Request By:
Theresa L. Holmes
Corporate Counsel
Lexington Fayette Urban County Government
200 East Main Street
Lexington, Kentucky 40507
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Martin Glazer, Assistant Attorney General
You seek an opinion of this Office as to whether the term "state funds" as used in KRS 337.010(3)(e) includes those funds which come from the State Treasury, but which are earmarked by statute for specific local governments, such as the County Road Program (KRS 179.400 et seq. ), the Municipal Aid Program (KRS 177.365 et seq. ) and the Local Government Economic Assistance Fund (KRS 42.450).
KRS 337.010(3)(e), as amended in the 1982 General Assembly, provides:
"Public works" includes all buildings, roads, streets, alleys, sewers, ditches, sewage disposal plants, waterworks and all other structures or work except for buildings constructed as institutions of learning constructed under contract with any public authority. However, the provisions of this section shall not apply to construction conducted by a city, county, urban-county government or school district unless such construction is financed with fifty percent (50%) or more of state funds.
The prevailing wage law has been drastically amended and curtailed. Public projects now conducted by local units of government, such as cities, counties, and urban county governments or school districts no longer need utilize prevailing wages or the prevailing wage law unless such construction is financed by 50% or more of state funds.
Apparently, it is your view that "state funds" only encompasses funds that are funneled into the state general fund and should not include monies collected by the state and paid into the State Treasury but which are earmarked for local units of government. It is your argument that the state acts merely as a conduit.
You specifically ask:
1. Must the Urban County Government use prevailing wage rates in specifications for any construction projects to which the Commonwealth of Kentucky is not a party?
2. Must the Urban County Government use prevailing wage rates in specifications for projects which are paid for by the Urban County Government with funds which were originally collected for the county by the Commonwealth?
Your questions cannot be answered, "yes" or "no" in the manner asked. The issue is, "What are state funds?"
In another opinion dealing with state deposits, "state funds" are encompassed in the broad expression as "all receipts of any character of any budget unit, all revenues collected for the state, and all public money and dues to the state." We enclose a copy of OAG 83-241.
In our view, state funds are not limited to general fund monies. Many boards and agencies have monies deposited to their accounts in trust and agency accounts, which do not lapse at the end of the fiscal year. So, the fact the monies may be earmarked for a particular agency, state or county, does not change the funds from being "state funds." If they come from the State Treasury, they are presumed to be state funds.
This is the interpretation which the Department of Labor has utilized in interpreting the section, and a court will give great weight to the contemporaneous construction of an agency authorized to carry out a particular law. Barnes v. Department of Revenue, Ky.App., 575 S.W.2d 169 (1978).
Generally, an exemption to a statute should be strictly construed and not favored. Hargett v. Kentucky State Fair Board, 216 S.W.2d 912, 309 Ky. 132 (1949).
Here, the Legislature has removed counties and local units of government from the operation of the prevailing wage law -- unless that unit uses state funds.
State funds should be broadly construed to comply with the general rule that prevailing wages apply unless the project is not a state project nor contains at least 50% of state funds.
CONCLUSION
"State funds" are any funds which come from the State Treasury. If a local project has received a 50% or more contribution from the State Treasury for construction of a prevailing wage project, the prevailing wage law is applicable.