Cabarrus Cty. Bd. of Educ. v. Dep't of State Treasurer ( 2020 )

IN THE SUPREME COURT OF NORTH CAROLINA
No. 369PA18
Filed 3 April 2020
CABARRUS COUNTY BOARD OF EDUCATION
v.
DEPARTMENT OF STATE TREASURER, RETIREMENT SYSTEMS DIVISION;
DALE R. FOLWELL, STATE TREASURER, in his official capacity; and STEVEN
C. TOOLE, DIRECTOR, RETIREMENT SYSTEMS DIVISION, in his official
capacity
On discretionary review pursuant to N.C.G.S. § 7A-31 of a unanimous,
published decision of the Court of Appeals, 821 S.E.2d 196 (N.C. Ct. App. 2018),
affirming a judgment entered on 30 May 2017 by Judge James E. Hardin, Jr., in
Superior Court, Wake County. Heard in the Supreme Court on 9 December 2019.
Michael Crowell; and Tharrington Smith, LLP, by Deborah R. Stagner and
Lindsay V. Smith, for petitioner-appellee.
Joshua H. Stein, by Matthew W. Sawchak, Solicitor General, Blake W. Thomas,
Deputy General Counsel, Ryan Y. Park and James W. Doggett, Deputy
Solicitors General, and Katherine A. Murphy, Assistant Attorney General, for
respondent-appellants.
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Elizabeth L.
Troutman and Jill R. Wilson; and Allison Brown Schafer for North Carolina
School Boards Association, amicus curiae.
ERVIN, Justice.
This case involves a dispute between petitioner Cabarrus County Board of
Education and the Retirement Systems Division of the Department of the State
CABARRUS CTY. BD. OF EDUC. V. DEP’T OF STATE TREASURER
Opinion of the Court
Treasurer; State Treasurer Dale R. Folwell,1 acting in his official capacity; and former
executive director of the Retirement System, Steven C. Toole,2 acting in his official
capacity, concerning the manner in which the cost of pensions for certain retirees
should be funded. Respondents manage the Teachers’ and State Employees’
Retirement System, which pays eligible retired state employees a fixed monthly
pension based upon the retiree’s four highest-earning consecutive years of state
employment.
In 2014, the General Assembly enacted An Act to Enact Anti-Pension-Spiking
Legislation by Establishing a Contribution-Based Benefit Cap, S.L. 2014-88, § 1, 2014
N.C. Sess. Laws 291, which is codified, in pertinent part, at N.C.G.S. § 135-5(a3). The
Act establishes a retirement benefit cap applicable to certain employees with an
average final compensation of $100,000 or more per year whose retirement benefit
payment would otherwise be significantly greater than the contributions made by
that retiree during the course of his or her employment with the State. Id. In order
to calculate the benefit cap applicable to each retiree, the Act directs the Retirement
System’s Board of Trustees to “adopt a contribution-based benefit cap factor
1At the time that the Board of Education initiated this proceeding, Janet Cowell
served as State Treasurer. As a result of the fact that he became State Treasurer on 1
January 2017, Mr. Folwell was substituted as a named respondent in lieu of Ms. Cowell.
2 Mr. Toole was replaced as the executive director of the Retirement Systems Division
by Interim Executive Director Thomas G. Causey in May 2019. Pursuant to N.C. R. App. P.
38(c), Mr. Causey is automatically substituted as a respondent for Mr. Toole. However,
consistent with the custom of this Court, under which the caption of the case as it appeared
in the trial court is deemed controlling, we continue to list Mr. Toole as a party-respondent.
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recommended by the actuary, based upon actual experience, such that no more than
three-quarters of one percent (0.75%) of retirement allowances are expected to be
capped” and to calculate the contribution-based benefit cap for each retiring employee
by converting the employee’s total contributions to the Retirement System to a single
life annuity and multiplying the cost of such an annuity by the cap factor. Id. In the
event that the retiree’s expected pension benefit exceeds the calculated contribution-
based benefit cap, the Retirement System is required to “notify the [retiree] and the
[retiree’s] employer of the total additional amount the [retiree] would need to
contribute in order to make the [retiree] not subject to the contribution-based benefit
cap.” N.C.G.S. § 135-4(jj) (2019). At that point, the retiree is afforded ninety days
from the date upon which he or she received notice of the additional payment amount
or the date of his or her retirement, “whichever is later, to submit a lump sum
payment to the annuity savings fund in order for the [R]etirement [S]ystem to restore
the retirement allowance to the uncapped amount.” Id. The retiree’s employer is
entitled to “pay[ ] all or part of the . . . amount necessary to restore the [retiree’s]
retirement allowance to the pre-cap amount.” Id.
According to N.C.G.S. § 135-6(l), “[t]he Board of Trustees shall designate an
actuary who shall be the technical adviser of the Board of Trustees on matters
regarding the operation of the funds created by the provisions of this Chapter.”
N.C.G.S. § 135-6(l) provides that “all the assumptions used by the [Retirement]
System’s actuary, including mortality tables, interest rates, annuity factors, and
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employer contribution rates, shall be set out in the actuary’s periodic reports or other
materials provided to the Board of Trustees,” with the materials to be “accepted by
the Board [of Trustees],” N.C.G.S. § 135-6(l), and adopted by the Board of Trustees
by means of an informal board resolution memorialized in its minutes pursuant to
the Administrative Code. See 20 N.C. Admin. Code 2B.0202(a) (1981) (stating that
“[a]ctuarial tables and assumptions will be adopted by the [B]oard of [T]rustees after
the presentation of the recommendations of the actuary by including the tables, rates,
etc. in the minutes of the [B]oard [of Trustees] with the resolution adopting said
tables, rates or assumptions”).
The Board of Trustees hired Larry Langer and Michael Ribble of Buck
Consultants to serve as the “[c]onsulting [a]ctuary.” At a meeting held by the Board
of Trustees on 23 October 2014, Mr. Langer and Mr. Ribble presented certain
calculations and assumptions, including summaries of expected retirement patterns,
based upon a 2012 valuation of the Retirement System’s assets and liabilities. The
actuary then recommended a cap factor of 4.8, which the Board of Trustees
unanimously approved.
Prior to his retirement on 1 May 2015, Dr. Barry Shepherd served as the
superintendent of Cabarrus County Schools. In light of his employment history, Dr.
Shepherd was eligible to receive benefits from the Retirement System. At the time
of his retirement, the Retirement System determined that Dr. Shepherd’s pension
benefits were subject to the contribution-based benefit cap and informed both Dr.
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Shepherd and the Board of Education that an additional contribution to the
Retirement System in the amount of $208,405.81 would be required in order for Dr.
Shepherd to receive the full retirement benefit to which he would have otherwise been
entitled. Upon receiving this information, the Board of Education submitted the
required amount on Dr. Shepherd’s behalf.
On 18 October 2016, the Board of Education filed a request for a declaratory
ruling asking that the invoice and the cap factor used to calculate the amount shown
on the invoice be declared “void and of no effect because the [Board of Trustees] did
not follow the rule making procedures of . . . the Administrative Procedure Act.”
According to the Board of Education, the cap factor was “not an actuarial assumption
under 20 N.C. Admin. Code 02B.0202” and was not, for that reason, “exempt from the
rule making procedures of the [Administrative Procedure Act].” On 17 November
2016, Mr. Toole denied the Board of Education’s request on the grounds that the
Board of Trustees “ha[d] statutory authority to adopt various recommendations of its
actuary” and that its “adoption of a cap factor for the contribution-based benefit cap
. . . based upon the recommendations of its actuary, [was] not void.”
On 16 December 2016, the Board of Education filed a petition for judicial
review in the Superior Court, Cabarrus County, in which it sought a declaratory
ruling that (1) “the cap factor is a rule within the meaning of [N.C.]G.S. [§] 150B-
2(8a) and that it may be adopted by the . . . Board of Trustees and implemented by
the Retirement System[ ] . . . only by complying with the rule making procedures of
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Article 2A of the [Administrative Procedure Act]”; that (2) “the cap factor adopted by
the . . . Board of Trustees . . . is void and of no effect because of the failure of the
[Board of T]rustees to follow the rule making procedures of Article 2A of the
[Administrative Procedure Act]”; that (3) “the respondents may not implement
[N.C.]G.S. [§] 135-5(a3) until a cap factor is adopted in compliance with the rule
making procedures of Article 2A of the [Administrative Procedure Act]”; and that (4)
“the Retirement System[’s] . . . assessment of $208,405.81 against [the Board of
Education] is void because of the failure of respondents to adopt a cap factor lawfully.”
This case was subsequently transferred to the Superior Court, Wake County, by
consent of the parties.
