When the 1998 budget bill restored the cost-of-living raise for state employees with poor performance ratings, did that fix reach backward to give them the 1997 COLA they missed too, or only the 1998 COLA?
Plain-English summary
In 1997, the NC General Assembly gave state employees a 2% cost-of-living adjustment (COLA), but it excluded employees whose most recent performance evaluation was below a threshold under N.C.G.S. § 126-7(c)(4b). The exclusion was unpopular: the affected employees were ineligible for the raise, but the determination of "poor performance" was based on a single recent evaluation, and some employees argued they should not lose the COLA on that basis.
In the 1998 budget bill (Session Law 1998-212, SB 1366), the legislature restored COLA eligibility for these excluded employees. The 1998 COLA was 1%, effective July 1, 1998. The State Personnel Director asked the AG: did the 1998 fix also reach backward to give these employees the 1997 2% COLA they had missed?
Senior Deputy AG Ann Reed and Special Deputy AG Lars Nance answered no. Their reasoning:
- The primary purpose of the 1998 fix was clearly to extend COLA eligibility to employees who otherwise would have been excluded going forward. The legislature was reacting to the practical effect of the 1997 exclusion.
- But neither the effective-date provision nor any other provision of the 1998 legislation manifested a clear intention to repeal § 126-7(c)(4b) retroactively, or to provide retroactive pay raises to the affected employees.
- Absent a clear expression of retroactive legislative intent, statutes are presumed to operate prospectively. This is a standard canon of statutory construction in NC and elsewhere.
- The 1998 legislation simply restored COLA eligibility going forward, leaving the 1997 exclusion intact for the 1997 COLA only.
So the affected employees received the 1% 1998 COLA effective July 1, 1998, but did not receive the 2% 1997 COLA retroactively. Their base salary for purposes of calculating the 1998 COLA was the June 30, 1997, salary (i.e., the pre-1997-COLA salary, since they had been excluded from the 1997 increase).
This is a small-stakes opinion in terms of money for any single employee, but it captures an important interpretive habit: legislative fixes to unpopular eligibility rules are read prospectively unless the legislature clearly says otherwise. Drafters who want retroactive effect have to say so explicitly.
Currency note
This opinion was issued in 1998. 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. NC's state employee COLA structure has changed significantly since 1998. The performance-based COLA exclusion in § 126-7(c)(4b) may have been repealed, amended, or restructured. The State Personnel Act has itself been substantially rewritten (now the State Human Resources Act, Chapter 126). Anyone advising on a current COLA dispute should check the current statutory framework.
Background and statutory framework
State employee salaries and benefits in NC are set largely by the General Assembly through the annual or biennial budget bill. The bill typically specifies a COLA percentage (or no COLA), and links eligibility to factors like length of service, performance rating, and continued employment on a specific date.
The 1997 legislation's exclusion of "poor performance" employees from the COLA was unusual. Most state-employee compensation rules are uniform across employees in the same classification, with performance feedback going to merit increases, promotions, or disciplinary action rather than to COLAs (which are typically meant to keep pace with inflation, not to reward performance). The 1997 exclusion blurred the line and triggered enough complaints to prompt the 1998 legislative fix.
The fix itself was characteristically narrow: it restored eligibility going forward but didn't address the past. The drafters might have intended a fuller correction, but the statutory text only operated prospectively. The AG's opinion enforces that narrower reading.
The retroactivity canon is well-established. NC courts will read a statute as operating retroactively only when (1) the statute expressly says so, or (2) the legislative intent for retroactive effect is clear from the statutory context. Bare changes to substantive rights are presumed prospective. The 1998 fix did not meet either prong.
Common questions
Could the affected employees have gotten the 1997 COLA by suing the state?
Probably not. The 1997 exclusion was a statutory rule enacted by the legislature; it was not the result of agency error or constitutional violation. Affected employees got what the 1997 statute said they would get (no COLA). The 1998 fix changed the rule going forward; it did not create a retroactive entitlement.
What about the COLAs from earlier years?
The AG's opinion focused on 1997 and 1998. Older COLAs were not affected by the 1998 legislation and were governed by the rules applicable in those earlier years.
How was the 1998 COLA calculated for affected employees?
The 1998 1% COLA was applied to the June 30, 1997, salary (the salary the employee had before any 1997 COLA would have been added). Since the affected employee had been excluded from the 1997 increase, their June 30, 1997, salary was the same as their June 30, 1998, salary (no intervening increase).
Did this opinion affect performance evaluations or appeals?
No. The opinion does not address the substance of the performance evaluations that led to the exclusion. It only addresses the COLA-restoration question. Affected employees who wanted to challenge the underlying evaluation had to use the State Personnel Act appeal procedures.
Source
Citations
- N.C.G.S. § 126-7(c)(4b) (performance-based COLA exclusion)
- Session Law 1998-212 (SB 1366)
- Current Operations and Capital Improvements Appropriations Act of 1997
Original opinion text
December 3, 1998
Mr. Ronald G. Penny
State Personnel Director
Office of State Personnel
116 West Jones Street
Raleigh, North Carolina
RE: Advisory Opinion: N.C.G.S. 126-7(c)(4b); State Employees; Entitlement to COLA; SB 1366
Dear Ron:
In your letter of November 16, 1998, you request our opinion as to the interpretation and application of certain provisions of Session Law 1998-212 (SB 1366), An Act to Modify the Current Operations and Capital Improvements Appropriations Act of 1997 and to Make Other Changes in the Budget Operation of the State.
[The opinion describes the 1997 COLA exclusion under § 126-7(c)(4b) and the 1998 legislative fix, and considers two competing interpretations of whether the fix is retroactive.]
It is our opinion that the first interpretation is correct. While it may be argued that the language of the 1998 legislation supports extending the entitlement back to the 1997 COLA, we do not believe this argument has merit. Granted the primary purpose of the legislation is to extend the entitlement to the COLA to employees who otherwise would not receive the increase because of documented poor performance. However, neither the effective date provision nor any other provision of the 1998 legislation manifests a clear intention to repeal N.C.G.S. 126-7(c)(4b) retroactively. Likewise the 1998 legislation does not manifest a clear intention to provide retroactive pay raises to the affected employees. Absent a clear expression of legislative intent, we believe the affected employees are entitled to receive only the 1% COLA for 1998.
Ann Reed
Senior Deputy Attorney General
Lars F. Nance
Special Deputy Attorney General