Request By:
Mr. David L. Keller
Executive Director
Kentucky School Boards Association
Route #3, Box 96A
Englewood Office Park
Frankfort, Kentucky 40601
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Robert L. Chenoweth, Assistant Deputy Attorney General and Chief Counsel
As the Executive Director of the Kentucky School Boards Association, you have asked the Office of the Attorney General to consider a matter relating to "the legality of transferring funds allocated to the Minimum Foundation Program (by the 1984 General Assembly) to non-foundation, post-secondary state operated vocational-tech programs." You explain that in your view the impetus for the transfer is language contained in the 1984 budget memorandum, but not in the 1984 budget bill. To achieve this transfer the Department of Education and the State Board of Education is considering the amendment of 705 KRS 2:030.
The legal issue to be addressed involves funds allocated to the Minimum Foundation Program by the Kentucky General Assembly. We believe it important to understand that these funds appropriated by the General Assembly for public education become a part of the "common school fund." Kentucky Constitution § 184. These funds may be used for only public school purposes. Cf.
Fannin v. Williams, Ky., 655 S.W.2d 480 (1983). The Kentucky Constitution by Section 186 further directs that "the General Assembly shall by general law prescribe the manner of the distribution of the public school fund among the school districts and its use for public school purposes." The sums of money appropriated by the General Assembly in aid of the common schools are channeled through and thereby distributed pursuant to what is known as the Minimum Foundation Program. KRS 157.010; KRS 157.310 et seq. Thus, these Minimum Foundation Program statutory provisions are the "general law" means by which the General Assembly has attempted to fulfill its mandatory responsibility laid out in Kentucky Constitution § 186. See OAG 75-597 for a previous consideration of the "common school fund."
KRS 157.320 establishes the definitions of various terms for the purposes of the Foundation Program laws. Subsection (4) defines "district" to mean "any school district as defined by law." The term "foundation program" itself is defined in subsection (6) to mean "the level of educational services and facilities, as defined in KRS 157.310 to 157.440, which is to be provided in each district from the public school foundation program fund." "Public school foundation program fund" is defined as "the fund created by KRS 157.330 for use in financing education in public elementary and secondary schools" in subsection (8). KRS 157.330 entitled "foundation program fund" provides:
"(1) There is hereby established the public school foundation program fund consisting of appropriations for distribution to districts in accordance with the provisions of KRS 157.310 to 157.440.
"(2) The resources of the public school foundation program fund shall be paid into the state treasury, and shall be drawn out or appropriated only in aid of public schools as provided by statute."
The allotment of foundation program funds for classroom units for each district is to be accomplished in accordance with KRS 157.360. Subsection (5) of this statute concerns classroom units for vocational education.
There is an additional subsection of KRS 157.320 pertinent to the matter here under consideration and that is subsection (9). This subsection reads in full:
"(9) 'Kentucky administrative regulations of the state board of education' means those regulations which the state board of education may adopt upon the recommendation and with the advice of the superintendent of public instruction. The superintendent of public instruction shall recommend for adoption by the state board of education such rules and regulations as he deems necessary for carrying out the purposes of KRS 157.310 to 157.440;"
It is in keeping with KRS 157.320(9) and other enabling legislation as well as KRS 157.360 that the State Board of Education has promulgated the regulation in issue, 705 KRS 2:030. This regulation establishes the methods and procedures for the allocation of vocational education units under the Minimum Foundation Program. That is, the regulation is intended to implement the statutory foundation program laws for the distribution of the common school funds to public school systems for vocational education programs for its students.
Thus, while KRS 157.330(2) requires that foundation program funds are to be drawn out or appropriated only "as provided by statute", we believe it to be entirely proper for the State Board of Education to adopt a regulation intending to implement the statutory law. "The adoption of administrative regulations necessary to implement and carry out the purpose of legislative enactment is executive in nature and is ordinarily within the constitutional purview of the executive branch of government. (Citation omitted)."
Legislative Research Com'n v. Brown, Ky., 664 S.W.2d 907, 919 (1984).