On 25 April 2017, the Board of Education moved for summary judgment in its
favor. On 30 May 2017, the trial court entered an order granting summary judgment
in favor of the Board of Education on the grounds that (1) “[t]he Board of Trustees’
adoption of the cap factor in [N.C.]G.S. [§] 135-5(a3) is subject to rule making under
the [Administrative Procedure Act]”; (2) “respondents’ denial of petitioner’s [r]equest
for a [d]eclaratory [r]uling was in error as a matter of law”; and (3) “[t]he substantial
rights of petitioner have been prejudiced by the respondents’ decision.” As a result,
the trial court determined that the Board of Education was “entitled to have this
Court declare that the Board of Trustees’ adoption of the cap factor on October 23,
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2014, and adoption of the new factor on October 22, 2015, are void and of no effect.”3
Respondents noted an appeal to the Court of Appeals from the trial court’s order.
In seeking relief from the trial court’s order before the Court of Appeals,
respondents argued that the General Assembly had intended that the cap factor be
adopted by the Board of Trustees by resolution, rather than by the use of
Administrative Procedure Act-complaint rulemaking procedures. Respondents
argued that the General Assembly had expressly delineated the functions that
required the use of rulemaking procedures in Article 1, Chapter 135 of the General
Statutes and that the list of functions contained in that chapter did not include the
adoption of actuarial recommendations. In addition, respondents contended that the
Administrative Procedure Act did not override the statutory provisions governing the
operation of the Retirement System, which spell out specific administrative
procedures that must be used in connection with the adoption of actuarial
recommendations. Finally, respondents argued that the trial court had erred by
failing to defer to the Retirement System’s interpretation of the relevant statutory
provisions and that the Retirement System had traditionally interpreted the relevant
statutory provisions to allow for the adoption and approval of actuarial tables, rates,
3 At a meeting held on 22 October 2015, the Board of Trustees discussed the
establishment of a new cap factor. At that meeting, Mr. Langer and Mr. Ribble presented
updated actuarial data. Based upon this data, the actuary proposed new assumptions and
recommended a range of cap factors from 4.2 to 4.8. At the conclusion of the actuary’s
presentation, the Board of Trustees unanimously adopted a new cap factor of 4.5.
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and assumptions by means of resolutions adopted by the Board of Trustees rather
than through the promulgation of an Administrative Procedure Act-compliant rule.
In affirming the trial court’s order, the Court of Appeals began by noting that
respondents had not challenged the trial court’s conclusion that “[t]he cap factor
meets the [Administrative Procedure Act’s] definition of a rule in that it is a
regulation or standard adopted by the Board [of Trustees] . . . to implement [N.C.]G.S.
[§] 135-5(a3)” and that respondents had, instead, argued that “[t]he General
Assembly has distinguished functions that require rule[ ]making from functions that
do not” and intended to exempt the cap factor determination from the coverage of the
rulemaking provisions of the Administrative Procedure Act “by implication.”
Cabarrus Cty. Bd. of Educ. v. Dep’t of State Treasurer, 821 S.E.2d 196, 201 (N.C. Ct.
App. 2018). The Court of Appeals rejected this aspect of respondents’ position on the
grounds that the General Assembly had not explicitly exempted the operations of the
Board of Trustees or the adoption of the cap factor from the rulemaking provisions of
the Administrative Procedure Act, as it had done with respect to various other
agencies and administrative actions in N.C.G.S. § 150B-1(c) and (d). Id. (citing Vass
v. Board of Trustees, 324 N.C. 402, 408, 379 S.E.2d 26, 29 (1989) (stating that, “[h]ad
the General Assembly intended that [the Board of Trustees of the Teachers’ and State
Employees’ Comprehensive Major Medical Plan] be excluded from the requirements
of the [Administrative Procedure] Act, we must assume that it would have inserted a
specific provision in some statute expressly stating this intent” (citing Lemons v. Old
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Hickory Council, 322 N.C. 271, 276–77, 367 S.E.2d 655, 658 (1988))); N. Buncombe
Ass’n of Concerned Citizens v. Rhodes, 100 N.C. App. 24, 27–28, 394 S.E.2d 462,
465 (1990) (holding that “the trial court lacked subject matter jurisdiction . . . because
the plaintiffs failed to exhaust their administrative remedies” under the
Administrative Procedure Act given that the Department of Environment, Health,
and Natural Resources “is not among those agencies which the [Administrative
Procedure Act] specifically exempts from its provisions”)).
In addition, the Court of Appeals declined to hold that the General Assembly
had implicitly exempted the adoption of the cap factor from the ambit of the
rulemaking provisions of the Administrative Procedure Act on the grounds that the
only State agency whose operations had been deemed to be entitled to that status was
the North Carolina State Bar. Id. at 203; see also Bring v. N.C. State Bar, 348 N.C.
655, 501 S.E.2d 907 (1998) (holding, by implication, that the rulemaking provisions
of the Administrative Procedure Act do not apply to the State Bar); N.C. State Bar v.
Rogers, 164 N.C. App. 648, 596 S.E.2d 337 (2004) (holding, by implication, that the
adjudicatory provisions of the Administrative Procedure Act do not apply to the State
Bar). In reaching this conclusion, the Court of Appeals noted that, in Rogers, it had
“recognized that the General Assembly enacted a distinct, thorough, complete, and
self-contained disciplinary process by which the State Bar—through the [Disciplinary
Hearing Commission]—was mandated to initiate and pursue investigations and
hearings as required to police and regulate attorney conduct” and that the existence
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of this complete and self-contained process, which “include[d] procedural rules[,] . . .
left no room for application of [Administrative Procedure Act] procedures.” Cabarrus
Cty. Bd. of Educ., 821 S.E.2d at 205. Similarly, in addressing our decision in Bring,
the Court of Appeals noted that “the organic statute at issue [in that case] . . .
established a rule making procedure completely independent from that contained in
the [Administrative Procedure Act,]” making it “clear that the specific rule making
provisions enacted for proceedings governed by the State Bar controlled,” especially
given that the statutory provisions at issue in Bring contained “adequate procedural
safeguards . . . to assure adherence to the legislative standards” and “a sufficient
standard to guide the Board [of Law Examiners]” in exercising its rulemaking
authority. Id. at 205–06 (quoting Bring, 348 N.C. at 659, 501 S.E.2d at 910). In view
of the fact that Article 1, Chapter 135 of the General Statutes “includes nothing
approaching the level of independent rule making mandated by the General
Assembly for the State Bar,” the Court of Appeals rejected respondents’ contention
that the applicability of the rulemaking procedures contained in the Administrative
Procedure Act should be determined on a “line-by-line basis . . . by analyzing each
individual sentence or clause of a statutory provision.” Id. at 206 (emphasis omitted).
Furthermore, the Court of Appeals determined that “[t]he requirement that
the actuary submit proposed cap factors to the Board [of Trustees] for adoption does
not constitute a separate procedure for rule making purposes” sufficient to render the
rulemaking provisions of the Administrative Procedure Act inapplicable. Id. at 207.
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Instead, the Court of Appeals concluded that “[t]his requirement merely insures that
the cap factor adopted by the Board [of Trustees] is based upon professionally
determined assumptions and projections, and that there will be sufficient
documentation to satisfy the requirements of Chapter 135, the [Administrative
Procedure Act], and the State Budget Act.” Id. at 207–08. After noting that Article
1, Chapter 135 of the General Statutes does not define the term “adopt” and that the
Administrative Procedure Act explicitly defined that term as meaning “to take final
action to create, amend, or repeal a rule,” the Court of Appeals held that “the word
‘adopt’ in N.C.G.S. § 135-5(a3) has the same meaning” that it does when it is used in
the Administrative Procedure Act. Id. at 208. The Court of Appeals further held
that, “any time the word ‘adopt’ is used, it expressly and necessarily requires an
associated rule,” citing N.C.G.S. § 150B-2(1b) (2017). Id. Similarly, after noting that
Article 1, Chapter 135 of the General Statutes does not define the term “rule,” the
Court of Appeals held that “the cap factor falls within the [Administrative Procedure
Act’s] definition of a ‘rule’ ” and that the General Assembly did not intend to modify
or amend the Administrative Procedure Act by implication at the time that it
prescribed the procedures to be utilized in connection with the adoption of a cap
factor. Id.
The Court of Appeals also rejected respondents’ related arguments that the
Board of Trustees “understood the cap factor to be an actuarial assumption or rate,
or that it adopted the cap factor pursuant to the provisions of 20 N.C. Admin. Code
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2B.0202,” and that the Board of Trustees’ interpretation of the relevant statutory
provisions to this effect should be given deference. Id. at 209 (citing Wells v. Consol.
