A BILL TO BE ENTITLED
AN ACT to appropriate funds for current operations and capital improvements for state departments, institutions, and agencies, and for other purposes.
The General Assembly of North Carolina enacts:

PART I. INTRODUCTION AND TITLE OF ACT

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
INTRODUCTION
SECTION 1.1.  The appropriations made in this act are for maximum amounts necessary to provide the services and accomplish the purposes described in the budget. Savings shall be effected where the total amounts appropriated are not required to perform these services and accomplish these purposes and, except as allowed by the Executive Budget Act, or this act, the savings shall revert to the appropriate fund at the end of each fiscal year.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Title of Act
SECTION 1.2.  This act shall be known as the "Current Operations and Capital Improvements Appropriations Act of 2003."

PART II. CURRENT OPERATIONS AND EXPANSION/GENERAL FUND

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright 
CURRENT OPERATIONS AND EXPANSION/GENERAL FUND
SECTION 2.1.  Appropriations from the General Fund of the State for the maintenance of the State departments, institutions, and agencies, and for other purposes as enumerated are made for the biennium ending June 30, 2005, according to the following schedule:

Current Operations – General Fund	2003‑2004	2004‑2005

EDUCATION

Community Colleges System Office	659,110,455 	662,184,769 

Department of Public Instruction	6,017,691,217 	6,025,509,098 

University System	1,761,408,589 	1,796,324,529 

HEALTH AND HUMAN SERVICES

Department of Health and Human Services
	Office of the Secretary	81,783,833 	80,583,833 
	Division of Aging	27,535,838 	27,535,838 
	Division of Blind Services/Deaf/HH	9,302,670 	9,387,008 
	Division of Child Development	250,943,174 	250,943,174 
	Division of Education Services	31,606,862 	31,470,076 
	Division of Facility Services	9,442,530 	9,442,530 
	Division of Medical Assistance	2,270,544,822 	2,558,592,984 
	Division of Mental Health	577,021,583 	580,154,434 
	NC Health Choice	45,057,907 	45,057,907 
	Division of Public Health	123,425,475 	122,421,895 
	Division of Social Services	176,728,674 	186,579,268 
	Division of Vocation Rehabilitation	39,798,384 	40,591,118 
Total			3,643,191,752 	3,942,760,065 

NATURAL AND ECONOMIC RESOURCES

Department of Agriculture and Consumer Services	49,214,757 	49,237,156 

Department of Commerce
	Commerce	32,925,728 	33,165,487 
	Commerce State‑Aid	10,999,731 	10,999,731 
	NC Biotechnology Center	5,883,395 	5,883,395 
	Rural Economic Development Center	4,425,677 	4,425,677 

Department of Environment and Natural Resources
	Environment and Natural Resources	146,337,419 	153,052,962 
	Clean Water Management Trust Fund	25,000,000 	25,000,000 

Office of the Governor – Housing Finance Agency	4,750,945 	4,750,945 

Department of Labor	13,265,001 	13,273,651 

JUSTICE AND PUBLIC SAFETY

Department of Correction	940,840,075 	960,172,282 

Department of Crime Control and Public Safety	29,034,326 	28,139,010 

Judicial Department	303,251,883 	310,448,697 
Judicial Department – Indigent Defense	72,578,130 	70,645,094 

Department of Justice	70,673,310 	71,459,312 

Department of Juvenile Justice and 
	Delinquency Prevention	130,313,473 	130,505,498 

GENERAL GOVERNMENT

Department of Administration	55,733,844 	56,312,231 

Office of Administrative Hearings	2,409,683 	2,411,797 

Department of State Auditor	10,243,471 	10,243,471 

Office of State Controller	9,694,464 	9,719,451 

Department of Cultural Resources
	Cultural Resources	54,193,964 	53,915,314 
	Roanoke Island Commission	1,500,000 	1,500,000 

State Board of Elections	7,439,982 	4,915,939 

General Assembly	41,561,463 	44,971,305 

Office of the Governor
	Office of the Governor	4,856,503 	4,826,503 
	Office of State Budget and Management	4,176,537 	4,180,842 
	OSBM – Reserve for Special Appropriations	3,130,000 	3,130,000 

Department of Insurance
	Insurance	21,735,135 	21,766,272 
	Insurance – Volunteer Safety Workers' 
		Compensation	4,500,000 	4,500,000 

Office of Lieutenant Governor	601,722 	601,722 

Department of Revenue	73,501,897 	73,501,897 

Rules Review Commission	310,454 	310,454 

Department of Secretary of State	7,754,229 	7,453,229 

Department of State Treasurer
	State Treasurer	19,941,830 	19,944,585 
	State Treasurer – Retirement for Fire and 
		Rescue Squad Workers	7,181,179 	7,181,179 

TRANSPORTATION

Department of Transportation	11,429,525 	11,460,101 

RESERVES, ADJUSTMENTS AND DEBT SERVICE

Reserve for Compensation Increases	132,350,000 	126,250,000 

Statewide Reserve for State Health Plan	72,000,000 	96,000,000 

Reserve for Teachers' and State Employees' 
	Retirement Rate Adjustment	26,546,000 	154,200,000 

Retiree Health Benefits	36,800,000	36,800,000 

Contingency and Emergency	5,000,000 	5,000,000 

Reserve for Salary Adjustments	500,000 	500,000 

Mental Health, Developmental Disabilities and 
	Substance Abuse Services Trust Fund	10,000,000 	0 

Reserve to Implement HIPAA	2,000,000 	0 

Economic Incentives Reserve	2,600,000 	0 

Judicial Staffing/Salary Reserve	461,198	461,198

State Surplus Real Property System	250,000 	0 

Blue Ribbon Commission on Medicaid Reform	500,000 	0 

Debt Service
	General Debt Service	387,785,920 	474,479,452 
	Federal Reimbursement	1,155,948 	1,155,948 

TOTAL CURRENT OPERATIONS – 
	GENERAL FUND	14,940,740,811 	15,535,630,248 

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
GENERAL FUND AVAILABILITY STATEMENT
SECTION 2.2.(a)  The General Fund availability used in developing the 2003‑2005 biennial budget is shown below:
	FY 2003‑2004	FY 2004‑2005
Unappropriated Balance	103,885 	0 

Beginning Unreserved Credit Balance	375,000,000 	0 

Revenues Based on Existing Tax Structure	13,398,700,000 	14,203,160,000 

Nontax Revenues
	Investment Income	126,266,801 	132,056,801 
	Judicial Fees	137,520,000 	144,430,000 
	Disproportionate Share	100,000,000 	100,000,000 
	Insurance	51,900,000 	53,900,000 
	Other Nontax Revenues	116,050,000 	120,100,000 
	Highway Trust Fund Transfer	252,422,125 	231,774,330 
	Highway Fund Transfer	16,379,000 	16,166,400 

		Subtotal Nontax Revenues	800,537,926 	798,427,531 

Total General Fund Availability	14,574,341,811 	15,001,587,531 

Adjustments to Availability:  2003 Session
	Finance Committee Revenue Initiatives	384,000,000 	480,900,000 
	Tobacco Settlement Funds – Tobacco Trust Fund 	40,000,000 	40,000,000 
	Tobacco Settlement Funds – Health & Wellness 
		Trust Fund	20,000,000 	20,000,000 
	Transfer from Disaster Reserve	100,000,000 	0 
	Credit Savings Reserve Account	(100,000,000)	0 
	Credit to Repairs and Renovations Account	(50,000,000)	0 

		Subtotal Adjustments to Availability:  
			2003 Session	394,000,000 	540,900,000 

General Fund Availability
	for 2003‑2005 Biennium	14,968,341,811 	15,542,487,531 

Total General Fund Appropriations 
	2003‑2005 Biennium	(14,968,341,811)	(15,535,630,248)

Unappropriated Balance	0 	6,857,283 

SECTION 2.2.(b)  Notwithstanding G.S. 143‑16.4(a2), of the funds credited to the Tobacco Trust Account from the Master Settlement Agreement pursuant to Section 6(2) of S.L. 1999‑2 during the 2003‑2004 and 2004‑2005 fiscal years, the sum of forty million dollars ($40,000,000) shall be transferred from the Department of Agriculture and Consumer Services, Budget Code 23703 (Tobacco Trust Fund) to the State Controller to be deposited in Nontax Budget Code 19978 (Intra State Transfers) to support General Fund appropriations for the 2003‑2004 and 2004‑2005 fiscal years.
SECTION 2.2.(c)  Notwithstanding G.S. 143‑16.4(a1), of the funds credited to the Health Trust Account from the Master Settlement Agreement pursuant to Section 6(2) of S.L. 1999‑2 during the 2003‑2004 and 2004‑2005 fiscal years, the sum of twenty million dollars ($20,000,000) that would otherwise be deposited in the Fund Reserve established by G.S. 147‑86.30(c) shall be transferred from the Department of State Treasurer, Budget Code 23460 (Health and Wellness Trust Fund) to the State Controller to be deposited in Nontax Budget Code 19978 (Intra State Transfers) to support General Fund appropriations for the 2003‑2004 and 2004‑2005 fiscal years.
SECTION 2.2.(d)  On July 1, 2003, the State Controller shall transfer one hundred million dollars ($100,000,000) from the Disaster Reserve Fund, Budget Code 13017, to Nontax Budget Code 19978 (Intra State Transfers) to support General Fund appropriations for the 2003‑2004 fiscal year. 
SECTION 2.2.(e)  Notwithstanding G.S. 105‑187.9(b)(1), the sum to be transferred to the General Fund for each of the fiscal years 2003‑2004 and 2004‑2005 is two hundred fifty million dollars ($250,000,000).
SECTION 2.2.(f)  Notwithstanding G.S. 143‑15.2 and G.S. 143‑15.3, the State Controller shall transfer only one hundred million dollars ($100,000,000) from the unreserved credit balance to the Savings Reserve Account on June 30, 2003.  This is not an "appropriation made by law", as that phrase is used in Article V, Section 7(1) of the North Carolina Constitution.  This subsection becomes effective June 30, 2003.
SECTION 2.2.(g)  Notwithstanding G.S. 143‑15.2 and G.S. 143‑15.3A, the State Controller shall transfer only fifty million dollars ($50,000,000) from the unreserved credit balance to the Repairs and Renovations Reserve Account on June 30, 2003. This subsection becomes effective June 30, 2003.
SECTION 2.2.(h)  Notwithstanding G.S. 147‑86.30(c), the Health and Wellness Trust Fund Commission may expend the balance of funds remaining from funds transferred from the Fund Reserve to Health and Wellness Trust Fund nonreserved funds pursuant to Section 2.2(h) of S.L. 2002‑126.  These funds shall be expended in accordance with G.S. 147‑86.30(d) during the 2003‑2005 fiscal biennium.

