Call to Order and Roll Call
The6th meeting of the Interim Joint Committee on Appropriations and Revenue was held on Tuesday, November 29, 2011, at 1:00 PM, in Room 154 of the Capitol Annex. Senator Bob Leeper, Chair, called the meeting to order, and the secretary called the roll.
Members:Senator Bob Leeper, Co-Chair; Representative Rick Rand, Co-Chair; Senators Walter Blevins Jr., Joe Bowen, Tom Buford, Jared Carpenter, Denise Harper Angel, Jimmy Higdon, Ray S. Jones II, Alice Forgy Kerr, Vernie McGaha, Gerald A. Neal, R.J. Palmer II, Joey Pendleton, Brandon Smith, Jack Westwood, and Mike Wilson; Representatives Royce W. Adams, John A. Arnold Jr., Dwight D. Butler, John "Bam" Carney, James R. Comer Jr., Ron Crimm, Mike Denham, Bob M. DeWeese, Kelly Flood, Danny Ford, Derrick Graham, Keith Hall, Richard Henderson, Jimmie Lee, Reginald Meeks, Lonnie Napier, Fred Nesler, Sannie Overly, Marie Rader, Jody Richards, Jim Stewart III, Tommy Turner, Jim Wayne, Alecia Webb-Edgington, Susan Westrom, and Brent Yonts.
Guests: Ms. Mary Lassiter, Secretary of the Governor's Executive Cabinet and State Budget Director; Ms. Mary Elizabeth Harrod, Division of Employee Management, Personnel Cabinet; Mr. Robbie Perkins, Division of Technology Services, Personnel Cabinet; Mr. Mack Gillim, Executive Director of the Office of Processing & Enforcement; Department of Revenue; and Mr. Don Speer, Executive Director, Office of Procurement Services, Finance and Administration Cabinet.
Representative Ford moved that the minutes from the previous meeting be approved as written. The motion was seconded by Senator Westwood. The minutes were approved by voice vote.
Reductions mandated and gaps created by the budget for FY12
Ms. Mary Lassiter, Secretary of the Governor's Executive Cabinet and State Budget Director gave an overview of FY12 budget balancing measures to be implemented by the Executive Branch. The secretary summarized cuts that have been implemented to date, and reported that agencies were informed that an additional cut of 2 percent would be implemented during FY12, noting that for the most part, state agencies exempt from prior cuts would also be exempted from the cuts in FY12. She noted that revenues are improving; however FY13 and FY14 will still be very challenging. The secretary reported that actual revenue collections continue to exceed the CFG forecast, and that a portion of those revenues will be used to balance the FY12 budget. Additional spending reductions will be imposed, including recurring savings from non-merit reductions during 2011, debt restructuring, and the 2 percent reduction. These measures will result in $189.1 million in revenues to offset the projected shortfall. The secretary noted that despite our revenue shortfalls, Kentucky has still fared better than many states during the recession.
Mr. John Hicks, Deputy Budget Director, then discussed the potential impact of federal budget sequestration on Kentucky. He discussed the Budget Control Act of 2011, which set caps on federal discretionary spending for 2012 until 2021. The Act also established the “Supercommittee,” and put into place automatic procedures called Sequestration to reduce spending by $1.2 trillion through 2021. The sequestrations will automatically be enacted on January 15, 2012, if Congress does not enact at least $1.2 trillion in deficit reductions measures by that time.
Mr. Hicks stated that the impact of federal sequestration would be felt in many areas of Kentucky. Sequestration would result in automatic, across-the-board cuts in budgetary resources to take effect in January of 2013, with 50 percent from defense and 50 percent from non-defense sources. Certain agencies are exempt from sequestration, including Medicaid, KCHIP, TANF, Supplemental Nutrient Assistance Program, foster care, Pell grants, highway traffic safety, and others. The largest areas which would not be exempt from sequestration cuts include education, Head Start, National Guard, clean & drinking water revolving fund, transit grants, aging programs, community block grants, Homeland Security, Employment Services, and LIHEAP, among others. It is estimated that the areas not exempt could see an 8.8 percent reduction in federal funding.
Recognition of committee member
Chairman Leeper presented Representative James R. Comer Jr. with a resolution honoring him for his years of service on the Appropriations and Revenue committee. Representative Nesler moved for the adoption of the resolution. The motion was seconded by Representative Ford. The motion carried by voice vote.
Representative Comer thanked the committee for the resolution and stated that he valued his service on the committee.
Implementation of the new personnel system
Mr. Robbie Perkins, Division of Technology Services, Personnel Cabinet, discussed implementation of the Kentucky Human Resources Information System (KHRIS). He reported that the system is the largest enterprise-wide technology transformation in the history of Kentucky state government. The new system replaced the payroll system, benefits administration system, life insurance system, and approximately 25 other systems used for human resource functions in state government. The system went live on April 4, 2011 and has been implemented with very few problems or issues. Some reports from the system for use in budgeting and planning purposes are currently available and others are in the final testing phases and will be available soon.
Mr. Robbie Perkins then discussed the various functions which will be combined within the new KHRIS system. These functions include organizational management, such as position control, workforce planning, and re-organization modeling. Personnel administration functions such as management of employee records and performance management will also be encompassed. Payroll, time and labor, and benefits administration will also be handled through the KHRIS system. KHRIS will eventually become a self service system, allowing employees and managers to manage their own information within the system.
Department of Revenue contingency fee contracts for collecting taxes
Mr. Mack Gillim, Executive Director of the Office of Processing & Enforcement; Department of Revenue informed the committee that an agreement between the Department of Revenue/Finance Cabinet and ACS State and Local Solutions relating to assistance with corporate audits was not continued after the initial term, and that no taxes were collected which would have resulted in contingency fees being paid to ACS during the term of the agreement.
There being no further business, the meeting was adjourned at 2:45 p.m.