Controller, legislative leaders ask NC Supreme Court to block Leandro money transfer

State legislative leaders and the state controller are asking the N.C. Supreme Court to block a forced money transfer tied to the long-running Leandro education funding case.

In separate motions filed Wednesday, Controller Nels Roseland and top lawmakers asked the high court to restore a previous order from the N.C. Court of Appeals. With a rare “writ of prohibition,” that court had ruled that a trial judge could not force government officials to move money out of the state treasury without permission from the General Assembly.

One day after his 47-0 confirmation vote in the N.C. Senate, Roseland urged the state Supreme Court to lift a stay on the Appeals Court order. The controller argued that the Supreme Court’s Nov. 4 Leandro ruling created uncertainty surrounding the forced money tranafer.

“This motion is made because the stays previously entered hinder the proper operations of the Controller’s Office until the legal issues discussed hereinafter, which were unresolved in this Court’s 4 November 2022 Order and Opinion, are resolved,” wrote attorney Robert Hunter, representing Roseland. “Maintaining the stays will allow the Controller’s Office to operate under the fiscal and budgetary statutes until such time as the Court resolves the issues addressed.”

“[T]he motion is made to allow the protective action to be taken given the fact that the need for relief is urgent and outweighs any benefit existing in maintaining the status quo,” Hunter added.

The state Supreme Court has yet to address questions that will affect the controller, Hunter wrote. “Whether the Court lacked personal jurisdiction over the Controller? Whether the Court Order is contrary to the express language of the General Statutes?  Whether state and local agency officials, who are not parties to the superior court case and who transfer the funds or spend the funds are liable under N.C. Gen. Stat. § 143C-10-1 for civil and criminal penalties provided therein? The rights of the ‘state actors’ required to implement the order need to be explicitly addressed. “

N.C. Gen. Stat. § 143C-10-1 creates a Class 1 misdemeanor for a person “to knowingly and willfully” “withdraw funds from the State treasury for any purpose not authorized by an act of appropriation.”

The state Supreme Court’s latest Leandro ruling also omits any information about who would be accountable for the transferred funds, whether court-ordered funds would be subject to state laws involving reversions of unspent money, even “the sequential cash flow process to be used in disbursing the funds ordered.”

“The Controller’s function is part of a larger network of safeguards the General Assembly enacted to prevent errors, fraud waste and abuse in government spending,” Hunter wrote. “The Controller, acting in concert with the Legislative Fiscal Research Division staff and the Office of State Budget and Management, has procedural safeguards built into the distribution process where the recipient of funds does not simply receive a check for the full amount of several years’ appropriation. The money is released as it is needed and applied for. There is a cash flow process the Order as it stands does not recognize.”

“The public interest is always served by following the Constitution and all the statutes regarding the handling of public funds,” Hunter added.

The separate motion from Republican legislative leaders asks the Supreme Court to permit legal briefing on unresolved Leandro issues. Lawmakers also ask for the Appeals Court order to be “automatically reinstated pending the Court’s consideration of those issues.”

“The Court’s decision to stay — rather than vacate — the writ of prohibition pending any further filings reflects a recognition that the parties have not yet had an opportunity to be heard on their appeals from the writ of prohibition itself,” wrote attorney Matthew Tilley, representing lawmakers. “By providing that the writ of prohibition will automatically be reinstated as soon [as] a party files a request to brief additional issues, the Court has protected the parties’ right to be heard.”

The state Supreme Court has not yet decided whether a November 2021 Leandro funding order violated due process rights of the state controller or legislators, Tilley wrote. The high court has not decided whether the Leandro trial judge had the right to apply his ruling on a statewide basis, rather than addressing individual counties and school systems involved in the lawsuit.

The brief also mentions unspent COVID funds. “[T]he majority’s opinion failed to address whether the Plaintiff school districts should first have to exhaust all funds available to them to pay for items in the CRP — including COVID-relief funds — before obtaining a judgment against the State,” Tilley wrote. “In Hoke County, this Court held that, when assessing whether the State fulfilled has its constitutional obligation, the court should include programs funded with federal money”

CRP refers to the comprehensive remedial plan, a court-endorsed multiyear plan for addressing North Carolina’s Leandro obligations.

No Leandro order has accounted for COVID relief funds, Tilley explained. “Indeed, the orders ignore the unprecedented sums the Plaintiff school districts have received in the form of COVID-relief funds,” he wrote. “Since the pandemic began, North Carolina’s school districts (including the Plaintiffs in this case) have received more than $6.4 billion in additional federal and State funding, often with the only limitation that the money be used to address ‘learning loss’ — a category that would cover most, if not all, of the 146 action items in the CRP. As of today, nearly $2.2 billion of that money (approximately 37%) remains unspent.”

The Leandro case, officially known as Hoke County Board of Education v. State, dates back to 1994. The state Supreme Court has issued major rulings in the case in 1997, 2004, and 2022.

The last ruling, issued in November, sent Leandro back to a trial judge. In a 4-3 party-line ruling, the state Supreme Court’s Democratic justices determined that a trial judge could order the state to spend additional money on education-related items. The court’s Democrats also set aside the Appeals Court ruling blocking a trial judge from ordering a forced money transfer.

Four days after that ruling, voters flipped two Supreme Court seats from Democrats to Republicans. A new 5-2 Republican-majority court will decide whether to consider Leandro issues again.

A new trial judge in the case is scheduled to hold his first Leandro hearing March 10 in Raleigh. He is charged with deciding how much money the state would need to spend to cover unfunded items from two years of the CRP.

If the state Supreme Court agrees to the requests from the controller and legislative leaders, it’s unlikely the case would reach justices soon. Lawmakers’ motion sets out a briefing timeline that would last nearly four months.

The post Controller, legislative leaders ask NC Supreme Court to block Leandro money transfer first appeared on Carolina Journal.