PART III. CURRENT OPERATIONS AND EXPANSION/HIGHWAY FUND

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
CURRENT OPERATIONS AND EXPANSION/HIGHWAY FUND
SECTION 3.1.  Appropriations from the State Highway Fund for the maintenance and operation of the Department of Transportation, and for other purposes as enumerated, are made for the biennium ending June 30, 2005, according to the following schedule:

Current Operations – Highway Fund	2003‑2004	2004‑2005
(1)	Transportation Admin. (84210)	$70,917,203 	$69,242,486 
(2)	Transportation Operations (84220)	28,190,393 	28,150,605 
(3)	Transportation programs (84230)		
	State Construction		
		Secondary	89,600,000 	90,590,000 
		Urban	14,000,000 	14,000,000 
		Public access	2,000,000 	2,000,000 
		Spot safety	9,100,000 	9,100,000 
		Contingency	10,000,000 	10,000,000 
	Federal Aid Match	4,160,000 	4,280,000 
	Maintenance	600,933,217 	576,859,889 
	Asphalt plant/OSHA	425,000 	425,000 
	Capital	7,000,000 	0 
	Ferry Operations	19,677,283 	19,677,283 
	Aid to municipalities	89,600,000 	90,590,000 
	Rail	15,090,919 	15,531,153 
	Public transit	76,232,576 	78,475,484 
(4)	Governor's highway safety (84240)	292,449 	293,118 
(5)	Transportation regulation (84260)	100,255,703 	100,323,363 
(6)	Reserves, transfers, other agencies (84270)	213,455,257 	218,670,347 
TOTAL		1,350,930,000 	1,328,208,728 

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright 
HIGHWAY FUND AVAILABILITY STATEMENT
SECTION 3.2.  The Highway Fund availability used in developing the 2003‑2005 biennial budget is shown below:

Highway Fund Budget Reform Statement	2003‑2004	2004‑2005

Beginning Credit Balance		‑
Estimated Revenue	 $ 1,350,930,000 	 $ 1,373,080,000 
Estimated Reversions		‑

Total Highway Fund Availability	 $ 1,350,930,000 	 $ 1,373,080,000 

PART IV. HIGHWAY TRUST FUND APPROPRIATIONS

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright 
HIGHWAY TRUST FUND APPROPRIATIONS
SECTION 4.1.  Appropriations from the State Highway Trust Fund for the maintenance and operation of the Department of Transportation, and for other purposes as enumerated, are made for the biennium ending June 30, 2005, according to the following schedule:

Current Operations – Highway Trust Fund	2003‑2004	2004‑2005

Intrastate System	$  423,993,831	$  459,363,570
Urban Loops	79,689,271	84,350,953
Aid to Municipalities	171,445,448	185,747,496
Total for Secondary Roads	44,486,843	48,197,953
Program Administration	38,001,482	39,636,698
Transfer to General Fund	252,422,125	231,774,330

GRAND TOTAL CURRENT OPERATIONS 
	AND EXPANSION	 $ 1,010,039,000 	 $ 1,049,071,000 

PART V. BLOCK GRANTS

Requested by:	Representatives Barnhart, Nye 
DHHS Block Grants
SECTION 5.1.(a)  Appropriations from federal block grant funds are made for the fiscal year ending June 30, 2004, according to the following schedule:

COMMUNITY SERVICES BLOCK GRANT

01.	Community Action Agencies	$ 15,266,973

02.	Limited Purpose Agencies	848,165

03.	Department of Health and Human Services
to administer and monitor
the activities of the
Community Services Block Grant	848,165

TOTAL COMMUNITY SERVICES BLOCK GRANT	$ 16,963,303

SOCIAL SERVICES BLOCK GRANT

01.	County departments of social services	$ 28,868,189
(Transfer from TANF ‑ $4,500,000)

02.	Allocation for in‑home services provided
by county departments of
social services	2,101,113

03.	Division of Mental Health, Developmental
Disabilities, and Substance Abuse Services	3,234,601

04.	Division of Services for the Blind	3,105,711

05.	Division of Facility Services	426,836

06.	Division of Aging ‑ Home and Community
Care Block Grant	1,840,234

07.	Child Care Subsidies	3,000,000

08.	Division of Vocational Rehabilitation ‑ 
United Cerebral Palsy	71,484

09.	State administration	1,693,368

10.	Child Medical Evaluation Program	238,321

11.	Adult day care services	2,155,301

12.	Comprehensive Treatment Services
Program	422,003

13.	Department of Administration
for the N.C. State Commission of Indian Affairs
In‑Home Services Program for the Elderly	203,198

14.	Division of Vocational Rehabilitation  Services ‑
Easter Seals Society	116,779

15.	UNC‑CH CARES Program for training and
consultation services	247,920

16.	Office of the Secretary ‑ Office of Economic
Opportunity for N.C. Senior Citizens'
Federation for outreach services to
low‑income elderly persons	41,302

17.	Division of Social Services ‑ Child
Caring Agencies	1,500,000

18.	Division of Mental Health,
Developmental Disabilities, and 
Substance Abuse Services ‑ Developmentally
Disabled Waiting List for services	5,000,000

19.	Transfer to Preventive Health Services Block
Grant for HIV/AIDS education, counseling, and
testing		145,819

20.	Division of Facility Services ‑ 
Mental Health Licensure	213,128

21.	Transfer to the Division of Aging for training
	provided through Alzheimer's Associations			        150,000

TOTAL SOCIAL SERVICES BLOCK GRANT	$ 54,775,307

LOW‑INCOME ENERGY BLOCK GRANT

01.	Energy Assistance Programs	$ 12,775,323

02.	Crisis Intervention	9,192,927

03.	Administration	2,957,339

04.	Weatherization Program	4,212,740

05.	Department of Administration ‑ 
N.C. State Commission of Indian Affairs	54,840

06.	Heating Air Repair and Replacement Program	1,966,153

TOTAL LOW‑INCOME ENERGY BLOCK GRANT	$ 31,159,322

MENTAL HEALTH SERVICES BLOCK GRANT

01.	Provision of community‑based
services for severe and persistently
mentally ill adults	$ 5,442,798

02.	Provision of community‑based
services to children	2,513,141

03.	Comprehensive Treatment Services
Program for Children	1,500,000

04.	Administration	783,911

TOTAL MENTAL HEALTH SERVICES BLOCK GRANT	$ 10,239,850

SUBSTANCE ABUSE PREVENTION
AND TREATMENT BLOCK GRANT

01.	Provision of community‑based
alcohol and drug abuse services,
tuberculosis services, and services
provided by the Alcohol and Drug Abuse
Treatment Centers	$ 18,901,711

02.	Continuation of services for
pregnant women and women
with dependent children	8,069,524

03.	Continuation of services to
IV drug abusers and others at risk
for HIV diseases	4,616,378

04.	Provision of services to children
and adolescents	7,740,611

05.	Juvenile Services ‑ Family Focus	851,156

06.	Allocation to the Division of Public Health
for HIV/STD Risk Reduction Projects	383,980

07.	Allocation to the Division of Public Health
for HIV/STD Prevention by County Health
Departments	209,576

08.	Allocation to the Division of Public Health
for the Maternal and Child Health Hotline	37,779

09.	Administration	2,596,307

TOTAL SUBSTANCE ABUSE PREVENTION
AND TREATMENT BLOCK GRANT	$ 43,407,022

CHILD CARE AND DEVELOPMENT FUND BLOCK GRANT

01.	Child care subsidies	$154,713,475

02.	Quality and availability initiatives	16,449,256

03.	Administrative expenses	6,969,533

04.	Transfer from TANF Block Grant for 
child care subsidies	79,562,189

TOTAL CHILD CARE AND DEVELOPMENT FUND
BLOCK GRANT	$257,694,453

TEMPORARY ASSISTANCE TO NEEDY FAMILIES
(TANF) BLOCK GRANT 

01.	Work First Cash Assistance	$129,396,275

02.	Work First County Block Grants	94,653,315

03.	Transfer to the Child Care and 
Development Fund Block Grant
for child care subsidies	79,562,189

04.	Child Care Subsidies for TANF Recipients	26,621,241

05.	Child Welfare Workers
for local DSS	10,382,391

06.	Transfer to Social Services Block Grant for
County Departments of Social Services for
Children's Services	4,500,000

07.	Support Our Students – Department of
Juvenile Justice and Delinquency
Prevention	1,925,000

08.	Residential Substance Abuse Services
for Women With Children	2,000,000

09.	Domestic Violence Services
for Work First Families	1,200,000

10.	After‑School Services for
At‑Risk Children	1,925,000

11.	Division of Social Services ‑
Administration	400,000

12.	Child Welfare Training	1,600,000

13.	TANF Automation Projects	592,500

14.	Work First/ Boys and Girls Clubs	1,000,000

15.	Work Central Career Advancement Center	550,000

16.	WCH‑Teen Pregnancy Prevention	570,000

17.	Transfer to Social Services Block Grant for Child Caring
	Institutions	1,500,000

18.	Special Children's Adoption Fund	2,000,000

19.	NC Fast Implementation	630,000

20.	Maternity Homes	838,000

21.	Pregnancy Prevention Coalition of North Carolina	127,500

22.	Individual Development Accounts	180,000

TOTAL TEMPORARY ASSISTANCE TO NEEDY FAMILIES
(TANF) BLOCK GRANT	$362,153,411

MATERNAL AND CHILD HEALTH BLOCK GRANT

01.	Healthy Mothers/Healthy Children
Block Grants to Local Health
Departments	9,838,074

02.	High‑Risk Maternity Clinic Services,
Perinatal Education and Training, 
Childhood Injury Prevention,
Public Information and Education, and
Technical Assistance to Local Health
Departments	2,307,918

