Program Review and Investigations Committee




<MeetMDY1> September 8, 2005


The<MeetNo2> September 8, 2005 meeting of the Program Review and Investigations Committee was held at<MeetTime> 10:00 AM, in<Room> Room 131 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; Senators Brett Guthrie, Vernie McGaha, R. J. Palmer II, Joey Pendleton, and Dan Seum; Representatives Adrian K. Arnold, Dwight D. Butler, Charlie Hoffman, Rick G. Nelson, and Susan Westrom.


Guests:  Steven Sparrow, Oldham County Sheriff and President of the Kentucky Sheriffs Association; William May Jr., Mayor of the City of Frankfort and Executive Director of the Kentucky Sheriffs Association; and Melinda Wheeler, Director, Administrative Office of the Courts.


LRC Staff:  Greg Hager, Committee Staff Administrator; Kara Daniel; Rick Graycarek; Jim Guinn; Tom Hewlett; Margaret Hurst; Van Knowles; Erin McNees; Nadezda Nikolova; Cindy Upton, and Susan Spoonamore, Committee Assistant.


Minutes of the August 11, 2005 meeting were approved, without objection, by voice vote upon motion made by Rep. Arnold and seconded by Sen. Pendleton.


Sen. Harris asked staff person Kara Daniel to summarize the different types of warrants from the report Improved Coordination and Information Could Reduce the Backlog of Unserved Warrants.


Ms. Daniel explained that complaint warrants are initiated through a complaint process; bench warrants are initiated generally by the court; and indictment warrants, which usually involve felonies, are issued by grand juries.


Sen. Seum asked if a complaint warrant could involve a felony.


Ms. Daniel stated that was correct.


Ms. Daniel added that the data contained in Appendix D of the report was for bench and indictment warrants.


Sen. Harris asked if a complaint warrant could lead to a felony.


Ms. Daniel stated that a complaint warrant could lead to a felony indictment.


Sen. Harris asked if a complaint warrant could also be issued for a misdemeanor offense as well as a felony.


Ms. Daniel stated that was correct.


Sen. Seum asked if the percentage of unserved warrants would change if the number for unserved felony complaint warrants was added to the number of felony warrants not served.


Ms. Daniel stated that would be correct.


Mayor William May Jr.,  Executive Director of the Kentucky Sheriffs Association, then commented on the report.  He stated that even though the counties were listed [in Appendix D] as not serving warrants in a timely manner, it did not mean that the sheriff’s office was not trying to serve the warrants. He stated that inaccurate information listed on the warrant or persons moving outside the county could be factors in not serving warrants. He stated that the size of the county and lack of staff could also contribute to the slow process of serving warrants.


Mr. May stated that the association agreed with recommendation 2.14. He stated that the arrest fee for misdemeanor warrants had been increased from $10 to $30, per language contained in Senate Bill 105.


Mr. May stated that the Association agreed with the recommendations regarding the implementation of a statewide e-Warrant system. He stated that the association would be willing to help draft legislation for the e-Warrant system.


Mr. May stated that the association also agreed with recommendations 3.7, 3.8, 3.11 and 3.12.


Sen. Seum asked if sheriffs were usually alone when serving warrants.


Steven Sparrow, Oldham County Sheriff, stated that a sheriff or a deputy was usually alone when serving warrants, except in the case of a felony warrant. 


Sen. Seum asked if the sheriff’s office received a fee for serving the warrant.


Sheriff Sparrow stated that a fee is charged for serving a warrant.


Sen. Seum asked if the fee for serving a felony warrant was more than the fee for serving a misdemeanor warrant.


Mr. May stated that the fee for serving a misdemeanor warrant was $30.


Sheriff Sparrow stated that the fee for serving a felony warrant was $20.


Sen. Seum asked why the service fee was more for a misdemeanor warrant than a felony warrant.


Sheriff Sparrow stated the fees are legislatively mandated and added that the association was in the process of drafting proposed bill language to increase the amount for serving felony warrants.


Sen. Seum asked if sheriffs’ offices were serving misdemeanor warrants before felony warrants because of the difference in the fee amounts.


Mr. May stated that some sheriff offices could be doing that.


Rep. Nelson asked if law enforcement officials in rural counties were utilizing constables for serving warrants.


Sheriff Sparrow stated that some rural counties were using constables for serving warrants.


Sen. Seum stated that he was concerned with the number of unserved felony warrants in Jefferson County.  He also stated that more effort needed to be put in serving felony warrants rather than misdemeanor warrants.


Sen. Seum asked if sheriffs would be required to serve warrants stemming from smoking violations in Jefferson County.


Sheriff Sparrow stated that sheriffs would be required to serve those warrants.


Sen. Seum asked if sheriffs could serve smoking violation warrants before felony warrants.


Mr. May stated he hoped that the sheriffs would look at the priority of serving a felony warrant before serving a misdemeanor warrant.


