June 9, 1995
Gerry Cohen, Director Legislative Bill Drafting Division
N.C. General Assembly Legislative Office Building 300 N. Salisbury Street Raleigh, North Carolina 27603
RE: Advisory Opinion; Authority of General Assembly to Provide Relief to Federal Pensioners; Article I, Section 32 of the North Carolina Constitution
Dear Gerry:
At the request of Senator John Kerr, you ask our opinion whether the General Assembly may lawfully enact legislation giving refunds or tax credits to federal pensioners even though the courts have definitively held that the state has no legal obligation to provide such relief.
For reasons which follow, it is our opinion that the Legislature has the authority to provide relief to federal pensioners, notwithstanding the decisions of the federal and state courts that the state has no legal obligation to provide such relief. This decision would be within the discretion of the General Assembly should it believe that federal pensioners’ prior public service as federal employees warrants such relief.
Article I, Section 32 of the North Carolina Constitution provides: "No person or set of persons is entitled to exclusive or separate emoluments or privileges from the community but in consideration of public services."
The exclusive emoluments provision of our State Constitution bars legislative grants which exempt some individuals from prohibitions that otherwise apply generally to all citizens of the state or which extend special privileges to select individuals or groups of individuals without a corresponding return of public service. Simonton v. Lanier, 71 N.C. 498 (1874); Plott v. Ferguson, 202 N.C. 446 (1932). However, not all special or exclusive emoluments are prohibited by Article I, Section 32. The Supreme Court of North Carolina recently held that "a statute which confers an exemption that benefits a particular group of persons is not an exclusive emolument or privilege within the meaning of Article I, Section 32 if: (1) the exemption is intended to promote the general welfare rather than the benefit of the individual, and (2) there is a reasonable basis for the legislature to conclude the granting of the exemption serves the public interest." Town of Emerald Isle v. State, 320 N.C. 640, 654 (1987).
Applying this test, the Supreme Court of North Carolina has held that government-conferred benefits do not violate Article I, Section 32 in a variety of circumstances even though the benefits were extended exclusively to small groups of individuals. See, Hinton v. State Treasurer, 193
N.C. 496 (1927) (home loan programs to World War I veterans did not violate the emoluments provision); Bromley v. Baxter, 225 N.C. 691 (1945) (donation of municipal land for World War II Veterans Center held not to violate the emoluments provision); Bridges v. City of Charlotte, 221 N.C. 472 (1942) (benefits received by retired state employees are deferred payments of
salaries for services rendered and do not violate the emoluments provision).
The most recent appellate court decision that is directly in point is Leete v. County of Warren,
114 N.C. App. 755 (1994). In Leete, the Warren County Board of Commissioners made a
payment of $5,073.12 to the county manager who voluntarily resigned. The trial judge enjoined
the county for making the payment on the ground that it was an unlawful gratuity that violated
Article I, Section 32. The Court of Appeals upheld the payment, notwithstanding the fact that the
county had absolutely no legal obligation to pay this gratuity to the former county manager. The
Court upheld the payment because of the county manager’s past public service to the county. As
the Court of Appeals reasoned:
"North Carolina Case law demonstrates that it is permissible to compensate public service
previously rendered without violating the constitutional ban on private emoluments, even though
the recipient may have no legal and enforceable right to the benefit. * * *
Hence, our Supreme Court has held, on more than one occasion, that the constitutional ban on
exclusive emoluments is not violated by a governmental grant of certain benefits, paid out of
public resources, to one class of citizens, but not to be enjoyed by all, if the grant is in
consideration of public service. From these cases, we discern that the primary inquiry under
Article I, [Section] 32 is not whether the recipient has a legal or enforceable claim against the
governmental entity granting the benefit, but rather, whether the governmental entity took such
action in consideration of the recipient’s public service." Id., 758, 759
Here, since all of the federal pensioners were federal employees, and because federal
employment like state employment is considered a public service, should the General Assembly
Mr. determine that some benefits should be provided to these federal pensioners because of their
prior public service, we believe such legislation would be constitutional.
Should you have any further questions, please contact us.
Andrew A. Vanore, Jr.
Chief Deputy Attorney General