Does NCSU's TACIT program, which sells consulting services to North Carolina local governments to help them select computer systems, violate the Umstead Act's prohibition on state agencies competing with private business?

Plain-English summary

In 1986 county and municipal governments across North Carolina were starting to computerize their operations. NCSU's Center for Urban Affairs and Community Services had set up TACIT, a program that contracted with local governments to train their employees in identifying computing needs, evaluating vendor proposals, and selecting appropriate systems. TACIT acted as a neutral consultant, not selling or recommending particular vendors but teaching local employees how to evaluate the options themselves.

The Register of Deeds in Cumberland County, whose office had contracted with TACIT, asked the AG whether this competed with private IT consultants in violation of the Umstead Act (G.S. § 66-58).

Assistant Attorney General Laura E. Crumpler concluded no.

The Umstead Act embodies the principle that "it is not the function of government to engage in private business" (In re University of North Carolina, 300 N.C. 563 (1980)). Specifically, the statute makes it unlawful for state agencies to "engage directly or indirectly in the sale of goods, wares or merchandise in competition with citizens of the State," or to "maintain service establishments for the rendering of services to the public ordinarily and customarily rendered by private enterprise."

The AG ran the TACIT facts against the statute. TACIT was not selling goods or merchandise (it sold consulting services only). The only colorable Umstead Act problem was the service-to-the-public prohibition. And on that the AG concluded TACIT was outside the statute for two reasons:

1. TACIT serves local governments, not "the public." The statute prohibits services "to the public." Interagency assistance, services from one government unit to another, is structurally different from public-facing commercial activity. The AG read the statute's language narrowly to address only public-facing services.

2. Education is the University's "business." The Umstead Act has a long line of exceptions and a recognized framework for activities that are themselves legitimate government functions. The NC Constitution (Article IX, §§ 8 and 9) and Chapter 116 establish that education is what the University of North Carolina exists to do. TACIT was an educational program (training local government employees in computer system selection). It fit the University's core function, not a side commercial venture.

The opinion connects to a broader interpretive framework for Umstead Act questions. The Supreme Court in In re University of North Carolina had explained that the Act was aimed at activities "not incidental to the legitimate function of the agency involved." Activities tied to the agency's core mission were not within the Act's prohibition. Here, NCSU's mission included extension and training services to local communities; TACIT was part of that extension function.

Currency note

This opinion was issued in 1986. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The Umstead Act remains in G.S. § 66-58 and the basic framework is intact. The University of North Carolina system continues to provide extension and consulting services to North Carolina local governments through the UNC School of Government, the UNC Institute of Government, and similar entities. The Center for Urban Affairs and Community Services has been folded into other NCSU outreach structures. Modern Umstead Act analysis follows the same template: identify the activity, ask whether it serves the public or other government agencies, and ask whether it is incidental to the agency's legitimate function.

Background and statutory framework

The Umstead Act was enacted in the 1930s, named after later-Governor and U.S. Senator William B. Umstead, to address concerns that state agencies were creeping into commercial activities that competed with private businesses. The Act's history includes a long list of legislative exceptions: state-printed publications, fairgrounds operations, university bookstores, and others. Each exception reflects a legislative judgment that a particular activity was either a legitimate government function or politically necessary despite some competition with private business.

The Act's interpretation by courts and the AG has settled into a two-step framework:

1. Is the activity public-facing (services to the general public) or government-facing (services to other agencies)?
2. If public-facing, is the activity itself a legitimate function of the agency, or is it a sideline?

Pure government-to-government services (interagency assistance, intergovernmental cooperatives, training programs) generally fall outside the Act's prohibition. Public-facing services that are not core to the agency's mission generally fall inside the prohibition. The middle ground (public-facing activities that are core to the agency's mission, like UNC student services) generally fall outside the prohibition because the legitimate function exception swallows them.

NCSU's extension function is constitutionally rooted. As a land-grant university, NCSU has a federal extension mission (the Cooperative Extension Service in agriculture and home economics) and a broader state extension mission to its constituent communities. TACIT fit comfortably within that mission framework.

Common questions

Could a state agency directly compete with private business if its activity was technically "legitimate"?

The framework leaves room for some competition. A university bookstore competes with private bookstores. A state-run printing operation competes with private printers. The general rule is that even when there is competition, the activity is OK if it is genuinely incidental to or part of the agency's core function. The Act targets activities that go beyond the agency's mission, not all activities that happen to overlap with private business.

Did the Cumberland County Register of Deeds have to use TACIT, or could it have hired a private consultant?

Counties remain free to hire private IT consultants. TACIT was one option, not a state-imposed monopoly. The Register's question was whether the option was lawful, not whether it was required.

What about competing private consultants who wanted the local-government business?

The opinion concluded that TACIT did not violate the Umstead Act, so private consultants did not have a legal claim under that statute. They could compete on price and quality, and many private consultants did and do serve this market. Whether the legislature should restrict state competition with private consulting is a policy question, not a legal one under existing law.

What if NCSU expanded TACIT to serve private businesses?

That would push the analysis. Services to private businesses are public-facing; the local-government exception in the AG's analysis would not apply. The question would then become whether the service to private businesses was itself a legitimate university function. Education and research services to industry could qualify (the University has long had industrial-extension programs), but pure commercial consulting to private business might not.

