If the State sends more money to a NC county's area mental-health, developmental-disabilities, and substance-abuse authority mid-year, or if the authority collects more fees than it budgeted, can the county trim its own contribution by the same amount?
Plain-English summary
C. Robin Britt, Sr., Secretary of the Department of Human Resources, asked the AG two questions on behalf of the Division of Mental Health, Developmental Disabilities and Substance Abuse Services. First, can a county mid-year reduce its contribution to an area mental-health, developmental-disabilities, and substance-abuse authority when the area authority gets extra money from the State. Second, can a county reduce its local tax revenue commitment when the authority's fee collections exceed budgeted receipts. Senior Deputy AG Ann Reed and Assistant AG Jane L. Oliver took the second question first because it had a clear statutory answer, then walked through the first one using construction principles.
On fee collections: G.S. § 122C-146 has an express rule. The statute requires area authorities to prepare fee schedules and to make every reasonable effort to collect reimbursement for services from individuals able to pay, including insurance and third-party payment. Then it explicitly provides that "[t]he collection of [such] fees by an area authority may not be used as a justification for reduction or replacement of the budgeted commitment of local tax revenue." That answers the second question outright. A county cannot trim its local tax commitment because the authority collected more in fees than it expected.
On extra state funds: Chapter 122C is not as explicit. There is no parallel "state funds may not be used as a justification" clause. So the AG resorted to construction. The avowed policy of the State, set out in G.S. § 122C-2, is to assist individuals with mental illness, developmental disabilities, and substance-abuse problems consistent with their dignity, rights, and responsibilities, and the legislature has obligated the State and local governments to work together to develop and maintain a public system for those services. G.S. § 122C-2 specifically says the system "requires the cooperation and financial assistance of counties, the State, and the federal government." Given that structural commitment, the AG could not read Chapter 122C as allowing counties to step back whenever the State stepped up. To read it that way would mean services stayed flat despite increased state appropriations. If the General Assembly had intended to give counties that off-ramp, it would have said so.
The AG reinforced that reading with G.S. § 122C-147(a), which requires area authorities to remit any unspent State and federal funds back to the Department within 60 days of certified audit. That remit-the-surplus rule shows the legislature did not view increased state funding as a free substitute for the county's contribution. Surplus state money goes back, not into a county-relief account.
The legal frame the AG used was familiar: legislative intent inferred from the nature and purpose of the statute and the consequences of various readings (Alberti); avoid absurd results (N.C. Commissioner of Insurance v. Rate Bureau); avoid constructions that undermine the statute's objective (Electric Supply Co. v. Swain Electrical Co.); give effect to every part of the statute (Hall v. Simmons). All four canons pointed the same direction.
Bottom line: state funds and unbudgeted fee collections are additive to the county's contribution, not substitutes for it.
Currency note
This opinion was issued in 1993. 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.
Chapter 122C has been heavily restructured since 1993, including the major statewide mental-health reform in the early 2000s that replaced the area-authority model with managed-care entities (LME/MCOs and successor structures), as well as more recent reorganizations. The substantive maintenance-of-effort principle the 1993 opinion identified is still recognizable in current practice, but the specific statutory cross-references and the names of the responsible local entities have changed. Anyone with a present question about NC county contributions to area authorities should consult the current version of Chapter 122C, current DHHS guidance, and counsel familiar with NC mental-health and local-government finance law.
Common questions
Q: What is an "area authority" in this context?
A: At the time of the opinion, an area authority was the local governmental body that administered mental-health, developmental-disabilities, and substance-abuse services for one or more NC counties. It received funding from the State, the federal government, the participating counties, and from fees collected from clients and third-party payers. The structure has changed since the early-2000s mental-health reform, but the core concept of layered State/county funding remains.
Q: Why does it matter whether counties can reduce their contribution mid-year?
A: Because area-authority service levels are budgeted up front, and they depend on the predictability of the funding mix. If counties could trim their contributions whenever new state money arrived or fees came in above budget, the authority would never gain ground. Any increase in state aid or unexpected fee revenue would just become county savings, not expanded services. The opinion construes Chapter 122C to keep state funds and fees additive rather than substitutive.
Q: What does the surplus-remit rule in G.S. § 122C-147(a) actually require?
