IN THE SUPREME COURT OF NORTH CAROLINA

No. 315PA18-2

Filed 18 December 2020

ROY A. COOPER, III, individually and in his official capacity as GOVERNOR OF 

THE STATE OF NORTH CAROLINA

v.

PHILIP E. BERGER, in his official capacity as PRESIDENT PRO TEMPORE OF 

THE NORTH CAROLINA SENATE; TIMOTHY K. MOORE, in his official capacity 

as SPEAKER OF THE NORTH CAROLINA HOUSE OF REPRESENTATIVES; 

CHARLTON L. ALLEN, in his official capacity as CHAIR OF THE NORTH 

CAROLINA INDUSTRIAL COMMISSION; and YOLANDA K. STITH, in her 

official capacity as VICE-CHAIR OF THE NORTH CAROLINA INDUSTRIAL 

COMMISSION

On discretionary review pursuant to N.C.G.S. § 7A-30 and § 7A-31 of a 

unanimous, published decision of the Court of Appeals, 837 S.E.2d 7 (N.C. Ct. App. 

2019), affirming a final judgment entered on 9 April 2018 by Judge Henry W. Hight, 

Jr., in Superior Court, Wake County. Heard in the Supreme Court on 31 August 

2020.

Daniel F. E. Smith, Jim W. Phillips, Jr., and Eric M. David, for plaintiffappellant Roy Cooper, Governor of the State of North Carolina.

Nelson Mullins Riley & Scarborough LLP, by D. Martin Warf and Noah H. 

Huffstetler, III, for defendants-appellee Philip E. Berger and Timothy K. Moore.

K&L Gates LLP, by Matthew T. Houston and Zachary S. Buckheit, for amicus 

curiae North Carolina Chamber Legal Institute.

Joshua H. Stein, Attorney General, by Ryan Y. Park, Solicitor General; James 

W. Doggett, Deputy Solicitor General; and Daniel P. Mosteller, Special Deputy 

Attorney General, for amicus curiae State of North Carolina.

ERVIN, Justice.
COOPER V. BERGER

Opinion of the Court

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The issue before us in this case is the extent to which the Governor of the State 

of North Carolina, as compared to the North Carolina General Assembly, has the 

authority to determine the manner in which monies derived from three specific 

federal block grant programs should be distributed to specific programs. After careful 

consideration of the record in light of the applicable law, we hold that the General 

Assembly did not overstep its constitutional authority by appropriating the relevant 

federal block grant money in a manner that differs from the Governor’s preferred 

method for distributing the funds in question. As a result, the Court of Appeals’

decision upholding the trial court’s decision to grant judgment on the pleadings in 

favor of the legislative defendants and against the Governor in this case is affirmed.

I. Factual Background

A. Substantive Facts

In March of 2017, plaintiff-appellant Roy A. Cooper, III, acting in his capacity 

as the duly-elected Governor, submitted a recommended budget to the General 

Assembly in which he suggested that funds derived from three specific federal block 

grant programs be spent in a particular manner. More specifically, the Governor 

recommended (1) that monies received from the Community Development Block 

Grant (CDBG) program be spent in such a manner that $10,000,000 would be 

allocated to “Scattered Site Housing” projects, $13,737,500 would be allocated to

“Economic Development” projects, and $18,725,000 would be allocated to

“Infrastructure” projects; that monies received from the Substance Abuse Block 
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Opinion of the Court

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Grant (SABG) program be spent in such a manner that $29,322,717 would be 

allocated to projects related to “Substance Abuse Treatment for Children and Adults”;

and that monies received from the Maternal and Child Health Block Grant (MCHBG) 

program be spent in such a manner that $14,070,680 would be allocated to projects

related to “Women and Children’s Health Services.”

On 22 June 2017, the General Assembly adopted Senate Bill 257, which 

approved a state budget for the 2017–2019 biennium. Although the Governor vetoed 

Senate Bill 257, the General Assembly overrode the Governor’s veto, so that the 

legislation in question became law as Session Law 2017-57. In its approved budget, 

the General Assembly redirected approximately $13,000,000 in funds derived from 

the CDBG program, $2,200,000 in funds derived from the SABG program, and 

$2,300,000 in funds derived from the MCHBG program to projects selected by the 

General Assembly. More specifically, Session Law 2017-57 redirected funds derived 

from the CDBG program to “Neighborhood Revitalization” projects and away from 

“Scattered Site Housing,” “Economic Development,” and “Infrastructure” projects;

redirected funds derived from the SABG program to “Competitive Block Grant”

projects and away from “Substance Abuse Treatment Services for Children and 

Adults” projects; and redirected funds derived from the MCHBG program to a 

“Perinatal Strategic Plan Support Position” project and the “Every Week Counts”

project and away from “Women and Children’s Health Services” projects. 2017 N.C. 

Sess. Laws 57 §§ 11A.14.(a), 11L.1.(a), 11L.1.(y)–(z), 11L.1.(aa)–(ee), 15.1.(a), 15.1.(d).
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Opinion of the Court

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B. Procedural History

1. Trial Court Proceedings

On 26 May 2017 the Governor filed a complaint against defendants Philip E. 

Berger, in his official capacity as President Pro Tempore of the North Carolina 

Senate; Timothy K. Moore, in his official capacity as the Speaker of the North 

Carolina House of Representatives; and two additional defendants, in their capacities 

as officials of the North Carolina Industrial Commission.1 In his original complaint, 

the Governor challenged the constitutionality of two state session laws and six state 

statutes that had been enacted by the General Assembly in late 2016 and early 2017 

immediately prior to and shortly after the Governor took office on the grounds that 

the challenged legislation unconstitutionally curtailed the Governor’s authority as 

defined in the North Carolina State Constitution. On 8 August 2017, the Governor 

filed an amended complaint in which he added claims challenging the 

constitutionality of the 2017–19 state budget as enacted in Session Law 2017-57. On 

14 September 2017, the legislative defendants filed a responsive pleading in which 

they moved for dismissal of the Governor’s amended complaint, denied the material 

allegations set out in the amended complaint, and asserted various affirmative 

defenses.

 

1 In view of the fact that the issues that led to the naming of these two Industrial 

Commission officials as defendants are not before the Court in this appeal, we will refrain 

from discussing the claims that the Governor asserted relating to those defendants any 

further in this opinion.
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Opinion of the Court

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On 16 March 2018, the Governor filed a motion seeking the entry of summary 

judgment in his favor with respect to two of the claims asserted in his amended 

complaint, including his challenge to the constitutionality of the enacted state budget 

and the reallocation of the monies derived from the CDBG program, the SABG

program, and the MCHBG program. On 19 March 2018, the legislative defendants 

filed a motion seeking the entry of judgment on the pleadings in their favor with 

respect to the same claims.

On 4 April 2018, the pending motions came on for hearing before the trial court. 

On 9 April 2018, the trial court entered an order granting the legislative defendants’

motion for judgment on the pleadings and dismissing the relevant claims as set forth

in the amended complaint on the grounds that the disputed block grant funds were 

“designated for the State of North Carolina [to] be paid into the State treasury” and 

that, in accordance with N.C. Const. art., V, § 7, “no money can be drawn from the 

State treasury without an appropriation” by the General Assembly. The Governor 

noted an appeal to the Court of Appeals from the trial court’s order.

2. Appellate Proceedings

In seeking relief from the order before the Court of Appeals, the Governor 

argued that the General Assembly did not have the authority to appropriate the

relevant block grant funds by passing Session law 2017-57 on the theory that the 

funds in question were not contained “within” the State treasury. After conceding

that, in accordance with the North Carolina State Constitution, money entering the 
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State treasury can only be appropriated in accordance with legislation adopted by the 

General Assembly, such as the state budget, the Governor argued that the block grant 

funds at issue in this case never entered the State treasury. As support for this 

contention, the Governor relied upon this Court’s decision in Gardner v. Bd. of 

Trustees of N.C. Local Governmental Employees’ Ret. Sys., 226 N.C. 465, 468, 38 

S.E.2d 314, 316 (1946), which described the “State treasury” as “[m]onies paid into 

the hands of the state treasurer by virtue of a state law” (emphasis added). According 

to the Governor, the block grant funds at issue in this case were raised and 

appropriated by federal, rather than state, law and should, for that reason, be treated

as “custodial funds” that are “beyond the legislative power of appropriation.” Arguing 

in reliance upon the Colorado Supreme Court’s decision in Colo. Gen. Assembly v. 

Lamm, 700 P.2d 508, 524–25 (Colo. 1985) (Lamm I), the Governor asserts that

custodial funds are monies that are “not generated by tax revenues” and have been

“given to the state for particular purposes,” a set of circumstances that places them 

outside the reach of the General Assembly’s appropriation power and makes them 

subject to executive branch, rather than legislative branch, control.

On the other hand, the legislative defendants argued that the named recipient 

of the relevant block grant funds was “the State of North Carolina” and that, “[a]s 

such, the funds come into the State treasury and are properly subject to legislative 

appropriation, pursuant to Article V, Section 7(1) of the North Carolina Constitution,”

which provides that “[n]o money shall be drawn from the State treasury but in 
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Opinion of the Court

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consequence of appropriations made by law.” As a result, the legislative defendants

urged the Court of Appeals to affirm the trial court’s order.

In affirming the trial court’s order, the Court of Appeals began by analyzing 

the history and purpose of federal block grant programs. According to the Court of 

Appeals, the federal government had expanded the number of block grants over time

on the theory that they “provided state and local governments additional flexibility 

in project selection” as compared to other types of grants. Cooper v. Berger, 837 

S.E.2d 7, 13 (N.C. Ct. App. 2019) (Cooper II) (quoting Robert Jay Dilger & Michael H. 

