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Personnel law/school funds : “Can we spend school funds on it?” and so much more. Amy Peabody Assistant General Counsel Kentucky Department of Education. Topics today. General discussion on the restrictions placed on the expenditure of school funds or resources

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Personnel law school funds can we spend school funds on it and so much more

Personnel law/school funds:“Can we spend school funds on it?” and so much more

Amy Peabody

Assistant General Counsel

Kentucky Department of Education


Topics today
Topics today

  • General discussion on the restrictions placed on the expenditure of school funds or resources

  • Restricted school funds/nutrition funds

  • One time bonus/fringe benefit to employees

  • Students with visas: ADA or tuition?

  • Responsibility to hold a position for an employee on WC or disability retirement

  • Work requirements for health insurance eligibility (state law and upcoming Affordable Care Act)

  • Break in service and sick leave


School funds educational purposes only
School funds: “educational purposes” only

  • Kentucky Constitution Sections 180-189 restricts the expenditure of school funds to “educational purposes.”

  • OAG 85-100 provides general description of what are “educational purposes”: a general rule is that school funds may be expended for those purposes authorized either expressly or by necessary implication by the statutes.

  • “School funds are held to be trust funds for educationalpurposes which the courts will not permit to be diverted to other even though closely kindred uses, no matter how meritorious the project may appear to be in its practical, ethical or sentimental aspects.”

  • The test is, what constitutes an educationalpurpose within the meaning of Section 184 of the Constitution, rather than whether an activity might be beneficial to education.”


Examples of educational purposes
Examples of educational purposes

  • Hiring an attorney to represent the board and the district (Hogan v. Glasscock, 324 S.W.2d 815 (Ky. 1959))

  • Paying for expenses incurred by teachers and administrators in attending professional activities and functions (OAG 83-228)

  • Lobbying for legislation (OAG 74-212)

  • Paying sewer connection tap-in fee, when the expense is normally borne by property owner (OAG 68-283)

  • Paying for preventative medical services for students (OAG 65-293)


Examples which are not educational purposes
Examples which are NOT educational purposes

  • Paying for bus turnarounds (OAG 93-63)

  • Paying for crossing guards (OAG 79-107 and 92-6)

  • Paying legal fees and costs incurred in a removal action of a board member for usurpation of office (OAG 78-648)

  • Election contests to determine whether a board member is entitled to hold the office (OAG 77-580)

  • Promoting political candidates (OAG 74-118)

  • Repairing public street (OAG 72-514)

  • Operating costs of county health department (OAG 68-143)

  • Defraying cost of public library furnishing books to school children (OAG 61-879)

  • Paying fire station expenses (OAG 60-612)

  • Selling/Giving school property for less than fair market value, even to a worthy cause or other government entity (OAG 72-376; OAG 91-85)

  • Paying for employee retirement gifts (OAG 96-23)

  • Paying for coaches cards for non-coaching or retired staff


Example coaches cards

Review whether a request is an “educational purpose” (cannot spend school funds on this or mixed benefit so might only pay part of the cost)

Example: coaches cards


What to consider
What to consider

  • Does this provide an educational benefit?

  • Is the entire purpose educational?

  • Is only part of the purpose educational?

  • Is this the cheapest option, even if only part of the purpose is educational?

  • If only part of the purpose is educational, then the district can only pay that part of the purchase cost unless the entire cost is the cheapest option for the district for this educational purpose expense.


Restricted funds and their restrictions
Restricted funds and their restrictions

  • Federal law only allow school nutrition funds to be spent on school nutrition projects/needs. See OMB Circular A-87 (which applies to all federal funds and allowable costs):

    “Purpose. This Circular establishes principles and standards for determining costs for Federal awards carried out through grants, cost reimbursement contracts, and other agreements with State and local governments and federally recognized Indian tribal governments (governmental units).

    Policy. This Circular establishes principles and standards to provide a uniform approach for determining costs and to promote effective program delivery, efficiency, and better relationships between governmental units and the Federal Government. The principles are for determining allowable costs only. They are not intended to identify the circumstances or to dictate the extent of Federal and governmental unit participation in the financing of a particular Federal award. Provision for profit or other increment above cost is outside the scope of this Circular.”

