LOUISVILLE, Ky. (CN) – Seven development districts claim in court that the Kentucky Department of Local Government is illegally withholding hundreds of thousands of dollars earmarked for rural jobs programs, public safety and elderly care to fill a gap left by a budget shortfall.
Lincoln Trail Area Development District and six others filed a lawsuit in Franklin County Circuit Court on Thursday to enforce part of House Bill 303, a budget bill that become law in 2016 and allocated the money at issue.
Represented by Elizabeth Barrera and Luke Morgan of the Lexington firm McBrayer McGinnis, the development districts want an injunction that forces the Department of Local Government to restore their funding.
Kentucky is in financial freefall with its pension fund currently weighed down by a $50 billion budget deficit. Its retirement system serves more than 365,000 current and retired state and local government workers.
The lawsuit says the state is withholding $867,900 meant for public programs because the Department of Local Government was ordered in December to slash its budget by $804,500. The department, which acts as a pass-through agency for the funds, decided to recoup its losses and take money meant to benefit the people of Kentucky, according to the districts.
“This effort of self-help is unconstitutional, without authority, and contrary to the allocation of the Kentucky General Assembly as established in House Bill 303,” the complaint states.
The plaintiffs’ attorneys, Barrera and Morgan, declined to comment Friday.
Department of Local Government staff attorney Darren Sammons said Friday that he could not comment on pending litigation.
Terry Sebastian, a spokesman for Kentucky Attorney General Andy Beshear, said his office is reviewing the lawsuit.
Through House Bill 303, the Kentucky General Assembly told the Department of Local Government to disperse $2,116,300 for the fiscal year 2017-2018 under the state’s Joint Funding Administration Program to the area development districts.
But the agency did not disperse almost 40 percent of those funds, according to the lawsuit.
The development districts claim they received “only a fraction” of the third-quarter installment and nothing in the fourth quarter.
The districts assert the Department of Local Government has ignored efforts to resolve the impasse and has not explained what happened to the money.
By denying funding, the districts say, the department has cut off funds used to create jobs in rural communities, support public safety and spur economic development.
The area development districts of Barren River, Bluegrass, Kentuckiana, Northern Kentucky, Pennyrile, and Purchase joined Lincoln Trail in filing the lawsuit.