Ann Palumbo, Rick Rand, Arnold Simpson, Chuck Tackett, and Jeff Taylor.


Legislative Guest: Representative Derrick Graham.


Guests: Damon Talley, Attorney, Bluegrass Water Supply Commission; Tom Marshall, Frankfort attorney; Dr. Ronnie Nolan, Director, Kentucky Educational Collaborative for State Agency Children; Paula Stafford, School Administrator, Rowan County; Gage Ramage, student, Lake Cumberland Youth Development Center; Michelle Sanborn, President, Children’s Alliance; and Terry Brooks, Executive Director, Kentucky Youth Advocates.



LRC Staff: Greg Hager, Committee Staff Administrator; Chris Hall; Colleen Kennedy; Van Knowles; Jean Ann Myatt; Chris Riley; William Spears; Shane Stevens; Joel Thomas; Aurora Cooper and Rayann Houghlin, Graduate Fellows; and Kate Talley, Committee Assistant.


Senator Carroll welcomed legislative guest Representative Derrick Graham and opened the meeting with a prayer and the pledge of allegiance.


Minutes for May 12, 2016

Upon motion by Senator Raque Adams and second by Representative Simpson, the minutes for the May 12, 2016, meeting were approved by voice vote, without objection.


Staff Report: State Funding Of The Bluegrass Water Supply Commission

Mr. Riley stated that drought conditions in 1999 negatively impacted the water supply in central Kentucky. Municipalities from the region formed a utilities round table group to discuss strategies for addressing water supply issues. Senate Bill 409, enacted in 2000, increased responsibilities for area development districts to develop strategies to address water supply shortages.


The Bluegrass Area Development District partnered with central Kentucky water utilities to form the Bluegrass Water Supply Consortium, which had 18 members as of 2004. The consortium received grants from the US Environmental Protection Agency and the Kentucky Infrastructure Authority for a $450,000 feasibility study to determine an optimal regional water supply strategy for the region. Based on the study’s evaluation criteria, the preferred option was construction of a water treatment facility at Pool 3 on the Kentucky River with supplemental raw water supply from the Ohio River. The study also called for the formation of a regional water commission to manage the construction and daily operation of the proposed water infrastructure projects.


The Bluegrass Water Supply Commission (BWSC) was formed in August 2004 under KRS 74.420-520 by an executive order from the Lexington-Fayette Urban County Government. Nine consortium members became founding members: Cynthiana, Frankfort, Georgetown, Lancaster, Lexington-Fayette, Mt. Sterling, Nicholasville, Paris, and Winchester. Berea joined the commission in 2007; Mt. Sterling left in 2011. Kentucky American Water, an investor-owned water utility that serves Fayette County and portions of surrounding counties, was a working partner of BWSC but not a member of the commission. The commission has maintained a consistent ratio of seven utility officials to two or three elected officials.


The mission of BWSC is to ensure adequate water supply to its members under any conditions, maximize use of the Kentucky River as raw water source, and maintain reasonable wholesale water rates.


Construction of the proposed water treatment facility and grid network was estimated to require capital funding in excess of $150 million. BWSC determined that the majority of funding for these projects would have to come from federal grants.


More than $2 million in state funding has been awarded to BWSC. A $250,000 Community Economic Growth grant was not used by the commission in the allotted time, so the funds reverted to the Governor’s Office for Local Development. The commission has used more than $1.8 million in state funding since FY 2005: two $900,000 appropriations and a $30,000 grant from the Kentucky River Authority (KRA).

In 2005, BWSC entered into loan agreements of $165,000 each with the Kentucky League of Cities and the Kentucky Association of Counties. The loans were used as part of the local matching requirement for the first $900,000 appropriation to the commission and for operating expenses. Both loans were retired with funds from the second $900,000 appropriation to the commission in May 2012 at a total cost of $354,232 including accrued interest.