  • Direct questions on school nutrition fund expenditures to:

    Sue Bartenfield, Schools Branch Manager, Div. School & Community Nutrition, KDE

    and

    Susan Barkley, Assistant Director, Div. District Support, KDE


One time bonus fringe benefit to employees
One time bonus/fringe benefit to employees

  • Kentucky Constitution Section 3 prohibits the expenditure of public funds except as payment for public services (can’t give away public funds).

  • KRS 160.291 (3) and (4) requires that payments to employees, including bonuses or fringe benefits, be only in exchange for services to be rendered and for the benefit of the common schools.

  • This statute requires a local board of education to adopt a plan for employee gross salary payments and for employee fringe benefits at the beginning of the school year.


One time bonus fringe benefit to employees1
One time bonus/fringe benefit to employees

  • A board action granting a bonus or fringe benefit to local district employees cannot be retroactive for services already rendered by the district employees.

  • The Kentucky Office of the Attorney General in 1996, in OAG 96-23 interpreted the requirements of the Kentucky Constitution and KRS 160.291 to prohibit a local board of education from granting district employees a bonus or fringe benefit or additional compensation of any kind for services already rendered. A local board of education’s decision, evaluated in OAG 96-23, to give additional compensation to a teacher for services already rendered was determined to be unconstitutional.


One time bonus fringe benefit to employees2
One time bonus/fringe benefit to employees

  • As you know, local school district funds are additionally limited by the Kentucky Constitution (Sections 180, 183-189) to expenditure for “educational purposes” and provision of a bonus or fringe benefit or any additional compensation to employees for services previously rendered (decision to give additional benefit after the service was rendered) would be a violation of this constitutional restriction on school funds as well.

  • KDE understands these sections of the Kentucky Constitution and this statute to allow a local board of education to provide a one time bonus scheduled in the current or next school year for employees as a fringe benefit and must be described as compensation for serviced rendered in the future and for the benefit of the common (public) schools.


One time bonus fringe benefit to employees3
One time bonus/fringe benefit to employees

  • First, the decision on the expenditure can only be prospective for services not yet rendered by the employees (and compensation given after services rendered, according to local district payment schedule).

  • Second, the local school district finance officer must review the district’s finances and should be asked to provide information regarding the financial feasibility and soundness of a decision to undertake an additional expenditure.


One time bonus fringe benefit to employees4
One time bonus/fringe benefit to employees

  • Third, KRS 160.291 states that the decisions as to the compensation, including extra duty pay, fringe benefits or bonuses, are to be made prior to the beginning of the school year, July 1, and for extra duty pay, fringe benefits or bonuses to be achievable during the next school year. While we interpret this last requirement to mean that a local school district should only vote to provide prospective additional compensation before the beginning of the next school year and relevant to services to be rendered during the next school year, there is the possibility that the statute allows this vote to occur during a school year and for the board to grant additional compensation to employees when future services are rendered.


One time bonus fringe benefit to employees5
One time bonus/fringe benefit to employees

  • Fourth, a local board of education will need to consider and act on any proposed one time fringe benefit payment in a public meeting. Please note that the school district will want to remain mindful of the deadlines in KRS 161.760 regarding notification to school district employees of any reduction in salary for the next school year (2013-2014), the year after this one time fringe benefit payment is possible and is provided to district employees.


One time bonus fringe benefit to employees6
One time bonus/fringe benefit to employees

  • A motion by a board member for this kind of action could be phrased something like “a motion to provide a one time fringe benefit bonus scheduled as part of the compensation for the next school year (13-14) for employees. This fringe benefit bonus will be compensation for future services to be rendered and for the benefit of the common (public) schools.” The board should describe the future services in this same public meeting.


One time bonus fringe benefit to employees7
One time bonus/fringe benefit to employees

  • From a practical standpoint, we do suggest that the phrasing of the bonus mechanism not reference the teachers’ salaries except to state, if the bonus is different for different salary ranges, that teachers making between $a and $b would receive $x as a bonus and replicating that language for all salary ranges. The reason for this suggestion is just wanting to prevent teachers from asserting at the end of this year/beginning of next year that they received a salary increase and therefore have a right to the increase again next year. The district can, without violating any provision of law, choose to ignore this suggestion.