A: It directs area authorities to send unspent State and federal funds back to the Department within 60 days of certified audit. The AG cited this as evidence that the legislature did not envision unspent state money becoming county-relief money. If the State sends more than the authority needed, the leftover goes back to the State, not to offset what the county was supposed to contribute.
Q: Was the fee-collection rule designed to push the burden onto private payers?
A: G.S. § 122C-146 required area authorities to collect from individuals able to pay (including insurance and third-party sources). The legislature was trying to ensure recovery from ability-to-pay sources. The provision the AG relied on (preventing reduction of local tax commitment because of fee collections) protects the public-funding floor against being eroded by private-payment success.
Q: Can a county legitimately reduce its contribution to an area authority at all?
A: Through the normal budget process at the start of a fiscal year, yes, subject to whatever statutory floor and maintenance-of-effort rules apply. The 1993 opinion is specifically about mid-year reductions tied to extra state funds or excess fee collections. The county still has to go through the regular budget process and abide by the statutory framework when setting its annual contribution.
Background and statutory framework
Chapter 122C of the General Statutes governs NC's mental-health, developmental-disabilities, and substance-abuse system. The chapter's architecture is layered: State policy and core funding from the Department, county-level funding through area authorities, fee recovery from individuals and third-party payers, and federal funds. The 1993 opinion is one of several from this era that fix the relationships among those funding layers, partly because the early-1990s budget environment created repeated questions about whether counties could trim their commitments in response to other revenue.
The two prongs of the opinion sit at different levels of statutory certainty. The fee-collection prong reads off an express prohibition. The state-funds prong, by contrast, is an inference from the chapter's structure and stated policy. The AG was careful to acknowledge that courts have the prerogative to definitively determine legislative intent, but applied accepted construction principles to reach the conclusion that the legislature did not authorize counties to use additional state funding to reduce their own.
Citations
- N.C.G.S. § 122C-2 (legislative policy; mental-health system requires cooperation and financial assistance of counties, State, and federal government)
- N.C.G.S. § 122C-146 (area authority fee schedules and collection duty; collection of fees may not be used as justification for reduction or replacement of budgeted commitment of local tax revenue)
- N.C.G.S. § 122C-147(a) (unspent State and federal funds shall be remitted to the Department within 60 days after certified audit)
- N.C.G.S. § 122C-147(b) (referenced in subject line of opinion)
- Alberti v. Manufactured Homes, Inc., 339 N.C. 727, 407 S.E.2d 819 (1991) (NC Supreme Court; legislative intent may be inferred from nature and purpose of statute and consequences of various constructions)
- N.C. Commissioner of Insurance v. Rate Bureau, 300 N.C. 381, 269 S.E.2d 547, rehearing denied, 301 N.C. 107, 273 S.E.2d 300 (1980) (NC Supreme Court; statutes construed to avoid absurd results)
- Electric Supply Co. v. Swain Electrical Co., 328 N.C. 651, 403 S.E.2d 291 (1991) (NC Supreme Court; statute must not be given a construction which would undermine or subvert the very objective of the statute)
- Hall v. Simmons, 329 N.C. 779, 407 S.E.2d 816 (1991) (NC Supreme Court; significance and effect should be accorded every part of an act, including every section, paragraph, sentence or clause, phrase, and word)
Source
Original opinion text
June 8, 1993
C. Robin Britt, Sr., Secretary Department of Human Resources 101 Blair Drive Raleigh, North Carolina 27603-2041
RE: Counties' Reduction Of Contributions To Area Authorities As The Result Of Additional Funds From The State Or Collection Of Fees Exceeding Budget Receipts; G.S. § 122C-2; G.S. § 122C-147(b)
Dear Secretary Britt:
On behalf of the Division of Mental Health, Developmental Disabilities and Substance Abuse Services, North Carolina Department of Human Resources, you have requested this office's response to the following questions: (1) may a county, during the fiscal year, reduce its contribution to an area mental health, developmental disabilities, and substance abuse authority (hereinafter "area authority") as a result of the receipt by the area authority of additional funds from the State, and (2) may a county reduce its local tax revenue commitment to an area authority during the fiscal year if the area authority's collection of fees for services exceeds its budgeted receipts during the year.