BWSC contracted with the Flint Group in 2005 for financial management, federal grant writing assistance, and lobbying. The Flint Group, which was paid more than $23,000 from the KRA grant, was registered as a federal lobbyist on behalf of BWSC in 2005, primarily to secure capital funding through a State and Tribal Assistance Grant. The efforts to secure capital funding through federal grants was unsuccessful.


The first $900,000 appropriation awarded to BWSC came from HB 267, the 2004-2006 biennium budget bill. The appropriation required $200,000 in local matching. The terms of the appropriation listed the Kentucky Infrastructure Authority (KIA) as the grantor of the funds, meaning that payments from the grant would be administered by KIA to BWSC. KIA was also authorized to request periodic reviews of projects associated with the funding. KRA, listed as the grantee of the funds, was responsible for overseeing the submission of project profiles, budgets, and other documentation associated with the project. BWSC was listed as the sub-grantee and was responsible for providing project profiles, project budgets, legal counsel, and other requirements per the grant assistance agreement to KIA after review by KRA. The funds were to be used for pre-construction activities including routing/engineering studies, legal fees, administrative fees, and property acquisition associated with proposed water infrastructure projects.


Total spending for this stage of BWSC’s efforts was more than $1.1 million, which included the $900,000 appropriation and more than $200,000 in matching. O’Brien & Gere Engineers, which received nearly $324,000 from BWSC, served as the primary engineering firm for the commission. Damon Talley, general counsel of the commission, was paid more than $300,000 for legal services and for reimbursement of expenses. The Bluegrass Area Development District was paid nearly $161,000 for administrative functions. Kentucky American Water was paid $171,000 for an engineering design modification that would have increased the capacity of its proposed water treatment facility by 25 percent as part of a potential partnership between BWSC and Kentucky American Water. Seven other vendors accounted for the remaining $144,000.


Mr. Thomas explained that Kentucky American Water decided at an informal conference convened by the Public Service Commission on March 14, 2006, to proceed with plans to build a water treatment facility near Pool 3 on the Kentucky River. During the conference, the BWSC general counsel stated that the commission was having difficulty securing the funding needed to partner with Kentucky American for the construction of the proposed water treatment facility. In 2008, the Public Service Commission granted permission to Kentucky American to move forward with the construction of the Pool 3 facility and pipeline. The treatment facility came online in September 2010. The 31-mile pipeline connects the Kentucky River with a Kentucky American connection point in Fayette County.


BWSC was awarded a second $900,000 appropriation during the 2006 Regular Session as HB 380. The appropriation was amended by HB 4 of the 2009 Extraordinary Session, which permitted BWSC to use funds from the second appropriation to pay off the Kentucky League of Cities and Kentucky Association of Counties loans from 2005. Because these loans had been used as local matching for the first $900,000 appropriation in 2005, in effect, state funds from one year were used to match state funds from another year.


After paying off the loans in 2012, BWSC had more than $545,000 remaining of the HB 380/HB 4 appropriation. In October 2012, BWSC voted to allow member municipalities to submit projects for funding from these funds. The projects had to meet BWSC’s original goals of providing water supply interconnectivity. Six member municipalities were awarded funding: Berea, Cynthiana, Frankfort, Lancaster, Nicholasville, and Paris. As of January 2016, only Berea and Frankfort had drawn down their funding from BWSC. At that time, BWSC had a remaining balance of nearly $184,000 restricted for use on these projects.


Senator Buford expressed concerns pertaining to the accountability of funds spent by the commission. There is a need for more detail for how these funds were used. He stated he was unclear of the status of the remaining $184,000, saying that perhaps the funding should revert to the state. The question is what the state received for the money spent. Based on a detailed breakdown of expenditures, committee staff may have recommendations. He proposed postponing approval of the report.


In response to a question from Senator Buford, Mr. Thomas said that $184,000 remaining is allocated to local municipalities’ projects.


