Court: Governor wrong to divert funds

Gov. Mike Easley was wrong to intercept $225million headed to N.C. state employee pension funds to help cover the 2001 budget shortfall because the state and federal constitutions protect them, an appeals court ruled Tuesday.

While all of the money ultimately was repaid to the retirement system funds and pension benefits didn't suffer, the 14 former and current state workers who first sued in 2002 want to ensure future governors can't divert pension benefits during a fiscal crisis.

Republican Gov. Jim Martin also withheld pension money to patch a 1991 shortfall.

“It's a great ruling for the teachers and the state employees,” said Hardy Lewis, an attorney representing the plaintiffs. “It essentially says the government can't use the pension fund as a rainy day fund.”

Easley has said he took the money appropriated by the Legislature for the N.C. Teachers' and State Employees' Retirement System and two other public employee funds because the state constitution required a balanced budget.

The governor scoured state government in his first year in office for pots of money to cover a budget that was off by $850million. Some of the money was repaid by the end of the 2001, but $130 million wasn't immediately returned.

Early last year, Superior Court Judge Joseph John ruled that the retirement funds could only be used for retirement purposes.

On appeal, attorneys for the state representing Easley, outgoing State Controller Robert Powell, Treasurer Richard Moore and others argued the $225 million had never been actually “diverted” because the money wasn't actually transferred to the pension funds.

Writing the unanimous opinion for the three-member panel, Judge Linda McGee said the plain meaning of “diverted” also applied to money earmarked by lawmakers but hadn't been deposited.

Lawyers for Easley's and Cooper's must now decide whether to appeal to the state Supreme Court.