The 2008 Kentucky Legislative Session convened on January 8, 2008 amid warnings from Governor Beshear that schools, universities and state government could expect budget cuts.  This session is considered a long session lasting 60 days to encompass passage of the state budget.  Areas of interest to the municipal utilities included a variety of issues:  agreement on the budget, personal emergency alert equipment, underground utility line placement, forestry, expanded gaming, deployment of broadband to underserved areas and funding for the Kentucky Retirement System.    Overall, this session was very good for  Kentucky Municipal Utilities.  No overly detrimental bills were passed and those that posed a threat were soundly defeated.  

KMUA’s very active membership, grassroots efforts, phone calls, letters and visits made to legislators made all the difference in our success this year. 

This year was an especially fruitful year for MWWAK with $225 million in water and sewer projects approved and an additional $200 million in federally leveraged loan funds available.

Expanded Gaming: The Governor’s legislative agenda and part of his campaign promises included three proposals:  Gaming, Ethics Reform and Pension Reform – none of which were successful during this legislative session. The flagship issue for the Beshear administration was a proposal for expanded gaming as a revenue source for the Commonwealth, which included 12 casinos – 5 of which would be located at race tracks.  The Governor wanted to give Kentuckians the opportunity to vote in a November 2008 referendum to decide the issue.  Some of the proceeds would go to fund education and help the horse racing industry.  Along with others, Kentucky Equine Education Project (KEEP) and former Governor Brereton Jones were strong proponents of the idea.  The Administration’s proposal was watered down in committee reducing the proposed 12 casinos to nine and did not give direct benefits or protection to the horse industry.  There simply were not enough votes to pass the bill in the House and the legislation died without ever going to a vote on the chamber floor.

Budget

Earlier this month the General Assembly approved a two-year, $19 billion state spending plan that included numerous cuts to government agencies and programs.  For the first time in Kentucky ’s history state revenues will fall short of current spending levels by $900 million over the next two years. 

After five days of open negotiations broadcast by KET, the last two days of negotiations were held behind closed doors away from public view.   

 The budget adds $300 million in new revenues – which comes from eliminating 3,400 state jobs, restructuring the state’s debt, efficiency measures and capturing an additional $14 million from the state lottery.  Legislators are hopeful that these new revenues along with the cuts in the budget will address the shortfall over the two year budget cycle.

Senate President David Williams and Rep. Greg Stumbo met and reinstated 150 million in individual water and sewer projects.  Up to $100 million for new projects went to non-coal producing counties and $50 million to tobacco settlement counties.   KMUA worked with KIA and others to ensure that the $200 million in federally leveraged funds for water and sewer projects is in the budget.  In the end, at the final hours, an additional $75 million in specific water projects were added by the Senate!

Road and building projects are very limited in this budget.  Higher education was cut by 3%, The Health and Human Services budget was cut by $40 million. The public defenders office was cut by $1.2 million over two years. 

State employees and teachers will get a 1% raise this year but the legislators will get the full 5% increase in salary for themselves and their staff. 

Non-violent offenders will be moved to home incarceration to save $4.4 million.  Those savings will be used to build the 200 bed pre-conviction drug treatment house outlined in SB 72.

The 2008, fiscal year will begin on July 1, 2008 . The Governor has the authority to enact line item vetoes.  If the legislature doesn’t pass the budget before the end of the session, there is no opportunity for the legislature to override the vetoes. In this session, the legislature passed the budget in a timely fashion, but apparently couldn’t get the votes or find the time to override the eleven gubernatorial vetoes.

Collective Bargaining:  KMUA joined forces with the Kentucky League of Cities on a variety of issues during the session.  Of particular note was the defeat of a collective bargaining bill, HB 403, sponsored by Representative Joni Jenkins.  KMUA members’ calls and letters helped a great deal in defeating this potentially harmful piece of legislation.   

The Retirement Bill: 
HB 600 went down to the wire and into free conference committee.  The bill failed when no agreement was reached between the House and Senate conferees.  The Governor has said that he may call a special session to work the differences out in June but not until the two chambers could work out their differences and craft a meaningful Kentucky Retirement System reform bill that could be passed in a five day special session.  KMUA members’ calls to protest the changes to the Cost of Living Allowance helped to raise questions and concerns about the bill and its passage.

Telecommunciations:
ConnectKentucky Pulls Legislation:  ConnectKentucky’s draft legislation was not be filed in the 2008 legislative session citing the state’s budget deficit as the cause. Andrew McNeil of ConnectKentucky stated, “Given the clear budgetary challenges facing the Commonwealth – ConnectKentucky has determined that the time is not right to pursue tax incentive legislation this session.”