Mr. Talley thanked the General Assembly for the two $900,000 appropriations. Central Kentucky cities were working together with Kentucky American to solve the water shortage problem. The effort included workshops, public meetings, engineering studies, and planning. Kentucky American had the financial resources to follow through and build a water treatment plant and pipeline. More recently, BWSC has been an advocate for rebuilding dams on the Kentucky River and has supported user fees to do so.


Mr. Marshall stated that he has followed BWSC closely since 2007. There was considerable opposition to the pipeline proposed by BWSC through Franklin and Scott Counties. He expressed concern as to whether BWSC spent money it was awarded by the state properly and whether BWSC followed all procurement laws. Perhaps some of the money should be returned to the state. The General Assembly should consider reviewing the contract review process and implementing more oversight for projects and entities such as the ones described in the report.


Senator West made a motion to adopt the report, but there was not a second. He withdrew the motion. [MJA(1] 


Senator Buford restated he would like a more detailed breakdown of expenditures of BWSC and added that perhaps legislation pertaining to the oversight of where and how state funds are spent should be considered.


Representative Simpson motioned to pass the vote to the next meeting. Senator Perry Clark seconded, and the motion carried.


Senator Stephen West requested that a member of BWSC be present at the next meeting to discuss the future of BWSC and to comment.


Dr. Nolan said that the mission of the Kentucky Educational Collaborative for State Agency Children (KECSAC) is to ensure that all state agency children receive a quality education by establishing and maintaining collaborative partnerships with public and private agencies. KECSAC’s authority is from statute and regulation. State agency partners are the Department of Education, the Cabinet for Health and Family Services, and the Justice and Public Safety Cabinet. KECSAC has 85 education programs and partners with 51 school districts. It serves 2,100 students daily and nearly 12,500 annually. He gave examples of types of programs. A6 students attend school 210 days per year. Classroom ratios are 10:1 or 15:1.


The interagency advisory group, which is outlined in regulation, includes representatives of state agency partner agencies, school district superintendents, school administrators, and a student representative. The group serves as an administrative hearing board and approves the biennial plan. KECSAC submits quarterly and annual reports to the Kentucky Board of Education.


The local school district is responsible for providing education services to state agency children. There are 338 full-time teachers, 151 classroom aides, and 59 on-site school administrators for A6 schools.


State agency children participate in all state assessments and are pre- and post-tested locally. A6 programs receive school report cards. A6 programs are monitored annually by a team of three experts.


Supplemental funding for state agency children is a $10.1 million line item in the Department of Education budget. Of this, 94.1 percent is allocated to local school districts to support instruction.


Mr. Ramage told of his experience as an A6 student. After receiving his GED, he encountered many obstacles while trying to obtain a postsecondary education. As a convicted felon, he received limited educational benefits and financial aid. Often he used his own money to pay for courses. He obtained his certificate in welding and successfully completed his first semester of college.


Ms. Sanborn said that state agency children are the responsibility of the Kentucky Department of Juvenile Justice; the Department for Community Based Services (DCBS); and the Department for Behavioral Health, Developmental and Intellectual Disabilities. KECSAC was designed to limit inequities and increase coordination of educational services for state agency children. She is unsure whether this intent is being fulfilled.


Of the 47 residential licensed programs serving children in the custody of the state on contract with DCBS, 23 have on-site schools. Children served in these schools struggle with multiple issues. Most have four diagnoses or more and have had more than five placements.


On-site schools reduce school disruption by providing stable care, significantly reduce school suspensions for children, increase attendance rates and classroom time, allow teachers to teach by having therapeutic interventions and behavioral supports immediately available, and increase school progress. No busing is needed, which saves the school district money and is safer.


The issue she emphasizes is that residential agencies are asked to provide mandated services, but they are not reimbursed to cover the cost of the care provided. Expenses for an on-campus school are not allowable expenses through DCBS. The cost of these critical services provided by residential providers are not being reimbursed by DCBS, KECSAC, or the Department of Education. Agencies cannot keep up with the added expenses.