Judicial Ret. Sys. of N.C., 354 N.C. 313, 319, 553 S.E.2d 877, 881 (2001) (stating that
“it is ultimately the duty of courts to construe administrative statutes” and that
“courts cannot defer that responsibility to the agency charged with administering
those statutes” (citing State ex rel. Utils. Comm’n v. Pub. Staff, 309 N.C. 195,
306 S.E.2d 435 (1983))). The Court of Appeals was not persuaded by respondents’
arguments that subjecting the adoption of a cap factor to formal rulemaking
requirements would result in “unnecessar[y] inefficien[cies]” and serve no useful
purpose on the grounds that the Court of Appeals “is not the proper entity to address
those arguments” and that the “[w]eighing . . . [of] public policy considerations is in
the province of our General Assembly” instead. Id. at 209–10 (quoting Wynn v. United
Health Servs./Two Rivers Health-Trent Campus, 214 N.C. App. 69, 79, 716 S.E.2d
373, 382 (2011)). As a result, for all of these reasons, the Court of Appeals affirmed
the trial court’s order. On 27 March 2019, this Court allowed respondents’ petition
for discretionary review of the Court of Appeals’ decision.
In seeking to persuade this Court to reverse the Court of Appeals’ decision,
respondents begin by arguing that the General Assembly had stated in N.C.G.S. §
135-5(a3) that actuarial decisions need not be made through the use of
Administrative Procedure Act-compliant rulemaking procedures and that, on the
contrary, the Board of Trustees had the authority to follow N.C.G.S. § 135-6(l) in
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making any required actuarial decisions. In support of this contention, respondents
direct our attention to Bring, in which the Board of Law Examiners adopted a set of
procedures for use in determining the identity of those persons eligible to take the
bar examination and a list of law schools that had been approved by the American
Bar Association that it presented to the State Bar Council and the Chief Justice for
approval in reliance upon N.C.G.S. § 84-24 (providing that “[t]he Board of Law
Examiners, subject to the approval of the [State Bar] Council shall by majority vote,
from time to time, make, alter and amend such rules and regulations for admission
to the [State] Bar as in their judgment shall promote the welfare of the State and the
profession”) despite the fact that nothing in the relevant statutory provisions
explicitly displaced the Administrative Procedure Act. Bring, 348 N.C. at 657–60,
501 S.E.2d at 908–10. In determining that the statutorily established procedural
requirements contained in Chapter 84 of the General Statutes superseded the
rulemaking procedures required by the Administrative Procedure Act, this Court
recognized that the Board of Law Examiners was an expert body with specialized
knowledge that was better equipped to make decisions concerning the suitability of
applicants to take the bar examination than the General Assembly. Id. at 659,
501 S.E.2d at 910. Similarly, respondents assert that the actuary in this case
provided the Board of Trustees with an analysis of the relevant information and a
recommendation pursuant to N.C.G.S. § 135-6(l) and that the Board of Trustees had
accepted the information and recommendations provided by the actuary, recorded its
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action in the meeting minutes, and begun implementing the cap factor. As a result,
respondents contend that our decision in Bring necessitates a conclusion that the
Board of Trustees was not required to utilize the rulemaking procedures specified in
the Administrative Procedure Act in adopting the cap factor.
Secondly, respondents contend that the Court of Appeals erred by holding that
specific procedural statutes, such as N.C.G.S. § 135-6(l), only supersede the
rulemaking provisions of the Administrative Procedure Act in the event that they
“left no room” for the application of those procedures, citing High Rock Lake Partners,
LLC v. N.C. Dep’t of Transp., 366 N.C. 315, 322, 735 S.E.2d 300, 305 (2012) (stating
that, “when two statutes arguably address the same issue, one in specific terms and
the other generally, the specific statute controls” (citing State ex rel. Utils. Comm’n v.
Edmisten, 291 N.C. 451, 465, 232 S.E.2d 184, 193 (1977))), and decisions from federal
courts. As additional support for this contention, respondents assert that “the Court
of Appeals allowed a generic statute to displace a specialized statute written for a
specific kind of agency action” contrary to this Court’s decision in Nat’l Food Stores v.
N.C. Bd. of Alcoholic Control, 268 N.C. 624, 151 S.E.2d 582 (1966), in which we held
that a specific statutory provision governing the sale of alcohol to minors superseded
a more generic statutory provision when the two statutory provisions conflicted with
each other. According to respondents, requiring the Board of Trustees to disregard
N.C.G.S. § 135-6(l) in favor of the rulemaking provisions of the Administrative
Procedure Act contravenes the General Assembly’s intent, citing LexisNexis Risk
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Data Mgmt. Inc. v. N.C. Admin. Office of the Courts, 368 N.C. 180, 187, 775 S.E.2d
651, 656 (2015), and Lunsford v. Mills, 367 N.C. 618, 623, 766 S.E.2d 297, 301 (2014).
Respondents argue that “the rationale for applying the more specific statute is
particularly strong when that statute was enacted after the generic one,” citing Nat’l
Food Stores (noting that the specific statute at issue in that case had been enacted
ten years after the enactment of the general statute), as is the case in this instance
given that the present Administrative Procedure Act rulemaking provisions were
enacted in 1991, while N.C.G.S. § 135-6(l) was enacted in 2012. In addition,
respondents contend that, contrary to the Court of Appeals’ decision in this case,
nothing requires that the specific statute be “distinct, thorough, complete, and self-
contained” in order for it to implicitly supersede the Administrative Procedure Act,
citing Hughey v. Cloninger, 297 N.C. 86, 89–92, 253 S.E.2d 898, 900–02 (1979), and
Piedmont Publ’g Co. v. City of Winston-Salem, 334 N.C. 595, 434 S.E.2d 176 (1993),
or that the specific statute be read in pari materia with the general statute, citing
High Rock Lake, 366 N.C. at 320–22, 735 S.E.2d at 304–05. Simply put, respondents
claim that the Court of Appeals’ decision “cannot be reconciled with this Court’s more-
specific-statute jurisprudence,” citing High Rock Lake, Nat’l Food Stores, and Bring,
and that the logic upon which the Court of Appeals relied “would have produced the
opposite result in Bring.”
Furthermore, respondents contend that there is ample evidence indicating
that the General Assembly did not intend that the cap factor be established using
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Administrative Procedure Act-complaint rulemaking procedures. More specifically,
respondents note that, while “the legislature explicitly required the [Board of
T]rustees to use rulemaking to define how the [R]etirement [S]ystem will report to
employers on probable cases of pension spiking[,] . . . the section of the session law
that describes setting the cap factor makes no mention of rulemaking.” Respondents
assert that this “drafting pattern[,] . . . [which] use[s] . . . key words in one place but
not elsewhere[,] bars an interpretation that injects the key words where the
legislature has omitted them,” citing Fid. Bank v. N.C. Dep’t of Rev., 370 N.C. 10, 21–
22, 803 S.E.2d 142, 150 (2017) and Morrison v. Sears, Roebuck & Co., 319 N.C. 298,
303, 354 S.E.2d 495, 498 (1987). Respondents argue that, while the use of
Administrative Procedure Act-complaint rulemaking makes sense in some
circumstances, such as complying with the reporting requirement discussed in
N.C.G.S. § 135-8(f)(2)(f), it “offers no value” in the setting of a cap factor, “has no
proper role in a process that mandates deference to an expert actuary,” and “cannot
be a matter of public debate” given the existence of a statutory requirement that the
cap factor be recommended to the Board of Trustees by the actuary based upon actual
experience, citing Lake Carriers’ Ass’n v. EPA, 652 F.3d 1, 3 (D.C. Cir. 2011) and
N.C.G.S. § 135-5(a3). In addition, respondents contend that the lengthy rulemaking
process required by the Administrative Procedure Act is incompatible with the
relatively short timeline in which the Act had to be implemented—a mere twenty-
two weeks pursuant to N.C.G.S. § 135-8(f)(2)(f). According to respondents, “the
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legislature cannot have intended for the agency” to reach the “nonsensical result” of
“miss[ing] the explicit deadlines stated in the law” and, instead, “intended the
[R]etirement [S]ystem to act swiftly to address the funding cap caused by pension
spiking” by acting in accordance with N.C.G.S. § 135-6(l), instead of complying with
the rulemaking procedures set out in the Administrative Procedure Act.4
Respondents cite Lunsford, 367 N.C. at 623, 766 S.E.2d at 301, in support of
their argument that, when viewed “as a whole[,] . . . [t]hose statutes confirm that the
legislature has consciously chosen to exclude actuarial recommendations from the
[Administrative Procedure Act’s] rulemaking requirements.” According to
respondents, twenty-six statutory provisions, including all fourteen of the provisions
relating to actuarial matters, simply state that the Board of Trustees must merely
“adopt” or “establish” certain measures without making any mention of the obligation
to utilize Administrative Procedure Act-complaint rulemaking. In addition,
respondents note that ten of the twelve provisions that deal with non-actuarial
matters explicitly require the use of Administrative Procedure Act-complaint
rulemaking.
Finally, respondents contend that “[t]he cases cited by the Court of Appeals do
not hold that the [Administrative Procedure Act’s] general rulemaking procedures
override specific procedures in an agency statute.” According to respondents, this
4 Respondents note that, when the Board of Trustees later adopted a cap factor
utilizing the Administrative Procedure Act’s rulemaking procedures, it took the agency 364
days to do so.
