Kentucky Political News Headlines

Thursday, December 22, 2011

Medicaid Briefing

Secretary Miller briefed the full House earlier this week on the implementation of Medicaid Managed Care.  She had Carrie Banahan and Commissioner Neville Wise with her to answer questions, but she handled the majority of the briefing and many of the questions.

She started with a statement that she knew legislators had been receiving calls, because she was receiving calls.  She said they would still receive calls as they move into each phase of the implementation.  They anticipated the first month would involve calls relating to the change in process and an education process on billing claims and pre-authorization under the new system.  They also anticipated the second month to be calls from providers on non-payment of claims.

She believes, and I think had the members believing, that for such a massive change in process, it had gone pretty well considering they had enrolled or registered 560,000 lives.  She thinks many of the original problems are getting resolved and the communication system has improved.  She had Neville address the Independent Pharmacy issues and Carrie address the claims payments issue.

The independent pharmacy issues relate mostly to the cuts in reimbursement and aren't going away.  Medicaid reimburses more than Medicare and more than commercial carriers.  The MCO's have moved very quickly to reduce the amounts.  The Cabinet has met with many of the independent pharmacists and the MCO's.  Their message to the pharmacies is they are working with the MCO's to see if they can improve the situation and in some areas they have been able to up the levels some.  Their message to the MCO's is these independents are vital to the communities, especially rural areas and if they are forced out of business will certainly impact access that is required under the contract.  As the Secretary put it, they are working with both groups to balance the access with the costs.

Carrie is leading the effort to handle the claims issues and is working with the MCO's directly on any calls she receives.  Initially the problem was with achieving clean claims to process.  That is getting better and where there have been problems, the MCO's have done some "gap" payments to alleviate pressure while they resolve the claims.  The Secretary believes the providers are getting better at billing and the MCO's better at reviewing.

The Secretary addressed the prior authorization issues.  She said that early in the transition it was taking an hour or so to get prior authorization and it was basically a communications problem.  Providers could not get through, but when they finally did, they were pre-authorizing 8-10 in one call.  She believes that is getting better.

The Commissioner stated he would be working at putting the state P and T committee with the P and T committees of the individual MCO's to see if they can normalize the formulary issues that have come up. Secretary Miller stressed that every drug for which a rebate agreement exist with the feds is covered under state Medicaid, if it is medically necessary.  She tried to refer to the formulary as a mechanism to get to whatever drug was medically necessary.

Specialty drugs have been a problem as the MCO's are apparently requiring they be obtained through their providers and that involves mail order.  That has created some confusion over whether or not the MCO's were trying to drive everyone to mail order.  The Secretary explained that the MCO's are not pushing anyone to mail order, and don't necessarily want it, but they do accept it.

There were several questions by legislators and nearly all were related to independent pharmacies and payments.  The Cabinet was staying over to get what information the individual legislators had.  They stressed it was important to get as much information together from their constituents on specific problems so they could track back to get to the problem.

KY Revenue Estimates

Consensus Forecasting Group Official Estimates

The Consensus Forecasting Group met earlier this week to develop an official budget forecast that the Governor and General Assembly will use to develop the state's budget during the 2012 legislative session. The Consensus Forecasting Group (CFG) is a group of nonpartisan economists from around the state who meet several times a year to look at economic indicators and receipts, and then estimate the expected revenues in the upcoming years.  

The group met in October and put together a preliminary forecast, however today's meeting produced the official numbers upon which the Governor's budget will be based when he presents in next month.  The overarching themes from the meeting are that an economic recovery is inevitable, but the timing continues to vary among different economic analysis and the strength of the recovery is dependent upon policy decisions by Congress and the Federal Reserve.  

Now let's get to the numbers.  The CFG looked at three models - optimistic, control, and pessimistic - and they also discussed and looked at a couple different blends of the control and pessimistic models.  The consensus of the group was to move forward with the control estimates - primarily because some members felt that there was a good amount of pessimism already built in.  The estimates show marginal revenue growth above what was discussed when the group met in October.

General Fund
  • FY 12 - 2.8% growth - 136.5 million in additional funds above the previous official FY 12 estimate.
  • FY 13 - 2.4% growth - 216 million in additional funds
  • FY 14 - 3% growth  - 276 million in additional funds
The CFG also put together an official estimate for the state Road Fund.  Like the General Fund, the control model was chosen for estimates for the next biennium.  The Road Fund has proven to have consistent growth during these slow economic times, primarily because of the motor fuels tax and an index provision tied to the average wholesale price of gasoline.

Road Fund
  • FY 12 - 5.5% growth - 71.6 million in additional funds above the previous official FY 12 estimate.
  • FY 13 - 6.1% growth - 86 million in additional funds
  • FY 14 - 4.6% growth - 69 million in additional funds
* the reduced growth in FY 14 takes into account that the the index will not be triggered for an increase in the motor fuels tax going into FY 14.

Also of note, the longtime chair of the CFG, Larry Lynch announced he will resign from the group at the end of the fiscal year.  Lynch has been a member of the Consensus Forecasting Group since 1974.

Tuesday, December 13, 2011

Chamber Conference Update

The Kentucky Chamber of Commerce held their annual policy conference yesterday in Lexington.  Below are the takeaways on specific issues discussed.

