NCICL Challenges Gov's Actions in Borrowing Money

Mar 10th, 2011
by Elizabeth Lincicome

Contact: Elizabeth Lincicome

Phone: 919-838-5313






RALEIGH, MARCH 10, 2011- Lawyers with the North Carolina Institute for Constitutional Law (NCICL) today questioned Governor Perdue’s plans to temporarily borrow nearly $500 million in dedicated state appropriations from a variety of funds to pay taxpayer refunds.  Those funds include moneys appropriated and dedicated for public school building funds, the Employment Security Commission reserve fund, the Clean Water Trust Management Fund and others.


Robert F. Orr, Executive Director of NCICL and Senior Staff Attorney Jeanette Doran categorized the Governor’s proposed actions as violations of the N.C. Constitution and in direct contravention of the N.C. Court of Appeals holding in the Goldston case.  In Goldston Governor Mike Easley’s transfer of $80 million from the Highway Trust Fund to the General Fund was ruled unconstitutional. 


Orr and Doran along with original counsel in the case Gene Boyce and Dan Boyce represented the taxpayer plaintiffs in Goldston.  “We feel that the Constitution is clear and the holding by our state’s second highest court is clear.” Orr said.  “The Governor simply does not have the authority to move duly appropriated funds around and borrow from dedicated Funds outside the General Fund without legislative approval.  There is no constitutional authority for the Governor to borrow money from any source - at any time – under any circumstance.  That authority resides solely within the General Assembly.”


The N.C. Constitution contains three specific provisions relative to this issue and an explanation of them in more detail is set out in the two attached documents on budget transfers and the special objects clause.  First, the Governor is required to administer the budget “as enacted by the General Assembly.” (Article III, Sec. 5 (3).  “Raiding funds specifically set up outside the General Fund with appropriations by the General Assembly – even temporarily – is beyond the Governor’s authority,” Orr said.   


“The Governor does have limited authority under the ‘effect the necessary economies’ clause in Article III, Sec. 5(3) if there is documented evidence that continued spending levels will result in an unbalanced budget,”  Orr noted.  The Goldston opinion limited that power, however, when it stated,  “We hold that the Constitution of North Carolina article III, section 5 is a grant of authority to the Governor, which is limited to escrowing or reducing budgeted expenditures and does not create a power to transfer and spend funds for one purpose to another purpose without statutory authority.”  The court then went on to declare that the transfer of $80 million from the Highway Trust Fund to the General Fund by Governor Easley exceeded his constitutional authority.


In the Goldston case before the Supreme Court a brief was filed by the leadership of both political parties in the General Assembly and the National Conference of State Legislatures.  In that brief they stated, “As Director of the Budget, the Governor is to give effect to the judgment of the General Assembly as expressed in the comprehensive budget.  Despite claims to the contrary in the Governor’s new brief, the General Assembly has never provided in its budgets for any significant policy discretion to be exercised by the Governor in administering the budget.”


Finally, Article V, Section 5 states, “Every act of the General Assembly levying a tax shall state the special object to which it is to be applied and it shall be applied to no other purpose.”  Justice Orr added, “The funds in question are potentially all, or in part, subject to this constitutional provision and ‘borrowing’ them to fund other purposes, no matter how meritorious those purposes might be, violates this constitutional provision.”


While the need to provide timely tax refunds to our state’s taxpayers is obviously important, the mechanism used by the Executive in this case violates the state constitution and exceeds the Governor’s authority while encroaching on the duly expressed powers of the General Assembly.  We respectfully disagree with the Governor’s position and call on her to find a proper constitutional path to making these refunds.  





If you would like more information on this topic, please call Elizabeth Lincicome at 919-838-5313 or email at