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case is distinguishable from Vass given that that case was decided at a time when the
Administrative Procedure Act “appl[ied] to every agency . . . except to the extent and
in the particulars that any statute . . . makes specific provisions to the contrary[,]”
see N.C.G.S. § 150B-1(c) (1987), formerly codified as N.C.G.S. § 150A-1(a), which
respondents describe as an “exclusivity requirement for rulemaking[,]” with this
language having been deleted in 1991 and with the “current [version of the
Administrative Procedure Act] impos[ing] no parallel exclusivity provision for
rulemaking.” In addition, respondents distinguish this case from Empire Power Co.
v. N.C. Dep’t of Env’t, Health and Nat. Res., 337 N.C. 569, 447 S.E.2d 768 (1994)
(holding that, in the event that an agency-specific statute and the Administrative
Procedure Act can be read in pari materia, the Court “must give effect to both if
possible”), which, in respondents’ view, dealt exclusively with contested case
provisions that are not at issue in this case and that “continue to be subject to the
mandate that exemptions from the [Administrative Procedure Act] be express,” citing
N.C.G.S. § 150B-1(e). As a result, respondents argue that both Empire Power and
Bring indicate that, “where the same question is answered by both the agency statute
and the [Administrative Procedure Act], . . . the more-specific statute applies.”
In seeking to persuade us to uphold the Court of Appeals’ decision, the Board
of Education argues that an exemption from the rulemaking provisions of the
Administrative Procedure Act only exists in the event that the clear and
unambiguous statutory language requires such a result. According to the Board of
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Education, the General Assembly explicitly created such an exemption for certain
enumerated agencies, such as the North Carolina Utilities Commission, and for
certain enumerated administrative actions, such as executions conducted by the
North Carolina Department of Public Safety. The Board of Education asserts that
the General Assembly’s failure to explicitly exempt the Retirement System from the
rulemaking requirements of the Administrative Procedure Act is sufficient to
establish the non-existence of such an exemption, citing Vass. In addition, the Board
of Education denies that any implied exemption from the rulemaking provisions of
the Administrative Procedure Act exists in this situation. Although several attempts
have been made in the General Assembly to obtain the enactment of legislation
exempting the establishment of a cap factor from the rulemaking provisions
contained in the Administrative Procedure Act, none of those efforts have been
successful. Moreover, the existence of such proposed legislation shows that, in the
event that the General Assembly wished to exempt the process of establishing a cap
factor from the rulemaking provisions of the Administrative Procedure Act, it knows
how to do so.
The Board of Education asserts that the facts of this case are distinguishable
from those at issue in Bring and Rogers. According to the Board of Education, both
Bring and Rogers recognize that the General Assembly had enacted a comprehensive
set of statutes governing the operations of the State Bar that were clearly intended
to supersede the relevant provisions of the Administrative Procedure Act. On the
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other hand, the Board of Education contends that the same cannot be said for the
statutes at issue in this case so that respondents are, in this instance, “asking the
[C]ourt . . . to conjure an exemption out of vague statutes and a history that
contradicts their explanation.”
In the Board of Education’s view, the legal principle that a specific statute does
not supersede the provisions of the Administrative Procedure Act unless it leaves “no
room for application of [Administrative Procedure Act-compliant rulemaking]
procedures” does not represent the adoption of a new, more stringent legal standard;
instead, the language to this effect utilized by the Court of Appeals is “simply a
description of the facts in the Rogers case.” Similarly, the Board of Education
contends that respondents have mischaracterized this Court’s decision in Empire
Power, which, in its view, clearly indicates that the goal of the 1991 amendments to
the Administrative Procedure Act, instead of “leav[ing] room for more exemptions,”
was “to further uniformity” in administrative rulemaking in accordance with the
Administrative Procedure Act and to reduce the number of exempt agencies.
The Board of Education argues that, contrary to respondents’ assertions,
N.C.G.S. § 135-6(l) “does not address rulemaking” and “includes no specific provision
at all comparable to what the [C]ourt considered in Empire Power.” In addition, the
Board of Education notes that respondents have not identified any “retirement
statute that offers the same kind of explicit conflict with the [Administrative
Procedure Act] as in Empire Power.” The Board of Education points out that, prior
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to the initiation of this proceeding, respondents had not treated statutes requiring
the Board of Trustees to “adopt” certain measures—including the statute at issue in
this case—differently from statutes requiring the Board of Trustees to “adopt a rule”
in order to address certain issues and asserts that “[i]t defies credibility for
[respondents] to now argue that [they] understood all along a difference based on the
use of ‘adopt a rule’ rather than ‘adopt.’ ” The Board of Education cites a number of
retirement statutes that make reference to rulemaking even though the Board of
Trustees has never adopted the rules called for by those statutory provisions. On the
other hand, the Board of Education cites statutes which would not, in respondents’
view, require the use of the rulemaking procedures pursuant to the Administrative
Procedure Act, in which rules have been adopted. As a result, the Board of Education
contends that respondents have failed to distinguish between statutory provisions
requiring them to “adopt” or “adopt a rule” in a meaningfully consistent manner.
According to the Board of Education, the fact that a cap factor must be based
upon the actuary’s recommendation does not compel a determination that the
decision to establish a particular cap factor is controlled by N.C.G.S. § 135-6(l) or
renders the rulemaking provisions of the Administrative Procedure Act inapplicable.
In the Board of Education’s view, “[w]hile the cap factor chosen by the Board of
Trustees must be based on actuarial assumptions, it is not an actuarial assumption
itself.” On the contrary, the Board of Education describes the adoption of a cap factor
as a “discretionary decision that results from consideration of the actuarial
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assumptions presented by the [R]etirement [S]ystem’s actuary” and states that
“[N.C.]G.S. [§] 135-6(l) requires the . . . [Board of T]rustees to include actuarial
assumptions in the state retirement plan to satisfy the [Internal Revenue Service’s]
requirement that the employer not be able to alter the defined benefits to retirees.”
In essence, the Board of Education asserts that a cap factor “is of a different character
than the tables, rates, and assumptions” governed by the Board of Trustees’ rule
concerning actuarial assumptions, citing 20 N.C. Admin. Code 2B.0202, and that the
record is devoid of any indication that the Board of Trustees “ever considered the cap
factor to be an actuarial assumption.” As a result, the Board of Education argues
that the mere fact that the actuary makes a recommendation concerning the cap
factor to the Board of Trustees does not exempt the Retirement System from the
rulemaking requirements of the Administrative Procedure Act, with “[t]here [being]
nothing remarkable . . . about the use of such expertise in rulemaking.”
The Board of Education contends that the Board of Trustees could have
satisfied the five-month time frame within which it was required to establish a cap
factor by adopting a temporary rule pursuant to N.C.G.S. § 150B-21.1. Although the
statutory deadline for setting the cap factor was 1 January 2015, the Board of
Education notes that no rulemaking proceeding was initiated until December 2017
and that no cap factor rule became effective until 21 March 2019. Even so, the Board
of Education points out that the Retirement System sent numerous notices to the
employers of affected retirees for the purpose of “seeking additional contributions . . .
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for retirements that occurred well before 21 March 2019,” including the notice sent
in this case, and that, when employers objected to the resulting invoices, the
Retirement System “replied that it consider[ed] the new rule applicable to all
retirements since 1 January 2015.” For that reason, the Board of Education asserts
that “[i]t would seem . . . that the [R]etirement [S]ystem [did] not really believe the 1
January 2015 effective date of the pension cap law established a deadline for
rulemaking that could not be met.”
Finally, the Board of Education contends that the significant public interests
at stake in the establishment of the cap factor make it “exactly the kind of important
administrative decision that should go through rulemaking.” In support of this
assertion, the Board of Education directs our attention to the “devastating sums of
money” that school systems have been billed following the retirement of eligible
employees, which the Board of Education describes as “liabilities the school boards
were powerless to avoid” given that “the pension cap law applied to contracts and
compensation decisions that had been entered [into] years before and that could not
have been changed in response to the new law.” In addition, the Board of Education
notes that, when the Board of Trustees proposes a rule that will have a “substantial
economic impact,” which any rule prescribing a cap factor will necessarily have, the
Administrative Procedure Act requires the agency to consider at least two
alternatives and perform a fiscal analysis. See N.C.G.S. § 150B-19.1(f). According to
the Board of Education, the use of the rulemaking procedures required by the
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Administrative Procedure Act would have the effect of “remind[ing the Board of
Trustees] that the school board has no taxing authority,” that the Board of Trustees
would learn that local boards of education “would have to seek additional funding
from the county commissioners,” and that the Board of Trustees would be informed
about “the number of teaching positions likely to be lost, the huge hole that would be
created in capital funding, and the other consequences of their rulemaking” through
the use of Administrative Procedure Act-compliant rulemaking to establish the cap
factor.
According to well-established North Carolina law, summary judgment is
appropriate where “the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that any party is entitled to a judgment as a matter
of law.” N.C.G.S. § 1A-1, Rule 56(c). An appellate court reviews a trial court’s
decision to grant or deny a motion for summary judgment de novo. Meinck v. City of
Gastonia, 371 N.C. 497, 502, 819 S.E.2d 353, 357 (2018). We will now resolve the
issue that has been presented for our consideration in this case in light of the
applicable standard of review.
