Can North Carolina's Governor use an executive order to require financial disclosure and ethical-conduct compliance from people appointed to state boards by other Council of State officers?

Plain-English summary

Governor Jim Martin issued Executive Order No. 1 in January 1985, creating the Board of Ethics, setting ethical standards for gubernatorial appointees, and requiring Statements of Economic Interest. In October 1990 the Governor issued Executive Order No. 127, amending the original order to cover "all members of boards, commissions, and councils within the executive branch that exercise the sovereignty of the State and/or advise the heads of principal departments, irrespective of appointing authority." That phrase swept in appointees made by the other nine Council of State officers, who were independently elected and constitutionally separate from the Governor.

Seven Council of State members (Secretary of State Edmisten, State Auditor Renfrow, State Treasurer Boyles, Superintendent Etheridge, Commissioners Graham, Brooks, and Long) asked the Attorney General whether their appointees had to comply with the order. Special Deputy Attorney General Daniel F. McLawhorn concluded they did not.

The reasoning runs along two tracks.

Track 1: Executive power outside the Governor's removal authority. The Governor's authority to issue ethical rules for appointees rests on the implied power that comes with the power to remove them. The Governor can remove members of Cabinet boards (under N.C.G.S. § 143B-13) for misfeasance, malfeasance, or nonfeasance, and the ethics rules of Executive Order No. 1 are a reasonable way to make sure those grounds for removal can be detected. But the Governor cannot remove appointees of the other Council of State officers. The Constitution treats each Council of State office as an independently elected officer with its own appointment and removal powers. The AG cited the Tice v. Department of Transportation case, where the Court of Appeals refused the Attorney General a power that "could be abused by exercise in a manner effectively derogative of the Governor's constitutional duties." The same reasoning runs in reverse against the Governor: he cannot exercise authority that would derogate the constitutional duties of other Council of State officers.

The AG noted that the leading national case on this question, New York's Rapp v. Carey, reached the same conclusion: a governor's executive order on ethics could not reach appointees over whom the governor had no removal authority.

Track 2: Separation of powers and legislative power. Even if the Governor had general supervisory authority over the executive branch (which he does not, with respect to Council of State officers), an executive order that purports to bind people the Governor cannot remove is a "law of general application." Under Article I, Section 6 of the North Carolina Constitution, only the General Assembly can enact laws of general application. The AG marshaled the long line of NC cases (Bayard v. Singleton from 1787 forward) holding that the legislative power is vested in the General Assembly and the executive branch can only execute laws, not make them. Coca-Cola v. Coble (the Governor cannot decline to enforce a law he thinks is unconstitutional), States Rights Democratic Party (an agency that expands its regulatory reach is legislating, not regulating), and State ex rel Commissioner of Ins. v. NC Rate Bureau all support the conclusion that the Governor's October 1990 amendment was an unconstitutional act of legislation.

The opinion drew a careful line. The original Executive Order No. 1, applied to gubernatorial appointees only, was a valid exercise of the Governor's removal authority and his administration of § 143B-13. That part of the regime remained intact. What the AG struck down was the attempted extension to non-gubernatorial appointees.

Practical consequence in late 1990: the Secretary of State's appointees to boards under his department, the Treasurer's appointees, the Auditor's appointees, and so on, did not have to file Statements of Economic Interest with the Governor's Board of Ethics. Each Council of State officer was free to impose ethics rules on their own appointees, but the Governor could not impose them across the board.

Currency note

This opinion was issued in 1990. 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. North Carolina later enacted the State Government Ethics Act (Chapter 138A) by statute, which displaces much of what the 1990 executive order tried to do, and which the legislature has the power to enact (in contrast to the Governor). The constitutional structure of independent Council of State officers, and the principle that the Governor cannot reach across to other officers' appointees by executive order, has been reaffirmed in subsequent litigation including more recent separation-of-powers cases.

