The second meeting of the Interim Joint Committee on Local Government and the fourth meeting of the Interim Joint Committee on State Government was held on Wednesday, September 24, 2003, at 10:00 AM, at the Estill County High School auditorium in Irvine, Kentucky. Senator Albert Robinson, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Local Government Members: Senator Albert Robinson, Co-Chair; Representative Steve Riggs, Co-Chair; Senators Walter Blevins, Charlie Borders, Tom Buford, Julie Denton, Ernie Harris, Alice Kerr, Elizabeth Tori, and Johnny Ray Turner; Representatives John Adams, Adrian Arnold, James Comer, Ron Crimm, Ted "Teddy" Edmonds, Derrick Graham, Charlie Hoffman, Stan Lee, Marie Rader, Arnold Simpson, Roger Thomas, Ken Upchurch, and Jim Wayne.
State Government Members: Senator Albert Robinson, Co-Chair; Representative Charles Geveden, Co-Chair; Senators Walter Blevins, Charlie Borders, Tom Buford, Julie Denton, Ernie Harris, Alice Kerr, Elizabeth Tori, and Johnny Ray Turner; Representatives John Adams, Adrian Arnold, Eddie Ballard, Carolyn Belcher, Jim Bruce, Buddy Buckingham, Dwight Butler, Larry Clark, Perry Clark, Tim Couch, Brian Crall, Tim Feeley, Derrick Graham, J. R. Gray, Mark Harmon, Charlie Hoffman, Jimmie Lee, Paul Marcotte, Mary Lou Marzian, Lonnie Napier, Steve Nunn, Jon David Reinhardt, Tom Riner, and Jim Wayne.
Guests: Jody Lassiter and Steve Gregory, Department for Local Government; Bill Hanes, Kentucky Retirement Systems; Former State Representative C. D. Noland, Irvine; Wallace Taylor, Estill County Judge/Executive; Sherry Fox, Estill County Clerk; Kevin Williams and Darrell Johnson, Estill County Magistrates; Elke Davis, Donna Shaw, and William Beard, Estill County Schools; Gordon Parido, Estill County High School; Delores Rowland, Estill County Tribune; Ron Jackson, Jimmie Wise, and Derek Merion, Estill County EMS; Derrick Muncie, Estill County Fire Department; Tom Williams, Irvine Mayor; Rhonda Gould, Irvine City Clerk; Kim Williams, Irvine Assistant City Clerk; Nancy Farmer, Irvine City Council; Jeff Kerr, Irvine Citizen Voice and Time; B. F. Williams, Irvine Municipal Utilities; Charles Crowe, Mayor of Ravenna; Kim Parks, Ravenna City Clerk; Lonza Moore, Jackson County Area Tech Center; Ralph Hoskins, Jackson County; Karen Bailey, Kentucky River Foothills Development; Jayne Combs, Bluegrass Area Development District; and Dave Poole, Clay City Times.
LRC Staff: Jamie Franklin, Joyce Crofts, Donna Gaines, Stewart Willis, Mark Mitchell, Joe Pinczewski-Lee, Mark Roberts, Rebecca Mullins, Donna Holiday, Jack McNear, Randy Smith, Becky Barnes, Roger Hogan, L. J. Tyree, and Cheryl Walters.
Senator Robinson welcomed guests to the meeting. He thanked Judge Wallace Taylor, Estill County Judge/Executive, and Mayor Tom Williams, Mayor of Irvine, for allowing the committees to meet in Irvine and for their help in preparing for the meeting. Senator Robinson then recognized Representative Geveden, Co-Chair of the State Government Committee, for some remarks.
Representative Geveden told the audience that he was glad to be in Irvine. He stated that it was good for committees to go to the people out in the state instead of always meeting in Frankfort.
Senator Robinson next recognized Representative Edmonds, who represents Irvine, for some comments. Representative Edmonds welcomed members of the committees and thanked them coming to Irvine. He recognized former State Representative C. D. Noland, who was present in the audience, and Representative Lonnie Napier, who had previously represented Irvine.
