Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1> August 1, 2012


Call to Order and Roll Call

The<MeetNo2> meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Wednesday,<MeetMDY2> August 1, 2012, 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, David Givens, Vernie McGaha, and Dennis Parrett; Representatives Royce W. Adams, Terry Mills, Ryan Quarles, and Tommy Turner.


Guests: Mr. Roger Thomas, Ms. Angela Blank, Mr. Joel Neaveill, Mr. Bill McCloskey, and Mr. Biff Baker, Governor’s Office of Agricultural Policy; Commissioner Sharon Clark, Department of Insurance; and D.J. Wasson, Acting Director, Kentucky Access.


LRC Staff: Lowell Atchley, Stefan Kasacavage, Kelly Ludwig, and Kelly Blevins.


The July 9, 2012, minutes were approved, without objection, by voice vote, upon motion by Representative Mills and second by Senator Parrett.


Governor’s Office of Agricultural Policy

The committee received the monthly report from Mr. Roger Thomas, Executive Director, Mr. Joel Neaveill, Chief of Staff, and Mr. Bill McCloskey, Director of Financial Services, Governor’s Office of Agricultural Policy (GOAP), regarding project funding decisions made by the Agricultural Development Board (ADB) during its July meeting.


Before giving their projects report, the GOAP officials showed committee members a series of agriculture-related promotional spots that will be aired on television and radio statewide. Some committee members lauded the videos, particularly because they deliver a positive message about the importance of agriculture. Some committee members also commented on the equipment brand names that were prominent in the videos and the message in one video about transitioning from tobacco production to poultry production.


The GOAP officials responded to committee members’ questions during the summary of funding allocations made under the County Agricultural Improvement, Deceased Farm Animal Disposal Assistance, and Shared-Use programs from the previous months. Mr. Neaveill described to Senator Givens the farm equipment acquired under the Shared-Use Equipment Program. He noted the county was able to acquire the farm equipment under a special Share-Use Equipment Initiative established for counties that receive little in the way of tobacco settlement funds. The initiative is being phased out.


Regular state and locally funded projects reviewed in subsequent discussion included: Kentucky Association of Food Banks, granted $47,500 in county funds to purchase farm produce for distribution at food banks; Daviess County Lions Club Fair, approved by the ADB for $50,000 in Daviess County funds to build a county agriculture multipurpose building; Wayne County Cattleman’s Association, approved by the ADB for $20,000 in county funds to establish a calf cost-share program; Pendleton County Extension District Board, approved for $21,401 in county funds to build a structure to house shared-use equipment; Mercer County 4-H Council, approved for $18,000 in county funds to build an outdoor education facility.


The GOAP officials replied to several questions from committee members during the discussion of the Kentucky Association of Food Banks project. Some committee members stressed the association needs to become self-sustaining and not dependent on governmental type funding. Senator Givens remarked that, while he supports the goals of the association, caution should be used in continually granting funds to the group. According to Mr. Thomas, the board has indicated it would prefer that, going forward, the association not apply for state tobacco settlement funds. During discussion later, he mentioned a bill the General Assembly passed in the 2012 session to create a state income tax check-off for the “farms to food banks” program. Later in the project discussion, Senator McGaha reiterated Senator Givens’ remarks about the continuous funding.


The GOAP officials responded to questions from Senators Givens and McGaha about what percentage of the funds would be set aside for administration. The officials promised to obtain additional information about administrative costs and provide that information to the committee.


Responding to Senator Gibson, the GOAP personnel described the way the association buys produce at auction markets in the state and then make the produce available to food banks.


In a response to Senator McGaha, the GOAP officials described how the board usually abides by county council recommendations. Senator McGaha suggested the notion of the board reconsidering that stance.


During the discussion of the Kentucky Association of Food Banks project, Co-Chair Stone indicated produce growers may not have been as aware of the availability of tobacco settlement fund grants as they are now.


Regarding the Daviess County Lions Club project, Mr. Neaveill responded to Senator Givens that the Daviess County Council had sufficient funds, either from this year’s allocation or from next year’s allotment, to fund the undertaking.


Kentucky Department of Insurance

            Ms. Sharon Clark, Commissioner, Department of Insurance, and D.J. Wasson, Acting Director, Kentucky Access, reported on the proceedings of the Kentucky Health Care Improvement Authority, which oversees activities of some entities receiving tobacco settlement funds, and the Kentucky Access program, the high-risk insurance pool, which receives tobacco settlement funds to use in its operations.


            During her remarks, Ms. Clark discussed the future of Kentucky Access in light of anticipated changes under the federal Patient Protection and Affordable Care Act. Ms. Clark told the committee that beginning January 1, 2014, insurers will be required, under the federal law, to guarantee issue health insurance coverage. Thus, Kentucky Access would eventually be phased out as lingering claims are paid and other issues resolved. According to her report, a legal analysis is being conducted on transition requirements, notification of Kentucky Access members will be undertaken at some point in time, members and health insurance agents will be educated about options after termination of coverage, and an actuarial analysis of funding needs will be undertaken.


            Responding to a question from Representative Adams, Ms. Clark indicated that appropriations shortfalls in the Kentucky Access program are made up with additional premium charges on those covered. Generally, she said, premium assessments cover 51 percent of total claims.


            Replying further to Representative Adams, Ms. Wasson said Kentucky Access has looked for ways to control costs, including a three-tiered pharmacy rider.


            Ms. Clark responded to Senator McGaha that attendance at Health Care Improvement Authority meetings is better than in the past.


            During her full report on the Kentucky Access program, Ms. Wasson indicated membership in the program has been declining, mainly due to factors like nonpayment of premiums, Medicare coverage being available to some members, and the acquisition of other coverage. She noted that the administrative costs are low at 6 percent. New benefits have included a child-only plan. The program received a “clean audit” from the Auditor of Public Accounts.


            Responding to Senator Parrett, Ms. Wasson said Kentucky Access has discussed repercussions if the federal Patient Protection and Affordable Care Act is repealed. The Department of Insurance officials had noted during the discussion that statutory changes would not be needed regarding Kentucky Access until the 2014 session.


            Ms. Clark and Ms. Wasson replied to Senator Givens that people sometimes stop paying premiums because they have received coverage elsewhere, have moved out of the state, have paid late, or have been dropped from the system but later re-enrolled in the program.


            As their presentation ended, Co-Chair Stone complimented them on receiving a clean audit from the Auditor of Public Accounts.


            Documents distributed during the committee meeting are available with meeting materials in the LRC Library.


            The meeting adjourned at approximately 11:45 a.m.