Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1> June 1, 2011


Call to Order and Roll Call

The<MeetNo2> meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Wednesday,<MeetMDY2> June 1, 2011, at<MeetTime> 10:00 AM, in<Room> Room 129 of the Capitol Annex. Representative Wilson Stone, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Paul Hornback, Co-Chair; Representative Wilson Stone, Co-Chair; Senators Carroll Gibson, Vernie McGaha, Dennis Parrett, and Joey Pendleton; Representatives Royce W. Adams, Tom McKee, Fred Nesler, and Tommy Turner.


Guests: Roger Thomas, Bill McCloskey, and Angela Blank, Governor’s Office of Agricultural Policy; Commissioner Sharon P. Clark and D. J. Wasson, Kentucky Department of Insurance; and Al Perkins, Kentucky Access.


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

As the meeting began, the presiding chair, Representative Stone, noted the passing of former Representative Eddie Ballard and received an update from an audience member regarding Representative Dewayne Bunch, previously injured in a school-related incident.


The May 11, 2011 minutes were approved, by voice vote and without objection, on a motion made by Senator Pendleton and seconded by Representative Adams.


Governor’s Office of Agricultural Policy

The presiding co-chair, Representative Stone, called on Mr. Roger Thomas, Executive Director, and Mr. Bill McCloskey, Director of Financial Services, Governor’s Office of Agricultural Policy (GOAP), to review the projects considered by the Agricultural Development Board (ADB) during its May meeting.


Mr. McCloskey reported on County Agricultural Improvement, Deceased Farm Animal Disposal Assistance, and Shared-use Equipment programs prior to reviewing statewide and regional projects acted on in the previous ADB meeting. The state and regional projects included: Marion County Industrial Foundation, a total of $23,000 approved for a value-added dairy processing feasibility study; Hopkinsville Elevator Co., Inc., $239,000 approved for a grain cleaning system to enable the cooperative to expand its customer base; and Shelby Area Rural Conservation, Inc., $5,378 to study the potential for a farmland preservation program for Shelby County.


The Marion County project resulted in a number of questions and comments from committee members regarding the project itself and the dairy industry as a whole. Mr. Thomas told Senator Pendleton that the dairy feasibility study grew out of a meeting GOAP staff had with Marion County officials regarding attracting an agricultural commodities processor to that county. Co-chair Stone mentioned Chaney’s Dairy in the Bowling Green area as an example of a dairy related enterprise that has been successful.


The GOAP officials responded to questions from Senator Gibson regarding how the federal dairy price support system works. Mr. Thomas noted that the federal dairy regulatory structure is very complicated. He mentioned one aspect affecting Kentucky that needs to be refined – the federal order system.


Senator Gibson also alluded to the possibility of a locale in Wisconsin, rather than Leitchfield, being the site of an expansion planned by a cheese company that has a factory in the Grayson County city.


 According to Mr. Thomas, much of the milk produced in upper Midwest states like Wisconsin and Michigan is used in the manufacturing of cheese. During the discussion, he reiterated the need to refine the federal order system.


As the projects review continued, Co-chair Stone indicated he was pleased to learn various county councils had contributed funds to assist the Hopkinsville Elevator expansion. Mr. Thomas indicated the Governor, in recent remarks, challenged them to consider regional projects.


Concerning the Shelby County farm preservation project, they pointed out to Senator Parrett that, several years ago, a bond issue to be paid off with tobacco settlement dollars helped fund farm preservation efforts statewide and in Fayette County. Since that time, the Fayette County council has contributed additional tobacco funds for land preservation. Scott and Woodford counties also have looked at the issue.


Before Mr. Thomas and Mr. McCloskey concluded their report, committee members discussed the on-going problem of how to dispose of dead farm livestock in the wake of tighter federal rules regarding how carcasses are used.


Senator Gibson mentioned the dilemma of keeping up with state inspections needed for on-farm composting systems. Mr. Thomas noted the role of the Department of Agriculture’s Office of State Veterinarian. He indicated some counties may wish to establish regional composting endeavors. Mr. Thomas mentioned a Farm Bureau-hosted meeting on livestock disposal that was taking place on the same day as the committee meeting. He also referred to the work that the University of Kentucky has done in the area of on-farm composting. He noted the state has a vibrant beef industry and indicated that carcass disposal is another aspect of that industry.


As discussion continued, Representative McKee mentioned the merits of addressing the disposal issue on a regional basis.


Department of Insurance, Kentucky Access Report

Next, the committee received reports from Ms. Sharon Clark, Commissioner, Ms. D.J. Wasson, Legislative Liaison, Kentucky Department of Insurance, regarding the Health Care Improvement Authority (HCIA), and from Mr. Al Perkins, Director of the Kentucky Access high-risk health insurance program. HCIA monitors four programs receiving tobacco settlement payments for public health initiatives – Kentucky Access, the Tobacco Use Prevention and Cessation Program, Kentucky Agency for Substance Abuse Policy (KY-ASAP), and the Kentucky Lung Cancer Research Program.


Ms. Clark’s report included a review of the current authority membership, its meeting schedule, HCIA programs, the role of HCIA, funding, particularly how tobacco settlement funds are used, and challenges.


Responding to Representative Adams, Ms. Wasson indicated that KY-ASAP grants awarded to communities are leveraged with local funds and resources.


Representative Nesler pointed out that, while headway was being made in reducing tobacco use, drug abuse was still a problem. He wondered aloud about the benefits of the KY-ASAP programs. He noted the state is losing the war on drugs.


In subsequent remarks, Senator Pendleton pointed out that funds are needed to help combat the illicit drug problem. He pointed out that a quick fix will not work. According to the senator, more funds are needed for rehabilitation and treatment.


Responding to Representative McKee, who had mentioned his recent remarks at a drug court graduation, Ms. Wasson said some KY-ASAP funds assist some drug courts.


Also responding to Representative McKee, Ms. Clark noted that, were it not for the Kentucky Access high-risk health insurance program, people with high-risk ailments would be seeking help from other public programs. According to Ms. Clark’s testimony, the federal health care reform law contained provisions for a national high-risk pool. Mr. Perkins noted that Kentucky Access is the first resort for many citizens.


In continuing discussion, Ms. Clark told Senator McGaha that she asked the Office of the Governor about filling some open HCIA vacancies. She indicated to the senator that HCIA board meeting attendance has not been good, with perhaps three out of four meetings occurring with no quorum present.


Next, Mr. Perkins updated the committee on the Kentucky Access insurance program. According to his report, the program had 4,820 active members as of March 31. The program pays 99 percent of its claims within 30 days of receipt. Premiums cover about 45 percent of the program’s expenses. The remainder is funded through tobacco settlement funds (32 percent), assessments on insurers (20 percent), and federal grants and interest earnings (3 percent). Administrative expenses to operate the program are only 6 percent of total program expenses. They expect new administrative regulations to reduce the amount of time it takes to approve an application for coverage. And, for FY10, the program received its tenth “clean” audit report from the State Auditor.


Responding to Co-chair Stone, who had asked about trends observed, Mr. Perkins indicated they constantly monitor the market place. According to Mr. Perkins, they attempt to offer a rich plan in terms of coverage, but one that is cognizant of costs.


In terms of possible future changes, Ms. Clark indicated some insurance agents have asked about the potential for child-only insurance policies.


Documents distributed during the committee meeting are available with meeting materials in the LRC Library. The meeting adjourned at approximately 11:45 a.m.