Background and statutory framework

The North Carolina Council of State is a constitutional artifact unique to the state. Article III creates ten statewide executive offices (Governor, Lieutenant Governor, Secretary of State, Auditor, Treasurer, Superintendent of Public Instruction, Attorney General, and Commissioners of Agriculture, Labor, and Insurance), each independently elected. They sit together as the Council of State, but each runs an independent department. The Lieutenant Governor is in the General Assembly's orbit as well, sitting as President of the Senate.

This independent-officer structure is not the federal model. The federal Cabinet consists of officers the President appoints and removes; the President has unified executive authority. The North Carolina Governor has unified authority only over the Cabinet (Chapter 143B), not over the Council of State agencies (Chapter 143A). Where federal courts apply the Humphrey's Executor doctrine to insulate certain independent agencies from presidential removal, North Carolina courts apply the Caldwell v. Wilson rule that the appointing authority is generally the removing authority, and the General Assembly can assign or reserve removal differently.

The 1985 Board of Ethics was the Governor's response to a perceived gap in ethics oversight. Statutory ethics rules at the time were thin. The Governor used his executive authority to fill the gap for his appointees. That use was uncontroversial because it stayed within the Governor's removal authority.

The October 1990 amendment expanded the reach into territory the Governor did not have constitutional authority over. The seven Council of State officers who asked for the opinion did not contest the wisdom of the ethics rules; they contested the authority. The AG validated their position.

The Rapp v. Carey decision from New York that the AG relied on is the leading case in the country on this issue. Rapp v. Carey is regularly cited in state-government law treatises for the proposition that a governor cannot use an executive order to impose ethical regulations on officers outside the governor's removal authority. The AG's opinion is in the mainstream of that doctrine.

The opinion did not address whether the General Assembly could enact a statute imposing the same ethics requirements on all executive branch appointees. The answer to that question was yes, and the General Assembly later did so through Chapter 138A.

Common questions

Could the Governor still apply Executive Order No. 1 to his own appointees?

Yes. The opinion left intact the original Executive Order No. 1 as applied to gubernatorial appointees. The unconstitutional part was the extension to non-gubernatorial appointees.

Could the Lieutenant Governor's appointees be reached by the executive order?

The Lieutenant Governor is a Council of State officer with appointment powers of his own, and his appointees were not subject to gubernatorial removal. The same reasoning that exempted the seven complaining officers' appointees applied to the Lieutenant Governor's.

What about Cabinet appointees the Governor appointed but did not directly removable?

The Governor's removal authority under § 143B-13 reached members of Cabinet boards and commissions for misfeasance, malfeasance, or nonfeasance. That removal authority supported the Governor's ethics oversight for those appointees, even where day-to-day supervision sat with a Cabinet secretary.

Did this opinion mean the seven Council of State officers had no ethics obligations?

No. Each officer had statutory authority to set ethics rules for their own appointees, and many did. The opinion was about who could impose what on whom by executive order, not whether ethics rules should exist.

What did the General Assembly do in response?

The legislative response over the following years included statutory ethics reform that eventually produced Chapter 138A's State Government Ethics Act, applicable to executive-branch officials and appointees by statute. The legislature had the authority to do what the Governor could not.

Citations

• N.C. Constitution, Articles I, III, IV
• N.C.G.S. Chapter 143A (Executive Act of 1971)
• N.C.G.S. Chapter 143B (Executive Organization Act of 1973)
• N.C.G.S. Chapter 147 (State Officers)
• Executive Orders Nos. 1, 127, and 128
• Martin v. Thornburg, 320 N.C. 533 (1987)
• Tice v. Department of Transportation, 67 N.C. App. 48 (1984)
• Rapp v. Carey, 44 N.Y.2d 157 (1978)
• State ex rel Martin v. Melott, 320 N.C. 510 (1987)
• N.C. State Bar v. Frazier, 62 N.C. App. 172 (1983)
• Caldwell v. Wilson, 121 N.C. 425 (1897)
• James v. Hunt, 43 N.C. App. 109 (1979)
• Humphrey's Executor v. United States, 295 U.S. 602 (1935)
• State ex rel Wallace v. Bone, 304 N.C. 591 (1982)
• Bayard v. Singleton, 1 N.C. 5 (1787)
• Coca-Cola v. Coble, 293 N.C. 565 (1977)