  • Districts should consider giving notice of reduction of salary, under KRS 161.760, since the compensation the year after the bonus/fringe benefit will be less.


Student visas and ada or tuition
Student visas and ADA or tuition

  • A specific issue arose this school year regarding questions about counting students with visas in a school district’s ADA.

  • KDE issued guidance on this subject in the Commissioner’s 2-25-13 email to superintendents.

  • Further clarification on the visa issue can be sought from attorney Lisa Lang at KDE.


Student visas and ada or tuition1
Student visas and ADA or tuition

  • In Plyler v. Doe , 457 U.S. 202 (1982), the U.S. Supreme Court held, in no uncertain terms, it was unconstitutional for a school to deny free public education to students who were not legally residing in the U.S., and schools could not ask any questions during the enrollment process which would have a “chilling effect” on a student’s right to education. Public schools in our country cannot inquire regarding the legality of presence of a student or the student’s family in the United States.


Student visas and ada or tuition2
Student visas and ADA or tuition

  • Under this holding, the KDE issued guidance in 2009 (available at http://education.ky.gov/comm/newtoky/pages/kentucky-enrollment-requirements.aspx) to local school districts in our state communicating this legal status inquiry prohibition and providing suggested alternative forms of identification a school should accept in lieu of a birth certificate, under KRS 158.032.  


Student visas and ada or tuition3
Student visas and ADA or tuition

  • As stated in our guidance, the general and default rule is that a school presented with a student for enrollment cannot inquire regarding the legality or visa under which a student is present in the U.S.

  • Students who are residents of the district, who are living within the boundaries of the school district, have a right to receive the educational services of the district without regard to their legal status in our country. These students can be counted like other residents of the district in the ADA.


Student visas and ada or tuition4
Student visas and ADA or tuition

  • A different issue arises when a student has entered the country on a temporary visitor visa issued by the federal government. As you may know, there are visas which allow a visitor to enter the U.S. and attend a school here and there are visas which do not allow a visitor to attend school in our country. Depending on the type of visa issued to a person entering our country, the visitor may or may not attend school in our country and the charging of full, unsubsidized tuition by the school may be mandated by federal law.


Student visas and ada or tuition5
Student visas and ADA or tuition

  • For those school districts that participate in a student exchange program where there is a one-to-one student exchange with a school district in a foreign country, the participating students will most likely have a J-1 visa and the host school in the United States is not required to charge the foreign student tuition to attend public school. 

  • However, in those cases where there is no one-to-one exchange and the foreign student is a non-immigrant student on an F-1 visa, federal law requires that the foreign student pay the full, unsubsidized per capita cost of education for each student in the school district where the public school is located.


Student visas and ada or tuition6
Student visas and ADA or tuition

  • Calculating the unsubsidized tuition cost: The unsubsidized cost is the school district’s total expenditure per student, excluding any fees and charges to the individual student. It includes expenditures from all public revenue sources including local, state and federal funds. All public expenditures would include all operating and capital expenditures (such as for instructional, support and non-instructional services; equipment acquisition; and facilities and construction), from all public revenue sources.  For rural Kentucky school districts, the full, unsubsidized per capita cost per student could be as much as $10,000.00 per year.  The student cost reimbursement requirement is mandatory and school districts cannot waive the reimbursement requirement. 

  • For more information regarding information on Foreign (F-1) Students in Public School, please visit http://travel.state.gov/visa/temp/types/types_1269.html.


Student visas and ada or tuition7
Student visas and ADA or tuition

  • Be further advised that under no circumstances is it permissible for a school district to include non-immigrant F-1 visa students as part of the host school district’s average daily attendance.  Non-immigrant F-1 visa students are nonresident students.  Pursuant to KRS 157.350(4), nonresident students are not included in a school district’s average daily attendance except when the students at issue are included in a written agreement with another Kentucky school district of the students’ legal residence. 

  • If a family has become residents of the district, versus temporary visitors like those on visas, then the students can be counted in ADA like any other residents of the district.

  • To include these nonresident students in a district’s average daily attendance is a direct violation of KRS 157.350. 


