COMMONWEALTH OF KENTUCKY
FRANKLIN CIRCUIT COURT
CIVIL ACTION NO. 14-CI-1337
DAVID ADAMS PLAINTIFF
V. RESPONSE TO DEFENDANTS’ MOTION
COMMONWEALTH OF KENTUCKY, ET AL. DEFENDANTS
Defendants having entered a CR 12.02(f) Motion to Dismiss to Plaintiff’s Complaint, Plaintiff respectfully responds as follows:
I. SUMMARY OF DEFENDANTS’ MOTION
Defendants base the bulk of Motion to Dismiss on their characterization of Complaint as being speculative and conclusory, making light of Plaintiff’s use of the term “illegal spending” while attempting to confuse it with state spending whose legality is properly established. Plaintiff is a taxpaying citizen whose right to challenge the legality of officials’ actions is well established. See Russman v. Luckett 391 S.W.2d 694 (Ky. 1965), which explains “public officials … are bound to perform their duties exactly as the Constitution and the statutory laws of this Commonwealth require when the command is clear.” Defendants deny Plaintiff’s characterization of improper attempts to spend state funds but, despite including for the record the entire Executive Branch Budget, fail to adequately address the main issues in the Complaint namely, “illegal spending” and “prior and proper legislative approval,” both of which were included in Complaint. Indeed, while Defendants complain in Section 1 of their Motion that “the pleading fails to provide any details about these allegedly illegal transactions, such as the amount, date or recipient of any such expenditure,” Defendants noticeably neglect to mention even once any of the three Executive Orders representing the only actions remotely attempting to legally make available Restricted Funds in question (available on the Secretary of State’s web site at www.apps.sos.ky.gov/Executive/Journal.) The General Assembly explicitly sought in KRS 12.028 to ensure constitutional and statutory limitations on Defendants’ power were maintained while making available requested funds should the aims of Defendants be met with necessary legislative approval. Those aims, namely Defendants’ desire to move Restricted Funds and, one presumes, taxing authority from “Division of Kentucky Access within the Department of Insurance” when its statutory purpose was accomplished to the General Fund and then on to “Division of Kentucky Access within the Office of Health Benefit and Health Information Exchange” in violation of the clear Executive Branch Budget denial of any General Fund resources on any expenditure directly or indirectly associated with the Health Benefit Exchange. Failure of Defendants to recede from their prior plans once they definitely in every way became prohibited brought about this action.
Defendants admit in Section 3 that for purposes of their motion “allegations in the pleading are accepted as true,” further stating “they must be sufficient to place the defending party on notice as to the cause of the action.” From this, Defendants find fault with Complaint’s lack of specific expenditures when the executive actions bringing about Complaint were explicit commitments by Defendants to perform actions which are in fact “illegal.”
Defendants express confusion at contents of the Complaint and deem it “speculative,” but admit the issues therein are justiciable by failing to cite even a single case, provision or fact definitively confirming their claim that all spending in question conforms to law. As such, Plaintiff respectfully requests this Court to deny their Motion to Dismiss.
Defendants conclude their argument by quoting extensively from CR 65.04, relating to Temporary Injunctions, and ask the Court to find the Complaint defective despite the fact that a Temporary Injunction is not requested. This must be rejected as well.
II. RELEVANT PORTIONS OF BUDGET
The current Executive Branch Budget provides for expenditure of Restricted Funds in the amount of $14,021,200 in Fiscal Year 2014-15 and $23,404,900 in Fiscal Year 2015-16. KRS 48.010(13)(f) defines the term Restricted Fund: “This fund shall consist of budget unit receipts restricted as to purpose by statute.” This language presents a complex, yet fatal problem for Defendants. With Executive Order 2014-561, Governor Beshear attempted to overcome the will of the legislature which had refused to ratify his prior two attempts to create the Kentucky Health Benefits Exchange in each of the two years preceding, thereby rejecting optional provisions of ObamaCare. Beshear did this by attempting in the Order to place the Division of Kentucky Access into the Exchange in order to use its surplus funding and taxing authority to provide state funds for the Exchange. Kentucky law does not allow him to do this, as will be detailed in the next section of this Reply.
Complaint Section 10 quotes Budget language reiterating the General Assembly’s repeated disapproval of executive orders, administrative regulations, proposed statutes and provisions effecting ObamaCare and expressing the General Assembly’s intention to limit Beshear’s unilateral implementation. Complaint Section 11 quotes Budget language absolutely forbidding General Fund spending even indirectly related to the Exchange. Complaint Section 12 quotes Budget language limiting General Fund spending for the Medicaid Expansion. Given this preponderant disapprobation, one finds it an inescapable conclusion that creating a Budget entry for nonexistent Restricted Funds requested by Defendants, perhaps in anticipation of a potential revised statute but in no instance as a replacement for one, would not conflict with subsequent disapproval of the creation of such funds in any form or clear confirming language to that effect in the same Budget.
