By Jim Morrill

U.S. Justice Department officials repudiated North Carolina's House Bill 2 on Wednesday, telling Gov. Pat McCrory that the law violates the U.S. Civil Rights Act and Title IX -- a finding that could jeopardize billions in federal education funding.

The department gave state officials until Monday to respond "by confirming that the State will not comply with or implement HB2."

The letter says HB2, which pre-empted Charlotte's anti-discrimination ordinance, violates Title IX, which bars discrimination in education based on sex, and Title VII of the Civil Rights Act, which bans employment discrimination.

If the finding is upheld, North Carolina could lose federal education funding. During the current school year, state public schools received $861 million. In 2014-15, the University of North Carolina system got $1.4 billion.

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 and requires people to use bathrooms in government buildings that match what's on their birth certificate.

The law sparked a national firestorm. Amid calls 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.

Speaking to business leaders Wednesday night, McCrory called the letter "something we've never seen regarding Washington overreach in my lifetime."

"This is no longer just a N.C. issue. This impacts every state, every university and almost every employee in the United States of America," he said. "All those will have to comply with new definitions of requirements by the federal government regarding restrooms, locker rooms and shower facilities in both the private and public sector."

GOP lawmakers also criticized the Justice Department -- and President Barack Obama.

House Speaker Tim Moore, who said the GOP leaders are consulting attorneys about a response, called the letter "a huge overreach (by) the federal government."

"It looks an awful lot like politics to me," Moore, a Republican, told reporters. "I guess President Obama, in his final months in office, has decided to take up this ultraliberal agenda."

Senate President Pro Tem Phil Berger called the ruling "a gross overreach." And Lt. Gov. Dan Forest blasted the Obama administration.

"To use our children and their educational futures as pawns to advance an agenda that will ultimately open those same children up to exploitation at the hands of sexual predators is, by far, the sickest example of the depths the ... administration will stoop to (to) 'fundamentally transform our nation,' " he said.

The North Carolina Values Coalition issued a statement saying HB2 is in full compliance with federal law. "The DOJ should be ashamed of itself for bullying North Carolinians, compromising the privacy and safety of our citizens, and spreading lies about what the clear language of Title IX and Title VII state," it said.

But opponents of HB2 applauded the Justice Department finding.

"The letter confirms what we've already known -- that HB2 is deeply discriminatory, violates federal civil rights law, and needs to be repealed as soon as possible," said Rep. Chris Sgro, a Democrat who is executive director of Equality NC. "We've already lost $500 million in economic impact, and now we are violating federal civil rights law and risking Title IX funding."

Chad Griffin, president of the Human Rights Campaign, the nation's largest gay rights group, commended the Justice Department "for enforcing the rule of law and protecting the rights of North Carolinians."

"We once again urge Gov. McCrory and the state of North Carolina to immediately do the same and fully repeal this harmful bill," he said.

Charlotte Mayor Jennifer Roberts declined to comment.

The Justice Department letter came two days after the Equal Employment Opportunity Commission posted a fact sheet reiterating its stance that it's a civil rights violation to deny transgender employees access to a bathroom based on gender identity.

That fact sheet refers to a 2015 decision in which the EEOC ruled that a civilian transgender woman working for the Army had been discriminated against when she was banned from using the common women's restroom and forced to use a single bathroom.

Carl Tobias, a University of Richmond law professor who has followed the HB2 legal issues, said the Justice Department letter was similar to one sent by the federal Education Department in the case of the Virginia transgender teen battling a bathroom ban in the Gloucester County school system.

"They might all be coordinating the federal response," Tobias said.

Tobias said noncompliance could also lead to a lawsuit filed by the Justice Department on the employment discrimination issue.

He said the letter puts "the ball in North Carolina's court."

In a statement, new UNC System President Margaret Spellings, who took office in March, said, "We take this determination seriously and will be conferring with the governor's office, legislative leaders and counsel about next steps and will respond to the Department by its May 9 deadline."

Already a political issue in an election year, HB2 rose to the top with Wednesday's letter.

"Enough is enough," said Democratic Attorney General Roy Cooper, McCrory's gubernatorial opponent. "It's time for the governor to put our schools and economy first and work to repeal this devastating law."

Democratic U.S. Senate candidate Deborah Ross called on Republican U.S. Sen. Richard Burr to "work to put an end to this law."

In the Justice Department letter, Vanita Gupta, the Justice Department's top civil rights lawyer, said, "HB 2 ... is facially discriminatory against transgender employees on the basis of sex because it treats transgender employees, whose gender identity does not match their biological sex, as defined by HB2, differently from similarly situated non transgender employees."

She went on to say the department "concluded that ... the state is engaged in a pattern or practice of resistance to the full enjoyment of Title VII rights by employees of public agencies ... "

(Staff writers Ely Portillo and Steve Harrison and (Raleigh) News & Observer reporters Anne Blythe, Colin Campbell and Craig Jarvis contributed to this story.)

(c)2016 The Charlotte Observer (Charlotte, N.C.)