OAG 93-78


November 8, 1993




Senator Susan Johns, Chairperson

Program Review and Investigations Committee

Legislative Research Commission

Frankfort, KY 406061

Dear Senator Johns:

You have requested an opinion from the Attorney General o an issue relating to the Kentucky Open records Act and the third party administrators for the seven programs operating under the umbrella of the Kentucky Association of Counties (KACo). Specifically, you ask whether these third party administrators are "public agencies" within the meaning of KRS 61.870(1), the definitional section of the Open Records Act. You explain that each of the programs is managed by a third party administrator which "provide[s] financial and other wide ranging administrative services for the [programs]." All are Kentucky corporations, and have a "contractual relationship" with the programs. To facilitate our analysis of this issue, you have provided this Office with information concerning revenues received by the third party administrators from state or local authority funds.

The Attorney General is charged with certain duties relative to the Open Records Law, including, of course, reviewing denials of public records if asked to do so by the person seeking inspection of those records. Here, we are presented with the threshold issue: Whether the third party administrators of programs operating under the KACo umbrella are "public agencies" as defined at KRS 61.870(1). That statute provides:

(1) "Public agency" means:

(a) Every state or local government officer;

(b) Every state or local government department, division, bureau board, commission, and authority;

(c) Every state or local legislative board, commission, committee, and officer;

(d) Every county and city governing body, council, school district board, special district board, and municipal corporation;

(e) Every state or local court or judicial agency;

(f) Every state or local government agency, including the policy-making board of an institution of education, created by or pursuant to state or local statute, executive order, ordinance, resolution, or other legislative act;

(g) Any body created by state or local authority in any branch of government;

(h) Any body which derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds;

(i) Any entity where the majority of its governing body is appointed by a public agency as defined in paragraph (a), (b), (c), (d), (e), (f), (g), (h), (j) or (k) of this subsection; by a member or employee of such a public agency; or by any combination thereof;

(j) Any board, commission, subcommittee, ad hoc committee, advisory committee, council, or agency, except for a committee of a hospital medical staff, established, created, and controlled by a public agency as defined in paragraph (a), (b), (c), (d), (e), (f), (g), (h), (i), or (k) of this subsection; and

(k) Any interagency body of two (2) or more public agencies where each public agency is defined in paragraph (a), (b), (c), (d), (e), (f), (g), (h), (i), or (j) of this subsection[.]

This Office has consistently recognized that a private corporation does not come within the purview of the Open Records Act if ti derives less than 25% of its funds from state or local authority. OAG 81-377; OAG 82-216; OAG 84-237; OAG 88-61; 92-ORD-1114. Where evidence is introduced that an agency receives at least 25% of its funds from state or local authority, the Attorney General has deemed it a "public agency." OAG 88-72; OAG 89-46.

In 92-ORD-1232, we held that a number of programs administered by KACo, including the Kentucky Association of Counties All Lines Fund (KALF), the Kentucky Association of Counties Leasing Fund (COLT), the Kentucky Association of Counties Medical Program (KAMP), and the Kentucky Association of Counties Advance Revenue Program (KARP), were public agencies within the meaning of KRS 61.870(1)(k)(1) insofar as they are constituted as interagency bodies of two or more political entities, agencies, or subdivisions of the state formed under the Interlocal Cooperation Agreement Act, codified at KRS 65.210 et seq. In 92-ORD-1245, we held that KACo-KLC Workers Compensation Self Insurance Fund (KACo-KLC), an interagency body of two or more public agencies formed pursuant to KRS 342.350(4), was a public agency within the meaning of KRS 61.878(1)(k). In 93-ORD-96, we declared that KACo itself is a public agency. Because it receives at least 25% of its funds from state or local authority, KACo falls within the parameters of KRS 61.878(1)(h), and is therefore subject to the Open Records Act. Most recently, we held that the KACo Reinsurance Trust Program (KRT) and the KACo Unemployment Insurance Fund are public agencies for purposes of the Open Records Act. OAG 93-65.

