January 31, 1996
Dr. Stan C. Broadway, Executive Director State Education Assistance Authority The University of North Carolina Post Office Box 2688 Chapel Hill, NC 27515-2688
Re: Advisory Opinion; Proposed CollegeVision Fund; Nature of the Proposed Fund as Institutional Trust FundsN. C. G. S. §§ 116-36.1 and 116-201 et seq.
Dear Dr. Broadway:
In a letter dated January 11, 1996, you requested an advisory opinion on the following question: Should the Board of Directors of the State Education Assistance Authority elect to authorize a program, such as the CollegeVision Trust Fund, would such an authorization and creation by the Board alone establish the CollegeVision Trust Fund as an instrumentality of the State of North Carolina?
It is our opinion that the act of the Board of Directors in creating and authorizing the CollegeVision Trust Fund alone would not establish the Trust Fund as an instrumentality of the State. However, it is our opinion that the proposed CollegeVision Trust Fund would qualify as "institutional trust funds" under N. C. Gen. Stat. § 116-36.1. The Fund would be a trust fund maintained and administered under the auspices of the State Education Assistance Authority and invested for the Authority by the State Treasurer.
We previously identified N. C. Gen. Stat. § 116-209.24 as the statute under which the Authority is authorized to participate in the CollegeVision Program. See Letter from Andrew A. Vanore, Chief Deputy Attorney General, to Stan C. Broadway dated February 3, 1995. While the State Education Assistance Authority is "created and constituted" a political subdivision of the State, which performs an "essential governmental function," the programs that are administered by the Authority are not instrumentalities of the State of North Carolina. For example, the North Carolina Student Loan Fund (NCSLF) is a revolving trust fund which the Authority is authorized to use to assure the viability of the student loan programs that it administers pursuant to N. C. Gen. Stat. § 116-201 et seq. See N. C. G. S. § 116-209.3 (1994). N. C. Gen. Stat. § 116-209.3 details the purposes of the NCSLF and delineates the sources of valid deposits to that fund, but it does not establish the fund as a separate entity. Its maintenance is entrusted to the expertise and care of the Authority Board.
Our conclusion that the CollegeVision Trust Fund would not be an instrumentality of the State is supported by decisions of the appellate courts in this State which have analyzed the nature of State agencies or instrumentalities. In Guthrie v. State Ports Authority, 56 N. C. App. 68, 286 S.
E. 2d 823 (1982), affirmed, 307 N. C. 522, 299 S. E. 2d 618 (1983), the Court of Appeals identified three distinguishing characteristics of an agency of the State of North Carolina: (1) The entity has a board the members of which are appointed by the Governor or other government officials; (2) Ultimate control of the funding of the entity lies with the State, either with the General Assembly or the Advisory Budget Commission; and (3) The entity is statutorily authorized to conduct its specific functions on behalf of the State. Guthrie, 56 N. C. App. at 7374, 286 S. E. 2d at 826. Although the Authority clearly meets these criteria, the CollegeVision Trust Fund would not. As a program of the Authority, it would lack a separate board of directors. The source of funding for the savings component would be purely private and the source of funding for the loan component may be a blend of private and public sources, depending upon the Board’s election. Neither source would be controlled by the General Assembly or the Advisory Budget Commission. As explained in the letter dated February 3, 1995, contributions to the CollegeVision Fund and any earnings thereon will remain the property of the participants in the program. Finally, the Authority’s enabling statutes fail to establish the CollegeVision Trust Fund as an instrumentality of the State. This analysis is substantially consistent with analysis employed by courts in other jurisdictions when determining the applicability of sovereign immunity to governmental and quasi-governmental corporations. See 72 Am. Jur. 2d States §§ 105-107 (1974).
Instead of an instrumentality of the State, the proposed CollegeVision Trust Fund would constitute "institutional trust funds." In accordance with N. C. Gen. Stat. § 116-11(1) and § 116209.21, the Authority operates as an administrative unit of the Board of Govenors of the University of North Carolina. The administration and investment of institutional trust funds are governed, in part, by N. C. Gen. Stat. § 116-36.1. For the purposes of G. S. § 116-36.1, "trust funds" include:
[m]oneys received by an institution pursuant to grants from, or contracts with, any State agencies, any political subdivisions of the State, any other states or nations or political subdivisions thereof, or any private entities whereby the institution undertakes, subject to terms and conditions specified by the entity providing the moneys, to conduct research, training or public service programs, or to provide financial aid to students.
N. C. G. S. § 116-36.1 (g)(3) (1994). N. C. Gen. Stat. § 116-36.1(b) requires the State Treasurer to hold all institutional trust funds in separate accounts in trust for the University of North Carolina and each institution, but allows for the pooling of those accounts for investment purposes. Moneys deposited to the Fund would be received by the Authority from private entities in order to provide future financial assistance for students attending institutions of higher education. In our opinion, the CollegeVision Fund would qualify as an institutional trust fund under G. S. § 116-36.1(g)(3), and therefore, could be invested by the State Treasurer as a trust fund of the Authority under G. S. § 116-36.1 and consistent with G. S. § 147-69.2.
In conclusion, while the Authority’s power to offer the CollegeVision Program is derived from its
powers to engage in programs of financial assistance for parents of students under N. C. Gen.
Stat. § 116-209.24, the program itself would not be an instrumentality of the State.
Andrew A. Vanore, Jr.
Chief Deputy Attorney General
Thomas J. Ziko
Special Deputy Attorney General