Opinion
Opinion By: Jack Conway, Attorney General; Michelle D. Harrison, Assistant Attorney General
Open Records Decision
At issue in this appeal is whether Dismas Charities, Inc. ("Dismas") violated the Kentucky Open Records Act in failing to issue a written response upon receipt of Courier-Journal reporter Deborah Yetter's April 7, 2011, request for various financial and operational records, generally accessible under the Act, for the years of 2008-2010. More precisely, the question presented is whether Dismas Charities, Inc., a "private, non-stock, not-for-profit national provider of community corrections and social services," 1 is a "public agency" within the meaning of KRS 61.870(1). Resolution of this determinative question, as in 09-ORD-085 (Howard Cobb/Dismas Charities, Inc.) and 09-ORD-096 (Quency Taylor/Dismas Charities, Inc.), both of which involved records for the year ending December 31, 2008, as well as 10-ORD-113 (Arnold Alexander/Dismas Charities, Inc.), which involved records for the year ending December 31, 2009, turns on the application of KRS 61.870(1)(h), as reinterpreted in 09-ORD-033, to Dismas. The limited evidence presented here similarly confirms that only 20.82% of the funds expended by Dismas in the Commonwealth of Kentucky for the year ending December 31, 2010, were derived from state or local authorities, and it consequently does not reach the 25% threshold of KRS 61.870(1)(h), just as it did not in 2008 or 2009. Nor does it otherwise qualify as a "public agency" within the meaning of KRS 61.870(1). Accordingly, this office must again conclude that Dismas is not subject to, and therefore cannot be said to have violated the provisions of the Act.
Having been advised by counsel for Dismas that no response to Ms. Yetter's request would be forthcoming, Jon L. Fleischaker, counsel for The Courier, initiated this appeal on its behalf. Noting that Dismas and the Kentucky Department of Corrections have both a statutorily authorized Master Agreement, which is a "firm fixed unit price contract" (or "no-bid" contract according to DOC) whereby DOC established "per diem" rates for halfway house services, in addition to a Personal Services Contract executed annually, under which Dismas provides "substance abuse treatment services" to state inmates, The Courier adamantly disputed the repeated assertion by Dismas that less than 25% of the funds it expends in the Commonwealth are derived from state or local funds. (Citations omitted.) In The Courier's view, the Auditor's Report, issued on April 5, 2011, and the Internal Revenue Service Form 990 (the "Return of Organization Exempt from Income Tax") "conclusively" demonstrate that Dismas is a "public agency" within the meaning of KRS 61.870(1)(h). For the 2009 calendar year, The Courier observed, Dismas "received 76.9 percent of its revenue from the federal government and 20.7 percent from the Commonwealth of Kentucky, for a total of 97.6 percent of its total revenue being derived from those two government sources." While The Courier's point regarding the need for accountability of how those public funds were spent is well-taken, the fact remains that funding derived from the Federal Bureau of Prisons, while public in character, is not relevant in the KRS 61.870(1)(h) analysis because it is not "derived from state or local authority funds." 2
In addressing the second part of the analysis under this provision, which it correctly observed requires examination of Dismas' expenditures, The Courier acknowledged that "[i]temized expenditure figures are not available to the public" because Dismas "refused to provide the Kentucky Auditor with detailed expense reports" and the "Auditor was unable to determine how much money [Dismas] expends in the Commonwealth." Nevertheless, The Courier asserted that "in light of the fact that 21 of 28, or 75 percent, of [Dismas] facilities are outside of Kentucky, its in-state expenditure totals can be reliably stated sufficiently to show that Dismas is a public agency. " It is "further a certainty," The Courier argued, that funds Dismas received from the Commonwealth in 2009 were "not expended outside of Kentucky in support of any of the 21 facilities in the 11 other states." However, The Courier premised its conclusion that 80% of the funds expended by Dismas in the Commonwealth were derived from state funds on the assumption that "[i]f Dismas . . . devotes 75 percent of its total expenditures to the 75 percent of its facilities that are outside of Kentucky, then 25 percent of its total expenses are incurred inside Kentucky." Although The Courier believes that "simple math makes it evident" that Dismas is a "public agency" under KRS 61.870(1)(h), as further evidenced by "examination of the 'per diem' amounts paid by the [DOC]," its calculations and conclusions, in short, require a certain amount of speculation or conjecture in which this office cannot engage, notwithstanding the legitimate concerns which prompted the recent audit of Dismas ("conducted in response to public reports and questions raised regarding certain financial transactions of Dismas Charities of which the APA became aware") or the findings and recommendations contained therein.
