Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1> June 3, 2009


The<MeetNo2> 4th meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Wednesday,<MeetMDY2> June 3, 2009, at<MeetTime> 10:00 AM, in<Room> Room 129 of the Capitol Annex. Representative Dottie Sims, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Representative Dottie Sims, Co-Chair; Senators David E. Boswell, David Givens, Vernie McGaha, and Joey Pendleton; Representatives Royce W. Adams, James R. Comer Jr., Charlie Hoffman, Tom McKee, and Tommy Turner.


Guests:  Roger Thomas, Joel Neaveill, Tim Hughes Cyndi Hall, and Bill McCloskey, Governor’s Office of Agriculture Policy; Dr. Melissa Lipps; Steve Hornback; Dave Maples and Kelly Tucker, Kentucky Cattlemen’s Association; Annette Bridges, Dr. Ruth Anne Shepherd, and Robin Herring, Division of Early Childhood Development.


LRC Staff:  Lowell Atchley, Biff Baker, Dane Bowles, and Kelly Blevins.


The May 6, 2009 minutes were approved, by voice vote and without objection, on a motion made by Senator Boswell, seconded by Senator Pendleton.

Before calling on the first speakers, Co-chair Sims recognized the newest member of the Committee, Senator McGaha.

The co-chair then asked Mr. Roger Thomas, Executive Director, and Mr. Joel Neaveill, Chief of Staff, Governor’s Office of Agricultural Policy (GOAP), to report on the projects considered by the Agricultural Development Board (ADB) during the May meeting. The speakers reviewed the County Agricultural Investment Program projects the board acted on, plus made note of counties approved for funding under the new Deceased Farm Animal Disposal Assistance Program.

In discussion regarding some recently completed GOAP workshops held to go over some policy changes, Senator Givens complimented Mr. Thomas and his staff on introducing the changes. The senator asked if other counties were applying for the funds under the animal disposal program. Mr. Neaveill said the agency continued to receive applications for the funds.

As discussion progressed, the speakers responded to Senator Boswell, who asked how the deceased animal program is administered and who is eligible for funding. According to their testimony, the GOAP developed the program in consultation with the Kentucky Division of Conservation, which will be offering funds from the annual tobacco settlement allocation that it receives. County councils can devote up to $7,500 to their program, plus other entities also can contribute.

They responded to Senator Boswell that the Office of State Veterinarian must approve a county’s dead animal disposal method, which could include a burial procedure, pickup by a rendering company, or other disposal methods. Senator Boswell mentioned the value that can be added to carcass pickup by renderers.

Responding to Co-chair Sims, the speakers listed the companies currently available for dead animal removal. Mr. Thomas said farmers will sometimes transport dead livestock to the animal diagnostic facilities in Lexington and Hopkinsville to learn how the stock died.

In the next segment of the agenda, the chair called on three of five speakers appearing at the meeting to discuss new programs to offer financial assistance for large/food animal veterinarians. The speakers were: Mr. Bill McCloskey, Kentucky Agricultural Finance Corporation (KAFC), Dr. Melissa Lipps, a Shelby County veterinarian, and Mr. Steve Hornback, a Shelby County banker.

In his remarks, Mr. McCloskey explained the need for the program and described how it operates. The ADB allocated $1 million to the KAFC to be used for low-interest financing for veterinarians who want to establish or expand large/food animal veterinary services. Dr. Lipps was approved for $88,565 in KAFC financing as a participation loan with a Shelbyville bank, which also loaned some money. The veterinarian used the loan funds to buy out a remaining interest in a veterinary clinic.

Speaking next, Mr. Hornback indicated the program was a “seamless” one. He mentioned working with Mr. McCloskey through the years and said they had discussed the need for more large/food animal veterinarians. He said the program is a good one with which to work and was ideal for Dr. Lipps and her situation. She probably would have had to transition to small animal practice, had the loan not come to fruition, according to Mr. Hornback.

Next, Dr. Lipps explained the circumstances that led to her seeking loan funds to buy the clinic. She told the committee that business training is not a part of a veterinary school curriculum. Surveying the industry, she said food/large animal veterinarians are graduating, but are finding practice areas difficult because of the current state of the beef and dairy industries.

In continuing discussion, Mr. McCloskey responded to Representative McKee that information about the program is on the KAFC Web site. He described the criteria to receive a loan, such as the value of a practice. The loan arrangement is a participation program with the application originating with local lenders. Funds can be used to construct, expand, equip, or buy into a practice, but cannot be used for refinancing, according to Mr. McCloskey.

In going over with Senator Givens the amount earmarked for the program and the maximum loan amount ($100,000), Mr. McCloskey indicated a benefit of the program is that it is a revolving loan process with the funds ultimately coming back to the KAFC. According to Mr. McCloskey, committing funds to “under served areas” is recognition that funds may be limited and priority must be directed to areas with fewer numbers of veterinarians.

Senator Givens complimented Dr. Lipps for choosing the large/food animal career path and asked what legislators can do to elevate veterinarians’ status. Dr. Lipps mentioned the rising costs associated with farming and suggested that legislators support farmers in any way they can. Mr. Hornback mentioned the decline in the farm population generally that is affecting large/food animal veterinarians. He complimented the state for setting aside the funds to establish the loan program.