03.	Services to Children With Special Health
Care Needs	5,078,647

TOTAL MATERNAL AND CHILD
HEALTH BLOCK GRANT	$ 17,224,639

PREVENTIVE HEALTH SERVICES BLOCK GRANT

01.	Statewide Health Promotion Programs	$3,282,810

02.	Rape Crisis/Victims' Services
Program ‑ Council for Women	197,112

03.	Transfer from Social Services
Block Grant ‑ 
HIV/AIDS education, counseling, and
testing		145,819

04.	Office of Minority Health	159,459

05.	Administrative Costs	108,546

TOTAL PREVENTIVE HEALTH SERVICES BLOCK GRANT	$3,893,746

SECTION 5.1.(b)  Decreases in Federal Fund Availability. – If the United States Congress reduces federal fund availability in the Social Services Block Grant below the amounts appropriated in this section, then the Department of Health and Human Services shall allocate these decreases giving priority first to those direct services mandated by State or federal law, then to those programs providing direct services that have demonstrated effectiveness in meeting the federally and State‑mandated services goals established for the Social Services Block Grant.  The Department shall not include transfers from TANF for specified purposes in any calculations of reductions to the Social Services Block Grant.
If the United States Congress reduces the amount of TANF funds below the amounts appropriated in this section after the effective date of this act, then the Department shall allocate the decrease in funds after considering any underutilization of the budget and the effectiveness of the current level of services. Any TANF Block Grant fund changes shall be reported to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division.
Decreases in federal fund availability shall be allocated for the Maternal and Child Health and Preventive Health Services federal block grants by the Department of Health and Human Services after considering the effectiveness of the current level of services.
SECTION 5.1.(c)  Increases in Federal Fund Availability. – Any block grant funds appropriated by the United States Congress in addition to the funds specified in this act shall be expended by the Department of Health and Human Services, with the approval of the Office of State Budget and Management, provided the resultant increases are in accordance with federal block grant requirements and are within the scope of the block grant plan approved by the General Assembly.
SECTION 5.1.(d)  Changes to the budgeted allocations to the block grants appropriated in this act and new allocations from the block grants not specified in this act shall be submitted to the Joint Legislative Commission on Governmental Operations  for review prior to the change and shall be reported immediately to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division.
SECTION 5.1.(e)  The Department of Health and Human Services may allow no‑cost contract extensions for up to six months for nongovernmental grant recipients under the TANF Block Grant.
SECTION 5.1.(f)  If federal funds are received under the Maternal and Child Health Block Grant for abstinence education, pursuant to section 912 of Public Law 104‑193 (42 U.S.C. § 710), for the 2003‑2004 fiscal year, then those funds shall be transferred to the State Board of Education to be administered by the Department of Public Instruction. The Department of Public Instruction shall use the funds to establish an Abstinence Until Marriage Education Program and shall delegate to one or more persons the responsibility of implementing the program and G.S. 115C‑81(e1)(4). The Department of Public Instruction shall carefully and strictly follow federal guidelines in implementing and administering the abstinence education grant funds.
The Department of Health and Human Services shall contract for the follow‑up testing involved with the Newborn Screening Program. The Department may contract for these services with an entity within or outside of the State; however, the Department may only contract with an out‑of‑state entity if it can be demonstrated that there is a cost‑savings associated with contracting with the out‑of‑state entity. The contract amount shall not exceed twenty‑five thousand dollars ($25,000). The amount of the contract shall be covered by funds in the Maternal and Child Health Block Grant.
SECTION 5.1.(g)  The sum of four hundred thousand dollars ($400,000) appropriated in this section to the Department of Health and Human Services in the Child Care and Development Fund Block Grant shall be used to develop and implement a Medical Child Care Pilot open to children throughout the State.
SECTION 5.1.(h)  Payment for subsidized child care services provided with federal TANF funds shall comply with all regulations and policies issued by the Division of Child Development for the subsidized child care program.
SECTION 5.1.(i)  The sum of four hundred thousand dollars ($400,000) appropriated in this section in the TANF Block Grant to the Department of Health and Human Services, Division of Social Services, for the 2003‑2004 fiscal year shall be used to support administration of TANF‑funded programs.
SECTION 5.1.(j)  The sum of two million dollars ($2,000,000) appropriated in this section in the TANF Block Grant to the Department of Health and Human Services, Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, for the 2003‑2004 fiscal year shall be used to provide regional residential substance abuse treatment and services for women with children. The Department of Health and Human Services, the Division of Social Services, and the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, in consultation with local departments of social services, area mental health programs, and other State and local agencies or organizations, shall coordinate this effort in order to facilitate the expansion of regionally based substance abuse services for women with children. These services shall be culturally appropriate and designed for the unique needs of TANF women with children.
In order to expedite the expansion of these services, the Secretary of the Department of Health and Human Services may enter into contracts with service providers.
The Department of Health and Human Services, the Division of Social Services, and the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, shall report on their progress in complying with this subsection no later than October 1, 2003, and March 1, 2004, to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division. These reports shall include all of the following:
(1)	The number and location of additional beds created.
(2)	The types of facilities established.
(3)	The delineation of roles and responsibilities at the State and local levels.
(4)	Demographics of the women served, the number of women served, and the cost per client.
(5)	Demographics of the children served, the number of children served, and the services provided.
(6)	Job placement services provided to women.
(7)	A plan for follow‑up and evaluation of services provided with an emphasis on outcomes.
(8)	Barriers identified to the successful implementation of the expansion.
(9)	Identification of other resources needed to appropriately and efficiently provide services to Work First recipients.
(10)	Other information as requested.
SECTION 5.1.(k)  The sum of one million nine hundred twenty‑five thousand dollars ($1,925,000) appropriated in this section in the TANF Block Grant to the Department of Health and Human Services and transferred to the Department of Juvenile Justice and Delinquency Prevention for the 2003‑2004 fiscal year shall be used to support the existing Support Our Students Program and to expand the Program statewide, focusing on low‑income communities in unserved areas. These funds shall not be used for administration of the Program.
SECTION 5.1.(l)  The sum of one million two hundred thousand dollars ($1,200,000) appropriated under this section in the TANF Block Grant to the Department of Health and Human Services, Division of Social Services, for the 2003‑2004 fiscal year shall be used to provide domestic violence services to Work First recipients.  These funds shall be used to provide domestic violence counseling, support, and other direct services to clients.  These funds shall not be used to establish new domestic violence shelters or to facilitate lobbying efforts.  The Division of Social Services may use up to seventy‑five thousand dollars ($75,000) in TANF funds to establish one administrative position within the Division of Social Services to implement this subsection.
Each county department of social services and the local domestic violence shelter program serving the county shall jointly develop a plan for utilizing these funds. The plan shall include the services to be provided and the manner in which the services shall be delivered. The county plan shall be signed by the county social services director or the director's designee and the domestic violence program director or the director's designee and submitted to the Division of Social Services by December 1, 2003. The Division of Social Services, in consultation with the Council for Women, shall review the county plans and shall provide consultation and technical assistance to the departments of social services and local domestic violence shelter programs, if needed.
The Division of Social Services shall allocate these funds to county departments of social services according to the following formula:  (i) each county shall receive a base allocation of five thousand dollars ($5,000) and (ii) each county shall receive an allocation of the remaining funds based on the county's proportion of the statewide total of the Work First caseload as of July 1, 2003, and the county's proportion of the statewide total of the individuals receiving domestic violence services from programs funded by the Council for Women as of July 1, 2003. The Division of Social Services may reallocate unspent funds to counties that submit a written request for additional funds.
The Department of Health and Human Services shall report on the uses of these funds no later than March 1, 2004, to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division.
SECTION 5.1.(m)  The sum of one million nine hundred twenty‑five thousand dollars ($1,925,000) appropriated in this section in the TANF Block Grant to the Department of Health and Human Services, Division of Social Services, shall be used to expand after‑school programs and services for at‑risk children. The Department shall develop and implement a grant program to award grants to community‑based programs that demonstrate the ability to reach children at risk of teen pregnancy and school dropout. The Department shall award grants to community‑based organizations that demonstrate the ability to develop and implement linkages with local departments of social services, area mental health programs, schools, and other human services programs in order to provide support services and assistance to the child and family. These funds may be used to establish one position within the Division of Social Services to coordinate at‑risk after‑school programs and shall not be used for other State administration. The Department shall report no later than March 1, 2003, on its progress in complying with this section to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Subcommittee on Health and Human Services, and the Fiscal Research Division.
SECTION 5.1.(n)  The sum of ten million three hundred eighty‑two thousand three hundred ninety‑one dollars ($10,382,391) appropriated in this section in the TANF Block Grant to the Department of Health and Human Services, Division of Social Services, for the 2003‑2004 fiscal year for Child Welfare Improvements shall be allocated to the county departments of social services for hiring or contracting staff to investigate and provide services in Child Protective Services cases; to provide foster care and support services; to recruit, train, license, and support prospective foster and adoptive families; and to provide interstate and post‑adoption services for eligible families.
SECTION 5.1.(o)  The sum of one million five hundred thousand dollars ($1,500,000) appropriated in this section in the Mental Health Block Grant to the Department of Health and Human Services, Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, for the 2003‑2004 fiscal year and the sum of four hundred twenty‑two thousand three dollars ($422,003) appropriated in this section in the Social Services Block Grant to the Department of Health and Human Services, Division of Social Services, for the 2003‑2004 fiscal year shall be used to continue a Comprehensive Treatment Services Program for Children in accordance with Section 21.60 of S.L. 2001‑424, as amended.
SECTION 5.1.(p)  The sum of one million six hundred thousand dollars ($1,600,000) appropriated in this section in the TANF Block Grant to the Department of Health and Human Services, Division of Social Services, for fiscal year 2003‑2004 shall be used to support various child welfare training projects as follows:
(1)	Provide a regional training center in southeastern North Carolina.
(2)	Support the Masters Degree in Social Work/Baccalaureate Degree in Social Work Collaborative.
(3)	Provide training for residential child care facilities.
(4)	Provide for various other child welfare training initiatives.
SECTION 5.1.(q)  If funds appropriated through the Child Care and Development Fund Block Grant for any program cannot be obligated or spent in that program within the obligation or liquidation periods allowed by the federal grants, the Department may move funds to child care subsidies, unless otherwise prohibited by federal requirements of the grant, in order to use the federal funds fully.
SECTION 5.1.(r)  The sum of eight hundred thirty‑eight thousand dollars ($838,000) appropriated in this section in the TANF Block Grant to the Department of Health and Human Services shall be used to purchase services at maternity homes throughout the State.
SECTION 5.1.(s)  The sum of two million dollars ($2,000,000) appropriated in this section in the TANF Block Grant to the Department of Health and Human Services, Special Children Adoption Fund, for the 2003‑2004 fiscal year shall be used to implement this subsection. The Division of Social Services, in consultation with the North Carolina Association of County Directors of Social Services and representatives of licensed private adoption agencies, shall develop guidelines for the awarding of funds to licensed public and private adoption agencies upon the adoption of children described in G.S. 108A‑50 and in foster care. Payments received from the Special Children Adoption Fund by participating agencies shall be used exclusively to enhance the adoption services program. No local match shall be required as a condition for receipt of these funds.
SECTION 5.1.(t)  The sum of one million five hundred thousand dollars ($1,500,000) appropriated in this act in the TANF Block Grant and transferred to the Social Services Block Grant to the Department of Health and Human Services, Division of Social Services, for child caring agencies for the 2003‑2004 fiscal year shall be allocated to the State Private Child Caring Agencies Fund. These funds shall be combined with all other funds allocated to the State Private Child Caring Agencies Fund for the reimbursement of the State's portion of the cost of care for the placement of certain children by the county departments of social services who are not eligible for federal IV‑E funds.  These funds shall not be used to match other federal funds.
SECTION 5.1.(u)  The sum of one million dollars ($1,000,000) appropriated in this section to the Department of Health and Human Services in the TANF Block Grant for Boys and Girls Clubs shall be used to make grants for approved programs. The Department of Health and Human Services, in accordance with federal regulations for the use of TANF Block Grant funds, shall administer a grant program to award funds to the Boys and Girls Clubs across the State in order to implement programs that improve the motivation, performance, and self‑esteem of youths and to implement other initiatives that would be expected to reduce school dropout and teen pregnancy rates. The Department shall encourage and facilitate collaboration between the Boys and Girls Clubs and Support Our Students, Communities in Schools, and similar programs to submit joint applications for the funds if appropriate.

