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ERVIN KLEIN; THOMAS C. RECHTIN; EDDIE NOEL; AND DAVID MILES APPELLANTS v. JONATHAN MILLER, IN HIS OFFICIAL CAPACITY AS THE SECRETARY OF THE FINANCE AND ADMINISTRATION CABINET; MARY LASSITER, IN HER OFFICIAL CAPACITY AS STATE BUDGET DIRECTOR; AND RICHARD MOLONEY, IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF THE DEPARTMENT OF HOUSING, BUILDINGS AND CONSTRUCTION APPELLEES
NOT TO BE PUBLISHED
The Appellants, Ervin Klein, Thomas C. Rechtin, Eddie Noel, and David Miles,Double challenge the constitutionality of the budget bill provisions which transferred surpluses from the Department of Housing, Buildings, and Construction (“the HBC”) agency accounts to the General Fund in order to balance the Commonwealth's budget. The Franklin Circuit Court rejected the Appellants' challenge and granted the Appellees' motion for summary judgment, dismissing the claims. After a thorough review of the parties' arguments, the record, and the applicable law, we affirm.
The facts of this case are not contested. The HBC was established on January 1, 1978, by executive order of Governor Julian Carroll to unite all related functions of the state's building industry in order to provide a uniform and more effective building inspection process. Ratifying legislation was enacted by the 1978 General Assembly and established the HBC under Kentucky Revised Statutes (KRS) Chapter 198B. The HBC is organized into four divisions: Building Codes Enforcement; Heating, Ventilation and Air Conditioning; Plumbing; and Fire Prevention, i.e., Office of the State Fire Marshall. The HBC is primarily responsible for oversight of building construction in the state through enforcement of standard building and fire codes pertaining to elevators, boilers, manufactured housing, hazardous materials, electrical installations, and the like. Thus, HBC is in charge of licensing and certifying various contractors in the industry including plumbers, electricians, boiler contractors, sprinkler and/or fire alarm contractors, and building inspectors. The HBC issues over 40,000 permits per year Double and conducts over 120,000 inspections per year.
The HBC is partly funded Double by a statutory fee system which imposes (1) licensing fees upon regulated contractors in exchange for the right to perform such services in the state, and (2) inspection fees on various building and machinery owners to ensure compliance with provisions of the Uniform State Building Code. The underlying statutes establishing the HBC fees provide that the funds derived from such fees are to be kept in separate agency fund accounts for the regulation of the specific trades. Double Several of these statutes include language that the funds not expended by the agency at the close of the fiscal year do not lapse and/or do not revert to the General Fund of the Commonwealth. Accordingly, some of the agency fund accounts contain excess funds from prior years.
In 2008, the General Assembly Double directed transfers of restricted funds from HBC, totaling $10,195,200, to the General Fund in the FY (fiscal years) 2008–2010 biennial budget, “notwithstanding the statutes or requirements of the Restricted Funds enumerated.” See HB 406 at 204, 210, 2008 General Assembly. Appellants sought a declaration of rights and injunctive relief from the Franklin Circuit Court, arguing that the transfers were invalid under our caselaw and that the transfers violated constitutional provisions because the license and permit fees paid to the HBC for policing the state's building code were private, restricted funds and could not then be transferred to the General Fund in a budget bill. The Appellees moved for summary judgment.
In granting the Appellees' summary judgment motion the court determined that the transfer of HBC funds by HB 406 was a valid exercise of legislative power. The court noted that, to the extent HBC exercises control over the funds it collects, such authority is simply delegated by the General Assembly because the legislature's power over the Commonwealth's purse strings is plenary. The court also noted that the legislature determines which funds are restricted Double and which funds lapse. Moreover, the court determined that the inclusion of “etc.” in KRS 48.315(1) Double authorized the legislature to transfer the funds in question and that KRS 48.315(3) Double permitted the suspension of any statute conflicting with the provisions of KRS 48.315.
The court then looked at the following two questions in light of Commonwealth ex rel. Armstrong v. Collins, 709 S.W.2d 437 (Ky.1986),Double in determining if the transfer of HBC funds was valid: (1) whether the General Assembly had the authority to lift statutory restrictions on HBC funds by temporarily suspending the relevant statute with the budget bill; and (2) whether HBC funds were available for the operation of state government and, thus, subject to transfer into the General Fund.
