The second meeting of the Interim Joint Committee on Transportation was held on<Day> Tuesday, September 4, 2001, at 10:00 AM, in Room 131 of the Capitol Annex. Senator Virgil Moore and Representative Hubert Collins co-chaired the meeting. Senator Moore called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Virgil Moore, Co-Chair; Representative Hubert Collins, Co-Chair; Senators Charlie Borders, Paul Herron Jr, Ray Jones II, Robert Leeper, Daniel Mongiardo, Richard Sanders Jr, and Ed Worley; Representatives Eddie Ballard, Larry Belcher, John Bowling, Denver Butler, Barbara White Colter, Howard Cornett, Mike Denham, Jimmie Lee, Paul Marcotte, Charles Miller, Lonnie Napier, Marie Rader, William Scott, Jim Thompson, Tommy Turner, John Vincent, and Mike Weaver.
Guests Appearing Before the Committee: Cliff Linkes, Deputy Secretary, Mike Hancock, Deputy State Highway Engineer, Taylor Manley, Deputy Commissioner, Department of Fiscal Management, Debra Gabbard, Transportation Cabinet Budget Director, and Margaret Plattner, Executive Director, Office of Transportation Delivery, Transportation Cabinet.
LRC Staff: Kathy Kackley, John Snyder, and Linda Hughes.
Representative Cornett moved to approve the minutes of the Committee’s August 7, 2001 meeting, as distributed. Representative Bowling seconded the motion, which passed by voice vote.
The first item on the Committee’s agenda was a status report of the 2001 highway construction projects, road construction funding, and how the Six-Year Road Fund has been affected by the economic slow down.
Ms. Gabbard, Transportation Cabinet Budget Director, informed the Committee that Road Fund receipts would fall short of original projections by $85 million in this fiscal year, and is estimated to be short $119 million in FY 2003, $134 million in FY 2004, $138 million in FY 2005, and $141 million in FY 2006. She reminded the members of the $53 million shortfall in the last fiscal year, 2001. Ms. Gabbard said that any future planning and budgeting would be based on the reduced forecasts, even though there is a projected growth for fiscal years 2002 and 2003. She said that a realized stronger economy would increase road construction: however, budgeting for that construction must be based upon current projections and that new construction would be the area most likely hit the hardest.
Several Committee members requested that, prior to the Transportation Cabinet recommending road construction cuts to the Governor, the Cabinet discusses those cuts with the legislators in the districts the cuts would occur. They agreed that in many cases the districts’ legislators could offer viable solutions, and getting them involved prior to any final decision making, could eliminate problems for everyone.
There was a consensus among the Eastern Kentucky legislators that there needed to be more transportation improvements in their region. Senator Mongiardo said that the lack of transportation is the biggest problem Eastern Kentucky faces. Representative Cornett stated that this was a “pay me now or pay me later” case. He said that infrastructure would have been less costly to build twenty years ago and far more costly twenty years from now. Chairman Collins said that Eastern Kentuckians have not gotten their fair share of road construction money. Representative Colter informed the members that Clay County was the only county in Kentucky where you had to pay to get in and pay to get out.
Representative Marcotte said that the Transportation Cabinet should continue to ensure that road dollars were spent in all regions where taxpayers are located. Representative Marcotte then asked if the Cabinet’s legislative package would include a gas tax. Cliff Linkes answered no, not at this time.
Representative Lee asked if the Cabinet has officially eliminated the plans for the new CAVIS system. Ms. Gabbard stated that at the present time the Cabinet could not justify, nor afford, the $12 million a year it would cost to operate the new system. She stated that the Governor’s Office for Technology has assured the Cabinet that the existing system, AVIS, although band-aided as it is, would continue to operate for the next several years.
Mike Hancock discussed the status of 2001 highway construction projects. He said that the Transportation Cabinet has two types of project financing, an obligation basis - where the funds are budgeted and reserved to pay for the entire project, and a cash flow basis - where cash is reserved to cover only a portion of the project costs based on the current year’s need or payment schedules. He explained that the Cabinet mostly uses the cash flow method and that the Cabinet purposely has more projects than money because if one project stalled, there was always another project in the wings to utilize that project’s appropriation. Mr. Hancock said that it was always better to use the money in lieu of allowing it to remain in an account that could be tapped-into. Mr. Hancock noted that the Cabinet has found that moving projects along was the better way to operate.
Mr. Hancock said that the Cabinet is on target with road projects this biennium. He said that 52 percent of these projects are on target. However, there are a number of things that are of concern to the Cabinet and could delay projects including the continued emphasis on the budget shortfall, not only for this year, but also what it means for the projects in future years of the six-year plan. Other concerns are cash flow pressures such as project overruns, the Cabinet’s cost calculations, and the Governor’s proposed six- percent gas tax which the 2001 Session of the General Assembly did not adopt but enacted a road plan based upon anticipated revenues from a gas tax. Mr. Hancock informed the Committee that he was concerned about the Cabinet’s inability to produce better project cost calculations and that it was his goal to find the means of producing more accurate calculations in the future.
Senator Jones asked if the Cabinet had any recommendations on how the state could increase funding to expedite construction projects, such as I-66, the Mountain Parkway, and the Daniel Boone Parkway. He said those projects are important and that Eastern Kentucky could not grow economically until they are completed. He said that he would like the Cabinet’s suggestions on increased funding for those projects. He noted that rural Western Kentucky is facing the same economic problems as Eastern Kentucky and that these two areas could ill afford to lose road projects.
