AG, governor urge top NC court to reject hog ‘slush fund’ appeal
North Carolina Attorney General Jeff Jackson, Gov. Josh Stein, and Controller Nels Roseland are asking the state’s highest court not to take another look at a case involving the AG’s environmental grant program. Critics have labeled the program a hog farm “slush fund.”
The state Appeals Court ruled last month that $12 million in the fund can remain with the AG’s grant program. That decision overturned a trial judge’s order to send the money instead to North Carolina schools.
Now Jonathan Burris, a pastor suing on behalf of the Randolph County school board, hopes the North Carolina Supreme Court will take the case. He filed a Feb. 11 petition with the high court.
Burris’ appeal “should be dismissed and his petition denied,” lawyers with Jackson’s state Department of Justice wrote in a court filing Tuesday. The DOJ lawyers represent the attorney general, governor, and controller.
“In this lawsuit, Mr. Burris has advanced a series of arguments to try to show that our legislature has not approved DOJ’s use of the program’s funding to award environmental grants,” the Justice Department lawyers wrote. “Below, a panel of the Court of Appeals unanimously rejected those arguments.”
Burris claims the Appeals Court’s decision “allows executive officials to ‘requisition funds from the State treasury without a legislative appropriation.’ He also claims that the decision lets those officials define the meaning of appropriations unilaterally, through ‘post hoc explanations’ about their meaning,” the court filing continued.
“Mr. Burris fails to show that review is needed,” Justice Department lawyers argued. “His claims about the decision below are based on mischaracterizations of its holdings and the governing law in this area. In reality, the Court below simply reached the unsurprising conclusion that DOJ’s use of the program’s funding to award grants has legislative sanction. And when the decision below is assessed on its actual terms, it lacks the significance needed to justify review.”
The state Supreme Court petition reached a different conclusion about the January appellate ruling.
“The Court of Appeals’ decision cannot be reconciled with this Court’s holding in Cooper v. Berger, which established that the General Assembly possesses ‘full and exclusive control over the allocation of the State’s expenditures,’” Burris’s lawyers wrote. “The Court of Appeals allowed affidavits from executive branch employees explaining why they chose a particular budget code to override the plain language of an appropriation by the General Assembly, even though no legislator ever saw or heard those explanations before enacting the budget.”
“The Court of Appeals also treated a statute that does not meet the State Budget Act’s definition of an appropriation as an appropriation anyway,” Burris’ lawyers continued. “This holding allows the executive branch to circumvent the General Assembly’s exclusive appropriation authority through private understandings not evident to legislators and contradicts the fundamental principle that ‘[n]o money shall be drawn from the State treasury but in consequence of appropriations made by law.’”
A unanimous Jan. 7 Appeals Court decision allowed Jackson’s office to maintain the money for an environmental grant program started by his predecessors.
Hog producer Smithfield Foods has been paying the state $2 million each year since the early 2000s as part of a deal reached in 2000 with former AG Mike Easley. At the time, Smithfield faced public scrutiny in North Carolina over potential environmental damage linked to hog lagoon waste spills.
The state Supreme Court has upheld the arrangement more than once. But a trial judge ruled in 2024 that $12 million Smithfield paid from 2019-25 should fund environmental enhancements in schools rather than remain with the AG’s grant program.
Burris had sued on behalf of his local school system to divert the funds from the attorney general.
Appellate Judge Allegra Collins cited the state Supreme Court’s 2020 decision in New Hanover County Board of Education v. Stein, also labeled “Stein I,” in her majority decision against Burris.
“The parties do not contest that, pursuant to the North Carolina Supreme Court’s decision in Stein I, ‘the payments contemplated by the [A]greement did not constitute penalties for purposes of article IX, section 7,’” Collins wrote. “Accordingly, the payments received from Smithfield pursuant to the Agreement were not required to be deposited into the Civil Penalty and Forfeiture Fund to be ‘faithfully appropriated by the General Assembly’ to the State Public School Fund and ‘used exclusively for maintaining free public schools.’”
“Plaintiff argues that ‘[t]he only appropriation for fiscal years 2021-2025 is to “seized and forfeited assets,” an appropriation to an Article IX forfeiture fund,’” Collins added. “Accordingly, Plaintiff argues, the payments received from Smithfield pursuant to the Agreement for those years must be used exclusively for public schools.”