Turning to the first question, the court noted that Armstrong, supra, held:
The General Assembly is mandated to operate the financial offices of the Commonwealth under a balanced budget. If revenues become inadequate, the General Assembly must be empowered to use adequate devices to balance the budget. Provisions in the budget document which effectively suspend and modify existing statutes which carry financial implication certainly are consistent with those duties and responsibilities.
Armstrong at 443.
In light of Armstrong, the trial court found that the legislature had the authority to lift statutory restrictions on HBC funds by temporarily suspending the relevant statute in the budget bill. Turning to the second question—whether HBC funds were available for the operation of state government and, thus, subject to transfer into the General Fund—the trial court again looked to the similar transfers from trust and agency accounts to the General Fund at issue in Armstrong. The court noted that Armstrong held that private funds and those public funds, which are commingled with private employee contributions and cannot be differentiated, could not be transferred by the legislature into the General Fund, namely the retirement systems and the workers' compensation accounts.
Applying Armstrong, the court concluded that the HBC was unlike the retirement systems and the workers' compensation funds held to be nontransferable because those funds were employee contributions and the insurance company assessments constituted private, mandatory donations. The trial court determined that the fees charged by the HBC were regulatory fees for licensing and inspections and were not comparable to the private, mandatory donations for a retirement system or workers' compensation fund. The trial court also concluded that the HBC fees were charged as fees and not taxes because the fees charged by the HBC were for a specific purpose, i.e., to regulate particular industries. Moreover, the trial court reiterated that the HBC is a creature of statute and, as such, its spending and its policing power are dictated by the legislature. Accordingly, the trial court concluded that the General Assembly had the authority to transfer the HBC excess funds to the General Fund through the budget bill. The trial court additionally found that the transfers did not violate constitutional provisions. Thus, the court denied Appellants' motion for declaration of rights and motion for injunctive relief and granted Appellees' motion for summary judgment. It is from this order that Appellants now appeal.
At the outset, we note that the applicable standard of review on appeal of a summary judgment is “whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App.1996). Summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Kentucky Rules of Civil Procedure (CR) 56.03. The trial court must view the record “in a light most favorable to the party opposing the motion for summary judgment and all doubts are to be resolved in his favor.” Steelvest v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky.1991).
Summary judgment is proper only “where the movant shows that the adverse party could not prevail under any circumstances.” Id. However, “a party opposing a properly supported summary judgment motion cannot defeat that motion without presenting at least some affirmative evidence demonstrating that there is a genuine issue of material fact requiring trial.” Hubble v. Johnson, 841 S.W.2d 169, 171 (Ky.1992), citing Steelvest, supra. See also O'Bryan v. Cave, 202 S.W.3d 585, 587 (Ky.2006); Hallahan v. The Courier Journal, 138 S.W.3d 699, 705 (Ky.App.2004). Since summary judgment involves only legal questions and the existence of any disputed material issues of fact, an appellate court need not defer to the trial court's decision and will review the issue de novo. Lewis v. B & R Corporation, 56 S.W.3d 432, 436 (Ky.App.2001). With this standard in mind we now turn to the parties' arguments.
On appeal, Appellants present five arguments, namely: (1) HBC fees are private funds prohibited from being expropriated to supplement the General Fund; (2) KRS 48.315 Double provides no basis for transferring HBC funds; (3) “excess funds” are also year-end balances prohibited from transfer to the General Fund;
(4) the transfer of HBC fees violates Kentucky Constitution Sections 15,Double
The Appellees disagree and argue that the fund transfers are constitutional. In support thereof, the Appellees present three arguments, namely: (1) agency accounts are “public,” “private,” or “commingled” and the transfers at issue are public funds; (2) the Supreme Court recently addressed what is a commingled fund and how, if at all, the legislature can transfer the funds to the General Fund in Beshear v. Haydon Bridge Co., Inc., 304 S.W.3d 682 (Ky.2010); (3) the circuit court correctly applied the law. The Appellees counterargue that Appellants' challenges to the transfers fail for four reasons, namely: (1) fees and assessments are not synonymous; (2) KRS 48.315 does not foreclose the transfers; (3) the concept of “excess funds” is simple; and (4) the use of excess fee revenue for general fund purposes does not convert the revenue into “taxes.”
