FRANKFORT — Franklin Circuit Judge Thomas Win gate has ruled that the state cannot balance its budget by using more than $1.9 million from a fund supported by assessments on employers.
"This is a major decision for all employers in Kentucky," said Springfield attorney Ed O'Daniel, representing a group of employers who sued to challenge the transfer.
The ruling, handed down on Friday, permanently enjoins the state from transferring money from the Benefit Reserve Fund to the General Fund, which pays for most state programs. The Benefit Reserve Fund is the investment account of the Workers' Compensation Funding Commission. Both of the accounts are funded by employers' workers' compensation premiums.
Gov. Steve Beshear might appeal the ruling. "We are studying the order and are reviewing our options," Beshear said in an e-mail message.
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The Beshear administration and the legislature decided last year to use $952,000 a year from the Benefit Reserve Fund to balance the budget, O'Daniel said.
A group of employers, led by Haydon Bridge Co., filed suit against the transfer.
Wingate issued a temporary restraining order in August against the transfer, but he now has made his order permanent.
The Kentucky Supreme Court ruled in January 2010 that the governor and state legislators can't transfer money to the General Fund from accounts where public and private dollars are commingled.
The ruling said political leaders cannot transfer money to the General Fund, which pays for most state programs, after it has been put into workers' compensation and similar accounts, because the accounts have received contributions from private employers.
The decision applies to any state government accounts that contain public and private money. Only government accounts containing public money may be tapped for the General Fund, the high court said.
The Supreme Court ruling specifically dealt with the annual transfer of $19 million from the Kentucky Workers' Compensation Funding Commission and the Workers' Compensation Benefit Reserve Fund to the state's General Fund for the 1998-2000 and 2000-02 state budgets.
O'Daniel said he has no idea why the legislature and Beshear proceeded to transfer money from the reserve fund during the 2010 General Assembly to balance the current two-year budget.
"I have to wonder if they were trying to retry the whole case by doing what they did," he said.