State government’s new controller is asking the N.C. Supreme Court to jettison a proposed forced transfer of $785 million out of the state treasury for court-ordered education purposes.
Acting Controller Nels Roseland’s request arrived Monday as parties in the long-running Leandro lawsuit submitted their latest round of briefs in the case.
Roseland took over the controller’s office after Linda Combs retired from the job on June 30. The state Senate has not yet confirmed Roseland for the job.
Like Combs, Roseland is arguing that a forced money transfer could place him in legal jeopardy. The transfer was part of a November 2021 trial court order that originally called for the controller to take part in the movement of $1.75 billion. A revised April order dropped the total to $785 million. The later order also dropped the forced money transfer.
“[W]ere this Court to reinstate the transfer provisions, the Court would place the Controller and his staff in civil and criminal liability, and would violate both controlling, well-settled precedent of this Court and Article V, Section 7 of the North Carolina Constitution,” wrote attorney Robert Hunter, who represented Combs and now represents Roseland.
Article V, Section 7 says “No money shall be drawn from the State treasury but in consequence of appropriations made by law.” First Combs, and now Roseland, have interpreted the constitutional provision to mean that the controller cannot move money out of the state treasury without authorization from the General Assembly.
“North Carolina law makes clear that the Office of the State Controller has no legal authority to transfer funds from the unappropriated balance, … and that the Controller is, in fact, expressly prohibited from doing so by the North Carolina Constitution, and by the State Budget Act,” Hunter wrote.
Moving money without the General Assembly’s permission could lead to a Class 1 misdemeanor charge against the controller, subjecting him to “criminal liability, forfeiture of office, or impeachment,” Hunter explained. Such action also would force the controller to violate his oath of office.
“Should the offending section of the … November Order be reinstated, the problems it would create for those in charge of implementing the Budget Act would multiply,” Hunter wrote. “For example from which appropriated fund should the funds be withdrawn? The Courts, the Legislative Budget, the Medicaid Budget? All of these state institutions and programs retain budget balances, and the Order was never clear nor was the recourse to which other beneficiaries of the original certified budget could appeal for relief.”
“In plain terms money is fungible and limited. Creating a windfall for the education agencies would create a commensurate shortage for other state agencies, institutions and programs,” he added. “The … November Order gave the Office of State Controller no manageable standards under which to make these adjustments with respect to the funds appropriated.”
Combs’ appeal of the November 2021 order helped return the Leandro case to the state Supreme Court. Originally filed in 1994, the case has produced major rulings from the state’s highest court in 1997 and 2004.
The N.C. Court of Appeals agreed with Combs’ argument against the forced money transfer. That court issued a rare “writ of prohibition” blocking the November 2021 order.
Advocates of the forced money transfer appealed to the state Supreme Court. Justices agreed to hear the case. But first they asked the trial court to review the impact of the state budget deal signed into law eight days after the $1.75 billion order.
By April, when a new trial judge issued an updated order, the price tag had dropped to $785 million. The money would fund items from the second and third years of a court-sanctioned education plan. Developed by San Francisco-based education consultants, this multiyear comprehensive remedial plan would eventually cost at least $5.6 billion.
Still up for debate is whether a judge can force state officials to transfer that money. Leandro plaintiffs and government lawyers working for the State Board of Education have argued in favor of the transfer. Lawyers working for the Republican-led General Assembly oppose the transfer. Legislative leaders argue that a judge should not have ordered the state to spend any additional money on education purposes.
A new brief from the State Board of Education filed Monday countered arguments from legislative leaders.
“Legislative-Intervenors contend that the Comprehensive Remedial Plan (CRP) and the November … 2021 Order directing State executives to transfer money from the General Fund to implement the action steps in the CRP were the product of a ‘friendly suit’ wherein all the parties sought the same result,” wrote Special Deputy Attorney General Matthew Tulchin. “Legislative-Intervenors contend that this ‘friendly suit’ has produced an ‘unnecessary’ remedy and no longer presents a genuine controversy for adjudication. … The record does not support these arguments.”
Tulchin defended the multiyear, multibillion-dollar comprehensive remedial plan. “The State Board of Education firmly believes that the action steps in the CRP are necessary to remedy the proven deficiencies in the North Carolina public school system,” he wrote.
In addition to briefs filed Monday, a final round of written paperwork is due at the state Supreme Court Aug. 12.
The court will hear oral arguments Aug. 31 and issue a final decision at a later date.
Editor’s note: This article was updated at 4:40 p.m. to include information about the N.C. State Board of Education’s new brief.