KMUA membership, board and leadership reached out to their legislators and made a real impact with the lawmakers on the proposed ConnectKentucky legislation that was harmful to municipal broadband interests.

In addition, Art Brodsky, from Public Knowledge, a Washington D.C. think tank issued an expose article on Connect KY that is getting a lot of attention in the industry and with the legislature. This is the first time that Connect KY has been publicly challenged. Brian Mefford of Connect KY has since issued a heated response. 

ConnectKentucky’s request for additional funding in the state budget was vetoed by the Administration.

Energy:

A major energy bill was passed in HB 2.  This bill was the combination of a variety of miscellaneous energy bills. This bill was passed after the clock was stopped at midnight . This bill offers three important points  for municipal utilities interests:

1. Beginning July 1, 2009 , all municipal/public buildings (and universities) that will be constructed or renovated must conform to a new high performance energy efficiency building standard which means installation of energy efficient equipment (i.e. ENERGY STAR product). This applies to all projects that have not entered the design phase prior to January 1, 2009 . Tax credits will be available to those entities purchasing energy efficient products. 

2. The Kentucky River Authority will promote private investment in the installation of hydroelectric generating units on the Kentucky River dams. 

3. Creates new sections of KRS Chapter 42 to establish the Kentucky Bluegrass Turns Green Program which creates a public sector grant fund and authorizes bond funds in fiscal year 2008-2009.  The principal amount authorized shall be increased by the amount necessary to capitalize and pay required principal and interest payments in fiscal year 2008-2009 and fiscal year 2009-2010.

Forestry:  KMUA worked with legislators and other interests to raise questions regarding the impact of four forestry/logging bill on municipal utilities, with the help of its membership.  The bills died in committee and the issue will be taken up again during the interim session over the summer. It is likely we will see it again in 2009.

Clock Stopped: When time ran out eleven bills and three House Joint Resolutions were passed after the midnight cut off on April 15^th.  Both the House and the Senate stopped the clock a practice used in the past to get those final pieces of legislation passed. The Kentucky constitution stipulates that the legislative session will end at midnight on the 60^th day of the session or at midnight on April 15, 2008 .

Kentucky ’s Attorney General, Jack Conway, has issued a statement to the press saying that those bills that were passed after the clock was stopped at midnight , will stand as law until and if they are challenged on the grounds of constitutionality in Franklin Circuit Court. 

KMUA Present and Involved:  Throughout the session, KMUA met with legislators to promote municipal water projects and raise the lawmakers’ awareness level about KMUA as an organization and about its legislative issues.

YOUR INVOLVEMENT WAS OUR SUCCESS!  KMUA’s membership and its active involvement made a huge difference in how much we achieved this year in terms of getting our water projects funded and in terms of amending or defeating potentially harmful legislation.  Thank you for your help.  We are much stronger together as municipal utilities than we could ever be apart.

While a significant number of bills were passed during this 60 day legislative session outlined below are the bills that are of significant interest to municipal utilities.

INDIVIDUAL BILLS OF INTEREST:

EMPLOYMENT ISSUES

Confidentiality Agreements for Unemployment Insurance Records:  SB 146:  Senator Gibson – Signed by the Governor

Amend KRS 341.190 to require a public agency that receives unemployment insurance information and records to enter into a written agreement to meet the federal safeguards of confidentiality and disclosure requirements; provide for release of information and records to a public official by subpoena; require that information and records be available to a federal official for the purpose of oversight and auditing; specify that disclosure of information is to be made only if necessary for the administration of the unemployment insurance program, a small amount of processing time is required, or cost of providing the information and records is paid by the recipient prior to the disclosure; amend KRS 341.990 to create a Class D felony penalty for any person who violates the confidentiality provision of information and records.

Comp Time for City (Municipal) Employees:  HB 365:  Representative Marzian  - D

KMUA polled its membership and more than 50% of respondents said they already had a comp time policy or allowed comp time or had no problem with allowing it in the future.

This bill amends KRS 337.285, relating to compensatory leave time, to include city employees in these requirements.  This bill was supported by  the Kentucky League of Cities and others as a “money” saver for cities – in lieu of paying overtime, managers could grant comp time.