Upon receiving notification of The Courier's appeal from this office, R. Gregg Hovious, legal counsel for Dismas, responded on behalf of his client. Citing 09-ORD-085, 09-ORD-096, and 10-ORD-113, Dismas asked this office to "affirm its determination" that Dismas is not a "public agency. " In Dismas' view, The Courier's appeal, in sum, "lacks any substance, is filled with exponential assumptions, and is based on rickety analytical structure, rising to no more than rank speculation. " Dismas argued that it "continues to be a private entity" and "no new issue" has been presented; rather, the appeal is based on speculation. Citing 10-ORD-113, Dismas reiterated that the Attorney General has previously recognized that it does not satisfy the 25% threshold of KRS 61.870(1)(h). According to Dismas, a departure from prior decisions by this office holding that Dismas is not a public agency "would demonstrate the unconstitutionality of KRS 61.870(1)(h)." 3 In addition, "with no new or conflicting information or change in applicable law, determining that [Dismas] is a public agency after making the opposite determination would be an unconstitutional and arbitrary exercise of power." (Citations omitted.) Both of these points are well-taken and further serve to illustrate the dilemma in which this office repeatedly finds itself when asked to apply KRS 61.870(1)(h).
Resolution of the question presented turns on whether Dismas is a "public agency" within the meaning of KRS 61.870(1), 4 which broadly defines "public agency" in eleven different ways codified at subsections (a)-(k). Despite the expansive language of KRS 61.870(1), its companion, KRS 61.870(2) (broadly defining "public records" ), 5 and the clearly expressed legislative intent that the Open Records Act must be strictly construed so as to ensure the broadest possible access to public records, 6 the Attorney General has recognized, on a number of occasions, that a private corporation, whether not-for-profit or for-profit, is not a public agency for purposes of the Open Records Act unless it "derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds." See KRS 61.870(1) as construed in 92-ORD-1114; 94-ORD-98; 97-ORD-114; 99-ORD-65; 05-ORD-012; 06-ORD-162; 09-ORD-033; 09-ORD-042; 09-ORD-083; 11-ORD-021; 11-ORD-040. It is apparent that Dismas does not qualify as a public agency under KRS 61.870(1)(a), (b), (c), (d), (e), (f), (g), (j), or (k). Likewise, 61.870(1)(i) is facially inapplicable given that its governing body is apparently not appointed by a public agency. In sum, KRS 61.870(1)(h) is the only subsection applicable on the facts presented.
In 09-ORD-033 (Deborah H. Patterson/M.A. Mortenson Company, issued February 19, 2009), the Open Records Decision which culminated in William H. Chilton, III v. M.A. Mortenson Company, 09-CI-02749 (Jefferson Circuit Court-Division Thirteen, November 24, 2009)(holding that KRS 61.870(1)(h) is unconstitutional), 7 this office was asked to determine whether Mortenson, the "Construction Manager-at-Risk" for the Louisville Arena Authority, was a "public agency" within the meaning of KRS 61.870(1)(h). This office adopted the interpretation of KRS 61.878(1)(h) set forth by the appellant, which admittedly represented "a significant departure from prior decisions in which the 'expended by it in the Commonwealth' language was not meaningfully applied." 8 09-ORD-033, p. 6. Reversing "that line of decisions in which this office did not effectively analyze what percentage of state or local authority funds the 'body' expended in the Commonwealth," the Attorney General reasoned, in relevant part, as follows:
In 1992, the statute was amended by resolving it into eleven component subsections at KRS 61.870(1)(a) through (k). Thus KRS 61.870(1) formerly limited the pertinent analysis to "bodies" which derived at least twenty-five percent of their funds from state or local authority funds. Since July 15, 1994, KRS 61.870(1)(h) has defined "public agency" as "[a]ny body which derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds." (Emphasis added.) The General Assembly altered the language of KRS 61.870(1)(h) by expanding its language to encompass any "body" receiving any state or local funding so long as that funding represents at least twenty-five percent of the total funds it expends in the Commonwealth.
09-ORD-033, p. 7 (emphasis in original).
