OFFICE OF CEMETERY OVERSIGHT - Maryland Department of …



OFFICE OF CEMETERY OVERSIGHT

ADVISORY COUNCIL ON CEMETERY OPERATIONS

MINUTES

DATE: April 28, 2011

TIME: 10:10 AM – 1:00 PM

PLACE: Department of Labor, Licensing and Regulation, 500 N. Calvert Street, 2nd Floor Conference Room, Baltimore, Maryland 21202

CALL TO ORDER

Chairman Goodman called the meeting to order at 10:15 a.m.

MEMBERS PRESENT

David Goodman, Chair

Jay Cherry

F. Thomas Claxton

Richard Cody

Susan Cohen

Erich March

Frank Porter

David Zinner

Walter Tegeler

MEMBERS ABSENT

Sarah Rex

Harriet Suskin

STAFF PRESENT

Benjamin Foster, Director

Patricia Tress, Investigator

Leila Whitley, Administrative Aide

Paulette Wirsching, Assistant Attorney General

GUEST SPEAKERS

Harry Loleas, Deputy Commissioner, Department of Labor, Licensing

and Regulation, Division of Occupational and Professional Licensing

John Yeatman, Maryland Cemetery, Funeral & Cremation Association

VISITORS

John Stierhoff, Venable LLP

MINUTES

Mr. Zinner made a motion to accept the December minutes and Mr. Claxton seconded the motion.

The minutes were unanimously approved with corrections.

ANNOUNCEMENTS

Chair Goodman reviewed the agenda and announced that there would be two guest speakers: Deputy Commissioner, Harry Loleas who was returning to complete discussion on budget and finance issues and Mr. John Yeatman, President of the Maryland Cemetery, Funeral & Cremation Association.

Clustered Spires (Cemetery) introduced House Bill 556 (Business Regulation – Cemeteries – Forfeited Rights to Interment), not Richard Cody.

Chair Goodman reminded Advisory Council members that the financial disclosure filing deadline for the Ethics Commission is April 30, 2011.

Director Foster welcomes Janet Morgan, the new Outreach Coordinator for the Occupational and Professional Licensing Units.

BUDGET AND FINANCE-Harry Loleas

Mr. Loleas reviewed the Office’s current fiscal status. The Office is three quarters of the way through the current fiscal year with a balance of approximately $104,000. Mr. Loleas observed that the Office is in the odd year in terms of income and that he anticipated that the Office would be down to zero by the end of the fiscal year.

Mr. Loleas spoke about cremation trends and fiscal impact. It is difficult to know how things will track out. Internet research led to the same set of predictive numbers. CANA’s numbers prevail. There is a clear and persistent growth of cremation across the country. The states of Washington & Nevada are registering a 70% cremation rate. Southern states have a lower rate of cremation. Maryland is running about 25th in the pool of states and appears to be holding at around a 30% cremation rate. There is currently a 1% growth rate per year in cremation verses other interment options. The trend is for steady change over time and it is anticipated that the percentage in Maryland will eventually reach 50 – 50 in terms of cremation vs. in ground burial. Mr. Cherry asked if there were any statistics available on unclaimed cremains. Mr. Loleas was not aware of these numbers being available. Mr. Zinner asked about the source of the raw data used in CANA’s report and also whether the state of Maryland collected data on cremations. Mr. March suggested that Vital Records might be a source for that information. Mr. Loleas said that CANA’s data appears to be the most accurate and reliable source and spoke about how the cremation trend ultimately means the office will face a decline in the collection of per contract fees. The Office is just now at a point of collecting enough revenue to cover its costs without giving consideration to other costs such as inflation.

Mr. Loleas stated that the numbers speak to the need for a fee adjustment. He observed that the Office has now gone five years without a fee adjustment. The program lives or dies by the per contract fee. The Office will need approximately $411,384 (amount submitted to the Department of Budget & Management) to $450,000. Of that amount, $240,000 goes to staff salary and benefits. Mr. Loleas spoke about maintaining the right balance of funds to allow flexibility without having to create a line item in the budget for every single activity such as being able to send the Investigator to a training opportunity in Philadelphia or to secure and maintain a lap top computer for the Investigator. At the same time, Mr. Loleas spoke about the importance of not building up a balance in the account which in bad economic times might be transferred. He gave as an example the Medical Board which lost three million from its fund. There are trends which make calculating the right balance a real challenge. He gave as an example the Real Estate Commission which suffered a loss of 13,000 licensees during the current economic crisis. He spoke about the importance of having an adequate fund balance, but emphasized that it must be reasonable.