Requested by:	Representatives Fox, West
NER Block Grant Funds
SECTION 5.2.(a)  Appropriations from federal block grant funds are made for the fiscal year ending June 30, 2004, according to the following schedule:

COMMUNITY DEVELOPMENT BLOCK GRANT

01.	State Administration	$1,000,000

02.	Urgent Needs and Contingency	50,000

03.	Scattered Site Housing	13,200,000

04.	Economic Development
	a.	Administered by Rural Economic Development Center, Inc.	2,250,000
	b.	Administered by Finance Center of the Department of Commerce	8,710,000

05.	Community Revitalization	12,200,000

06.	State Technical Assistance	450,000

07.	Housing Development	2,000,000

08.	Infrastructure	5,140,000

TOTAL COMMUNITY DEVELOPMENT BLOCK GRANT – 
2004 Program Year	$45,000,000

SECTION 5.2.(b)  Decreases in Federal Fund Availability. – If federal funds are reduced below the amounts specified above after the effective date of this act, then every program in each of these federal block grants shall be reduced by the same percentage as the reduction in federal funds.
SECTION 5.2.(c)  Increases in Federal Fund Availability for Community Development Block Grant. – Any block grant funds appropriated by the Congress of the United States in addition to the funds specified in this section shall be expended as follows:  Each program category under the Community Development Block Grant shall be increased by the same percentage as the increase in federal funds.
SECTION 5.2.(d)  Limitations on Community Development Block Grant Funds. – Of the funds appropriated in this section for the Community Development Block Grant, the following shall be allocated in each category for each program year:  up to one million dollars ($1,000,000) may be used for State administration; not less than fifty thousand ($50,000) may be used for Urgent Needs and Contingency; up to thirteen million two hundred thousand dollars ($13,200,000) may be used for Scattered Site Housing; up to ten million nine hundred sixty thousand dollars ($10,960,000) may be used for Economic Development, including Urban Redevelopment grants; not less than twelve million two hundred thousand dollars ($12,200,000) shall be used for Community Revitalization; up to four hundred fifty thousand dollars ($450,000) may be used for State Technical Assistance; up to two million dollars ($2,000,000) may be used for Housing Development; up to five million one hundred forty thousand dollars ($5,140,000) may be used for Infrastructure.  If federal block grant funds are reduced or increased by the Congress of the United States after the effective date of this act, then these reductions or increases shall be allocated in accordance with subsection (b) or (c) of this section, as applicable.
SECTION 5.2.(e)  Increase Capacity for Nonprofit Organizations. – Assistance to nonprofit organizations to increase their capacity to carry out CDBG‑eligible activities in partnership with units of local government is an eligible activity under any program category in accordance with federal regulations.  Capacity building grants may be made from funds available within program categories, program income, or unobligated funds.
SECTION 5.2.(f)  Up to four million dollars ($4,000,000) of funds for Economic Development may be used for Urgent Needs and Contingency for drought recovery.

PART VI. GENERAL PROVISIONS

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
SPECIAL FUNDS, FEDERAl FUNDS, AND DEPARTMENTAL RECEipts, and authorization for expenditures
SECTION 6.1.  There is appropriated out of the cash balances, federal receipts, and departmental receipts available to each department, sufficient amounts to carry on authorized activities included under each department's operations.  All these cash balances, federal receipts, and departmental receipts shall be expended and reported in accordance with provisions of the Executive Budget Act, except as otherwise provided by statute, and shall be expended at the level of service authorized by the General Assembly.  If the receipts, other than gifts and grants that are unanticipated and are for a specific purpose only, collected in a fiscal year by an institution, department, or agency exceed the receipts certified for it in General Fund Codes or Highway Fund Codes, then the Director of the Budget shall decrease the amount he allots to that institution, department, or agency from appropriations from that Fund by the amount of the excess, unless the Director of the Budget finds that the appropriations from the Fund are necessary to maintain the function that generated the receipts at the level anticipated in the certified Budget Codes for that Fund.
Funds that become available from overrealized receipts in General Fund Codes and Highway Fund Codes may be used for new permanent employee positions or to raise the salary of existing employees only as follows:
(1)	As provided in G.S. 116‑30.1, 116‑30.2, 116‑30.3, 116‑30.4; or
(2)	If the Director of the Budget finds that the new permanent employee positions are necessary to maintain the function that generated the receipts at the level anticipated in the certified budget codes for that Fund. The Director of the Budget shall notify the President Pro Tempore of the Senate, the Speakers of the House of Representatives, the Chairs of the Appropriations Committees of the Senate and the House of Representatives, and the Fiscal Research Division of the Legislative Services Office that he intends to make such a finding at least 10 days before he makes the finding. The notification shall set out the reason the positions are necessary to maintain the function.
The Office of State Budget and Management shall report to the Joint Legislative Commission on Governmental Operations and to the Fiscal Research Division of the Legislative Services Office within 30 days after the end of each quarter the General Fund Codes or Highway Fund Codes that did not result in a corresponding reduced allotment from appropriations from that Fund. 
This section shall expire June 30, 2004.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
No Expenditure of Unbudgeted Receipts
SECTION 6.2.  Effective July 1, 2004, G.S. 143‑27 reads as rewritten:
"§ 143‑27.  Appropriations to educational, charitable and correctional institutions are in addition to receipts by them.
All appropriations now or hereafter made to the educational institutions, and to the charitable and correctional institutions, and to such other departments and agencies of the State as receive moneys available for expenditure by them are declared to be in addition to such receipts of said institutions, departments or agencies, and are to be available as and to the extent that such receipts are insufficient to meet the costs anticipated in the budget authorized by the General Assembly, of maintenance of such institutions, departments, and agencies; Provided, however, that if the receipts, other than gifts and grants that are unanticipated and are for a specific purpose only, collected in a fiscal year by an institution, department, or agency exceed the receipts certified for it in General Fund Codes, Highway Fund Codes, or Wildlife Fund Codes, the Director of the Budget shall decrease the amount he allots to that institution, department, or agency from appropriations from that Fund by the amount of the excess. Notwithstanding the foregoing provisions of this section, receipts within The University of North Carolina realized in excess of budgeted levels shall be available, up to a maximum of ten percent (10%) above budgeted levels, for each Budget Code, in addition to appropriations, to support the operations generating such receipts, as approved by the Director of the Budget.
The Office of State Budget and Management shall report to the Joint Legislative Commission on Governmental Operations and to the Fiscal Research Division of the Legislative Services Office within 30 days after the end of each quarter on expenditures of receipts in excess of the amounts certified in General Fund Codes, Highway Fund Codes, or Wildlife Fund Codes, that did not result in a corresponding reduced allotment from appropriations from that Fund."

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
prepare to budget payroll at actual cost
SECTION 6.3.  The Office of  State Budget and Management shall prepare and present to the General Assembly no later than 10 days after the convening of the 2004 Regular Session of the 2003 General Assembly such adjustments as are necessary to rebudget the payroll costs of State departments, agencies, and institutions in fiscal year 2004‑2005 at  levels that reflect actual payroll requirements. Proposed adjustments shall include changes in related expenditure lines that have been underbudgeted with the expectation that shortfalls could be met with lapsed salary funds.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Contingency and Emergency Fund Allocations
SECTION 6.4.  Funds in the amount of five million dollars ($5,000,000) for the 2003‑2004 fiscal year and five million dollars (5,000,000) for the 2004‑2005 fiscal year appropriated in this act to the Contingency and Emergency Fund may be expended only for the purposes outlined in G.S. 143‑23(a1)(2).

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Change Effective Date ‑ Private Plates on Public Vehicles
SECTION 6.5.(a)  The introductory language to Section 6.14(b) of S.L. 2001‑424 reads as rewritten:
"SECTION 6.14.(b)  Effective October 1,  2004, G.S. 20‑39.1(b), as enacted in subsection (a) of this section, reads as rewritten:".
SECTION 6.5.(b)  Section 6.14(h) of S.L. 2001‑424 reads as rewritten:
"SECTION 6.14.(h)  Subsection (b) of this section becomes effective October 1,  2004. Except as provided in subsection (c) of this section, the remainder of this section is effective when it becomes law."