Senator David Williams stressed that the state's fiscal situation is not good and the budget process will not be easy this session.  He said there is a 500 million dollar deficit over the next biennium, which doesn't include an additional 200 million dollars the Medicaid program is requesting or 120 million is SEEK funds that schools are entitled too due to an issue with how the formula is applied.  Williams also said that it will be a priority of the Senate to keep the debt capacity under 6% and that if you include the state pensions unfunded liability, there really is no room for additional bonding.  Rep.Rick Rand said the House feels that budget issues are not quite as serious as Williams indicated.  He recognized that it won't be an easy session, but that the House thinks that now is the time fund some needed projects - because of low interest rates and to help stimulate the economy.  

Tax Reform
Rep. Rand said he thinks the best approach is to convene members of the legislative and executive branches and the business community and meet during the summer to put together a tax reform proposal that could be voted on during the 2013 session.  He said that it will take great efforts by all and that there will be winners and losers - he noted that the current sales tax exemptions all have constituencies, which will make changes difficult.  
Senator Williams wants to see the personal income tax repealed and said that whatever proposal is addressed must be initiated by the House and he doesn't envision that happening with the current make-up.

There was some back and forth on this issue between Rand and Williams over where the issue should start.  Rand noted that the House has passed gaming before and that it should start this session in the Senate. Williams disagreed, saying the House has never passed a Constitutional Amendment - which is the only way it will ever pass both chambers.  He went on to say that this is the Governor's issue and the Governor should submit a proposal and meet with all legislators to get sign off, before it is introduced - and until that happens the issue won't go anywhere.

Unemployment Insurance
Williams talked about UI more so than Rand, and said that it's his understanding that the administration will propose a bill to look at UI standards and fix the way the state is able to make the interest payments on money loaned by the federal government. He said he would prefer that policy makers address these issues and that they not be negotiated by labor and industry.  Rand said he doesn't believe the situation is as dire as Williams was making it out to be.

Both agreed that they would like to see redistricting voted on as early as possible during the session, Rand mentioned the first 5 or 6 days of the session and Williams agreed.

The discussion focused mainly around K-12 issues like differentiated teacher pay, teacher training, charter schools, and raising the dropout age. Sen. David Givens (R) and Rep. Carl Rollins (D) each staked out their Chambers respective positions and it appears this will be a key issue during the next session.

The panel discussion consisted of representatives from the coal and utility industry, Bruce Scott with DEP, and Sen. Brandon Smith (R). There were not specific policy initiatives discussed in regards to the next session, though Sen. Smith made it clear he wants to see incentives that will allow Kentucky to benefit from low energy rates to create jobs. The focus was on the cost that ratepayers and businesses will experience due to increased EPA regulations.

A representative from HHS in Washington shared his thoughts on the creation of health insurance exchanges. He was joined by Sen. Tom Buford and Rep. Tom Burch who shared their thoughts on topics from exchanges to a statewide smoking ban. Both seem to support exchanges though Buford seemed to be more apt to be part of a national exchange ran by the Federal government.  In his comments later in the day, Senator Williams said that if exchanges are approved by Executive Order, he thinks there would be a court challenge. He said that everyone should be very concerned that the administration hasn't proposed how the states plans to handle the exchanges thus far, and that small businesses particularly associations should be concerned about the exchanges.

Tuesday, November 29, 2011

A&R Committee Update

November 29, 2012

The Interim Joint Appropriations & Revenue Committee met Tuesday in Frankfort to hear testimony on several topics, but the main item of interest was a presentation from Secretary of the Cabinet & Budget Director Mary Lassiter on the Beshear Administration's budget balancing measures for Fiscal Year 2012. The key points from her presentation are below and a copy of the handouts are available HERE

- The Beshear Administration has to reduce the budget by $189 million in the current fiscal year due to budget reductions enacted by the General Assembly.

- In order to balance the $189 million, they plan to:
  • Use $75 million in excess revenues from FY 2012 as projected by the state economists
  • Make $114 million in spending reductions broken out as follows:
      • $27 million in recurring 1.5% budget cuts and non-merit reductions
      • $57 million in debt service lapse (timing of when bonds were sold)
      • $29 million in additional 2% budget cut fr FY 2012
- The Administration has announced the additional 2% cuts for FY12. The additional 2% applies to the majority of state agencies, but not all as the Administration has exempted several; including - SEEK, Medicaid, Corrections, Universities, debt service, etc.

- In essence the 2% cuts will be taken from the vast majority of state agencies, but those agencies only make up 15% of the General Fund dollars. So those exempted from the additional 2% makes up 85% of General Fund dollars.

- In addition to the presentation on the FY 2012 balancing measures, John Hicks gave an overview on the impact of Federal Sequestration, across the board cuts to Federal funds that normally flow to states beginning in 2013. The good news is that 85% of the Federal funds that flow to Kentucky are exempt from the Federal Sequestration. However, Hicks provided a scenario that could have significant impact of nearly an 9% reduction. This will impact the budget lawmakers will be putting together during the 2012 Session.

- The tone of the overall presentation by Mary Lassiter was very pessimistic, which is somewhat of a change from the upbeat news from a few months ago when Kentucky posted a large surplus in the rainy day fund and revenues seemed on the uptick.

- Legislators asked a variety of questions most of which were aimed at the Governor's priorities going into the next session and his budget recommendation. Lassiter shrugged these off saying that it was too premature to discuss those until the revenue numbers were finalized in December. She said the Governor will present his budget on January 17th.

