Supreme Court of North Carolina hears oral arguments

N.C. Supreme Court favors Cabarrus school system in pension fight

In a 6-1 ruling, the N.C. Supreme Court has affirmed a lower-court decision throwing out a $208,000 charge to the Cabarrus County school system. The state retirement system had demanded that payment in 2015.

The retirement system had applied the state’s 2014 anti-pension-spiking law to Cabarrus’ retiring school superintendent. The school system paid the bill, then went to court. The legal dispute focuses on whether the retirement system’s trustees followed the correct procedure in adopting rules linked to the 2014 law. The suit specifically targets the “cap factor” used to calculate Cabarrus’ bill.

Writing for the majority, Justice Sam Ervin IV explained that those rules should have been adopted through the state’s Administrative Procedure Act.

[W]hile the General Assembly is, of course, the ultimate arbiter of whether the adoption of a cap factor is implicitly exempt from the rulemaking provisions spelled out in the Administrative Procedure Act, the relevant statutory language, read in light of this Court’s decisions construing the language of other statutes to determine if they supplanted the requirements of the Administrative Procedure Act, satisfies us that the General Assembly did not intend such a result.

Justice Paul Newby dissented.

In 2014 the General Assembly addressed an imminent threat to the solvency of the entire State Retirement System: pension spiking. When it passed the pertinent anti-pension spiking provision, it required the Board of Trustees of the State Retirement System (the Board) to adopt a “cap factor” recommended by an actuary, and specifically described the procedures the Board must follow. … The Board expeditiously proceeded according to this process. Now the majority creates a five-year gap in this law’s enforcement by holding that the procedures under the Administrative Procedure Act (APA) should apply. If, however, separate statutory provisions specifically describe the relevant agency’s procedures, those provisions supersede those of the APA. In this case the General Assembly has given detailed directions to the Board on how to adopt and implement regulations to limit pension spiking. The legislature determined that quick action by the Retirement System was necessary to keep the retirement fund solvent.

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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