“Never-Due” v. “Due” Funds – A Commentary on Long v. Commonwealth of Kentucky, Department of Revenue (Ky. 2025)

1 · Introduction

On 14 August 2025 the Supreme Court of Kentucky issued a consolidated opinion in Amelia Long, et al. v. Commonwealth of Kentucky, Department of Revenue and companion cases (“Long”). At stake were tens of millions of dollars that state universities and Kentucky’s Department of Revenue (DOR) had recouped from patients and former students under the Commonwealth’s “Collection Statutes” (KRS 45.237-.241; KRS 131.130).

The plaintiffs alleged that the universities referred un-adjudicated, consumer-type debts to DOR, which then used its powerful tax-collection tools (liens, wage garnishments, refund offsets) to seize money and tack on 25 % collection fees. The circuit court agreed the statutes did not authorize such practices; the Court of Appeals split the baby—allowing declaratory relief but shielding the Commonwealth from refund liability under sovereign immunity. Now, the Supreme Court has:

• Recognised a new constitutional line between “funds never due to the state” (refundable) and “funds due to the state” (shielded);
• Clarified that sovereign/governmental immunity does not bar purely declaratory actions;
• Explained when an appellate court may address sovereign immunity inside other interlocutory appeals; and
• Partly mooted the medical-debt claims because the General Assembly has now forbidden DOR from collecting health-care debt.

2 · Summary of the Judgment

1. The Court affirmed that declaratory claims may proceed and that DOR lacks statutory authority ab initio to collect non-judgment debts referred by universities.
2. Money claims were split:
   • Refunds of funds never due to the state – allowed (no sovereign immunity).
   • Refunds of funds that were in fact due – barred (sovereign immunity intact).
3. Prospective declaratory relief in the Medical Case is moot after the 2022 amendment to KRS 131.130(11), but retrospective declarations remain live.
4. An appellate court hearing an interlocutory class-certification appeal may decide sovereign-immunity questions “as a threshold matter” even if the immunity ruling was not appealed within the usual 30-day window.
5. The constitutional Takings claims survive—Sections 13 and 242 of the Kentucky Constitution are self-executing waivers of immunity.

3 · Analysis

3.1 Precedents Cited and Distinguished

• Ross v. Gross, 188 S.W.2d 475 (Ky. 1945) – allowed recovery of money never owed to the state; used to justify the “never-due” exception.
• Beshear v. Haydon Bridge Co., 416 S.W.3d 280 (Ky. 2013) (Haydon II) – barred restitution of workers-comp funds due to the state; relied upon for the “due-funds” immunity.
• Breathitt County Bd. of Educ. v. Prater, 292 S.W.3d 883 (Ky. 2009) – source for immediate appealability of immunity denials.
• Hensley v. Haynes Trucking, 549 S.W.3d 430 (Ky. 2018) & Sexton, 566 S.W.3d 185 (Ky. 2018) – restrict interlocutory scope but allow threshold jurisdictional review.
• Statutes addressed: KRS 45.237-.241 (Collection Statutes); KRS 131.130 (DOR powers); KRS 45.111, 131.565, 131.570 (refund & indemnity provisions).

3.2 Court’s Legal Reasoning

1. Threshold jurisdiction in interlocutory posture
   Sovereign immunity affects the power of a trial court; thus, the Court of Appeals rightly examined it even inside a class-certification appeal.
2. No immunity for pure declarations
   Following Commonwealth v. Kentucky Retirement Systems (2013) and UK v. Moore (2020), the Court reaffirmed that declaratory-judgment suits do not need a legislative waiver.
3. “Due-funds / never-due-funds” dichotomy
   a) If money becomes the state’s property because it was actually owed, Section 230 forbids courts to order its return without legislative appropriation; b) If money was taken but never owed, the Constitution lets courts order its refund.
4. No statutory waiver for “due” funds
   KRS 45.111, 131.565, and 131.570 address mistakenly received or excess funds; none explicitly waives immunity for lawfully-owed taxes or debts.
5. Mootness
   Since 2022 the legislature bars DOR from collecting health-care debt, extinguishing forward-looking controversy for the medical plaintiffs.

3.3 Impact of the Decision

The decision will reverberate across Kentucky’s public-finance and litigation landscape:

• Government Collections – State agencies must now verify that any debt referred to DOR is liquidated, adjudicated and truly “due.”
• Refund Litigation – Plaintiffs’ counsel will plead whether funds were “never due” to avoid immunity; the burden shifts to the Commonwealth to prove otherwise.
• University & Hospital Billing – Commonwealth institutions will likely revert to conventional collection suits or administrative hearings instead of DOR enforcement.
• Appellate Procedure – Litigants may see broader appellate scrutiny of immunity in other interlocutory contexts; trial counsel must preserve records carefully.
• Legislative Response – The General Assembly may craft explicit refund procedures (and appropriations) to manage exposure created by the “never-due” carve-out.

4 · Complex Concepts Simplified

Sovereign vs. Governmental Immunity

Sovereign immunity belongs to the Commonwealth itself; governmental immunity is the spill-over that protects state agencies performing governmental functions. For practical purposes both block suits for money unless waived.

Liquidated Debt (KRS 45.241)

A sum certain that is final, all appeals exhausted, and usually embodied in a judgment or administrative order. Non-liquidated debts cannot be fast-tracked through DOR.

Collection Statutes

KRS 45.237-.241 authorize agencies to send certain certified debts to DOR, which may append 25 % fees and use tax-collection remedies. The Supreme Court held they never applied to medical/educational receivables lacking judgments.

Section 230, Kentucky Constitution

“No money shall be drawn from the State Treasury except pursuant to appropriations.” Interpreted as a backbone of sovereign-immunity doctrine.

Declaratory Judgment v. Monetary Relief

A declaration merely defines legal rights—no treasury draw. A refund order forces payment—triggers immunity unless within the new “never-due” exception.

5 · Conclusion

Long establishes a sharp, workable rule: “The Commonwealth may keep what was rightfully owed; it must return what never was.” By synthesising Ross and Haydon Bridge II, the Court gives lower courts a blueprint for refund cases while preserving fiscal stability. Simultaneously, the opinion warns government collectors that extra-statutory shortcuts invite liability. Finally, the procedural holding allowing immunity issues to piggy-back on other interlocutory appeals signals a more pragmatic—though controversial—approach to appellate jurisdiction.

Key Takeaways:

• Declaratory relief against state actors remains fully available.
• Refund claims survive only for money not “actually due.”
• Mootness doctrines can extinguish prospective relief when statutes change mid-case.
• Appellate courts may review immunity within other interlocutory appeals; counsel should file protective notices when in doubt.
• Sections 13 & 242 (Takings) trump sovereign immunity for uncompensated seizures.

Practitioners challenging state collections must marshal evidence that the debtor’s obligation was never liquidated. Agencies, conversely, must tighten documentation and double-check statutory authority before turning DOR’s powerful machinery on ordinary citizens.