The sole issue for our consideration in this case is whether the General
Assembly intended to relieve the Board of Trustees from the necessity for compliance
with the rulemaking provisions contained in the Administrative Procedure Act in
adopting a cap factor pursuant to N.C.G.S. § 135-5(a3). In view of the fact that
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respondents have not denied that the establishment of a cap factor falls within the
scope of the Administrative Procedure Act’s definition of a “rule” and the fact that
respondents acknowledge that the Board of Trustees is not explicitly exempt from the
Administrative Procedure Act, the ultimate issue before us in this case is whether
the establishment of a cap factor is implicitly exempt from the Administrative
Procedure Act’s rulemaking provisions. A careful analysis of our prior decisions
concerning the extent to which particular agencies or decisions are deemed to be
implicitly exempt from the necessity for compliance with the provisions of the
Administrative Procedure Act makes it clear that such implicit exemptions are very
much the exception, rather than the rule, and should only be recognized in the event
that it is abundantly clear that the General Assembly intended such a result.
This Court’s decision in Empire Power stemmed from a challenge by a property
owner to a state agency’s decision to award an air emissions permit to a utility
company. Empire Power Co., 337 N.C. at 574, 447 S.E.2d at 771–72. The property
owner alleged that he would suffer injury to his health by virtue of the emissions that
would result from the issuance of the permit. Id. The state agency contended, and
the Court of Appeals agreed, that, pursuant to N.C.G.S. § 143-215.108(e), the right to
challenge such permitting decisions was limited to the applicant. Id. at 573–74, 447
S.E.2d at 771. In considering whether the “organic statute amends, repeals, or makes
an exception to the [Administrative Procedure Act,] so as to exclude [the property
owner] from those entitled to” challenge the agency’s permitting decision, we noted
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that (1) “the primary function of a court is to ensure that the purpose of the
[l]egislature in enacting the law . . . is accomplished”; (2) “statutes in pari materia,
and all parts thereof, should be construed together” and “reconciled with each other
when possible”; and (3) “any irreconcilable ambiguity should be resolved so as to
effectuate the true legislative intent.” Id. at 591, 447 S.E.2d at 781 (quoting Comm’r
of Ins. v. Rate Bureau, 300 N.C. 381, 399–400, 269 S.E.2d 547, 561 (1980) (citation
omitted), overruled on other grounds by In re Redmond, 369 N.C. 490, 497, 797 S.E.2d
275, 280 (2017)). In addition, we stated that “implied amendments cannot arise
merely out of supposed legislative intent in no way expressed, however necessary or
proper it may seem to be,” and that “[a]n intent to amend a statute will not be imputed
to the legislature unless such intention is manifestly clear from the context of the
legislation.” Id. at 591, 447 S.E.2d at 781 (quoting In re Halifax Paper Co., 259 N.C.
589, 594, 131 S.E.2d 441, 445 (1963)). We also held that an implied exemption to the
relevant statutory provision will only be recognized “where the terms of a later
statute are so repugnant to an earlier statute that they cannot stand together.” Id.As long as there is “a fair and reasonable construction of the organic statute that
harmonizes it with the provisions of the [Administrative Procedure Act,] . . . it is our
duty to adopt that construction.” Id. at 593, 447 S.E.2d at 782 (citing In re Miller,
243 N.C. 509, 514, 91 S.E.2d 241, 245 (1956)). In view of the fact that the General
Assembly “ha[d] not expressed or otherwise made manifestly clear an intent to
[supplant the Administrative Procedure Act]” in the “organic” statute at issue in
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Empire Power and the fact that there was not “such repugnancy between the statutes
[at issue in that case] as to create an implication of amendment or repeal ‘to which
we can consistently give effect under the rules of construction of statutes,’ ” we
declined to recognize the existence of an implied exemption from the judicial review
provisions of the Administrative Procedure Act sufficient to bar the landowner from
seeking review of the challenged agency action. Id.Similarly, Bring involved a challenge by an individual who had graduated from
a law school that had not been approved for accreditation pursuant to N.C.G.S. § 84-
24. In rejecting the individual’s argument that the Board of Law Examiners was not
required to have identified the law schools whose graduates were eligible to take the
North Carolina bar examination, we stated, without further elaboration, that
N.C.G.S. § 84-21 “[gave] specific directions as to how the Board [of Law Examiners]
should adopt rules.” Id. at 660, 501 S.E.2d at 910. As a result, we held that the
existence of a specific statute prescribing the manner in which the Board of Law
Examiners was required to adopt rules sufficed to render the rulemaking provisions
of the Administrative Procedure Act inapplicable. Id. at 659, 501 S.E.2d at 910.
In Vass, an individual insured under a state medical plan filed an unsuccessful
claim seeking the recovery of costs associated with laser vision correction surgery.
Vass, 324 N.C. at 403–04, 379 S.E.2d at 27. Although the individual appealed to the
medical plan’s Board of Trustees, that body rejected his appeal on the grounds that
the surgical procedure in question was not covered pursuant to N.C.G.S. § 135-
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40.6(6)(h) at that time. Id. In determining whether the individual’s ability to seek
further review of the Board of Trustees’ decision was limited by N.C.G.S. § 135-39.7,
which provided that the Board of Trustees had the authority to “make a binding
decision on the matter in accordance with procedures established by the Executive
Administrator and Board of Trustees,” we noted that, at the time, the Administrative
Procedure Act “clearly indicate[d]” that it “shall apply to every agency of the executive
branch of State government, except to the extent and in the particulars that any
statute ‘makes specific provisions to the contrary,’ ” id. at 406, 379 S.E.2d at 28(quoting N.C.G.S. § 150B-1(c) (1987), previously codified as N.C.G.S. § 150A-1(a)),
and that “[i]t is clear that the General Assembly intended only those agencies it
expressly and unequivocally exempted from the provisions of the Administrative
Procedure Act be excused in any way from the Act’s requirements,” with even such
specific exemptions to “apply only to the extent specified by the General Assembly.”
Id. at 407, 379 S.E.2d at 29. In considering whether N.C.G.S. § 135-39.7 exempted
the Board of Trustees’ decision from further review pursuant to the Administrative
Procedure Act, we noted that “the General Assembly has shown itself to be quite
capable of specifically and expressly naming the particular agencies to be exempt
from the provisions of the Act” and that the Board of Trustees had never “been
expressly exempted from the Act’s requirements.” Id. As a result, “we conclude[d]
that the [Board of Trustees’] decisions [were] subject to administrative review under
the [Administrative Procedure Act],” stating that, “[h]ad the General Assembly
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intended that the [Board of Trustees] be excluded from the requirements of the
[Administrative Procedure Act], we must assume that it would have inserted a
specific provision in some statute expressly stating this intent.” Id. at 407–08, 379
S.E.2d at 29 (citation omitted).
A collective analysis of these decisions, which encompass a range of different
issues and varying present and now-repealed statutory provisions, demonstrates that
this Court has consistently refused to recognize the existence of any implicit
exemption from the provisions of the Administrative Procedure Act in the absence of
a clearly-stated legislative intent to the contrary. A presumption that the rulemaking
provisions of the Administrative Procedure Act apply to the formulation of rules, as
that term is defined in N.C.G.S. § 150B-2(8a), in the absence of an explicit or implicit
exemption, is fully consistent with the applicable statutory provisions and represents
the most logical reading of them. See N.C.G.S. § 150B-1(a) (providing that “[t]his
Chapter establishes a uniform system of administrative rule making and
adjudicatory procedures for agencies”); N.C.G.S. § 150B-18 (providing that “[t]his
Article applies to an agency’s exercise of its authority to adopt a rule[,]” with “[a] rule
[not being] valid unless it is adopted in substantial compliance with this Article”).
For the following reasons, we are not persuaded that the General Assembly, in
enacting the anti-pension-spiking legislation that is at issue in this case, intended to
implicitly exempt the Board of Trustees from complying with the rulemaking
provisions of the Administrative Procedure Act when establishing a cap factor.
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As an initial matter, we are unable to conclude that N.C.G.S. § 135-5(a3) and
N.C.G.S. § 135-6(l) are “so repugnant to [the Administrative Procedure Act] that they
cannot stand together.” Empire Power Co., 337 N.C. at 591, 447 S.E.2d at 781(quoting In re Halifax Paper Co., 259 N.C. at 594, 131 S.E.2d at 445). On the contrary,
we have no difficulty in concluding that the relevant statutory provisions can be
harmonized with the rulemaking requirements of the Administrative Procedure Act
with relative ease. Simply put, we do not see anything in N.C.G.S. § 135-5(a3) or
N.C.G.S. § 135-6(l) that suggests that the General Assembly intended to dispense
with the necessity for compliance with the relevant provisions of the Administrative
Procedure Act in establishing a cap factor.
