— More than 100 state environmental regulators who will implement upcoming legislative decisions on natural gas drilling, offshore oil exploration and changes to air and water quality rules will soon do so as “exempt” employees who can be fired without cause or appeal.

A legislative change to the State Personnel Act in 2012 gave Gov. Pat McCrory the ability to designate 1,000 so-called "exempt positions" throughout his cabinet departments, more than any governor in a quarter-century.

An analysis by WRAL News shows that these re-designated workers are disproportionately concentrated within the hierarchy of the Department of Environment and Natural Resources, where McCrory will soon strip employment protections from about 150 directors and managers.

When the changes go into effect this month, exempt employees will make up about 5 percent of the department's 3,500 employees, a percentage second only to the much smaller Department of Administration. The result is a deep penetration of at-will employees in areas responsible for issuing permits and enforcing environmental regulations.

"The underlying concern here is that the deeper you go and the more you positions you exempt – it's making those positions much more political than they've ever been," Derb Carter, director of the Southern Environmental Law Center’s North Carolina offices, said.

The McCrory administration attributes the comparatively high number of exempt employees to the unique management structure of DENR, which has regional offices dotted across the state. But environmental advocates say it's another step toward bringing the department in line with efforts to expand energy production and cull regulations in the state, an agenda McCrory has repeatedly pushed with the General Assembly.

Department earns temporary reprieve

In the three years since Republicans took control of the legislature, lawmakers have slashed the agency's budget by more than 40 percent and moved entire divisions out from the DENR organization chart.

When he sat down with WRAL News in January, incoming DENR Secretary John Skvarla said one of his first missions was to repair a relationship with lawmakers that was "more adversarial than it's needed to be." With a change in approach, he said, it was possible for his department to work more effectively with businesses and developers and protect the environment at the same time.

"Maybe it's not the regulations. Maybe it's the way, internally at DENR, they handle permittees," Skvarla said. "Maybe with a more customer service environment, the regulations stay the same and everybody is happy because they've worked together to try to accomplish the same thing. That's my goal."

The 2013-15 budget restored the worst of the cuts. But in a video message to his staff last month, Division of Water Resources Director Tom Reeder said lawmakers will spare the rod only for so long.

"We're only getting a six- to nine-month reprieve, and we've got to get out ahead of this problem, and we've got to do it now," Reeder said. "We don't have any choice about this. By next spring, we have to have turned our public perception around."

The department has another mandate from legislators as well, provided McCrory signs a major regulatory reform bill approved in the final days of the 2013 session. The bill asks agencies to review regulations and classify them as "unneeded," "needed but not controversial" and "needed but controversial." DENR is first on deck for that process.

In the debate over the appropriate balance between business and environmental protections, many of DENR’s regulations are likely to fall into the third category.

Proponents say a review of the regulatory system and a more customer service-oriented approach make the department easier to navigate for developers and growing industries looking to do business in North Carolina.

"[Secretary Skvarla] has heard from the legislature that DENR is the No. 1 obstacle to job creation in the state," Drew Elliot, communications director for DENR, said. "What the secretary has said is, 'We're not going to be that anymore.'"

But employees who have left the department in recent months say the secretary's new approach, coupled with increased pressure from lawmakers, has DENR staffers worried.

"Morale is at the lowest that I have seen," said Michael Burkhard, a former environmental senior specialist with the Division of Water Quality who retired in May. "It's down to the very bottom right now."

More integration, alignment under McCrory

Change in exempt positions Department Perdue McCrory Change % change DENR 24 167 143 595.8% DHHS 79 388 309 391.1% Transportation 44 167 123 279.5% Administration 15 50 35 233.3% Commerce 35 62 27 77.1% Revenue 16 23 7 43.8% Public Safety 102 106 4 3.9% Cultural Resources 13 11 -2 -15.4% Source: Office of State Personnel

With these changes weighing on the department, it's unclear what impact the spike in exempt positions will have.

"A lot of that comes down to how you use that power," said Robin Smith, former assistant secretary for the environment at DENR. "You can designate all sorts of positions as exempt and never take any action to remove people."

Under Gov. Bev Perdue, Smith was one of the 24 employees designated exempt at DENR as of late 2012.

