Call to Order and Roll Call
The meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on Tuesday, July 8, 2014, at 1:00 PM, in Room 129 of the Capitol Annex. Representative Wilson Stone, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Paul Hornback, Co-Chair; Representative Wilson Stone, Co-Chair; Senators Carroll Gibson, Jimmy Higdon, Dennis Parrett, Robin L. Webb, and Whitney Westerfield; Representatives Tom McKee, Terry Mills, Ryan Quarles, and Jonathan Shell.
Guests: Attorney General Jack Conway, Mr. Sean Riley and Ms. Susan Britton, Office of the Attorney General; Mr. Roger Thomas, Mr. Joel Neaveill, Mr. Bill McCloskey, Ms. Angela Blank, and Mr. Brian Murphy, Governor’s Office of Agricultural Policy; Ms. Terry Tolan, Governor’s Office of Early Childhood.
LRC Staff: Lowell Atchley, Kelly Ludwig, and Kelly Blevins.
The June 4, 2014, minutes were approved, without objection by voice vote, upon a motion by Representative Mills and a second by Senator Westerfield.
Master Settlement Agreement Report
Attorney General Jack Conway discussed the state's settlement of a dispute with tobacco companies centering on 10 years of Master Settlement Agreement (MSA) claims and litigation.
Mr. Conway testified on the 1998 agreement between the nation's largest tobacco companies and 46 states to reconcile pending Medicaid lawsuits against the tobacco industry. He discussed more recent litigation related to diligent enforcement of the MSA and an arbitration panel's ruling last fall that found Kentucky was not diligent in its enforcement in 2003. He believes the ruling was arbitrary but decided to launch settlement talks to bring stability to future MSA payments and avoid a long legal battle.
Mr. Conway detailed the payments to be received by the state. Kentucky received $110.4 million in disputed and related payments under the settlement. Combined with the $48.3 million in MSA payments already received for 2014, the total MSA payments for FY 2014 are $158.7 million.
Mr. Conway said the MSA payments would be allocated to the various agriculture and health programs under a formula set in statute.
Several committee members expressed their appreciation to Attorney General Conway for reaching the settlement that resulted in the additional MSA dollars, particularly those that will be going to the Agricultural Development Fund.
Representative Quarles pointed out the MSA allocation statutes should be followed.
Mr. Conway responded to Representative McKee and Senator Gibson that an arbitrary value was placed on the MSA at the time of its signing. The agreement had a 25-year duration but will continue as long as cigarettes are sold in the United States. He told Senator Parrett that other states that had lost before the arbitration panel had also agreed to settle or were discussing settlements. He said Kentucky received a "most favored nation clause" in its settlement, meaning that no other subsequent settlement could be better.
In a response to Senator Westerfield, Mr. Conway explained how the enforcement of MSA nonparticipating tobacco companies has improved with the involvement of the Office of Attorney General and the Department of Revenue. In response to Senator Higdon, Mr. Conway said that nonparticipating companies are being required to escrow funds equivalent to those paid by participating tobacco companies.
In his response to Senator Gibson, Mr. Conway said the state will have a new enforcement regime as a result of the settlement.
Governor's Office of Agricultural Policy
Mr. Roger Thomas, Executive Director, Mr. Joel Neaveill, Chief of Staff, and Mr. Bill McCloskey, Director of Financial Services, Governor's Office of Agricultural Policy, summarized the project funding decisions made by the Agricultural Development Board (ABD) during its June meeting.
Mr. Neaveill discussed the tobacco settlement funding allocations for the previous months under the County Agricultural Improvement (CAIP), Deceased Farm Animal Disposal Assistance, and Shared-use Equipment programs.
During the discussion of the dead animal disposal programs, Co-Chair Stone and Representative Shell commented on programs that involve on-site burial.
Mr. McCloskey reviewed the state and local programs receiving funding approvals. Those included: Franklin-Simpson High School Agricultural Education Program, $25,000 to build a greenhouse; Biological Prospects LLC, $23,863 to research the potential of the smooth sumac plant as an anti-diabetic nutraceutical for dogs, cats, and horses; Shelby County Cooperative Extension, $1,150 to promote the sale of products produced under the Kentucky Proud label in Shelby County. Senator Parrett commented on the sumac project, noting the uniqueness of pursuing a positive use for the plant.
Senator Webb commented on a project proposed by William Gallrein of Shelby County to build an educational barn to help customers learn about farm animals. The board denied funding for the project. The senator stressed the importance of helping young people become acquainted with aspects of farming, such as egg and milk production.
Mr. Thomas explained the standard used for persons from the same family who wish to apply for the CAIP funds. According to Mr. Thomas, the process in considering applications is to affect as many people as possible and make sure that people are not "double-dipping." Representative Shell's commented on how the Garrard County Council considers applications and opens the process up to different groups.
Senator Webb and Senator Parrett discussed the need award the funds for a variety of endeavors.
Mr. Thomas stressed the importance of the MSA settlement and its affect restoring the county funds.
Governor's Office of Early Childhood
Ms. Terry Tolan, Executive Director, Governor's Office of Early Childhood, discussed early childhood programs.
In her report, Ms. Tolan discussed the importance of brain development in young children; the progress of the program from the establishment of KIDS NOW in 2000 to the current program; school readiness in Kentucky and the preschool screening process; how the federal Race to the Top funding will be used; the status of the Community Early Childhood Councils, the different facets of the KIDS NOW programs; and KIDS NOW outcomes.
Ms. Tolan explained to Representative McKee the status of the Early Childhood Council serving Harrison, Scott, and Nicholas counties. She noted the council lost its fiscal agent this year and needs to replace that agent in order to be in line for funding.
Responding to Representative Quarles, Ms. Tolan said her office can provide Early Childhood program profiles for committee members based the legislators' newly drawn districts.
Ms. Beth Jurek, Director of the Office of Policy and Budget, Cabinet for Health and Family Services, responded to a series of questions from Senator Webb regarding the dilemma of providing child care in under-served areas. Ms. Jurek indicated that providing child care services in underserved areas can be "a struggle." Data is often collected for facilities outside the more traditional day care settings.
Senator Webb observed that a better job needs to be done in reaching "desert areas" of child care. Ms. Jurek noted that at least half the children in Kentucky live in those areas.
Ms. Tolan responded to Representative Mills regarding the involvement of local schools in the process.
Representative Derrick Graham, a noncommittee member who sat in on that part of the discussion, thanked Ms. Tolan for her work in attempting to acquire Race to the Top matching funds. Representative Graham mentioned the need to collaborate between school districts on early childhood education.
Representative Stone said there seems to be a correlation between education in the early years of a child and the child's third grade years.
Documents distributed during the committee meeting are available with meeting materials in the LRC Library. There being no further business, the meeting was adjourned.