III. LEGAL ARGUMENT
This Court faces tremendous pressure to construe Defendants’ executive actions liberally and it should. Executive management of the Commonwealth’s government is a difficult job and deference to the Chief Executive’s aims is understandable and not without precedent. Nevertheless, Kentucky law simply prohibits Defendants from continuing on their current course regarding implementation of ObamaCare.
Governor Beshear’s Executive Order 2012-587 attempted to temporarily create the Exchange for purposes of operating an optional state-based bureaucracy in the implementation of ObamaCare. The Order admitted that state funds would be necessary to provide full funding for operation of the Exchange as of January 1, 2015. It did not seek to create a funding source or taxing authority for state funds required for use by January 1, 2015 by federal law. The 2013 General Assembly did not ratify the now expired Order and also did not create funding or a taxing authority. Governor Beshear attempted to reverse this denial by the General Assembly in part by issuing Executive Order 2013-418. Governor Beshear’s Executive Order 2013-418 attempted again to temporarily create the Exchange for purposes of operating an optional state-based bureaucracy in the implementation of ObamaCare. The Order admitted that state funds would be necessary to provide full funding for operation of the Exchange as of January 1, 2015. It did not seek to create a funding source or taxing authority for state funds required for use by January 1, 2015 by federal law. The 2014 General Assembly did not ratify the now expired Order and also did not create funding or a taxing authority. Governor Beshear attempted to reverse this denial in part by issuing Executive Order 2014-561. Governor Beshear’s Executive Order 2014-561 attempted again to temporarily create the Exchange for purposes of operating an optional state-based bureaucracy in the implementation of ObamaCare, but before it did, state Budget negotiations intervened.
Governor Beshear has attempted an intricate game of musical chairs in reorganizing state government for three years running, struggling with the fact the General Assembly has not and does not approve his attempts to force the Commonwealth into ObamaCare implementation. But the music stopped when he tried to shift Restricted Funds beyond his authority to do so. Essentially, Beshear sought to use Kentucky Access funds and taxing authority to pay for the Exchange. Kentucky Access was created in 2000 by KRS 304.17B-005 as part of the Department of Insurance. No subsequent legislation has changed that, which is significant because accrued funds existing within Kentucky Access existed as Restricted Funds. KRS 48.010(13)(f) defines “Restricted Fund” as “budget receipts restricted as to purpose by statute.” Again, no statute has repurposed or otherwise transferred Kentucky Access Restricted Funds proposed in the Executive Branch Budget to fund the Exchange in 2014-15. Further, no statute has created a new taxing authority to fund the Exchange in 2015-16 or at any other time through Kentucky Access or otherwise. KRS 304.17B-021(1) mandates that taxes levied for Kentucky Access “shall be used for the purpose of funding GAP losses and Kentucky Access.” If we accept that one or more of Governor Beshear’s Executive Orders have done away with Kentucky Access, then GAP losses no longer exist as their purpose has been accomplished through the Affordable Care Act and also the Kentucky Access program as it existed in the Kentucky Department of Insurance pursuant to KRS 304.17B-005 no longer exists. The purpose of Kentucky Access under the statute is “implementing an acceptable alternative mechanism within the meaning of 42 U.S.C. sec. 300gg-44(a)(1) so that Kentucky may preserve the flexibility over the regulation of health coverage allowed by federal law.” This purpose, then, has also been accomplished through passage of the Affordable Care Act. In this case such funds, restricted as to purpose by statute, are not eligible to be transferred directly into another Restricted Fund, even one with a similar name and similar purpose. “The surplus remaining after object of a levy has been accomplished must be treated as part of a general fund.” See Fannin v. Davis (Ky. 1964) 385 S.W.2d 321. “The surplus remaining after the object of a levy has been accomplished is treated as part of the general fund … notwithstanding Section 180 of the Constitution of Kentucky, forbidding the diversion of taxes from the purposes for which they were levied.” See Field v. Stroube, 103 Ky 114, 44 S.W. 363.
If, however, we do not accept the Executive Orders, then the Kentucky Access program still exists as in current statute and the same Restricted Funds are not available to be transferred to the Exchange thanks to Section 180 and no legally created funding mechanism exists to provide for operating costs in the second year of the biennium or at any other time. Either way, the original Kentucky Access Restricted Funds cannot be transferred absent specific state legislation to fund ObamaCare as Defendants have attempted to do. Defendants may certainly refine their argument to attempt to make their official action stand before the Court, but they cannot pretend that their CR 12.02(f) Motion to Dismiss maintains any weight. Again, Defendants’ actions constitute illegal spending lacking prior and proper legislative approval and cannot be countenanced.
Lastly, Defendants claim Plaintiff’s request for injunctive relief is deficient because it fails to comply with CR 65.04, which governs motions for temporary injunctions. Plaintiff has not yet filed such a motion, but will comply with requirements of same at such time.
121 Nave Place
Nicholasville KY 40356
CERTIFICATE OF SERVICE
This certifies the forgoing was served this 5th day of December, 2014 via U.S. Mail upon Patrick R. Hughes, Dressman Benzinger LaVelle PSC, 207 Thomas More Parkway, Crestview Hills, Kentucky 41017-2596.