In that appeal, the Attorney General acknowledged that KRS 61.870(1)(h) "lacks specific parameters for analysis, and that this office lacks authority to compel disclosure of documents from 'bodies' disputing their status as public agencies, " ultimately concluding, based on the affidavit of Mortenson's Chief Financial Officer, which the appellant presented "insufficient probative evidence to refute, " that Mortenson was not a "public agency" within the meaning of KRS 61.870(1)(h). Similarly, this office has recently been asked to apply KRS 61.870(1)(h) relative to Dismas on several occasions, including 09-ORD-085, in which our decision was based upon the unrefuted affidavit of Stephen B. Clark, Vice President of Finance and Chief Financial Officer of Dismas, who advised that "for the most recent year in which the percentage of state or local authority funds expended in the Commonwealth could be calculated, to wit, the year ending December 31, 2008, [footnote omitted] only 21.8% of the funds Dismas expended in the Commonwealth were derived from state or local authorities. " Id., p. 2. Shortly thereafter, this office affirmed 09-ORD-085 in 09-ORD-096. The following year, Dismas again provided this office with an affidavit from Mr. Clark in support of its position regarding KRS 61.870(1)(h). Based upon his review of the records for the year ending December 31, 2009, Mr. Clark determined that "20.9% are derived from Kentucky state or local authorities. " 10-ORD-113, p. 3. In each of those instances, legal counsel for Dismas expressly advised that Mr. Clark's determination was made in conformance with how this office has interpreted KRS 61.870(1)(h) since 09-ORD-033, and offered the affidavit confirming that it remained below the 25% threshold of that provision to the extent 02-ORD-119 and 06-ORD-077 may not have adequately taken into account the "expended by it in the Commonwealth of Kentucky" language found therein.
Because no such evidence was initially presented here, and the relevant time frame encompassed not only 2008 and 2009, but also 2010, this office asked legal counsel for Dismas to provide us with additional information pursuant to KRS 61.880(2)(c) and 40 KAR 1:030, Section 3, and specifically an affidavit covering the 2010 financial records of Dismas, to assist in resolution of this matter. On July 1, 2011, Mr. Hovious supplemented his initial response on behalf of Dismas in response to our June 24, 2011, request, providing the requested affidavit from CFO Stephen B. Clark. Having reviewed the financial records of Dismas for the year ending December 31, 2010, Mr. Clark "calculated that of the funds expended by Dismas in the Commonwealth of Kentucky for the year ending December 31, 2010, 20.82% are derived from Kentucky state or local authorities. " 9 No evidence to conclusively refute that statement has been presented nor has our independent research located any such evidence.
Although The Courier has arguably provided some compelling arguments in support of its position that Dismas is a "public agency" within the meaning of KRS 61.870(1)(h), particularly from a policy standpoint, and this office shares its concern regarding the lack of accountability resulting from nondisclosure of the records being sought given the amount of public funds allocated to Dismas, especially in light of the findings contained in the recent Audit of Dismas, the record on appeal contains "insufficient probative evidence to refute" the contrary evidence presented regarding this issue and justify a departure from governing precedents. 09-ORD-033, p. 10. When viewed in light of 09-ORD-085, 09-ORD-096, and 10-ORD-113, the affidavit ultimately provided in support of Dismas' position compels a finding in its favor. "Acknowledging that KRS 61.870(1)(h) lacks specific parameters for analysis, and that this office lacks authority to compel disclosure of documents from "bodies" disputing their status as public agencies, the Attorney General finds that [Dismas] is not a "public agency" within the meaning of KRS 61.870(1)(h), and its records are not accessible under the Open Records Act, inasmuch as [Dismas] apparently does not derive at least "25% of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds." 09-ORD-033, p. 10.
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceeding.
Distributed to:
Jon L. FleischakerRaymond J. WeisR. Gregg Hovious
Footnotes
Footnotes
1 02-ORD-119, p. 1.
2 Compare 10-ORD-192 (holding that block grant money used by Kentucky Consumer Advocate Network constituted state funds for KRS 61.870(1)(h) purposes because "said funds are deposited in the State Treasury upon receipt, cannot be expended until appropriated by the General Assembly per Section 230 of the Kentucky Constitution, and undergo continuing state oversight by the LRC per KRS Chapter 45 and the Department pursuant to its contract with KYCAN" and KYCAN was therefore a "public agency" under KRS 61.870(1)(h) because it satisfied the 25% threshold) ; 10-ORD-115 ("Since Medicaid dollars appropriated by the General Assembly were state funds under the standard expressed in 10-ORD-092, University Health Care, Inc., was a 'public agency' for purposes of the Open Records Act where over 75 percent of the funds expended by it in Kentucky were obtained through its contract with the Department for Medicaid Services, and its records were public records insofar as they related to the expenditure of state funds").