Senator Robinson recognized Representative Riggs, Co-Chair of the Local Government Committee, for some remarks. Representative Riggs commented that he liked to meet out in the state in order to give people an opportunity to talk with legislators. He said he was happy to be in Estill County.
Senator Robinson recognized Representative Arnold, Co-Chair of the Task Force on Elections, Constitutional Amendments, and Intergovernmental Affairs, for comments. Representative Arnold stated that it was a good opportunity to be in Irvine and thanked the people of Irvine for having the committee there.
Senator Robinson recognized Senator Kerr, Co-Chair of the Task Force on Elections, Constitutional Amendments, and Intergovernmental Affairs, for remarks. Senator Kerr told the audience that it was a pleasure to be in Irvine and appreciated their attendance at the meeting. She said that she had previously visited the area with family and was pleased to return.
Senator Robinson then asked the members of the committees to introduce themselves.
The first item of business was approval of minutes from the June 19, 2003 meeting of the Interim Joint Committee on Local Government. Representative Riggs asked for a motion to approve the minutes. Representative Stan Lee so moved, seconded by Senator Denton. The motion carried by voice vote.
The next item of business was welcoming remarks by Judge Taylor. Judge Taylor thanked the committee for coming to Estill County. He then introduced various local officials who were present in the audience.
Judge Taylor told the committees that small, rural counties have many needs: 1) jails are destroying county budgets. He stated that that prisoners are setting in jails and the county is having to pay their medical costs, which is expensive; 2) drug abuse is rampant in rural Kentucky and needs to be resolved; 3) the Red River is vastly underused and has the potential for industrial and tourism development; 4) local army ordinance makes terrorism a potential threat; and 5) work needs to be done on the current laws dealing with litter abatement.
The next item of business was a presentation regarding activities and services of the Department for Local Government (DLG). Representative Riggs introduced Commissioner Jody Lassiter with DLG. Commissioner Lassiter told the committees that DLG was a one-stop-shop for local governments to access information and to obtain assistance.
Commissioner Lassiter next discussed DLG’s programs and services. He stated that DLG has two major responsibilities: 1) DLG is the statutory and constitutional financial regulators for cities, counties and special districts; and 2) administrator for community development for state programs, which include: a) Division of Financial Services, which includes electronic recording of financial information, approval of bonded indebtedness tax rates for local governments, banking of money that other cabinets spend, and management of funds for the coal severance program; b) participation as a partner in the Renaissance Kentucky Program; c) manager of the Kentucky Community Development Block Grant program; and d) overseer of the state’s Appalachia Regional Commission program.
Commissioner Lassiter told the committees that DLG also oversees other federal and state programs such as: 1) Parks and Recreation portion of the Land and Water Conservation Fund; 2) Recreational Trail Program; 3) Body Armor Program for local police; 4) the recently created Cemetery Preservation Fund; 5) Gas System Restoration Program; 6) Flood Control; and 7) management of road aid funds.
Representative Marcotte asked Commissioner Lassiter if it would be possible to provide the committees with additional information on who received funds over the last year and the names of the advisory committee members. Commissioner Lassiter replied that he would be glad to provide that information.
Representative Adams asked Commissioner Lassiter if he has been satisfied with the performance of the 15 area development districts (ADDs) and their partnership with DLG. Commissioner Lassiter stated that the ADDs work as subcontractors for DLG for many programs. He added that DLG has an excellent rapport with the ADDs right now.
Representative Adams also asked if the Renaissance Kentucky and Enterprise Zone Programs will continue. Commissioner Lassiter said he expects the Renaissance Kentucky program to continue in the future. He added that 96 cities have participated and that it is very popular. He said many other departments and state agencies coordinate their programs for Renaissance Kentucky. Commissioner Lassiter stated that he was uncertain about the Enterprise Zone Program since their agency really does not have oversight of that program.
