The lawsuit alleges the Kentucky Department of Corrections isn't properly transferring inmates to state prisons and has failed to pay counties for housing state inmates.
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Inmates will be sent there once staff training is completed this summer, officials said.
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The state Department of Public Advocacy is reviewing the practices in jails across Kentucky's 120 counties and whether any intercepted phone calls have been given to prosecutors.
Supporters of House Bill 463 touted the bill's success at a press conference, while law enforcement and prosecutors pointed to the concerns surrounding de-criminalization and early release.