Your second question will be dealt with initially because G.S. § 122C-146 specifically addresses the issue. G.S. § 122C-146 requires area authorities to ". . . prepare fee schedules for services and to make every reasonable effort to collect appropriate reimbursement for costs in providing these services from individuals able to pay, including insurance and third-party payment, . . ." Additionally, the statute specifically provides that "[t]he collection of [such] fees by an area authority may not be used as a justification for reduction or replacement of the budgeted commitment of local tax revenue." (A copy of G.S. § 122C-146 is attached.) Therefore, a county may not reduce its local tax revenue commitment to an area authority during the fiscal year if the area authority's collection of fees for services exceeds its budgeted receipts during the year.
With respect to your first question, the General Assembly has not so precisely explained the intended relationship between State-funded appropriations to area authorities and local revenue commitments. Thus, it is necessary to consider Chapter 122C as a whole in order to discern what the General Assembly intended the relationship to be. While recognizing that it is the courts and not the Attorney General's office which have the prerogative to definitively determine the intent of the General Assembly when legislative intent is not clearly stated, this office can apply accepted rules of statutory construction to make a reasonable determination as to whether the General Assembly intended to permit a county to reduce its financial contribution to the area authority as a result of the receipt of an area authority of additional funds from the State.
It is well-established that "legislative intent may be inferred from the nature and purpose of [a] statute and the consequences which would follow, respectively, from various constructions." Alberti v. Manufactured Homes, Inc., 339 N.C. 727, 732, 407 S.E.2d 819 (1991). In addition, statutes are to be construed in such a way as to avoid absurd results. N.C. Commissioner of Insurance v. Rate Bureau, 300 N.C. 381, 434, 269 S.E.2d 547, rehg. denied, 301 N.C. 107, 273 S.E.2d 300 (1980). For example, a statute must not be given a construction which would undermine or subvert the very objective of the statute. Electric Supply Co. v. Swain Electrical Co., 328 N.C. 651, 656, 403 S.E.2d 291 (1991). Also, "significance and effect should be accorded every part of [an] act, including every section, paragraph, sentence or clause, phrase, and word." Hall v. Simmons, 329 N.C. 779, 784, 407 S.E.2d 816 (1991).
Bearing in mind the foregoing principles of statutory construction, it is the avowed policy of the State "to assist individuals with mental illness, developmental disabilities and substance abuse problems in ways consistent with the dignity, rights, and responsibilities of all North Carolina citizens." G.S. § 122C-2 (copy attached). To this end, the General Assembly has obligated both the State and local governments to work together to develop and maintain a public system for the delivery of services to persons with mental illness, developmental disabilities and substance abuse problems. G.S. § 122C-2 specifically provides that "[t]he furnishing of services to implement [this] policy requires the cooperation and financial assistance of counties, the State, and the federal government."
Given the stated purpose of Chapter 122C and the statutorily prescribed scheme for accomplishing same, this office cannot conclude that the General Assembly intended to allow a county to reduce its financial assistance to an area authority to the extent that the State is, from time to time, able to provide additional funding for mental health services. To construe the statute to permit a reduction in funding by a county would necessarily mean that the level of services provided by the area authority would remain constant despite increased State funding. Had the General Assembly intended to alleviate the fiscal burden or obligation of local governments by increasing State appropriations to the area authorities, we believe that the General Assembly would have plainly and clearly stated this intent.
Because the provision of mental health services is clearly intended by the General Assembly to be a joint effort on the part of the counties, the State and the federal government, it necessarily follows that the General Assembly did not intend to permit a county to reduce its obligation to an area authority simply because additional State funding becomes available. This conclusion is consistent with G.S. § 122C-147(a), which provides in pertinent part:
Unspent State and federal funds shall be remitted to the Department within 60 days after the date that a certified audit is rendered as required by the Local Government Commission.
It is apparent from the foregoing language that the General Assembly intended that if a surplus of funds exists as a result of the receipt of State funds by an area authority, the area authority must return the unspent State funds to the Department of Human Resources. Therefore, it is our opinion that funds appropriated by the State are not intended to be used as a substitute or replacement for local funding.
Ann Reed Senior Deputy Attorney General
Jane L. Oliver Assistant Attorney General