Request By:
Frank A. Wichmann, Esq.
City Attorney, City of Erlanger
Erlanger, Kentucky 41018
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter raising questions relating to the city's participation in the Kentucky Law Enforcement Foundation Program Fund (KLEFPF) established pursuant to KRS 15.410 to 15.510 as well as the city's policemen's pension fund existing under the provisions of KRS 95.520 to 95.620.
Some time ago a member of the police department sustained an extended work-related disability and during the course of his disability he received vacation pay and sick pay directly from the city and disability benefits from Workmen's Compensation insurance, Social Security and a health and accident insurance policy maintained by the city. During the officer's period of disability, the city also paid him 15% of his Workmen's Compensation benefits which it erroneously thought it was required to do pursuant to KRS 15.460 and the regulations adopted pursuant thereto. The city was initially reimbursed by KLEFPF for the erroneous disbursements but upon the discovery of the erroneous nature of the disbursements, KLEFPF requested the city to refund those payments. Shortly thereafter the officer in question submitted his resignation from the city's police force and requested a refund of his contributions to the pension fund pursuant to KRS 95.620(2).
Your specific questions are as follows:
"1) Is the City of Erlanger required to refund to KLEFPF the monies it received therefrom as reimbursement for the erroneous payments to the Police Officer?
2) If Erlanger is required to refund such monies to KLEFPF, is the Police Officer required to refund to the city the erroneous payments received by him?
3) If the Officer is required to refund the erroneous payments to the City, but fails or refuses to do so, may the Board of Trustees of the Pension Fund, established pursuant to KRS 95.520, pay the amount thereof to the City from the contributions made by the Police Officer to the Pension Fund; and refund only the balance thereof to the Police Officer without a Judgment or other court order authorizing such action by the Board of Trustees? "
In connection with the purposes for which monies associated with KLEFPF shall be expended, we direct your attention to KRS 15.470 and 503 KAR 5:050 (Section 2), both of which provide in part that such funds shall be used only as a cash salary supplement to police officers who meet the qualifications established by law and the administrative regulations. Furthermore, KRS 15.450(2) and 503 KAR 5:020 (Section 10) provide that payments to any local unit that does not comply with the requirements of the act or the regulations enacted pursuant thereto may be withheld or terminated.
There is no authority for the city to use monies received from KLEFPF to supplement the workmen's compensation benefits or other benefits being received by a police officer in connection with a work-connected injury or disease. Under the KLEFPF program the salaries of police officers who meet specified educational and training guidelines are supplemented. Since the city was improperly utilizing monies of the KLEFPF the city should repay those funds, particularly if it wants to continue its participation in the program, or face whatever action the Secretary of the Department of Justice and his legal staff consider appropriate.
As to whether the police officer should refund to the city the payments from KLEFPF erroneously made by the city to him, we first direct your attention to McQuillin Mun. Corp. (3rd Ed.), Vol. 15, § 39.37, where the following appears:
"One who deals with a municipality is bound by the limitations on its powers, and is chargeable with knowledge thereof. Hence, creditors are chargeable with notice of the restrictions placed on the powers of the municipality as to expenditures and incurring debts, by constitutional provisions, statutes and ordinances."
In
Louisville Extension Water Dist. v. Diehl Pump & Supply Co., Ky., 246 S.W.2d 585, 587 (1952), the Court quoted with approval from an earlier case:
"'. . . The persons who contract with municipal corporations must, at their peril, know the rights and powers of the officers of such municipalities to make contracts and the manner in which they must make them. Any other rule would destroy all the restrictions which are thrown around the people of municipalities for their protection by the statute laws and the Constitution, and would render abortive all such provisions. The rule in certain instances may be harsh, but no other is practical.'"
The city, as previously stated, had no authority to use monies received from KLEFPF for purposes not specifically authorized and supplementing payments received as a result of a work-connected injury is not a purpose of the program. The police officer, as an officer of the city and a participant in the KLEFPF program, is charged with knowledge of the program and the city's role and powers pursuant to that program. The officer should repay to the city those funds received to which he has no legal right.
In connection with your last question dealing with the refund of contributions made to the pension fund, see KRS 95.620(2), which states:
"The board of trustees of the pension fund may refund a member's contributions upon that member's withdrawal from service prior to qualifying for pension. The member shall be entitled to receive a refund of the amount of contributions made by the member after the date of establishment, without interest."
We next direct your attention to OAG's 76-718 and 72-431, copies enclosed, particularly the latter, where we said at page three thereof:
"In answer to your initial question we would interpret subsection (2) to mean that the Legislature intended to vest the Board of Trustees with discretion in authorizing a refund of contributions. On the other hand, if the board authorizes a refund, it is required to refund the entire amount of contributions made by the member. In other words, we believe the authorizing of a refund of a member's contribution is permissive, but once authorized the board must refund all of the contributions made by the member. . . ."
Thus in the situation you have presented, the Board of Trustees of the Pension Fund must, if it is decided to refund the member's contributions, refund all of that particular member's contributions and it cannot withhold a sum of money from those contributions representing what the officer owes the city in connection with KLEFPF monies.