Taylor Manley discussed the ramifications of House Bill 502, adopted by the 2000 General Assembly. He said that HB 502 allows the Cabinet to incur highway project obligations above the enacted appropriation limit. In the past, statutes had held the Cabinet to that limit; however, the Cabinet is now able to award projects in access of the appropriation limit, but manage those in a way that the expenditures associated with those projects do not exceed the enacted appropriation. Mr. Manley said that in the past the Cabinet was restricted in the number of projects it could do and thus limited the amount of expenditures that could be incurred in any one year. This resulted in a large obligated cash reserve in the Road Fund. In the past, that reserve fund amounted to between $600-$700 million with an investment income of around $40 million. He said by using the pre-financing system, the Cabinet is beginning to spend down that cash reserve. Mr. Manley cautioned the members that the budget shortfall is reducing future appropriations through future budgets and by the end of next summer there will no doubt be a more limited highway program in place. He said the Cabinet feels there will probably be an average cash balance of around $100 million a year, accruing $5.5 million yearly in invested earnings.
Senator Worley asked if there is not always going to be a substantial amount of money the Cabinet is required to invest, because that money is allocated to certain projects that for whatever reason have stalled. Referring to a bypass in Richmond, which was started in 1978 and opened in 1998, he said that he believed funds from delayed project would always be available as an investment tool. Mr. Manley said no, not under the Cabinet’s pre-financing method. For example, with a project having a $10 million obligation, the Cabinet now only looks at the actual dollars needed for the project phase(s) that could occur in that year, the remaining portion of the $10 million would then be used on other projects. Senator Worley asked if under this methodology, there would be less investment money but more projects under way. Mr. Manley said yes. Senator Worley also noted that the project budget shortfall could be avoided if there is an upswing in the economy. Cabinet officials agreed.
Mr. Hancock said that he has been involved in the preparations of five six-year road plans and this next plan will be one of the most difficult plans to prepare. He said that, given the budget shortfalls and the projections for projects in 2003 and 2004, today is probably the day to start making some tough decisions about projects scheduled for 2003 and 2004.
At this time, Senator Moore turned the meeting over the Representative Collins to chair. The last item on the Committee’s agenda was an update on the Cabinet’s human service transportation delivery system. Ms. Margaret Plattner and Mr. Cliff Linkes gave this presentation.
Ms. Plattner said that the program is in its third year and, as mandated by 2000 House Bill 488, the Cabinet conducted the rebidding process for all broker positions throughout the state. As a result of this rebidding there are two new brokers in the system. She said the rebidding process commenced on January 16, 2001, with the new contracts having gone into effect on July 1, 2001. She noted that the broker evaluation committee is scheduled to select a top bid in mid September for Region 6, the Louisville area.
Ms. Plattner said some of the other changes in the system are that program coordinators now have three working days to address recipients’ complaints, they verify all eligibility issues, and are responsible for denying trips instead of the brokers. She noted that the coordinators have a stronger data interface about recipient information than the brokers.
Ms. Plattner informed the Committee that the average monthly trips, per year, increased from 60,000 in 1997 to 96,466 in 2000, and the average miles per trip declined from 24 miles in 1997 to 13 miles in 2000. She noted that the average monthly cost per trip also declined from $29.03 per trip in 1997 to $19.67 per trip in 2000.
Representative Lee said that he was one of the Cabinet’s most vocal critics during the start-up of this program, but that he wanted the Committee to know that, in his opinion, Ms. Plattner has done an outstanding job in bringing this program up to speed. He said the program was now working as the legislature intended it to work because of her willingness to meet problems head-on, to travel to areas where problems were occurring to get first hand knowledge, and her fortitude to get the job done right. He told Ms. Plattner that he, for one, appreciated her dedication and all her hard work. Other members echoed Representative Lee’s appreciation. Ms. Plattner thanked the Committee members for their praise and support and said that she could not have succeeded without the help of many dedicated people.
Representative Vincent expressed this concern that June payments have not been made to subcontractors and asked Ms. Plattner if she had any information on this matter. Ms. Plattner said there were two brokers who defaulted in June on payments to their subcontractors, and that those individuals were no longer brokers. She said that subcontractors in those areas have been asked to submit their vouchers to the Cabinet and that she is currently working with the Governor’s Office trying to get those subcontractors paid. She said that the Finance Cabinet, which contracts with brokers, now has language in the contract that provides for the state to make direct payment to the subcontractors if brokers are defaulting on their payments. Representative Vincent asked if that would be applicable for his subcontractors. Ms. Plattner answered, no, because the Transportation Cabinet had the original contracts and the contracts did not allow for the Cabinet to make direct payments to subcontractors. She believes that, by working with the Governor’s Office, the deficiency that took place in June will be remedied. Representative Vincent asked if the brokers were paid for the month of June. Ms. Plattner said yes, that the Cabinet upheld its contractual obligation.
Representative Lee commented that no one wanted any subcontractor to not be paid. He said that there has been approximately $100 million spent on non-emergency medical transportation since the broker system went into place and all of the $100 million, with the exception of $240,000, has been paid to the appropriate person. He said that there is a system already in place whereby every two years when the General Assembly convenes there is a committee that considers any unpaid claims and determines if the claims should be paid. He said that he did not see how a subcontractor would not be paid if he submitted the proper documentation.
With no further business before the committee, the meeting adjourned at 12:10 p.m.