In a July 1 letter to the state personnel director and legislative leaders, McCrory tacked on another 143 such positions within DENR. These employees have not yet been exempted, Elliot said, but will be informed of the change “very soon.” Shortly after the initial publication of WRAL's story late Friday afternoon, Skvarla notified employees of the upcoming change via email.

Proportionally, this seven-fold increase outpaces the growth of exempt employees in every other cabinet agency, including much larger departments like Health and Human Services and Transportation.

"I think part of the reason for that is that we had the opportunity to designate additional people as managerial and policy-making exempt," Neal Alexander, director of the Office of State Personnel, said. "This creates the opportunity to have that alignment to the governor's vision, the administration's vision and the secretary's vision."

In some cases, especially in areas involved in permitting and compliance, employees six levels removed from the DENR secretary now serve in exempt positions.

Exemptions vs. agency size Department Employees % exempt DENR 3,500 4.77% DHHS 17,127 2.27% Transportation 13,085 1.28% Administration 691 7.24% Commerce 2,608 2.38% Revenue 1,466 1.57% Public Safety 27,450 0.39% Cultural Resources 945 1.16% Source: Office of State Personnel,

July 2013 state employee data

In addition to stripping away the requirement that the state demonstrate just cause before firing an employee, some exempt jobs don't have to be publicly posted and don't have to be chosen from a "pool of the most qualified persons." For these "policy-making exempt" positions, employees are inherently political per state law, since loyalty to the governor is "reasonably necessary" for the job.

The number of these policy-making exempt positions within DENR will triple under McCrory and will include not just the top political appointees, but every division director department-wide.

It's this trend that worries Rep. Paul Luebke, D-Durham. He was one of a small minority of lawmakers in the House to vote against a measure this session to add 500 exempt positions to McCrory's limit. That bill, which would bring the governor's exemption cap to 1,500 positions across state government, is currently waiting on McCrory's signature.

Managerial vs. policy-making Perdue McCrory Administration Policymaking 8 8 Managerial 7 42 Commerce Policymaking 13 20 Managerial 22 42 Cultural Resources Policymaking 5 5 Managerial 8 6 DHHS Policymaking 35 45 Managerial 44 343 DENR Policymaking 7 21 Managerial 17 146 Public Safety Policymaking 27 32 Managerial 75 73 EPA Statutatory 1 Revenue Policymaking 5 6 Managerial 11 17 Transportation Policymaking 15 33 Managerial 29 134 Source: Office of State Personnel

"Increasing the number of exempt positions in DENR fits exactly with the attack on environmental protections that this General Assembly has undertaken," Luebke said. "It does suggest that more exempt positions leads to more people who are sympathetic to anti-environmental perspectives."

Elliot says this is far from the case and not how Skvarla intends to manage the department.

“There has been no decision that we have made from an environmental standpoint that has been influenced by politics,” Elliot said. “I don't expect that to change in the future because the number of exempt positions has increased.”

Alexander pointed to the broad array of DENR divisions and regional offices as one reason for the large number of exempt employees. He also said the administration has taken steps to standardize who qualifies as exempt across cabinet departments.

"To be honest, that was not happening before with the small number in previous administrations," Alexander said. "There's a lot more integration and alignment under McCrory than there have been in previous administrations."

If anything, Elliot says, the spike shows that DENR is ahead of other agencies when it comes to reorganizing the department.

“We do not expect to ask for any additional positions when the next 500 come available,” he said.

And as for the exempt employees themselves, Elliot said these new designations show how valuable they really are to the department.

“The secretary has called it a badge of distinction and a mark of leadership,” he said. “I know not all employees are going to share that sentiment, but that's how the secretary intends to manage: with the assumption that those employees are outstanding leaders.”

CORRECTION: A previous version of this story incorrectly reported that Michael Burkhard was a former employee of DENR's Ecosystem Enhancement Program. He was actually a former employee of DENR's Division of Water Quality.



A previous version of this story also incorrectly reported that exempt employees are not subject to rules governing salary ranges and qualifications. In fact, exempt employees – both policy-making and managerial – are subject to rules governing compensation and qualifications per G.S. 126-4(2) and 4(3).

