Bevin’s midyear cuts to universities were illegal, Kentucky Supreme Court says

The Kentucky Supreme Court dealt a decisive blow to Gov. Matt Bevin’s executive power Thursday, finding that he exceeded his statutory authority by cutting state universities’ budgets by 2 percent last spring, after the General Assembly had already appropriated their funding.

The 5-2 ruling reverses a May 18 decision by Franklin Circuit Judge Thomas Wingate, who said the state’s universities and colleges are part of the executive branch of government and that Bevin has the power to reduce budget allotments to units within that branch.

Kentucky’s high court disagreed, concluding that whatever power Bevin has to reduce spending “does not extend to universities, which the legislature has made independent bodies politic with control over their own expenditures.”

The ruling said Bevin’s executive order “effectively intercepted the funds before they became available to the universities.”

“By reducing the final quarterly allotment, the governor has essentially frustrated the overall appropriation by the General Assembly,” the opinion says. “Money that the General Assembly made available to the universities through its appropriations was made unavailable by the governor’s actions. Simply put, there is a difference between exercising an authority not to spend money once it has been made available and preventing the money from being made available to the entity that has the power to decide not to spend it.”

Oral arguments were held last month. Attorney General Andy Beshear, who filed suit against Bevin, said the governor violated the state constitution’s separation of powers by usurping legislative power over the budget. Bevin’s general counsel, Steve Pitt, said state law allows the governor to alter financial payments to state agencies through the State Budget Office.

In his earlier ruling, Wingate ordered the state to put $18 million — the amount of the 2 percent cut — in a separate account until a final decision is reached.

Beshear called on Bevin to immediately release the money “he wrongfully withheld from our public colleges and universities.”

Bevin has 20 days to ask for a rehearing, but a spokeswoman for the governor did not address that issue in her statement.

“We are disappointed in the court’s decision today and strongly disagree with its reasoning,” Amanda Stamper said.

Bevin has repeatedly said that the cuts were necessary to help prop up the state’s ailing pension system.

“The attorney general clearly does not understand the severity of the pension problem, which became the nation’s worst funded plan under the watch of his father’s administration,” Stamper said, referring to former Gov. Steve Beshear.

The ruling was written by Justice Mary Noble, with Chief Justice John Minton and justices Bill Cunningham, Lisabeth Hughes and Michelle Keller concurring. Justices Daniel Venters and Samuel Wright dissented. In his dissent, Venters said the attorney general did not have standing in an executive action. Wright also dissented, saying that university presidents had agreed to the 2 percent cuts, which rendered all other issues “moot.”

The court did not address the constitutional question that Andy Beshear raised about separation of powers, saying the issue could be dealt with through state laws.

Noble said universities differ from the rest of state government because appropriations are made directly to them, instead of having their bills paid through the treasurer’s office. In addition, the university governing boards have “fundamental independence,” a large portion of which is “financial self-control.”

“Here, the statutory language is clear that the legislature has not given the governor control over the universities’ appropriated funds regardless of whether such authority exists in regard to other budget units,” Noble wrote.

The decision also said “there is no question” that the governor has the authority to make budget cuts specifically when there is a budget shortfall of 5 percent or less and there is a legislative budget reduction plan. But in the last quarter of the 2015-2016 fiscal year, there was a surplus, not a shortfall.

The majority decision also ruled that three legislators who joined Beshear in the lawsuit do not have legal standing in the case.

The opinion is the first resolution in a series of legal and personal skirmishes between Beshear and Bevin, including Beshear’s challenge to Bevin’s dissolution of the University of Louisville Board of Trustees. Bevin also has hired a private firm of lawyers to investigate the administration of Beshear’s father, the former governor.

Beshear said he thinks the ruling could favorably affect the U of L case before Franklin Circuit Judge Phillip Shepherd because it defines universities as “independent bodies politic.”

He called Thursday’s ruling a “turning point” for Bevin.

“It is time for him to stop attacking, and to instead join me in building a better Kentucky,” Beshear said, citing Kentucky’s problems with child abuse, senior citizen scams and drug abuse. “These are the problems Kentuckians expect us to address, and they are problems that all of us — Democrats, Republicans or independents — can address together. So I would hope that after today, the nasty press releases and name-calling stop, and the governor joins us for the real work that needs to be done to help Kentucky families.”

House Speaker Greg Stumbo, D-Prestonsburg, said he was pleased that the court reconfirmed “the legislature’s spending authority as the constitution’s framers intended.”

“I predict today’s decision is the first of what will be a series of Kentucky Supreme Court rulings against Gov Bevin’s illegal actions,” Stumbo said.

Bevin first ordered universities on March 31 to cut their spending by 4.5 percent before the fiscal year ended June 30, but he later reduced the cut to 2 percent. The two-year state budget that took effect July 1, which lawmakers approved earlier this year, cut universities by an additional 4.5 percent each year.

The universities will now presumably receive one-time funds ranging from $5.6 million to the University of Kentucky to less than $1 million to Morehead State University. Kentucky State University was excluded from all cuts because of its precarious financial footing.

“The Supreme Court’s ruling today provides all the state’s universities a greater sense of certainty in our budget planning process as we all move forward,” said Eric Monday, UK’s vice president for finance and administration. “The funds that will be returned to the University of Kentucky, about $5.6 million, will be included in our focus on student success initiatives, particularly in the areas of retention and graduation rates.”

Linda Blackford: 859-231-1359, @lbblackford

How much each state university will get

Eastern Kentucky University: $1,360,700

Kentucky Community and Technical College System: $3,803,200

Kentucky State University: $0

Morehead State University: $866,800

Murray State University: $960,500

Northern Kentucky University: $970,800

University of Kentucky: $5,592,200

University of Louisville: $2,781,500

Western Kentucky University: $1,493,000