Cecire, Cong. Research Serv., R40638, Federal Grants to State and Local 

Governments: A Historical Perspective on Contemporary Issues 39 (2019)). In 

addition, the Court of Appeals noted that, in the statutory provisions governing the 

relevant block grant programs, Congress had elected to refrain from including

statutory language “that would have required state legislative appropriation of the 

. . . block grants” and to remain “silent regarding the authority of state legislatures 

to appropriate federal block grant funds.” Id. at 14. Although the relevant block 

grant statutes “impose certain restrictions and criteria” upon their recipients, the 

Court of Appeals acknowledged that they afford “significant discretion to the 

recipient states on how that money is ultimately spent.” Id. at 15.

The Court of Appeals rejected the Governor’s contention that the relevant block 

grant monies were not part of the State treasury on the theory that Gardner actually 

expanded the types of funds deemed to be held within the State treasury rather than 
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Opinion of the Court

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limiting the contents of the State treasury to monies stemming from “taxes, fines, or 

penalties” raised pursuant to state law. See Gardner, 226 N.C. at 467, 38 S.E.2d at 

316. In addition, the Court of Appeals noted that the block grant funds at issue in 

this case did, as a technical matter, “enter into the hands of the State Treasurer by 

virtue of a State Law” given the statutory mandate that:

[a]ll funds belonging to the State of North Carolina, in the 

hands of any head of any department of the State which 

collects revenue for the State in any form whatsoever, and 

every institution, agency, officer, employee, or 

representative of the State or any agency, department, 

division or commission thereof . . . collecting or receiving 

any funds or money belonging to the State of North 

Carolina, shall daily deposit the same in some bank, or 

trust company, selected or designated by the State 

Treasurer, in the name of the State Treasurer.

N.C.G.S. § 147-77 (2019). Similarly, the Court of Appeals rejected the Governor’s 

argument that Congress had intended for the executive branch in each state 

government to control the manner in which the relevant block grant monies were 

spent on the grounds that Lamm II had not persuaded it of the merits of that 

contention. See Colorado General Assembly v. Lamm, 738 P.2d 1156, 1169 (Colo. 

1987) (Lamm II) (reviewing a number of block grant statutes, including those at issue 

in this case, and finding that “Congress has left the issue of state legislative 

appropriation of federal block grants for each state to determine”).

The Court of Appeals agreed with the legislative defendants that the named 

recipient for the block grants was “the State of North Carolina” rather than the 

Governor or any state executive agency and concluded that “[t]he fact that specific 
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Opinion of the Court

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State agencies are tasked with administering each Block Grant does not render those 

agencies the sole beneficiaries or allocators to the exclusion of the rest of the State.”

Cooper II, 837 S.E.2d at 20. Finally, the Court of Appeals declined to hold that the 

relevant block grant funds constituted “custodial funds” or “agency funds” for 

purposes of N.C.G.S. §§ 143C-1-1, noting that the “General Assembly has been 

appropriating block grants . . . without challenge through the budgetary 

appropriations process since 1981.” Id. at 21 (citing 1981 N.C. Sess. Laws Ch. 1282 

§ 6). As a result, since the Court of Appeals could not identify any constitutional 

support for the Governor’s argument that the relevant block grant funds were outside 

the scope of the General Assembly’s appropriation authority, it affirmed the trial 

court’s order.

On 7 January 2020, the Governor filed a notice of appeal from the Court of 

Appeals’ decision pursuant to N.C.G.S. § 7A-30(1) on the grounds that this case 

involves a substantial question arising under the North Carolina State Constitution 

and, in the alternative, a petition seeking discretionary review of the Court of 

Appeals’ decision pursuant to N.C.G.S. § 7A-31(c). On 26 February 2020, this Court 

retained jurisdiction over the Governor’s appeal and allowed the Governor’s 

discretionary review petition.
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Opinion of the Court

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II. Substantive Legal Issues

A. Positions of the Parties

1. Governor’s Arguments

In seeking to persuade us to reverse the Court of Appeals decision, the 

Governor begins by contending that the Court of Appeals erred by determining that 

the block grant funds at issue in this case were “within the State treasury” and

rejecting his assertion that N.C. Const. art. V, § 7, does not authorize the General 

Assembly to appropriate these federal block grant funds. In support of this assertion, 

the Governor places substantial reliance upon Gardner’s description of the “State 

treasury” as money that is “paid into the hands of the state treasurer by virtue of a 

state law,” arguing that, in order for money to be within the State treasury, it must 

be “[1] obtained under the power of the state to enforce collection” and “[2] placed in 

the hands of the state treasurer to be handled by him in accordance with the 

provisions of a state law.” 226 N.C. at 467, 38 S.E.2d at 316. As a result, the Governor 

contends that only money that is raised as the result of state taxation or some other 

state revenue-generating activity should be deemed to be part of the State treasury.

Id. at 467, 38 S.E.2d at 316; see also Garner v. Worth, 122 N.C. 250, 29 S.E. 364 (1898) 

(defining the State treasurer as “the officer in whose hands the legislative department 

has placed the funds it has raised and appropriated”) (emphasis added).

As additional support for this argument, the Governor relies upon N.C. Const. 

art. IX, § 6, which defines the “State school fund” and provides that:
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Opinion of the Court

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The proceeds of all lands that have been or hereafter may 

be granted by the United States to this State, and not 

otherwise appropriated by this State or the United States; 

all moneys, stocks, bonds, and other property belonging to 

the State for purposes of public education; the net proceeds 

of all sales of the swamp lands belonging to the State; and 

all other grants, gifts, and devises that have been or 

hereafter may be made to the State, and not otherwise 

appropriated by the State or by the terms of the grant, gift, 

or devise, shall be paid into the State Treasury and, 

together with so much of the revenue of the State as may 

be set apart for that purpose, shall be faithfully 

appropriated and used exclusively for establishing and 

maintaining a uniform system of free public schools.

N.C. Const. art. IX, § 6 (emphasis added). In the Governor’s view, monies derived 

from the relevant block grant programs constitute funds that are “otherwise 

appropriated . . . by the terms of the grant” and should not, for that reason, be deemed 

to have been paid into the State treasury.

The Governor further contends that the Court of Appeals erred by interpreting 

Gardner in such a manner as to find that funds enter the State treasury by virtue of 

N.C.G.S. § 147-77. In the Governor’s view, the reasoning upon which the Court of 

Appeals relied impermissibly “allows a statutory enactment to determine a 

constitutional meaning.” On the contrary, the Governor argues that, since the

relevant federal block grant funds are not encompassed within the State treasury in 

light of the test articulated in Gardner, they constitute a separate category of 

“custodial funds” that are not subject to appropriation by the General Assembly. In 

support of this proposition, the Governor cites decisions from other jurisdictions, such 

as Colorado, Oklahoma, and Massachusetts, in which the highest court in the states 
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in question recognized the existence of a category of funds that was not subject to 

legislative appropriation. See Lamm I, 700 P.2d 508, 524–25 (Colo. 1985); Opinion of 

the Justices to the Senate, 378 N.E.2d 433, 436 (Mass. 1978); In re Okla. ex rel. Dep’t 

of Transp., 646 P.2d 605, 609–10 (Okla. 1982). According to the Governor, the concept 

of a “custodial fund” is explicitly recognized in N.C. Const. art. IX, § 6. In addition, 

the Governor claims that the relevant block grant funds constitute custodial funds 

given that they are “trust fund[s] or agency fund[s]” as described in N.C.G.S. § 143C1-1 (defining state funds as “[a]ny moneys including federal funds deposited in the 

State treasury except moneys deposited in a trust fund or agency fund as described 

in G.S. 143C-1-3”).

The Governor argues that the absence of any federal statutory language 

allowing state legislatures to appropriate the block grant funds indicates that 

Congress did not intend for state legislatures to exercise such authority. See Alcoa 

S.S. Co. v. Fed. Mar. Comm’n, 348 F.2d 756, 758 (D.C. Cir. 1965) (stating that,

“[w]here Congress has consistently made express its delegation of a particular power, 

its silence is strong evidence that it did not intend to grant the power”). In addition, 

the Governor directs our attention to In re Separation of Powers, 305 N.C. 767, 772, 

295 S.E.2d 589, 592 (1982), which he describes as recognizing that the 1982 General 

Assembly was uncertain as to whether it had the authority to enact legislation that 

would delegate decision-making authority relating to federal block grant monies to a 

twelve-member legislative committee. In an advisory opinion provided by this Court, 
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its members suggested that the enactment of such a statute would likely be 

unconstitutional before declining to decide whether the General Assembly was 

authorized “to determine how the [block grant] funds will be spent” given that the 

briefs and the other materials submitted for the Court’s consideration “contain[ed] 

very little, if any, information about the grants, their purposes, for whom they are 

intended, and the conditions placed on them by Congress.” 305 N.C. at 778, 295 

S.E.2d at 595.