Source

• Landing page: https://ncdoj.gov/opinions/the-governor-executive-orders-rulemaking-power-separation-of-powers/

Original opinion text

Requested By: Rufus L. Edmisten, Secretary of State; Edward Renfrow, State Auditor; Harlan E. Boyles, State Treasurer; Bob R. Etheridge, Superintendent of Public Instruction; James A. Graham, Commissioner of Agriculture; John C. Brooks, Commissioner of Labor and James E. Long, Commissioner of Insurance

Question: Are Council of State appointees to boards and commissions that either exercise a portion of the sovereign power of the State or are advisory only required to comply with the terms of Executive Order No. 1?

Conclusion: No. Executive Order No. 1, through the amendment in Executive Order No. 127, became a law of general application. The Governor has usurped executive power allocated to other constitutionally established general civil executive offices of the State. Additionally, by its promulgation, the Governor has attempted to enact a statute and violated the Separation of Powers Clause of the Constitution of North Carolina.

The issue is whether under the State Constitution the Governor may mandate the filing of financial disclosure statements by and prescribe rules of ethical conduct for members of boards, commissions and councils appointed by other constitutionally established officers. Not at issue is the wisdom of imposing such standards on all appointees to public boards and commissions.

Executive Order No. 1, issued on January 31, 1985, established the Board of Ethics, set ethical standards for all gubernatorial appointees, and required the Governor's appointees to file Statements of Economic Interest. The Board of Ethics, inter alia, provides advice to the Governor on ethical issues and conflicts of interest. It also recommends to the Governor or other elected appointing authority remedial action when investigations reveal ethical problems or violations of Executive Order No. 1. The question presented was addressed to the Attorney General by seven other members of the Council of State. They asked whether the Governor exceeded his powers when he amended Executive Order No. 1 to include persons appointed to office by other members of the Council of State.

The Governor issued the questioned amendment to Executive Order No. 1 on October 29, 1990. The amendment, Executive Order No. 127, enlarges the scope of Executive Order No. 1 from members of boards, commissions and councils appointed by the Governor to "all members of boards, commissions, and councils within the executive branch that exercise the sovereignty of the State and/or advise the heads of principal departments, irrespective of appointing authority."

n1 Under the General Statutes, the term "Principal departments" includes all state agencies, without regard to independence from the Governor under the Constitution. G.S. 143A-11 and G.S. 143B-6.

n2 Executive Order No. 128, issued on November 1, 1990, extended the time for compliance with Executive Order No. 127 until ninety days after November 1, 1990. During the intervening period, affected appointees may continue to execute the duties of their office.

(1) Executive Authority Incidental to Removal Power

The executive branch of government for the State of North Carolina is established in Article III of the Constitution of North Carolina. It consists of three primary components: (1) the Governor, (2) and the nine other constitutionally created statewide officers (3) which, as a body, compose the Council of State. The division of responsibility and executive power within the executive branch is reflected in the three chapters of the General Statutes which more fully define the scope of these constitutionally created offices; Chapter 143A, the Executive Act of 1971; Chapter 143B, the Executive Organization Act of 1973; and Chapter 147, State Officers. In common parlance, the agencies in Chapter 143A are the Council of State agencies and the agencies in Chapter 143B are the Cabinet agencies.

n3 G.S. 147-4; Martin v. Thornburg, 320 N.C. 533, 359 S.E. 2d 472 (1987).

n4 The Lieutenant Governor, the Secretary of State, the Auditor, the Treasurer, the Superintendent of Public Instruction, the Attorney General, the Commissioner of Agriculture, the Commissioner of Labor, and the Commission of Insurance.

n5 The ten offices created in Article III of the Constitution of North Carolina are the members of the Council of State. Article III, Sec. 8.

