Could Kentucky reduce a turnpike debt-payment fund allotment during a road-fund shortfall despite an escrow rule?

Plain-English summary

A Kentucky legislator asked whether the transportation secretary violated KRS 175.505 by lapsing the 1990–91 allocation to a fund for faster repayment of turnpike bonds during a road-fund shortfall. The Attorney General said in 1992 that the secretary acted within his authority. The statute’s escrow requirement addressed money already allocated to the fund but unusable for accelerated repayment because bond terms, market conditions, or similar obstacles prevented payment. It did not cover the absence of money caused by a revenue shortfall. The AG read that rule alongside the budget-reduction provisions of KRS Chapter 48 and found no conflict.

Currency note

This opinion was issued in 1992. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical summary

Transportation and budget officials

The AG distinguished a reduced allotment from an inability to spend funds already allotted. Under its reading, KRS 175.505 required escrow when a bond-related obstacle prevented use of available money for debt acceleration. Chapter 48, by contrast, governed allotment reductions during a revenue shortfall. On the facts given, the secretary could curtail the fund’s allotment.

Legislators reviewing the fund

The AG rejected the premise that the two statutory schemes conflicted. It treated “other factors” in the escrow provision as factors like bond terms and bond-market conditions, not a lack of revenue. That construction meant the opinion did not have to decide whether a specific statute would override a general one.

Common questions

Did the AG find the 1990–91 turnpike fund lapse unlawful?

No. It concluded that the transportation secretary acted within his authority in reducing the allotment during the road-fund shortfall.

When did the opinion say the escrow rule applied?

When money had been allotted but could not be used for accelerated bond payments because of bond terms, market conditions, or similar structural obstacles.

Did a revenue shortfall count as an “other factor” requiring escrow?

The AG said no. It read that phrase in light of the bond-related examples in KRS 175.505, while Chapter 48 addressed reduced allotments during a shortfall.

Background and statutory framework

KRS 175.505 created the debt payment acceleration fund and an escrow procedure for allocated money that could not be used for faster bond repayment. KRS 48.130 and KRS 48.600 addressed budget reductions and allotment changes during deficits. The AG harmonized those provisions by separating the amount allotted from how an existing allotment must be handled if acceleration is impossible.

Citations and references

• KRS 175.505: fund and escrow provision construed by the AG.
• KRS 48.130 and KRS 48.600: budget-reduction provisions considered alongside it.
• Ledford v. Faulkner, Ky., 661 S.W.2d 475, 476 (1983): cited for harmonizing apparently conflicting statutes.
• Steinfield v. Jefferson County Fiscal Court, 312 Ky. 614, 229 S.W.2d 319 (1950): cited in interpreting the phrase “other factors.”

Source

• Landing page: https://kdla.access.preservica.com/uncategorized/IO_86571e0f-6ce2-43c4-bf2d-5e8e28b924e9/
• Original PDF: https://kdla.access.preservica.com/download/file/IO_86571e0f-6ce2-43c4-bf2d-5e8e28b924e9

Original opinion text

OAG 92-7
January 22, 1992
Representative Joe Clarke
Presiding Co-chairman of the Interim Joint Committee On Appropriations and Revenue Legislative Research Commission State Capitol Frankfort, Kentucky 40601 Dear Representative Clarke: You have asked the Attorney General to determine whether the secretary of transportation violated KRS 175.505 in lapsing the 199091 allocation for the debt payment acceleration fund. We find no such violation. Background: KRS 175.505 establishes the debt payment acceleration fund, which is an account to be used for the accelerated payment of the debt service for bonds issued by the Kentucky turnpike authority. The fund is financed by allocation of a portion of the supplemental highway user motor fuel tax imposed by KRS 138.220. The transportation cabinet is directed to use the funds in the account to accelerate payment of debt service and to report annually to the legislature regarding the status of the accelerated payments. The following language in KRS 175.505 provokes your inquiry to the Attorney General: In the event that, due to bond market conditions, the terms of the bonds issued or other factors, the transportation cabinet is unable to accelerate debt service payments, the transportation cabinet shall provide documentation to the interim joint committee on appropriations and revenue that such acceleration is not possible and the reasons therefor. In such an event, the funds not available for debt acceleration shall be placed in a special escrow account in the transportation cabinet. Such funds shall not be expended for any of the lawful purposes of the transportation cabinet but shall be held in escrow until such time as the debt acceleration described by this