A careful analysis of the relevant statutory provisions makes it clear that the
adoption of a cap factor is not a ministerial act in which the Board of Trustees does
nothing more than ratify the actuary’s recommendation. According to N.C.G.S. § 135-
5(a3), the Board of Trustees is required to “adopt a contribution-based benefit cap
factor recommended by the actuary, based upon actual experience, such that no more
than three-quarters of one percent (0.75%) of retirement allowances are expected to
be capped.” Although the remaining provisions of N.C.G.S. § 135-5(a3) prescribe, in
considerable detail, what use is to be made of the cap factor once it has been adopted,
the relevant statutory provisions do not prescribe any additional procedural steps
that must be taken in connection with the adoption of the cap factor. In view of the
fact that the actuary serves as “the technical adviser of the Board of Trustees on
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matters regarding the operation of the funds created by the provisions of this
Chapter” and the fact that the cap factor is a substantive decision to be made by the
Board of Trustees, rather than an “assumption[ ] used by the [Retirement System’s]
actuary,” N.C.G.S. § 135-6(l), we are not persuaded that the cap factor is an actuarial
assumption or that the Board of Trustees is required to simply rubber stamp the
actuary’s cap factor recommendation.5 On the contrary, as is evidenced by the fact
that the adopted cap factor cannot result in more than “three-quarters of one percent
(0.75%) of retirement allowances being capped,” N.C.G.S. § 135-5(a3), it is clear that
the Board does, in fact, have a degree of discretion in determining an appropriate cap
factor within the confines of the stated statutory parameters. In addition, the fact
that an actuary must be involved in the process of establishing the cap factor does
not suffice to provide affected persons with the sort of procedural protections that are
inherent in Administrative Procedure Act-compliant rulemaking proceedings,
obviate the importance of public input into the adoption of a cap factor, or reduce the
importance of the additional analytical steps that administrative agencies must take
in making decisions of the apparent magnitude of this one. See, e.g., N.C.G.S. § 150B-
5 Although the interpretation of the relevant statutory language adopted by an
administrative agency is entitled to “great weight,” Frye Reg’l Med. Ctr. v. Hunt, 350 N.C. 39,
45, 510 S.E.2d 159, 163 (1999) (citing High Rock Lake Ass'n v. N.C. Envtl. Mgmt. Comm'n,
51 N.C. App. 275, 279, 276 S.E.2d 472, 475 (1981)), we are not persuaded by respondents’
interpretation of the relevant statutory provisions or satisfied that such a rule of construction
has substantial bearing in situations in which an agency is seeking to avoid the constraints
that would otherwise be imposed by the Administrative Procedure Act.
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21.4(b1)–(b2) (requiring that, where the aggregate financial impact of an
administrative agency decision upon all affected persons exceeds $1 million during a
twelve-month period, the agency must generate a fiscal note describing, among other
things, “at least two alternatives to the proposed rule that were considered by the
agency and the reason the alternatives were rejected”)6. As a result, we conclude that
the procedural requirements detailed in N.C.G.S. § 135-5(a3) and N.C.G.S. § 135-6(l),
are not, unlike those at issue in Bring, sufficiently detailed to suggest that the
General Assembly intended for the establishment of the cap factor to be implicitly
exempt from the rulemaking provisions of the Administrative Procedure Act and we
believe, instead, that the relevant statutory language contemplates that the cap
factor will be established in a manner similar to that required when other
administrative agencies are required to make discretionary decisions that are
informed by agency staff expertise, as is the case with many, if not virtually all,
administrative decisions.7
6 The fact that N.C.G.S. § 135-5(a3) prohibits the Board of Trustees from adopting a
cap factor that results in more than “three-quarters of one percent (0.75%) of retirement
allowances being capped” necessarily means that a range of cap factors are statutorily
permissible, making it perfectly sensible for the agency to be required to consider multiple
alternatives.
7 The descriptions of the cap factor decisions actually made by the Board of Trustees
are fully consistent with the understanding set out in the text of this opinion. For example,
at the time that the initial cap factor was established in 2014, the actuary, after
recommending the adoption of a 4.8 cap factor, stated that, “[f]or the reasons previously
stated, the Board [of Trustees] may consider a more conservative factor[.]” Similarly, at the
time that the Board of Trustees established a new cap factor in the following year, the actuary
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Although respondents suggest that the fact that the relevant statutory
provisions use the term “adopt,” rather than the expression “adopt a rule,” indicates
the existence of a clear distinction between circumstances in which Administrative
Procedure Act-compliant rulemaking is required and those in which it is not, we
conclude that this argument rests upon an exceedingly nuanced semantic distinction
that does not appear to reflect the Board’s actual practice. In addition, we are not
persuaded that the distinction that respondents seek to draw between provisions
couched in terms of “adopt,” rather than “adopt a rule,” is sufficient to overcome the
presumption against the recognition of implicit exemptions from the requirements of
the Administrative Procedure Act that is inherent in the relevant statutory
provisions and this Court’s practice of reading allegedly conflicting statutes in
harmony whenever it is possible to do so. Id. at 593, 447 S.E.2d at 782 (citing In re
Halifax Paper Co., 259 N.C. at 595, 131 S.E.2d at 445; and In re Miller, 243 N.C. at
514, 91 S.E.2d at 245).
In addition, we are not convinced that the prior decisions of this Court upon
which respondents rely provide significant support for the decision that they ask us
to make. For example, we are not persuaded that our decision in Fidelity Bank, in
which we held that an undefined term in the relevant statutory provision should be
stated that “the Board [of Trustees] may consider decreasing the factor[,]” that “the current
factor [for the Teachers’ and State Employees’ Retirement System] is 4.8[,]” and that “the
minimum allowable factor is 4.2[.]” As a result, the establishment of a cap factor does, in
fact, involve the making of a discretionary decision that allows for the consideration of
information other than purely actuarial considerations.
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interpreted in accordance with its plain meaning and that, in the event that the
General Assembly intended for the term in question to be used in a certain manner,
it could have included such a definition in the relevant legislation, see Fid. Bank, 370
N.C. at 20, 803 S.E.2d at 149, provides any support for respondents’ position given
that respondents give the term “adopt” a somewhat technical meaning that lacks
support in the remaining statutory language. In addition, our decision in High Rock
Lake Partners, LLC, 366 N.C. at 322, 735 S.E.2d at 305, which rests upon the fact
that the relevant statutory language was “clear and unambiguous,” is of little
moment in this case, given our belief that the relevant statutory provisions clearly do
not exempt the establishment of the cap factor from the rulemaking provisions of the
Administrative Procedure Act.
Similarly, our decision in Hughey, 297 N.C. at 92, 253 S.E.2d at 902, in which
we held that a specific statute allowing the State Board of Education to disburse
funds to severely learning disabled children superseded a more general statutory
provision allowing county commissioners to disburse funds to the “physically or
mentally handicapped,” does not support respondents’ position given that Hughey
rested, at least in part, upon the fact that “the General Assembly has consistently
delegated specific responsibility for the special education of learning disabled
children to the State and local boards of education.” Nothing in the present record
suggests that the General Assembly has consistently exempted decisions by the
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Board of Trustees of a similar magnitude as the establishment of the cap factor from
the rulemaking provisions of the Administrative Procedure Act.
In Nat’l Food Stores, which involved statutes governing the sale of alcohol to
minors, our determination that a specific statute must be given effect over a more
general statute hinged upon the fact that the relevant statutes directly conflicted
with each other, with the specific statute requiring that the seller know that the
buyer was a minor while the general statute contained no such knowledge
requirement. 268 N.C. at 629, 151 S.E.2d at 586. In the same vein, we held in
Piedmont Publ’g Co. that a specific statute prevailed over a general statute because
any attempt to read the two in harmony with each other would produce an “illogical”
result. 334 N.C. at 597, 434 S.E.2d at 177. For the reasons set forth in more detail
above we do not see the sort of conflict present in these decisions in analyzing the
rulemaking provisions of the Administrative Procedure Act, on the one hand, and
N.C.G.S. § 135-5(a3) and N.C.G.S. § 6(l), on the other.
Finally, unlike the situation at issue in Bring, the statutory provisions upon
which respondents rely in support of their argument for an implicit exemption lack
the sort of substantive and procedural safeguards that are present in the rulemaking
provisions of the Administrative Procedure Act. 348 N.C. at 659, 501 S.E.2d at 910.
Instead, N.C.G.S. § 135-5(3a) and N.C.G.S. § 135-6(l) are devoid of the sort of
procedural detail that persuaded us to recognize an implicit exemption from the
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Opinion of the Court
rulemaking provisions of the Administrative Procedure Act in Bring. As a result, we
are not persuaded by respondents’ arguments in reliance upon our precedents.
