Request By:
Mr. Wilburn J. Pratt
Commissioner
Department for Local Government
Capital Plaza Tower
Frankfort, Kentucky
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
In July 1978 it was called to your attention that Letcher County was not operating within its budget and, in fact, had a "floating indebtedness" which could not be retired during the fiscal year. The department ordered the county to make only such payments as were necessary for the general operations of the county, to eliminate unnecessary jobs and to hire no additional personnel and to seek no additional bank loans.
During FY 78-79 the department engaged in follow-up visits, and assistance was given in making various budget amendments and establishing fiscal procedures. However, the fiscal court continued to live beyond its means and by October 1979 about $200,000 was owed local banks, with a total annual budget of $850,000. The fiscal court proceeded to borrow an additional $90,000 to repair the courthouse. The county was unable to make payments as they became due and could not retire the debt.
On October 5, 1979, an agreed order was entered by fiscal court authorizing the State Local Finance Officer [DLG] to countersign and disburse all Letcher County checks, except for the payroll. Your staff has examined the fiscal records of Letcher County frequently and made recommendations, but matters are not improving.
Question No. 1:
"What action is reasonably required of the Department for Local Government in the administration of Section 157 of the Constitution and KRS 68.210?"
From what you say the county is virtually bankrupt and is repeatedly violating the constitution [Sec. 157] and budget statutes.
Section 157 of our Constitution puts counties on a pay-as-you-go basis, so as not to incur obligations, except on a vote of the people, in excess of their current revenues.
Payne v. Covington, 276 Ky. 380, 123 S.W.2d 1045 (1938).
KRS 68.210 provides that the administration of the County Uniform Budget System shall be under the supervision of the State Local Finance Officer [a part of your department]. This includes the inspection and supervision of the administration of accounts and financial operations. The State Local Finance Officer may investigate, examine, and supervise the accounts and operations of all local governments and local government officers.
It is our opinion that under Section 157 of the Constitution and KRS 68.210 your office, through the State Local Finance Officer, has acted reasonably in this situation and within the administrative authority given under that statute. See also KRS 147A.020(1).
Question No. 2:
"Has the Department for Local Government met its obligation in regard to Letcher County; if not, what more needs to be done?"
Your office has over a substantial period analyzed their fiscal and debt management problems and has directed a fiscal course calculated to get them out of their financial predicament. It is our opinion, under the facts given, that you have reasonably done all required of you under the statutes. You have fought a good fight and have finished your course.
Question No. 3:
"What procedures need to be followed to correct the unlawful financial condition of Letcher County and who is responsible for doing it?"
It is our opinion that the courts would hold, if presented with the question, that the close supervision you have given Letcher County's fiscal affairs without any progress has satisfied any obligation you had to install such close supervision. It is our view, under the discouraging and continuing trend established by the fiscal court, that your office has no statutory obligation to continue the close surveillance and scrutiny conducted by you over a rather long period of time.
They have been advised as to how to handle their fiscal affairs. At this point we believe that if your investigation and supervision has disclosed the possible commission of crime on the part of those local officials responsible for carrying on the fiscal affairs of the county, you should disclose it to the local prosecutorial officers, for any action they deem proper. For example, see KRS 61.170 [malfeasance or neglect of county officers]. Also see KRS Chapter 522, relating to offenses involving abuse of public office.
In addition, pursuant to KRS 68.350, if the State Local Finance Officer finds that any county officer or member of the County Budget Commission is wilfully violating or neglecting the duties imposed by KRS 68.210 through 68.360, he may institute legal proceedings in the Letcher Circuit Court to compel compliance with the law.