Request By:
William T. Warner
Goldberg & Simpson, P.S.C.
2800 First National Tower
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; Patrick B. Kimberlin III, Assistant Attorney General
This is in response to your recent letter to our office wherein you ask our opinion with reference to the following question:
Is a non-profit 501(c)(3) Kentucky corporation which assumes the operation of a noncommercial public television station from the local Board of Education, and whose employees are to be transferred from the Board to the Corporation, which employees were members of the County Employees Retirement System (CERS) legally eligible as an "entity or instrumentality" within the meaning and application of KRS 61.510(3), to be designated by Executive Order of the Governor under 61.520 as a participant in the Kentucky Employes Retirement System (KERS)?
You indicate that in 1967 the Jefferson County Board of Education, with leave of the Federal Communications Commission, assumed the non-commercial broadcast license for WKTC-TV, Channel 15, Louisville, Kentucky. Instructional (ITV) and non-instructional public broadcasting activities were conducted by the Board thereafter. All persons engaged in operating Channel 15 were employees of the Board, were paid by the Board, and participated in either the Teachers' Retirement System (TRS) or the CERS. In July, 1980, the Board adopted a resolution expressing its intent to transfer the license for Channel 15 to a non-affiliated group, which group would agree to continue the operation of Channel 15 in the public interest and contract with the Board for operation of its ITV function.
In October, 1980, Fifteen Telecommunications Incorporated (FTI) was incorporated under KRS Chapter 273 as a Kentucky non-profit corporation. FTI commenced negotiations with the Board for the transfer of the license and assets of Channel 15. On March 9, 1981, FTI and the Board entered into a number of contracts and agreements wherein the Board agreed to transfer the license and assets of Channel 15 to FTI conditioned upon approval by the Kentucky Superintendent of Public Education, the FCC, and a number of other public agencies which regulate the Board and Channel 15.
Actual transfer of the license and assets will occur at a closing date on or about August 15, 1981. Under the comprehensive set of agreements between FTI and the Board, FTI assumed immediate management of Channel 15 with the Board maintaining full responsibility under its FCC license. FTI has also agreed and will, in fact, undertake all in-school ITV broadcast functions for the Board as of July 1, 1981. These agreements also provide for FTI to lease Board-owned studio space and equipment for a period of up to three years.
You also indicate that FTI is in all respects qualified under Section 501(c)(3) as an organization exempt from federal income taxation and to which contributions are deductible. An application for formal recognition of this status is now pending before the Internal Revenue Service. FTI is the successor of Kentuckiana Public Television Corporation (KPTC), a Kentucky non-profit corporation formed by the Board of Education for the operation of the public broadcasting activities of Channel 15, and for certain fund raising activities. As noted, all station employees were employees of the School Board and not KPTC. KPTC was qualified as a 501(c)(3) corporation. You indicate that all 17 of the employees involved here are currently participants in CERS with some of those employees having as much as 20 years accumulated service. These employees and FTI desire to continue participation in a Kentucky public retirement system program. You state that the officials of KERS would be willing to facilitate this continuation by transferring actual participation by these employees from the CERS to the KERS pursuant to an Executive Order issued by the Governor under KRS 61.520. As of June 30, 1981, these 17 Board employees who currently operate Channel 15 will be terminated from Board employment and immediately employed by FTI to operate the station and the Board's ITV function under the agreements between the Board and FTI. All 17 of these employees, as previously mentioned, are participants in the CERS.
As you may be aware, the KERS has previously admitted into its membership employees of non-profit corporations which have some "nexus" with state government. The most obvious example of such non-profit corporations have been the mental health-mental retardation boards throughout the Commonwealth of Kentucky. In Kentucky Region 8 et al v. Commonwealth of Kentucky, Ky., 517 S.W.2d 489 (1974), the then Kentucky Court of Appeals found that the participation in the KERS by employees of a particular mental health-mental retardation board was impermissible under an interpretation of KRS 61.510(3). The basis of that opinion was that those employees were not under the state merit system, salary schedules, or other state personnel regulations and therefore were not state agencies within the meaning of those statutes controlling the KERS. The Court found that the department, board, or agency would have to be an integral part of state government such as to come within regular patterns of administrative organization, structure and government personnel policy.
However, shortly after the decision was rendered in the above-captioned case, KRS 61.510(3) was amended, insofar as is here applicable, to permit coverage of mental health-mental retardation boards, as follows:
Any other body, entity or instrumentality designated by Executive Order by the Governor, shall be deemed to be a department notwithstanding whether said body, entity or instrumentality is an integral part of state government.
Thus, the necessity of such a non-profit organization coming within regular patterns of administrative organization, structure, and governmental personnel policies and thus being an integral part of state government, was for all intents and purposes, eliminated by the statutory change. See OAG 78-685. Clearly, KRS 61.510(3) was purposely broadened in order to provide coverage in the KERS for employees of certain non-profit organizations.
Here, given the public purpose and public interest to be served by the non-profit corporation, it is our opinion that an appropriate Executive Order may be prepared and pursuant to KRS 61.520 authorizing the participation of this non-profit corporation to participate in the KERS and that said corporation would in fact qualify for such participation under KRS 61.510(3).