North Carolina is facing additional threats to its federal funding as two more agencies — the U.S. Department of Transportation and Housing and Urban Development — say they are reviewing the state’s controversial House Bill 2.

Earlier this week, U.S. Justice Department officials told Gov. Pat McCrory that the law — which pre-empted Charlotte’s anti-discrimination ordinance — violates the U.S. Civil Rights Act and Title IX, which bars discrimination in education based on sex. That could jeopardize billions in federal education funding.

In response to questions from the Observer Thursday, a spokesperson for the U.S. Department of Transportation wrote that the agency is reviewing House Bill 2 “to determine if, among other things, it violates non-discrimination grant provisions for DOT federally-assisted projects.”

The federal DOT provides about $1 billion a year to North Carolina.

The U.S. Department of Transportation is reviewing North Carolina statute HB 2 to determine if, among other things, it violates non-discrimination grant provisions for DOT federally assisted projects.

DOT spokesperson

HUD has also been examining House Bill 2 for more than a month. On Thursday, a spokesperson confirmed that HUD continues to review the law.

HUD provides millions in grants each year to North Carolina and its cities. In 2012, HUD Secretary Shaun Donovan announced new regulations designed to ensure that the agency’s core housing programs are open to all who are eligible, regardless of sexual orientation or gender identity.

The Republican-controlled General Assembly passed HB2 in March in response to Charlotte’s extension of its anti-discrimination ordinance.

That ordinance would have allowed transgender people to use the bathroom of the gender with which they identify and would have extended anti-discrimination protections to LGBT residents. HB2 pre-empted that ordinance, requiring people to use bathrooms in government buildings that match what’s on their birth certificate.

The law has ignited a civil liberties fight in North Carolina and beyond. As prominent musicians called for boycotts of the state, at least two companies announced plans not to relocate or expand in North Carolina. The NBA is considering moving its 2017 All-Star Game from Charlotte.

The justice department gave state officials until Monday to respond to its ruling “by confirming that the State will not comply with or implement HB2.”

Republican state leaders have said they’re in no hurry to meet that deadline. House Speaker Tim Moore said Thursday that legislators won’t meet the deadline.

A spokesman for McCrory said the governor does plan to have a response by Monday’s deadline, but he did not offer further details.

A justice department official, who asked not to be named, told the Observer Thursday that the agency prefers to seek voluntary compliance with federal anti-discrimination laws. But if necessary, the official said, the department can seek a court order.

Civil rights expert Gilda Daniels, an associate professor at the University of Baltimore School of Law, says the U.S. government is authorized to use the “power of the purse” if it finds violations of federal law.

But John Dinan, professor of politics and international affairs at Wake Forest University, said it’s “almost unprecedented” for the federal government to cut off funding.

Staff Writer Jim Morrill and Raleigh News & Observer Staff Writer Anne Blythe contributed to this story.


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