Secondly, the Governor argues that the General Assembly’s appropriation of 

the relevant federal block grant funds violates the separation of powers provision of 

the State constitution, N.C. Const. art. I, § 6 (providing that “[t]he legislative, 

executive, and supreme judicial powers of the State government shall be forever 

separate and distinct from each other”), and interferes with his constitutional duty to 

see that the laws are faithfully executed, N.C. Const. art. III, § 5(4) (providing that 

“[t]he Governor shall take care that the laws be faithfully executed.”). In support of

this assertion, the Governor directs our attention to this Court’s decision in State ex 

rel. McCrory v. Berger, 368 N.C. 633, 645, 781 S.E.2d 248, 256 (2016), which holds 

that a separation of powers violation occurs “when one branch exercises power that 

the constitution vests exclusively in another branch” or when “the actions of one 

branch prevent another branch from performing its constitutional duties.” According 

to the Governor, his duty to ensure that the laws are faithfully executed includes “the 

ability to affirmatively implement the policy decisions that executive branch agencies 
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subject to his or her control are allowed . . . to make,” citing Cooper v. Berger, 370 

N.C. 392, 414–15, 809 S.E.2d 98, 111–12 (2018) (Cooper I). In the Governor’s view, 

his duty to ensure that the laws are faithfully executed encompasses the 

responsibility to determine the distribution and administration of the block grant 

funds that become available to the State of North Carolina. In essence, the Governor 

claims that, since the relevant block grant funds have already been appropriated “(by 

Congressional action), the only way for the General Assembly to coerce gubernatorial

action is through (unconstitutional) interference with the Governor’s spending of 

federal funds” by reappropriating those funds.

Thirdly, the Governor cites decisions from six other jurisdictions holding that 

the state executive branch exercises control of monies provided by the federal 

government to the exclusion of the state legislative branch and urges this Court to

find that the relevant block grant funds are “custodial funds” not subject to state 

legislative appropriation. According to the Governor, “custodial funds” are those 

which have been appropriated by a federal statute specifying (1) “the purposes the 

state is directed to accomplish with the money,” (2) “the manner in which the 

purposes are to be accomplished,” and (3) “the restrictions placed on use of the funds 

by the federal government.” Lamm II, 738 P.2d at 1173. Although the Governor 

acknowledges that decisions from the highest state courts in four other jurisdictions 

have held that monies derived from the federal government are subject to legislative 

appropriation, he argues that we should not find these decisions to be persuasive on 
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the grounds that “[a]pplication of the overly broad constitutional rules” applied in 

those cases “would distort North Carolina law.”

2. Legislative Defendants’ Arguments

In seeking to persuade us to affirm the Court of Appeals’ decision, the 

legislative defendants begin by arguing that Congress, rather than making the 

relevant federal block grant monies subject to state executive branch control, “left the 

issue of state legislative appropriation of federal block grants for each state to 

determine,” citing Cooper II, 837 S.E.2d 7, 19 (quoting Lamm II, 738 P.2d at 1169), 

and that the relevant federal statutes make the State, rather than any executive 

branch agency or official, the named recipient of the relevant grant funds, citing 42 

U.S.C. §§ 5302, 5303 (defining a “State” as “any State of the United States, or any 

instrumentality thereof approved by the Governor” and authorizing the making of

grants to “States, units of general local government, and Indian tribes”); 42 U.S.C. § 

300x-64(b)(2) (defining “State” as “each of the several States, the District of Columbia, 

and each of the territories of the United States”); 42 U.S.C. §§ 701(c)(5)(b), 702(c) 

(defining “State” as “each of the 50 States and the District of Columbia” and providing 

that the federal government “shall allot to each State which has transmitted an 

application [for the funds] . . . an amount determined” by statute). As a result, the 

legislative defendants contend that the Court of Appeals correctly held that, as a 

constitutional matter, the relevant block grant funds “pass through the constitutional 

and codified budgetary process.”
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In addition, the legislative defendants contend that the Court of Appeals 

correctly interpreted Gardner as expanding, rather than limiting, the definition of 

the funds that are contained within the State treasury. According to the legislative 

defendants, this Court held in Gardner “that general funds derived from general 

taxation and funds coming into the hands of the State Treasurer by virtue of a State 

law . . . can be disbursed only in accordance with legislative authority,” with Gardner

providing no support for any contention that there is a category of state funds that is 

outside the General Assembly’s appropriation authority. Similarly, the legislative 

defendants argue that N.C. Const. art. IX, § 6, does not create a category of funds 

that is outside legislative control given that the categories of funds to which it refers

“are paid into the State Treasury and are then to be used exclusively for the public 

schools.”

In the legislative defendants’ view, the State constitution provides that the 

State Treasurer’s duties “shall be prescribed by law,” N.C. Const. art. III, § 7(2), with 

the General Assembly having directed the State Treasurer to “receive[ ] all moneys 

which shall from time to time be paid into the treasury of this state.” Gardner, 226 

N.C. at 468, 38 S.E.2d at 316 (citing N.C.G.S. § 147-68(a)). According to the 

legislative defendants, “it is not clear that the Governor (as opposed to the State) 

could even ‘receive’ the block grant funds at issue” given that N.C.G.S. § 143C-7-2(a)

provides no support for such a proposition.
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The legislative defendants also argue that the General Assembly is the policymaking branch of government, with the appropriation of funds ultimately being a 

policy decision, citing Rhyne v. K-Mart Corp., 358 N.C. 160, 169–70, 594 S.E.2d 1, 8–

9 (2004) (stating that “the General Assembly is the policy-making agency because it 

is a far more appropriate forum than the courts for implementing policy-based 

changes to our laws”). Although this Court did hold in Cooper I that the Governor 

should be free to “implement the policy decisions that executive branch agencies 

subject to his or her control are allowed, through delegation from the General 

Assembly, to make,” this holding does not allow the Governor to make policy decisions

that are outside of “the guardrails set by the General Assembly” in delegating its 

policy-making authority. Cooper I, 370 N.C. at 415 n.11, 809 S.E.2d at 112 n.11

(noting that the use of the phrase “the Governor’s policy preferences” should “not be 

understood as suggesting that [a state executive agency] has the authority to make 

any policy decision that conflicts with or is not authorized by the General Assembly, 

subject to applicable constitutional limitations”).

Finally, the defendants argue that the cases from other jurisdictions upon 

which the Governor relies that posit the existence of a category of “custodial” funds

should not be deemed controlling in this case given that “each state constitution has 

its own unique history of development, both in terms of the constitutional text itself 

and of the judiciary’s interpretation of that text.” Cooper v. Berger, 371 N.C. 799, 813, 
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822 S.E.2d 286, 297 (2018). As a result, the legislative defendants urge us to affirm 

the Court of Appeals’ decision.

B. Analysis of the Parties’ Positions

1. Standard of Review

According to well-established North Carolina law, this Court reviews 

constitutional questions using a de novo standard of review. McCrory, 368 N.C. at 

639, 781 S.E.2d at 252 (citing Piedmont Triad Reg’l Water Auth. v. Sumner Hills, Inc., 

353 N.C. 343, 348, 543 S.E.2d 844, 848 (2001)). “In exercising de novo review, we 

presume that laws enacted by the General Assembly are constitutional, and we will 

not declare a law invalid unless we determine that it is unconstitutional beyond a

reasonable doubt.” Id. (citing Hart v. State, 368 N.C. 122, 131, 774 S.E.2d 281, 287–

88 (2015)). “All power which is not expressly limited by the people in our State 

Constitution remains with the people, and an act of the people through their 

representatives in the legislature is valid unless prohibited by that Constitution.” 

State ex rel. Martin v. Preston, 325 N.C. 438, 448–49, 385 S.E.2d 473, 478 (1989). 

“The presumption of constitutionality is not, however, and should not be, conclusive,”

with an act of the General Assembly being subject to invalidation if it offends a

specific constitutional provision beyond a reasonable doubt. Moore v. Knightdale Bd. 

of Elections, 331 N.C. 1, 4, 413 S.E.2d 541, 543 (1992). On the other hand, if a statute 

passed by the General Assembly complies with the requirements of the state and 

federal constitutions, it must be upheld. See Town of Boone v. State, 369 N.C. 126, 
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130, 794 S.E.2d 710, 714 (2016) (noting that the North Carolina constitution “is in no 

matter a grant of power” and that “all power which is not limited by the Constitution 

inheres in the people, and an act of a State legislature is legal when the Constitution 

contains no prohibition against it”) (quoting Lassiter v. Northampton Cty. Bd. of 

Elections, 248 N.C. 102, 112, 102 S.E.2d 853, 861 (1958)).

2. Federal Block Grant Programs

As an initial matter, we note that the federal block grant programs at issue in 

this case constitute “allocations of sums of money from the United States Government 

to the various states,” the use of which “is largely left to the discretion of the recipient 

state” as long as that use falls within the broad statutory requirements of each grant.2 

Legislative Research Comm’n By & Through Prather v. Brown, 664 S.W.2d 907, 928 

(Ky. 1984). The three block grants at issue in this case were created by means of the 

Omnibus Budget and Reconciliation Act of 1981 (OBRA), Pub.L. 97–35, in which 

Congress consolidated approximately seventy-five “categorical grants” into nine new 

block grant programs. Lamm II, 738 P.2d at 1160. At that time, block grants were 

viewed as a “midpoint in the continuum of recipient discretion” on the grounds that

they afforded recipient states more control over the spending of federal funds than

 

2 We are unable to discern anything in the relevant federal statutory provisions that 

prescribes the manner in which the funds derived from the federal block grants at issue in 

the case must be distributed to the actual payees. As the Governor conceded at oral 

argument, this case must be decided on the basis of state law rather than upon the basis of 

a determination that the relevant federal statutes require that the identification of the 

payees of the proceeds of the federal grant programs at issue in this case be made by either 

the executive or legislative branches of state government.
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had been the case with monies derived from federal categorical grant programs, while 

giving the recipient states less control over the relevant grant funds than was 

afforded in connection with federal “revenue-sharing” funds.3 Cooper II, 837 S.E.2d 

at 13 (quoting Robert Jay Dilger & Eugene Boyd, Cong. Research Serv., R40486, 

Block Grants: Perspectives and Controversies 3 (2014)); see also Lamm II, 738 P.2d 

at 1159. As a result, block grants were intended to give recipient states “substantial 

discretion in identifying problems and designing programs to meet those problems.” 