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
HIPAA Reserve
SECTION 6.6.  Funds in the amount of two million dollars ($2,000,000) are appropriated in this act to the Reserve to Implement HIPAA. This reserve shall be located in the Office of State Budget and Management.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
HIPAA Implementation
SECTION 6.7.  The Governor or the Governor's designee shall coordinate the State's implementation of the federal Health Insurance Portability and Accountability Act ("HIPAA"), Title II Subtitle F (Administrative Simplification). Specifically, the scope of coordination shall include the following:
(1)	Coordinating correspondence between the State and the United States government on all matters relating to HIPAA Administrative Simplification requirements under Subtitle F of Title II of HIPAA.
(2)	Coordinating official State comments on proposed federal regulations and the federal rule‑making process pertaining to HIPAA Administrative Simplification.
(3)	Obtaining from the North Carolina Attorney General legal interpretations of federal rules pertaining to HIPAA Administrative Simplification compliance, implementation, and enforcement.
(4)	Establishing deadlines and benchmarks for State agencies to provide the necessary data required to monitor compliance with HIPAA Administrative Simplification requirements.
The Information Resource Management Commission ("IRMC") shall cooperate with the Governor to ensure that IRMC policies and activities and State HIPAA implementation are complementary to ensure effective and efficient monitoring of HIPAA Administrative Simplification requirements.
SECTION 6.7.  The University of North Carolina System and the Teachers' and State Employees' Comprehensive Major Medical Plan may develop and implement HIPAA Administrative Simplification compliance and shall report bimonthly to the Governor on the status of implementation.
SECTION 6.7.  Funds appropriated to the Reserve for Health Insurance Portability and Accountability Compliance that are unexpended and unencumbered at the end of the fiscal year shall not revert to the General Fund but shall remain in the Reserve for use in accordance with the purposes of the Reserve.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
State Surplus Real Property System 
SECTION 6.8.(a)  The Department of Administration, in consultation with the Office of State Budget and Management and other affected State departments, shall develop and implement a uniform real property disposal system that will continuously identify, evaluate, and dispose of all unused or underused State‑owned land and buildings. In order to comply with this section, the Department of Administration, in consultation with the Office of State Budget and Management and other affected State departments, shall do all of the following:
(1)	Review the current inventory of State‑owned land and buildings for accuracy and completeness.
(2)	Determine how and when State‑owned land and buildings should be declared surplus.
(3)	Determine whether State agencies have the authority to retain funds from the disposal of surplus real property and whether this is consistent among agencies and conducive to the disposal of unneeded property.
(4)	Consider the use of private real estate brokers, auction, and any other method determined to be suitable in order to efficiently and effectively dispose of surplus real property.
(5)	Review the real property held by a selected number of State agencies to determine whether the agency has any property that meets the criteria as set forth in this section.
(6)	Assess the need for additional staff to effectively administer the system.
(7)	Examine current State law to assess the need for changes in order to support a uniform system to identify, evaluate, and dispose of all unused or underused State‑owned land and buildings.
The Department may retain consultants to assist the accomplishment of the objectives set forth in subdivisions (1) through (7) of this subsection. The Department shall report its findings and recommendations to the General Assembly no later than March 1, 2004.
SECTION 6.8.(b)  There is established the Real Property Management Advisory Council in the Department of Administration.  The Advisory Council shall examine the use of State‑owned real property and shall advise the Secretary of Administration as to the identification of those properties that are unneeded or underutilized. The Advisory Council shall consist of the following members:
(1)	Four members appointed by the Speaker of the House of Representatives, including one member who shall be designated as House cochair.
(2)	Four members appointed by the President Pro Tempore of the Senate, including one member who shall be designated as Senate cochair.
(3)	Four members appointed by the Governor.
The Advisory Council shall meet upon the call of the cochairs.
Members of the Advisory Council shall serve for a term of two years beginning July 1, 2003, and shall receive subsistence and travel expenses as provided in G.S. 138‑5. Staff support to the Advisory Council shall be provided by the Department of Administration. 
SECTION 6.8.(c)  Of funds appropriated in this act to the Department of Administration, a sum not exceeding two hundred fifty thousand dollars ($250,000) shall be used to accomplish the purposes set forth in this section.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Expedite Sale of Surplus Land
SECTION 6.9.  The Department of Administration shall work with all State departments, agencies, and institutions, including the Department of Transportation and The University of North Carolina, to identify surplus state‑owned real property and to expedite the sale of that property.  Unless otherwise provided by law, the clear proceeds of the sale of surplus real property shall be credited to the General Fund.  It is the intent of the General Assembly that these proceeds shall partially offset debt service costs occasioned by the use of Certificates of Participation to finance the repair and renovation of State buildings. The Department of Administration shall report to the Joint Legislative Commission on Governmental Operations no later than December 1, 2003, regarding the extraordinary measures being taken to comply with this provision. 

Requested by:	Representatives Culpepper, Crawford, Earle, Owens, Wright
Government Agencies to Use products of Recycled Steel
SECTION 6.10.  G.S. 130A‑309.14 is amended by adding a new subsection to read:
"(l)	Any State agency or agency of a political subdivision of the State that is using State funds, or any person contracting with any agency with respect to work performed under contract, shall procure products of recycled steel if all of the following conditions are satisfied:
(1)	The product must be acquired competitively within a reasonable time frame.
(2)	The product must meet appropriate performance standards.
(3)	The product must be acquired at a reasonable price."

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Implement a Pilot Project For Long‑Term Care Community Service Coordination
SECTION 6.11.(a)  In accordance with the recommendations in the final report from the Institute of Medicine Task Force on Long‑Term Care and the study report recommendations resulting from S.L. 2001‑491, Part XXII, the Department of Health and Human Services shall implement a communications and coordination initiative to support local coordination of long‑term care and shall pilot the establishment of local lead agencies to facilitate the long‑term care coordination process at the county or regional level.  For those counties that voluntarily participate, the local long‑term care coordination initiative shall aid in the development of core services, coordinate local services, and streamline access to services. The initiative shall eliminate fragmentation and barriers to information and services; provide a seamless connection among State agencies and local entities, regardless of funding sources; and allow consumers to efficiently and effectively navigate among long‑term care services.
SECTION 6.11.(b)  The Department shall submit an interim report on the pilot project for local long‑term care coordination to the North Carolina Study Commission on Aging by October 1, 2004, and a final report by October 1, 2005.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Joint Committee on Executive Budget Act Revisions
SECTION 6.12.(a)  There is created a Joint Committee on Executive Budget Act Revisions.  The Committee shall be composed of 12 members, six of whom shall be Representatives appointed by the Speaker of the House of Representatives and six of whom shall be Senators appointed by the President Pro Tempore of the Senate.  The Speaker of the House of Representatives shall designate one member as cochair and the President Pro Tempore of the Senate shall designate one member as cochair.  The Committee shall meet upon call of the cochairs.
SECTION 6.12.(b)  The Committee shall consider contemporary financial management practices in reviewing the current budget process.  The Committee shall recommend any changes to the Executive Budget Act that are needed to modernize and improve the processes of budget preparation, budget adoption, budget execution, and program evaluation.  The Committee shall report its recommendations to the 2003 General Assembly on or before April 1, 2004.
SECTION 6.12.(c)  The Legislative Services Office shall assign professional and clerical staff to assist the Committee in its work.  Members of the Committee shall receive per diem, subsistence, and travel allowances in accordance with G.S. 120‑3.1, 138‑5, or 138‑6, as appropriate.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Issue Request for Information/Energy Management
SECTION 6.13.  The Department of Administration (Department) shall issue a Request for Information (RFI) to identify companies interested in providing, and qualified to provide, comprehensive energy management services to State departments, agencies, and institutions. The Department shall evaluate information collected through the RFI to determine the:
(1)	Number of qualified companies interested in doing energy management business with State government.
(2)	Types of energy management services available and applicable to State‑owned facilities.
(3)	Long‑term cost savings potentially available to the State from the implementation of various energy management services.
(4)	Modifications to State law or regulations that may be necessary to acquire and utilize successfully energy management services.
By March 1, 2004, the Department shall report its findings, conclusions, and recommendations to the Chairs of the Senate and House of Representatives Appropriations Committees.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Blue Ribbon Commission on Medicaid Reform
SECTION 6.14.(a)  There is established the North Carolina Blue Ribbon Commission on Medicaid Reform (Commission). The Commission shall examine the State's Medicaid program and make comprehensive recommendations for fundamental reform. The Commission shall consider:
(1)	Methods to responsibly restrain the growth in Medicaid spending.
(2)	Best practices in both the public and private sectors in managing and administering health care.
(3)	Options for maximizing existing resources while controlling Medicaid program costs.
(4)	Current array of services available within the State Medicaid program to determine the appropriateness of the type, frequency, and duration of those services.
(5)	Opportunities for long‑term, systemic change in the Medicaid program through the use of federal waivers and other management tools.
(6)	Any other matter relating to reform of the State Medicaid program.
SECTION 6.14.(b)  The Commission shall consist of 12 members appointed as follows:
(1)	Six members appointed by the Speaker of the House of Representatives, including one member who shall be designated as House Cochair. No more than three may be legislators.
(2)	Six members appointed by the President Pro Tempore of the Senate, including one member who shall be designated as Senate Cochair. No more than three may be legislators.
The appointing officer shall fill vacancies. The Commission shall meet at the call of the Cochairs. Members of the Commission shall receive per diem, subsistence, and travel expenses as provided in G.S. 120‑3.1, G.S. 138‑5, or G.S. 138‑6, as appropriate. The Commission may contract for consultant services as provided in G.S. 120‑32.02. Upon approval of the Legislative Services Commission, the Legislative Services Officer shall assign professional staff to assist the Commission in its work. Clerical staff shall be furnished to the Commission through the offices of the House of Representatives and Senate Directors of Legislative Assistants. The Commission may meet in the Legislative Building or the Legislative Office Building. The Commission may exercise all of the powers provided under G.S. 120‑19 through G.S. 120‑19.4 while in the discharge of its official duties.
SECTION 6.14.(c)  By April 1, 2004, the Commission shall make an interim report to the 2003 General Assembly. The Commission shall make its final report to the 2005 General Assembly by February 1, 2005, and shall expire upon submitting that report.