Several Children’s Alliance members have worked to negotiate ways to share the costs of these services with their local public school agencies. Negotiations between some residential programs and their local public school agency have not been successful at resolving how the costs of these services will be covered. Additionally, individual negotiations do not provide for a standard, uniform way to ensure that the costs of services are reimbursed.


Several schools in one county worked to negotiate a new agreement and the negotiations were unsuccessful. KECSAC stepped into resolve the issue but ended up requiring additional tasks for agencies, to be funded by the agencies, such as administering medications, developing a plan for addressing crisis behaviors, staffing and supervising a time-out room, and monitoring the cafeteria.


What is needed from Program Review is a third-party review of the 23 on-site schools to be included in the committee’s study of foster care and adoption[MJA(2] . Legislators need to know whether resources being provided to the children in these schools are being used appropriately, whether children in these schools are receiving the same services that other children in public schools are receiving, and who is responsible for providing and covering the cost of treatment and other services being required in the KECSAC agreements.


Mr. Brooks said that little is definitively known from objective and independent sources about A6 education. The quality of A6 programs varies so much across and within school districts that placement of students is like a lottery. a student could be placed in an innovative and personalized program or a program that lacks resources and fails to deliver a quality education.


He suggested five question groups that should be studied:

1.      What is the budget of each A6 program and why do budgets vary so much? How is funding tracked?

2.      What are program outcomes? When were programs assessed by external and independent sources and what were the results?

3.      How are student outcomes tracked? Are there pre- and post-assessments? How are evaluations used?

4.      How are supplemental services delivered?

5.      Is the current governance structure effective enough?


In response to a question from Senator Raque Adams, Dr. Nolan said that each student receives the same amount of funding. Funding is provided to each district based on the number of students.


Mr. Brooks commented that Kentucky Youth Advocates has concerns about whether A6 students are fully funded. Variations for side-by-side districts in per pupil expenditures varied by thousands of dollars.


Senator Raque Adams said that she would like to see a study and compare side-by-side funding.


In response to questions from Senator Carroll, Dr. Nolan said districts determine how SEEK [Support Education Excellence in Kentucky] funding is spent. KECSAC funding is required to be spent on students. School districts are responsible for all educational services. Mr. Brooks would like the committee to look at categorical funding, SEEK funding, and allocation. Ms. Sanborn commented that clarity on who is responsible for certain funds is needed. Therapeutic services are the responsibility of private agencies.

In response to a question from Senator Seum, Dr. Nolan said only districts that have A6 programs are served by KECSAC. Funds do not flow from district to district. Local tax dollars are used to provide educational services for students who must attend another district with an A6 program.


Representative Graham clarified that most districts are working with private agencies to provide services but are not paying for the services.


In response to a question from Senator Clark, Dr. Nolan said KECSAC does not track students long term. The Department for Juvenile Justice and the DCBS may have that information.


In response to a question from Representative Taylor, Dr. Nolan said the highlighted schools on the press releases enclosed in KECSAC’s packet are the A6 schools.[VK3] 


In response to a question from Representative Graham, Dr. Nolan will find out if Mr. Ramage’s lack of being able receive funding due to a felony is a federal or state guideline. Mr. Brooks said youth expungement is a federal and state issue and is currently being discussed regarding postsecondary education.


Senator Carroll summarized that the main concerns regarding A6 schools are equitable funding, quality in each program, standardization, and responsibility of funding.


            Mr. Brooks commented that youth fall under different agencies frequently. Integrated responsibility for care would make sense.


The meeting adjourned at 12:14 PM.

 [MJA(1]Asked to v, asked?

 [MJA(2]I didn’t recall that it was mentioned to add to the foster care study, but I may have missed it.

 [VK3]It might help to give context—otherwise, those not present would have no idea: … the highlighted schools on the lists of Programs of Distinction enclosed in the KECSAC packet are the A6 schools.