Media coverage of the Leandro lawsuit has painted a picture of a partisan battle on education funding. Missing from the narrative is the debate on whether the judicial branch has the authority to appropriate state funds – something that has never been done in North Carolina.

As the North Carolina business community’s organized voice for legal policy development and analysis, the NC Chamber Legal Institute is charged with developing legal strategies to protect you, our state’s job creators, from threats originating within the court system. We are not engaged in the Leandro case, but last week the NC Chamber name was invoked in the PR swirl around the case. With oral arguments looming, it is important to have the full context around this case and why it could have a lasting impact on our state’s legal climate.

Background

At its origin, this is a lawsuit about education funding. In 1994, five low-wealth counties sued the state alleging their districts did not have adequate resources to fund K-12 education, despite taxing their residents at rates higher than the state average. The plaintiffs argued that, relative to the rest of the counties, students in their counties were not afforded the same access to a sound, basic education. Simply put, this case was about relative state funding for high-poverty versus low-poverty districts.

Since 1994, there have been many shifts in education funding. According to Georgetown University’s FutureEd, North Carolina now ranks better than most states – higher than New York and Illinois and just behind California – on “funding equity,” or the difference in education funding between wealthy and impoverished school districts.

So why wasn’t that the end of it?

Several years ago, the plaintiffs got together with the defendants and decided to work together – while still maintaining the veneer of adversaries in the ongoing legal proceedings.

Wait…What?

This unscrupulous practice is often called an engineered consent judgement – an activist group sues a like-minded agency, they bring the case before a like-minded judge, and the trio gets to write new laws – without lawmakers.

When both sides began working together, the focus of the case shifted from funding levels between counties to how much the legislature spends on education statewide. It is unusual enough for plaintiffs and defendants to collaborate, but for a case to make such a significant shift in focus is also highly unusual.

Current State of Play

In 2018, the plaintiffs and defendants both asked Superior Court Judge David Lee to order a consultant firm called WestEd to recommend changes to the state’s education funding framework. Judge Lee so ordered it and WestEd recommended education funding changes that will cost nearly $10 billion.

This is where it can be tempting to get lost in the dollars and cents but miss the broader implications on North Carolina’s legal climate.

On November 10, 2021, at the request of the plaintiffs and defendants, Judge Lee ordered implementation of the WestEd plan, directing former state Controller Linda Combs to withdraw $1.7 billion from the state treasury and give it to various state agencies to implement the first two years of the 8-year WestEd plan.

Senate Leader Phil Berger and House Speaker Tim Moore responded publicly, saying, “A judge does not have the legal or constitutional authority to order a withdrawal from the state’s General Fund.”

Controller Combs appealed Judge Lee’s order, arguing that only the legislature, not a court, can order her to withdraw money from the treasury. Judge Lee rejected her argument, but on November 30, 2021, the state Court of Appeals agreed with her and temporarily blocked Judge Lee’s order until the matter could be fully litigated at the Court of Appeals.

At this point, the legislature sought to formally intervene in the case to defend their exclusive constitutional authority to appropriate funds. Their intervention request was granted.

On March 18, 2022, the state Supreme Court issued an order removing the Court of Appeals from the case, thus expediting the process to allow the Supreme Court to decide on the matter before the November 2022 elections – when it is projected the balance of the court will shift.

The Supreme Court will hear oral arguments at the end of August.

What’s Next?

It is tempting to opine on the merits of the underlying Leandro debate and the larger question of just how much funding for education is enough. So far, we have refused to suggest that we can precisely pinpoint the Goldilocks zone.

We respect the fact that we have the honor of representing a broad swath of businesses, all of which have bright and energetic leaders at the helm. Each of those leaders likely have a different view of just how much funding any particular state program should or is entitled to receive. We also trust the wisdom of the process that allows 170 elected legislators from all across the state to battle over these questions year in and year out, and who not incidentally just passed an overwhelmingly bipartisan budget to fund all aspects of state government, including education, for another twelve months.

What concerns us here is the manner in which the collaborating litigants appear poised to blithely disregard the institutional harm likely to erupt if the judiciary can stray from their clearly defined constitutional mandate over into the business of appropriating state funds. Ironically, they recently made clear the executive branch was not allowed such latitude.

This case already has a myriad of eyebrow raising crooks and turns. For example, our legislative leaders were initially told by the courts they could not be a part of the case before more recently being chastised by the courts for not doing so.

Bottom Line

Neither the NC Chamber nor its Legal Institute have formally appeared in the case, and we currently we have no plans to do so. That said, we will watch closely and keep you apprised of where the current path may ultimately lead.