Attorney General's Opinion
Attorney General, Richard Blumenthal
April 28, 1995
Honorable Ronald F. Petronella
Department of Labor
200 Folly Brook Boulevard
Wethersfield, CT 06109
Dear Commissioner Petronella:
By letter dated March 3, 1995 you requested an opinion from this office which raises the following question: Has the department of labor's practice of annually transferring those funds in excess of $500,000 from the Employment Security Special Administration Fund to the regular Employment Security Administration Fund, for the purpose of offsetting projected deficits of federal administrative funds in future fiscal years, complied with Conn. Gen. Stat. Section 31-259 and any other applicable laws? You have informed this office that this practice has been employed to avert cuts in services which might have otherwise resulted from projected federal funding deficits. We conclude that such a practice has been in compliance with the law because the administrator of the Unemployment Compensation Act has determined it to be necessary or suitable and has secured the approval of the Governor and the Secretary of the Office of Policy and Management as prescribed by § 31-259(d).
The question arises in the context of a letter addressed to Governor Rowland from the Auditors of Public Accounts regarding your agency's handling of the Employment Security Special Administration Fund. The Special Administration Fund, which was created by Conn. Gen. Stat. § 31-259(d), consists of all interest and penalties on past due contributions and assessments collected under the Unemployment Compensation Act. The auditors have found that shortly before July first of each year, the Labor Department has transferred those funds in excess of $500,000 from the Special Administration Fund to the regular Employment Security Administration Fund, which is subject to Conn Gen. Stat. § 31-259(a). The concern raised in the Auditors' letter is whether each of these withdrawals is justified as "an amount necessary to cover any commitments for expenditures which have previously been approved in accordance with the provisions of this subsection." Conn. Gen. Stat. § 31-259(d). The Auditors' letter suggests that annual transfers from the Special Administration Fund "should be limited to the actual needs of the coming quarter... and not merely determined by the amount needed to make a transfer to the Unemployment Compensation Fund." This is in order that "[a]ny amounts transferred to the Unemployment Compensation Fund would then help to reduce future borrowings from the Federal Government for unemployment benefits."
As your supporting materials describe, the Employment Security Special Administration Fund was established in 1947. Interest on past due contributions collected under the Act was deposited in this segregated fund to be used for "costs of administration which are found not to have been properly and validly chargeable against federal grants or other funds received for or in the Employment Security Administration Fund." In addition, Public Act 47-235 imposed the following restriction: "Said monies shall not be expended or available for expenditure in any manner which would permit their substitution for or a corresponding reduction in federal funds which would in the absence of said money, be available to finance expenditures for the administration of this act."
In 1978, the statutory maximum assets of the fund, then equal to $200,000, was amended to include "an amount necessary to cover any commitments for expenditures which have previously been approved in accordance with the provisions of this subsection." The language "in accordance with the provisions of this subsection" was an apparent reference to the sections cited above, which (1) allowed expenditures only for administrative costs disallowed by the federal government, and (2) prohibited expenditures which would result in substitution for or reduction in available federal administrative funds, as well as (3) the procedural requirement that withdrawals "be made by the treasurer...on warrants drawn by the comptroller at the direction of the administrator, subject to the approval of the governor and the secretary of the office of policy and management."
In 1982, the General Assembly enacted major amendments to Conn. Gen. Stat. Section 31-259(d). Public Act 82-396 explicitly eliminated from the law both the requirement that the fund only be used for administrative costs disallowed by the federal government and the prohibition on costs which would substitute for or reduce federal funding. In addition to reimbursing the Employment Security Administration Fund under Section 31-259(b), money in the Special Administration Fund was permitted, under the 1982 amendments, to be used "for any other purpose authorized by law."
The Labor Department's practice is consistent with the amended language of § 31-259(d) as to the use of the Special Administration Fund. The pre-1982 restriction limiting use of this fund only to reimburse disallowed federal costs and prohibiting the substitution for unavailable federal funding has been eliminated. The only restriction now is that withdrawals are limited "to an amount necessary to cover any commitments for expenditures previously approved in accordance with this subsection." Conn. Gen. Stat. § 31-259(d).
The term "commitment for expenditures" is no longer narrowly defined as it was prior to the 1982 amendment. In addition to allowing for expenditure for disallowed costs, as described in § 31-259(b), its purpose became broadly stated. Expenditures now include "use[s] for the payment of costs of administration, to reimburse the Employment Security Administration Fund under the condition provided in subsection (b) of this section and for any other purpose authorized by law." The previous approval referenced in this term is no longer limited to administrative costs disallowed by the federal government. Therefore, Special Administration funds can be used for administrative costs as are funds in the Employment Security Administrative Fund under § 31-259(a).