Sen. Harris asked if the association had spoken to officials listed in the low- ranking counties as to why they were not serving warrants. He asked that the information contained in Appendix D be shared with officials in the counties listed as doing poorly in serving warrants.


Mr. May stated that the information would be shared with officials of the Kentucky Sheriffs Association meeting later this month.


Sen. Harris asked that the association review the information contained in the report, and pursue legislation to implement changes.


Mr. May stated that the association would continue to work with the Program Review staff to improve the warrant process.


Cindy Upton, Program Review staff, then presented a follow-up to the report Uncollected Revenues and Improper Payments Cost Kentucky Millions of Dollars a Year.


Ms. Upton stated that the report, which was adopted by the Committee on September 9, 2004,  is a high-level review of major state dollars that were not being collected or were being spent improperly or unnecessarily.


Ms. Upton stated that the report concluded that improvements could be made in four major areas:


1.      Collection of court-imposed fines, fees, and costs;

2.         Collection of amounts owed to the Medicaid Program and control of   improper  payments made by the Medicaid program;

3.      Collection of court-ordered child support, including medical support orders;     and,

4.      Oversight and assistance by the Finance and Administration Cabinet in collecting money and controlling improper and unnecessary payments.


Ms. Upton stated that the report included 26 recommendations, which could take years to implement, but the potential benefit to the Commonwealth’s economic condition could justify the effort. She stated that additional staff and other resources could be necessary to coordinate the statewide approach.


She explained that one reason it could take so long is that agencies are not accustomed to working with each other to collect money that may go to the general fund rather than to their individual agency. She said that they were also not accustomed to identifying and reporting improper payments. Agency leaders would have to understand the benefit to the state as a whole for collecting debts and preventing improper payments. She said that the Finance and Administration Cabinet would be the logical leader in educating agency leaders.


Ms. Upton said that once agency leaders bought into the idea, then they would have to make sure their personnel understood the requirements and their responsibilities.


She said that a wider audience for the Program Review report would be helpful. The report integrates the provisions of HB 162 and SB 228;  describes federal agency requirements that are similar to, but wider in scope than the two bills; and summarizes best practices from other states. She stated that with the right people in place, agencies will also need information systems so they can accumulate information and communicate it to each other.


Ms. Upton explained that the Finance and Administration Cabinet has an important role in implementing many of the report’s recommendations. She said that the Cabinet had taken the lead in coordinating efforts to prevent improper payments and collect debt. She stated that the Controller issued a preaudit manual to help prevent improper payments, and developed a regulation to help state agencies identify and reduce improper payments.  She said that the Controller also developed training materials for an internal control and preaudit workshop for state agency personnel.


She said that the Department of Revenue was helping agencies collect debts. She stated that agencies are required to report year-end information on debts with the closing package information. The Department of Revenue reviews that information to identify and prioritize agencies, and then meets with agencies of significance to discuss their receivables and collection process.


Ms. Upton stated that the Department of Revenue set up pilot projects, which allowed them to learn more about the agencies, and what will be required to collect the debts. Because a manual system is not cost effective, the Commonwealth Office of Technology is working on an interface that will allow any agency to electronically refer debts to Revenue.  She stated that Department of Revenue already has an electronic interface with Child Support that allows Revenue to electronically receive information and begin collection procedures.  She said that the Department of Revenue collected over $3 million in delinquent child support payments last fiscal year.


Ms. Upton stated that Department of Revenue also conducted a pilot project with the Department for Community Based Services to collect overpayments on food stamps and cash payment cases, and had collected approximately $24,000, or 8 percent of the debt referred.


She stated that Department of Revenue also has been working with unemployment insurance cases, the Kentucky Higher Education Authority, and Medicaid. She said they also were continuing to meet with state entities to work out the details, and so far agencies appeared to be putting forth an effort to make the collection project work.


Ms. Upton also discussed the eight recommendations pertaining to the court system for improving  the collection of court fines, fees, and costs. She noted that seven of the recommendations called for the Administrative Office of the Courts (AOC) to consult with the Finance and Administration Cabinet.


Ms. Upton said that the courts’ computerized bookkeeping system has been implemented in 10 counties so far, but there is no plan for an interim manual system to be used before all counties have the bookkeeping system. She stated that AOC officials say that credit cards are now accepted in 11 counties and that credit card acceptance will be pursued aggressively. She stated that AOC and Revenue have agreed that using criminal garnishments and withholding state disbursements will be handled by Revenue. The two agencies are working together to develop a strategic plan to collect debts owed the courts.


Ms. Upton says that in response to the Program Review report’s recommendation that AOC study other states’ best practices, AOC has determined that using Revenue’s central collection unit is the best option.


Ms. Upton also discussed the responses of the Cabinet for Health and Family Services to Chapter 3’s recommendations regarding Medicaid. Ms. Upton said that cabinet officials report that insurance companies generally comply with the requirement of KRS 205.623 that they provide coverage information and data on claims paid on behalf of Medicaid-eligible policyholders and dependents, but including a penalty for noncompliance would be helpful.


She noted that the inspector general had described the new field-based unit to investigate suspected eligibility fraud—Determining Eligibility Through Extensive Review—at the August Program Review Committee meeting. She also explained that the inspector general has added about 15 new investigators and auditors for looking into suspected improprieties by providers, contractors, and cabinet personnel. She said that the drug rebate program is now being handled by a Medicaid contractor, which tracks current rebates and interest receivable. The old amounts on the books have not been resolved, in part because the employees with knowledge and experience to resolve the disputed amounts have retired.


Ms. Upton stated that the report also noted how uncollected child support affects not only the families but other programs as well. For example, she stated that staff estimated that $8.1 to $36.5 million in state and federal funds could have been saved in FY 2003 if noncustodial parents provided health insurance as ordered.


Ms. Upton also discussed the effect of uncollected child support on the SEEK funding formula for public schools. She stated that if a noncustodial parent does not pay child support, the likelihood increases that the children will qualify for free lunch and thus be categorized as at-risk, which results in extra funding. She said that if child support collections were increased enough to reduce the number of at-risk students by just 5%, the state could save $6.8 million a year. She stated the report contained three recommendations concerning child support.


The first recommendation was that there be a reexamination of the costs and benefits of providing greater financial incentives to county child support offices to improve enforcement of child support orders. Ms. Upton reported that the Department for Community Based Services did not present a cost-benefit analysis for staff’s review, but did use $800,000 in restricted funds to draw down $2.4 million in federal funds to add to county attorneys’ contracts for FY 2006 under the equity plan. She reported that, related to the second recommendation, the Cabinet for Health and Family Services has not presented evidence that it has examined the consequences of allowing custodial parents who receive K-TAP to keep some or all of their child support payments. She said the cost would require additional general funds from the department, but that Medicaid and other programs would benefit.  In response to the third recommendation, she said the cabinet has not provided an evaluation of whether noncustodial parents who cannot provide dependent health insurance should be required to provide some financial assistance.


In conclusion, Ms. Upton stated that improvements are being made in controlling improper payments and unnecessary payments and collecting debts, but that more needed to be done.  She said that the committee may wish to have a future update on progress.


Sen. Harris stated that a yearly update to the committee would be appropriate since the implementation of the recommendations would be a long-term effort.


Rep. Westrom asked how long it took for staff to compile the  report.


Ms. Upton stated that it took almost a year to complete the report.


Rep. Westrom asked if staff had been requested to do a study on the collection of unpaid taxes.


Ms. Upton stated that the Department of Revenue was in the process of instituting an initiative to collect unpaid taxes at the time the study commenced so the report focused on other issues.


Sen. Seum asked if noncustodial parents provided health insurance as ordered, would there be an impact on the KCHIP program.


Rick Graycarek, Program Review staff, explained that the estimate of total savings to the state was based on the number of medical support orders that the court gave that required the noncustodial parent to provide medical support. Staff found that in 95 percent of the cases, while medical support was ordered, it was not provided by the noncustodial parent. Mr. Graycarek said that staff looked at what would happen if those 95% of medical support court orders were fulfilled in terms of its impact on the Medicaid program.  The estimate did not address how many of those children would be enrolled in KCHIP, or what that impact might be.


Melinda Wheeler, Director, Administrative Office of the Courts, stated that AOC was working with the Finance and Administration Cabinet and other agencies to implement the recommendations contained in the report. She stated that AOC has a concern regarding the use of credit cards as a form of payment. She stated that in order to avoid the three percent service fee paid to the credit card companies, AOC was implementing procedures for taking payments over the Internet or the telephone.


Sen. Harris asked if those changes would require legislation.  He said that, if the courts only got 97 percent of the amount, that seemed better than not collecting at all.


Ms. Wheeler stated she was not sure what was needed.  She said there are 11 counties that are on credit cards and they have collected $63,780 through those. AOC  has had to absorb $1,913.49 in fees from the credit card companies.  She said if they expand across the state, the state will benefit by the use of credit cards, but AOC and the Court of Justice will have to pick up that fee. Ms. Wheeler said she just wanted the legislature to be cognizant of that and understand that they are going to try other methods so they will not need additional funding. 


Sen. Harris asked if committee members had any questions regarding the proposed study topic, Legal Aspects of Eminent Domain in Kentucky. He stated that the report would discuss the implications for Kentucky arising from the recent U.S. Supreme Court case; provide an overview of state law governing eminent domain, including how public use is defined; and summarize actions by other states in response to the court’s decision.


Rep. Arnold asked if the report would be completed before the next legislative session.


Sen. Harris answered yes.


The study topic, Legal Aspects of Eminent Domain in Kentucky, was approved without objection, by roll call vote, upon a motion made by Rep. Arnold and seconded by Sen. Guthrie.


Meeting adjourned at 11:15 a.m.