Responding to Senator Givens, Dr. Lipps related that she had classmates who were interested in large/food animal veterinary medicine, but are not practicing in small animal settings.

Senator Boswell noted it should be recognized that large/food animal veterinary medicine is market driven.

The next speakers on the issue were Mr. Dave Maples and Kelly Tucker with the Kentucky Cattlemen’s Association. The KCA Foundation received a $1 million zero interest loan from the ADB and must match the funds with an additional $1 million. The KCA Foundation will use revenues from interest on the funds to establish a veterinary incentive program whereby three large/food animal veterinarians or veterinarian technicians can receive an annual incentive of $6,000 each for a maximum of three years. As the program matures, nine veterinarians and veterinarian technicians could receive incentives in a given year.

Mr. Maples told the committee the program is meant to help recent veterinarian and veterinarian technician graduates.

A requirement of the loan is that the Cattlemen’s Foundation must match the $1 million with an additional $1 million. Mr. Maples told the committee he had $136,000 in matching funds committed so far. Later, Mr. Maples discussed in more detail with Senator Givens how the organization will go about raising the matching funds.

Ms. Tucker responded to Senator Givens that several other states have veterinarian incentive programs.

Asked by Senator McGaha about the number of veterinarian gradates who would be coming to Kentucky, primarily from Auburn University, Mr. Maples guessed 20.

Mr. Maples explained the incentive selection process to the senator, indicating the incentives would be awarded based on a community needs criteria which would be formulated by a selection committee. He reiterated that the program also is aimed at veterinarian technicians, in addition to veterinarians.

Mr. Maples responded to Representative Comer that the foundation selects its own directors. In continuing testimony, he described how an investment committee of the foundation went about finding a bank to hold the $1 million in investment funds.

Following that discussion, Co-chair Sims next called on Annette Bridges, Division Director, Early Childhood Development, who was accompanied by Dr. Ruth Ann Shepherd, Division Director, Maternal and Child Health, Department for Public Health, and Robin Herring, Child Care Operations Manager, Department for Community Based Services.

The speakers reported on the KIDS NOW Early Childhood Initiative, with Ms. Bridges discussing the mission of the program, Dr. Shepherd the maternal and child health, and family support aspects of the program, and Ms. Herring covering the early care and child care provider education segments of the program.

Asked by Co-Chair Sims about the need for fluoride varnish, offered under the oral health part of the program, Dr. Shepherd said fluoride prevents early decay of baby teeth and ultimately helps prevent bodily infections.

Responding to Senator Boswell, Ms. Bridges indicated she was aware of at least two states that had earmarked tobacco funds for early childhood development similar to Kentucky.

Dr. Shepherd responded to Senator Boswell that they interact with other non-state programs, such as the March of Dimes. As an example, she said they partner with the March of Dimes in the B vitamin folic acid campaign aimed at preventing neural tube defects.

According to Dr. Shepherd, they use non-agency funds to fill gaps in their budget. She next elaborated on the HANDS program, saying it was meant to make babies healthier, thus saving funds for the state.

Following Ms. Herring’s report, Co-chair Sims asked for clarification of the STARS for KIDS NOW child care facility rating system. Ms. Herring’s testimony indicated staff members conduct on-site evaluations, with facilities ultimately receiving incentives and points based on quality of care offered.

Turning to the budget chart given to committee members, Ms. Bridges said many of their programs “pull down dollars” through collaborative grants.

As discussion progressed, Ms. Herring responded to Senator Givens about a chart showing that 42,000 children were enrolled in certified centers. Ms. Herring said the figure of 29 percent of eligible children enrolled in child care assistance facilities was close to the national average.

Responding to questions from Senator Givens about the HANDS program, Dr. Shepherd said parents agree to participate. She said various types of medical facilities screen prospective clients. According to the witness, the program is meant for over-burdened first-time parents who are at-risk. She said they serve about 11,000 children. She also indicated that almost all of the $9.2 million budgeted for the program goes for front-line home staffing. That applies across all services, she said.

Senator McGaha asked a series of questions, some related to the budget. The senator sought clarification on a statement in a university evaluation which said that 73 percent of parents surveyed are strongly encouraged to participate in a child’s education program.

Surveying a budget sheet the senator pointed out that, in some instances, high percentages of funds remained to be expended from some accounts. In many cases, billing agencies wait until near the end of the fiscal year to bill for services, Dr. Shepherd said. Senator McGaha noted that seemed unusual.

Responding to Co-chair Sims, who asked about federal matching dollars, Dr. Shepherd mentioned that the HANDS program uses tobacco settlement money to match federal Medicaid funds, but in many cases, the funds cannot be leveraged with federal dollars.

Representative McKee lauded the report and noted how the Early Childhood Development effort grew out of a vision of former Governor Paul Patton and First Lady Judy Patton.

As the meeting was ending, Ms. Bridges said she would provide Senator McGaha with agency fund totals appropriated to the division.

Documents distributed during the committee meeting are available with meeting materials in the LRC Library. The meeting adjourned at approximately 12:10 pm.