The decision to make the commitment to administrative expenditures first rests with the exercise of discretion by the administrator. A policy question arises as to whether funds will be more wisely spent by transfer to the Unemployment Compensation Fund or to the Administration Fund. The administrator must determine that the incursion of the administrative expense of those sums in excess of the § 31-259(d) $500,000 limit that is the subject of the transfer to the Administration Fund is appropriate. He may do so consistent with his statutory authority. "In administering this chapter, the administrator may adopt such regulations, employ such persons, make such expenditures, require such reports, make such investigations and take such other action as may be necessary or suitable." Conn. Gen. Stat. § 31-250(a); 92 Conn. Op. Atty. Gen. (February 28, 1992). He so reports annually to the governor as to his administration. Conn. Gen. Stat. § 31-250(a).
The necessary approval as to these committed expenditures then rests with the exercise of discretion by the Governor and the Secretary of the Office of Policy and Management. Section 31-259(d) requires their participation and concurrence. The warrant which they approve authorizes the transfer. "Withdrawals from [the Special Administration Fund] shall be made by the treasurer, notwithstanding the provisions of section 4-86, on warrants drawn by the comptroller at the direction of the administrator, subject to the approval of the governor and the secretary of the office of policy and management." Conn. Gen. Stat. §31-259(d).
The basis for the warrant's authority to provide for the transfer is found in the meaning of the term "warrant" and case law precedent. "Warrant" in this context refers to an authorization or directive to make a transfer of funds. See Dowe v. Egan, 133 Conn. 112, 129, 48 A.2d 735 (1946). The "General Assembly [may order] the treasurer to pay, or the comptroller to draw orders upon him for the payment of amounts to be fixed by some other official or officials." Id., at 133. The "other official" in Dowe was also the administrator.
The legislative intent to so invest these executive officials with such discretion is consistent with the statutory scheme. The otherwise applicable requirement of transfer of funds by the authority of the General Assembly as stated in § 4-86(d) is met through § 31-259(d) by the delegation of authority to these executive officials. In addition to the administrator's § 31-250(a) delegation, both the Governor and Secretary of the Office of Policy and Management are similarly authorized. Conn. Gen. Stat. § 3-1 enables the Governor to "take any proper action concerning...the laws of the state and the protection of its citizens." The Secretary of the Office of Policy and Management assists the Governor as to the investigation, supervision and coordination of the expenditures and fiscal operations of state agencies. Conn. Gen. Stat. § 4-70b.
The multiple levels of authorization needed to make a transfer to the Special Administration Fund is evidence of a precaution taken as to the making of an important policy determination. This can be appreciated by contrasting it to the authority required for a withdrawal from the Administration Fund as opposed to the Special Administration Fund. The former does not require the approval of the Governor and the Secretary to the Office of Policy and Management. Conn. Gen. Stat. § 31-259(c).
The decision to so commit for expenditure these excess amounts for administrative costs is consistent with the legislative history of § 31-259(d). The General Assembly has expressed its concern as to the prospect of having to close an office or discontinue a program due to a lack of federal funds. This prompted the enactment of Public Act 82-396. The purpose of this amendment to § 31-259(d) was to deal with "the potential or possible cutbacks in federal funds for the administration of unemployment." 25 H.R. Proc. Pt. 14, 1982 Sess., p. 4372, remarks of Rep. Gardner Wright. The administrator was thereby specifically enabled by this amendment "to employ such persons" and "make such expenditures" by the decision to make commitments for administrative expenditures. Conn. Gen. Stat. § 31-250(a).
This exercise of discretion by the administrator is also consistent with the remedial purpose of the Unemployment Compensation Act and the principle of its liberal construction with respect to beneficiaries. Burnham v. Administrator, 184 Conn. 317, 325, 439 A.2d 1008 (1981); Halabi v. Administrator, 171 Conn. 316, 322, 370 A.2d 938 (1976). A construction of the Act which allows the administrator to prevent a reduction in services to the public is consistent with its history, language and purpose that it is designed to serve. Board of Education v. Board of Labor Relations, 201 Conn. 685, 690, 519 A.2d 41 (1986); State v. Kozlowski, 199 Conn. 677, 673, 674, 509 A.2d 20 (1986); 92 Conn. Op. Atty. Gen. (February 28, 1992).
Your practice is also consistent with precedent as described in your materials. Reports from the Auditors have approved of prior transfers of the excess amounts since the 1982 amendment.
Therefore, we conclude that your practice of annually transferring those funds in excess of $500,000 from the Employment Security Special Administration Fund to the regular Employment Security Administration Fund for the purpose of offsetting projected deficits of federal administrative funds in future fiscal years has been in compliance with the law. This is so because theadministrator has determined that such action has been necessary or suitable and has obtained the approval of both the Governor and the Secretary of the Office of Policy and Management as prescribed by § 31-259(d).
Very truly yours,
Richard Blumenthal
Attorney General
Thadd A. Gnocchi
Assistant Attorney General
RB/TG/dh