ENERGY

Expanded sources of energy for net metering.  SB 83  Senator Harris – R

This bill expands the sources of energy for net metering and applies only to “regulated” utilities as stipulated KRS Chapter 278. KMUA watched it closely throughout the legislative session. This bill amends KRS 278.465 to add wind, water, or other renewable energy sources to eligible sources of customer-generated electricity. The bill was amended to include biomass and biogas as sources of net-metered energy; increase rated capacity of generating units from 15 to 50 kilowatts, to require the PSC to develop guidelines for interconnection and net metering by retail electric suppliers and to require suppliers to file tariff complying with guidelines. It amends KRS 278.466 to increase the cap on accommodating customer generators from one tenth of one percent to one percent of the supplier's single hour peak load.  The legislation adds biomass and biogas to list of fuels in definition of "eligible electric generating facility"; increases the maximum rated capacity of such facilities from 15 to 30 kilowatts, amends KRS 278.466 to increase percentage of peak load beyond which suppliers may petition PSC to limit additional customer-generators, requires suppliers to carry forward net-metered credits for the life of the customer-generator's account, requires customer-generator to pay for any interconnection upgrade and also amends KRS 278.467 to require the PSC to develop interconnection and net-metering guidelines and require retail electric suppliers to file tariffs complying with those guidelines.  This bill was sent to the Governor on April 15^th.  He has taken no action to date and has until Friday the 25^th to veto or sign the bill.  If he takes no action and does not sign the bill it will become law.

Coal Gasification Bill  SB 243 – Senator Ridley – D

This law pertains to special waste and amends KRS 224.50-760 to include wastes generated from coal gasification as special wastes and specifies which coal gasification wastes are treated as special wastes and require testing of those wastes to be submitted to the Environmental and Public Protection Cabinet for approval. This bill was signed into law by the Governor.  KMUA contacted the members with generation capacity and they were not affected by this bill.

Gas Acquisitions Authority Bill HB 690 Representative Rand – D

This bill is significant for KMUA as it represents Joint Action for six municipal natural gas providers to join in a Gas Acquisition Authorities created through the interlocal cooperation act for acquiring and financing reliable and economical supplies of natural gas for the use and benefit of municipal utilities. Private natural gas companies worked cooperatively with Carrollton Municipal Utilities to get the bill passed without opposition.

INSURANCE

Colorectal Cancer Screening Covered  - SB 96 - Senator Buford – R

This bill requires health benefits plans to cover colorectal cancer screening effective January 1, 2009 , in accordance with guidelines of the American Cancer Society.  Less than 50% of the municipal utilities that responded to the KMUA are self insured.  However, all insurance plans and costs will be affected by this new requirement.   All the major insurance companies fought against this bill and were unsuccessful. This bill was signed into law.

Mammograms Covered – HB 316 – Representative Marzian – D

This bill requires health plans to cover the cost of mammograms.

This bill was delivered to the Governor on April 15^th and to date has not been signed or vetoed. Less than 50% of the municipal utilities that responded to the KMUA are self insured.  However, all insurance plans and costs will be affected by this new requirement.   All the major insurance companies fought against this bill and were unsuccessful. This bill was signed into law.

LOCAL GOVERNMENT

Construction Supervision - SB 23  - Senator Tapp 23 - R

This bill requires political subdivisions to utilize a licensed architect or professional engineer for the construction of public works that involve "the practice" of architecture or engineering; requires that a licensed architect or professional engineer directly supervise only the administration of specified public work construction contracts rather than directly supervise that public work's construction, generally. KMUA met with Senator Tapp to ensure that the bill did not affect sheds etc. that might be built by a municipal utility.

Annexation of City Owned Utilities by Another City -  HB 506 Representative Ron Wilkey – D

This new law establishes procedures for annexation by a city of an area of another city in which a city owned utility infrastructure exists. It prohibits the annexation of any area that includes utility infrastructure owned by a city if the city objects at or by the second reading of the annexation ordinance by the annexing city.  The cities in interest may agree otherwise through an interlocal agreement.  This will allow for formal notification if municipal utility infrastructure is in question. This bill is considered advantageous to KMUA members.

TAXATION

Utility Refunds – HB 704 – Representative Moberly – D

This bill specifies circumstances for utility refunds of overpayment of gross utility receipts tax and for inaccurate billing of property owners. This bill amends KRS 160.6156 to provide that a utility service provider shall not be entitled to a refund or credit of taxes paid, unless the provider refunds or credits its related customers the amount of overpayment made to the department.  It amend KRS 160.6157 to allow the department to issue a penalty on a utility service provider who erroneously bills a customer after being notified by the department of the error in an amount equal to $25 per subsequent error, not to exceed $10,000 per month; amend KRS 160.6158 to allow the penalty to be waived based on reasonable cause. This bill was reviewed by OMU and it was determined that it did not impact municipal utilities as they do not pay the gross revenue tax.  This bill was delivered to the Governor on April 16; he has until the 26^th to take no action and it will become law, veto the bill or sign the bill into law.

