Caught between opposing federal and state directives, the University of North Carolina Board of Governors held a special meeting Tuesday afternoon to get legal advice and try to resolve a standoff on the issue of transgender rights that puts hundreds of millions of dollars at stake.

On Tuesday evening, they had no resolution to offer, only expressions of concern about the importance of federal funding on university operations and the difficulty of juggling two competing mandates.

The “bathroom law” passed this spring has put the state squarely in the center of an intense national conversation about gay and transgender rights. Opponents of the law say it is discriminatory and is causing significant economic harm to the state: Hundreds of millions of federal dollars could get yanked, at least two companies canceled expansion plans, and the law has put NCAA tournament games at risk. Supporters say the intention of the law has been distorted, that it simply makes sense and protects peoples’ privacy.

And the university system, dependent on federal funding that could be cut off if officials comply with state law, is caught squarely in the middle.

On May 9, North Carolina Gov. Pat McCrory (R) and U.S. Attorney General Loretta Lynch announced dueling lawsuits regarding HB2, a law that requires people to use public restrooms according to the sex they were assigned at birth, rather than the one they identify with. (Monica Akhtar/The Washington Post)

The president of the UNC system, Margaret Spellings, said in a letter Monday that they are in a difficult spot, caught between federal and state law. The situation is even more complicated by unsettled case law, and shifting cultural mores.

On Tuesday evening, Spellings, a former U.S. education secretary under President George W. Bush, issued a statement that said, “The University of North Carolina is about providing high-quality educational opportunities to all. We depend on federal funding to help provide this access. In fact, more than 138,000 of our students—representing all 100 North Carolina counties and all UNC institutions—receive some type of federal aid. Because of this, we take the legal questions surrounding HB2 and the related lawsuits seriously. We intend to remain in close communication with state and federal officials to underscore our shared interest in resolving these difficult issues as quickly as possible so that we can refocus our efforts on educating students.”

The UNC Board of Governors Chairman Lou Bissette said in a statement, “The purpose of today’s Board meeting was to consult with our attorneys concerning the pending litigation involving the Department of Justice. We support all the actions President Spellings has taken thus far in leading the University and responding to HB2. The Board appreciates and values her ongoing leadership.

“As she said yesterday, the University is in a difficult position—caught in the middle between state and federal law. We are committed to resolving the legal issues in the University’s favor as quickly as possible. In the meantime, we are going to continue to focus on our primary mission of educating students.”

Last week federal officials, arguing that the state’s transgender “bathroom law” violates federal civil rights protections, ordered North Carolina officials not to comply with it. The U.S. Department of Justice told the UNC system that it must reject the law, which requires people to use the bathrooms that correspond to the gender on their birth certificates, regardless of the gender with which they identify. The department warned North Carolina Gov. Pat McCrory (R) that the state risked losing hundreds of millions of dollars in federal funding if the law were not disavowed by Monday.

McCrory responded by filing a lawsuit Monday, accusing the federal government of overreach. “This is an attempt to unilaterally rewrite long-established federal civil rights laws,” the complaint argued. He has said the law is not discriminatory and that the Obama administration is trying to force high schools to let boys use girls’ bathrooms.

The Justice Department countered with a lawsuit filed Monday afternoon, calling it an important civil-rights issue akin to the laws that barred black people from entering bathrooms designated for white people.

The 10 Republican congressmen from North Carolina wrote to the U.S. secretary of education Monday, asking for an assurance by Friday that federal funds will not be withheld from the state. They wrote that the Obama administration is choosing to define discrimination on the basis of sex to include discrimination based on gender identity, although the Title IX act does not specify gender identity. They called the threat to cut funding “without legal merit and an unprecedented overreach by the federal government.”

Meanwhile, faculty were uniting in opposition to the state law.

The University of North Carolina system Faculty Assembly sent a letter to McCrory Monday night that read, in part, “It is the considered judgment of the UNC Faculty Assembly that the provisions of House Bill 2 constitute an ill-advised legislative intervention in the governance of the University of North Carolina and its constituent institutions….

“House Bill 2 undermines the principles the office of the Governor is duty-bound to uphold. It is the considered advice and counsel of the UNC Faculty Assembly that you make every effort to mitigate, if not negate, the effects of this ill-advised and unnecessary interference in the governance of the University.”

The Faculty Assembly resolution stated that discrimination “is antithetical to the freedoms required for the pursuit of academic excellence…”

Faculty resolutions in opposition to the law were passed at 11 of the 17 campuses, and discussions are underway at the other six.

Here are the full letter to the governor and the faculty actions:

Here is the letter from House Republicans: