Call to Order and Roll Call
The fourth meeting of the Interim Joint Committee on State Government was held on Wednesday, November 18, 2015, at 1:00 PM, in Room 154 of the Capitol Annex. Senator Joe Bowen, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Joe Bowen, Co-Chair; Senators Morgan McGarvey, Dorsey Ridley, and Albert Robinson,; Representatives John Carney, Joseph M. Fischer, Derrick Graham, Mike Harmon, Kenny Imes, James Kay, David Meade, Suzanne Miles, Phil Moffett, Brad Montell, Sannie Overly, Tanya Pullin, Jody Richards, Tom Riner, Steven Rudy, Kevin Sinnette, and Tommy Turner.
Guests: J. D. Chaney, Kentucky League of Cities; David Adkisson, Kentucky Chamber of Commerce; Frank Kubala and Gerald Ross, Department of Criminal Justice Training; and Ken Schwendeman, Kentucky Law Enforcement Council.
LRC Staff: Judy Fritz, Alisha Miller, Karen Powell, Greg Woosley, Kevin Devlin, and Peggy Sciantarelli.
Approval of Minutes
The minutes of the October 28 meeting were not approved because a quorum of members was not present.
Recognitions
The committee observed a moment of silence for Lynda Thomas, Senator Reginald Thomas’s wife who died recently. The committee also congratulated Representative Harmon for his recent election as Kentucky Auditor of Public Accounts and extended birthday wishes to Representative Miles.
Basic Requirements for Police Officer Training
J. D. Chaney, Deputy Executive Director, Kentucky League of Cities (KLC), discussed that organization’s concerns about the process used to establish law enforcement training requirements for police officers. He said that state law—KRS 15.404 and 15.440—requires every police officer in the state to receive at least 640 hours basic training within one year of being hired in order to participate in KLEFPF (Kentucky Law Enforcement Foundation Program Fund). The law also allows the Kentucky Law Enforcement Council (KLEC, hereinafter referred to as the Council) to increase the number of hours beyond 640 by the promulgation of an administrative regulation. The Council has done that with administrative regulation 503 KAR 1:110. It was amended in July to provide that a candidate for graduation from the Department of Criminal Justice Training (DOCJT, hereinafter referred to as the Department) should achieve a minimum of 888 hours. KLC’s position is that the governing statute provides that the regulation should set a specific numbers of training hours rather than a minimum number of hours that would be subject to increase outside the regulatory process. Mr. Chaney said that the State Government Committee, by putting the issue on today’s agenda, has prompted a dialog between KLC and the two executive branch agencies. It was KLC’s original intent to testify that legislation would be necessary to ensure that training requirements would be established through collaboration between the Department, the Council, cities, and taxpayers. KLC is now hopeful that the issue can be resolved through cooperation; if not, the KLC board of directors will pursue legislation.
Responding to questions from Senator Bowen, Mr. Chaney said that he has been told that after an updated job task analysis that included a survey of police officers, the Department increased the basic training course from 18 weeks to 22 weeks on January 1, 2015; in September it was increased to 23 weeks. The Council, through the Department, proposed an administrative regulation that eliminated any reference to the number of hours required. KLC objected to that administrative regulation and urged inclusion of a specific number of hours. The regulation was later amended and adopted through the regulatory process to specify a minimum of 888 hours. By stating a minimum, the Department would have the option of increasing the hours outside the regulatory process.
Representative Carney said he had been meeting with the family of slain Richmond police officer Daniel Ellis. He believes that the perpetrator and others involved in attacks on law enforcement officers may have “fallen through the cracks” in the criminal justice system. He hopes to work with members of the General Assembly and others to revisit House Bill 463, relevant legislation that was enacted in 2011. He would like to know of others in the Richmond community who may be interested in the issue, and Mr. Chaney said he would be glad to pass that information along.
Senator Bowen recognized the following persons who asked to testify: Gerald Ross, Assistant General Counsel for the Kentucky Department of Criminal Justice Training and the Kentucky Law Enforcement Council; Frank Kubala, Assistant Director of the Department’s Training Operations Division; and Ken Schwendeman, Executive Director of the Kentucky Law Enforcement Council.
Mr. Kubala said the Department has a long standing relationship with KLC. They are willing to work with Mr. Chaney and KLC in an effort to resolve their differences.
Responding to questions from Representative Graham, Mr. Wells indicated that the Department at this time is not in full agreement with KLC. He said he drafted the final version of the administrative regulation to specify a minimum of 888 hours training. The role of law enforcement officers throughout the country continues to evolve, and this would allow needed flexibility in providing the mandatory training. Proposed training curricula are submitted for approval to the Council, which includes police chiefs, sheriffs, mayors and county judges as members. The Department requires fewer basic training hours than the commonwealth’s three other academies—Kentucky State Police, Lexington Police Department, and Louisville Metro Police Department. The current curriculum is based on needs approved by the Council, as well as job task analyses and recommendations of instructors. The training was expanded from 18 to 22 weeks because trainees were being paid 120 to 160 hours overtime weekly while at the academy. Mr. Wells questioned whether it is fair to pay overtime to someone who is not on active duty.
Mr. Kubala said the training was increased from 22 to 23 weeks in response to the nationwide climate in law enforcement and the 2014 job task analysis. The Department is proud that Kentucky has not had to deal with use-of-force issues such as those recently experienced in other parts of the country.
Mr. Chaney said that KLC is not questioning the law enforcement expertise of the Council or the Department. KLC’s position is that the Council and the Department, as executive branch agencies, should not make decisions that have a cost impact without first collaborating with the city governments that bear the cost. KLC and its members want those involved to work together and to consider the financial consequences of decisions.
Mr. Schwendeman said the Council serves city and county governments and state agencies. Its role is to make public service providers in Kentucky more professional and efficient. The administrative regulation sets a floor rather than a cap on training hours to allow flexibility to respond to emerging issues like those in Ferguson, Missouri, and Baltimore, Maryland. All four Kentucky academies in 2015 increased their required training in response to those events. Lexington requires 1,000 training hours, State Police 969, and Louisville 970. The Department requires fewer hours partly because it does not represent a specific home jurisdiction.
Representative Riner said he has talked to several police officers who plan to retire early because of concern about use-of-force issues and the future of the profession. He asked how the training helps officers deal with the problems and pressures of the job. Mr. Kubala said that the academy provides a stress and wellness course to help officers understand the difficulties of the job. It also focuses on fitness and nutrition. There is a significant rate of divorce, alcoholism, and suicide in the law enforcement profession, especially among older officers. Representative Riner said it is encouraging that the training uses a holistic approach.
Responding to questions from Representative Carney, Mr. Wells said that costs for a first time recruit are paid to the academy through the disburser of the KLEFPF funds. City governments do not pay for housing or meals. Mr. Schwendeman said that part of the training cost is an overhead allocation that is included in debt service payments. The current hourly tuition rate is about $27.64. The true variable cost for students would probably be about $20/day.
Senator Bowen said that police officer training is a timely and important topic. Hopefully, everyone will be able to work together in a collaborative manner to resolve the problems without the need for legislation. He thanked the speakers and said the committee appreciates their comments and their positions on the issue.
Kentucky Chamber of Commerce Perspective on the KTRS Funding Work Group
David Adkisson, Kentucky Chamber of Commerce President and member of the Kentucky Teachers’ Retirement System (KTRS) Funding Work Group created by Governor Steve Beshear, presented his observations and the Chamber’s perspective on the work group’s progress.
Mr. Adkisson said the Chamber, which has represented more than 60,000 Kentucky employers, has been consistently outspoken about the state’s pension problems and has tried to be a constructive voice in solving those problems. The legislature has made positive moves in recent years, but more attention and diligence are needed. The Chamber has embraced the call for a comprehensive performance audit of Kentucky Retirement Systems (KRS) and will be working with the State Auditor to see that the audit begins as soon as possible. The Chamber also has concerns about the use of placement agents by KRS and has encouraged the Public Pension Oversight Board to look at the proper role and payment of agents.
Mr. Adkisson said that KTRS Funding Work Group Chairman David Karem has done an outstanding job moderating a broad range of opinions. Consultant William Fornia has been responsive to the group and seems to be objective. Although nearing the end of the process, the work group has not achieved a consensus. At the November meeting a draft set of principles was discussed but not adopted. A revised version was subsequently transmitted to the members with a request for input. The final report due in December will likely present a set of options with the consultant’s best estimate of projected costs or savings and the pros and cons of each.
There is a broad range of opinions among the group. Some feel the legislature should pay the bill, which would involve new revenue and a probable tax increase. Others favor borrowing $3.3 billion to leverage the market and take advantage of low interest rates, and some propose converting teachers to a 401k system.
The shared responsibility approach worked well in 2010 when legislation was enacted to save retired teachers’ health insurance and when labor and business reached a compromise on unemployment insurance. The Chamber has asked the consultant to estimate cost for a 50/50 plan in which half of the solution would come from additional revenue and half from restructuring benefits for future teachers.
The inviolable contract has not been seriously contested in work group proceedings. Outside the inviolable contract, the inclusion of accumulated sick leave when calculating final pay is one item that could be considered for change, but the cost savings would be relatively small. The most significant cost savings would come from structural change relating to future teachers—for example, extending the eligible retirement age. The Chamber does not have a solid proposal for a defined contribution plan but has requested an estimate of the cost to convert future teachers to a 401k plan. Because teachers are not covered by social security, however, the state and school boards would have to begin paying social security. This would be in addition to the amount needed to address the current underfunding of the system.
At the November meeting, the consultant presented a new proposal for 30-year additional funding, beginning in FY 2017, with graduated payments the first 12 years and a static payment each of the remaining 18 years. He said he would provide specific cost data to KTRS, the Kentucky Education Association, and the Chamber. Under this plan the state would simply pay more, and it would not involve shared responsibility. The state of the economy, the condition of the state budget in future years, demographic change, and opinion of the bond rating agencies would be concerns under this plan.
The required years of service for retirement was previously reduced from 30 to 27, and people are living an average 16 years longer than when KTRS was established. This also adds strain to a defined benefit system. The calculation of sick leave as compensation in the last year of service produces an expensive benefit spiking and cost to the state. Minimum retirement age also should be examined. The Chamber feels that structural change will be needed, regardless of any graduated or phase-in plan that might be considered.
Mr. Adkisson said that everyone involved needs to be mindful of how structural change might impact the teaching profession. There is already concern about attracting new teachers, especially in the education community. The funding problem is so massive and expensive that, however it is solved, there will be significant ramifications on the ability of future teachers to receive salary increases. He said a Morgan Stanley bond expert advised that the legislature needs to take action in the 2016 regular session; if not, he is confident that the state’s bond rating would again decline. The Chamber agrees that something must be done in the next session of the General Assembly.
Mr. Adkisson emphasized that the legislature has two retirement systems to protect and that KRS is in an especially precariously condition. He stated that if bonding is considered as a funding option, it might be needed more for KRS than to provide relief for KTRS.
Senator Bowen said that changes outside the inviolable contract could help reduce the unfunded liability. He believes that the General Assembly will be looking at the sick leave component, the high-3 benefit factor, and the 3 percent multiplier after 30 years of service.
Representative Fischer inquired whether the inviolable contract automatically applied to the reduction in required years of service. Mr. Adkisson said he did not have the legal expertise to answer that question but would try to get that information.
Representative Moffett said he finds it hard to understand from a logical standpoint why sweeteners to the inviolable contract might not be viewed as changing the contract, while changes that lessen benefits would be termed a violation. He also stated that he appreciates the work of the KTRS work group but that the Kentucky Employees Retirement System is a dying system with problems that must be addressed.
Senator McGarvey said that switching to a 401k system would not be easy when factoring in the state contribution for social security that it would require. Teachers currently put more than 13 percent of their pay into the pension system. Since they do not receive social security, they also are not eligible for survivor benefits. How a 401k system would impact teacher retention and recruitment and whether it would necessitate increasing teacher starting salaries are questions that need to be answered.
Representative Graham said there will be unintended consequences for local school districts if sick days cannot be counted when calculating retirement benefits. That would prompt teachers to use their sick leave before they retire, and school districts would incur the additional cost of hiring substitutes.
Senator Bowen said it is important to note that the KTRS asset base has actually increased in spite of the unfunded liability, whereas the opposite is true for KRS. He thanked Mr. Adkisson for an excellent and thorough overview. There being no further business, the meeting was adjourned at 2:18 p.m.