Finally, we agree with the Board of Education that the public interests at stake
in this case support, rather than undercut, the Board of Education’s contention that
the cap factor should be established by using the rulemaking provisions of the
Administrative Procedure Act, which ensure the opportunity for adequate public
input before a decision becomes final. As we have already demonstrated, the relevant
statutory language clearly indicates that the establishment of a cap factor is a
discretionary decision that must be made by the Board of Trustees, with the aid of an
actuary, rather than a ministerial decision over which the Board of Trustees has little
to no control. Moreover, as the Board of Education correctly notes, the relatively tight
deadline within which the Board of Trustees was required to adopt an initial cap
factor is entitled to very little weight in our analysis given that the Administrative
Procedure Act allows for the adoption of temporary rules in the event that an agency
is required to act while subject to significant time constraints. See N.C.G.S. § 150B-
21.1(a)(2) (stating that “[a]n agency may adopt a temporary rule when it finds that
adherence to the notice and hearing requirements of [N.C.]G.S. [§] 150B-21.2 would
be contrary to the public interest and that the immediate adoption of the rule is
required by . . . [t]he effective date of a recent act of the General Assembly”). Lastly,
while the General Assembly is, of course, the ultimate arbiter of whether the adoption
of a cap factor is implicitly exempt from the rulemaking provisions spelled out in the
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Opinion of the Court
Administrative Procedure Act, the relevant statutory language, read in light of this
Court’s decisions construing the language of other statutes to determine if they
supplanted the requirements of the Administrative Procedure Act, satisfies us that
the General Assembly did not intend such a result. Thus, for all of these reasons, we
agree with the Court of Appeals that the Board of Trustees was required to adopt the
statutorily mandated cap factor utilizing the rulemaking procedures required by the
Administrative Procedure Act and that the Retirement System erred by billing the
Cabarrus County Board of Education an additional amount relating to Dr. Shepherd’s
pension, in light of the Board of Trustees’ failure to adopt the necessary cap factor in
an appropriate manner. As a result, the Court of Appeals’ decision in this case is
affirmed.8
AFFIRMED.
8 Although the Retirement System ultimately adopted a cap factor using the
rulemaking procedures specified in the Administrative Procedure Act, we do not believe that
this fact renders this case moot, given that the Board of Education has sought to have the
additional amount that it paid to have Dr. Sheppard’s pension refunded.
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Justice NEWBY dissenting.
In 2014 the General Assembly addressed an imminent threat to the solvency
of the entire State Retirement System: pension spiking. When it passed the pertinent
anti-pension spiking provision, it required the Board of Trustees of the State
Retirement System (the Board) to adopt a “cap factor” recommended by an actuary,
and specifically described the procedures the Board must follow. That law was
enacted against the backdrop that, since at least 1981, the Board has adopted
actuarial recommendations by resolution. The Board expeditiously proceeded
according to this process. Now the majority creates a five-year gap in this law’s
enforcement by holding that the procedures under the Administrative Procedure Act
(APA) should apply. If, however, separate statutory provisions specifically describe
the relevant agency’s procedures, those provisions supersede those of the APA. In this
case the General Assembly has given detailed directions to the Board on how to adopt
and implement regulations to limit pension spiking. The legislature determined that
quick action by the Retirement System was necessary to keep the retirement fund
solvent. Because I believe the majority mistakenly requires the Board to submit to
the APA’s rulemaking procedures when it adopts a cap factor, I respectfully dissent.
The Retirement System is funded by contributions by state employers and
employees over the course of the employment. Under state law, a state employee’s
pension upon retirement is calculated based on the average salary the employee earns
CABARRUS CTY. BD. OF EDUC. V. DEP’T OF STATE TREASURER
Newby, J., dissenting
during the employee’s four highest paying years of employment. It became evident
that for a retiree who, for the last four years of employment, earned significantly
higher salaries than in previous years, the calculated pension value was strikingly
high compared to the amount contributed into the fund on the retiree’s behalf. This
practice was labeled “pension spiking.” Pension spiking usually involves either early
retirements or late-career pay raises that inflate the calculated pension amount. In
the aggregate, pension spiking creates a dangerous deficit in the state retirement
fund.
Seeing this threat to the solvency of the Retirement System, the General
Assembly passed a law to limit pension spiking. An Act to Enact Anti-Pension-
Spiking Legislation by Establishing a Contribution-Based Benefit Cap, S.L. 2014-88,
§ 1, 2014 N.C. Sess. Laws 291, 291–94. Under this law, which applies only to retirees
who earned at least $100,000 per year during their four years of highest pay, the
retiree’s last employer must contribute additional funds into the Retirement System
if the retiree’s pension value significantly exceeds the annuitized value of the amount
contributed on the retiree’s behalf. N.C.G.S. § 135-5(a3) (2019). The employer must
contribute additional funds if the ratio of the pension to the contributions exceeds the
“cap factor.” The cap factor is a ratio set by the Board. Id. Subsection 135-5(a3)
specifically explains how a cap factor is to be set—an expert actuary must recommend
the factor, and the cap factor must be of a value such that no more than three-quarters
of one percent (0.75%) of retirees’ plans will be capped by it. Id. Once the actuary
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Newby, J., dissenting
recommends a cap factor, the provision states that the Board “shall adopt” it. Id. A
plain reading of that provision shows that the Board has no discretion on this point;
it must adopt the cap factor recommended by the actuary. The text of the Act provided
that it would go into effect less than six months after its passage. An Act to Enact
Anti-Pension-Spiking Legislation by Establishing a Contribution-Based Benefit Cap,
S.L. 2014-88, § 1, 2014 N.C. Sess. Laws 291, 291–94. The General Assembly thus
signaled in at least two ways that a cap factor should be established quickly: (1) by
giving detailed instructions for how the Retirement System must adopt a cap factor
to address the problem and (2) by leaving a relatively short amount of time until the
Act took effect.
The General Assembly has directed the Board to generally address actuarial
calculations by accepting all documentation supporting actuarial recommendations
and recording all such relevant information in its meeting minutes. N.C.G.S. § 135-
6(l) (2019). In accordance with this statutory directive, it has been the Board’s policy
at least since 1981 to adopt actuarial recommendations by resolution and publication
in meeting minutes, not by formal rulemaking procedures. 20 N.C. Admin. Code
2B.0202(a) (1981). In this case the Board followed these longstanding procedures and
adopted a cap factor recommended by the actuary in compliance with subsection 135-
5(a3).
Despite the detailed instructions the General Assembly gave the Board
regarding the adoption of cap factors, the majority holds that the APA’s rulemaking
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Newby, J., dissenting
procedures, which require public notice and comment, also bind how the Board adopts
cap factors. By doing so, it fails to properly apply the longstanding principle of
statutory construction that the intent of the General Assembly controls. In
accordance with legislative intent, the recent more specific statute relevant to the
case should apply instead of the earlier more general statute; but the majority avoids
this principle. It also ignores the appropriate consideration of the agency’s
longstanding practice regarding specialized and technical issues like the one in this
case. The majority misses this straightforward analysis because it wrongly mines
from dated case law a presumption that the APA’s procedures should apply to all
agency actions.
“The principal goal of statutory construction is to accomplish the legislative
intent.” Lenox, Inc. v. Tolson, 353 N.C. 659, 664, 548 S.E.2d 513, 517
(2001) (citing Polaroid Corp. v. Offerman, 349 N.C. 290, 297, 507 S.E.2d 284, 290
(1998)). “The best indicia of that intent are the language of the statute[,] . . . the spirit
of the act[,] and what the act seeks to accomplish.” Coastal Ready-Mix Concrete Co.
v. Bd. of Comm’rs, 299 N.C. 620, 629, 265 S.E.2d 379, 385 (1980) (citation omitted).
In this case all of those indicia support the Board’s adoption of cap factors by
resolution instead of by the APA’s rulemaking procedures. The statutory language
directs that the Board “shall adopt” the cap factor recommended by the actuary; the
General Assembly intended that the Board follow the specific procedures it provided,
and nothing more. The General Assembly has given precise guidelines to the
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Newby, J., dissenting
Retirement System directly, choosing a cap factor is extremely technical and requires
unique expertise, and the Board historically has adopted actuarial recommendations
through resolution and publication, not through formal rulemaking.
The Retirement System should be allowed to use its own specialized
procedures because the statute governing the adoption of a cap factor is more specific
than the relevant provisions of the APA. When two statutes address the same subject
matter, the more specific statute controls—the statute that more directly addresses
the activity in question. See Nat’l Food Stores v. N.C. Bd. of Alcoholic Control, 268
N.C. 624, 629 151 S.E.2d 582, 586 (1966). In Bring v. N.C. State Bar, this Court
considered whether the North Carolina State Bar Council, in promulgating a rule,
had to follow the APA’s rulemaking procedures or whether it could use the procedures
described in the statute governing the Board of Law Examiners. 348 N.C. 655, 659–
60, 501 S.E.2d 907, 910 (1998). That statute provided that the Board of Law
Examiners could make rules and regulations related to State Bar admission as long
as the State Bar Council gave approval. Id. at 657, 501 S.E.2d at 908. This Court held
that “[i]t was not necessary to adopt the rule in accordance with the requirements of
the APA,” because the statute that created the Board of Law Examiners “gives
specific directions as to how the Board shall adopt rules. These directions must govern
over the general rule-making provision of the APA.” Id. at 660, 501 S.E.2d at 910.