- The Budget Chairmen Sen. Leeper and Rep. Rand definitely shared Lassiter's mood in terms of the difficulties they will face putting the next budget together. That isn't necessarily out of character for Leeper who has been outspoken in his concerns about the next budget. Rep. Rand however, had been more moderate in past meetings, but seemed to be more pessimistic today.

- Other topics that were covered by legislator questions included:

Ohio River Bridges: Rep. Wayne asked about bonding and how the Governor would approach the bridges project in 2012.  Lassiter said the Governor has shown his commitment to the project, its just premature to say what they will obligate towards bonds.

Medicaid: Leeper commented that he is aware that Medicaid has requested an additional $200 million in the request they sent to the Governor's office. Medicaid came up on a couple of occasions since the $189 million was supposed to be covered in part from the Governor's Medicaid Managed Care program.

Furloughs & Layoffs: Lassiter was clear that the administration has determined that it will not use furloughs in FY 2012. On the topic of layoffs, however Lassiter said the preference was not to use those, but that they had not taken that off the table as a policy decision in order to meet the budgeted cuts. When asked about the next budget, Lassiter said it was too premature to determine what they would do on these issues in the next biennium.

Monday, November 28, 2011

Governor's Inauguration Details

Below is the press release from the Governor's Office regarding inaugural events set for December 13. We will continue to provide you more details including an Open House we are going to host at our office that day.
Government Strategies

Commonwealth of Kentucky
Office of the Governor
Kerri Richardson

Terry Sebastian

Governor's Inauguration to be Frugal, Family-Friendly Celebration

FRANKFORT, Ky. (Nov. 28, 2011) – The upcoming 59th Kentucky Governor's Inauguration will cost significantly less than prior inaugurals but will still offer many free events suitable for Kentucky families, according to Inauguration Executive Director Bob Stewart. 

The state's two highest constitutional officers, Governor Steve Beshear and Lieutenant Governor-elect Jerry Abramson, will be sworn into office during a full day of festivities Tuesday, Dec. 13, 2011. The theme of the inauguration is "Kentucky Tomorrow," and the Beshears and Abramsons are encouraging Kentuckians to recognize and consider Dec.13 as a day of service.

"We are very mindful of the current economic hardships across Kentucky as we plan this inauguration. We are looking at every possible way to be frugal." Gov. Beshear said. "The vast majority of the cost of the inauguration will be covered by private funds."

Event organizers will partner with many Kentucky vendors, use existing resources and reutilize and recycle when possible to create a more conservative event than in years past, Gov. Beshear said.   

"While the inauguration is an event for all Kentuckians to enjoy, Governor Beshear and Lieutenant Governor-elect Abramson felt very strongly that our citizens should be able to enjoy our 59th inauguration without worry about the cost to taxpayers," Stewart said.

As part of the event, the Honorary Co-Chairs will be former governors Wendell Ford, Julian Carroll, John Y. Brown Jr., Martha Layne Collins, Brereton Jones, Paul Patton and Ernie Fletcher.

Public Inaugural Events
All events below are free, open to the public and handicap accessible. 

8:30 a.m. – Inaugural Worship Service, Frankfort Convention Center
Due to the change in location from a local church to the Frankfort Convention Center, this year marks the first time in recent years the inaugural worship service will be open to the public. Kentuckians from across the Commonwealth are invited to participate in the worship service – a nondenominational ceremony offering solemn preparation for the day's events.

Worshippers and attendees are encouraged to drop off new toys or monetary donations at the service to benefit the Kentucky National Guard's Operation Military Cheer, a program that supports Kentucky military families in need during the holiday season. 

*10 a.m.- noon – Inaugural Parade
The traditional inaugural parade will begin at the intersection of Wilkinson Boulevard and Broadway Street and will conclude in front of the Capitol. 

Gov. Beshear and First Lady Jane Beshear, and Lt. Governor-elect Abramson and Mrs. Abramson will wave to the crowd from open horse-drawn carriages provided by the Kentucky Horse Park.  

*2 p.m. – Swearing-in Ceremony, Capitol
Visitors may line up along the Capitol's grand front steps to witness Gov. Beshear take his oath of office. This inauguration marks only the second time in the state's history that a sitting governor will be sworn in to a second consecutive term. The ceremony will be emceed by Gov. Beshear's younger son, Andrew. A musical prelude begins at 1 p.m. and seating is available for the public.  

Lt. Governor-elect Abramson will be sworn in first, followed by the oath of office for Gov. Beshear. Chief Justice John D. Minton Jr. will administer the oath to both officials. 

3:30 p.m. – Public Inaugural Reception, Kentucky History Center
The reception, hosted by the citizens of Frankfort, is open to all inaugural visitors. The museum will offer snacks and beverages.  The Hall of Governors at the museum was recently remodeled and will be open to the public during this event.

*8 p.m. – The Grand March, Capitol
The Grand March is a formal presentation of the Governor, newly-elected Lieutenant Governor and other constitutional officers, who will be sworn in Jan. 2. Music for the Grand March will be provided by the Owensboro Symphony Orchestra. Attire for this event is black tie optional. Doors will open for this event at 7 p.m. 

