Auditor: Kentucky Misused Funds from State Insurance Tax

The Kentucky Law Enforcement Foundation Program Fund is supposed to be spent on training for police officers. But state lawmakers have raided its coffers for other purposes so often it forced officials to increase a tax on insurance policies just to prevent a deficit, a new audit has found.

Auditor Mike Harmon said state lawmakers took $93 million from the fund between 1989 and 2012 and spent it on things other than law enforcement. The money in the fund comes from an assessment on property and casualty insurance premiums. In 2010, with the fund facing a deficit, state officials increased the assessment to 1.8 percent from 1.5 percent.

Yet lawmakers continued to take money from the fund to help balance the state budget, removing another $56 million from 2012 to 2016.

“If they had not swept those $93 million in funds, would it be necessary to increase (the assessment)? Probably not,” said Harmon, a Republican.

The fund pays most of the operating expenses for the Department of Criminal Justice Training, along with an annual incentive pay to police officers to complete mandatory training. Harmon said the assessment on insurance policies was set by the Office of the State Budget Director, even though the office had no authority in state law to set the rate.

Harmon said his office could find no evidence the Justice and Public Safety Cabinet, which includes the training department, had given any information to the Department of Revenue to justify the assessment rate.

“Considering the amounts swept from the fund since its inception, the surcharge rate has historically been out of step with the actual needs of the fund,” Harmon’s office wrote in the report.

Harmon said Gov. Matt Bevin should consider lowering the insurance tax, or use the money for other law enforcement purposes. The most recent budget Bevin signed used money from the fund to increase the annual incentive pay for law enforcement officers to $4,000 from $3,100. It also used some of the money to address the backlog in DNA testing at the state crime lab.

Harmon announced audit results with Justice and Public Safety Cabinet Secretary John Tilley and State Rep. Denny Butler, a former Louisville police officer who has repeatedly called for the audit. They all criticized using the money for purposes other than law enforcement. But Harmon and Tilley are former members of the House of Representatives and voted for past budgets that authorized spending the money on things other than law enforcement – budgets that Butler also supported.

“The hard thing about voting on a budget, you don’t vote on one item. You’ve got to judge it in its entirety,” Harmon said.

The audit also found state officials at the Department of Criminal Justice Training used money from the fund on unnecessary and excessive purchases, including custom engraved mint julep cups and wrist watches that were gifts for retiring employees. Since 2008, the audit found the department spent $11,907 on retirement gifts for employees, which is illegal.

The audit also found the department had contracts with Eastern Kentucky University that were designed to skirt state laws governing procurement and hiring practices, which led to family members of high ranking officials landing lucrative jobs that, in one instance, paid more than $158,000 a year in salary and benefits.

Justice and Public Safety Cabinet Secretary John Tilley blamed the previous administration under former Democratic Gov. Steve Beshear and said he is reviewing the agency’s contracts and has stopped using public money for retirement gifts.

“I want to be clear: This culture of mismanagement and misconduct is unacceptable and won’t be tolerated under our watch,” Tilley said.