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section is possible. The transportation cabinet shall invest the funds allocated to the escrow account and any funds generated from these investments shall remain in the escrow account. Any funds remaining in the escrow account at the close of the fiscal year shall not lapse but shall be carried forward to the next fiscal year for use as provided in this section. In fiscal year 1990-91, the secretary of transportation, facing a shortfall in road fund revenues of $37 million, lapsed the entire allocation to the debt payment acceleration fund. The secretary claimed to act under the authority of KRS 48.130 and 48.600. The relevant portion of KRS 48.130 provides: (2)(a) In recommending budget reductions, the Governor, the Chief Justice, and the Legislative Research Commission shall not recommend universal percentage reductions, but shall weigh the needs of all budget units and shall strive to protect the highest possible level of service in their respective branches. Services which are not essential to constitutional functions shall be subject to reduction.

Subsection 1 of KRS 48.600 provides:
In the event of an actual or projected deficit, as determined by the finance and administration cabinet, in total tax receipts, as specified in KRS 48.130, of less than five percent (5%), the governor, the chief justice, and the legislative research commission shall make such allotment reductions for the budget units of their respective branches of government as are deemed necessary, and shall take such steps to revise allotments for their respective branches as are necessary to prevent a cash deficit. You contend that where KRS 175.505 and 48.600 conflict, the specific provisions of KRS 175.505 control over the general provisions of KRS 48.600. You thus conclude that the secretary of transportation had no authority to divert funds intended to finance the debt payment acceleration fund. Discussion:

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One of the most durable tenets of statutory construction provides that “[w]here there is an apparent conflict between statutes or sections thereof, it is the duty of the court to try to harmonize the interpretation of the law so as to give effect to both sections or statutes if possible.” Ledford v. Faulkner, Ky., 661 S.W.2d 475, 476 (1983). In obedience to this principle we must, before reaching your question of which statute controls, determine whether the statutes may be construed to avoid conflict altogether. KRS 175.505 describes only two circumstances that would render the transportation cabinet unable to accelerate debt service payments. These are bond market conditions and the terms of the bonds issued. When these or other factors are present, the statute compels the transportation cabinet to hold the money in escrow, presumably until the repayment is possible or the legislature directs that the funds be expended otherwise. We find it significant that the statute presumes that funds will be available whenever the transportation cabinet is unable to accelerate debt service payments; that is to say, it is the inability of the transportation cabinet to accelerate payments, rather than a shortage of funds, that invokes the escrow procedure. Using the statute’s examples as illustrative, the cabinet would be unable to accelerate payments if market conditions or the terms of the bonds themselves prevented accelerated payment. In those circumstances the cabinet could not make accelerated payments even if it wanted to, and hence the statute prescribes the disposition of the funds that cannot be expended. We construe the phrase “unable to accelerate debt service payments” to denote an inability to expend available funds because of some structural impediment related to the bonds or bond market; in other words, the statute refers to situations in which it is not in fact possible to make the accelerated payments, rather than to situations in which no funds are available to spend in the first place. Any other interpretation would result in the statute’s directing how to deposit funds when the funds are unavailable, an obvious irrationality. We note also that the two specific expressions in the statute, namely bond market conditions and the terms of the bonds themselves, must be construed as illustrative of the scope of the general term “other factors.” Steinfield v. Jefferson County Fiscal Court, 312 Ky. 614, 229 S.W.2d 319 (1950). We find it significant that the statute enumerates two conditions under which it can be invoked, as opposed to a general reference such as “for any reason.” We do not believe that the scope of “other factors” includes revenue shortfalls, for such an interpretation would broaden the “other factors” term to

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include conditions that differ from the “same kind, class or nature as those specifically enumerated.” Id. at 320. Our construction of KRS 175.505 removes any conflict with KRS Chapter 48. Chapter 48 directs the allocation of funds when a shortfall renders the state incapable of expending revenues as originally planned; KRS 175.505 directs the disposition of funds that have been allocated to the debt payment acceleration fund. When construed together as a harmonious whole the statutes provide for the expenditure or escrow of funds allotted to the debt payment acceleration fund while permitting the secretary of transportation, in times of financial need, to reduce the allotment of revenue that would normally be attributed to the fund. Since we construe the statutes to present no conflict, we need not determine whether the specific provisions in one prevail over the general provisions in the other. Conclusion: We conclude that the secretary of transportation acted within his authority in curtailing the allotment of funds to the debt payment acceleration fund. Sincerely, Chris Gorman Attorney General

Ross T. Carter
Assistant Attorney General
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