Sections 7 and 8 of the present 705 KRS 2:030 regulation must be reviewed as each relates to the question in issue. These sections respectively read:
"Section 7. The allocation of units to local school districts sending students to state vocational-technical schools and area vocational education centers shall be calculated on the basis of the number of students enrolled as of October 1. A vocational education unit shall be allotted for thirty (30) students attending the school three (3) hours per day, five (5) days per week or equivalent to this amount of student time. Units will be calculated to the nearest one-tenth (0.1). The 'contract' vocational unit shall be calculated at the value for a Rank III teacher with four (4) to nine (9) years experience and one (1) month extended employment. The unit shall include the foundation program value for salary, capital outlay, and current expenses.
"Section 8. The funds calculated from the Founation Program for students attending state-operated vocational schools shall be divided. Twenty (20) percent shall be transferred to the local school district owning the facility and eighty (80) percent transferred to the Bureau of Vocational Education for operating the program. If the facility is state-owned, 100 percent of the funds shall be transferred to the Bureau of Vocational Education. "
Section 7 explains how the allocation of units to local school districts will be calculated. Of course the units are the basis by which the foundation program funds will be allocated to the local school districts. Section 8 addresses the situation where a local school district owns the vocational school the students attend, but the operation of the vocational education program is by the State Department of Education, Bureau of Vocational Education. In this situation, the local school district will realize only 20% of the foundation program funds and the Bureau of Vocational Education will receive 80% of these funds to cover the operational expenses. While this transaction technically may be taken care of by a mere bookkeeping entry, the legal significane is that the local school districts owning a vocational facility but which is being operated by the Department of Education are expending 80% of the vocational foundation program funds to which they are entitled for the operational facet of the vocational education program. The regulation provides that if the facility is owned by the state and the operation of the program is also by the state, then the local school district will owe the state (Bureau of Vocational Education) 100% of the foundation program unit monies.
You have made us aware that over the past decade or so local school districts were encouraged to build vocational schools that were to have the programs operated in them by the Department of Education. In fact this "encouragement" was reduced to a formalized written contract entered into between the Superintendent of Public Instruction and a local school district. A sample of such a contract reads in relevant part:
"Each local school district that sends secondary students to the area vocational education center will receive a vocational unit (or fraction thereof), from the State Minimum Foundation Program, for every 30 students attending 3 hours per day, 5 days per week. The local school district that holds title to the area vocational education center, through a contractual agreement with the other participating local school districts, shall receive the full value of all of the vocational units allocated for these students.
"In consideration of the services provided by the Bureau through the regional vocational education staff, the Board shall pay the Bureau 80 percent of the value of all the vocational units which have been allocated to the participating local school districts on the secondary students attending the area vocational education center. (This includes the vocational units received by the local school district which holds title to the area vocational education center.) These funds will be deposited in the State Treasury and will become a part of the operating budget for the area vocational education center which shall be administered by the regional director of vocational education. The remaining 20 percent shall be retained by the Board to pay the bonded indebtedness incurred in constructing the area vocational education center and in paying the costs incurred in maintaining the vocational center. The annual maintenance of the physical plant is the responsibility of the local school district holding title to the facility. All other operational costs are the responsibility of the Bureau as delegated to the regional vocational education staff."
This type of contract and the regulation itself reflect a virtual business relationship between a local school district and the State Department of Education. The local school district agrees to expend its foundation program funds in order to receive the operational services provided by the Bureau of Vocational Education. It is simply a quid pro quo. However, the legal fact remains, the foundation program money is for public school children and except for a bookkeeping entry convenience is actually paid out of the state treasury to the local school districts. The school district is legally expending this money for someone else (the Bureau of Vocational Education) to operate the vocational program.
This Office's consideration of the legal vagaries of this situation is being sought because the State Board of Education is currently contemplating the amendment of 705 KAR 2:030. Generally speaking, the State Board of Education has the right to amend or repeal any regulation it has adopted so long as such action is consistent with the laws and constitutional provisions of the Commonwealth. Because 705 KAR 2:030 is principally the codification of a contractual arrangement, we believe the regulation could affectively only be modified upon agreement between the parties involved. That is, if the State Board of Education desired to change section 8 to reflect an increase in the expense of operating the vocational education program, in that it is the local school district that is entitled to receive the funds in the first place, the local school district could determine it no longer desired the state to operate the program and would commence doing so itself. Note that section 7 provides that "the unit shall include the foundation program value for salary, capital outlay, and current expenses. " As with any contract-like relationship there must be a meeting of the minds before modifications can be reasonably effectuated.
