The state Supreme Court is deciding whether Gov. Chris Christie overstepped his authority when he abolished the Council on Affordable Housing and transferred its duties to the Department of Community Affairs.

How the court rules will determine whether there will be an agency “in but not of” the department — and thus able to act independently of the governor’s office — or whether it will be subject to greater control by the chief executive.

The case, In re Plan for the Abolition of the Council on Affordable Housing, A-127-11/A-14-12, was argued to the court on Monday.

Last year, the Appellate Division ruled that Christie acted ultra vires by invoking the Executive Reorganization Act of 1969 — which generally allows consolidation of executive functions to increase efficiency — to eliminate COAH, which the Legislature created in 1985 as part of the Fair Housing Act.

Christie issued Reorganization Plan 001-2011 on June 29, 2011, under which COAH would be eliminated in 60 days unless the Senate and Assembly adopted a concurrent resolution of disapproval. The Legislature did not meet during that 60-day period and so did not act.

The Fair Share Housing Center of Cherry Hill challenged the action, arguing that using the Reorganization Act to eliminate an agency that is “in but not of” an executive department would violate separation of powers.

The appeals court agreed, saying, “Without clear direction in the Reorganization Act that it should apply to independent agencies, there is no basis from which to infer that the Legislature intended to permit a governor to undo such a balanced representation scheme through a reorganization plan.”

At oral argument on Monday, Assistant Attorney General Robert Lougy said Christie has authority to put an agency within a state cabinet department, which would carry out the agency’s functions.

“If you’re going to have a state agency, it has to be within one of the three branches,” Lougy said.

Justice Barry Albin asked if COAH was designed to have a high degree of independence from both the executive and legislative branches.

“COAH is in the executive branch,” Lougy replied.

Justice Anne Patterson asked if the Legislature now had any remedy if it objected to Christie’s move.

The Legislature, Lougy said, had 60 days after the reorganization plan was issued to act but did nothing. “The Legislature can’t do anything after the 60-day period,” he said.

The justices raised hypothetical examples of other “in but not of” agencies that might be put under direct control of a cabinet official and by extension the governor.

Albin asked, for example, whether the Office of the Public Defender, which is in but not of the Department of the Treasury, could be made part of the Department of Law and Public Safety and whether the attorney general could then decide what criminal cases could be appealed.

Lougy said that would run afoul of the Sixth Amendment to the U.S. Constitution.

Patterson pointed out that the Legislature could have simply blocked the move in this case.

Lougy agreed. “The Legislature had the opportunity in 2012 and it declined to do so.”

Albin observed that a governor would have more authority to act unilaterally if the Senate and the Assembly are controlled by different parties.

“All it takes is one house to do nothing. They can go fishing and an agency disappears,” he said.

Lougy said that was correct. “Under the Reorganization Act, it requires two houses to disapprove” of such a move.

Adam Gordon, counsel to the Fair Share Housing Center, said the Reorganization Act did not give Christie the authority to do away with an agency altogether.

“This was not a rearranging, it was a rewriting” of COAH and the Fair Housing Act, he said. “That sweeping power was never intended by the Legislature.”

Patterson again noted that the Legislature could have acted within 60 days to reverse Christie’s decision.

Gordon said such a substantive change should have required an affirming action by the Legislature, as opposed to a default.

There was never meant to be this “broad grant of authority,” he said. “It’s hard to believe that the Legislature, in enacting the Reorganization Act, intended this.”

This case was moving through the appeals process at the same time that legislation was being considered that would have given municipal governments more time to spend affordable housing funds before the money is required to be returned to the state.

In June, the Assembly and Senate passed, in votes largely along party lines, A-2950, which would have extended the time within which municipal governments must spend the affordable housing funds from four to six years.

Proponents of the bill say local governments have delayed spending the money because of confusion over whether their actions will still be governed by COAH, whose future existence was and is still in question.

Christie vetoed the bill in July.