Interim Joint Committee on Appropriations and Revenue


Budget Review Subcommittee on Economic Development and Tourism, Natural Resources and Environmental Protection


Minutes of the<MeetNo1> 3rd Meeting

of the 2006 Interim


<MeetMDY1> September 28, 2006


The<MeetNo2> 3rd meeting of the Budget Review Subcommittee on Economic Development and Tourism, Natural Resources and Environmental Protection of the Interim Joint Committee on Appropriations and Revenue was held on<Day> Thursday,<MeetMDY2> September 28, 2006, at<MeetTime> 10:00 AM, in<Room> Room 169 of the Capitol Annex. Senator Ernie Harris, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Ernie Harris, Co-Chair; Representative John A Arnold Jr, Co-Chair; Representatives Jim Gooch Jr, Charlie Hoffman, Dennis Keene, Tommy Thompson, and Susan Westrom.


Guests:  Leah MacSwords, Director, Division of Forestry, and Steve Cull, Vice-Director, Division of Forestry; Department for Natural Resources; Lesia Layson, Director, Division of Administrative Services, Department of Labor; Keith Talley, Deputy Director, Office of Financial Institutions, and Colleen Keefe, Director, Division of Securities; Tony Royalty, Executive Director,  and Chris Lilly; Office of Charitable Gaming; Beth O'Donnell, Executive Director; Garnett Thurman, Legislative Liaison;  Kentucky Public Service Commission.


LRC Staff:  Jack McNear, Kevin Mason, Jeffery Hancock, Janie Miller, Tom Willis, and Matt Ellis.


Chairman Harris welcomed Director MacSwords and Steve Cull for a presentation on the agency mission and day-to-day operations of the Division of Forestry in the Department of Natural Resources. Upon completing the presentation, Ms. MacSwords opened the floor to questions.


Chairman Harris asked if pine seedlings are raised by the Division of Forestry. Ms. MacSwords replied that only pines native to Kentucky are raised, adding that Christmas trees were raised at one time, but hardwood species are more profitable.


Chairman Harris asked if there have been any glitches in the program and how they could be fixed. Ms. MacSwords stated that the General Assembly  established a temporary master logger card for those who wanted to start work before the next available class in the University of Kentucky's Master Logger Program. Also, the Kentucky Forest Industry Association is supporting legislation to stop "bad actors", those who have two or more citations on their logging jobs. The biggest problem is that there are fewer logging inspectors available because of vacant positions.  


Chairman Harris asked if firefighters from the Division on Forestry are called upon to assist other states in the western part of the country. Ms. MacSwords replied in the affirmative, adding that they go on leave and are put on the Forest Service payroll. The leave is granted because of the experience gained in fighting these fires is valuable to Kentucky. Any firefighters sent to the twelve southern states are covered under the Interstate Fire Compact that we have with those states and are kept on the Division of Forestry's payroll.


Representative Keene asked what percentage of arsonists are caught and what is the recourse when they are caught. Ms. MacSwords replied that arsonists are hard to catch, adding that when they are caught they are prosecuted in local courts, some of which do not consider wood arson to be a crime. These arsonists are often not prosecuted to the fullest extent that they could be.


Representative Keene asked if the Division of Forestry helped private landowners in the restoration of damaged timber. Ms. MacSwords replied that they can only assist through advising because there is no funding available.


Representative Keene asked if there is anything the General Assembly can do to make the arson and timber theft charges more serious. Ms. MacSwords replied that the Division of Forestry along with the Arson Task Force would be happy to work with the General Assembly to obtain additional funding and make statute changes.


Representative Arnold asked if accidental fires can be misinterpreted as arson and how to differentiate between the two. Ms. MacSwords replied that forest rangers are trained in fire cause determination and look at circumstances and find cause, adding that wild land arson is defined as deliberately and willfully setting a fire. In the case of accidental fire, the statute allows the state to charge the guilty party for the cost of suppressing the fire.


Chairman Harris thanked Ms. MacSwords for her presentation and welcomed Lesia Layson for a presentation of the agency mission and day-to-day operations for the Division of Administrative Services in the Department of Labor. Upon completing the presentation, Ms. Layson opened the floor for any questions.


There being no questions, Chairman Harris thanked Ms. Layson for her presentation and welcomed Keith Talley and Colleen Keefe for a presentation on the agency mission and day-to -day operations of the Office of Financial Institutions (OFI). Upon completing the presentation, the floor was opened for any questions.


Chairman Harris asked if there is a significant difference between the standards of state and federally chartered banks. Mr. Talley stated that the FDIC, who is the insurance corporation for both sets of banks, takes part in both examinations, so there is no significant difference. The regulatory compliance required of both state and federally chartered institutions is fairly similar.


Chairman Harris asked if our state banks are held more accountable than federal banks resulting in a higher capital leverage ratio. Mr. Talley replied that state institutions know their markets better and are more conservative in their approach to banking within the community.


Chairman Harris asked if the $6 million fund transfer to the general fund was a voluntary transfer. Mr. Talley relied that OFI was happy to be in a position to provide these funds to the General Assembly.


 Chairman Harris asked if the federal regulation in which transfers of $10,000 or more are monitored and looked into was in effect. Mr. Talley replied that a currency transaction report is done on transactions involving cash in excess of $10,000. There is also a suspicious activity report for banks that is sent in cases of activity not consistent with normal practice. There is no accurate definition of "suspicious activity", but constant work with the legislature is being done to set firm guidelines.


Representative Thompson stated that fund transfers from OFI puts an unnecessary burden on them to fund the significant number of examiners. This department should be able to retain the money they have to hire better examiners to compete with other states. 


Chairman Harris thanked Mr. Talley and Ms. Keefe for the presentation and welcomed Tony Royalty and Chris Lilly for a presentation on the agency mission and day-to-day operations of the Office of Charitable Gaming. Upon completing the presentation, Mr. Lilly opened the floor to any questions.


Chairman Harris asked if the drop in restitutions from 2003 to the present is good news or bad news. Mr. Lilly replied that it was good news in 2003 because someone was arrested while in possession of stolen money. Last year there was a significant conviction for $400,000 of stolen money but since the gentleman were 70 years of age or older, the prospect of restitution is slim.


Representative Arnold asked how an organization qualifies to sell pull-tabs. Mr. Lilly replied that to qualify you must get a license and qualify as a 501C organization in existence for at least three years for purposes other than gaming.


Representative Arnold asked if poker tournaments are regulated. Mr. Lilly replied that an organization may play two tournaments a year with a special limited license. There is some dispute whether it is gambling if the house gives out all proceeds as prizes and does not profit. Some prosecutors will not prosecute this as illegal gambling.


Representative Thompson stated that in a number of districts individuals complain that the cost of compliance is becoming suffocating to groups such as churches, who only have few events a year. If an organization only has an event once a year they could be exempt from some reporting or have to drop these activities altogether. Mr. Lilly replied that the office is aware and has met with several groups to try and reach middle ground on the issue.


Chairman Harris thanked Mr. Royalty and Mr. Lilly for the presentation and welcomed Beth O'Donnell for a presentation of the agency mission and day-to-day operations of the Public Service Commission. Upon completing the presentation, Ms. O'Donnell opened the floor to any questions.


Chairman Harris thanked Ms. O'Donnell for her presentation and expressed appreciation for all of those in attendance.


There being no further business, the meeting adjourned at 12:00 p.m..