This office has independently confirmed that Dismas receives funding directly from the Federal Bureau of Prisons and the funding therefore does not satisfy the standard of 10-ORD-092.
3 Citing 09-ORD-057 and 10-ORD-113, Dismas further acknowledged that this office "is compelled to continue applying KRS 61.870(1)(h) as written until the General Assembly amends the statute or the Kentucky Court of Appeals or Kentucky Supreme Court issues a decision declaring it unconstitutional." See also 10-ORD-092 (this office is "not at liberty to treat" KRS 61.870(1)(h) as unconstitutional in the absence of a published appellate opinion).
4 KRS 61.870(1) defines "public agency" to include:
(a) Every state or local government officer;
(b) Every state or local government department, division, bureau, board, commission, and authority;
(c) Every state or local legislative board, commission, committee, and officer;
(d) Every county and city governing body, council, school district board, special district board, and municipal corporation;
(e) Every state or local court or judicial agency;
(f) Every state or local government agency, including the policy-making board of an institution of education, created by or pursuant to state or local statute, executive order, ordinance, resolution, or other legislative act;
(g) Any body created by state or local authority in any branch of government;
(h) Any body which derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds;
(i) Any entity where the majority of its governing body is appointed by a public agency as defined in paragraph (a), (b), (c), (d), (e), (f), (g), (h), (j), or (k), of this subsection; by a member or employee of such a public agency; or by any combination thereof;
(j) Any board, commission, committee, subcommittee, ad hoc committee, advisory committee, council, or agency, except for a committee of a hospital medical staff, established, created, and controlled by a public agency as defined in paragraph (a), (b), (c), (d), (e), (f), (g), (h), (i), or (k) of this subsection; and
(k) Any interagency body of two (2) or more public agencies where each public agency is defined in paragraph (a), (b), (c), (d), (e), (f), (g), (h), (i), or (j) of this subsection[.]
5 KRS 61.870(2) defines "Public record" to mean:
. . . all books, papers, maps, photographs, cards, tapes, discs, diskettes, recordings, software, or other documentation regardless of physical form or characteristics, which are prepared, owned, used, in the possession of or retained by a public agency. "Public record" shall not include any records owned or maintained by or for a body referred to in subsection (1)(h) of this section that are not related to functions, activities, programs, or operations funded by state or local authority [.]
6 KRS 61.871.
7 It is noteworthy that in that in University Health Care, Inc. v. The Courier-Journal, No. 10-CI-04753 (Jefferson Circuit Court-Division Twelve, March 11, 2011), another Division of Jefferson Circuit Court acknowledged the holding of William W. Chilton v. M.A. Mortenson Company, above, but went on to find "that, while deference is, of course, given to the decisions of its brothers and sisters on the Bench, those determinations in no way affect the conclusions of this Court." Having done so, the Court ultimately held that KRS 61.870(1)(h) "is not unconstitutionally vague, ambiguous or unintelligible." University Health Care, above, at p. 7.
These conflicting opinions from different divisions of the same circuit amply illustrate why this office has taken the approach of continuing to follow existing precedent, both in general, and specifically in relation to KRS 61.870(1)(h), until a published opinion by either the Supreme Court or the Court of Appeals to the contrary is rendered and, relative to KRS 61.870(1)(h) in particular, why this office is compelled to apply it as written until such time as the General Assembly amends it or one of those Courts expressly finds it unconstitutional in a published opinion.
8 In so doing, this office reminded the parties that in Commonwealth v. Chestnut, 250 S.W.3d 655, 663 (Ky. 2008), the Kentucky Supreme Court expressly recognized the prerogative of the Attorney General to depart from precedent, declaring that the "Attorney General was permitted to reexamine -- and even reject -- its former interpretation of the law." Significantly, the Court went on to find that "any shock the [agency] suffered when the Attorney General changed course certainly caused the [agency] to suffer no lasting prejudice, . . . because the [agency] had the right, which it obviously exercised, to appeal the Attorney General's" decision to circuit court. Id.
9 At page 1 of the "Introduction and Background" section of the Auditor's Report, the Auditor observed that "Dismas Charities is funded primarily through state and federal sources including funds from the Commonwealth of Kentucky as well as the Federal (U.S.) Bureau of Prisons. Approximately 22 percent of its funding is derived directly from the Commonwealth and 75 percent from the U.S. Bureau of Prisons, totaling 97 percent from public funds. "