NC State Workers Get New Hearing on Easley Suit

June 13, 2003 ( - A North Carolina state worker organization on Friday won the chance to make its case to a state appeals court that Governor Mike Easley illegally held back $212 million in pension contributions as a budget-balancing move.

>The North Carolina Supreme Court tossed a Court of Appeals ruling, which had dismissed the lawsuit of the State Employees Association of North Carolina (SEANC) after finding that the group lacked the legal right – or standing – to sue, according to an Associated Press report. The Court of Appeals will now rehear the case with an admonition to conduct a hearing on SEANC’s claims that Easley’s actions in 2001 were unconstitutional. The group says the state is in an implied contract with the employees to supply pension contributions.

“It means the lawsuit’s back in play,” SEANC spokeswoman Sherry Melton told the AP. “We believed all along we were going to have standing.” Most of SEANC 58,000 members are vested in the state retirement system. SEANC worried the withdrawal sets a bad precedent and could led to lower cost-of-living raises for retirees. “It comes down to the basic question of whether the governor has the constitutional authority to divert the pension funds for no other purpose than to benefit the members,” Melton said.

Contribution Holdback

SEANC originally went to court in May 2001 after Easley withheld the taxpayer-funded pension contribution earlier in the year to help address a budget shortfall that eventually totaled $850 million. Easley has said he had the authority to withhold the funds, citing his constitutional obligation to balance the budget (See  Sharing The Pain ). 

A Superior Court judge ruled SEANC had no standing and refused to issue a temporary restraining order blocking Easley from taking the funds. In a 2 to 1 opinion last year, the Court of Appeals agreed, saying there was no evidence to show SEANC members would suffer a “distinct and palpable injury likely to be remedied by granting the relief requested,” (See NC Workers Denied Again ).

>However, in Friday’s ruling, the high court cited the dissenting appellate court opinion in reversing the decision.   There Judge John Tyson wrote there is no requirement that all association members face potential harm in order for the group to have standing to sue.

Still Wating for Funds

Part of the money was since returned, but $130 million remains outstanding. Legislative leaders promised to begin repaying the money beginning this year. The House and Senate budget proposals set aside $10 million for repayment, but a later House proposal expanded it to $76 million thanks in part to a one-time federal relief package.

The General Assembly usually has made a matching annual contribution to the North Carolina Teachers’ and State Employees’ Retirement System, which is valued at $42 billion with more than 470,000 current and retired state employees enrolled.