9 p.m. – Governor's Inaugural Celebration, Frankfort Convention Center
Instead of several balls at multiple locations, Gov. Beshear requested a single, centralized celebration for all Kentuckians in Frankfort. This inaugural ball will be catered by Kentucky State Parks and will serve some of the Commonwealth's favorite foods. Attire for this event is black tie optional. Doors will open at 7:30 p.m. and guests will be able to watch a live broadcast of the Grand March via on-site viewing screens.      

For more information and updates on public inaugural events, please visit the Governor's official inaugural website at
*Events to be broadcast live on the KET network. 


Follow Governor Beshear on Twitter @Govstevebeshear, read the Governor's personal notes on his blog at, and view the Governor's weekly YouTube commentary at

Thursday, November 10, 2011

October Revenues - Mixed Bag

The Office of the Budget Director released the October Tax Receipts for the General Fund and Road Fund today. General Fund revenues took a slight dip of 0.8%, while Road Fund revenues saw strong 13.2% growth. You can download the full press release and receipts report HERE. A few highlights:

- October is the 4th month in the Fiscal Year and the General Fund revenues have been down twice in these four months, August and now October. That being said through 4 months of this fiscal year General Fund receipts are up 3.5% YTD and only have to increase 0.3% over the next 8 months to meet the revenue estimate.

- The Road Fund growth through the first four months of this Fiscal Year is 6.6% and actually receipts can decline 3% over the remaining 8 months and still achieve the revenue estimate. However, Budget Director Lassiter predicted even stronger growth through the rest of the fiscal year.

The importance of the revenue receipts is magnified as the General Assembly session approaches in January, when the Governor and the General Assembly will work together to build the next 2 year budget. Not only are state policy makers trying to determine if there will be enough money to fund current programs, but legislators heading into an election year in November 2012 will be looking at possible projects and programs to take back home. Thus everyone is paying a little closer attention to the numbers. 

In this recent Courier-Journal article on Kentucky's current and future budget situation, it is clear that the House and Senate seem to have differing views of how the next budget might look. Certainly with the Governor's Race over the 2012 Session and its largest issue, the budget, will take center stage. 

Wednesday, November 9, 2011

Final 2011 Election Returns

Final 2011 Election returns with 100% reporting from the Secretary of State's Office:

Candidate     Party Total Votes Percentage
Governor/Lt. Governor
David L. WILLIAMS / Richie FARMER REP 295435 35.38
Steven L. BESHEAR / Jerry E. ABRAMSON DEM 464657 55.65
Gatewood GALBRAITH / Dea RILEY IND 74923 8.97
Secretary of State
Bill JOHNSON REP 322377 39.45
Alison Lundergan GRIMES DEM 494823 60.55
Attorney General
Todd P'POOL REP 368976 45.05
Jack CONWAY DEM 450081 54.95
John T. KEMPER III. REP 350717 44.32
Adam H. EDELEN DEM 440691 55.68
K. C. CROSBIE REP 377226 46.67
L. J. Todd" HOLLENBACH" DEM 393785 48.72
Kenneth C. MOELLMAN JR. LIB 37309 4.62
Commissioner of Agriculture
James R. COMER REP 520709 63.84
Robert Bob" FARMER" DEM 294991 36.16

Tuesday, November 8, 2011

Election Summary

2011 General Election Re-Cap

Top Headlines:
- Governor Beshear Re-Elected
- Democrats win 6 of 7 Constitutional Officers, Comer lone Republican Winner
- Voter Turnout Low

Kentuckians went to the polls today primarily to elect Kentucky's seven statewide Constitutional Officers with the featured race being for Governor of the Commonwealth between incumbent Governor Steve Beshear (D), Senate President David Williams (R), and Gatewood Galbraith an Independent.

Governor Beshear was successfully re-elected to a second term with 56% of the vote.
President Williams and Gatewood Galbraith garnered 35% and 9% respectively of the more than 800,000 votes cast in the Governor's Race. With Governor Beshear's victory his running mate, former Louisville Mayor Jerry Abramson (D) becomes Kentucky's Lt. Governor.

Although the Governor's Race was the featured race on the ballot the outcome was somewhat anti-climactic as Governor Beshear had shown significant strength in pre-election polling that matched his margin of victory tonight. Political observers are much more interested in what agenda Beshear might push forward in a second term after a large victory tonight. His victory speech offered a few hints; including: continuing fiscal discipline, world-class education system, and job creation is and will continue to be the top priority.

Down the Ballot

With wins in the Governor, Lt. Governor, Attorney General, Secretary of State, Auditor, and Treasurer races, the Democrats picked up 6 of 7 Constitutional Offices. The lone Republican winner was State Rep. James Comer who will be the next Agriculture Commissioner.

Its still early to draw significant analysis from tonight's election returns, but it is somewhat surprising that Kentucky; which has 2 U.S. Senators, 4 of the 6 Congressional Seats, and a State Senate controlled by Republicans, would see such strength by Democrats statewide. Maybe Kentucky's strong Democrat voter registration is just more persistent in these Constitutional election years.

Only three of the seven races featured incumbents, but all three won and all three were Democrats: Governor Beshear, Attorney General Conway, and Treasurer Hollenbach. So it doesn't seem that an anti-incumbent sentiment was at play today, which has been more predominant in the past few election cycles.

No doubt more analysis will be done on tonight's returns in the days ahead.

