Interim Joint Committee on Appropriations and Revenue

 

Minutes of the<MeetNo1> 5th Meeting

of the 2011 Interim

 

<MeetMDY1> October 27, 2011

 

Call to Order and Roll Call

The<MeetNo2> 5th meeting of the Interim Joint Committee on Appropriations and Revenue was held on<Day> Thursday,<MeetMDY2> October 27, 2011, at<MeetTime> 1:00 PM, in<Room> Room 154 of the Capitol Annex. Representative Rick Rand, Chair, called the meeting to order, and the secretary called the roll.

 

Present were:

 

Members:<Members> Senator Bob Leeper, Co-Chair; Representative Rick Rand, Co-Chair; Senators Walter Blevins Jr., Joe Bowen, Tom Buford, Jared Carpenter, Denise Harper Angel, Ernie Harris, Jimmy Higdon, Paul Hornback, Ray S. Jones II, Alice Forgy Kerr, Vernie McGaha, Gerald A. Neal, Brandon Smith, Jack Westwood, and Mike Wilson; Representatives Royce W. Adams, Dwight D. Butler, John "Bam" Carney, Jesse Crenshaw, Ron Crimm, Mike Denham, Bob M. DeWeese, Danny Ford, Derrick Graham, Keith Hall, Jimmie Lee, Reginald Meeks, Lonnie Napier, Sannie Overly, Marie Rader, Jody Richards, Sal Santoro, Arnold Simpson, Tommy Turner, Jim Wayne, Susan Westrom, and Brent Yonts.

 

Guests: Secretary J. Michael Brown, Justice and Public Safety Cabinet; Mr. Mike Clark and Mr. Perry Nutt, LRC Staff.

 

LRC Staff: John Scott, Charlotte Quarles, Jennifer Hays, and Sheri Mahan.

 

Representative Meeks moved to approve the minutes from the previous meeting as written. The motion was seconded by Representative Denham. The motion carried by voice vote.

 

Chairman Rand informed the committee that the November meeting has been approved to be held on Tuesday, November 29.

 

Fiscal Impact of 2011 Regular Session HB 463

Secretary J. Michael Brown of the Justice and Public Protection Cabinet discussed the provisions and implementation of HB 463, the 2011 penal code reform bill. He provided a brief overview of the current inmate statistics, and provisions of the bill, focusing on the billís requirements for the measurement and documentation of cost savings. He stated that there are 21,692 inmates in the Department of Corrections system. Of those inmates, 8,051 are housed in county jails, representing 37 percent of the felon population. He discussed the percentage of the total population that represents drug offenders, and repeat offenders.

 

Secretary Brown stated that the bill divides the fiscal savings into different cost saving areas. The bill requires the Department of Corrections to measure and document fiscal savings resulting from changes to the controlled substance act. These savings are to be used solely for expanding and enhancing evidence-based drug treatment programs. Twenty five percent of the documented savings from other law changes is directed to go into the Local Corrections Assistance Fund. These funds are to be used to supplement county jail reimbursement for housing a portion of the state felon population. A portion of the remaining savings is to be directed to expanded probation and parole services, additional pre-trial services, and the addition of drug court case specialists.

 

Secretary Brown discussed additional cost saving measures in the bill, including the use of risk and needs assessment tools, improvement of release planning services to expedite discharge of inmates, utilization of new types of supervision for offenders, and the expanded use of home incarceration. The Secretary provided the committee with additional information regarding these types of measures. He also provided examples of provisions of the bill which the Department had implemented. These include the implementation of bi-weekly meetings with key staff, hiring 50 new parole officers, use of a violation matrix for probationers, and expansion of home incarceration utilization.

 

Secretary Brown discussed the challenges faced by the Department in implementing the provisions of HB 463. The Department has seen an increase in the prison population of about 1,000 additional inmates since July of 2010. The Departmentís current budget was based on flat population growth, leading to reduction in funds in some areas. The population will diminish by 1200 to 1300 in January 2012 when mandatory supervision is implemented. Another challenge for the Department is finding the resources to provide appropriate substance abuse programs to inmates who require this service.