Source

• Landing page: https://ncdoj.gov/opinions/state-agencies-government-in-business-act-interagency-assistance/

Citations

• N.C.G.S. § 66-58 (Umstead Act)
• N.C. Const. art. IX, §§ 8-9
• N.C.G.S. § 116-1, § 116-11
• In re University of North Carolina, 300 N.C. 563, 268 S.E.2d 472 (1980)
• Mullen v. Town of Louisburg, 225 N.C. 53, 33 S.E.2d 484 (1945)
• Stevenson v. City of Durham, 281 N.C. 300, 188 S.E.2d 281 (1972)
• In re Hardy, 294 N.C. 90, 240 S.E.2d 367 (1978)

Original opinion text

Requested By:

George E. Tatum, Register of Deeds Cumberland County

Question:

Does the TACIT program, offered by North Carolina State University's Department of Urban Affairs to units of local government to educate employees with respect to selecting appropriate computer equipment, violate the provisions of N.C.G.S. § 66-58?

Conclusion:

No.

The Center for Urban Affairs and Community Services was created in 1966 by North Carolina State University to provide instruction, research and other educational services to federal, state and local government agencies and organizations. As a part of its role to educate and assist local government agencies, and in response to a growing need on the part of local government for assistance in determining the nature and types of computer systems needed, the Center established TACIT, a program designed to educate local government agencies with respect to identifying their needs and selecting appropriate computer and information processing systems. TACIT acts as a neutral consultant to train local government employees to evaluate the various systems available, to prepare requests for proposals, to make appropriate selections, and subsequently to do follow-up evaluations of their selections. TACIT does not make decisions for the agencies involved; its purpose is to educate the employees to make their own decisions with regard to selection of a system.

You have written, as Register of Deeds in a county which has contracted with TACIT for its services, and have asked whether the TACIT program violates the provisions of N.C.G.S. § 66-58.

N.C.G.S. § 66-58, commonly referred to as the "Umstead Act" has been described by the North Carolina Supreme Court as embodying the principle that "it is not the function of government to engage in private business." In Re University of North Carolina, 300 N.C. 563, 577, 268 S.E.2d 472, 480 (1980). The statute, in pertinent part, provides as follows:

Except as may be provided in this section, it shall be unlawful for any unit, department or agency of the State government, or any division or subdivision of any such unit, department or agency, or any individual employee or employees of any such unit, department or agency in his, or her, or their capacity as employee or employees thereof, to engage directly or indirectly in the sale of goods, wares or merchandise in competition with citizens of the State, . . . or to maintain service establishments for the rendering of services to the public ordinarily and customarily rendered by private enterprise, . . . or to purchase for or sell to any person, firm or corporation any article of merchandise in competition with private enterprise.

At the outset, we note that TACIT does not purport to "engage directly or indirectly in the sale of goods, wares or merchandise" nor to "purchase for or sell to any person, firm or corporation any article of merchandise." cf. Mullen v. Town of Louisburg, 225 N.C. 53, 33 S.E.2d 484 (1945) (purchase of electricity not purchase of "apparatus," "materials" or "equipment" since latter terms connote types of tangible personal property). Thus, TACIT violates the statute, if at all, only if it renders "services to the public ordinarily and customarily rendered by private enterprise." N.C.G.S. § 66-58.

The guiding principle in construing the language of a statute is that "the intent of the legislature controls the interpretation" of the statute. Stevenson v. City of Durham, 281 N.C. 300, 303, 188 S.E.2d 281, 283 (1972); In Re Hardy, 294 N.C. 90, 240 S.E.2d 367 (1978). In order to ascertain the will of the legislature, due consideration must be given to "the language of the statute, the spirit of the act, and what the act seeks to accomplish." Stevenson v. City of Durham, 281 N.C. at 303, 188 S.E.2d at 283. Applying these well-established principles of statutory construction, we conclude that the program as set up by the Center for Urban Affairs does not come within the language or the spirit of the Umstead Act's prohibitions. TACIT provides to units of local government the education and training necessary to permit employees to make intelligent decisions concerning their needs for and selection of computer systems. The program is designed to help local governments improve management and increase productivity. The Umstead Act, by its language, prohibits the extension of services to the public; it does not forbid the rendering of services to other units or agencies of government. Furthermore, a careful reading of the statute and its numerous exceptions reveals that the Act is intended to proscribe those activities of government which are not incidental to the legitimate function of the agency involved, but rather intrude upon those areas which have traditionally been associated with private enterprise. See In Re University of North Carolina, 300 N.C. 563, 268 S.E.2d 472. Under the Constitution, Article IX, §§ 8 and 9, and the statutes, N.C.G.S. §§ 116-1 and 11, education is in fact the "business" of the University of North Carolina and its constituent institutions. Where, as here, the activities involved are, in fact, themselves legitimate functions of the governmental agency, the Act has no application.

In conclusion, on the facts as presented, TACIT's extension of consulting and educational services to units of local government constitutes a valid exercise of a governmental function and does not violate the provisions of the Umstead Act.

LACY H. THORNBURG
ATTORNEY GENERAL

Laura E. Crumpler
Assistant Attorney General