The Constitution and statutes generally vest the executive power of the State in the Governor. Article III, Sec. 1; G.S. 147-12; G.S. 143A-4; G.S. 143B-4. The cited provisions contain broad declarations regarding the executive power of the Governor. The courts of this State have considered these sweeping statements vis-a-vis the other constitutionally established general civil executive offices of the State. The Constitution has been interpreted and applied to preserve the independence of those offices from the Governor's exercise of his executive power. In fact, the courts have recognized a potential for conflict between the offices. Martin v. Thornburg, supra, ftn. 3; Tice v. Department of Transportation, 67 N.C. App. 48, 312 S.E. 2d 241 (1984).

In Tice, the court refused a power to the Attorney General which "could be abused by exercise in a manner effectively derogative of the Governor's constitutional duties to exercise executive power and to supervise the official conduct of all executive officers" in agencies or departments under the supervision of the Governor. Ibid, 67 N.C. App at 55. The principles of law which determined the result of Tice require the same answer to the question here presented. The Governor exceeded his authority and usurped executive power vested in other members of the Council of State. Moreover, Executive Order No. 1, as amended on October 29, 1990, violates the Separation of Powers clause of the Constitution of North Carolina. Article I, Sec. 6. As an order applicable to persons other than those subject to removal by the Governor, it is a law of general application. Thus, it unconstitutionally invades the province of the General Assembly. Accord, Rapp v. Carey, 44 N.Y. 2d 157, 404 N.Y.S. 2d 565, 375 N.E. 2d 745 (1978).

n6 This New York case involved the same legal issues presented herein. It is the leading case in the country on the Governor's power to issue executive orders controlling appointees by other constitutionally established offices.

Executive Order No. 1, before it was amended, had as its primary purpose the discharge by the Governor of his duty to prevent misfeasance and malfeasance by his appointees. It is clear that the power to appoint other members of the executive branch is not exclusively vested in the Governor by the Constitution. State ex rel Martin v. Melott, 320 N.C. 510, 359 S.E. 2d 783 (1987); Cunningham v. Sprinkle, 124 N.C. 638, 33 S.E. 138 (1899). The General Assembly may reserve the power of appointment to itself, or delegate it to another whether within the executive branch or the judicial branch. Martin v. Melott, supra; State ex rel Salisbury v. Croom, 167 N.C. 223, 83 S.E. 354 (1914). The Court of Appeals held in N.C. State Bar v. Frazier, 62 N.C. App. 172, 302 S.E. 2d 648, rev. den., 308 N.C. 677, 383 S.E. 2d 546 (1983), that a legislative act conferring separate appointment powers to an administrative agency on the Governor, the Lieutenant Governor and the Speaker did not violate the separation of powers principle. Such holding is consistent with the general rule of law enunciated by the Supreme Court in 1944: "The distribution of the power of government in any state is a political privilege. Where the written Constitution does not otherwise direct, the Legislature may distribute these powers and functions as it may deem proper for the best interests of the public. . ." Belk's Dept. Store, Inc. v. Guilford Co., 222 N.C. 441, 448, 23 S.E. 2d 897 (1943).

G.S. 147-12(3) vests in the Governor the power to make appointments not otherwise provided for in all departments. A further comparison of Chapters 143A and 143B removes any doubt as to the several sources of power to appoint members of boards and commissions. The Governor appoints the heads of Cabinet agencies. G.S. 143A-9. Within the Council of State agencies, the general power of appointment is reposed in the Constitutional officer heading the agency. The heads of both Council of State and Cabinet principal departments are authorized to create and appoint committees or councils to consult with and advise their departments. See, G.S. 147-16.2 and G.S. 143B-10(d), respectively.

