Public schools owed $750M by state bring lawsuit

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DURHAM, N.C. (AP) — North Carolina school board leaders sued again Wednesday to receive more than $700 million in civil penalties that a court ruled 10 years ago was owed to districts because state agencies for years failed to pass them along.

The North Carolina School Boards Association and 20 individual school boards filed a lawsuit reviving a legal battle over fees collected by agencies for late tax payments, overweight vehicles and other items.

The state constitution requires certain fines and forfeitures go to public schools, but between 1996 and mid-2005 seven state agencies failed to pass the money along, according to court decisions.

School boards sued in 1998, and the state Supreme Court in 2005 agreed that state agencies were violating the constitution. A trial judge in 2008 determined districts should receive nearly $750 million from the penalty proceeds. But Superior Court Judge Howard Manning stopped short of ordering the legislature to pay up, saying that was beyond the scope of his judicial power.

A decade later, almost all the state agencies have yet to pay. With just a week before the 2008 court decision expires, the association and board leaders filed a new lawsuit to revive it.

"The plaintiffs did not want to file this lawsuit," school boards association attorney Rod Malone said at a Durham school announcing the action filed in Wake County Superior Court. "But after 10 years of unsuccessful attempts to collect on the judgment, or to reach an amicable settlement on the matter, the plaintiffs had no choice."

So far, the University of North Carolina system is the only state agency that had paid part of what it owes — $18 million of $42 million total, Malone told reporters. The other agencies— such as the Department of Revenue and Department of Transportation — have yet to pay anything at all, Malone said. The lawsuit seeks the remaining $730 million.

Ultimately the legislature, which approves state spending, would have to act and allocate funds.

Leanne Winner, a longtime school boards association lobbyist, said the economic climate at the time of Manning's judgment explains partly why the issue still hasn't been resolved. The Great Recession led to multibillion-dollar shortfalls for the state beginning in 2009, when Democrats led the General Assembly. Today, Republicans are in charge.

"When the judgment came down we went straight into a significant recession," Winner told reporters at George Watts Montessori Magnet School. "We knew at that point it was going to be very difficult to release those funds at that time."

Winner said schools were willing to be patient at that time and worked to seek new sources of revenue to help pay the settlement. The association proposed legislation in 2009 that would create new state traffic fines to raise the funds for the unpaid penalties, but it never passed the General Assembly.

Winner said the association sent letters in March to Attorney General Josh Stein, House Speaker Tim Moore and Senate leader Phil Berger seeking to discuss settlement ideas, but those leaders never responded to them. Stein is listed as a defendant in Wednesday's complaint.

Rep. Craig Horn, a Union County Republican and co-chairman of the House education budget-writing committee, said he thinks the legislature and the school boards can work out a deal.

"I do believe we can reach a reasonable settlement ... to address this satisfactorily," Horn wrote in a text. "I shall certainly try."


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