Lamm II, 738 P.2d at 1159 (citing Advisory Commission on Intergovernmental 

Relations, Safe Streets Reconsidered: The Block Grant Experience 1968–1975 1 

(1977)).

In advising Congress with respect to the enactment of OBRA, the United 

States Comptroller General opined that the categorical grant system inhibited the 

involvement of state legislatures in administering the monies in question and 

recommended that “these Federal constraints on state legislative involvement be 

removed.” Report to the Congress by the Comptroller General of the United States, 

GGD–81–3 (Dec. 15, 1980), https://www.gao.gov/products/GGD-81-3. In addition, the

Comptroller General found that “the absence of [state] legislative involvement 

adversely affect[ed] federal interests” by diminishing the recipient state’s

 

3 According to the Colorado Supreme Court, categorical grants “involve a high degree 

of federal regulation and often have gone to local governments or independent single-purpose 

agencies such as urban renewal authorities or housing authorities,” while revenue sharing is 

a “general support payment program designed to provide financial resources to state and 

local governments to spend for local priorities.” Lamm II, 738 P.2d at 1159.
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accountability to the federal government given the absence of legislative oversight of

state executive actions and recommended that OBRA “not be construed as limiting or 

negating the powers of the state legislatures under State law to appropriate federal 

funds.” Id. at iii. However, Congress declined to “include in OBRA the comptroller 

general’s recommendation that would have required state legislative appropriation 

of the OBRA block grants” and, instead, left “OBRA [ ] silent regarding the authority 

of state legislatures to appropriate federal block grant funds.” Lamm II, 738 P.2d at 

1160.

As the record reflects, North Carolina has been receiving funds pursuant to the 

three relevant federal block grants at issue in this case since those programs were

created in 1981. Throughout that time, the General Assembly has appropriated the 

funds on an annual basis through the enactment of state budget legislation. See, e.g., 

1981 N.C. Sess. Laws Ch. 1282 § 6. In 2017, the proceeds made available by block 

grant programs and other federal grants made up 28.4% of North Carolina’s total

budget. Federal Aid to State and Local Governments, Center on Budget and Policy 

Priorities (Apr. 19, 2018), https://www.cbpp.org/research/state-budget-andtax/federal-aid-to-state-and-local-governments.

The CDBG program is administered at the federal level by the United States 

Department of Housing and Urban Development (HUD), with its stated purpose 

being, among other things, “to eliminate blight, to conserve and renew older urban 

areas, to improve the living environment of low- and moderate-income families, . . . 
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to develop new centers of population growth and economic activity,” and to provide 

“decent housing and a suitable living environment and expanding economic 

opportunities” for persons of low and moderate income. 42 U.S.C. § 5301. At least 

seventy percent of the federal funds awarded to the states pursuant to the CDBG 

program must be used to support persons of low and moderate income. Id. § 5301(c). 

According to the relevant federal statutory provisions, the term “State” is defined to 

mean “any State of the United States, or any instrumentality thereof approved by the 

Governor; and the Commonwealth of Puerto Rico.” 42 U.S.C. §§ 5302, 5303.

At the state level, the CDBG program is administered by the North Carolina 

Department of Commerce, which applies to HUD for an award of CDBG funds, with 

the State’s application being required to include “Consolidated Plans,” “Annual 

Action Plans,” and “Analyses of Impediments to Fair Housing Choice” which detail 

how the monies awarded pursuant to the program will be spent in compliance with 

federal law. After HUD has reviewed and approved the State’s application and the

accompanying plans submitted by the Department of Commerce, the Department of 

Commerce is required to submit a disbursement request to HUD associated with a 

specific project expenditure, at which point HUD remits the relevant funds to a 

“[Department of Commerce] account held by the Department of [the] State 

Treasurer.”

The MCHBG program is administered at the federal level by the Department 

of Health and Human Services (DHHS), with its stated purposes being, among other 
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things, to provide access to quality health services for mothers and children, “to 

reduce infant mortality and the incidence of preventable diseases and handicapping 

conditions among children,” to increase immunizations among children, and to 

“promote the health of mothers and infants by providing prenatal, delivery, and 

postpartum care for low income, at-risk pregnant women.” 42 U.S.C. § 701. 

According to the relevant federal statutory provisions, the “State maternal and child 

health agency” of each recipient state must “prepare and submit to the Secretary [of 

DHHS] annual reports on its activities under this subchapter.” Id. § 706.

In North Carolina, the MCBHG program is administered by the North 

Carolina Department of Health and Human Services, which applies to the federal

DHHS for an award of block grant funds. After the federal DHHS has approved the 

State’s application, the North Carolina DHHS submits a “draw down” request for 

funds, which are then deposited by the federal DHHS into an account held by the 

State Treasurer. After the North Carolina DHHS obtains access to the MCBHG

funds, it disburses the funds in question to a subdivision within the agency or to a 

third party for use in compliance with the governing statute. The federal DHHS

conducts regular audits to ensure that the North Carolina DHHS is administering 

the MCBHG program in accordance with the applicable provisions of federal law.

The SABG program is also administered at the federal level by the federal 

DHHS, with its stated purpose being to provide “community mental health services 

for adults with a serious mental illness and children with a serious emotional 
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disturbance.” 42 U.S.C. § 300x(b)(1). As a precondition for being eligible to receive 

funds pursuant to the SABG program, recipient states must submit reports detailing 

the efforts that they are making to ensure that tobacco products are not sold to 

persons under twenty-one years of age. Id. § 300x-26. The SABG program, like the 

MCHBG program, is administered at the state level by the North Carolina DHHS,

with the process for disbursing funds mirroring the process that is used in connection 

with the operation of the MCHBG program.

3. Specific Legal Claims

a. State Constitutional Spending Rules

The appropriations clause of the North Carolina State Constitution provides 

that “[n]o money shall be drawn from the State treasury but in consequence of 

appropriations made by law, and an accurate account of the receipts and expenditures 

of State funds shall be published annually.” N.C. Const. art. V, § 7(1). In light of this 

constitutional provision, “[t]he power of the purse is the exclusive prerogative of the 

General Assembly,” with the origin of the appropriations clause dating back to the

time that the original state constitution was ratified in 1776.4 John V. Orth & Paul 

Martin Newby, The North Carolina State Constitution 154 (2d ed. 2013) (Orth). In 

drafting the appropriations clause, the framers sought to ensure that the people, 

 

4 The North Carolina Constitution of 1776 provided that “the Governor, for the time 

beings shall have power to draw for and apply such sums of money as shall be voted by the 

general assembly, for the contingencies of government, and be accountable to them for the 

same.” N.C. Const. of 1776, § XIX.
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through their elected representatives in the General Assembly, had full and exclusive 

control over the allocation of the state’s expenditures. See Id. at 154 (noting that 

early Americans were “acutely aware of the long struggle between the English 

Parliament and the Crown over the control of public finance and were determined to 

secure the power of the purse for their elected representatives”); see also White v. 

Worth, 126 N.C. 570, 599–600, 36 S.E. 132, 141 (1900) (Clark, J., dissenting) (stating 

that “[t]his power of the legislature over the public purse is the most essential one in 

the system of a government of the people by the people, and its abandonment under 

any pretext whatever can never with safety be allowed”). As a result,, the 

appropriations clause “states in language no man can misunderstand that the 

legislative power is supreme over the public purse.” State v. Davis, 270 N.C. 1, 14, 

153 S.E.2d 749, 758 (1967).

As has already been noted, the North Carolina Constitution specifically 

provides that “[t]he legislative, executive, and supreme judicial powers of the State 

government shall be forever separate and distinct from each other,” N.C. Const. art. 

I, § 6, and defines the manner in which this three-branch governmental structure 

should operate in the budgetary context by providing that “[t]he Governor shall 

prepare and recommend to the General Assembly a comprehensive budget of the 

anticipated revenue and proposed expenditures of the State for the ensuing fiscal 

period,” and that “[t]he budget as enacted by the General Assembly shall be 

administered by the Governor.” N.C. Const. art. III, § 5(3). In accordance with this 
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constitutionally derived budgetary process, “the governor must recommend a 

‘comprehensive budget,’ although the legislature has no duty to adopt it as 

recommended,” with the Governor being required to administer “[w]hatever budget 

is adopted.” Orth at 118. As a result, while the Governor is required to make 

budgetary recommendations to the General Assembly and is entitled to veto budget 

legislation, he has no ultimate say about the contents of the final budget as adopted 

by the General Assembly and must faithfully administer the budget adopted by the 

General Assembly once it has been enacted.

The North Carolina budgetary process is further outlined in the State Budget 

Act, which defines “state funds” as “[a]ny moneys including federal funds deposited 

in the State treasury except moneys deposited in a trust fund or agency fund as 

described in [N.C.]G.S. [§] 143C-1-3” and directs that “[n]o State agency or non-State 

entity shall expend any State funds except in accordance with an act of appropriation 

and the requirements of the Chapter.” N.C.G.S. § 143C-1-1(b), (d)(25) (2019). In 

addition, the State Budget Act addresses the manner in which monies derived from 

federal block grant programs should be handled for budgetary purposes by placing 

them squarely within the category of “state funds” that must be administered in 

accordance with the State Budget Act:

The Secretary of each State agency that receives and 

administers federal Block Grant funds shall prepare and 

submit the agency’s Block Grant plans to the Director of 

the Budget. The Director of the Budget shall submit the 

Block Grant plans to the General Assembly as part of the 

Recommended State Budget.
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N.C.G.S. § 143C-7-2(a). Federal grant funds, including block grant funds, have long 

been an important part of the state budget, as the Governor points out in his brief.

