Request By:
Mr. Edward L. Fossett
Office Head
Legal and Legislative Services
Department of Education
Capital Plaza Tower
Frankfort, Kentucky 40601
Opinion
Opinion By: Robert F. Stephens, Attorney General; Robert L. Chenoweth, Acting Deputy Attorney General
As the Attorney for the State Board for Elementary and Secondary Education, you have asked the Office of the Attorney General two unrelated questions. The first question relates to KRS 160.550 and 703 KAR 3:050. These provisions concern safeguarding against deficit spending by local boards of education. You have asked about the alternatives available to the State Board in reviewing annual budgets of local school districts where the school district in question is in a deficit position.
As you stated, KRS 160.550 prohibits a local superintendent from recommending and local board members from voting for expenditures of income and revenue in any year in excess of the budget as approved by the State Board. This section of our school law reads as follows:
"No superintendent shall recommend and no board member shall vote for an expenditure in excess of the income and revenue of any year, as shown by the budget adopted by the board and approved by the state board for elementary and secondary education, except for a purpose for which bonds have been voted or in case of an emergency declared by the state board for elementary and secondary education. "
The Administrative Regulation adopted by the State Board relating to KRS 160.550 is 702 KAR 3:050 which reads in Sections 1 and 2:
"(1) The Superintendent of Public Instruction shall determine on the basis of evidence submitted in an application of a local board of education whether or not an emergency exists within the meaning of KRS 160.550. The Superintendent of Public Instruction shall examine carefully all facts pertaining to the claimed emergency and take such action as he deems appropriate, including the authority to declare an emergency in those cases where the health and safety of the pupils of the school district are placed in jeopardy or the school program disrupted.
(2) Any application filed under this regulation, as well as any emergency declared by the Superintendent of Public Instruction, shall be submitted to the State Board of Education for final approval."
We believe the above provisions clearly prohibit a "running" deficit financial status by a local board of education. The intent of the statute is that every fiscal year will be commenced by each public common school district with a balanced budget. The statute does recognize reality, however, and provides for the possibility of exceeding a balanced budget for an emergency situation. The regulation then comes into play by providing that in the situation where a local school district finds itself in a position of exceeding its budget due to the existence of an emergency, an application can be made by the local board to the State Superintendent of Public Instruction who, if he determines the evidence supports that an emergency does exist, may declare the emergency and submit the application and his finding to the State Board for approval. If the State Board grants this emergency status to a local board of education, the local board would be permitted to expend more money than it has in the fiscal year the emergency was declared.
It is very important to understand the practical and legal effect of the granting to a local board such an emergency declaration. A local board may then lawfully carry a deficit from one fiscal year into the next. However, we strongly believe a local board must then prepare a balanced budget for the fiscal year the deficit has been carried into, which balanced budget must show total eradication of the carried forward emergency deficit. The failure of the local board to present such a balanced budget would place it in an illegal deficit spending posture and preclude the State Board from approving the local board's post emergency fiscal year budget. A "running" deficit situation would have been commenced.
It should be evident that it is our opinion a local board of education who is flirting with a deficit financial position should face up to that fact as quickly as reasonably possible and go to the State Superintendent and State Board with its application for an emergency declaration application. Ending a fiscal year with a deficit without having gone to the State Board is simply imprudent. If for some reason such a situation does develop, the local board may, on bended knee, present an emergency declaration application to the State Superintendent and State Board and ask for nunc pro tunc (now for then) consideration. This possibility is to be discouraged, but under exigent circumstances may need to be followed. Sinners who come late to the altar are usually, nevertheless, welcomed.
You made inquiry in your letter of whether the State Board has any additional alternatives where a local school system is already in a deficit position and the submitted budget would decrease the deficit but would not entirely wipe out the deficit. We do not believe a local board of education may ever legally present a deficit budget for approval. The fact that a local board can show that it will live within its means for a current fiscal year but cannot eradicate a carried forward deficit does not put the district in a legal financial posture. Again, the law contemplates and requires that a local board of education commence each fiscal year with a balanced budget. Although as discussed above, provisions may be made to incur a deficit and then to drag the deficit into a new fiscal year, the next budget of the school district must show a total eradication of the carried forward deficit as well as expenditures not exceeding income and revenue for the fiscal year.
The last question you presented relating to this topic was the courses of action available to the State Board where the deficit persists year after year. The only answer, we believe, is to turn to the penalty provision relating to KRS 160.550. KRS 160.990(5) reads as follows:
"(5) Any person who violates any of the provisions of KRS 160.550 shall be fined not less than fifty (50) nor more than one hundred dollars ($100), and shall be subject to removal from office."
Thus, we believe a local superintendent and local board members who violate KRS 160.550 may be prosecuted and fined in the district court for this violation. Also, the statute provides that the violator is subject to removal from office. We believe this could be done pursuant to KRS 156.132 through KRS 156.136, see OAG 79-394 or by the Office of the Attorney General, see Hogan v. Kentucky State Board of Education, Ky., 329 S.W.2d 563 (1959) and Richardson v. Commonwealth, 275 Ky. 486, 122 S.W.2d 156 (1938).
Your second question is whether the State Board has the authority to authorize the Superintendent of Public Instruction to withhold state funds from any school district which fails to file or have on file reports required by statute or rules and regulations of the State Board. This authority has been delegated to the State Superintendent by 702 KAR 3:045.
The real issue involved in your second question is not the authority to authorize the State Superintendent to take such action but the authority of the State Board itself to have the action taken. We believe that under the plenary powers given to the State Board for Elementary and Secondary Education, such control over the administration of local school districts is authorized.
In support of our conclusion, we note several provisions of our school laws. In KRS 156.035(2) we find the following:
"(2) For the benefit of programs under their control and supervision the boards are authorized to implement the provisions of any act of Congress appropriating and apportioning funds to the state, to receive funds appropriated by the Kentucky general assembly, and to provide for the proper apportionment and disbursement of such funds in accordance with state or federal laws, and to accept and provide for the administration of any gifts, donations, or devise."
The State Board is directed to receive state funds and to provide for the proper apportionment and disbursement of such funds. Under KRS 156.070(1) the State Board is given the authority for "the management and control of the common schools, and all programs operated in such schools. . ." Subsection 4 of the same statute provides in pertinent part:
"(4) The state board for elementary and secondary education may, on the recommendation and with the advice of the superintendent of public instruction, prescribe, print, publish and distribute at public expense such rules, regulations, courses of study, curriculums, bulletins, programs, outlines, reports and placards as it deems necessary for the efficient management, control and operation of the schools under its jurisdication."
See also KRS 156.114(2). When these provisions are viewed cummulatively, we believe strong support is found for action by the State Board to assure itself that local school districts are filing reports required by the statutes or regulations.