The next item of business was a presentation on funding issues affecting the Kentucky Retirement Systems. Representative Geveden introduced Mr. Bill Hanes, Executive Director of the Kentucky Retirement Systems (KRS). Mr. Hanes told the committees that the KRS is comprised of all public employees in all systems with the exception of teachers, legislators, and judges. He said the KRS currently has over 250,000 members and is administered by a board of trustees. Mr. Hanes explained that the board and staff operate as fiduciaries of the KRS fund and operate solely for the fund and its members.
Mr. Hanes stated that he did not have good news. He referred members to the “Funding Issues” report. Mr. Hanes noted that the actuarial report containing the recommendations for this year’s rates are determined by this report, which must be approved by the board.
Mr. Hanes pointed out that all benefits are protected by state and federal rights, which are vested, contractual rights. He added that any legislative changes to the system can only affect new hires because older employees are vested with promised rights. Mr. Hanes said any costs such as post medical insurance and administrative expenses that are put on the system by increased benefits is calculated over a 30-year cost period.
Regarding investment losses, Mr. Hanes explained that when investments do not perform as expected, this creates increased liability in an actuarial report. He noted that an actuarial looks to see how programs are meeting the five-year assumptions they have made, and may decide to change rates based on changes in actual performances versus assumptions. Mr. Hanes added that annual loses are amortized over a five-year period.
Regarding medical insurance benefits, Mr. Hanes stated that contributions are divided between pensions and insurance programs (both state and employer). He stated that the new actuary is saying that Kentucky’s liability is running ahead of the market and the national trend, and both funds are showing deficits. Mr. Hanes explained that if Kentucky brings in anything less than an 8.25% return, then we are running a deficit. He noted that returns over the last three years have been losses. Mr. Hanes pointed out that other state systems are in a similar situation. He said Kentucky has medical insurance benefits that are contractly guaranteed that are not offered in many other states.
Mr. Hanes told the committees that the cost of medical insurance is a great concern. He stated that Kentucky has the highest funded level of medical insurance for retirees than any other state, which is protected by inviolable contract. Mr. Hanes mentioned that the fund is paying in some counties over $900 for hazardous duty employee retirees for medical costs. He added that the full funded rate would be about 13% per employee.
Mr. Hanes informed members that the COLA payment is a major concern, but it is amendable or could be repealed. He said it will cost about $43 million to fund a 3% COLA for this year. He said over 10 years there will be a minimum increase of at least 15% or more to fund the COLA benefit.
In closing, Mr. Hanes stated that new data says these increases could be even greater. He added that most increases are being driven by increasing insurance and medical costs. Mr. Hanes noted that Kentucky’s retirement system offers far more generous benefits than other states.
Senator Robinson asked Mr. Hanes if he had any solutions. Mr. Hanes replied no.
Representative Comer asked if those who retire and come back to work can use the flexible spending account. Mr. Hanes replied no, that they can only use one program for health insurance. Representative Comer also asked if he knew the number of retirees that have come back to work. Mr. Hanes said he did not.
Representative Geveden commented that there was a special committee formed to find some resolution to these problems and make the necessary legislative recommendations.
The last item of business was a report of the Task Force on Elections, Constitutional Amendments, and Intergovernmental Affairs. Senator Robinson recognized Senator Kerr to present the first part of the report. Senator Kerr reported that the Health America Act implementation requires voting machine access to all persons. She stated that Kentucky received $5 million from the federal government in April and it is being distributed by the Board of Elections, who is working with the counties. Senator Kerr added that Kentucky was also eligible for $41 million more if Kentucky makes a 5% match. She noted that Kentucky has drafted a plan to apply as required, but the feds have not yet decided if these funds may be used for just federal elections or all elections.
Senator Robinson then recognized Representative Arnold to present the second part of the report. Representative Arnold stated that some of the state agencies are being slow in transferring information to the Board of Elections. He pointed out that some other problems that need to be addressed are increased pay for election officers, lack of training of election workers, and lack of voter education regarding machine usage.
There being no further business, the meeting was adjourned at 12:10 p.m.