You have informed us that the impetus for the State Board of Education seeking to change section 8 of 705 KAR 2:030 is language not in the 1984-86 Executive Appropriation Act, House Bill 474, but rather language appearing in the 1984 budget memorandum. On page E-68 of the 1984 budget memorandum, relative to the "Minimum Foundation and related program" appropriation unit the following language appears under "III Budget Intent Statements":
"In addition, the General Assembly recommended that 705 KAR 2:030 Section 8 be revised to change the local district transfer provision from 20% to the established value of the capital outlay component of a foundation unit. The difference in the above transfer shall be used to fund the operational costs of the New Rowan County State Vocational-Technical School and the expanded facilities in Ashland and Elizabethtown."
On page E-69 of the budget memorandum the following language appears as part of the "Notes":
"The General Assembly directs the Department of Education to revise 705 KAR 2:030 Section 8, to reduce the refund made to local school districts for Vocational Contract Units from 20% to the value of the capital outlay allotment."
Lastly, on page E-73 of the budget memorandum, relative to the "Office of Vocational Education" appropriation unit, the following language appears:
"In addition, the budget provides additional funding to open new and expanded vocational schools by revising 705 KAR 2:030 section 8.
"The General Assembly recommends that 705 KAR 2:030 Section 8 be revised to change the local district transfer provision from 20% to the established value of the capital outlay component of a foundation unit. The difference in the above transfer shall be used to fund the operational costs of the New Rowan County State Vocational-Technical School and the expanded facilities in Ashland and Elizabethtown."
The existence of the budget memorandum is pursuant to KRS 48.300. Subsection (2) reads:
"(2) Prior to the passage of a budget bill and any other acts necessary, the appropriations committee of the general assembly shall prepare a budget memorandum. The budget memorandum shall enumerate the changes made by the appropriations committees in a branch budget recommendation, and shall explain such changes in detail sufficient to convey the intent of the appropriations committees."
The budget memorandum is to facilitate an understanding of any difference between the financial plan for a branch budget submitted to the General Assembly's consideration and what changes the legislative appropriations committees have wrought to the recommended budget plan submitted. The budget memorandum is to be detailed enough to "convey the intent of the appropriations committees for the changes."
We have observed that in the budget memorandum language referenced earlier, it is both "recommended" and "directed" that 705 KAR 2:030 Section 8 be revised. While we believe precatory language in a budget memorandum is arguably permissible, we have serious reservations about any stronger, mandatory language. See Kentucky Constitution § 51 and cf. OAG 84-184. Irrespective of this legal position, however, the acute reasons why the "directive" cannot legally be carried out is Kentucky Constitutions §§ 184 and 186. The funds involved, it must be remembered, are foundation program funds and not just general funds appropriated for education. To follow the budget memorandum language would be to provide that the school districts owning a vocational center in which the state operated the vocational program are to receive only $1800 (the 1984 budgeted foundation program amount for capital outlay - Kentucky Acts Chapter 418 at page 1134) per unit of the minimum foundation money for vocational education. The Department of Education would "keep" the foundation program value for salary and current expenses. The State Department of Education is legally entitled to some of this foundation program money now only because it is providing a service to local school districts and the local school districts are paying for that service with their foundation program vocational dollars.
The budget memorandum language further lacks legal efficacy in that it apparently is premised upon a belief that the "difference in the transfer" amount of funds could be used to support the operational cost of the Rowan County State Vocational-Technical School and expanded facilities in Ashland and Elizabethtown. This is as much as saying that foundation program funds could be used for non-foundation purposes, which is again precluded by Kentucky Constitution Sections 184 and 186.
Thus, it is the formal opinion of the Office of the Attorney General that the 1984 budget memorandum language referencing the minimum foundation program vocational unit regulation of the State Board of Education is at best precatory in nature. Moreover, and most importantly, it is believed that any consideration given by the State Board of Education to amending 705 KAR 2:030 take into account the Kentucky Constitutional restrictions on the expenditure of common school foundation program funds and that a careful consideration be given to the basic contract reliance upon these provisions by public school districts "doing vocational business" with the Bureau of Vocational Education.