Burris “erroneously conflates” the state account designated for the environmental grants with the civil penalty fund devoted to schools, Collins explained.
“Because the funds were not placed into the Civil Penalty and Forfeiture Fund authorized by Article IX, Section 7 and N.C. Gen. Stat. §§ 115C-457.1 to -475.3, the trial court erred by concluding that the EEG funds must be used exclusively for public schools,” Collins wrote.
Collins also challenged Burris’ argument that defendants “violated Article V of the North Carolina Constitution and Chapter 143C of the General Statutes” by spending the Smithfield money from 2021 through 2025 without an appropriation.
“Plaintiff consistently argues, however, that the General Assembly did appropriate the funds for fiscal years 2021-25,” she wrote. “Plaintiff’s appropriations clause argument is another way of asserting his civil penalty clause argument – to wit, because the EEG funds were appropriated to ‘an Article IX forfeiture fund,’ the funds must have been used exclusively for public schools.”
“[T]he EEG funds were not placed into the Civil Penalty and Forfeiture Fund authorized by Article IX, Section 7 and implemented by N.C. Gen. Stat. §§ 115C-457.1 to -475.3, and the trial court thus erred by concluding that the EEG funds must be used exclusively for public schools,” Collins explained.
The Appeals Court rejected Burris’ arguments about money Smithfield paid from 2019 to 2021.
“Smithfield’s gift to the State is not a general gift that was not intended for any other purpose and, thus, is not subject to the gift clause,” Collins wrote. “Instead, the terms of the Agreement expressly direct Smithfield’s gift to ‘be paid to such organizations or trusts as the Attorney General will designate’ to be used ‘to enhance the environment of the State, including eastern North Carolina, to obtain environmental easements, construct or maintain wetlands and such other environmental purposes, as the Attorney General deems appropriate.’”
“Given the General Assembly’s mandate and the specific terms of the Agreement, the gift clause does not require the EEG funds to be used exclusively for public schools. The trial court erred in holding otherwise,” Collins added.
Judges Jeff Carpenter and Julee Flood joined Collins’ opinion.
Jackson’s office challenged the trial judge’s ruling during oral arguments last September.
“This case calls on this court to consider the validity of a longstanding environmental grant program that has greatly benefited our state for more than two decades,” argued state Deputy Solicitor General Jim Doggett. “Despite those benefits, this case also unfortunately marks the latest in a series of legally meritless attempts to redirect the funding of the program away from its intended source.”
The case’s plaintiff makes “strained arguments that, if accepted, would profoundly disrupt both appropriations enacted by our General Assembly and also charitable giving to the state,” Doggett said.
“There was a time in North Carolina when the attorney general or other state officers could hold state funds in private bank accounts,” argued Dan Gibson, Burris’ lawyer. “That time was up until 2019.”
That year the General Assembly approved a law “requiring all funds belonging to the state of North Carolina to be placed into the state treasury,” Gibson added. Closing a “loophole,” state lawmakers guaranteed that state money would be spent only with a legislative appropriation.
“So the question in this case is what the legislative appropriation is,” Gibson argued. “The legislative appropriation is clear: The appropriation is to seized and forfeited assets.”
The state constitution required proceeds of seized and forfeited assets to head to North Carolina’s schools, Gibson explained.
“The decisive question in this case is whether the Attorney General can requisition money from the State Treasury without any law allowing him to remove that money. Our Constitution says the answer is ‘no,’” Burris’ lawyers wrote in June 2025.
“The Attorney General cannot evade the Constitution by contract,” Burris’ lawyers added. “The power of the purse belongs to the General Assembly alone. For fiscal years (‘FY’) 2019-2021, the General Assembly did not appropriate the funds at issue. Article IX of our Constitution says unappropriated gifts go to public schools.”
“When the General Assembly appropriated the funds at issue in FY 2021-2025, it incorporated the Governor’s recommended base budget,” the court filing continued. “The Governor’s base budget appropriated the funds to ‘seized and forfeited assets.’ The Attorney General’s unstated and unseen reasons for using the ‘seized and forfeited assets’ budget code cannot alter the plain meaning of the budget and the Constitution. Our Constitution says seized and forfeited assets go to public schools.”