The Constitution does not address removal of appointed officers. As a general principle, the power to remove an appointed official is vested in the appointing authority. However, as with the power of appointment, the Legislature may assign the power of removal or reserve it to itself: ". . . the power of appointment includes by implication that of removal, the application of which is necessarily limited by Constitutional or statutory provisions." Caldwell v. Wilson, 121 N.C. 425, 467, 28 S.E. 554 (1897). The Governor, by statute, has the power to remove any members of a board or commission, created by or under the authority of the Executive Organization Act of 1973 (which deals with Cabinet departments, the heads of which are appointed by the Governor) for misfeasance, malfeasance, and nonfeasance. G.S. 143B-13(d); -16.

The Caldwell case involved an issue similar to the question presented. The Legislature appointed Railroad Commissioners but gave the Governor the power to suspend commission members pending a final decision on removal by the General Assembly. The Supreme Court found that division of powers to be lawful:

It comes rather under the generally recognized rule that, in the absence of any constitutional restriction expressed or necessarily implied on the power of the Legislature, it may provide by statute for the suspension of a public officer by some other officer or board. (Emphasis in original). Caldwell v. Wilson, supra, 121 N.C. at 467.

In a 1979 opinion, the Court of Appeals reviewed the power of the Governor to remove an individual appointed by the Governor to the North Carolina Cemetery Commission. James v. Hunt, 43 N.C. App. 109, 258 S.E. 2d 481 (1979), cert. denied, 299 N.C. 121, 262 S.E. 2d 6 (1979). The matter arose when the member refused the Governor's request that he resign because his "legal representation of thirteen cemeteries and Cemetery Funds of North Carolina, Inc. erodes the public's confidence in the ability of the Cemetery Commission to represent the people in matters which the Commission considers." Ibid, 43 N.C. App. at 110. The Governor then issued an order which enumerated seven reasons for his removal and suspended the member from the Commission pending final determination of his removal from the Commission.

Chief Judge Naomi Morris authored the opinion which affirmed that the Cemetery Commission, in the discharge of its power and duty to adopt rules, "must act with entire impartiality." Ibid, 43 N.C. App. at 117. The Court also held that removal by the Governor must be for cause. Otherwise, the power of removal could have a coercive influence that threatened the independence of commissions. The Court quoted extensively from a United States Supreme Court opinion regarding the independence of commissions, entities "not only wholly disconnected from the executive department, but which, as already fully appears, (were) created by Congress as a means of carrying into operation legislative and judicial powers, and as an agency of the legislative and judicial departments." Humphrey's Executor v. United States, 295 U.S. 602, at 630, 79 L.Ed. 1611, at 1620, 55 S.Ct. 869, at 875 (1935). The General Statutes contain a similar, general limitation on the Governor in G.S. 143B-14(b):

Except as otherwise provided in the Executive Organization Act of 1973, in G.S. 120-30.28 [now repealed], or in G.S. 150B-11(3), the powers, duties, and functions of a commission (including but not limited to rule making, regulation, licensing, and promulgation of rules, rates, regulations, and standards, and the rendering of findings, orders, and adjudications) shall not be subject to the approval, review, or control of the head of the department or of the Governor.

The Governor issued Executive Order No. 1 and established the Board of Ethics consistent with his duty to administer G.S. 143B-13. See, State v. Frinks, 284 N.C. 472, 201 S.E. 2d 858 (1974). The requirement for filing statements of Economic Interest, the promulgation of ethical standards, and review by the Board of Ethics of ethical complaints are consistent with the Governor's duty to guard against misfeasance and malfeasance by members of the executive department that he is authorized to remove. See, Rapp v. Carey, supra; Ill. State Employees Assoc. v. Walker, 57 Ill. 2d 512, 315 N.E. 2d 9, cert., den., 419 U.S. 1058, 42 L.Ed. 2d 656, 95 S.Ct. 642 (1974); Kenny v. Byrne, 164 N.J. Supp. 243, 365 A. 2d 211, aff'd., 75 N.J. 458, 783 A. 2d 428 (1976). In each of these cases, the Governor had limited the Executive Order's application to persons appointed by and subject to removal by the Governor. This Office finds the cited authorities compel the conclusion that the Governor, by Executive Order, cannot establish ethical standards and financial disclosure requirements for persons subject to appointment or removal by other Constitutional officers or entities. That power, absent Legislative authority to the contrary, is vested exclusively in those other Constitutional officers.

n7 When a duty is imposed upon a public agency, there arises an implication that adequate power is bestowed upon the agency to perform the duty in accord with the Federal and State Constitutions. See also, General Motors Corp. v. Kinlaw, 78 N.C. App. 521, 338 S.E. 2d 114 (1985).