Requested by:	Representatives Howard, Crawford, Sherrill, Baker
Competitively Bid beverages Contracts
SECTION 6.15.(a)  Article 3 of Chapter 143 of the General Statutes is amended by adding the following new section to read:
"§ 143-64.  Beverages contracts.
Notwithstanding any other provision of law, local school administrative units, community colleges, and constituent institutions of The University of North Carolina shall competitively bid contracts that involve the sale of juice or bottled water. The local school administrative units, community colleges, and constituent institutions may set quality standards for these beverages, and these standards may be used to accept or reject a bid."
SECTION 6.15.(b)  This section is effective when it becomes law and applies to contracts bid on or after that date.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Distinguished Professors Endowment Trust Fund
SECTION 6.16.(a)  G.S. 116‑41.15 reads as rewritten:
"§ 116‑41.15.  Distinguished Professors Endowment Trust Fund; allocation; administration.
(a)	As used in this Part, "focused growth institution" means Elizabeth City State University, Fayetteville State University, North Carolina Agricultural and Technical University, North Carolina Central University, the University of North Carolina at Pembroke, Western Carolina University, and Winston-Salem State University. As used in this Part, "special needs institution" means the North Carolina School of the Arts and the University of North Carolina at Asheville.
(b)	For constituent institutions other than focused growth institutions and special needs institutions, the amount appropriated to the trust shall be allocated by the Board as follows:
(1)	On the basis of one three hundred thirty‑four thousand dollar ($334,000) challenge grant for each six hundred sixty‑six thousand dollars ($666,000) raised from private sources; or
(2)	On the basis of one one hundred sixty‑seven thousand dollar ($167,000) challenge grant for each three hundred thirty‑three thousand dollars ($333,000) raised from private sources.
If an institution chooses to pursue the use of the allocated challenge grant funds described in either subdivision (1) or subdivision (2) of this subsection, the funds shall be matched on a two‑to‑one basis.
(c)	For focused growth institutions and special needs institutions, subsection (b) of this section shall be applied such that the amount appropriated to the trust shall be allocated by the Board on a one-to-one basis instead of a one-to-two basis.
(d)	Matching funds shall come from contributions made after July 1, 1985, and pledged for the purposes specified by G.S. 116‑41.14. Each participating constituent institution's board of trustees shall establish its own Distinguished Professors Endowment Trust Fund, and shall maintain it pursuant to the provision of G.S. 116‑36 to function as a depository for private contributions and for the State matching funds for the challenge grants. The State matching funds shall be transferred to the constituent institution's Endowment Fund upon notification that the institution has received and deposited the appropriate amount required by this section in its own Distinguished Professors Endowment Trust Fund. Only the net income from that account shall be expended in support of the distinguished professorship thereby created."
SECTION 6.16.(b)  G.S. 116‑41.16 reads as rewritten:
"§ 116‑41.16.  Distinguished Professors Endowment Trust Fund; contribution commitments.
(a)	For constituent institutions other than focused growth institutions and special needs institutions, contributions may also be eligible for matching if there is:
(1)	A commitment to make a donation of at least six hundred sixty‑six thousand dollars ($666,000), as prescribed by G.S. 143‑31.4, and an initial payment of one hundred eleven thousand dollars ($111,000) to receive a grant described in G.S. 116‑41.15(b)(1); or
(2)	A commitment to make a donation of at least three hundred thirty‑three thousand dollars ($333,000), as prescribed by G.S. 143‑31.4, and an initial payment of fifty‑five thousand five hundred dollars ($55,500) to receive a grant described in G.S. 116‑41.15(b)(2);
and if the initial payment is accompanied by a written pledge to provide the balance within five years after the date of the initial payment. Each payment on the balance shall be no less than the amount of the initial payment and shall be made on or before the anniversary date of the initial payment. Pledged contributions may not be matched prior to the actual collection of the total funds. Once the income from the institution's Distinguished Professors Endowment Trust Fund can be effectively used pursuant to G.S. 116‑41.17, the institution shall proceed to implement plans for establishing an endowed chair.
(b)	For focused growth institutions and special needs institutions, subsection (a) of this section is modified such that contributions may be eligible for matching based on a schedule to be adopted by the Board of Governors such that at least one-sixth of the commitment will be donated each year."

PART VII. PUBLIC SCHOOLS

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
TEACHER SALARY SCHEDULES
SECTION 7.1.(a)  Effective for the 2003‑2004 school year, the Director of the Budget shall transfer from the Reserve for Experience Step Salary Increase for Teachers and Principals in Public Schools for the 2003‑2004 fiscal year funds necessary to implement the teacher salary schedule set out in subsection (b) of this section, including funds for the employer's retirement and social security contributions and funds for annual longevity payments at one and one‑half percent (1.5%) of base salary for 10 to 14 years of State service, two and twenty‑five hundredths percent (2.25%) of base salary for 15 to 19 years of State service, three and twenty‑five hundredths percent (3.25%) of base salary for 20 to 24 years of State service, and four and one‑half percent (4.5%) of base salary for 25 or more years of State service, commencing July 1, 2003, for all teachers whose salaries are supported from the State's General Fund.  These funds shall be allocated to individuals according to rules adopted by the State Board of Education.  The longevity payment shall be paid in a lump sum once a year.
SECTION 7.1.(b)  For the 2003‑2004 school year, the following monthly salary schedules shall apply to certified personnel of the public schools who are classified as teachers.  The schedule contains 30 steps with each step corresponding to one year of teaching experience.
	2003‑2004 MONTHLY SALARY SCHEDULE
	"A" TEACHERS
Years of	"A"	NBPTS
Experience	Teachers	Certification
0	$2,525	N/A
1	$2,567	N/A
2	$2,611	N/A
3	$2,764	$3,096
4	$2,904	$3,252
5	$3,036	$3,400
6	$3,164	$3,544
7	$3,266	$3,658
8	$3,314	$3,712
9	$3,362	$3,765
10	$3,412	$3,821
11	$3,461	$3,876
12	$3,511	$3,932
13	$3,561	$3,988
14	$3,614	$4,048
15	$3,667	$4,107
16	$3,722	$4,169
17	$3,777	$4,230
18	$3,834	$4,294
19	$3,892	$4,359
20	$3,950	$4,424
21	$4,011	$4,492
22	$4,072	$4,561
23	$4,136	$4,632
24	$4,200	$4,704
25	$4,264	$4,776
26	$4,330	$4,850
27	$4,398	$4,926
28	$4,467	$5,003
29	$4,538	$5,083
30+	$4,538	$5,083

	2003‑2004 MONTHLY SALARY SCHEDULE
	"M" TEACHERS
Years of	"M"	NBPTS
Experience	Teachers	Certification
0	$2,778	N/A
1	$2,824	N/A
2	$2,872	N/A
3	$3,040	$3,405
4	$3,194	$3,577
5	$3,340	$3,741
6	$3,480	$3,898
7	$3,593	$4,024
8	$3,645	$4,082
9	$3,698	$4,142
10	$3,753	$4,203
11	$3,807	$4,264
12	$3,862	$4,325
13	$3,917	$4,387
14	$3,975	$4,452
15	$4,034	$4,518
16	$4,094	$4,585
17	$4,155	$4,654
18	$4,217	$4,723
19	$4,281	$4,795
20	$4,345	$4,866
21	$4,412	$4,941
22	$4,479	$5,016
23	$4,550	$5,096
24	$4,620	$5,174
25	$4,690	$5,253
26	$4,763	$5,335
27	$4,838	$5,419
28	$4,914	$5,504
29	$4,992	$5,591
30+	$4,992	$5,591
SECTION 7.1.(c)  Certified public school teachers with certification based on academic preparation at the six‑year degree level shall receive a salary supplement of one hundred twenty‑six dollars ($126.00) per month in addition to the compensation provided for certified personnel of the public schools who are classified as "M" teachers.  Certified public school teachers with certification based on academic preparation at the doctoral degree level shall receive a salary supplement of two hundred fifty‑three dollars ($253.00) per month in addition to the compensation provided for certified personnel of the public schools who are classified as "M" teachers.
SECTION 7.1.(d)  Effective for the 2003‑2004 school year, the first step of the salary schedule for school psychologists shall be equivalent to Step 5, corresponding to five years of experience, on the salary schedule established in this section for certified personnel of the public schools who are classified as "M" teachers.  Certified psychologists shall be placed on the salary schedule at an appropriate step based on their years of experience.  Certified psychologists shall receive longevity payments based on years of State service in the same manner as teachers.
Certified psychologists with certification based on academic preparation at the six‑year degree level shall receive a salary supplement of one hundred twenty‑six dollars ($126.00) per month in addition to the compensation provided for certified psychologists. Certified psychologists with certification based on academic preparation at the doctoral degree level shall receive a salary supplement of two hundred fifty‑three dollars ($253.00) per month in addition to the compensation provided for certified psychologists.
SECTION 7.1.(e)  Effective for the 2003‑2004 school year, speech pathologists who are certified as speech pathologists at the masters degree level and audiologists who are certified as audiologists at the masters degree level and who are employed in the public schools as speech and language specialists and audiologists shall be paid on the school psychologist salary schedule.
Speech pathologists and audiologists with certification based on academic preparation at the six‑year degree level shall receive a salary supplement of one hundred twenty‑six dollars ($126.00) per month in addition to the compensation provided for speech pathologists and audiologists. Speech pathologists and audiologists with certification based on academic preparation at the doctoral degree level shall receive a salary supplement of two hundred fifty‑three dollars ($253.00) per month in addition to the compensation provided for speech pathologists and audiologists.
SECTION 7.1.(f)  Certified school nurses who are employed in the public schools as nurses shall be paid on the "M" salary schedule.
SECTION 7.1.(g)  As used in this section, the term "teacher" shall also include instructional support personnel.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
SCHOOL‑BASED ADMINISTRATOR SALARY SCHEDULE
SECTION 7.2.(a)  Effective for the 2003‑2004 school year, the Director of the Budget shall transfer from Reserve for Experience Step Salary Increase for Teachers and Principals in Public Schools for the 2003‑2004 fiscal year funds necessary to implement the salary schedule for school‑based administrators as provided in this section.  These funds shall be used for State‑paid employees only.
SECTION 7.2.(b)  The base salary schedule for school‑based administrators shall apply only to principals and assistant principals.  The base salary schedule for the 2003‑2004 fiscal year, commencing July 1, 2003, is as follows:
2003‑2004
PRINCIPAL AND ASSISTANT PRINCIPAL SALARY SCHEDULES

CLASSIFICATION

Yrs of	Assistant	Prin I	Prin II	Prin III	Prin IV
Exp	Principal	(0‑10)	(11‑21)	(22‑32)	(33‑43)
0‑4	$3,226	‑	‑	‑	‑
5	$3,373	‑	‑	‑	‑
6	$3,515	‑	‑	‑	‑
7	$3,629	‑	‑	‑	‑
8	$3,681	$3,681	‑	‑	‑
9	$3,735	$3,735	‑	‑	‑
10	$3,791	$3,791	$3,845	‑	‑
11	$3,845	$3,845	$3,901	‑	‑
12	$3,901	$3,901	$3,956	$4,015	‑
13	$3,956	$3,956	$4,015	$4,074	$4,135
14	$4,015	$4,015	$4,074	$4,135	$4,197
15	$4,074	$4,074	$4,135	$4,197	$4,259
16	$4,135	$4,135	$4,197	$4,259	$4,324
17	$4,197	$4,197	$4,259	$4,324	$4,388
18	$4,259	$4,259	$4,324	$4,388	$4,456
19	$4,324	$4,324	$4,388	$4,456	$4,524
20	$4,388	$4,388	$4,456	$4,524	$4,596
21	$4,456	$4,456	$4,524	$4,596	$4,666
22	$4,524	$4,524	$4,596	$4,666	$4,737
23	$4,596	$4,596	$4,666	$4,737	$4,811
24	$4,666	$4,666	$4,737	$4,811	$4,886
25	$4,737	$4,737	$4,811	$4,886	$4,963
26	$4,811	$4,811	$4,886	$4,963	$5,042
27	$4,886	$4,886	$4,963	$5,042	$5,143
28	$4,963	$4,963	$5,042	$5,143	$5,246
29	$5,042	$5,042	$5,143	$5,246	$5,351
30	$5,143	$5,143	$5,246	$5,351	$5,458
31	$5,246	$5,246	$5,351	$5,458	$5,567
32	‑	$5,351	$5,458	$5,567	$5,678
33	‑	‑	$5,567	$5,678	$5,792
34	‑	‑	$5,678	$5,792	$5,908
35	‑	‑	‑	$5,908	$6,026
36	‑	‑	‑	$6,026	$6,147
37	‑	‑	‑	‑	$6,270