Official Returns (Winners in Yellow) 98.6% of Precincts Reporting

Voter Turnout - 28%  This is historically low, second only to the 1999 Gubernatorial Race when turnout was 20%.

Governor-Lt. Governor

Beshear-Abramson (D)  56
Williams-Farmer (R)      35
Galbraith-Riley (I)           9

Attorney General

Conway (D)   55
P'Pool (R)     45

Secretary of State

Grimes (D)    61
Johnson (R)  39


Hollenbach (D)   49
Crosbie (R)         46
Moellman (L)        5


Edelen (D)      56
Kemper (R)     44

Agriculture Commissioner

Comer (R)    64
Farmer (D)   36

Monday, October 31, 2011

Appropriations and Revenue Committee

Meeting Summary
The Appropriations and Revenue Committee met in Frankfort on 10-27.  The Committee heard from LRC staff on the Consensus Forecasting Group's two year economic and revenue forecast.  As you will remember, a few weeks ago CFG met and developed estimates or planning figures in preparation for the development of the 2013-14 Executive Branch Budget.  A good part of today's presentation was a review of what the consensus forecasting group is charged with and the process they go about using to put together their estimates. As part of this discussion, the point was made - and it's worth repeating - that fiscal year 2011 General Fund revenues surpassed the 2008 numbers - which were at pre-recession levels.

As you heard from us following the CFG meeting, it appears that the group will use a blend of the control and pessimistic forecasts for the General Fund estimates.  By using this model, the economists estimate that the state will realize some growth at the rate of 1.8% in 2013 and 2.8% in 2014.  Interestingly, Chairman Leeper had several points that he emphasized to his fellow committee members.  He was very clear that putting the budget together this upcoming session will not be an easy task - and he encouraged the committee to go back home and let their constituents know that even though there appears to be revenue growth for the next biennium, the budget situation is still dire.  Senator Leeper explained that during the last budget cycle roughly $300 million was used in one time money to close the gap and help balance the budget.  He had committee staff put together numbers based on the CFG estimates that there will be 1.8% revenue growth in 2013 and 2.8% in 14.  Based on those numbers, Leeper says that the state will face a deficit of $337 million in 2013 and $224 million in 2014.  Those numbers do not take into account any additional expenses in Medicaid, Corrections, Unemployment Insurance and the SEEK formula.  On November 29th, A&R will meet again and discuss in detail the potential budget deficit for the next biennium.

It appears that the budget dynamics for this next session are beginning to unfold and that the Senate majority could take a position against new spending.  Speaker Stumbo has on several occasions advocated for taking advantage of low interest rates and has said that now may be the time to address projects like building schools and addressing other infrastructure needs.  As you would expect, the potential seems to exist for opposite budgetary priorities from the majority parties in the House and Senate.

Time will tell, but rest assured that the next few months, along with the 2012 session, are bound to get interesting.

Monday, October 10, 2011

State Revenues Rebound

The State Budget Director Mary Lassiter released the September revenue receipts today and the General Fund revenues were up 10% and the Road Fund revenues were up 5.9% over September 2010. You can download the full release and numbers HERE, our analysis is below:

- After General Fund revenues decreased in August, for the first time in over a year, they came back strong in September. The General Fund revenues only have to achieve 0.2% increase over the rest of the fiscal year to achieve the estimated growth of 1.3%. This seems likely if the state's economy is able to shrug off the woes of the national economy.

- The Road Fund continues its growth with the fifteenth straight month of revenue increases. The Road Fund can actually fall 1.4% over the rest of the fiscal year and achieve the official revenue estimate. A significant surplus in the Road Fund seems likely if gas prices continue at their current levels.

Analysis: The Consensus Forecasting Group, the economists that predict the revenues the next state budget will based on, have been meeting and reviewing the state's economy. In August they were relatively upbeat because the 2011 FY was in the books and the state had made a significant deposit of $121 million in the rainy day fund. But at their September meeting the national economy had soured and the August receipts were down and they were very pessimistic about the state's short term and long term revenues. The question is how will strong growth in September revenues impact their outlook at the upcoming CFG meeting this Friday, Oct. 14?

Stay tuned!

Friday, September 30, 2011

Notes from CFG Meeting

The Consensus Forecasting Group, a panel of economists charged with predicting the state's future revenues, met today in Frankfort to review the key economic data for the US and Kentucky economies. The highlights from the meeting are below and you can view the handouts HERE:

- This is the second of a three meeting series, with the final meeting of this series scheduled for October 14, when the CFG will make its preliminary revenue forecast. The Governor's Office will utilize that number to prepare the Governor's Budget that he will present in January. The CFG will meet again in December and January to finalize the state's revenue forecast for use in the 2012 Session as the General Assembly builds the next biennial budget.  

- Today's meeting was more focused on an analysis of the economic data and discussion of the economists overall views of the economy. Most of the economists were relatively pessimistic in their view of the economy. That view may still lead to revenue growth in the next biennium, but possibly not as robust as originally thought.

Friday, September 23, 2011

Budget Committee Notes

The Interim Joint Committee on Appropriations & Revenue met yesterday and heard testimony regarding Kentucky's Economic Development efforts and a staff report regarding Kentucky's use of bonding and current credit status.

