If a North Carolina county can't pay its share of Medicaid because the legislature suddenly raised the county percentage, can the county borrow money from the State Public Assistance Contingency Fund without holding a referendum?

Plain-English summary

After North Carolina increased counties' share of nonfederal Medicaid costs from 15 to 35 percent, several counties reported difficulty paying. The Department of Human Resources asked whether a county could borrow from the State Public Assistance Contingency Fund without voter approval, and whether the Constitution's two-thirds borrowing limit applied to debts incurred under other enumerated exceptions.

The 1980 Attorney General identified two possible routes to a loan without a county vote. First, Article V, Section 4(2)(f) permitted debt authorized by uniformly applicable general law within a limit tied to the prior year's reduction in outstanding debt. Second, Section 4(2)(e) permitted debt to meet an emergency immediately threatening public health or safety, if the Governor conclusively determined that emergency in writing.

The request did not contemplate a loan within subsection (f), so the AG assumed the counties at issue would not qualify under that route. Of the remaining listed exceptions, the opinion found only subsection (e) potentially applicable to the stated circumstances. It did not determine that a qualifying emergency existed; that required the Governor's written determination.

The AG separately concluded that subsection (f)'s two-thirds limit did not apply to debt authorized by subsections (a) through (e). It explained that (f) governed debt authorized by general laws enacted by the General Assembly, while the other exceptions were authorizations in the Constitution itself.

Currency note

This opinion was issued in 1980 under the constitutional and fund provisions it cites. Verify current North Carolina borrowing law before applying its analysis to a new loan.

What this means for you

County officials. Assess the subsection (f) route on its own terms. The AG assumed it did not fit the counties in the request, but did not eliminate it for other loans. The alternative subsection (e) route required a written Governor determination of a qualifying emergency.

State program staff. The opinion does not itself declare an emergency or approve a particular loan amount. It distinguishes the two paths and says an (e) loan is not constrained by (f)'s two-thirds calculation.

Common questions

Was a Governor emergency finding the only way to avoid a county vote?

No. The opinion's conclusion also permits a loan that complies with Article V, Section 4(2)(f). The AG assumed these counties did not qualify under that provision, so it analyzed the emergency path for their circumstances.

Did the AG say Medicaid costs automatically create a qualifying emergency?

No. Section 4(2)(e) required a written Governor determination that an emergency immediately threatened public health or safety.

Does the two-thirds cap apply to an emergency loan?

No, according to the opinion. It says subsection (f)'s limit applies to debt authorized by general law, not to debt authorized under the Constitution's other listed exceptions.

Background and statutory framework

Article V, Section 4(2) generally required voter approval for local faith-and-credit debt, with exceptions listed in subsections (a) through (f). The AG quoted subsection (e)'s Governor emergency procedure and subsection (f)'s generally applicable law and two-thirds debt-reduction formula. It read Article XIV, Section 3 to distinguish general laws enacted by the legislature from constitutional debt authorizations. The loan question concerned the State Public Assistance Contingency Fund in N.C.G.S. 108-54.1.

Citations

• Article V, Section 4(2)(e) of the North Carolina Constitution
• Article V, Section 4(2)(f) of the North Carolina Constitution
• Article XIV, Section 3 of the North Carolina Constitution
• N.C.G.S. 108-54.1

Source

• Landing page: https://ncdoj.gov/opinions/counties-constitutional-debt-limitation/

Original opinion text

Requested By: Dr. Sarah T. Morrow, Secretary Department of Human Resources

Questions: May a county, under the circumstances set forth in the opinion, procure a loan from the State Public Assistance Contingency Fund (N.C.G.S. 108-54.1) without securing approval on the qualified voters of the county, as provided in Article V, Section 4 of the North Carolina Constitution?

Is a debt incurred pursuant to Article V, Section 4(2)(a)-(e) subject to the two-thirds limitation imposed by Article V, Section 4(2)(f)?

Conclusions: A county may procure a loan under such circumstances: (a) if such loan will not violate the provisions of Article V, Section 4(2)(f); or (b) if the Governor determines the existence of an emergency under the provisions of Article V, Section 4(2)(e) of the Constitution.

No.

The letter requesting this opinion states that several counties are unable to pay the county share of Medicaid (Ch. 108, Art. 2, Part 5, N.C.G.S) because the 1978 Session of the North Carolina General Assembly increased the percentage that counties must pay from fifteen (15%) percent to thirty-five (35%) percent of the non-federal share. Inquiry is made whether, in view of the provisions of Article V, Section 4 of the North Carolina Constitution, loans can be made to such counties without such loans being approved by the qualified voters of the respective counties.

The provisions of Subsection (2) of Article V, Section 4 of the Constitution, which are particularly applicable here, read as follows:

"Authorized purposes; two-thirds limitation. The General Assembly shall have no power to authorize any county, city or town, special district, or other unit of local government to contract debts secured by a pledge of its faith and credit unless approved by a majority of the qualified voters of the unit who vote thereon, except for the following purposes:

a. to fund or refund a valid existing debt;
b. to supply an unforeseen deficiency in the revenue;
c. to borrow in anticipation of the collection of taxes due and payable within the current fiscal year to an amount not to exceed 50 per cent of such taxes;
d. to suppress riots or insurrections;
e. to meet emergencies immediately threatening the public health or safety, as conclusively determined in writing by the Governor;
f. for purposes authorized by general laws uniformly applicable throughout the State, to the extent of two-thirds of the amount by which the unit's outstanding indebtedness shall have been reduced during the next preceding fiscal year."

Since the inquiry, as made, does not contemplate a loan within the provisions of Article V, Section 4(2)(f) (which permits authorization of debt without voter approval if the local unit's indebtedness does not exceed two-thirds of the amount by which the unit's outstanding indebtedness was reduced during the next preceding fiscal year), it is assumed that the counties involved would not qualify under such provision. The question, then, is whether the loan could be made under one or more of the other five exceptions appearing in Section 4(2).

It is our opinion that Section 4(2)(e) is the only exception, if applicable, that meets the circumstances of the inquiry. Section 4(2)(e) is an exception designed "to meet emergencies immediately threatening the public health or safety, as conclusively determined in writing by the Governor."

A further inquiry is whether a loan made pursuant to any exception appearing in Section 4(2)(a)-(e) will be unconstitutional if it exceeds the limitation imposed by Section 4(2)(f). We conclude that the two-thirds limitation set forth in Section 4(2)(f) does not apply to a loan made pursuant to Section 4(2)(a)-(e). Section 4(2)(f) exempts from voter approval debt incurred "for purposes authorized by general laws uniformly applicable throughout the State" so long as such debt does not exceed the two-thirds limitation. As is clear from Article XIV, Section 3 of the Constitution, "general laws uniformly applicable" are laws enacted by the General Assembly, not constitutional provisions. Thus, Section 4(2)(f) applies to debts authorized by laws enacted by the General Assembly, and not to debts specifically authorized by the Constitution.

We conclude, therefore, that upon determination in writing by the Governor, in an appropriate situation, of an emergency immediately threatening the public health or safety, a loan may be made to a county or counties from the State Public Assistance Contingency Fund without approval by the voters of the county or counties and that such loan would not be subject to the two-thirds limitation imposed by Article V, Section 4(2)(f) of the Constitution.

Rufus L. Edmisten
Attorney General

Henry T. Rosser
Assistant Attorney General