Locke, NCICL urge N.C. Supreme Court to rule Leandro forced money transfer ‘unconstitutional’

Jeanette Doran, president and general counsel of the N.C. Institute for Constitutional Law

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  • The John Locke Foundation and N.C. Institute for Constitutional Law label a proposed forced money transfer in the Leandro case "unconstitutional."
  • The N.C. Supreme Court will hear oral arguments Aug. 31 about the transfer of $785 million for education-related purposes.

The N.C. Supreme Court should reject a trial judge’s decision to move hundreds of millions of dollars out of the state treasury to pay for education-related expenses. That’s the key argument in a brief submitted by the John Locke Foundation and N.C. Institute for Constitutional Law.

“This Court should hold that any court order directing the transfer or disbursement of money from the State Treasury, in the absence of an appropriation by the General Assembly, is unconstitutional,” wrote Jeanette Doran, NCICL president and general counsel. “To do otherwise would result in judges across the State writing a new budget and ordering the executive branch to execute that budget. This is a legislative power the Constitution reserves solely to the legislative branch.”

The Supreme Court issued an order Tuesday accepting Doran’s friend-of-the-court brief.

The state’s highest court will hear oral arguments Aug. 31 in Hoke County Board of Education v. State, a case better known by the shorthand title Leandro. Originally filed in 1994, the case already has produced major state Supreme Court rulings in 1997 and 2004.

The current dispute involves a Nov. 10, 2021, order from Superior Court Judge David Lee, who oversaw the Leandro case at the time. Lee ruled that the state owed $1.75 billion to the N.C. Department of Public Instruction, Department of Health and Human Services, and the University of North Carolina System. The money would cover items included in a court-sanctioned comprehensive remedial plan. San Francisco-based consultants drafted the plan to help resolve the Leandro dispute.

A second piece of Lee’s order would have forced the state controller, treasurer, and budget director to take part in transferring $1.75 billion out of the state treasury. Such a move would have bypassed the General Assembly.

An amended April 26 order from Lee’s successor, Judge Michael Robinson, whittled the size of the court-ordered spending down to $785 million. Robinson also struck Lee’s forced money transfer.

Now Leandro plaintiffs and N.C Justice Department lawyers representing the State Board of Education urge the state Supreme Court to restore Lee’s forced money transfer.

Locke and NCICL disagree. They ask the court to consider the impact of the state budget signed into law eight days after Lee’s November 2021 order.

“[T]he enactment of the budget would undermine whatever supposed authority might have existed for a court to order a transfer of funds from the State Treasury,” Doran wrote.

Lee based his order on the fact that the General Assembly and governor had not yet finalized a state budget. At that time, N.C. state government had not enacted a new state budget since 2018.

Lee turned to two potential sources of power for his forced money transfer, Doran wrote. One was his “inherent authority.” The other was a new assertion that Article I, Section 15 of the N.C. Constitution amounts to “an ongoing constitutional appropriation.”

That section of the Declaration of Rights says “The people have a right to the privilege of education, and it is the duty of the State to guard and maintain that right.”

“The adoption of the Budget Act eliminated the foundations upon which Judge Lee had crafted the authority to order the transfer,” Doran wrote.

Locke and NCICL label Lee’s idea of inherent authority “nebulous.” “This ill-defined concept provided the cornerstone on which rested the transfer directive. But, ‘inherent authority is limited. While it may be used by a judge to fill in gaps not addressed by the statutes or rules, inherent authority does not empower a court to override legislative decisions,’” Doran wrote.

The state budget signed into law on Nov. 18, 2021, should have had a direct impact on Lee’s eight-day-old order, Doran explained.

“The trial court expressly premised its exercise of inherent authority on the ‘need’ for the trial court to order the transfer. Specifically, the trial court explained that ‘when’ the legislature enacts a budget, ‘there is no need for judicial intervention to effectuate the constitutional rights,’” Doran wrote. “Once the General Assembly enacted the State Budget, the supposed need for judicial intervention evaporated, so too evaporated the purported inherent authority to order the transfers at issue.”

“The Budget Act is the very kind of legislative decision a court cannot override through exercise of its inherent authority,” Doran added. “The enactment of the State Budget stripped the trial court of whatever inherent authority it claimed to have had to order the transfer directive.”

“Assuming only for the sake of argument that a court could order a transfer from the State Treasury, the trial court’s justification for doing so in the 10 November Order was the fact a State Budget had not passed,” she wrote. “With the enactment of the Budget Act, the trial court’s justification for its unconstitutional order disappeared.”

“Even if a court determines that it is not satisfied with the legislative decisions of the General Assembly, a court may not stretch its authority (constitutional, statutory, or inherent) to override legislative decisions,” Doran explained.

A forced money transfer violates both the “constitutionally mandated” budget process and the governor’s duty to “faithfully execute” the laws, Locke and NCICL argued.

The state Supreme Court can review its precedents for guidance in the current Leandro dispute, Doran wrote.

“This Court has previously held that the Governor does not have the authority to spend money which has not been appropriated in the state budget. No authority suggests the courts do either. The courts have no role in the state budget process, either in its enactment or its administration, so the justification for permitting a court order transferring money from the treasury is even more attenuated than the transfers made by the governor and which this court declared unconstitutional,” she wrote. “There is simply no constitutional basis for permitting a court to order an expenditure or transfer of funds, particularly where, as here, the General Assembly fulfilled its obligation to enact a budget.”

“Even if a constitutional shortcoming exists, rewriting of the budget is not an option given to the judicial branch,” Doran added.

Compliance with the state constitution requires the Supreme Court to reject the forced money transfer in Lee’s November 2021 order, the brief argued.

“Enactment of the State Budget Act is the only constitutionally permissible authorization for the drawing of money from the State Treasury,” Doran wrote. “Once the Budget Act became law, it stripped the court of any supposed ‘inherent authority” the court might theoretically have had to justify the transfer directive. … After all, as this Court put it, ‘there is a limit to what the court can do by fiat.’”