Budget Staff Changes: Of particular importance, it was announced at the meeting that Bart Hardin the current LRC Budget Director would be retiring next week. Beginning October 1, Greg Rush will take over those duties. Greg has most recently been the Budget Review staff for Education. He will be joined by Stephanie Craycraft as his Deputy. Stephanie is coming from the Budget Review staff for Transportation.

Economic Development
Secretary Larry Hayes and Commissioner for Business Development Erik Dunnigan presented an update to the committee on current economic development efforts and the status of implementation of House Bill 3 from the 2009 Special Session. Much of their presentation followed very closely with their slides which are available for download HERE, the highlights are below:

- Staffing at the Cabinet is down 30% from 2007. They have been looking at their structure and trying to get "flatter" by reducing down from 3 Commissioners to 1 and by tearing down silos to be more cross-functional. This has been in response to the changes in HB 3.

- Prior to the passage of HB 3 in 2009, they had the K-programs, which were useful, but they took a piecemeal approach to trying to help a company. The focus was on new business location and not necessarily helping the companies Kentucky already had. Business changed the way they were doing things, competition wasn't for the next Toyota, but inter-company for a Kentucky business unit to compete against the same company's unit in another state or country. Incentives had to change.

- HB 3 has been helpful because of the reinvestment incentives, the consolidation of the K programs, and the increased accountability if companies do not meet the goals in their economic development agreements.

- Since 2009, the Cabinet credited HB 3 with $3.5 billion in new investment from 350 firms that have been approved. Creating nearly 20,000 new jobs and retaining more than 7,000 existing jobs.

State's Debt
LRC Staff for the Capital Projects and Bond Oversight Committee, Kristi Culpepper, gave a presentation on the state's debt. Her presentation served as the highlights from a recent report she compiled that is more in depth on Kentucky's bonded indebtedness. You can download the presentation slides and the report are attached, and the highlights are below:

- Due to structural budget imbalances, high levels of debt per capita and dept as a percent of revenues, and due to high levels of unfunded liability in Kentucky's pension system Fitch and Moody's have each downgraded Kentucky in the last year. Further, the outlook from all three of these agencies is negative.

- The practical impact is that Kentucky will have difficulty issuing more debt going forward, because investors will want higher rates thus costing more in terms of state appropriations for debt service.

- There are no silver bullets to solve the problem as increased appropriations to fund items like pension liabilities eat up revenues that could be used to pay debt service on new or expanding projects and programs and actually reduce the states cash position.

The attached presentation and report provides more in depth analysis.

BR Sub on Transportation

The Budget Review Subcommittee on Transportation met yesterday a summary is below and the handouts are available for download HERE

The Cabinet gave an update of the Road Fund.  It was characterized by the Chair as the one piece of positive financial news in Frankfort recently.  In 2011 they met and exceeded all estimates with the three main tax sources--motor fuels tax, motor vehicle usage taxes and the other category which is weight distance and the various license fees.

Chairman Collins, Chair of Transportation asked a question about the escalating gas tax and whether it was in danger of falling back with the falling wholesale prices.  The Cabinet answered they were confident the current tax rate would be safe to at least January.

The Cabinet also gave an update on the bond situation.  The state has 1.45 B in bond funds authorized dating back to 2005.  The years 05 and 06 are pretty much maxed out.  The years 09 and 2010 have substantial bonding authority remaining.  They expect to have the remaining projects obligated in the next two years.

Another Cabinet presentation was on the Appalachian Projects that are funded with Appalachian Regional Commission funds, but contain a 20% state match.  These projects were started in 2002 and are huge in scope--some 600 plus million in Letcher, and the Pike US 460  corridor.  Majority Leader Adkins brought up the initiative to have the remaining 2-3 lane section of the Mt. Parkway and the corridor from Campton to Hazard as Appalachian eligible and able to receive APD funding.  These are projects that have been discussed for some time and most state officials believe they couldn't fund without the APD designation.

Finally, they had a quick update on BRAC spending by the head of BRAC in Kentucky, Col. Mark Needham.
No mention of the Sherman Minton or the Ky/In Bridges project.

Thursday, September 22, 2011

2012 Session Calendar

See the news release from LRC below and/or access the 2012 Session calendar by clicking HERE.

News Release
September 16, 2011

Calendar set for 2012 legislative session

FRANKFORT – The 2012 Regular Session of the Kentucky General Assembly is scheduled to begin on Jan. 3 and will last 60 days, the maximum number allowed by the state constitution.

The session will conclude on April 9, according to the schedule that has been approved by Senate President David L. Williams and House Speaker Greg Stumbo. The schedule is pending ratification of the full 16-member Legislative Research Commission, which Williams and Stumbo co-chair.

Legislators will not meet in session on Jan. 16 in honor or Martin Luther King, Jr. Day or on Feb. 20 in observance of Presidents' Day.

The veto recess – the period of time when lawmakers commonly return to their home districts to see which bills, if any, the governor chooses to veto – will run from March 28 through April 7.

The 2012 session calendar can be viewed online at


Friday, September 9, 2011

August Revenue Report - GF Down & RF Up

The State Budget Director's Office released the August tax receipts report today. Click HERE to see the full report, here are the highlights:

- The General Fund broke a string of 15 months of increasing revenues, as August General Fund receipts came in 3.0% below August 2010, $623 million compared to $642 million a year ago.