5 

As the Court of Appeals noted, block grant funds have been appropriated by the 

General Assembly as a part of the state’s constitutional budget process since at least 

1981, which was the year in which the federal block grants programs at issue in this 

case were created. Cooper II, 837 S.E.2d at 16 (citing 1981 N.C. Sess. Laws Ch. 1282 

§ 6). And, as has already been noted, the General Statutes provide that “[a]ll funds 

belonging to the State of North Carolina, in the hands of any head of any department 

of the State which collects revenue for the State in any form whatsoever . . . shall 

daily deposit the same in some bank . . . in the name of the State Treasurer.” N.C.G.S. 

§ 147-77 (2019).

While noting that federal grant money has long comprised a substantial 

portion of North Carolina’s budget, the Governor attempts to distinguish the block 

grant funds at issue in this case by categorizing them as “custodial funds.” In support 

of this contention, the Governor directs our attention N.C. Const. art. IX, § 6, with 

his argument focusing upon that portion of the constitutional language which 

provides that “all other grants, gifts and devises that have been or hereafter may be 

 

5 According to the Governor, “federal grant funds have been an important part of the 

state budget since as early as the 1920s. For example, the State Treasurer’s report for the 

fiscal year ending June 30, 1922 showed nearly $400,000 in ‘Special Fund Receipts’ 

attributable to ‘Federal Funds,’ ” citing Report of the Treasurer of North Carolina for Seven 

Months—December 1, 1920–June 20, 1921, and for Fiscal Year—July 1, 1921–June 30, 1992 

at 12–14 , 24–25 (under “Federal Funds” headings).
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made to the State, and not otherwise appropriated by the State or by the terms of the 

grant, gift, or devise shall be paid into the State Treasury.” The Governor argues 

that, based upon this language, all other grants, gifts and devises that are otherwise 

appropriated by their own terms should not be paid into the State treasury.

A careful examination of the relevant constitutional language in the context in 

which it appears persuades us that it does not, contrary to the position espoused by 

the Governor, create a separate category of “custodial funds” that is not subject to 

legislative control. Instead, N.C. Const. art. IX, § 6, delineates four categories of 

monies that are contained within the “State school fund” and provides that each of 

these four types of funds “shall be paid into the State Treasury” and “shall be 

faithfully appropriated and used exclusively for establishing and maintaining a 

uniform system of free public schools.” For this reason, we conclude that the relevant 

constitutional provision is intended to ensure that any general grants, gifts, and 

devises that are received by the State and are not intended for any other purpose 

shall be spent for educational purposes rather than explicitly or implicitly creating a 

category of “custodial funds” which are subject to executive, rather than legislative, 

control.

Admittedly, some categories of funds are exempt from the state budgetary 

process as a statutory matter, including educational funds described in N.C.G.S. § 

143C-1-3(c) (providing that “funds established for The University of North Carolina 

and its constituent institutions pursuant to the following statutes are exempt from 
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Chapter 143C of the General Statutes and shall be accounted for as provided by those 

statutes”) and the “trust funds or agency funds” mentioned in N.C.G.S. § 143C-1-

1(d)(25). N.C.G.S. § 143C-1-3 defines a number of such funds including 

governmental, proprietary, and fiduciary and trust funds, with fiduciary funds 

consisting of “custodial funds” that are defined as “[a]ccounts for resources held by 

the reporting government in a purely custodial capacity” and that include “fiduciary 

activities that are not required to be reported in investment trust funds, pensions and 

other employee benefit trust funds, and private-purpose trust funds, as described in 

this section.” Id. at § 143C-1-3(a)(8). In essence, the funds contained in this category

are legally held by the state government in a fiduciary capacity while being equitably 

owned by the beneficiaries of the trusts or the employees who earned the funds. Id. 

at § 143C-1-3(a)(9)–(11).

According to the Governor, the block grant funds at issue in this case are 

“custodial funds” as defined in N.C.G.S. § 143C-1-3(a)(8). As the record clearly 

reflects, however, the block grant funds at issue in this case are not being held by the 

State in a fiduciary capacity for later distribution to their equitable owner. Instead, 

the relevant block grant monies have been paid by the federal government to the 

State to fund programs that will benefit North Carolina residents. As a result, we 

hold that the monies that the State derives from the relevant block grant programs 

are not “custodial funds” as that term is defined in N.C.G.S. § 143C-1-1(b).
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In addition, the federal block grant monies at issue in this case are not 

custodial funds as was the case with respect to the lien against state funds that was

before the Vermont Supreme Court in Button’s Estate v. Anderson, 112 Vt. 531, 28 

A.2d 404 (1942), which held that the payment of certain attorney’s fees that were 

owed from the State of Vermont to the estate of a deceased lawyer did not require an 

appropriation from the state legislature given that the attorney’s estate was the 

equitable owner of the funds and that a state statute “exempt[ed] funds held by the 

State in trust from the requirement that no moneys shall be paid out of the treasury 

except upon specific appropriation.” Id. at 531, 28 A.2d at 409–10. In reaching this 

conclusion, the Vermont Supreme Court held that the monies owed to the attorney’s 

estate were subject to the “trust fund exception” to the constitutional provision 

requiring state funds to be appropriated by the legislature, which

appl[ies] only to such funds, the equitable as well as the 

legal rights to which are in the State. . . . That the 

Legislature has apparently recognized this intent is 

indicated by its exemptions of trust funds and rebates 

heretofore referred to from its acts requiring 

appropriations before payment. Although the legal title to 

the whole fund no doubt is in the State, the petitioners 

have equitable rights to that portion of the same which 

represents their fee. This part in all equity and good 

conscience belongs to them. They have earned it and 

should receive it. This portion of the fund never legally and 

equitably belonged to the State as part of its public funds 

for, at the latest, when received, the lien attached to it and 

remains upon it so that it is held by the State subject to the 

same.
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Id. at 531, 28 A.2d at 410. Although the Governor argues in reliance upon this 

decision that “not all funds received by the State are part of the State treasury” and 

that the General Assembly should not be allowed to appropriate “custodial” funds as 

that term is used in Button’s Estate, the federal block grant funds at issue in this case 

do not, in our opinion, implicate the “trust fund exception” given that the State holds 

the “equitable,” as well as the “legal,” rights to the block grant monies in question in 

this case.

In the same vein, we are not persuaded that this Court’s decision in Gardner

creates a category of funds that is owned by the State while remaining outside the 

State treasury and beyond the reach of the General Assembly. In reliance upon

Gardner, the Governor argues that, in order to be part of the State treasury and 

subject to the General Assembly’s appropriation authority, monies must be “obtained 

under the power of the state to enforce collection” and “placed in the hands of the 

state treasurer to be handled by him in accordance with the provisions of a state law.” 

Gardner, 226 N.C. at 467, 38 S.E.2d at 316. In our view, the Governor’s argument 

overlooks the fact that nothing in our decision in Gardner suggests that only money 

“obtained under the power of the state to enforce collection” ever enters the State 

treasury.

In Gardner, this Court considered a statute that precluded state employees

from becoming members of the Local Governmental Employees’ Retirement System 

in the event that they received benefits from another retirement system that drew its 
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funds “wholly or partly . . . from the treasury of the State of North Carolina.” Id. at 

466, 38 S.E.2d at 315 (quoting N.C.G.S. § 128-24(2) (1946)). In seeking a 

determination that he was entitled to become a member of the Local Government 

Employees’ Retirement System despite having participated in the Law Enforcement 

Officers’ Benefit and Retirement Fund, which was financed, in part, by a $2.00 fee 

collected from every convicted state criminal defendant and “paid over to the 

treasurer of North Carolina,” id. at 467, 38 S.E.2d at 315, the plaintiff argued that 

the $2.00 fee used to finance the Law Enforcement Officers’ Benefit and Retirement 

Fund had not been drawn from the State treasury even though it had been paid to 

the State Treasurer and that such payments were, instead, “held in a special fund”

by the State Treasurer for later distribution to law enforcement officers. Id. at 467–

68, 38 S.E.2d at 316. In rejecting the plaintiff’s attempt to distinguish between the 

“treasury” and “treasurer,” this Court held that the source and purpose of the

payments was not controlling, “since it is the duty of the state treasurer ‘to receive 

all moneys which shall from time to time be paid into the treasury of this state.’ ” Id. 

at 468, 38 S.E.2d at 316 (quoting N.C.G.S. § 147-68 (1946)). Contrary to the plaintiff’s 

contention, the Court held that the $2.00 fees paid to the State Treasurer for the 

purpose of funding the Law Enforcement Officers’ Retirement and Benefit Fund were,

in fact, contained within the State treasury on the grounds that

[m]onies paid into the hands of the state treasurer by 

virtue of a state law become public funds for which the 

treasurer is responsible and may be disbursed only in 

accordance with legislative authority. A treasurer is one in 
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charge of a treasury, and a treasury is a place where public 

funds are deposited, kept and disbursed.

Id. As a result, rather than limiting the definition of “state treasury” to a location in 

which the public funds raised by the state’s own tax and other revenue-generating 

measures are collected and maintained, our decision in Gardner expanded the 

definition of the State treasury to include any funds received by the State Treasurer

in accordance with a state law regardless of the capacity in which those funds are 

being held.

In addition, we are not persuaded by the Governor’s contention that the Court 

of Appeals’ reference to N.C.G.S. § 147-77 impermissibly allows the General 

Assembly to define the meaning of the constitution. Although he has not challenged

the constitutionality of N.C.G.S. § 147-77, the Governor does contend that the Court 

of Appeals erroneously held that the General Assembly’s decision to appropriate 

funds derived from the relevant block grant programs was consistent with the 

principles enunciated in Gardner on the theory that those funds had entered the 

State treasury pursuant to N.C.G.S. § 147-77, which provides that all funds

“belonging to the state of North Carolina” must be deposited in the name of the State 

Treasurer. We do not find this argument to be persuasive for several reasons.