Any funds which the third party administrators receive from these programs must be treated as "state or local authority funds." In 93-ORD-96, we dealt with this precise issue. It is instructive to quote at length:

KRS 61.870(1)(h) defines a public agency as "[a]ny body which derives at least twenty-five percent (25%) of its funds . . . from state or local authority funds[.]" The term "state or local authority" is not defined in the statute, nor has it been construed by this Office, but it is commonly understood to mean "a government agency that administers a project," New World Dictionary, 94 (2d ed. 1978), or "a public agency or corporation with administrative powers in a specified field," Webster's II New Riverside University Dictionary, 139 (2d ed. 1988). See also, The American Heritage Dictionary, 142 (2d ed. 1985). KRS 446.0880(4) provides that "[a]ll words and phrases shall be construed according to the common and approved usage of language . . . ." Consistent with this rule of law, we believe that the term "authority" must be construed to mean "public agency." Since KACo-KLC, KALF, COLT, KARP, . . . KAMP [, KRT, KACo Unemployment Insurance Fund, and KACo] have been deemed "public agencies" for purposes of the Open Records Act, we believe that funds derived from these sources must be calculated into the 25% threshold established in KRS 61.870(1)(h).

93-ORD-96, p. 6.

Turning to the specific issue which you raise, we examine each of the five third party administrators to determine if they are "public agencies." The Committee's research discloses that Governmental Services, Inc., generated $611,058 in gross revenue in 1992. One hundred percent of this revenue was derived from KACo-KLC Workers Compensation Self-Insurance Fund, for which it provides administrative services. It is therefore a "public agency" within the scope of KRS 61.870(1)(h). Similarly, KACo Administrative Services, Inc., which generated $500,000 in gross revenues in 1992, received 100 of its funds from the Kentucky Association of Counties Leasing Trust, which it administers. It, too, must be characterized as a "public agency" as defined in KRS 61.878(1)(h). Kentucky Risk Insurance Services, Inc. (KRISI) generated $521,026 in 1991,(2) receiving 100 of this revenue from the Kentucky Association of Counties All Lines Fund, Kentucky Association of Counties Medical Program, Kentucky Association of Counties Advance Revenue Program, Kentucky Association of Counties Leasing Trust, and Kentucky Association of Counties Unemployment Insurance fund collectively. KRISI is therefore a "public agency" for purposes of the Open Records Act.

Based on the scant information with which the Committee was provided, it does not appear that Selective Management Services, Inc., or Multi-Benefits System, of Kentucky, Inc., which administer KACo All Lines Fund and KACo Medical Program, respectively, are "public agencies" under the 25% funding rule. Mr. Richard Williams, Selective Management's owner, indicated that it receives only 15% of its funds from KALF, and provided access to financial records to substantiate this claim. Mr. Dale Wood, owner of Multi-Benefits System, declined access to the corporation's gross revenue figures, but advised that funds received from KAMP represent less than 15% of its gross income. Assuming that they do not fall within the parameters of any of the other definitional sections of the parameters of any of the other definitional sections of the Act, we must conclude that these third party administrators are not "public agencies," and are not subject to the Open Records Act.(3)

To summarize, it is our opinion that Governmental Services, Inc., KACo Administrative Services, Inc., and Kentucky Risk Insurance Services, Inc., are "public agencies" insofar as each of them satisfies the 25% public funding threshold established in KRS 61.870(1)(h). Selective Management Services, Inc., and Multi-Benefits Systems, Inc., on the other hand, cannot be characterized as "public agencies" since neither derives 25% or more of its funds from state or local authority funds.. This assumes the accuracy of the financial figures provided to this Office by your Committee.

Sincerely yours,

CHRIS GORMAN

ATTORNEY GENERAL





Amye B. Majors

Assistant Attorney General

(502) 564-7600

ABM:jgh/1354

cc: Joe Fiala

Mike Greenwell

1. KRS 61.870(1)(k) defines a public agency as "[a]ny interagency body of two (2) or more public agencies where each public agency is defined in [preceding paragraphs (a) through (j) of this definitional subsection.]"

2. The Committee was unable to obtain information from Kentucky Risk Insurance Services, Inc., relative to its 1992 gross revenue. We are left with no alternative but to assume that the revenue for both years was roughly equivalent, and was received from the same sources.

3. It is, in our view, unfortunate that a private entity charged with administering a public agency, and public agency funds, would choose to ignore the mandates of the Open Records Act, at least with respect to records relating to the public agency, regardless of whether the entity can be characterized as a public agency. This opens the door to widespread abuse, permitting the public agency to "secret away" its records in the shelter of a private corporation.