- The Road Fund on the other hand continued its streak of revenue growth for the 14th consecutive month with a 5.4% increase in August resulting in $134 million in revenue.


- General Fund: At the most recent meeting of the Consensus Forecasting Group, the state's economists predicted that revenues would increase and that based on current budgeted expenses Kentucky could possibly have a significant surplus of $192 million in June 2012. To meet the official forecast revenues would need to grow 1.2% over the rest of this fiscal year. Certainly one down month won't necessarily have a large impact, but given the national economy it will be interesting to see if this forms into a trend.

If so it could drastically impact the General Assembly's work on the 2012 budget in January if they have less revenue than expected. Since 2008, the General Assembly and Governor Beshear have had to deal with less revenue year over year, and it appeared with the recent $121 million deposit into the rainy day fund and possible surplus next year things were looking up. However, they may not be able to take a break from the budget cutting just yet.

- Road Fund: Lead by continued growth in motor fuels tax 4.4% and a strong growth month from motor vehicle usage tax 10% the fund continues to grow. Only two months into this fiscal year and revenues could decline 0.7% over the rest of the fiscal year and the fund would still meet its revenue forecast. Certainly, more monies in the Road Fund could aide in the overall politics of the state budget when the legislature takes it up in the 2012 Session. But it is a long time between now and January and with the overall apprehension about the national economy anything could happen.

Thursday, September 8, 2011

Transportation Committee Notes

The Senate and House Transportation Committees met separately today in Frankfort to discuss a variety of issues. Both committees had the same agenda, with the exception of an update from KY Speedway on parking and traffic improvements related to the NASCAR race that took place several months ago. The Senate Transportation Committee included this as part of their agenda, while the House committee did not.

KY Speedway
Mark Simendinger, the General Manager at Kentucky Speedway, gave a good review of the problems that they experienced with traffic and parking at the recent NASCAR Sprint Cup Race, to Senate Committee members this morning. As part of their effort to improve track operations before next year's race, the Speedway has purchased land for additional parking. In addition to this improvement, the state has agreed to fund the construction of a tunnel connecting the new parking lot to the track and also a new lane exiting off of I-71. The total cost to the state will be $3.6 million. Several Republican senators were critical of using public monies to pay for a private venue for an event that will take place one time per year. Secretary Hancock said that they will use funds from the Cabinet's contingency account. In response to questions from Senator Givens, Hancock explained that the account contains approximately $31 million annually, and those funds are budgeted by the General Assembly.

Road Fund Update
A brief update was given by the Cabinet on the status of the Road Fund. As has been reported, revenues have exceeded Road Fund estimates, to the tune of $73 million in FY 11. The following questions were asked:

Senator Shaughnessy asked for a breakdown of the gas tax by county and the Cabinet responded that it is not reported in that manner. Shaughnessy has requested a meeting with Hancock and Finance Cabinet officials to determine if that data can be determined.

Senator Thayer asked how the additional revenues would be spent and Hancock told the committee that the funds will support state funded construction projects.

There were a couple of questions related to electric vehicles and how funding for roads will continue with this movement away from gasoline. Hancock said that all states are wrestling with this issue and they are hopeful that Congress will provide guidance. Senator Higdon mentioned that he is aware that a bill will be filed in the 2012 session to allow for tax credits for electric vehicles.

In the House Committee, Chairman Collins mentioned the car trade-in tax credit and his desire that the credit be placed back into the budget this coming session. He believes the program has been positive for revenues. There were additional questions related to how the additional revenues would be used, and as in the Senate committee Hancock said they will go toward state funded projects. As part of this conversation, Rep. Combs expressed concern that the construction jobs are not going to labor workers and instead going to out of state workers. Rep. Henley echoed those concerns.

I-69 Update
Ted Merryman was introduced as the project manager for the I-69 project. Merryman gave the background and then an update on where the state is with I-69. The interstate will cover approximately 160 miles, with 140 miles along the existing parkway system. Last week 55 miles were branded as I-69. Eventually 10 miles of new road and 1 new bridge will need to be added as part of the project. Jody Wassmer, with the Owensboro Chamber of Commerce and Brad Schneider with the Henderson County Chamber of Commerce spoke in support of the project. In the House Committee, Chairman Collins asked how the project would be funded. Hancock said that innovative financing will be an option as well as state funds; they will be looking for the right mix. Arnold Simpson followed up by asking if tolls were the innovative financing that Hancock referred to. He said that, yes, tolls would be looked at for the project. Simpson also asked about the support of the Congressional delegation. The answer he received was limited to contacts with Whitfield, McConnell, and (to a lesser extent) Rogers. Steve Riggs tried to hone in on whether Paul supported the project. It seems that there has not yet been contact with Paul.

KAVIS Update
Representatives from the Cabinet, Tom Zawacki and others, gave an update on the implementation of the new Automated Vehicle Information System. The current system, AVIS, needs to be replaced because of new technology and to improve certain processes and customer service to the public and to county clerk office. The vendor that the state is using is 3M and they have successfully implemented similar programs in several states. Currently AVIS has high maintenance and programming costs and the new KAVIS system will reduce those numbers by half. In addition KAVIS will allow for digital documents, more reporting options, and more online renewal options. The Cabinet has set August of 2012 as the earliest possible go live date, but have a secondary date of the end of 2012, if need be due to the heavy workload the County Clerks will have working on the November 2012 presidential election. House committee members asked questions regarding the potential that exists with driver's licensing and paperless titling. The Cabinet says that the new system is designed to handle both of these, but will not be implemented at this time. A driver's licensing system would require an additional capital investment as well.

