COMMONWEALTH OF KENTUCKY
FRANKLIN CIRCUIT COURT
DIVISION II
CIVIL ACTION NO. 14-CI-1337
DAVID
ADAMS PLAINTIFF
V. RESPONSE TO DEFENDANTS’ MOTION
TO
DISMISS
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.
Respectfully
submitted,
David
Adams
121
Nave Place
Nicholasville
KY 40356
859-537-5372
Plaintiff
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.
