Type II Transfers; Personnel and Budget Powers

Subject:

Requested By: Mr. Brent Lane Executive Director

N.C. Technological Development Authority

Question: Does the N.C. Technological Development Authority have the right to make decisions in regard to the staffing of positions and the hiring and firing of its employees independently of the Department of Commerce?

Conclusion: No. The Department of Commerce has the authority to manage and direct the staffing of positions and hiring and firing of the employees of all agencies transferred to the Department as "Type II" transfers including the N.C. Technological Development Authority notwithstanding the provisions of G.S. 143B-471.3A(2).

The N.C. Technological Development Authority (NCTDA) was created by legislation enacted in 1983 codified as G.S. 143B-471 et. seq. Relevant statutory provisions specifically relating to NCTDA are as follows:

The Authority shall be administratively located within the Department of Commerce, but shall exercise its powers independently of the head of that department, as if it had been transferred to the Department of Commerce by a Type II transfer as defined in G.S. 143A-6(b).

G.S. 143B-471.

In order to enable it to carry out the purposes of this Part, the Authority may:

. . .

(2) Employ an executive director, whose salary shall be set by the General Assembly in the Current Operations Appropriations Act. The Authority may employ such other professional staff and clerical and secretarial staff as it deems necessary within the funds available to it. The salaries of such other personnel shall be set under the State Personnel Act.

G.S. 143B-471.3A.

Standing alone, the above cited provisions could support an argument that the NCTDA is empowered to act independently of the Department of Commerce (Department) in regard to personnel matters. However, those provisions must be examined in the light of G.S. 143A-6(b) and (c) and the decisions of the Supreme Court relating to Type II transfers. G.S. 143A-6(b) and

(c)

read as follows:

(b)

Under this Chapter, a Type II transfer means the transferring intact of an existing agency, or part thereof, to a principal department established by this Chapter. When any agency, or part thereof, is transferred to a principal department under a Type II transfer, that agency, or part thereof, shall be administered under the direction and supervision of that principal department, but shall exercise all its prescribed statutory powers independently of the head of the principal department, except that under a Type II transfer the management functions of any transferred agency, or part thereof, shall be performed under the direction and supervision of the head of the principal department.

(c)

Whenever the term "management functions" is used it shall mean planning, organizing, staffing, directing, coordinating, reporting and budgeting.

The North Carolina Supreme Court has interpreted G.S. 143A-6(b) and (c) as granting the exclusive power to fire to the head of the principal department, Smith v. State, 298 N.C. 115, 257 S.E.2d 399 (1979). In Smith, the plaintiff claimed that because the State Board of Mental Health had been transferred by a Type II transfer to the Department of Human Resources, the Department of Human Resources lacked the capacity to fire him. Plaintiff maintained that the Department had only the power to supervise the State Board of Mental Health. The Supreme Court rejected that argument, stating that the power to direct and supervise gave the Department final authority over all management decisions.

When an agency is transferreed to a new department by a "type II transfer." G.S. 143A-6(b) provides that the management functions of the agency shall be performed not only under the "supervision" but also the "direction" of the head of the principal department. The word "direction" refers to the "act of governing; management; superintendence; a guiding or authoritative instruction." Black’s Law Dictionary (Rev. 4th ed. 1968). Clearly, the legislature intended for the head of the Department of Human Resources to have final authority over all management functions, not merely "supervisory" power. To hold that a transferred agency could exercise all of its former powers after the reorganization, subject only to some undefined supervision by the head of the new department, would treat the transfer as merely a change in name thus defeating the purpose of the Organization Act.

G.S. 143A-6(c) defines the term "management functions" to mean "planning, organizing, staffing, directing, coordinating, reporting and budgeting." Even if this definition was intended to be inclusive, an issue we need not now decide, the power to fire clearly falls within its scope since the Act expressly gives the head of the principal department power over "staffing."

298 N.C. at pp. 126, 127, 257 S.E.2d at pp. 405, 406.

The Court in Smith, supra, reviewed the report of the Committee on State Government Reorganization and made the following statement regarding the legislative intent of G.S. 143A6(b) and (c).

In providing for a "type II transfer," the legislature clearly intended to distinguish between the rule-making or policy functions of a transferred agency and its management function. Under the statutory scheme established by the Act, the former functions were to remain in control of the transferred agency while the latter were to become the sole province of the heads of the principal departments. . . . . With this distinction in mind it is clear that the power to fire a disobedient employee must be considered an aspect of management rather than an aspect of policy-making.

298 N.C. at p. 128, 257 S.E.2d at p. 406.

In an Attorney General’s opinion dated June 7, 1972 involving an analogous question between the Burial Commission and the Department of Commerce it was concluded that:

Once transfer of the Commissioner and Commission to the Department of Commerce has been accomplished, all administrative employees heretofore employed by either the Commissioner or Commission are subject to the supervision and direction of the Secretary of Commerce, including the power of the Secretary of Commerce to appoint, dismiss, or transfer administrative personnel within the offices included in the Department of Commerce.

41 N.C.A.G. 921

Seen in the context of the powers of a principal Department over agencies transferred as Type II transfers, the provisions of G.S. 143B-471 and G.S. 143B-473.3A can be seen as granting autonomy to NCTDA in all policy matters and also in regard to how to best use its employees in implementing those policies. However, the clear legislative intent of the Executive Reorganization Act of 1971 as found by the Supreme Court in the Smith decision supra, is that the principal Department is to have the authority to staff positions as well as the authority to hire and fire personnel within the Department. By the reference in G.S. 143B-471 to "Type II" transfers, the General Assembly incorporated the provisions of G.S. 143A-6 and G.S. 143A-9 which clearly place the authority for personnel decisions within the Department of Commerce.

LACY H. THORNBURG ATTORNEY GENERAL

Charles J. Murray Special Deputy Attorney General