As an initial matter, we do not, for the reasons set forth above, read Gardner

as holding that the State treasury consists of nothing more than the proceeds of state 

taxes, penalties, fines, and other revenue-generating devices. In addition, we do not 

believe that N.C.G.S. § 147-77 allows the General Assembly to define the “State 
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treasury” or the “State Treasurer” as a constitutional matter and acknowledge that 

the terms and expressions used in the State constitution must necessarily have a

meaning separate and apart from the manner in which the General Assembly seeks 

to construe them. On the other hand, an act of the General Assembly is constitutional

if “the Constitution contains no prohibition against it.” Town of Boone, 369 N.C. at 

130, 794 S.E.2d at 714. In our view, rather than conflicting with the relevant 

constitutional provisions, N.C.G.S. § 147-77 is consistent with the constitutional 

mandate that “[n]o money shall be drawn from the State treasury but in consequence 

of appropriations made by law” by directing that all funds “belonging to the State of 

North Carolina” must be deposited into the State treasury. In other words, rather 

than being repugnant to any provision of the State constitution, N.C.G.S. § 147-77

builds upon and implements the definitions of the State treasury and the State 

Treasurer found in the State constitution. See Baker v. Martin, 330 N.C. at 337, 410 

S.E.2d at 890 (concluding that this Court “will find acts of the legislature repugnant 

to the Constitution only ‘if the repugnance does really exist and is plain’ ”) (quoting 

State ex rel. Martin v. Preston, 325 N.C. 438, 448, 385 S.E.2d 473, 478 (1989)).

After a careful review of the relevant legal authorities, we have been unable to 

find any provision of the North Carolina State Constitution that creates a category of 

money that might possibly include the federal block grant monies that lies outside 

the State treasury or the General Assembly’s appropriation authority. The General 

Assembly enacted the state budget embodied in Session Law 2017-57 in accordance 
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with N.C. Const. art. III, § 5, as it was required to do so. In enacting the annual State 

budget, the General Assembly was fully entitled to disagree with the 

recommendations relating to the manner in which the funds derived from the

relevant federal block grant programs should be spent set out in the Governor’s 

recommended budget given that “the legislature has no duty to adopt [the budget] as 

recommended.” Orth at 118. Although the General Assembly did not, as a matter of 

federal law, have the authority to appropriate the federal block grant monies at issue 

in this case for a purpose that was not authorized under the relevant block grant 

statutes, the remedy for any such conduct would be for the federal government to stop 

payment of block grant monies to the State. See 42 U.S.C. § 5311 (providing that, 

“[i]f the Secretary finds . . . that a recipient of assistance under this chapter has failed 

to comply substantially with any provision of this chapter, the Secretary, until he is 

satisfied that there is no longer any such failure to comply, shall terminate payments 

to the recipient under this chapter.”); see also 42 U.S.C. § 706(b)(2) (providing that 

“[t]he Secretary may, after notice and opportunity for a hearing, withhold payment 

of funds to any State which is not using its allotment under this subchapter in 

accordance with this subchapter.”).6 As a result, we hold that the block grant funds

at issue in this case are contained in the State treasury and subject to the General 

Assembly’s appropriations authority.

 

6 The Governor does not argue that the General Assembly appropriated the relevant 

block grant monies in a manner that violated the underlying federal statutes.
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b. Separation of Powers

As we have already noted, the North Carolina State Constitution contains an 

explicit separation of powers clause, N.C. Const. art. I, § 6, and directs the Governor 

to “take care that the laws be faithfully executed,” N.C. Const art. III, § 5(4). “[T]he 

separation of powers doctrine is well established under North Carolina law.” Bacon 

v. Lee, 353 N.C. 696, 715, 549 S.E.2d 840, 853 (2001) (citing, inter alia, State ex rel. 

Wallace v. Bone, 304 N.C. 591, 609, 286 S.E.2d 79, 89 (1982)). A violation of the 

separation of powers clause occurs when one branch of government attempts to 

exercise the constitutional powers of another or when “the actions of one branch 

prevent another branch from performing its constitutional duties.” McCrory, 368 

N.C. at 645, 781 S.E.2d at 256. In determining whether a separation of powers

violation has occurred, this Court must “examine the text of the constitution, our 

constitutional history, and this Court’s separation of powers precedents.” Id. at 644, 

781 S.E.2d at 255. More specifically, when analyzing a claim that the legislative 

branch has attempted to usurp the executive branch’s constitutional authority, we 

examine whether the legislature has “unreasonably disrupt[ed] a core power of the 

executive.” Id. at 645, 781 S.E.2d 256 (quoting Bacon, 353 N.C. at 715, 549 S.E.2d at

853).

We have examined whether the General Assembly has unconstitutionally 

attempted to interfere with the authority of the executive branch to faithfully execute 

the law in several relatively recent cases. In State ex rel. McCrory v. Berger, this 
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Court held that the General Assembly had violated the separation of powers clause

when it enacted a statute giving itself the authority to appoint a majority of voting 

members to three state commissions, each of which were determined to be “executive 

in character,” given that they were responsible for executing various state 

environmental laws by promulgating oil and gas rules, issuing mining permits, and 

deciding whether surface coal ash impoundments should be closed. 368 N.C. at 645–

47, 781 S.E.2d at 256–257. In reaching this result, we reasoned that the Governor 

needed to have “enough control” over these executive commissions in order to fulfill 

his constitutional duty to faithfully execute the laws and that the relevant statutory 

provisions impermissibly impaired his ability to do so by preventing him from 

appointing a majority of the commissions’ members, restricting him from removing 

any of the members in the absence of a showing of cause, and allowing the 

commissions to operate outside of his supervision and control. Id. at 646, 781 S.E.2d 

at 256–57. Similarly, in State ex rel. Wallace v. Bone, this Court held that the

enactment of a statute appointing sitting legislators to an executive agency charged 

with issuing permits and investigating issues arising from the administration of air 

and water pollution laws constituted an impermissible encroachment upon the 

Governor’s authority to see that the laws were faithfully executed. 304 N.C. 591, 

608–09, 286 S.E.2d 79, 88–89 (1982). In reaching this conclusion, the Court noted 

that the enforcement of environmental laws bore no relation “to the function of the 

legislative branch of government, which is to make laws.” Id. at 608, 286 S.E.2d at 
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88. As a result, this Court has not hesitated to step in to preclude impermissible 

violations of the separation of powers and faithful execution clauses in appropriate 

instances.

In urging us to determine that this case involves a separation of powers 

violation, the Governor asserts that this Court’s decision in Cooper I establishes that 

the “faithful execution” clause found in N.C. Const. art. III, § 5(4) “contemplate[s]

that the Governor will have the ability to affirmatively implement the policy 

decisions” made by the “executive branch agencies subject to his or her control.” 370 

N.C. at 415, 809 S.E.2d at 112. In Cooper I, the Court held that legislation creating 

a Bipartisan State Board of Elections and Ethics Enforcement caused a separation of 

powers violation, id. at 422, 809 S.E.2d at 116, by requiring the Governor to appoint

eight members to that board, with four appointments to be made from two lists

prepared by “the State party chair[s] of the two political parties with the highest 

number of registered affiliates,” none of whom could be removed in the absence of

“misfeasance, malfeasance, or nonfeasance,” id. at 396, 809 S.E.2d at 100–01, and 

precluding the appointment of a new Executive Director until approximately two 

years had elapsed. Id. at 416, 809 S.E.2d at 112. After concluding that the agency in 

question “clearly perform[ed] primarily executive, rather than legislative or judicial, 

functions,” given its responsibility for executing laws relating to “elections, campaign 

finance, lobbying, and ethics,” id. at 415, 809 S.E.2d at 112, we found that the General 

Assembly had unconstitutionally interfered with the Governor’s duty to ensure that 
COOPER V. BERGER

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the laws were faithfully executed by requiring him to “appoint half of the commission 

members from a list of nominees consisting of individuals who are, in all likelihood, 

not supportive of, if not openly opposed to, his or her policy preferences” while limiting 

his ability to supervise the agency and remove its members. Id. at 418, 809 S.E.2d 

at 114.

Although the Court did refer to the Governor’s “interstitial” policymaking

authority in the course of invalidating the statutory provisions governing the 

Bipartisan State Board, the authority to which we referred in Cooper I was delegated 

to, rather than inherently possessed by, the Governor. In other words, our decision 

in Cooper I held that, having delegated “interstitial” discretionary authority to make 

policy decisions to the executive branch rather than making those policy decisions 

itself, the General Assembly was not then entitled to “impermissibly interfere” with 

the manner in which the Governor opted to execute the authority that had been

granted to the executive branch by the General Assembly. Id. at 422, 809 S.E.2d at 

116. In the present instance, however, the General Assembly has not delegated the 

authority to determine how the relevant federal block money should be spent to 

anyone; instead, it made the underlying policy decisions itself by appropriating the 

monies made available to the State through the relevant federal block grant programs 

through the enactment of legislation establishing the annual state budget. As a 

result, nothing in Cooper I provides any support for the Governor’s state 

constitutional separation of powers claim.
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In addition, the Governor argues that his duty to faithfully execute the laws 

includes an obligation to ensure that the monies received by the State from the 

relevant federal block grant programs are spent appropriately on the theory that his 

duty to faithfully execute the laws “includes not only the execution of state laws, but 

also the responsibility to enforce federal laws and regulations.” In other words, the 

Governor argues that his obligation to ensure that the distribution of federal block 

grant monies satisfies “the requirements and conditions” of the federal statutes 

leaves “no room” for appropriation of the funds in question by the General Assembly. 