Stein served as attorney general when Wake County Superior Court Judge Graham Shirley issued the 2024 decision against the AG’s office. Stein appealed that decision.
Jackson had replaced Stein as attorney general by the time the AG’s office submitted its opening brief to appellate judges in May 2025. The brief emphasized the environmental grant program’s benefits.
“Under that program, the Department of Justice has awarded grants to fund projects that safeguard our State’s environment, like conserving wildlife habitats and restoring shorelines,” the court filing explained. “The funding for the program comes from Smithfield Foods, which agreed to fund the program in a 2000 agreement. Smithfield’s funding of the program serves as a gift to the State. That gift has allowed Smithfield to attempt to rehabilitate its reputation, after it suffered years of bad publicity due to spills of its hog waste into the State’s waters.”
The state Supreme Court rejected earlier attempts to force the attorney general to transfer money from the grant fund to schools. Burris filed a new suit in 2023 after the high court’s last ruling.
“A superior court agreed with the taxpayer, granting him summary judgment on the basis of several novel legal theories,” state lawyers argued. “The superior court held that even though the grant program’s funding had not settled any civil penalties, the civil‐penalty clause still required that the funding be spent on schools anyway.”
The legal dispute involves $12 million Smithfield Foods has paid to the state since July 2019. Shirley determined in July 2024 that the money must be used to support North Carolina’s public schools.
“Any money received by the State from Smithfield Foods pursuant to the Agreement must be appropriated by the General Assembly in such a manner as to protect Smithfield Foods’ purpose. The purpose of these payments is environmental enhancement,” Shirley wrote.
State lawmakers made no appropriations of the funds from 2019 to 2021. Since then, the money has been placed into an account designated for seized and forfeited assets. Yet Stein had access to the funds to pay for environmental grants chosen by his office.
“When the funds from the Smithfield Agreement were not appropriated for fiscal years 2019-2021, N.C. Const. Art. IX, § 6 mandates that these funds must be appropriated and used as required by that section but may only be used in a manner consistent with the purposes set forth in the Smithfield Agreement: environmental enhancement,” Shirley wrote.
“For fiscal years 2021-2025, the General Assembly was not required to appropriate these funds into an account for seized and forfeited assets,” the order continued. “The appropriation of the funds into an account for seized and forfeited assets does not convert the nature of the funds into clear proceeds of civil penalties, forfeitures, or fines. However, N.C. Const. Art. IX, § 7(b) states that ‘[m]Joneys in such State fund shall be faithfully appropriated by the General Assembly … to be used exclusively for maintaining free public schools.’”
“Given the importance our Constitution and Supreme Court have placed on providing a sound basic education to the children of this State, the Court concludes that if funds of whatever nature are placed in such account, they must be used exclusively for maintaining free public schools,” Shirley wrote.
“The Court Declares that all funds received from Smithfield Foods after July 1, 2019, must be used for the purpose of environmental enhancement in public schools,” Shirley concluded.
Gibson and Paul “Skip” Stam have represented Burris. Stam, a former top Republican state House leader, served until 2025 as a board member of the John Locke Foundation. Locke oversees Carolina Journal.
The legal dispute stemmed from a multimillion-dollar deal Easley negotiated with Smithfield Foods during his successful run for governor in 2000. Easley’s successors as attorney general controlled the money completely until 2019.
Since that time, the money has been deposited in the state treasury. Stam argued in court that Stein continued to control the money as AG through arrangements made with other state employees.
“There is still about $12 million in controversy (i.e., $2 million per year from 2020 to 2025),” according to a court filing from the plaintiffs. “The Attorney General has continued to ‘requisition’ the money from the treasury and distribute the money to his chosen grantees.”
Stein argued “that the money does not have to be appropriated by the General Assembly, nor does it have to go to public schools,” according to the court filing. Critics argue that Stein’s legal argument goes against Article V and Article IX of the state constitution.
The suit argued that Stein violated the state constitution when he “requisitioned” more than $5.1 million from the state treasury from July 2019 to November 2023. Stein requested that money after the General Assembly approved a law in 2019 treating future Smithfield payments as gifts to the state.