Mr. Loleas suggested a possible $3.00 or more per contract fee increase to $13.00 from the current $10.00 fee. Such an adjustment would be sufficient to cover at least the next two licensing cycles. Mr. March asked if there was ever a time when fees were actually reduced because of a surplus. Mr. Loleas responded that revenue prediction is an imprecise process, but gave an example of a DLLR Board where fees were actually reduced. Mr. Loleas said that although this is not a common occurrence, DLLR’s approach is that it is better to return money to the people who pay the fees whenever possible.

Mr. March spoke about the industry not deriving much benefit from sales staff licensing fees because of the high turnover rate and questioned whether it would be possible to lower the license fees. Mr. Foster stated that the individual holding the license and not the company was responsible for paying this fee. Mr. March advised that the industry practice was for the company to pay the fee. Mr. Loleas said that the fee is the responsibility of the individual as far as the law is concerned.

Mr. Cody said he would be in favor of a per contract fee for cremation. Mr. Loleas suggested that could be examined when once regulation of cremation is operational. Ms. Wirsching stated there is no contract fee allowed at this time for crematories. Mr. Cody spoke about training his staff to look at cremation as part of the memoralization process and not an end. Mr. Loleas said the Office would be responsible for overseeing approximately six crematories and the Board of Morticians would be responsible for approximately thirty three. Once both offices have dealt with real life experiences in terms of how much staff time is needed for oversight it would be easier to arrive at an understanding of operational budgetary needs. The current statue only allows for collection of an annual $250 fee per crematory, which for the Office means approximately $1,500 of additional revenue.

Mr. March spoke about the expectation that the number of cremations is anticipated to increase dramatically around 2020. A huge spike in the death rate will occur around that time due to the baby boomers generation coming of age. Mrs. Cohen asked Mr. March to comment on the cost difference between cremation and burial. Mr. March suggested that the price structure for performing cremations has been understated from the beginning and that the numbers don’t work in terms of having a profitable crematory operation. With the cost of a retort running between $80,000 and $100,000 plus maintenance costs, a crematory would have to perform ten cremations per day at the current price structure to break even. Mr. Loleas said that the economics are clear and questioned at what point economics tip the balance in terms of what people choose.

There was some discussion about the concept of hiring a CPA to assist the Office in reviewing trust reports and also about implementing E-Licensing. Mr. Loleas thinks the Office of Cemetery Oversight can get E-licensing and still keep a reasonable flow of revenue to support Office operations.

Chair Goodman asked what steps would have to be taken to raise the per contract fee. Mr. Loleas advised that Mr. Foster would initiate the change by proposing a fee increase. There would be a thirty day comment period, required posting in the Maryland Register. A date would be set for the fee increase and it would finally go into effect ten days after the second posting.

Mr. Porter would like a copy of the proposed budget. Mr. Loleas anticipates a four month process once Mr. Foster proposes the increase.

Mr. Loleas spent time doing a final review of the Legislative session and process. Mr. Loleas stated the following bills were withdrawn or had an unfavorable report: Senate Bill 245 (Cemeteries – Pre-need Burial Contracts – Interest or Finance Charges), Senate Bill 352 (Office of Cemetery Oversight – Cemetery Financial Statement – Requirements), and Senate Bill 353 (Cemeteries – Perpetual Care and Pre-need Burial Contracts Trust Accounts – Report Filing Deadline Extension).

Mrs. Cohen asked if the Legislature saw a need for the Advisory Council. Mr. Loleas said yes and advised that the General Assembly would be returning soon to conduct a Sunset Review. He then spoke about upcoming committee changes in the General Assembly, specifically in the House where cemetery issues will no longer be reviewed by the House Economic Matters Committee and instead will be covered by the Committee on Health and Government Operations which already has responsibility for legislative matters involving morticians. That way, all death care related matters would be reviewed in one committee instead of two. In the Senate, Senate Finance Committee would continue to address cemetery related issues and the Education & Environmental Affairs Committee would handle matters related to morticians. Mr. March predicted that in ten years regulation of the death care industry would be combined and fall under one entity.

Questions were raised about the Office’s internal process in deciding what position to hold on specific cemetery related legislation that is introduced during the legislative session. Mr. Loleas described the Departmental process. Staff meets as a Legislative Committee every Friday morning during the Legislative session. Positions are developed at that meeting and reported to the Governor’s Office. Mr. Foster said that when each bill came out during the last session, he contacted each member of the Advisory Council for input and feedback. Mr. Loleas said that Mr. Foster was the empowered regulator and that he tried to navigate the process as fairly and reasonably as possible. Mr. Zinner asked if copies of the Office’s testimony were available. Mr. Foster said he would send out copies for review.

