November 4, 1997
Richard Whisnant, General Counsel Department of Environment, Health & Natural Resources Post Office Box 27687 Raleigh, North Carolina 27611
Re: Advisory Opinion — Proper Disposition of Environmental Civil Penalties Collected from Local School Administrative Units
Dear Mr. Whisnant:
Earlier this year you requested our opinion on the proper disposition of environmental civil penalties collected from local school administrative units. We have delayed responding to your request because legislation was pending before the most recent session of the General Assembly which potentially could have affected our response. After careful review of the legislation in question, and for the reasons which follow, we conclude the clear proceeds of environmental civil penalties controlled by Article IX, Section 7 which were collected from offending local school administrative units before September 1, 1997, may not be returned to the offending local units but rather should be deposited into the General Fund. We also conclude the clear proceeds of environmental civil penalties controlled by Article IX, Section 7 which are collected from offending local school administrative units on or after September 1, 1997, may not be returned to the offending local units. However, in compliance with N.C.G.S. 115C-457.1 et seq., these funds should be remitted to the Civil Penalty and Forfeiture Fund, transferred to the State School Technology Fund and allocated to all eligible local school administrative units, except the offending unit, on the basis of average daily membership.
Senate Bill 882, entitled Civil Penalty and Forfeiture Fund Established, proposed to have the clear proceeds of all civil penalties and forfeitures controlled by Article IX, Section 7 deposited into a Civil Penalty and Forfeiture Fund and subsequently transferred to the State School Technology Fund for distribution to local school administrative units on the basis of their average daily membership. Senate Bill 882 was not enacted but rather incorporated into and ratified as Section 8.20(a) of Senate Bill 352, the Appropriations Bill. A copy of Section 8.20(a) is enclosed for your review.
Senate Bill 352 amends Chapter 115C of the General Statutes by adding a new Article 31A consisting of sections 115C-457.1 through -457.3. N.C.G.S. § 115C-457.1 creates a Civil Penalty and Forfeiture Fund administered by the Office of State Budget and Management (OSBM).
N.C.G.S. § 115C-457.2 provides in pertinent part "[n]otwithstanding any other law, all funds which are civil penalties or civil forfeitures within the meaning of Article IX, Section 7 of the Constitution shall be deposited in the Civil Penalty and Forfeiture Fund." New N.C.G.S. § 115C
457.3 requires the funds deposited in the Civil Penalty and Forfeiture Fund to be transferred to the State School Technology Fund, administered by the Department of Public Instruction, and thereafter allocated to local school administrative units on the basis of average daily membership. These provisions were effective September 1, 1997.
In Craven County Board of Education v. Boyles et al., 343 N.C. 87, 468 S.E.2d 50 (1996), the North Carolina Supreme Court held that money paid in settlement of a environmental civil penalty were "civil penalties" within the scope and coverage of Article IX, Section 7. Therefore, it is clear that environmental civil penalties assessed against and collected from local school administrative units are "penalties" within the meaning of Article IX, Section 7. In reaching its decision in Craven County, the Court cited with approval its earlier statement in Cauble v. City of Asheville, 301 N.C. 340, 271 S.E.2d 258 (1980), concluding "it is neither ‘the label attached to the money’ nor ‘the [collection] method employed’ but ‘the nature of the offense committed’ that determines whether the payment constitutes a penalty [controlled by Article IX, Section 7]." 343 N.C. at 91. The Court also cited with approval its earlier decisions in State ex rel. Thornburg
v. 532 B Street, 334 N.C. 290, 432 S.E.2d 684 (1993) and Mussallam v. Mussallam, 321 N.C. 504, 364 S.E.2d 364 (1988) which recognized that penalties included within the scope and coverage of Article IX, Section 7 are those which are "punitive rather than remedial in nature and . . . intended to penalize the wrongdoer rather than compensate a particular party."
These judicial decisions defining civil penalties as punishment are significant in that they compel the common law principle prohibiting a wrongdoer from enriching himself as a result of his own misconduct be applied to the distribution of the civil penalties. Under this time-honored principle, it would offend public policy to have any portion of a civil penalty collected from a offending local school administrative unit returned to that unit. See Davenport v. Patrick, 227
N.C. 686, 44 S.E.2d 203 (1947) Therefore, we advise your Department to pay over to the State Controller for deposit in the General Fund the clear proceeds of all environmental civil penalties collected from local school administrative units prior to September 1, 1997. Environmental civil penalties collected by your Department from local school administrative units on or after September 1, 1997, should be deposited into the Civil Penalty and Forfeiture Fund and transferred by OSBM to the State School Technology Fund. However, consistent with the legal conclusions provided herein, the Department of Public Instruction will be advised of our opinion that proceeds from civil penalties or forfeitures collected from a local school administrative unit should not be allocated to the offending unit. Rather, these funds should be allocated to the remaining local school administrative units on the basis of their average daily membership.
I trust this advisory opinion has been responsive to your inquiry. I am taking the liberty of providing a copy of this advisory letter to the Office of State Budget and Management, the State Controller’s Office, the State Treasurer’s Office, the Department of Public Instruction and counsel for the N.C. School Boards Association.
W. Dale Talbert Special Deputy Attorney General