Holding a position for an employee receiving workers compensation
Holding a position for an employee receiving workers’ compensation

  • Kentucky workers' compensation law does not require that a position be held open for an injured worker.  The only WC provision dealing with employment is the prohibition against firing a worker for bringing a workers' compensation claim in KRS 342.197 (1).

  • Contact for this information was:

     John W. Mann

    Attorney/Chief Specialist

    Kentucky Labor Cabinet

    Kentucky Dept. of Workers' ClaimsDivision of Ombudsman & Workers' Comp Specialist Services  


Holding a position for an employee on disability
Holding a position for an employee on disability compensation

  • Classified employees can receive disability retirement from CERS/KRS under Kentucky statute KRS 61.600 (worked 5+ years) or KRS 61.621 (worked less but disabled on the job). See also KRS 78.510(4) and 78.545(10) (school board classified employees’ disability retirement governed by KRS 61.661). Continuance of disability retirement reviewed every 1-5 years.

  • Certified employees can receive disability retirement from KTRS under Kentucky statute KRS 161.661 (worked 5+ years) and 161.663 (worked less but disabled on the job). “Periodic examinations” for continuance.


Holding a position for a certified employee on disability
Holding a position for a certified employee on disability compensation

Leave of absence for certified employee, due to disability, is granted by the local board under KRS 161.770(1):

  • “(1) Upon written request of a teacher or superintendent, a board of education may grant a leave of absence for a period of not more than two (2) consecutive school years for educational or professional purposes, and shall grant such leave where illness, maternity, adoption of a child or children, or other disability is the reason for the request. Upon subsequent request, such leave may be renewed by the board.”

  • “(2) Without request, a board of education may grant leave of absence and renewals thereof to any teacher or superintendent because of physical or mental disability, but such teacher or superintendent shall have the right to a hearing and appeal on such unrequested leave of absence or its renewal in accordance with the provisions for hearing and appeal in KRS 161.790.”

  • Certified employee returning from leave, under KRS 161.770, resumes same contract status (tenured/non-tenured) the employee held before the leave.


Certified employee s right to return to work and disability retirement application
Certified employee’s right to return to work and disability retirement application

  • Certified employee retains tenure during disability retirement application processing period. KRS 161.661(3): “Retirement because of disability under this section shall not be cause for termination of the contract of a teacher or superintendent under KRS 161.790 during the twenty-four (24) calendar month period described in this section. A teacher or superintendent who applies for disability retirement under the provisions of KRS 161.661 shall retain continuing service status during the period of time the application for disability retirement is being processed. If the application is not approved, the teacher or superintendent may return to the contract, employment, or leave status held prior to submission of the application.”


Certified employee s right to return to work and disability retirement
Certified employee’s right to return to work and disability retirement

  • Certified employee retains tenure during 24 months from date of disability retirement.

    KRS 161.661 (1): “Teachers and superintendents with continuing status who retire because of disability shall, notwithstanding provisions of KRS 161.720 to 161.810 to the contrary, retain continuing status in the school district from which they retired for twenty-four (24) calendar months from the date of retirement, if the teacher or superintendent:

    (a) Is approved for disability retirement under the provisions of KRS 161.661, or

    (b) Is approved for disability retirement but elects to have benefits calculated on the service retirement formula under the provisions of KRS 161.661, or

    (c) Is disqualified from receiving disability retirement benefits by KRS 161.661(2) but is otherwise eligible for disability retirement under the remaining provisions of KRS 161.661.


Certified employee s priority consideration after disability retirement
Certified employee’s priority consideration after disability retirement

  • After 24 months (and before 43 months), the certified employee does not have a right to return to work in the district, but does get priority consideration for future hiring.

    KRS 161.661(4)(b): “If the teacher recovers from the disability and presents written notice of such recovery, supported by the statement of a licensed physician, to the superintendent within twenty-five (25) through forty-two (42) months from the date of retirement, the superintendent shall give priority consideration to reemployment of the teacher for the first available position for which the teacher is qualified and certified.”

  • There is a similar provision for superintendent in KRS 161.661(4)(a).