Although the Governor’s argument has some surface appeal, it overlooks the fact that 

nothing in the relevant federal statutory provisions prescribes the manner in which 

each individual state must determine how the relevant federal block grant monies 

are distributed. Instead, the applicable federal statutes leave that issue for 

determination under state law. And, as we have already established, the North 

Carolina State Constitution provides that the appropriation authority lies with the 

General Assembly rather than with the Governor. See Rhyne,, 358 N.C. at 169–70, 

594 S.E.2d at 8–9 (determining that the General Assembly was the “appropriate 

forum” for implementing policy changes given that it was “well equipped to weigh all 

the factors surrounding a particular problem, balance competing interests, provide 

an appropriate forum for a full and open debate, and address all of the issues at one 

time” (cleaned up)).
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Finally, the Governor relies upon the decision of the Court of Appeals in

Richmond Cty. Bd. of Educ. v. Cowell, 254 N.C. App. 42, 803 S.E.2d 27 (2017), in 

support of his separation of powers argument. In that case, the Court of Appeals 

held, as a general proposition, that the General Assembly is required to “appropriate 

funds” and the executive branch is responsible for implementing the relevant 

legislative decision by disbursing the money in accordance with the General 

Assembly’s instructions. 254 N.C. App. 422, 423, 803 S.E.2d 27, 29 (2017). In 

addition, the Court of Appeals stated that “[a]ppropriating money from the State 

treasury is a power vested exclusively in the legislative branch” and that the judicial 

branch lacked the authority to “order State officials to draw money from the State 

treasury.” Id. at 426–27, 803 S.E.2d at 31. Similarly, while the executive branch 

does have the authority under the relevant provisions of the North Carolina State 

Constitution to faithfully execute the laws by submitting disbursement requests to 

the federal government and paying out the block grant funds in a lawful way, nothing 

in either state or federal law makes the executive branch responsible for determining 

how the monies derived from the relevant federal block grant programs should be 

spent. As a result, for all of these reasons, we hold that the enactment of Session Law 

2017-57 did not violate the separation of powers or faithful execution clauses of the 

North Carolina State Constitution.

c. “Custodial Funds”
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Finally, the Governor urges us to adopt the “custodial fund” test that has been 

adopted in several other jurisdictions, citing six cases in which the appellate courts 

in other states have found that federal grant money was not subject to the state 

legislature’s appropriation authority. See Lamm I, 700 P.2d at 524–25 (Colo. 1985); 

Opinion of the Justices to the Senate, 375 Mass. at 854, 378 N.E.2d at 436; In re Okla. 

ex rel. Dep’t of Transp., 646 P.2d at 609–10; State ex rel. Sego v. Kirkpatrick, 86 N.M. 

359, 370, 524 P.2d 975, 986 (1974); Navajo Tribe v. Ariz. Dep’t of Admin., 111 Ariz. 

279, 528 P.2d 623 (1974); Tiger Stadium Fan Club v. Governor, 217 Mich. App. 439,

553 N.W.2d 7 (1996). However, as the Governor candidly notes in his brief, there are 

other decisions around the country that reach a different result and the decisions

upon which he relies were rendered under constitutional provisions and traditions 

that differ from those that exist in North Carolina. In light of our inability to find 

anything in the language or history of the North Carolina State Constitution that 

provides any basis for recognizing the existence of such a test, we decline to accept 

the Governor’s invitation to adopt the “custodial funds” test or to hold that the 

executive branch, rather than the legislative branch, has the constitutional authority 

to determine the manner in which the funds derived from the relevant block grant 

programs are distributed in North Carolina.

III. Conclusion

Thus, for the reasons set forth above, we hold that the Court of Appeals did not 

err by upholding the trial court’s decision to grant the legislative defendants’ motion 
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Opinion of the Court

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for judgment on the pleadings and to dismiss the two claims that are at issue in this 

case. As a result, the Court of Appeals’ decision is affirmed.

AFFIRMED.
Justice EARLS dissenting.

By this appeal, the Governor seeks to do something which should not be 

controversial: to ensure that funds applied for by state executive agencies and 

obtained through federal programs are spent consistently with the applications for 

those funds. The Governor, having obtained federal funds through three block grant 

programs, submitted a proposed budget which sought to direct those funds in 

compliance with the State Budget Act. See N.C.G.S. § 143C-7-2(a) (2019). However, 

the General Assembly passed a budget, over the Governor’s veto, which redirected 

certain portions of those funds, as the majority has described. The General Assembly 

exceeded its authority when it did so. Because, in my view, the General Assembly 

encroached on the Governor’s authority in violation of our constitution’s separation 

of powers clause, I respectfully dissent.

The Governor, through state executive agencies, administers all three of the 

federal block grants at issue in this case. Those programs are the Community 

Development Block Grant (CDBG) program, the Substance Abuse Block Grant 

(SABG) program, and the Maternal and Child Health Block Grant (MCHBG) 

program. Cooper v. Berger, 837 S.E.2d 7, 10 (N.C. Ct. App. 2019) (Cooper II). Each 

program is administered at the state level by an executive agency. The CDBG 

program is administered by the North Carolina Department of Commerce (DOC). The 
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Earls, J., dissenting

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MCHBG and SABG programs are both administered by the North Carolina 

Department of Health and Human Services (NC DHHS). 

All three of the block grant programs work similarly. In each case, the state 

executive agency administering the program applies to its federal counterpart and 

requests funding. In each case, the funds are held by the federal government until 

they are ready to be used. In each case, the approved funds are transmitted from the 

federal agency to the state agency, and then to the subgrantee. As a result, the federal 

block grant funds do not sit in state accounts ready to be used for the state’s general 

purposes. Instead, they pass through state accounts on their way from the federal 

government to the specific subgrantees for which they are earmarked.

Significantly, in each case the executive agencies administer the federal block 

grant programs pursuant to either state or federal legislative enactment. For 

example, DOC’s administration of the CDBG program is pursuant to discretionary 

authority laid out in the statute that describes its functions. See N.C.G.S. § 143B431(d) (“The Department of Commerce, with the approval of the Governor, may apply 

for and accept grants from the federal government and its agencies . . . and may 

comply with the terms, conditions, and limitations of such grants in order to 

accomplish the Department’s purposes.”). Similarly, NC DHHS administers the 

MCHBG program pursuant to federal legislative authority. See 42 U.S.C. § 709(b). 

Likewise, NC DHHS administers the SABG program pursuant to federal legislative 

authority. See 42 U.S.C. § 300x-32(b)(1)(A)(i) (requiring a “single State agency” be 
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Earls, J., dissenting

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responsible for administering the program); see also N.C.G.S. § 143C-7-2(a) (referring 

to “each State agency that receives and administers federal Block Grant funds”). 

Against this backdrop, the General Assembly’s diversion of a portion of the 

block grant funds toward its own priorities was an unconstitutional encroachment on 

the Governor’s authority, in violation of the separation of powers principles laid out 

in our constitution. “The legislative, executive, and supreme judicial powers of the 

State government shall be forever separate and distinct from each other.” N.C. Const. 

art. I, § 6. Where “one branch exercises power that the constitution vests exclusively 

in another branch,” we have stated that it is “[t]he clearest violation of the separation 

of powers clause.” State ex rel. McCrory v. Berger, 368 N.C. 633, 645, 781 S.E.2d 248, 

256 (2016). 

Here, the disposition of the block grant funds is firmly within the Governor’s 

authority to determine. The Governor is required by our constitution to “take care 

that the laws be faithfully executed.” N.C. Const. art. III, § 5. This provision both 

“contemplat[es] that the Governor will have the ability to preclude others from forcing 

him or her to execute the laws in a manner to which he or she objects” and “that the 

Governor will have the ability to affirmatively implement the policy decisions that 

executive branch agencies subject to his or her control are allowed, through 

delegation from the General Assembly to make.” Cooper v. Berger, 370 N.C. 392, 415, 

809 S.E.2d 98, 111–12 (2018) (Cooper I). As to the substance of the Governor’s duty, 

it extends to upholding both state and federal law. See, e.g., N.C. Const. art. III, § 4 
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Earls, J., dissenting

-4-

(“The Governor, before entering upon the duties of his office, shall, before any Justice 

of the Supreme Court, take an oath or affirmation that he will support the 

Constitution and laws of the United States and of the State of North Carolina, and 

that he will faithfully perform the duties pertaining to the office of Governor.”). 

The Governor, then, is required to give effect to the federal and state laws 

pertaining to the federal block grants, and the General Assembly violates the 

separation of powers when it either (a) attempts to usurp that role, or (b) prevents 

the Governor from implementing policy decisions which are granted to executive 

branch agencies by statute. The General Assembly has done both. For each of the 

federal block grants, discretionary spending decisions are delegated to the Governor. 

As to the CDBG program, DOC is explicitly authorized to “apply for and accept grants 

from the federal government” and to use those grants “in order to accomplish the 

Department’s purposes.” N.C.G.S. § 143B-431(d). As to the MCHBG program, NC 

DHHS is charged with submitting an application to the federal government which 

states how the block grant funds will be used. 42 U.S.C. § 705(a); id. § 709(b). The 

funds issued under the program must then be spent in accordance with that 

application. Id. § 704(a). Finally, as to the SABG program, NC DHHS, as North 

Carolina’s dedicated agency, is charged with “administration of the program.” Id. § 

300x-32(b)(1)(A)(i). Furthermore, the statute requires that the “chief executive officer 

of the State” certify covenants between the state and the federal government 

regarding certain program requirements. Id. § 300x-32(a)(3). 
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Earls, J., dissenting

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For each program, it is the Governor’s duty to ensure compliance with the law. 

