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2005-SC-000208-TG LISA BAKER, ET AL. ON TRANSFER FROM THE COURT OF APPEALS 2005-CA-0613 FRANKLIN CIRCUIT COURT NO. 04-CI-01169 APPELLANTS

V.

ERNIE FLETCHER IN HIS OFFICIAL CAPACITY AS THE GOVERNOR OF THE COMMONWEALTH OF KENTUCKY OPINION OF THE COURT BY CHIEF JUSTICE LAMBERT AFFIRMING

APPELLEE

The question before this Court is whether the General Assembly may retroactively suspend KRS 18A.355, a statute that provides all employees of the Commonwealth of Kentucky an annual increment in their salaries of not less than five percent . The trial court answered in the affirmative . A notice of appeal was filed and this Court granted transfer of the appeal .' FACTS The facts, as well-stated by the able trial court, are as follows . In August of 2004, the Plaintiffs, Lisa Baker, Jeffrey Howard, John Meehan, and Stanley C . Nickell, filed this class action complaint in the Franklin Circuit Court, requesting declaratory and injunctive relief pursuant

1 CR 74.02.

to KRS 418.040 and CR 57, against the named Defendant Ernie Fletcher, in his official capacity as Governor of Kentucky. The origin of the Plaintiffs' complaint emerges from the Kentucky General Assembly's failure to fulfill its constitutional and statutory duty to enact a comprehensive balanced budget appropriating revenues to fund the Executive Branch. As a result of the General Assembly's neglect and in the absence of a budget appropriation, then Governor Paul E. Patton declared a state of emergency and issued an Executive Order (2002-727) for the fiscal year beginning July 1, 2002. Pertinent to the case at hand, Governor Patton's Executive Spending Plan contained language seeking to suspend operation of KRS 18A .355(1) and alternatively provide for a two and seven-tenths (2.7%) annual salary increment for state employees . The 2003 regular session of the General Assembly proved to be more productive ; and on March 25, 2003, the Legislature promulgated a biennial budget for the fiscal year beginning July 1, 2002 and ending on June 30, 2003, and for the fiscal year beginning July 1, 2003, and ending on June 30, 2004. The enacted budget bill also contained language suspending KRS 18A.355(1) and providing a cost-of-living adjustment of two and seven-tenths percent (2 .7%) for the fiscal year 2002-2003 on the base salary or wages of each eligible state employee on their anniversary date. The crux of the Plaintiffs' complaint focuses on the interim period (July 1, 2002 to March 25, 2003) in which the Executive Branch of the Commonwealth was funded solely from the Executive Order of Governor Patton. During this time period, the named Plaintiffs were all state employees, each having their annual increment dates fall between July 1, 2002 and March 25, 2003. Pursuant to the Executive Order, the Plaintiffs received a two and seven-tenths (2.7%) annual increment. They maintain, however, that they were entitled to a full five percent (5%) annual increment as provided under KRS 18A.355(1). The Plaintiffs now seek declaratory and injunctive relief requiring the Defendant to implement a full five percent (5%) salary increase for them and all similarly situated state employees under KRS 18A .355 for the fiscal year beginning July 1, 2002. In support, the Plaintiffs maintain that the Governor was without authority to suspend the statutory mandates of KRS 18A .355(1) and an Executive Order attempting otherwise represents a violation of Section 15 and Section 81 of the Kentucky Constitution. The Plaintiffs further assert that they are entitled to an upward adjustment in their base salary and/or retirement benefits for each fiscal year after the adoption of the Executive Order to reflect the increased salary to which they claim they are entitled.

DISCUSSION OF THE LAW It is beyond dispute that the General Assembly possesses power to suspend statutes . Section 15 of the Kentucky Constitution states that "[n]o power to suspend laws shall be exercised unless by the General Assembly or its authority." This section, like the majority of the Kentucky Bill of Rights, was modeled after a similar provision in the Pennsylvania Constitution, and was originally designed to reflect the will of the framers to prevent suspension of duly-enacted laws by any entity other than the constitutionally-elected legislative body, a power the British government had ruthlessly exercised over the colonies . Prevailing precedent of this Court provides that the General Assembly may also suspend statutes in a budget bill . Moreover, the General Assembly may retroactively suspend statutes in some circumstances, provided that the legislature clearly manifests its intent to do so.6 These principles of Kentucky jurisprudence, while instructive, fall short of resolving the case before us, as it calls into question whether the General Assembly may retroactively suspend the salary-increment statute in the middle of a budget cycle, after employee rights may have become vested . The parties agree that actions relevant to the adjudication of this case were taken by the General Assembly . Counsel for Appellants began his oral argument by informing the Court that this case was about "[w]hether state employees who have

a statutory

2 The Bill of Rights is enumerated in sections 1 through 26 of the Constitution of Kentucky. 3 Pa . Const. of 1790, Art. IX,

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