May 26, 1988

Ms. Judith M. Payne 
Acting Executive Director 
South Dakota Public Entity 
Pool for Liability 
Bureau of Administration 
State Capitol 
Pierre, South Dakota 57501

OFFICIAL OPINION NO. 88-23

Funding of PEPL/State Agreement

Dear Director Payne:

On behalf of the Board of Directors for the Public Entity Pool for Liability (PEPL) you have requested my opinion on the following matter.

FACTS: 

The Legislature appropriated $1 million in 1986 to be used for the purchase of a master insurance contract or for the State's initial contribution to PEPL.  That money is still available and will be used for that purpose. However, the actuarial study that was done concluded that the first year funding should be $2,027,500.  The $1 million General Fund appropriation equates to $147.62 per Generally Funded FTE.  The Bureau of Administration is proposing to bill each agency $147.62 per Federally and Other Funded FTE to fund the pool at an adequate level.

QUESTION: 

Based upon those facts you have requested my opinion regarding whether  "Federal and Other Funds" may be used for this purpose.

RESPONSE:

Your question essentially raises two issues.  First, whether the terms of the agreement, grant, or program providing federal or "other" funds which are used to employ individuals within state government allow the expenditure of those federal or other funds for this purpose.  Second, whether the South Dakota Legislature has given the necessary authority to the Bureau of Administration to charge the various agencies for the PEPL coverage and in turn whether the PEPL Board has the authority to receive and expend these funds.

The initial question simply cannot be answered within any reasonable time frame.  Accordingly, for the purpose of this Opinion, I am assuming that the individual programs, grants, agreements and other arrangements which provide the federal and other funds allow for expenditures of this sort.  The category of expenditure being contemplated is of course for liability coverage for the employees and entity or agency administering the particular program.  While it would be possible to inquire of each program administrator within state government the cite of each statute, regulation, and agreement under which each federal program they may administer is authorized, the work and time involved in such an effort would be enormous.  It would seem that the individual program administrators will know whether their program allows these expenditures and they may so indicate to the Bureau of Administration and the PEPL Board.  Of course, if the funding source does not allow for expenditures of this sort they may not be made.

The second issue relates essentially to the appropriation process within state government.  While review of the general appropriations bills either currently in effect or commencing July 1, 1988, do not reveal specific appropriation for insurance or similar liability coverage within each individual agency or program's budget, general authority for such activity may be found.  Section 1 of the Annual General Appropriation Bill indicates that the funds appropriated therein--general, federal, and other--are "for the expenses of the operations of certain officers, boards and departments." Thereafter the bill appropriates funds for the two categories of personal services and operating expenses.  In addition, SDCL 4-7-1(2) provides that the General Appropriations Act authorizes expenditure of money from public funds for "ordinary current and capital expenditures."  Also SDCL 4-4-4(7) describes a type of fund under the heading of "Proprietary Funds" known as "Internal service funds," which accounts for the "financing of goods or services provided by one department or agency to other departments or agencies ... on a cost-reimbursement basis."  According to budget analysts within the Legislative Research Council, the expenditure contemplated here falls within the general category of Operating Expense and would be identified as a sub-object "Contractual Service" within the categories followed by the Appropriations Committee in reviewing the State's budget on an annual basis. It is further explained that this subcategory is used for accounting for  internal service funds provided by one agency to another.

In Official Opinion 72-9 the Personnel Division proposed to publish an employee newspaper and asked whether it had the authority to establish the newspaper and more importantly whether agencies could spend their funds for this paper.  Of interest here is the discussion in that opinion to the effect that under the General Appropriations Bill the agency could expend its appropriation for any valid purpose authorized by the statutes.  Additional discussion is given concerning revolving funds and expending the funds within them.  The reasoning therein is applicable to this situation, since here it is explicitly clear that the Legislature in establishing PEPL granted the authority to PEPL to expend the money it receives and granted the authority to the State to contract with PEPL for liability coverage.  Since this is a legitimate operating expense of the agencies, the payments can be made if the expenditure authority exists.

The precise mechanism for making the transfers contemplated in your question may be found in SDCL 4-8A-8.  The statute provides: 

Moneys appropriated on a program basis by the general appropriation act may be transferred between program accounts within or between departments and bureaus only at the written request of a department secretary or bureau commissioner, or his designee, in accordance with procedures established by the bureau of finance and management.  Moneys appropriated by the general  appropriation act may be transferred between institutions of the state only upon written request of the appropriate governing board, and upon specific written approval of the bureau of finance and management.  The bureau of finance and management shall keep a record of all such authorizations of transfers and make them available for public inspection.  The bureau of finance and management shall also submit an informational report detailing all transfers approved to the special legislative committee established in § 4-8A-2.

That statute obviously contemplates transfers of funds between program accounts within or between departments and bureaus.  Here transfers of funds from various agencies and departments to the Bureau of Administration for payment into the Public Entity Pool for Liability is a transfer "between program accounts within or between departments and bureaus."  Based upon my inquiries, I believe there is adequate excess expenditure authority for federal and other funds to accomplish the necessary transfers.  In the event it is determined there is insufficient expenditure authority, it may be necessary to follow the process identified in SDCL ch. 4-8B to create the necessary expenditure authority.  

See especially SDCL 4-8B-10.

Based upon all of the foregoing, and assuming that the federal or other fund source allows for expenditure of this type, it is my opinion that the Bureau of Administration does have authority to bill the various agencies the amount  necessary and transfer those funds to the Public Entity Pool for Liability.

Respectfully submitted,

Roger A. Tellinghuisen
Attorney General