Call to Order and Roll Call
The meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on Wednesday, May 6, 2015, at 10:00 AM, in Room 129 of the Capitol Annex. Senator C.B. Embry Jr., Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator C.B. Embry Jr., Co-Chair; Representative Wilson Stone, Co-Chair; Senators Carroll Gibson, Jimmy Higdon, Dennis Parrett, Robin L. Webb, and Whitney Westerfield; Representatives Mike Denham, Tom McKee, Terry Mills, Ryan Quarles, and Jonathan Shell.
Guests: Mr. Roger Thomas, Mr. Joel Neaveill, Ms. Angela Blank, Mr. Brian Murphy, and Mr. Luther Hughes, Governor’s Office of Agricultural Policy; and Ms. Debby Milton, Kentucky Infrastructure Authority.
LRC Staff: Lowell Atchley, Kelly Ludwig, and Kelly Blevins.
Co-chair Election
Following the roll call and confirmation of a quorum, House committee members, with staff presiding, nominated and elected by acclamation Representative Stone as the House co-chair.
Governor’s Office of Agricultural Policy Reports
Mr. Roger Thomas, Executive Director, and Mr. Joel Neaveill, Chief of Staff, Governor’s Office of Agricultural Policy (GOAP), testified to the committee, with Mr. Thomas discussing tobacco settlement budget issues at the outset and later, Mr. Neaveill updating the committee on the project funding decisions made by the Agricultural Development Board (ADB) during its April meeting.
Mr. Thomas’ discussion referenced the Master Settlement Agreement (MSA) settlement last fall that resulted in Kentucky receiving $110.4 million in disputed and related payments, the recent passage of House Bill 510 with appropriations to agriculture and health improvement programs in FY 2014-2015 and FY 2015-2016, the larger than anticipated shortfall in MSA funds received by the state this year, and the Governor’s line-item veto to prevent budget cuts. According to Mr. Thomas, GOAP had planned for $73.1 million in MSA funds this year, but the actual payment will probably be lower, $61.8 million, or roughly $11 million below the anticipated amount.
Regarding the veto, Mr. Thomas indicated the Governor did not want to veto any legislation, but because of the potential impact on programs receiving the MSA funds, he did undertake the line-item veto. Mr. Thomas responded to questions and comments from Senator Westerfield, Representative Stone, Representative Denham, and Representative McKee, regarding budgeting for the current and previous fiscal years, the use of the MSA funds as a result of the settlement last year, the maintenance of adequate funding for health improvement programs such as Early Childhood Development, the remaining unappropriated MSA funds, and the status of funds directed to county agricultural development councils.
Representative Mills indicated that he had attended a recent GOAP regional workshop in Green County and discussed the value of offering a structured means of making MSA funding decisions at the local level.
Mr. Neaveill presented the monthly Agricultural Development Board report, beginning with the funds committed to the Deceased Farm Animal and Shared-Use Equipment programs.
Regarding the statewide and regional projects the board had approved for funding, Mr. Neaveill said the board had awarded $72,500 in state funds as a cost reimbursement grant to the Kentucky Agriculture and Environment in the Classroom program, overseen by the Department of Agriculture. In the previous month, the board awarded $71,384 to the program to buy half of a mobile science activity center. The more recent funding will be used for curricular materials. According to Senator Webb, the animal production industry is being depicted in a negative manner. In light of that, she indicated policymakers have an obligation to monitor the curriculum of the Agriculture and Environment in the Classroom program.
Mr. Neaveill said the Jessamine County FFA Alumni Association was approved for $10,000 in Jessamine County funds for agriculture related projects to help students gain interest in and explore agricultural careers.
Kentucky Infrastructure Authority Report
Ms. Debby Milton, Financial Analyst, Kentucky Infrastructure Authority (KIA), reported on infrastructure loan and grant projects made possible with tobacco settlement funds. Ms. Milton’s report covered the evolution of KIA, the regional water management council application structure, basic loan programs, legislative line item tobacco and coal development grants, the status of funding, total funding committed to water and sewer projects since 2000, examples of grant projects throughout the state, and current projects.
Representative Denham and Senator Higdon voiced concerns about the availability of water in hard-to-reach locales, such as the end of a country road. Representative Denham said people without water service have to haul their water, and he cited a large dairy as an example. Senator Higdon said he receives calls from constituents who need water service.
Ms. Milton indicated that, in those instances, it is probable that some water districts cannot justify financially extending the lines. KIA does have some grants available for water districts. Representative Denham said a way needs to be found to accommodate those citizens.
Senator Gibson said the extension of water service in areas can have a positive effect through business creation and tax generation.
Ms. Milton said that a balance of about $740,000 in closed-out line-item grants could be redistributed, and about half of the $35 million budgeted by the state for existing projects could be reauthorized for other projects. She suggested that the legislature in the next session could consider redistribution of those funds.
Representative Stone asked how much of the tobacco settlement funds are used to pay debt service on water and sewer project bonds. Ms. Milton said she would provide that information.
Documents distributed during the committee meeting are available with meeting materials in the LRC Library. There being no further business, the meeting was adjourned.