by Mitch Kokai
Senior Political Analyst, John Locke Foundation
A split 2-1 panel of the N.C. Court of Appeals has ruled that money resulting from a settlement between Smithfield Foods and the N.C. attorney general must flow into the state treasury. The ruling effectively ends the attorney general’s hog settlement “slush fund.”
The case returned to the Appeals Court after the state Supreme Court ruled 6-1 in April in favor of Attorney General Josh Stein. The state’s highest court agreed with Stein that the money flowed from a voluntary agreement with Smithfield and its subsidiaries rather than a legal settlement producing a penalty. That distinction allowed Stein to maintain control of the money, rather than forcing the funds into the state treasury for distribution to local school districts.
But Appeals Court Judge John Tyson, writing for himself and fellow Judge Phil Berger Jr., reached a different conclusion.
North Carolina’s courts have not permitted members of the executive branch to exercise unbridled appropriation or expenditure of unbudgeted public funds.“The Attorney General is not only the State’s chief law enforcement officer but a steward of our liberties.” The stated purpose of the public funds being used for environmental purposes was not changed by the statute. The statute mandates the location and depository where the public money is to be deposited and held. All funds due or held under the Agreement must be paid and deposited into the State treasury, rather than into a private bank account under the exclusive control and discretion of the Attorney General.
Former Civitas Institute leader Francis De Luca filed the original suit, but the case has proceeded in recent years with the New Hanover County school system as the only plaintiff. The schools had argued that the attorney general’s special environmental fund took away from funding that should go to education.
Tyson addressed potential use of the funds:
No party challenged the [school] Board’s standing to seek funds from that public source for the benefit of New Hanover County public schools and their programs, consistent with the environmental purposes for which the funds may be used….
… In the absence of any disputed issues of fact and the applicability of the statute purely a question of law, we reverse and remand to the trial court for entry of an order to compel the Companies and the Attorney General to transfer and deposit all funds presently held and those to be paid and received from the Companies under the Agreement in the future into the State treasury.