2003‑2004
PRINCIPAL AND ASSISTANT PRINCIPAL SALARY SCHEDULES
CLASSIFICATION
Yrs of	Prin V	Prin VI	Prin VII	Prin VIII
Exp	(44‑54)	(55‑65)	(66‑100)	(101+)
14	$4,259	‑	‑	‑
15	$4,324	‑	‑	‑
16	$4,388	$4,456	‑	‑
17	$4,456	$4,524	$4,666	‑
18	$4,524	$4,596	$4,737	$4,811
19	$4,596	$4,666	$4,811	$4,886
20	$4,666	$4,737	$4,886	$4,963
21	$4,737	$4,811	$4,963	$5,042
22	$4,811	$4,886	$5,042	$5,143
23	$4,886	$4,963	$5,143	$5,246
24	$4,963	$5,042	$5,246	$5,351
25	$5,042	$5,143	$5,351	$5,458
26	$5,143	$5,246	$5,458	$5,567
27	$5,246	$5,351	$5,567	$5,678
28	$5,351	$5,458	$5,678	$5,792
29	$5,458	$5,567	$5,792	$5,908
30	$5,567	$5,678	$5,908	$6,026
31	$5,678	$5,792	$6,026	$6,147
32	$5,792	$5,908	$6,147	$6,270
33	$5,908	$6,026	$6,270	$6,395
34	$6,026	$6,147	$6,395	$6,523
35	$6,147	$6,270	$6,523	$6,653
36	$6,270	$6,395	$6,653	$6,786
37	$6,395	$6,523	$6,786	$6,922
38	$6,523	$6,653	$6,922	$7,060
39	‑	$6,786	$7,060	$7,201
40	‑	$6,922	$7,201	$7,345
41	‑	‑	$7,345	$7,492
SECTION 7.2.(c)  The appropriate classification for placement of principals and assistant principals on the salary schedule, except for principals in alternative schools, shall be determined in accordance with the following schedule:
	Number of Teachers
Classification		Supervised
Assistant Principal
Principal I	Fewer than 11 Teachers
Principal II	11‑21 Teachers
Principal III 	22‑32 Teachers
Principal IV	33‑43 Teachers
Principal V 	44‑54 Teachers
Principal VI	55‑65 Teachers
Principal VII	66‑100 Teachers
Principal VIII	More than 100 Teachers
The number of teachers supervised includes teachers and assistant principals paid from State funds only; it does not include teachers or assistant principals paid from non‑State funds or the principal or teacher assistants.
The beginning classification for principals in alternative schools shall be the Principal III level. Principals in alternative schools who supervise 33 or more teachers shall be classified according to the number of teachers supervised.
SECTION 7.2.(d)  A principal shall be placed on the step on the salary schedule that reflects total number of years of experience as a certificated employee of the public schools and an additional step for every three years of experience as a principal. A principal or assistant principal shall also continue to receive any additional State‑funded percentage increases earned for the 1997‑1998, 1998‑1999, and the 1999‑2000 school years for improvement in student performance or maintaining a safe and orderly school.
SECTION 7.2.(e)  Principals and assistant principals with certification based on academic preparation at the six‑year degree level shall be paid a salary supplement of one hundred twenty‑six dollars ($126.00) per month and at the doctoral degree level shall be paid a salary supplement of two hundred fifty‑three dollars ($253.00) per month.
SECTION 7.2.(f)  There shall be no State requirement that superintendents in each local school unit shall receive in State‑paid salary at least one percent (1%) more than the highest paid principal receives in State salary in that school unit:  Provided, however, the additional State‑paid salary a superintendent who was employed by a local school administrative unit for the 1992‑1993 fiscal year received because of that requirement shall not be reduced because of this subsection for subsequent fiscal years that the superintendent is employed by that local school administrative unit so long as the superintendent is entitled to at least that amount of additional State‑paid salary under the rules in effect for the 1992‑1993 fiscal year.
SECTION 7.2.(g)  Longevity pay for principals and assistant principals shall be as provided for State employees under the State Personnel Act.
SECTION 7.2.(h)
(1)	If a principal is reassigned to a higher job classification because the principal is transferred to a school within a local school administrative unit with a larger number of State‑allotted teachers, the principal shall be placed on the salary schedule as if the principal had served the principal's entire career as a principal at the higher job classification.
(2)	If a principal is reassigned to a lower job classification because the principal is transferred to a school within a local school administrative unit with a smaller number of State‑allotted teachers, the principal shall be placed on the salary schedule as if the principal had served the principal's entire career as a principal at the lower job classification.
This subsection applies to all transfers on or after the effective date of this section, except transfers in school systems that have been created, or will be created, by merging two or more school systems. Transfers in these merged systems are exempt from the provisions of this subsection for one calendar year following the date of the merger.
SECTION. 7.2.(i)  Participants in an approved full-time masters in school administration program shall receive up to a 10-month stipend at the beginning salary of an assistant principal during the internship period of the masters program. The stipend shall not exceed the difference between the beginning salary of an assistant principal and any fellowship funds received by the intern as a full-time student, including awards of the Principal Fellows Program. The Principal Fellows Program or the school of education where the intern participates in a full-time masters in school administration program shall supply the Department of Public Instruction with certification of eligible full-time interns.
SECTION 7.2.(j)  During the 2003‑2004 fiscal year, the placement on the salary schedule of an administrator with a one‑year provisional assistant principal's certificate shall be at the entry‑level salary for an assistant principal or the appropriate step on the teacher salary schedule, whichever is higher.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
CENTRAL OFFICE SALARIES
SECTION 7.3.(a)  The monthly salary ranges that follow apply to assistant superintendents, associate superintendents, directors/coordinators, supervisors, and finance officers for the 2003‑2004 fiscal year, beginning July 1, 2003.  The top of these ranges shall be increased by one and sixth‑tenths percent (1.6%) annually for full‑time employees.
School Administrator I	$2,932	$5,266
School Administrator II	$3,112	$5,586
School Administrator III	$3,303	$5,925
School Administrator IV	$3,436	$6,162
School Administrator V	$3,574	$6,410
School Administrator VI	$3,792	$6,799
School Administrator VII	$3,945	$7,072
The local board of education shall determine the appropriate category and placement for each assistant superintendent, associate superintendent, director/coordinator, supervisor, or finance officer within the salary ranges and within funds appropriated by the General Assembly for central office administrators and superintendents. The category in which an employee is placed shall be included in the contract of any employee hired on or after July 1, 2003.
SECTION 7.3.(b)  The monthly salary ranges that follow apply to public school superintendents for the 2003‑2004 fiscal year, beginning July 1, 2003.  The top of these ranges shall be increased by one and sixth‑tenths percent (1.6%) annually for full‑time employees.
Superintendent I	$4,187	$7,503
Superintendent II	$4,445	$7,956
Superintendent III	$4,716	$8,441
Superintendent IV	$5,005	$8,953
Superintendent V	$5,312	$9,499
The local board of education shall determine the appropriate category and placement for the superintendent based on the average daily membership of the local school administrative unit and within funds appropriated by the General Assembly for central office administrators and superintendents.
Notwithstanding the provisions of this subsection, a local board of education may pay an amount in excess of the applicable range to a superintendent who is entitled to receive the higher amount under Section 7.2.(f) of this act.
SECTION 7.3.(c)  Longevity pay for superintendents, assistant superintendents, associate superintendents, directors/coordinators, supervisors, and finance officers shall be as provided for State employees under the State Personnel Act.
SECTION 7.3.(d)  Superintendents, assistant superintendents, associate superintendents, directors/coordinators, supervisors, and finance officers with certification based on academic preparation at the six‑year degree level shall receive a salary supplement of one hundred twenty‑six dollars ($126.00) per month in addition to the compensation provided pursuant to this section.  Superintendents, assistant superintendents, associate superintendents, directors/coordinators, supervisors, and finance officers with certification based on academic preparation at the doctoral degree level shall receive a salary supplement of two hundred fifty‑three dollars ($253.00) per month in addition to the compensation provided for under this section.
SECTION 7.3.(e).  The State Board of Education shall not permit local school administrative units to transfer State funds from other funding categories for salaries for public school central office administrators.
SECTION 7.3.(f).  The Director of the Budget shall transfer from the Reserve for Compensation Increases created in this act for fiscal year 2003‑2004, beginning July 1, 2003, funds necessary to provide an average annual salary increase of one and six‑tenths percent (1.6%), including funds for the employer's retirement and social security contributions, commencing July 1, 2003, for all permanent full‑time personnel paid from the Central Office Allotment. The State Board of Education shall allocate these funds to local school administrative units.  The local boards of education shall establish guidelines for providing their salary increases to these personnel.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
NONCERTIFIED PERSONNEL
SECTION 7.4.(a)  The Director of the Budget shall transfer from the Reserve for Compensation Increases created in this act for fiscal year 2003‑2004, commencing July 1, 2003, funds necessary to provide a salary increase of one and six‑tenths percent (1.6%), including funds for the employer's retirement and social security contribution, commencing July 1, 2003, for all noncertified public school employees whose salaries are supported from the State's General Fund.
SECTION 7.4.(b)  Local boards of education shall increase the rates of pay for all such employees who were employed for all or part of fiscal year 2002‑2003 and who continue their employment for fiscal year 2003‑2004 by at least one and six‑tenths percent (1.6%), commencing July 1, 2003. For part‑time employees, the pay increase shall be pro rata based on the number of hours worked.
SECTION 7.4.(c)  These funds shall not be used for any purpose other than for the salary increases and necessary employer contributions provided by this section.
SECTION 7.4.(d)  The State Board of Education may adopt salary ranges for noncertified personnel to support increases of one and six‑tenths percent (1.6%) for the 2003‑2004 school year.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
RESERVE FOR EXPERIENCE STEP INCREASE FOR TEACHERS AND PRINICPALS IN PUBLIC SCHOOLS
SECTION 7.5.(a)  Funds in the Reserve for Experience Step Increase for Teachers and Principals in Public Schools shall be used for experience step increases for employees of schools operated by a local board of education, the Department of Health and Human Services, the Department of Correction, or the Department of Juvenile Justice and Delinquency Prevention, who are paid on the teacher salary schedule or the principal and assistant principal salary schedule.  
SECTION 7.5.(b)  Effective July 1, 2003, any permanent certified personnel employed on July 1, 2003, and paid on the teacher salary schedule with 29+ years of experience shall receive a one‑time bonus equivalent to the average increase of the 26 to 29 year steps.  Effective July 1, 2003, any permanent personnel employed on July 1, 2003, and paid at the top of the principal and assistant principal salary schedule shall receive a one‑time bonus equivalent to two percent (2%).  For permanent part‑time personnel, the one‑time bonus shall be adjusted pro rata.  Personnel defined under G.S. 115C‑325(a)(5a) are not eligible to receive the bonus.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
SUPPLEMENTAL FUNDING IN LOW‑WEALTH COUNTIES
SECTION 7.6.(a)  Funds for Supplemental Funding. – The General Assembly finds that it is appropriate to provide supplemental funds in low‑wealth counties to allow those counties to enhance the instructional program and student achievement.  Therefore, funds are appropriated to State Aid to Local School Administrative Units for the 2003‑2004 fiscal year and the 2004‑2005 fiscal year to be used for supplemental funds for the schools.
