Plaintiff School Board Alleges Misappropriation by State Officials Over Environmental Funds

The North Carolina Court of Appeals recently reversed a trial court’s decision regarding the allocation of funds from an environmental enhancement agreement. The case was initiated by Jonathan Burris on behalf of the Randolph County Board of Education against North Carolina Attorney General Josh Stein, Controller Nels Roseland, and Governor Roy Cooper. Filed in Wake County Superior Court on July 17, 2024, the lawsuit challenged the distribution of funds received under a 2000 agreement between the Attorney General and Smithfield Foods.

The crux of the case lies in whether funds from Smithfield Foods intended for environmental enhancement should be redirected to public schools. Burris argued that these funds were unconstitutionally appropriated by state officials and should benefit public education as per Article IX, Section 7 of the North Carolina Constitution. This section mandates that proceeds from penalties and forfeitures be used exclusively for maintaining free public schools. The trial court had previously sided with Burris, granting summary judgment in his favor.

However, upon appeal, the defendants contended that the funds were not civil penalties but rather part of an agreement specifically designated for environmental purposes. The appeals court agreed with this interpretation, citing a previous Supreme Court ruling which clarified that payments under such agreements do not constitute penalties requiring allocation to schools. Additionally, it was noted that Smithfield’s contributions were earmarked for specific environmental projects across North Carolina, including wetland maintenance and pollution reduction efforts.

Burris also raised concerns about compliance with constitutional appropriation clauses, arguing there was no lawful appropriation for these funds between 2019-2021. However, since the terms of Smithfield’s gift specified its use for environmental enhancement and not general educational purposes, this argument did not hold up under scrutiny.

Ultimately, the appellate court found no merit in redirecting these funds to public schools based on existing constitutional provisions or statutory requirements. The judgment underscored that future allocations beyond fiscal years 2024-25 should adhere strictly to legislative appropriations and donor intent as stipulated in agreements like those with Smithfield Foods.

Representing Burris were attorneys R. Daniel Gibson from Davis Hartman Wright LLP and Paul Stam from Stam Law Firm PLLC. Defending the state officials were Deputy Solicitor General James W. Doggett along with Special Deputy Attorneys Matthew Tulchin and Laura H. McHenry under Attorney General Jeff Jackson’s office. The case was presided over by Judge A. Graham Shirley II at Wake County Superior Court before being reviewed by Judges Collins, Carpenter, and Flood at the appellate level (Case ID: COA25-130).