However, by subverting the Governor’s funding priorities where discretion is placed 

in the executive, and by obstructing the Governor’s ability to ensure that 

expenditures match requests, inhibiting compliance with the reporting requirements 

of the federal programs, the General Assembly both frustrates the Governor’s “ability 

to preclude others from forcing [him] to execute the laws in a manner to which [he] 

objects” and the Governor’s “ability to affirmatively implement the policy decisions” 

allowed through statutory enactment. See Cooper I, 370 N.C. at 415, 809 S.E.2d at 

112. 

By contrast, the disposition of these funds is not within the General Assembly’s 

authority. The General Assembly’s supreme authority over the public purse derives 

from (current) Article V, Section 7, of the North Carolina State Constitution, which 

states that “[n]o money shall be drawn from the State treasury but in consequence of 

appropriations made by law.” N.C. Const. art. V, § 7(1); see State v. Davis, 270 N.C. 

1, 14, 153 S.E.2d 749, 758 (1967). As a result, money must be in the state treasury to 

trigger the legislature’s appropriations power. However, the federal block grants are 

not part of the state treasury.

The state treasury consists of funds obtained by the state pursuant to its 

collection powers. Gardner v. Bd. of Trs., 226 N.C. 465, 467, 38 S.E.2d 314, 316 (1946) 

(stating that money is part of “the treasury of the state” where it “is obtained under 

the power of the State to enforce collection, and is placed in the hands of the State 
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Earls, J., dissenting

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Treasurer to be handled by him in accordance with the provisions of a State law”). In 

Gardner, we considered whether a city policeman was eligible to join the Local 

Governmental Employees’ Retirement System. Id. at 466, 38 S.E.2d at 315. At the 

time, state law excluded from that retirement system persons receiving retirement 

allowances from “funds drawn from the treasury of the State of North Carolina.” Id.

We concluded that the police officer, who was receiving retirement benefits funded 

partly by a two-dollar charge appended to every criminal conviction, id. at 467, 38 

S.E.2d at 315, could not belong to both retirement systems. Id. at 468, 38 S.E.2d at 

316. Central to our analysis was our observation, referring to the conviction-funded 

retirement system, that “[t]he money is obtained under the power of the State to 

enforce collection, and is placed in the hands of the State Treasurer to be handled by 

him in accordance with the provisions of a State law.” Id. at 467, 38 S.E.2d at 316. It 

was of no moment, we determined, that the funds were not “derived from general 

taxation.” Id. Instead, because the funds were collected “by virtue of a State law” and 

came “into the hands of the State Treasurer,” they were part of the state treasury. Id.

The funds at issue in this case, of course, were not “obtained under the power 

of the State to enforce collection.” See id. Instead, they were requested by state 

executive branch agencies and received directly from the federal government. As a 

result, they are outside of the General Assembly’s appropriations power because they 

were not part of the state treasury. N.C. Const. art. V, § 7(1) (“No money shall be 

drawn from the State treasury but in consequence of appropriations made by 
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Earls, J., dissenting

-7-

law . . . .”); see Davis, 270 N.C. 1, 14, 153 S.E.2d 749, 758 (stating that the General 

Assembly’s supreme legislative power over the public purse derives from this 

provision, formerly N.C. Const. art. XIV, § 3). 

The majority fundamentally misunderstands our decision in Gardner, claiming 

that the decision expanded the definition of state treasury to include any funds held 

by the state. This interpretation ignores that all of the funds in Gardner, which we 

held were part of the state treasury, were collected pursuant to state law. Gardner, 

226 N.C. at 467, 38 S.E.2d at 315. The distinction in Gardner was between funds 

collected pursuant to the general taxing power and funds collected pursuant to other 

state law. Id. at 467, 38 S.E.2d at 315–16. All funds “obtained under the power of the 

State to enforce collection” and “placed in the hands of the State Treasurer to be 

handled by him in accordance with the provisions of a State law” are part of the state 

treasury. Id. at 467, 38 S.E.2d at 316. This is consistent with our observation that 

“[t]he power to appropriate money from the public treasury is no greater than the 

power to levy the tax which put the money in the treasury.” Maready v. City of 

Winston-Salem, 342 N.C. 708, 714, 467 S.E.2d 615, 619 (1996) (quoting Mitchell v. 

North Carolina Indus. Dev. Fin. Auth., 273 N.C. 137, 143, 159 S.E.2d 745, 749–50 

(1968)). The General Assembly’s power to appropriate funds is limited by its power 

to put funds into the treasury. As a result, the General Assembly has no power over 

funds that it did not collect. 
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Earls, J., dissenting

-8-

The idea that some funds held by the state are not subject to the legislative 

appropriations power is enforced in our state constitution. For example, article IX, 

section 6 exempts from the General Assembly’s appropriation power “grants, gifts, 

and devises” which have been “made to the State” and have been “appropriated . . . 

by the terms of the grant, gift, or devise.” N.C. Const. art. IX, § 6. While the majority 

observes, correctly, that this section ensures that gifts not intended for another 

purpose are spent on education, the majority wholly fails to address the fact that our 

state constitution explicitly refers to funds held by the state in a custodial capacity, 

and excludes those funds from the power of legislative appropriations. 

Moreover, the status of the block grant funds as “custodial funds” is affirmed 

by the “information about the grants, their purposes, for whom they are intended, 

and the conditions placed on them by Congress.” See In re Separation of Powers, 305 

N.C. 767, 295 S.E.2d 589 (1982). As noted previously, the block grant funds are held, 

not in state accounts, but by the federal government until they are ready to be used. 

The record evidence indicates that they then pass through the state executive agency 

on their way to their ultimate recipient, the subgrantee. Of particular significance is 

the fact that the federal government exercises substantial oversight over the block 

grant funds. For example, in February 2017, HUD wrote to DOC to express concern 

that CDBG funds were being spent in accordance with the plan that DOC had sent 

to HUD. Similarly, Congress requires that funds issued from the MCHBG program 

be spent consistently with the funding application submitted by NC DHHS. 42 U.S.C. 
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Earls, J., dissenting

-9-

§ 704(a). The ultimate purpose of the block grant funds, the insignificant amount of 

time spent in state accounts, and the federal oversight mandated by Congress all 

suggest that the funds are not generally for the benefit of the state, but are instead 

temporarily held by the state for the benefit of others, making them custodial funds 

not subject to the legislative power of appropriation.

Such a result does not give the executive branch unlimited authority over all 

federal funds. The majority notes that block grant programs and other federal grants 

made up 28.4% of the state budget in 2017. However, where Congress specifically 

delineates legislative authority over federal funds, the General Assembly has an 

independent basis for exercising power over them—the terms of the grant require it.

In that case, there is no need for the legislature to resort to its constitutional 

authority over the treasury.

The conclusion that these particular funds are not part of the state treasury is 

consistent with the outcomes reached by a number of our sister courts. For example, 

the constitution of the State of Colorado provides that “[n]o moneys in the state 

treasury shall be disbursed therefrom by the treasurer except upon appropriations 

made by law, or otherwise authorized by law, and any amount disbursed shall be 

substantiated by vouchers signed and approved in the manner prescribed by law.” 

Colo. Const. art. V, § 33. However, the Colorado Supreme Court determined that 

“[t]he power of the General Assembly to make appropriations relates to state funds” 

and that “federal contributions are not the subject of the appropriative power of the 
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Earls, J., dissenting

-10-

legislature. MacManus v. Love, 499 P.2d 609, 610 (Colo. 1972). In a later case 

involving federal block grants, that Court determined, after reviewing the structure 

of the federal block grant programs at issue, that the block grants not requiring 

matching funds from the state were subject to executive, not legislative authority. 

Colo. Gen. Assembly v. Lamm, 738 P.2d 1156, 1173 (Colo. 1987) (Lamm II).

Similarly, the constitution of New Mexico provides that “money shall be paid 

out of the treasury only upon appropriations made by the legislature.” N.M. Const. 

art. IV, § 30. Even so, the New Mexico Supreme Court held that the legislature “has 

no power to appropriate and thereby endeavor to control the manner and extent of 

the use or expenditure of Federal funds” which had been granted to the state’s 

universities. State ex rel. Sego v. Kirkpatrick, 1974-NMSC-059, ¶ 51, 86 N.M. 359, 

370, 524 P.2d 975, 986. 

The majority dismisses these precedents as not relevant on the ground that 

“these decisions were rendered under constitutional provisions and traditions that 

differ from those that exist in North Carolina.” This facile rationale fails to explain 

why the statement in our constitution that “[n]o money shall be drawn from the State 

treasury but in consequence of appropriations made by law”, N.C. Const. Art. V, §7, 

should mean something different from the statement that “money shall be paid out 

of the treasury only upon appropriations made by the legislature.” N.M. Const. art. 

IV, §30. It further fails to explain what about our state traditions would mandate a 
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Earls, J., dissenting

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different interpretation. At the end of the day, this is about whether this Court will 

honor the principles of separation of powers set out in our state constitution.

The particular federal block grants at issue in this case are appropriately 

subject to the discretion of the executive. In reaching the opposite conclusion, the 

majority ignores our precedent defining the extent of executive authority in the face 

of delegated authority from our state and federal legislatures, misinterprets our prior 

caselaw regarding the limits on legislative authority, and ignores the guidance of 

other courts who have faced this same issue. While doing so, the majority permits the 

legislature to upset settled expectations between this state and the federal 

government about how the block grant programs will be used and threatens the 

independence of the separate branches of government in this state. I therefore 

respectfully dissent.