Request By:
Mr. William Savage
Director
International Division
Department of Commerce
Capital Plaza Office Tower
Frankfort, Kentucky 40601
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
You are concerned about OAG 79-448 in which we concluded that the practice of making full or partial payments on state personal service contracts in advance of the actual performance of personal service is unconstitutional. The conclusion is based upon the constitutional and statutory requirement that money to be paid out of the state treasury for personal service can only be paid after the services have been performed. See KRS 45.340, 44.010, 64.410, §§ 3 and 171 of the Kentucky Constitution. Also see
Webster County v. Vaughn, Ky., 365 S.W.2d 109 (1963) 110; and
Batesville Casket Co. v. Fields, 288 Ky. 104, 155 S.W.2d 743 (1941) 746.
Your problem relates to the legality of advance payments for the operational expenses of the European Economic Development Office of the Commonwealth of Kentucky, which is located in Brussels, Belgium.
The problem was described as follows:
"At the present time, a bank account is maintained in Belgium for the benefit of the operational expenses which are specified in the Personal Service Contract Number CT 080104 of Mr. Robert S. Manasse, Manager of the Kentucky European Economic Development Office.
"Advance payments are necessary and desirable from an administrative standpoint in order to allow the office to function efficiently.
"Compensation for the personal services of the manager of the Brussels office have always been, and will continue to be, paid on a monthly basis after his personal services have been rendered.
"Advance payment for operational expenses only is required due to the fact that there is not adequate time to receive in Kentucky the bills for operational expenditures from Brussels, obtain the money from the Department of Finance, and remit the money to Brussels in time to pay the operational expenditures by the time they are due and payable. When an advance payment is transferred to the operational bank account in Brussels the funds remain in this bank account until the operational bills are due and payable at which time the Brussels office manager must have access to funds in order to pay the bills on time."
You have emphasized that when an advance payment is transferred to the operational bank account in Brussels, the money remains in that bank account until the operational bills are due and payable, at which time the Brussels office manager must have access to such funds in order to pay the bills on time. The compensation for the personal services of the Brussels office manager is always paid on a monthly basis after his personal services have been rendered.
You say, for example, that if such "operational expenses" cannot be advanced, under local (Brussels) billing requirements the telephone system in the office could be jerked out. The continuity of such office facilities and services are vital in that operation.
In this factual situation, it is our opinion that the advance payment of money to the Brussels office for the purpose of paying certain operational expenses is constitutional under §§ 3 and 171 and meets precisely the requirements of KRS 44.010 that claims against the state treasury be paid only when due. The significant fact here is that the final and effective disbursement of the operational money is only effected after the persons or corporations have actually performed the services. They are only paid when the claim is due. KRS 44.010. The transfer of the money from the state's depository to the Brussels office in reality does not involve, at that point, a final effective disbursement. Thus the Brussels office manager in receiving the operational money holds, at that point in time, the money, as a state agent, in the constructive possession of the state until final disbursement.