Chair Goodman thanked Deputy Commissioner Loleas for again taking time out from his very busy schedule to meet with Advisory Council members.

GUEST SPEAKER-John Yeatman

Mr. Yeatman is currently serving as the President of Maryland Cemetery, Cremation, and Funeral Association and believes that the name of the organization has changed a number of times over the years due to changes and trends in the industry. He cited increases in cremation, declines in pre-need sales, increased regulation and increased consumer expectations.

Mr. March asked Mr. Yeatman if he knew which state had the highest Perpetual Care percentage requirement. Tennessee has the highest percentage rate for Perpetual Care Trusts, which is 20%. California has the minimum, which is on a per square foot basis. Mrs. Cohen expressed concern about inadequate perpetual care funding and asked what could be done. Mr. Yeatman shared his own effort to address that issue via charging a marker related fee (based on the size of the marker) that would be added to the Perpetual Care Trust Fund. Mr. Zinner raised several questions about the oversight of Trust funds. He asked Mr. Yeatman about whether he saw the relationship between the Office and Association as a partnership or more of an adversarial relationship. Mr. Yeatman does not see the relationship as a partnership due to the nature of the Office being a regulatory entity.

Chair Goodman asked Mr. Yeatman if he would comment on his perspective of the relationship between the Association and the Office and if he could reflect on areas in need of improvement. Mr. Yeatman spoke about progress and improvements the Office has made in speeding up the licensing process. However, he indicated there is still room for improvement and a hope that this process could still be accomplished in a more timely way. He also spoke about the recent legislative process and the lack of communication between the Office and the Association and expressed hope for improvement in the future.

Mr. Yeatman thinks most cemeteries would not be supportive of paying a fee for an outside consultant (CPA).

Chair Goodman thanked Mr. Yeatman for taking the time to meet with all of the members of the Council and the Office staff and for sharing his insights and perspectives.

RICHARD CODY- Forfeited Rights to Interment

Mr. Cody noted that the bill that Clustered Spires introduced was not supported by the Office. He gave out information for Council members to study. He asked if Mr. Foster would be willing to contact the National Regulators group to obtain information about other state practices. Mr. Porter objected to Mr. Cody asking the Director to do this research and instead suggested it might be more appropriate for Mr. Cody to take on that effort himself.

DIRECTOR’S REPORT

Mr. Foster would like to finish the changes on the licensing applications. In addition, Mr. Foster would like to work on getting the next newsletter out (in early summer). Many issues that are going on in the Office are taking up a good portion of the Office’s time that has precedence over other issues.

Mr. Zinner suggested that a small committee be formed to help with getting out information in the newsletter. Volunteers are, Mr. Goodman, Mr. Zinner, and Mr. Claxton will decide in the next month or two.

The Office of Cemetery Oversight is waiting for the Morticians’ Board to complete their portion of the regulations to license crematories.

Mr. Foster spoke about the possibility of doing a reprint of the brochure that was produced by the Office and the Board of Morticians.

Chair Goodman inquired about the status of forming a partnership with Maryland Archives on the further development of the Cemetery Inventory. Mr. Foster said that this was still under consideration, but that the Office would have to first post the Cemetery Inventory on its own website before such a partnership could be considered or move ahead.

Chair Goodman asked for an update on the Sunset Review process. Mr. Foster said that he just received first notice yesterday announcing that the process would get under way sometime in June.

INVESTIGATOR’S REPORT

Ms. Tress stated that 60 Minutes has contacted the Office of Cemetery Oversight in reference to federal legislation for cemetery regulation. They provided a list of questions to our Communications Office, which will be answered by Mr. Foster.

Ms. Tress is using the laptop and loves it. Ms. Tress has cremation training in Philadelphia, PA on June 9, 2011. The training is designed for members of the industry and is also recommended for regulators. The certification program is being put on by CANA (Cremation Association of North America).

Ms. Tress spoke about this being a busy time due to the approaching holidays (Mother’s Day / Memorial Day) and that complaints usually go up dramatically during this time of the year.

ADJOURNMENT

A motion to adjourn the meeting made by Mr. Porter and seconded by Mr. Cherry. The meeting adjourned at 12:55 p.m.

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