 

Secretary Brown discussed the projected cost savings associated with the implementation of HB 463. It is estimated that once fully implemented, the provisions of the bill will provide $42 million per year in savings.

 

In response to a question from Chairman Rand, Secretary Brown stated that the increase in prison population has been gradual, and the inmate population is actually lower than the projected. In January, there should be a decrease in the population by about 1300 inmates who will be transferred from incarceration to intensive supervision.

 

In response to a question from Representative Wayne, the Secretary answered affirmatively that substance abuse treatment programs have long waiting lists within the system, and it is hoped that the substance abuse treatment options and requirements in HB 463 will help reduce waiting times for entry into programs.

 

In response to a question from Representative Yonts, Secretary Brown replied that the Department is aware that the demand for services is greater than the availability of inmate services, especially in the area of substance abuse programs.

 

In response to a question from Representative Meeks, the Secretary answered affirmatively that the Department does expect to achieve $42 million per year in cost savings, mostly through a reduction in the inmate population. The Department believes that the 50 new parole officers will be sufficient to cover the initial increase in parolees.

 

In response to a question from Senator Higdon, Secretary Brown responded that 17 of the 78 regional jails currently operate an in-house substance abuse program.

 

Consensus Forecasting Group preliminary revenue and economic forecast

Mr. Mike Clark and Mr. Perry Nutt from the Legislative Research Commission presented the Consensus Forecasting Groupís (CFG) preliminary revenue and economic forecast for the next two years. Mr. Clark provided a brief description of the statutory required reports from the CFG, along with an overview of the process used by the CFG to produce the groupís reports. Mr. Clark discussed and provided statistics regarding various factors, both national and Kentucky specific, that influence the CFGís findings. The federal factors include total US nonfarm and manufacturing employment, housing starts, and real personal income. Kentucky factors include wages and salaries, and nonfarm employment.

 

Mr. Clark discussed the projected revenues for the General Fund over the next biennium. The CFG preliminary estimates for General Fund growth are 2.8 percent for fiscal year 2012, 1.8 percent for fiscal year 2013, and 2.4 percent for fiscal year 2014. Mr. Clark briefly discussed the 13.5 percent increase in the sales and use tax for September, and the 7.1 percent increase for the first quarter. He stated that the 7.1 percent increase is the highest quarter increase since Tax Modernization, when alcohol was added to the sales tax base. The CFG believes that this will be a onetime increase.

 

Mr. Clark then provided an overview of the fiscal years 2012, 2013, and 2014 General Fund estimates. The estimated revenue for FY12 is $9,008 million, an increase of 2.8 percent, with significant increases seen in the corporate income tax. The estimated revenue for FY13 is $9,172 million, an increase in yearly revenue of 1.8 percent. The estimated revenue for FY14 is $9,397 million, an increase in revenues of 2.4 percent. There is a $137 million increase seen in the FY12 October forecast as compared to the official FY12 October estimate, reflecting mainly the increases in corporate income tax.

 

Next, Mr. Clark discussed the Road Fund revenues, stating that the FY11 revenues surpassed FY08 pre-recession levels. The estimated revenue for FY12 is $1,413 million, an increase of 5.5 percent. The estimated revenue for FY13 is $1,496 million, an increase in yearly revenue of 5.9 percent. The estimated revenue for FY14 is $1,582 million, an increase in revenues of 5.7 percent. The Road Fund is expected to increase by $72 million in the FY12 October forecast as compared to the official FY12 October estimate.

 

Mr. Clark discussed the Master Settlement Agreement payment estimates. The current estimates are $97 million in FY 12, $92 million in FY13 and $91 million in FY 14.

 

In response to a question from Chairman Rand, Mr. Clark responded that the CFG is required to produce its first forecast by August 14, the second forecast by October 15, and the final estimate by the 15th legislative day.

 

Being no further business, the meeting was adjourned at 2:40 p.m.