STATE GOVERNMENT

Personal Alarm Systems – SB 57 – Senator Buford

This bill was signed by the Governor and creates a new section of KRS Chapter 438 to establish the limitations on the performance of services of a personal emergency response system provider; effective January 1, 2009 .  The only municipal utility that provides this service is the Frankfort Plant Board. KMUA worked with Representatives Harmon and Damron and Senator Buford to ensure that this bill did not harm the ability of municipal utilities to perform the service.  Section 4 of this bill exempts cities from the criteria in the bill.  Local government can impose a tax or a licensing or franchise fee on a personal emergency response system. 

Expands Best Value in Procurement Code - SB 100 - Senator Tapp

This new law expands the definition of “best value” in the Model Procurement Code and requires “best value” in the contract specifications. The law expands the definition of "best value" to include provision of items equal to those named in the contract specifications; amend KRS 45A.170 to require the inclusion of best value procurement in contract specifications; amend KRS 162.065 to require the inclusion of best value provisions in school construction contract specifications; amend KRS 164A.585 to best value provisions in construction contracts at public colleges and universities.  This bill will have a minimal impact on new construction by municipal utilities and is considered a construction cost saver bill.

State Budget Bill - HB 406 – Representative Moberly –D

The state budget bill went to free conference committee and

UTILITY SERVICES, TELECOMMUNCIATIONS

Call 811 Before You Dig HB 649 – Representative Webb-Edgington – R

This law requires determination of the location of underground facilities through the PSC 811 call center and exempts utilities in an emergency situation. This bill was designed to protect the telecommunications fiber from damage during digging and was heavily promoted by AT&T.  KMUA worked with AT&T’s lobbyist and other investor owned utilities to reach agreement on an amendment to impose a response time requirement on utilities.  The sponsor chose not to add the amendment.  This bill is yet to be signed by the Governor.

WATER

Water Districts Board of Commissioners - HB 83 – Representative Yonts – D

This new law is a housekeeping bill that KMUA amended to make sure that it was not detrimental to municipal utilities. The law creates boards of commissioners that manage water districts when an extension, merger or acquisition of a water district has occurred.

Stream Restoration and Mitigation - HB 717- Representative Adkins – D

This new law creates stream restoration and mitigation authorities within watersheds by local governments with specific objectives for improvement of water quality within the water shed. The law requires restoration and mitigation planning to be on a watershed basis and grants permissive authority for the creation of Stream Restoration and Mitigation Authorities for each watershed in the Commonwealth.  The authorities are empowered to coordinate with area utilities, governments, universities, and special districts to prioritize work in the watershed, coordinate planning projects, construct databases, and to conduct certain restoration and mitigation pilot projects.  It amends KRS 151.110 to provide that restoration and mitigation is of vital importance in the Commonwealth and requires local communities to develop stream restoration and mitigation plans along with water supply plans on a watershed basis. The cabinet is required to promote mitigation and restoration, offer technical assistance including monitoring, and coordinate with Stream Restoration and Mitigation Authorities to promote and implement projects on a watershed basis. This law stipulates “mitigation organization" is an organization approved by the U.S. Army Corps. of Engineers.  Definitions are added for "Section 401 certification", "stream restoration and mitigation," and "mitigation review team".  It adds storm water runoff and wastewater to stated policies of the Commonwealth for conserving and protecting aquatic resources.  It requires that stream restoration and mitigation authorities be established for HUC 10 rather than HUC 11 watersheds.  Authorities are prohibited from having the power of eminent domain and are in an advisory role vis a vis the mitigation review team and the division of water.  It allows the authority to expend funds for remediation of preexisting sources of pollution if approved by USACE. expand the members of the authority from 5 to 13 to include representatives from local governments, organizations representing aquatic interests; agriculture, and business and industry.  The initial terms for the new members are staggered. The bill deletes the authority's attachment to the Department for Natural Resources; allows the authority to make recommendations on projects to the mitigation review team, undertakes stream restoration and mitigation projects, establishes technical advisory committees,  prepares a 6-year work plan, and conducts restoration and mitigation in compliance with state, federal, and local laws. This law does not include the  authority to set total maximum daily loads, construct databases, and identify point source emitters; nor does it make reference to surface mining in the mining pilot projects. This law clarifies that the work plan does not amend federally mandated 2008 water quality plans; and does not allow the Stream and Restoration Authority's ability to identify point source discharges.