Holding a position for a certified employee on disability1
Holding a position for a certified employee on disability disability retirement

  • Certified employee return to work notice to district requirement:

    KRS 161.662(2)(b) provides: If the teacher recovers from disability and presents written notice of such recovery, supported by the statement of a licensed physician, to the superintendent within the twenty-four (24) calendar month period but not later than April 15 prior to the beginning of the school term, the superintendent shall reinstate the teacher to active continuing status at the beginning of the school term. If notice of recovery from disability is not presented to the superintendent within the twenty-four (24) calendar month period, or if the teacher states to the superintendent, in a verified document, prior to expiration of the twenty-four (24) calendar month period that he or she will not return to employment in the school system, the continuing service contract of the teacher shall terminate as by retirement under the provisions of KRS 161.661.

  • No certified employee has a right to any particular position or school assignment, per KRS 161.750.


Holding a position for a classified employee on disability leave
Holding a position for a classified employee on disability leave

  • Granting leave: Board policy, per KRS 161.011, governs leave of absence for classified employees. Continuation of leave and whether the district will hold the classified job will be governed by board policy as well. See KSBA Model Policy No. 03.2234.

  • Return to work: Local board policies include the return to work notification requirements for classified employees returning from disability leave and notice regarding whether employee has the right to return to a particular position or school assignment. See KSBA Model Policy No. 03.2234 and 03.223 (classified employee leave and return to work notice).


Work requirements for health insurance eligibility
Work requirements for health insurance eligibility leave

Kentucky law -- 702 KAR 1:035. Group health and life insurance:

  • Section 4. (1) Regular full-time certified, noncertified, and blended employees shall be eligible for state contribution for health and life insurance premiums unless they are on leave without pay from the local educational agency or interlocal cooperative.

  • (2) For purposes of administration of the group health and life insurance programs for local school district employees:

  • (a) Leave without pay shall include unpaid leave, unpaid sick leave, unpaid educational leave, and unpaid leave while receiving Workers' Compensation benefits; and

  • (b) Unpaid leave shall include the beginning of the first day of the month following an employee's last paid working day.

  • (3) An employee on leave without pay shall not be eligible for state contribution for health and life premiums until the employee has actively returned to work from leave.

  • (4) An employee who has actively returned to work shall be eligible for state contribution for health and life premiums when he returns to work at least one (1) day of the next consecutive month after being on leave without pay.


Ky work requirements for health insurance eligibility
KY work requirements for health insurance eligibility leave

  • Who is a full time employee?

  • (3) "Regular, full-time, certified employee" means an employee with the expectation that he is to perform duties for the full school term (or the remainder of the school term) as established in KRS 158.070, and the employment will not require less than seventy (70) percent of the school day or school month as defined in KRS 158.060.

  • (4) "Regular, full-time, noncertified employee" means an employee having the expectation that he is to be employed for the full school term (or the remainder of the school term) as established in KRS 158.070, and whose assignments require a minimum of eighty (80) hours per school month as established in KRS 158.060.

  • “Blended employee” also defined and described in this regulation.


Health insurance eligibility and the federal affordable care act
Health insurance eligibility and the federal Affordable Care Act

General Information about Employers’ Responsibilities regarding health coverage was in Commissioner’s 4-15-13 email to superintendents:

  • The federal Affordable Care Act (ACA) amended the Internal Revenue Code to add provisions regarding the “shared responsibility for employers regarding health coverage.”  These added provisions are sometimes called the “Employer Shared Responsibility” or the “Employer Play or Pay Mandate.” 

  • The Kentucky Personnel Cabinet issued advisory guidance with links to IRS information on the federal law’s requirements. This advisory guidance is included in your session materials.


Health insurance eligibility and the federal affordable care act1
Health insurance eligibility and the federal Affordable Care Act

  • School districts most likely are “large employers” subject to the “minimum essential coverage” for “full-time” (FT) or “full-time equivalent” (FTE) employees or face penalties under the “Play or Pay Mandate.”

  • The Personnel Cabinet advisory guidance provides general background information about this subject for employers, such as school boards; however, employers should not rely solely on this information in making decisions.  Instead, this information and the relevant law should be reviewed by each district’s legal and human resources staff, to determine how to start appropriately planning for such considerations, if these requirements apply in a particular district.