In light of the parties' numerous arguments, we believe that a more proper characterization of the issues on appeal is in order. Succinctly stated, the parties present three issues: first, whether the transfer of HBC funds was improper in light of our caselaw, namely Armstrong and its progeny, such as Haydon Bridge; second, whether the transfer of HBC funds violated KRS 48.315; and third, whether the transfer of HBC funds violated enumerated constitutional provisions. With these issues in mind we now turn to the applicable jurisprudence concerning the first issue: whether the transfer of HBC funds was improper in light of our caselaw, namely Armstrong and its progeny, Haydon Bridge.
The Kentucky Supreme Court addressed a similar situation in Commonwealth ex rel. Armstrong v. Collins, 709 S.W.2d 437 (Ky.1986). Therein, the court addressed the transfers from forty-seven trust and agency funds to the General Fund, which ran the gamut from Fish and Wildlife Resources to the State Police Retirement Fund to the University of Kentucky Tobacco Research Trust Fund. The ArmstrongDouble court held that private funds and those public funds which are commingled with private contributions and cannot be differentiated could not be transferred by the legislature into the General Fund. In so holding, the court stated:
However, the transfers of funds which relate to appropriations of private contributions cannot be termed suspensions or modifications of the operation of the statutes. Because the General Assembly has no authority to transfer private funds to the general fund, the transfer of money from agencies in which public funds and private employee contributions are commingled, and cannot be differentiated, is unconstitutional. Diversions from the Kentucky Employees Retirement System, County Employees Retirement System, State Police Retirement System, and Teachers' Retirement System fall within this category, as do Workers' Compensation and Workers' Claims Special Fund. The employee contributions and the insurance company assessments constitute private, mandatory donations.
Armstrong at 446–47.
Appellants interpret Armstrong to foreclose the transfer of the HBC agency funds because Appellants contend that said funds are “private.” We disagree. The Armstrong court was presented multiple agency fund accounts, some similar to HBC, and found that transfers from accounts which contained private contributions, such as retirement funds and workers' compensation funds, to be invalid. The HBC is funded primarily through regulatory fees as established by statute. The HBC is not funded through private employee contributions, such as those of a retirement system, nor are they funded through private contributions, such as insurance premiums or assessments,Double like those in Thompson v. Kentucky Reinsurance Ass'n, 710 S.W.2d 854, 857 (Ky.1986), or the Workers' Compensation Fund. Thus, the HBC agency accounts are not “private funds.” As noted in Beshear v. Haydon Bridge Co., Inc., 304 S.W.3d at 703, legislation is valid when it “affects only public funds which are not commingled, or if so, are capable of differentiation ․”. Having determined that the HBC accounts at issue were comprised of public funds, we must now turn to the second issue, namely whether the transfer of HBC funds violated KRS 48.315.
The Appellants argue that KRS 48.315 provides no basis for transferring HBC funds because the statute does not specifically list any of the HBC statutes. Appellants are correct that KRS 48.315 does not specifically mention the HBC statutes, but we do note that, in listing the specific statutes, KRS 48.315(1) ends with an “etc.” It takes little interpretation to conclude that the legislature meant, by adding “etc,” for KRS 48.315 to include other statutes within its purview. In doing so, we turn to our oft-employed rules of statutory construction, and note that as a general rule we must interpret statutes according to their plain meaning and in accordance with the intent of the legislature. Floyd County Bd. of Educ. v. Ratliff, 955 S.W.2d 921, 925 (Ky.1997). To determine legislative intent, a court must refer to “the words used in enacting the statute rather than surmising what may have been intended but was not expressed.”․ Similarly, a court “may not interpret a statute at variance with its stated language.” McDowell v. Jackson Energy RECC, 84 S.W.3d 71, 77 (Ky.2002), quoting Hale v. Combs, 30 S.W.3d 146, 151 (Ky.2000) (citation omitted); see also Commonwealth v. Allen, 980 S.W.2d 278, 280 (Ky.1998) (citations omitted).
