When the NC Environmental Management Commission submits a fiscal note for a proposed rule, can the Director of the Budget refuse to certify it just because another affected agency (such as DOT) objects to the cost numbers or to spending funds available in that agency's budget?
Plain-English summary
The Environmental Management Commission (EMC), through its staff at the Division of Environmental Management (DEM), submitted a fiscal note for a proposed rule. The note flagged a potential cost effect on the Department of Transportation (DOT). The Director of the Budget asked DOT for budget information and got verbal objections to the cost numbers. At that point, the Director asked DEM and DOT to talk and submit any agreed revisions. EMC's counsel wrote to the Attorney General asking three questions about the Director of the Budget's authority.
Senior Deputy Attorney General Daniel C. Oakley and Special Deputy Attorney General Frank W. Crawley walked through each question:
Q1: Must the Director of the Budget get the approval of any other state agency before certifying a fiscal note? No. The statute does not require approvals from other agencies. The Director may "seek necessary financial and budgetary input from potentially affected agencies." But the certification is the Director's decision.
Q2: Can the Director refuse certification just because an affected agency disagrees with the fiscal note's calculations? No. G.S. 150B-21.4 places the certification decision squarely with the Director. Neither the submitting agency nor a potentially affected agency can make the call for the Director. The Director can consider data from any source, including the affected agency, but the responsibility is the Director's.
Q3: If the affected agency has funds available in a relevant source (like the Highway Trust Fund) to cover the projected cost, can the Director refuse certification just because the affected agency objects to spending those funds in the manner the rule would require? No. Once the Director has confirmed that potentially affected agencies have funds available to meet the rule's requirements, it is not legally supportable to refuse certification solely on the basis that an affected agency objects to spending available funds.
The opinion was careful to note that the Director of the Budget had no written rules on the fiscal note process, so the Director's job was "to make a reasonable administrative evaluation of the note submitted by DEM and determine independently whether to certify." The AG also declined to opine on the substantive funds-availability question; that was the Director's call.
Currency note
This opinion was issued in 1994. 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 NC Administrative Procedure Act (Chapter 150B) has been amended many times since 1994. The fiscal note framework has been revised, including a 2011 overhaul that introduced more detailed economic and small-business impact analysis requirements. The role and title of "Director of the Budget" has shifted with the various Office of State Budget and Management reorganizations. Anyone with a current fiscal note dispute should pull current G.S. 150B-21.4 (and § 150B-21.4A through C), current OSBM guidance, and Rules Review Commission practice.
Common questions
Q: What is a fiscal note in NC rulemaking?
A: It is a written estimate of the cost impact of a proposed administrative rule. The submitting agency prepares it. The Director of the Budget then certifies (or declines to certify) that funds are available for any required state agency expenditures. The fiscal note process is part of how NC controls the budget impact of agency rulemaking.
Q: Why did the EMC need clarification?
A: A pattern was forming where the Director of the Budget might be tempted to ask the affected agency (DOT, in this case) for sign-off rather than make the call on the merits. EMC was concerned that affected agencies could effectively veto rulemaking by objecting to the fiscal note. The AG's opinion took that veto power off the table.
Q: What is the difference between "input" and "delegation"?
A: The Director of the Budget can ask DOT how much something would cost, whether DOT's accounting agrees with DEM's accounting, where any funds would come from, and so on. That is input. Delegation would be the Director saying, "DOT, you decide whether I certify this fiscal note." The AG said the first is fine, the second is unlawful.
Q: What does "potentially affected agency" mean?
A: Any state agency whose budget would be touched by the cost of complying with the proposed rule. If EMC proposes a rule on stormwater discharges that DOT will have to pay to comply with, DOT is a "potentially affected agency."
Q: Can the affected agency block a rule by refusing to spend available funds?
A: Not through the fiscal note process. If DOT has the money but does not want to spend it the way the rule would require, the answer is to lobby the EMC to change the rule or to take the dispute to the General Assembly during budget time. The fiscal note process is a yes-or-no funds-availability check, not a debate forum about agency priorities.
Q: What was the AG's statutory-interpretation move?
A: Standard NC canons. State v. Wiggins, 272 N.C. 147 (1967): give words their plain and ordinary meaning. In re Hardy, 294 N.C. 90 (1977): a construction that defeats the object of the statute must be avoided where possible. The statute clearly gave the certification authority to the Director; reading it to let affected agencies veto would defeat the statutory scheme.
Background and statutory framework
The NC Administrative Procedure Act (G.S. Chapter 150B) governs how state agencies adopt rules. Article 2A of Chapter 150B sets out the rulemaking procedure. G.S. 150B-21.4 deals specifically with fiscal notes: when a proposed rule has a substantial economic impact on state agencies, the submitting agency must prepare a fiscal note, the Director of the Budget must certify funds availability, and the Office of State Budget and Management plays a coordinating role.