(2) Separation of Powers

Our Supreme Court has issued numerous opinions which shape and define Article I, Section 6 of the Constitution of North Carolina, the Separation of Powers Clause. A similar clause has always been included in each of the successively adopted State Constitutions. State ex rel Wallace v. Bone, 304 N.C. 591, 286 S.E. 2d 79 (1982). The principle of separation of powers is the cornerstone of the state government. Ibid; Bayard v. Singleton, 1 N.C. 5 (1787). "The right to make laws is vested in the General Assembly. The right to decide what the law is and what it was is vested in the Supreme Court." Houston v. Bogle, 32 N.C. 496, at 503 (1849). The executive branch has the right to administer or execute the laws. Wallace v. Bone, supra. "The legislative authority is the authority to make or enact laws; that is, the authority to establish rules and regulations governing the conduct of the people, their rights, duties and procedures, and to prescribe the consequences of certain activities." State ex rel Lanier v. Vines, 274 N.C. 486, 164 S.E. 2d 161 (1968).

An executive branch agency may only promulgate standards governing the conduct of the people when the Legislature has lawfully conferred on that agency the power to promulgate standards. If the agency exceeds the conferred power, its act is unlawful. State ex rel Utilities Commission v. General Telephone Co. of Southeast, 281 N.C. 318, 189 S.E. 2d 705 (1972). The Legislature must first declare the policy of the State, establish a framework of the law, and denominate the framework of the law to be followed before an executive branch agency may promulgate rules to be followed under the law. In re Nowell, 293 N.C. 235, 237 S.E. 2d 246 (1977). The Governor has no more authority to determine the policy of the State through the enactment of laws in the guise of executive orders than he, or any other executive agency has the power to refuse to comply with a law he determines to be unconstitutional. Coca-Cola v. Coble, Sec. of Revenue, 293 N.C. 565, 238 S.E. 2d 780 (1977); Bickett v. State Tax Commission, 177 N.C. 433, 99 S.E. 415 (1919). When an executive agency expands upon the statutory requirements for qualification or expands those persons regulated by the agency through a rule or regulation it is "legislating rather than regulating." States Rights Democratic Party v. State Board of Elections, 229 N.C. 179, at 187, 49 S.E. 2d 779 (1948); Utilities Comm'n v. Telephone Co., supra; State ex rel Commissioner of Ins. v. North Carolina Rate Bureau, 300 N.C. 381, 269 S.E. 2d 547, rehearing denied 301 N.C. 107, 273 S.E. 2d 300 (1980).

The same principles limit the Governor in the use of his authority to issue executive orders. Executive Order No. 127 violates both principles. It purports to alter the minimum qualifications of non-gubernatorial appointees for service on boards, commissions and councils; and it purports to extend the power of the Governor to protect against misfeasance and malfeasance by appointed officials to persons the Governor cannot remove from office.

n8 G.S. 143B-13(a) sets the general standards for appointment to boards, commissions and councils. It is limited to Cabinet agencies.

The Governor has ample power over his own appointees to promulgate ethical standards. Assuming, without deciding, that Executive Order No. 1 is exempt from the definition of "rule" as a statement of internal management under G.S. 150B-2(8a)a., the appointees of the Governor and others within G.S. 143B agencies that he has the power to remove are lawfully required to comply with Executive Order No. 1 and the "rules" of the Board of Ethics. The Governor exceeded his constitutional and statutory powers to the extent Executive Order No. 127 requires compliance with Executive Order No. 1 by appointees to boards, commissions and councils who are neither appointed by nor removed by the Governor.

LACY H. THORNBURG, Attorney General