“When the Attorney General takes funds after a short ‘dip’ in the treasury before requisitioning them right back, his action is not a real ‘deposit,’” Burris’ lawyers argued. “It is akin to paying for groceries with a check and then, after cooking and eating dinner, stopping payment on the check before it is deposited by the grocer.”
Burris urged the court to “harmonize” Article IX of the state constitution, the original Smithfield agreement, and the 2019 state law. “That resolution is to use Smithfield’s funds to promote environmental enhancement, as and when appropriated by the General Assembly to the public schools for grants named ‘Smithfield Environmental Enhancement Grants.’”
A unanimous state Supreme Court ruled in 2022 in favor of Stein in an earlier suit targeting the Smithfield funds. At the time, the author of the high court’s opinion noted that a new lawsuit could challenge funds that reached state government after the 2019 law took effect.
Easley’s original deal with Smithfield Foods required the company “to pay each year for 25 years an amount equal to one dollar for each hog in which the Companies … have had any financial interest in North Carolina during the previous year, provided, however, that such amount shall not exceed $2 million in any year,” according to Burris’ lawsuit.
“From 2000 [through] 30 June 2019 the Attorney General deposited funds directly into an account solely within the Attorney General’s control,” the suit continued. “The Attorney General then disbursed the Agreement funds from his account to grant recipients selected in the Attorney General’s sole discretion.”
The General Assembly approved a law in 2019 — NC General Statute 147-76.1 — requiring “all funds received by the State, including cash gifts and donations, shall be deposited into the State treasury.”
After the law took effect, Stein “began depositing the Agreement funds into the State treasury a total of more than $8,150,000.00 through June of 2023,” according to the lawsuit.
A later court filing indicated total deposits topped $10.2 million by November 2023.
“Although the Attorney General began depositing Agreement funds into the State treasury, the Attorney General continued to ‘requisition’ Agreement funds from the Treasury to the Department of Justice for payments to his selected grant recipients,” the lawsuit alleged. “From 1 July 2019 to June 2023, the Attorney General has consistently requisitioned Agreement Funds without legal authority to do so.”
Burris’ lawyers argued that Stein’s actions violated the state constitution.
“Article V of the North Carolina Constitution provides that ‘[nJo money shall be drawn from the State treasury but in consequence of appropriations made by law,’” according to the lawsuit. “There are no ‘appropriations made by law’ for the drawing of Agreement funds from July 1, 2019 to the present.”
If the judge determined that an appropriation has occurred, the money should go to North Carolina’s civil penalty forfeiture fund, the suit argued. That fund benefits local school systems.
“The purpose of Article V is to ensure that the people, through their elected representatives in the General Assembly, have full and exclusive control over the allocation of the state’s expenditures. ‘The power of the purse is the exclusive prerogative of the General Assembly,’” according to the lawsuit.
“By drawing or abetting the drawing of Agreement funds from the State treasury without an appropriation, Defendants have violated Article V of the North Carolina Constitution and Chapter 143C of the General Statutes,” the plaintiffs argued.
Article IX of the state constitution focuses on education funding.
“This Court should declare that Defendants’ actions violated Article IX and deprived the public schools of these funds,” according to the lawsuit. “As part of that judgment, the Court should order all unappropriated funds placed in the State treasury after 1 July 2019 may only be appropriated to the public schools and require the Attorney General to return to the State treasury all the funds that it ‘requisitioned’ from 1 July 2019 to the present. The Court should order that such funds go to the Civil Penalty Forfeiture Fund to be used for environmental enhancement at K-12 public schools.”
The legal fight against the attorney general’s environmental grant fund started in October 2016. Francis De Luca, then-president of the Civitas Institute, went to court to have the proceeds of the fund declared a state penalty against Smithfield. As the case proceeded through the state’s legal system, courts ruled De Luca out as a plaintiff. The New Hanover County school board proceeded with the initial case after De Luca bowed out.
The Civitas Institute merged capabilities in 2021 with the John Locke Foundation.
“AG, governor urge top NC court to reject hog ‘slush fund’ appeal” was originally published on www.carolinajournal.com.
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