Estimating Procedures for Highway Construction Contracts
Finally, Secretary Hancock and Steve Waddle (State Highway Engineer) gave an overview of how the cabinet goes about putting together engineering estimates to be used in bidding highway construction contracts. The state's engineer estimate is the baseline for a project and the Cabinet will use that to analyze and review the bids they receive. The estimates for all highway construction projects are kept confidential.
Two methods are used: a historical data approach and a cost-based analysis. The Cabinet will use both of these approaches and sometimes a combination of the two depending on the project.

In response to questions, particularly in the House committee, the Cabinet said they get more bids on projects than they have in the past and specifically are averaging 3 bidders per project. In some instances, they have had as many as 11 bids on a single project. Rep. Riggs asked if the process that is used is audited and the Cabinet said that it is audited frequently. There was also some discussion as to whether contractors were able to hire from the cabinet staff who put together the engineering estimates. Hancock and Waddle mentioned the ethics laws and also said they didn't see where it would be an issue, although they did ultimately say that would look into the issue further.

Wednesday, May 18, 2011

2011 Primary Election Update

Kentucky voters went to the polls Tuesday in record-low numbers to determine the Democratic and Republican nominees for state-wide Constitutional Offices: Governor & Lt. Governor, Attorney General, Secretary of State, Auditor, Treasurer, and Commissioner of Agriculture.

Voter turnout for the Primary on Tuesday was around 9%, with just over 270,000 ballots cast. AP Story on Low Turnout

Primary Results: Winners in Yellow & (i) signifies incumbents

Governor & Lt. Governor

Democrat: Governor Steve Beshear (i) - Unopposed in Primary

Republican: David Williams 48%,  Phil Moffett  38%, and Bobbie Holsclaw 14%        

In the Republican primary, State Senate President David Williams won in a three-way race defeating Tea Party candidate Phil Moffett and Jefferson County Clerk Bobbie Holsclaw. For Williams that was the good news, unfortunately he failed to achieve a majority of the Republican votes cast on Tuesday despite out spending his competitors significantly.

Williams will face incumbent Governor Steve Beshear in November, who was unopposed in the primary. Beshear has a significant campaign war chest of more than $4 million and the power of incumbency as his assets. Williams will have support from national Republican groups like the Republican Governor's Association to help even out the differences in fundraising. Its early to chart out the gameplan for each campaign, but Beshear will run on his efforts to attract jobs and balancing the budget through tough economic times. Williams will likely run against Beshear's record, which he will say has no significant policy victories.

All of the other races are really under card bouts as the Office of the Governor is still the top political prize in Kentucky politics and this looks to be a very interesting race.

Attorney General

Democrat: Jack Conway (i) - Unopposed in Primary

Republican: Todd P'Pool - Unopposed in Primary

This race will finally get underway as both candidates moved through the primary unopposed. Conway as the incumbent and coming off of his 2010 run for the US Senate has strong name ID that will make him the front runner. P'Pool as a newcomer on the statewide scene will have to work hard to raise money and increase his exposure in Kentucky.

Secretary of State

Democrat: Alison Lundregan Grimes 55% Elaine Walker (i) 45%

Republican: Bill Johnson 50.4% Hilda Legg 49.6% - Too Close to Call

These were the two most competitive primary elections on Tuesday. For Frankfort insiders, Grimes defeat of Walker, the Democrat incumbent who was appointed by Governor Beshear, was the most intriguing. The race exposes a potential rift in the Democrat Party between Beshear and Grimes' father Jerry Lundergan, a former Democrat Party Chair.

On the Republican side at the time of this writing the two candidates are seperated by only 100 votes with 99.8% of precincts reporting. This race is too close to call.


Democrat: Adam Edelen - Unopposed in Primary

Republican: John Kemper 57% Addia Wuchner 43%

This is an open seat being vacated by Auditor Crit Luallen. The Democrat nominee is Adam Edelen who will have a significant financial advantage in November over his Republican opponent, John Kemper, who defeated State Rep. Wuchner on Tuesday. Kemper has gotten some bad publicity as of late as he is going through a personal bankruptcy.


Democrat: Todd Hollenbach (i) 71% Steve Hamrick 29%

Republican: K.C. Crosbie - Unopposed in Primary

State Treasurer Todd Hollenbach handily beat his Democrat primary opponent and will now face Lexington Council Member K.C. Crosbie. Crosbie is a new comer on the statewide scene, but is not a political novice as she holds a local office and her husband Scot has also held local office in Lexington. Should be competitive in November.

Commissioner of Agriculture

Democrat: Robert Farmer 30%, John Lackey 21%, B.D. Wilson 19%, Stuart Gritton 17%, David Williams 13%

Republican: James Comer 67%, Rob Rothenburger 33%

This is an open seat vacated by Richie Farmer. State Rep. James Comer won handily over his Republican primary opponent and now faces Democrat primary Robert Farmer. Comer will be well positioned to run strong in November as Farmer is a newcomer to politics and apparently the agriculture community as well. 

We will be bringing you more analysis in the days and weeks to come.