Appellants contend that the use of “etc.” at the end of the enumerated statutes in KRS 48.315(1) does not allow the inclusion of the HBC statutes. We disagree. While Appellants rely on the maxim expressio unius est exclusio alterius, i.e., the enumeration of particular things excludes the idea of something else not mentioned, the Kentucky Supreme Court recently noted that “this canon of statutory construction is resorted to only when the relevant language is ambiguous and only as an aid in arriving at [legislative] intention, and not to defeat it.” Public Service Com'n of Kentucky v. Commonwealth, 320 S.W.3d 660, 666 (Ky.2010) (internal citations omitted). The application of this canon would ignore the inclusion of “etc.” by the legislature. “Etc.” is defined in Black's Law Dictionary 592 (8 th ed.2004) as “[a]nd other things. The term usu. indicates additional, unspecified items in a series.” The use of “etc.” by the legislature expresses an obvious intent to include other or additional unspecified statutes. Thus, the HBC account funds are properly included. However, even if we were to apply the canon as argued by the Appellants, we believe “etc.” to be relevant language which is unambiguous in nature which, in and of itself, defeats the application of the maxim. Thus, the inclusion of “etc.” makes the enumerated list of statues in KRS 48.315(1) illustrative rather than exhaustive. See Fox v. Grayson, 317 S.W.3d 1, 10 (Ky.2010). Therefore, we disagree with Appellants' argument that KRS 48.315 does not provide a basis for the transfer of the HBC account funds and now turn to the third issue before us: namely whether the transfers violated the enumerated constitutional provisions.
The Appellants next argue that the transfer was improper because the HBC account funds were taxes. We believe that they are regulatory fees and not taxes.
At first blush, one might be persuaded by Reeves v. Adam Hat Stores, 303 Ky. 633, 637, 198 S.W.2d 789, 791 (1946), wherein the court stated:
[A] license fee is imposed under the police power, the fee exacted must not be so large as to charge the ordinance with the imputation of a revenue-producing purpose. The fee that may be imposed under the police power is one that is sufficient only to compensate the municipality for issuing the license and for exercising a supervision regulation over the subjects thereof. Anything in addition to this amounts to a tax for revenue, and cannot be upheld as a valid exercise of the police power.
However, we find Commonwealth v. Louisville Atlantis Community/Adapt, Inc., 971 S.W.2d 810, 815 (Ky.App.1997), to be dispositive:
[T]he Court in Gray v. Methodist Episcopal Church, 272 Ky. 646, 114 S.W.2d 1141 (1938), held as follows:
[S]ince a tax is a charge imposed for the purpose of raising revenue, a charge primarily imposed for the purpose of regulation is not a tax, and is not subject to the constitutional limitations upon the power of taxation․ If the primary purpose of the legislature in imposing such a charge is to regulate the occupation or the act, the charge is not a tax even if it produces revenue for the public.
Id. at 652, 114 S.W.2d at 1144. Further, “[a] tax is universally defined as an enforced contribution to provide for the support of government, whereas a fee is a charge for a particular service.” Long Run Baptist Ass'n v. Sewer Dist., Ky.App., 775 S.W.2d 520, 522 (1989).
Louisville Atlantis Community at 815.
In the case sub judice, the primary purpose of the legislation imposing the fees paid to the HBC is to regulate the trades governed by the HBC. Thus, even if the transfer to the General Fund produced a revenue for the public, it does not become a tax. Accordingly, the trial court did not err in determining that the funds at issue were not taxes.
Lastly, the Appellants argue that the transfer of funds was improper because the HBC account funds were year-end balances prohibited from transfer. In Haydon Bridge, the Kentucky Supreme Court addressed the transfer of an agency fund which contained private funds. In finding that the “year-end balances” therein could not be separated into categories called “public money” and “private agency funds,” the court held that Armstrong “would not tolerate any transfer that would or might include private agency funds.” Id. at 705. While true that the Court said Armstrong prohibited the transfer of year-end balances containing commingled funds, we do not believe that the Court intended to prevent the transfer of year-end balances that contained public funds that were not commingled with private funds. Given that we have found that the HBC funds at issue are not private funds, nor public funds commingled with private funds, Armstrong does not prevent their transfer even if they are year-end balances. Thus, Appellants' argument is unpersuasive on this issue.
The Appellants argue that the transfers from HBC violate Sections 15, 51, 59, 180, and 181 of the Kentucky Constitution. We now address these arguments.
Concerning Sections 59 and 181, the Appellants do not address why the transfers allegedly violate these sections and do not provide any authority for their terse argument; thus, we decline to address this argument. See CR 76.12(4)(c)(v) and Cherry v. Augustus, 245 S.W.3d 766, 781 (Ky.App.2006).