The 1994 question turned on the textual fact that G.S. 150B-21.4 vests the certification decision in the Director of the Budget alone. There is no requirement that other agencies agree, nor any procedural step requiring affected-agency consent. The legislative purpose, as the AG read it, was to ensure that agencies considering new rules understand the budget consequences before adopting them, not to give other agencies a veto over each other's rulemaking.
The Director of the Budget has discretion in how to evaluate a fiscal note. The Director can ask any source for input. The Director can ask submitting and affected agencies to talk and refine numbers. What the Director cannot do is cede the decision. That is the line the AG drew.
Citations
- N.C.G.S. § 150B-21.4 (fiscal note certification by Director of the Budget)
- State v. Wiggins, 272 N.C. 147 (1967) (plain and ordinary meaning of statutory words)
- In re Hardy, 294 N.C. 90 (1977) (construction defeating statutory purpose to be avoided)
Source
Original opinion text
The text reproduced from the NCDOJ landing page begins with the three questions. The salutation and opening framing are not in the rendered HTML on the landing page.
- (1) Is the Director of the Budget required to obtain the approval of any other state agency before issuing the certification required by the statute?
- (2) Is it appropriate for the Director of the Budget to refuse to provide the required certification on the basis that a potentially affected state agency disagrees with the fiscal note calculations provided by the proposing agency?
- (3) If relevant sources (such as the Highway Trust Fund) are reasonably projected to include funds sufficient to cover the costs projected to be associated with a proposed rule change, is it appropriate for the Director of the Budget to refuse to provide the required certification on the basis that the potentially affected state agency objects to spending available funds in the fashion that would be required?
Conclusions
1) The Director of the Budget is not required by statute to obtain approvals from other state agencies before determining whether to issue the fiscal note certification, but may seek necessary financial and budgetary input from potentially affected agencies.
2) G.S. 150B-21.4 clearly provides that the Director of the Budget makes the certification determination, and neither the submitting agency nor a potentially affected agency can make the decision for him. He may consider data from any source, including the potentially affected agency.
3) While the Director of the Budget must determine that potentially affected agencies do have funds available to meet the requirements of the proposed rule, it is not legally supportable for the Director of the Budget to refuse a requested certification solely on the basis that a potentially affected agency objects to spending available funds.
Discussion
Our understanding of the facts surrounding these issues is as follows. The Division of Environmental Management (DEM), as staff to the EMC, prepared and submitted the required fiscal note to the Director of the Budget, noting inter alia a potential effect on the Department of Transportation (DOT). The Director of the Budget sought information related to funding from DOT, and received verbal objections to the note. At that point, the Director of the Budget requested DEM and DOT to discuss the note and present any revisions to him, and both agencies agreed to this process. The Director of the Budget has advised us that he is waiting for a resubmission and does not consider any matter presently pending before him. Please let us know if any of these facts are in error.
The Director of the Budget has no written rules on the fiscal note consideration process; thus, his responsibility is to make a reasonable administrative evaluation of the note submitted by DEM and determine independently whether to certify that funds are available for required state agency expenditures. The statute, G.S. 150B-21.4, is clear and unambiguous as to his responsibility for the decision and it would not be consistent with the statute to delegate that duty to an affected agency, in this case DOT. "It is elementary that in the construction of a statute words are to be given their plain and ordinary meaning…." State v. Wiggins, 272 NC 147, 153 (1967). The primary purpose of the fiscal note requirement is that the effect on state agency budgets be recognized by the body proposing a rules adoption or modification. It would not appear that the General Assembly further desired to give potentially affected agencies an opportunity to derail a rules package; thus the Director of the Budget was clearly given independent authority to consider the fiscal implications. "A construction which will defeat or impair the object of the statute must be avoided if that can reasonably be done without violence to the legislative language." In re Hardy, 294 NC 90, 96 (1977). On the other hand, it is within the authority of the Director of the Budget to seek input from DOT on matters related to the fiscal note and to its budget.
The questions posed imply that the Director of the Budget has, or will, cede his decision-making authority to DOT. However, there is nothing in the record that supports that implication. If, and when, the Director of the Budget receives contradictory information from the submitting agency and a potentially affected agency, the law is clear that it will be his responsibility to carefully consider the issue and make the final decision.
We hope this advisory opinion has clarified the process of decision-making in this matter. It would not be prudent at this point to further offer our opinions on what may or may not be a supportable call on the substantive issue of funds availability. However, we will be glad to further consult with you, DEM, DOT or the Director of the Budget on questions which may arise in the future.
Daniel C. Oakley Senior Deputy Attorney General
Frank W. Crawley
Special Deputy Attorney General