NC State Employees Sue Governor

May 23, 2001 (PLANSPONSOR.com) - The State Employees Association of North Carolina (SEANC) has filed a lawsuit against the State of North Carolina over the diversion of employer retirement contributions by Governor Mike Easley in his emergency budget declaration in February.

The suit charges that governor lacks authority to withhold the funds from the Retirement System, and that the governor’s actions represent a violation of contract that will cause employees “irreparable harm’ unless “the defendants are restrained.”

The SEANC claims that the governor illegally diverted $151 million in employer retirement contributions for general use to help balance the budget, further maintaining that the diversion of the funds was neither reasonable nor necessary to assure a balanced budget since other means are available to accomplish that goal.

The lawsuit further charges that the order constitutes “a taking of property from the members of the Retirement Systems without due process of law,’ a violation of the US and North Carolina constitutions. The association asks the court to grant immediate relief by preventing the Defendant from using the funds for anything other than employee retirement purposes.

The SEANC also voiced concerns over a legislative trend towards lowering retirement contributions and the consequences such a trend will have on future cost-of-living adjustments and enhancements to the retirement systems. A spokesman pointed out that a decade ago, the state contribution was 9%. In February 2001, the employer contribution rate stood at 5.33% and now the governor was proposing an employer rate of 2.83% to come into effect on July 1.

Affected by the lawsuit are:

  • the Teachers’ and State Employees’ Retirement System,
  • the Consolidated Judicial Retirement System, and
  • the Legislative Retirement System.

– Camilla Klein                     editors@plansponsor.com

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