Here, like in Bring, the relevant statute is more specific than the APA. It
specifically governs the adoption of cap factors by the Board. Though the APA
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Newby, J., dissenting
generally requires an opportunity for public notice and comment before an agency
enacts a rule, see N.C.G.S. § 150B-21.2 (2017), subsection 135-5(a3) specifically
provides that the Board “shall adopt a contribution-based benefit cap factor
recommended by the actuary, based upon actual experience, such that no more than
three-quarters of one percent (0.75%) of retirement allowances are expected to be
capped.” N.C.G.S. § 135-5(a3). The statute then goes into even more detail on how the
cap factor must be used to determine certain pension payments. Id.
The best reading of this statute, alongside the APA, is that, even though the
APA’s procedural requirements might generally apply to rules made by the
Retirement System, when adopting a cap factor the Board should follow the specific
path of subsection 135-5(a3). This reading complies with the specific-general canon
of statutory construction and gives reasonable effect to both the APA and subsection
135-5(a3).
The majority’s position, however, fails to give full effect to subsection 135-5(a3).
That provision requires that the Board adopt the cap factor recommended by the
actuary and mandates that the cap factor must cap no more than three quarters of
one percent of retirement allowances. N.C.G.S. § 135-5(a3). An additional
requirement of public notice and comment could pressure the Board to ignore the
specific guidelines of subsection 135-5(a3). If the actuary recommends a certain cap
factor that complies with the “three-quarters-of-one-percent” ceiling but, during the
public notice and comment portion of the proceedings, the public presents evidence
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Newby, J., dissenting
in favor of a different cap factor, what is the Board to do? Under subsection 135-5(a3),
the Board should choose the cap factor recommended by the actuary. But, under the
APA, the Board must give due consideration to the cap factor that the commenting
public recommended. The Board could not adequately do both.1 Quintessentially here,
the more specific statute should control over the more general one. See Nat’l Food
Stores, 268 N.C. at 629, 151 S.E.2d at 586 (explaining that, when multiple statutes
that would apply to a set of facts cannot be reconciled, the more specific statute should
control, especially when the more specific statute was enacted later in time).
The statutory analysis should control this case. When interpreting the APA
and subsection 135-5(a3) on their own terms and in light of one another, it is clear
that the Board need not follow the APA’s rulemaking procedures. That conclusion
should be the end of the matter. Still, multiple other reasons exist to properly consider
the agency’s interpretation.
We should respect the Board’s procedures under subsection 135-5(a3) because
the determination of a cap factor requires special and technical expertise. This Court
1 Moreover, as the majority notes, the APA “require[es] that, where the aggregate
financial impact of an administrative agency decision upon all affected persons exceeds $1
million during a twelve-month period, the agency must generate a fiscal note describing,
among other things, ‘at least two alternatives to the proposed rule that were considered by
the agency and the reason the alternatives were rejected,’ ” citing N.C.G.S. §§ 150B-
21.4(b1)–(b2). I do not see how the Board could adopt only the cap factor recommended by
the actuary, but also meaningfully consider at least two other alternatives. These
provisions of the APA do not make sense when applied to the process of adopting cap
factors.
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Newby, J., dissenting
respects an agency’s interpretation of a statute when the agency decisionmakers have
special expertise in the area covered by the statute. Wells v. Consol. Judicial Ret. Sys.
of N.C., 354 N.C. 313, 320, 553 S.E.2d 877, 881 (2001) (explaining that an
administrative interpretation of a provision is given great weight when “the subject
is a complex legislative scheme necessarily requiring expertise”); see also Frye Reg’l
Med. Ctr., Inc. v. Hunt, 350 N.C. 39, 45, 510 S.E.2d 159, 163 (1999) (explaining that
“[t]he interpretation of a statute given by the agency charged with carrying it out is
entitled to great weight”). Establishing a cap factor can be quite complex. That reality
may partially explain why the General Assembly gave such technical guidelines and
assigned most of the work to the expert actuary. This issue is therefore not one for
which additional public comment would likely be of much value. Indeed, when the
Board did eventually adopt a cap factor through the APA’s rulemaking procedures, it
adopted an identical cap factor to the one it previously adopted under N.C.G.S. § 135-
5(a3).
Plaintiff argues that because, in its view, school boards may not be able to
handle the financial burden of making the payments required by the cap factor in
some cases, the school boards and the public should have a say in the determination
of the cap factor. The General Assembly, however, has already made a policy
determination to address this issue. It mandated that a cap factor (1) shall be
established, (2) based on the actuary’s recommendation, (3) that applies only to those
retirees earning an average of over $100,000 per year during their four highest paid
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Newby, J., dissenting
years, and (4) that no more than three quarters of one percent of retirement plans
could be affected by the cap factor.
Moreover, we should respect the Board’s procedures because the Board has
adopted actuarial recommendations through informal procedures for years without
the General Assembly intervening to stop it. In construing administrative statutes,
this Court gives “great weight to the administrative interpretation, especially when,
as here, the agency’s position has been long-standing and has been met with
legislative acquiescence.” Wells, 354 N.C. at 319–20, 553 S.E.2d at 881. At least since
the latest version of its rule, which has been in effect since 1981, the Board has had
the policy of adopting actuarial recommendations by resolution, not by formal
rulemaking. 20 N.C. Admin. Code 2B.0202(a). The General Assembly has not stepped
in to require it to do otherwise, so we may presume that the practice comports with
legislative intent. See Wells, 354 N.C. at 319, 553 S.E.2d at 881 (“When the legislature
chooses not to amend a statutory provision that has been interpreted in a specific
way, we assume it is satisfied with the administrative interpretation.”). Furthermore,
the General Assembly affirmatively acted in the past to encourage this procedure.
See generally N.C.G.S. § 135-6(l) (providing the process the Board is to utilize
regarding actuarial assumptions). The General Assembly thus did not intend for the
APA’s procedures to apply.
The majority misses the preceding statutory analysis because it mistakenly
mines from this Court’s dated case law a presumption that the APA’s procedures
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Newby, J., dissenting
always control agency action unless a statute explicitly says otherwise. That blanket
presumption applied under an older version of the APA, but it does not any more.
Before 1991, the text of the APA explained that it would “apply to every agency . . .
except to the extent and in the particulars that any statute . . . makes specific
provisions to the contrary.” See An Act to Improve the Administrative Rule-Making
Process, S.L. 1991-418, § 2, 1991 N.C. Sess. Laws 791 (removing the quoted language
in 1991). This Court concluded when that text was in effect that “the General
Assembly intended only those agencies it expressly and unequivocally exempted”
from the APA to not be governed by it, and that any exempted agency is only
exempted “to the extent specified by the General Assembly.” Vass v. Bd. of Trs. of
Teachers’ and State Emps.’ Comprehensive Major Med. Plan, 324 N.C. 402, 407, 379
S.E.2d 26, 29 (1989).
In 1991, however, the General Assembly amended the APA and removed that
language. See An Act to Improve the Administrative Rule-Making Process, S.L. 1991-
418, § 2, 1991 N.C. Sess. Laws 791. Now, the only provision containing similar
language relates to “contested cases.” See N.C.G.S. § 150B-1(e) (2017) (“The contested
case provisions of this Chapter apply to all agencies and all proceedings not expressly
exempted from the Chapter.”). Rulemaking and other methods of adopting policies
are not “contested cases.”
Since the time the General Assembly amended the APA in that way, this Court
has expressly presumed that the APA’s procedures apply only when a “contested case”
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Newby, J., dissenting
was central to the dispute. See, e.g., Empire Power Co. v. N.C. Dep’t. of Env’t, Health,
and Nat. Res., Div. of Envtl. Mgmt., 337 N.C. 569, 573–74, 447 S.E.2d 768, 771 (1994).
This Court has not held that the APA as amended presumptively applies to agency
rulemaking or other policy enactments. I therefore disagree with the majority that
the procedures found in the APA presumptively apply to the Board’s adoption of a
cap factor. If the majority is to recognize such a presumption, it must do so entirely
based on an interpretation of the relevant statutes; our precedent does not demand
it. Yet, as discussed above, a reasonable interpretation of the statutes does not
support the majority’s decision.
The specificity of the statute at hand, and its technical subject matter, rebuts
any presumption that the APA’s procedures apply. In subsection 135-5(a3), the
General Assembly gave specific directions to the Retirement System about how to
limit pension spiking, and those directions did not require formal rulemaking. That
more detailed and targeted provision supplants the APA where the two provisions
overlap. The Retirement System has long adopted the recommendations of actuaries,
who have special expertise, through resolution of the Board and publication in the
meeting minutes. The General Assembly intended these procedures to be sufficient.
I respectfully dissent.
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