Request By:
Mr. Dale Burchett
Attorney at Law
107 North Public Square
Glasgow, Kentucky 42141
Opinion
Opinion By: Steven L. Besheap, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
On behalf of the Clinton County Judge/Executive, you request an opinion interpreting the provisions of KRS 68.280 as it applies to the Clinton County budget for the 1981-82 fiscal year.
KRS 68.280 reads:
"The fiscal court may make provision for the expenditure of receipts unanticipated in the original budget by preparing an amendment to the budget, showing the source and amount of the unanticipated receipts and specifying the budget funds that are to be increased thereby. The amendment shall be submitted to the state local finance officer subject as the original budget. "
Thus under KRS 68.280 a fiscal court may make provisions for the expenditure of receipts unanticipated in the original budget by an amendment to the budget. The State Local Finance Officer is required by KRS 68.280 and 68.250(3) to approve the amendment if he finds the proposed amendment is uniform with other counties in the form and classification of accounts and conforms to the budget laws.
When the Clinton County budget was adopted, the anticipated receipts were conservatively estimated. It is now evident that actual receipts will appreciably exceed the amounts originally budgeted. Local Government Economic Assistance funds, covered in KRS 42.450 et seq., which were not dealt with in the original budget, expected to be received during the fiscal year, July 1, 1981, to June 30, 1982, will amount to $134,047.15, according to advice given by the State Local Finance Officer.
The State Local Finance Officer has taken the position that he will not approve an amendment to the budget in excess of the amount the county already has received. Thus he would approve an amendment covering $48,330 of the L.G.E.A. fund the county has actually received to date.
You ask whether the State Local Finance Officer is required to approve that amount ($134,047.15) reasonably anticipated to be received during the subject fiscal year. The answer is "no", as will be explained hereinafter.
You contend that since the original budget is based upon anticipated receipts, a fortiori, the amendment can be also based upon anticipated receipts of revenue. That does not follow in our view. The original budget must necessarily be based upon anticipated receipts, since the preparation of the budget must come in advance of the actual incoming receipts. In other words, it is prepared for the next fiscal year. See KRS 68.240. The proposed county budget must be adopted by fiscal court not later than July 1 of each year. In this case, the budget had to be adopted by fiscal court not later than July 1, 1981, and involves appropriations for the fiscal year July 1, 1981, to June 30, 1982. See KRS 68.260, 68.270, and 68.250. However, once the county gets over into the fiscal year for which the budget is formulated, any amendments to provide for what was at the original budgeting unanticipated receipts must be based upon actual receipts of revenue. Until the money is received, it is academic to amend the budget. In addition, the fiscal court will not lose any funds simply because a particular amendment does not embrace anticipated but not actually received revenue. Either a subsequent amendment, if timely, or a subsequent budget for the following fiscal year can deal with it.
Significantly, the literal wording of the statute compels this view. The statute reads in part:
"The fiscal court may make provision for the expenditure of receipts unanticipated in the original budget by preparing an amendment to the budget, showing the source and amount of the unanticipated receipts and specifying the budget funds that are to be increased thereby." (Emphasis added).
If the amendment were designed to cover still unanticipated and unreceived money, the legislature would not have employed the language "funds that are to be increased thereby." (Emphasis added). They would have said: "funds that may be increased thereby." (Emphasis added). The language used definitely suggests that actual receipts only are involved in the amendment, since the statute contemplates that funds are definitely to be increased, and not "may be increased."
KRS 42.480(1) provides that the Secretary of Finance, on or before July 1, 1981, and each year thereafter, shall provide the legislative body of each local government, eligible for local government economic assistance funds, an "estimate of the funds that will be allocated to the local government for fiscal year 1981-82, and each year thereafter." (Emphasis added). Only the certainty of actual receipts can result in an actual increase of budget funds, as contemplated by KRS 68.280.
Thus the State Local Finance Officer can only approve an amendment to the budget up to the amount of unanticipated revenue actually received by the county.
The next question concerns KRS 68.310, which reads:
"Except in case of an emergency concerning which the county judge/executive, the fiscal court and the state local finance officer unanimously agree in writing, no county may, during the first half of any fourth fiscal year, beginning with the fiscal year 1941-1942, encumber or expend more than sixty-five percent (65%) of all its current funds, taken as a unit, budgeted for that fiscal year, not counting as current funds any budgetary allotments for or payments of principal and interest of bonded indebtedness. "
Here are the facts and question you submitted:
The budget for Clinton County with all amendments approved to date totals $1,375,491.00. Included in this total are proceeds from an insurance policy in the amount of $685,000.00 paid to Clinton County upon the loss of the Clinton County Courthouse due to fire. The only expenditures made from this fund were for an architect's fees in the approximate amount of $43,000. This fund has not been obligated in any way and no ordinance, resolution, or orders have been adopted or promulgated by the Clinton County Fiscal Court with reference to this fund with the exception of the architect's fees, above mentioned, which have already been paid.
We request an opinion on the question of whether or not all of the $685,000.00 insurance fund is encumbered within the meaning of KRS 68.310 in determining if the 65% maximum has been reached during the first half of the fiscal year.
Under the literal wording of KRS 68.310, it is clear that the fiscal court for the period July 1, 1981, to December 31, 1981, cannot expend more than sixty-five percent (65%) of all the county's current funds, "taken as a unit", budgeted for that fiscal year, exclusive of payments for bonded indebtedness. (Emphasis added). "Taken as a unit" simply means put in one hat or totaled. Thus, since the $685,000 is included in the total of current funds, which total amounts to $1,375,491.00, and assuming the $685,000 is not committed to bonded indebtedness nor to contractual obligation prior to July 1, 1981, the insurance fund of $685,000 is included in the application of the 65% computation.
The point is that the $685,000 should be included in the total of current funds unexpended in the first half of the present fiscal year, provided that prior contractual obligation must be honored by the fiscal court. In the total context the word "encumber" has no special significance aside from "expend" , in applying the 65% as a multiplier, since the fiscal court can only expend county money for public purposes and within the budgeted amounts. See §§ 3 and 171, Kentucky Constitution, and KRS 68.240 and 68.300. To "encumber" means to become indebted to. Roget's International Thesaurus, 3rd ed. § 838.8.
In order to get KRS 68.310 into focus, as applied to your problem, we must make these observations: (1) The limitation on expenditure of county money applies to the period July 1, 1981, to December 31, 1981. (2) The statute concentrates on expenditures of current county funds for that period. (3) The statute involves expenditure of current funds taken as a unit or as a whole (it deals with totality). (4) The terms "encumber of expend" mean that the encumbering or expenditure will take place during the period in question. Obviously any of the current funds put under contract prior to the beginning of this period will have to follow the terms of such contracts, and thus the 65% computation would not apply to such encumbered funds. However, any current funds encumbered on and after July 1, 1981, to December 31, 1981, will be included in the 65% computation. Thus the $685,000 will be included in the 65% computation, except for the $43,000 encumbered and already paid.
If the legislature had intended to have the 65% level apply to each of the county's budget funds, it could have easily said so. Instead, it said "all its current funds, taken as a unit." In such case we have no authority to transcend the literal language of the statute.
Commonwealth v. Glover, 132 Ky. 588, 116 S.W. 769 (1909).
The statute, KRS 68.310, is designed to insure that the incoming fiscal court will have enough money to at least pay for essential governmental services during their first six months in office. This buttresses our view that the statute relates to encumbering and expending funds during the first half of the fourth fiscal year.