Request By:
Mrs. Frances Jones Mills
State Treasurer
Capitol Annex
Frankfort, Kentucky 40601
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The Treasury Department is considering the possibility of conducting a pilot program for the direct deposit of funds into the bank accounts of certain persons who receive benefit payments from the state of Kentucky. We assume you mean retired state employees. The transfer of funds will be effected electronically from the state depository bank to the payee's designated institution. In this type of transfer no check will be issued by the state treasurer. By the electronic transfer the recipient's institutional deposit account will receive a credit to the recipient's account reflecting the precise amount of money value being so electronically transferred.
You request an official opinion of this office concerning the state treasurer's authority to pay out funds in this manner.
Clearly a warrant document has to be prepared by the department pursuant to KRS 41.110, 41.120 and 41.130. KRS 41.120 states that all claims against the state shall be paid by the treasurer on the warrants of the Department of Finance. KRS 41.130 specifies the data to be included in the warrant document.
Once the warrant documents are prepared by Finance and submitted to the state treasurer, KRS 41.150 requires the treasurer to accept the warrant documents " and issue his [or her] check on a state depository bank in payment therefor. . ." (Emphasis added). KRS 41.150(2) requires the treasurer to maintain a "check register" that shall show "all checks issued", name of payee, etc. (Emphasis added).
KRS 41.160 provides in part that "no money shall be paid out of the treasury except by the check of the treasurer upon a state depository. " (Emphasis added). See
Gibony v. Commonwealth, Ky., 91 S.W. 732 (1906) 733, holding that the mailing of the check of the treasurer upon a designated state depository constituted payment to him of the amount specified therein. Note KRS 337.070, which requires all employers who employ 10 or more and who pay by check, making deductions from salaries, to specifically state the amount for which the deductions are made and the general purpose of the deductions.
The payment of salaries underwent through the years an evolution from cash to the paycheck. Now there is a national interest in the latest step in this evolutionary process of the monetary system, i.e., banking paychecks electronically. However, it is our opinion that the electronic transfer of funds from the state treasury cannot be legally done under the present statutes. Action of the General Assembly will be necessary to authorize this kind of transfer.
Under the explicit language of KRS 41.160, the check is presently the exclusive device for transferring money out of the state treasury. An ordinary "check" is an unconditional promise to pay a sum certain, taking the form of a written document or negotiable instrument. See