Concerning Sections 15 and 51, first we find that, pursuant to Haydon Bridge, the validity of the transfers depends on whether KRS 48.315 is limited by Armstrong. In that we have previously found that the “etc.” language of KRS 48.315 includes the HBC account funds and that Armstrong does not prevent the transfers, then Section 15 of the Kentucky Constitution is not violated. Second, we
disagree with the Appellants that these transfers amount to an “amendment” and require publication under Section 51. Cf. Haydon Bridge at 705 (transfers of commingled private agency funds were improper suspensions under Section 15, and, as “amendments,” rather than “suspensions,” were subject to the “publication” requirement of Section 51 of the Kentucky Constitution.) There is nothing to indicate that the budget bill did anything other than transfer funds then in existence. It acted only as a temporary suspension of the statutes. There was no amendment to the statutes that would activate the publication requirement of Section 51 of the Kentucky Constitution, thus, we find no violation thereof.
Lastly, we address Section 180 of the Kentucky Constitution, which concerns taxation. Having already determined that the transfers of the agency funds did not convert fees into taxes, we do not find a violation of Section 180 of the Kentucky Constitution. Double
Appellants next argue that the transfers from HBC violate the Equal Protection Clause and Kentucky Constitution Sections 2 and 242. In essence, the Appellants argue that the transfers were arbitrary because there were differing amounts taken from the various HBC agency funds. We disagree with Appellants that such transfers are arbitrary in violation of Section 2 of the Kentucky Constitution. Double Commonwealth Natural Resources and Environmental Protection Cabinet v. Kentec Coal Co., Inc., 177 S.W.3d 718, 724 (Ky.2005), addressed Section 2 of the Kentucky Constitution and the Equal Protection Clause:
Section 2 of the Kentucky Constitution provides the Commonwealth shall be free of arbitrary action. With respect to adjudications, whether judicial or administrative, this guarantee is generally understood as a due process provision whereby Kentucky citizens may be assured of fundamentally fair and unbiased procedures ․the state is enjoined against arbitrariness by Section 2 of the Kentucky Constitution which, we have held is “a concept we consider broad enough to embrace both due process and equal protection of the laws, both fundamental fairness and impartiality.”
Id. at 724 (internal citations omitted). Thus, we note that the Equal Protection Clause requires people who are similarly situated to be treated equally. See Weiand v. Board of Trustees of Kentucky Retirement Systems, 25 S.W.3d 88, 92 (Ky.2000). If they are not, there must be a rational basis to justify the disparate treatment of similarly situated individuals. See Wynn v. Ibold, Inc., 695, 696 (Ky.1998). A statute involving the regulation of economic matters or matters of social welfare comports with both due process and equal protection requirements if it is rationally related to a legitimate state objective. Wynn at 696, citing Kentucky Harlan Coal Co. v. Holmes, 872 S.W.2d 446, 455 (Ky.1994); Waggoner v. Waggoner, 846 S.W.2d 704 (Ky.1992); Estridge v. Stovall, 704 S.W.2d 653, 655 (Ky.App.1985); see also Stephens v. State Farm Mut. Auto. Ins. Co., 894 S.W.2d 624, 627 (Ky.1995) (“[w]hen economic and business rights are involved, rather than fundamental rights, substantive due process requires that a statute be rationally related to a legitimate state objective.”).
Our courts have held that a “person challenging a law upon equal protection grounds under the rational basis test has a very difficult task because a law must be upheld if there is any reasonably conceivable state of facts that could provide a rational basis for the classification.” Commonwealth ex rel. Stumbo v. Crutchfield, 157 S.W.3d 621, 624 (Ky.2005), citing United States Railroad Retirement Board v. Fritz, 449 U.S. 166, 101 S.Ct. 453, 66 L.Ed.2d 368 (1980). A party seeking to have a statute declared unconstitutional is faced with the burden of demonstrating that there is no conceivable basis to justify the legislation. Holbrook v. Lexmark International Group, Inc., 65 S.W.3d 908, 915 (Ky.2001), citing Buford v. Commonwealth, 942 S.W.2d 909 (Ky.App.1997).
In the case sub judice we do not believe that the Appellants have met the burden imposed upon those seeking to have legislation declared unconstitutional for violation of the Equal Protection Clause. Thus, the trial court did not err in concluding that the Appellants' constitutional challenges must fail.
Finding no error, we affirm the trial court's grant of summary judgment.
WINE, JUDGE, concurS.
kELLER, JUDGE, CONCURS IN RESULT ONLY.
CAPERTON, JUDGE: Double
Response sent, thank you
Docket No: NO. 2010–CA–000750–MR
Decided: December 22, 2011
Court: Court of Appeals of Kentucky.
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