Affordable care act guidance
Affordable Care Act guidance Act

  • FT: employed on average 30 hours/week (worked or entitled to pay including vacation, holiday, illness, incapacity, layoff, jury duty, military duty or leave of absence (if paid)).

  • FTE: A FTE includes all employees (including seasonal workers) who were not full-time employees for any month in the preceding calendar year. These employees are included in calculating the employer’s FTEs for that month by: (1) calculating the aggregate number of hours of service (not more than 120 hours for any employee) for all employees who were not employed on average at least 30 hours of service per week for that month; and (2) dividing the total hours of service in (1) by 120.


Affordable care act guidance1
Affordable Care Act guidance Act

  • Additional provisions exist for non-traditional workers such as seasonal workers, teachers, and other employees of educational organizations.

  • Educational organizations present a special situation compared to other workplaces because they typically function on the basis of an academic year, which involves various extended periods in which the organization is not in session or is engaged in only limited classroom activities. Many of the employees in educational organizations, while typically employed for at least 30 hours of service per week during the active portions of the academic year, are precluded from working during periods when the organization is entirely or largely closed. The rules propose an averaging method for employment break periods that generally would result in an employee who works full-time during the active portions of the academic year being treated as a full-time employee for the purposes of the Play or Pay Mandate.

  • See the advisory guidance from the Kentucky Personnel Cabinet.


Affordable care act guidance2
Affordable Care Act guidance Act

  • The advisory guidance in your materials contains general information regarding the employer Play or Pay Mandate. Employers should not rely only on this advisory guidance to comply with the employer Play or Pay Mandate. Rather, employers need to review and be familiar with the rules and guidance outlined in IRS Notice 2011-36, IRS Notice 2011-73, IRS Notice 2012-17, IRS Notice 2012-58 and the proposed rule, “Shared Responsibility for Employers Regarding Health Coverage.”

  • Employers need to identify and count full-time employees and FTEs. In doing so, employers will need to establish a standard measurement period, an administrative period (if any), and a stability period.

  • Employers should consult their HR and Legal Departments on how to address the 2014 Employer Play or Pay Mandate.


Affordable care act
Affordable Care Act Act

  • Important links to information regarding the Play or Pay Mandate:

  • IRS Notice 2011-36 - http://www.irs.gov/pub/irs-drop/n-11-36.pdf

  • IRS Notice 2011-73 - http://www.irs.gov/pub/irs-drop/n-11-73.pdf

  • IRS Notice 2012-17 - http://www.irs.gov/pub/irs-drop/n-12-17.pdf

  • IRS Notice 2012-58 - http://www.irs.gov/pub/irs-drop/n-12-58.pdf

  • IRS proposed rule, “Shared Responsibility for Employers Regarding Health Coverage” -https://www.federalregister.gov/articles/2013/01/02/2012-31269/shared-responsibility-for-employers-regarding-health-coverage


Break in service and sick leave
Break in service and sick leave Act

  • The sick leave statute for all school district employees, KRS 161.155 requires continuity of employment from one district to another for accumulated sick leave to transfer. Sick leave transfers with the employee when an employee moves without a break in service from one public school district to another or to KDE and back to the district.  The statute requires that the transfer be without a break in service. One cannot resign, have a break in service, move somewhere new and pick up the formerly accumulated sick leave. There is Kentucky case law that says the phrase in KRS 161.155 “transfers…from one school district to another” means that there must be continuity in employment from one district to another in order for the sick leave to transfer.  Young v. Board of Education, 661 S.W. 2d 787 (Ky. App.  1983).

  • Note: School district employment typically runs through June 30 so the person is still employed through that date and a “break in service” doesn’t usually begin before then.

  • Cross reference: KRS 156.026 (transfer from/to KDE and school district).

  • No current ceiling on number of sick leave days the employee can transfer.

  • Reduction in Force (RIF) break in service: Classified, in KRS 161.011(8)(c), get sick leave restored with recalled. Certified, in KRS 161.800, also most likely get sick leave back when restored to tenure status.


Questions
Questions? Act

Amy Peabody

Assistant General Counsel

Kentucky Department of Education

[email protected]


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