SECTION 7.6.(b)  Use of Funds for Supplemental Funding. – All funds received pursuant to this section shall be used only:  (i) to provide instructional positions, instructional support positions, teacher assistant positions, clerical positions, school computer technicians, instructional supplies and equipment, staff development, and textbooks; (ii) for salary supplements for instructional personnel and instructional support personnel; and (iii) to pay an amount not to exceed ten thousand dollars ($10,000) of the plant operation contract cost charged by the Department of Public Instruction for services.
Local boards of education are encouraged to use at least twenty‑five percent (25%) of the funds received pursuant to this section to improve the academic performance of children who are performing at Level I or II on either reading or mathematics end‑of‑grade tests in grades 3‑8 and children who are performing at Level I or II on the writing tests in grades 4 and 7. Local boards of education shall report to the State Board of Education on an annual basis on funds used for this purpose, and the State Board shall report this information to the Joint Legislative Education Oversight Committee. These reports shall specify how these funds were targeted and used to implement specific improvement strategies of each local school administrative unit and its schools, such as teacher recruitment, closing the achievement gap, improving student accountability, addressing the needs of at‑risk students, and establishing and maintaining safe schools.
SECTION 7.6.(c)  Definitions. – As used in this section:
(1)	"Anticipated county property tax revenue availability" means the county‑adjusted property tax base multiplied by the effective State average tax rate.
(2)	"Anticipated total county revenue availability" means the sum of the:
a.	Anticipated county property tax revenue availability,
b.	Local sales and use taxes received by the county that are levied under Chapter 1096 of the 1967 Session Laws or under Subchapter VIII of Chapter 105 of the General Statutes,
c.	Food stamp exemption reimbursement received by the county under G.S. 105‑164.44C,
d.	Homestead exemption reimbursement received by the county under G.S. 105‑277.1A,
e.	Inventory tax reimbursement received by the county under G.S. 105‑275.1 and G.S. 105‑277.001,
f.	Intangibles tax distribution and reimbursement received by the county under G.S. 105‑275.2, and
g.	Fines and forfeitures deposited in the county school fund for the most recent year for which data are available.
(3)	"Anticipated total county revenue availability per student" means the anticipated total county revenue availability for the county divided by the average daily membership of the county.
(4)	"Anticipated State average revenue availability per student" means the sum of all anticipated total county revenue availability divided by the average daily membership for the State.
(5)	"Average daily membership" means average daily membership as defined in the North Carolina Public Schools Allotment Policy Manual, adopted by the State Board of Education. If a county contains only part of a local school administrative unit, the average daily membership of that county includes all students who reside within the county and attend that local school administrative unit.
(6)	"County‑adjusted property tax base" shall be computed as follows:
a.	Subtract the present‑use value of agricultural land, horticultural land, and forestland in the county, as defined in G.S. 105‑277.2, from the total assessed real property valuation of the county,
b.	Adjust the resulting amount by multiplying by a weighted average of the three most recent annual sales assessment ratio studies,
c.	Add to the resulting amount the:
1.	Present‑use value of agricultural land, horticultural land, and forestland, as defined in G.S. 105‑277.2,
2. 	Value of property of public service companies, determined in accordance with Article 23 of Chapter 105 of the General Statutes, and
3.	Personal property value for the county.
(7)	"County‑adjusted property tax base per square mile" means the county‑adjusted property tax base divided by the number of square miles of land area in the county.
(8)	"County wealth as a percentage of State average wealth" shall be computed as follows:
a.	Compute the percentage that the county per capita income is of the State per capita income and weight the resulting percentage by a factor of five‑tenths,
b.	Compute the percentage that the anticipated total county revenue availability per student is of the anticipated State average revenue availability per student and weight the resulting percentage by a factor of four‑tenths,
c.	Compute the percentage that the county‑adjusted property tax base per square mile is of the State‑adjusted property tax base per square mile and weight the resulting percentage by a factor of one‑tenth,
d.	Add the three weighted percentages to derive the county wealth as a percentage of the State average wealth.
(9)	"Effective county tax rate" means the actual county tax rate multiplied by a weighted average of the three most recent annual sales assessment ratio studies.
(10)	"Effective State average tax rate" means the average of effective county tax rates for all counties.
(10a)	"Local current expense funds" means the most recent county current expense appropriations to public schools, as reported by local boards of education in the audit report filed with the Secretary of the Local Government Commission pursuant to G.S. 115C‑447.
(11)	"Per capita income" means the average for the most recent three years for which data are available of the per capita income according to the most recent report of the United States Department of Commerce, Bureau of Economic Analysis, including any reported modifications for prior years as outlined in the most recent report.
(12)	"Sales assessment ratio studies" means sales assessment ratio studies performed by the Department of Revenue under G.S. 105‑289(h).
(13)	"State average current expense appropriations per student" means the most recent State total of county current expense appropriations to public schools, as reported by local boards of education in the audit report filed with the Secretary of the Local Government Commission pursuant to G.S. 115C‑447.
(14)	"State average adjusted property tax base per square mile" means the sum of the county‑adjusted property tax bases for all counties divided by the number of square miles of land area in the State.
(14a)	"Supplant" means to decrease local per student current expense appropriations from one fiscal year to the next fiscal year.
(15)	"Weighted average of the three most recent annual sales assessment ratio studies" means the weighted average of the three most recent annual sales assessment ratio studies in the most recent years for which county current expense appropriations and adjusted property tax valuations are available. If real property in a county has been revalued one year prior to the most recent sales assessment ratio study, a weighted average of the two most recent sales assessment ratios shall be used. If property has been revalued the year of the most recent sales assessment ratio study, the sales assessment ratio for the year of revaluation shall be used.
SECTION 7.6.(d)  Eligibility for Funds. – Except as provided in subsection (h) of this section, the State Board of Education shall allocate these funds to local school administrative units located in whole or in part in counties in which the county wealth as a percentage of the State average wealth is less than one hundred percent (100%).
SECTION 7.6.(e)  Allocation of Funds. – Except as provided in subsection (g) of this section, the amount received per average daily membership for a county shall be the difference between the State average current expense appropriations per student and the current expense appropriations per student that the county could provide given the county's wealth and an average effort to fund public schools.  (To derive the current expense appropriations per student that the county could be able to provide given the county's wealth and an average effort to fund public schools, multiply the county wealth as a percentage of State average wealth by the State average current expense appropriations per student.)
The funds for the local school administrative units located in whole or in part in the county shall be allocated to each local school administrative unit located in whole or in part in the county based on the average daily membership of the county's students in the school units.
If the funds appropriated for supplemental funding are not adequate to fund the formula fully, each local school administrative unit shall receive a pro rata share of the funds appropriated for supplemental funding.
SECTION 7.6.(f)  Formula for Distribution of Supplemental Funding Pursuant to This Section Only. – The formula in this section is solely a basis for distribution of supplemental funding for low‑wealth counties and is not intended to reflect any measure of the adequacy of the educational program or funding for public schools.  The formula is also not intended to reflect any commitment by the General Assembly to appropriate any additional supplemental funds for low‑wealth counties.
SECTION 7.6.(g)  Minimum Effort Required. – Counties that had effective tax rates in the 1996‑1997 fiscal year that were above the State average effective tax rate but that had effective rates below the State average in the 1997‑1998 fiscal year or thereafter shall receive reduced funding under this section.  This reduction in funding shall be determined by subtracting the amount that the county would have received pursuant to Section 17.1(g) of Chapter 507 of the 1995 Session Laws from the amount that the county would have received if qualified for full funding and multiplying the difference by ten percent (10%).  This method of calculating reduced funding shall apply one time only.
This method of calculating reduced funding shall not apply in cases in which the effective tax rate fell below the statewide average effective tax rate as a result of a reduction in the actual property tax rate. In these cases, the minimum effort required shall be calculated in accordance with Section 17.1(g) of Chapter 507 of the 1995 Session Laws.
If the county documents that it has increased the per student appropriation to the school current expense fund in the current fiscal year, the State Board of Education shall include this additional per pupil appropriation when calculating minimum effort pursuant to Section 17.1(g) of Chapter 507 of the 1995 Session Laws.
SECTION 7.6.(h)  Nonsupplant Requirement. – A county in which a local school administrative unit receives funds under this section shall use the funds to supplement local current expense funds and shall not supplant local current expense funds. For the 2003‑2005 fiscal biennium, the State Board of Education shall not allocate funds under this section to a county found to have used these funds to supplant local per student current expense funds.  The State Board of Education shall make a finding that a county has used these funds to supplant local current expense funds in the prior year, or the year for which the most recent data are available, if:
(1)	The current expense appropriation per student of the county for the current year is less than ninety‑five percent (95%) of the average of the local current expense appropriations per student for the three prior fiscal years; and
(2)	The county cannot show:  (i) that it has remedied the deficiency in funding, or (ii) that extraordinary circumstances caused the county to supplant local current expense funds with funds allocated under this section.
The State Board of Education shall adopt rules to implement this section.
SECTION 7.6.(i)  Reports. – The State Board of Education shall report to the Joint Legislative Education Oversight Committee prior to May 1, 2004, if it determines that counties have supplanted funds.
SECTION 7.6.(j)  Department of Revenue Reports. – The Department of Revenue shall provide to the Department of Public Instruction a preliminary report for the current fiscal year of the assessed value of the property tax base for each county prior to March 1 of each year and a final report prior to May 1 of each year.  The reports shall include for each county the annual sales assessment ratio and the taxable values of (i) total real property, (ii) the portion of total real property represented by the present‑use value of agricultural land, horticultural land, and forestland as defined in G.S. 105‑277.2, (iii) property of public service companies determined in accordance with Article 23 of Chapter 105 of the General Statutes, and (iv) personal property.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
SMALL SCHOOL SYSTEM SUPPLEMENTAL FUNDING
SECTION 7.7.(a)  Funds for Small School Systems. – Except as provided in subsection (b) of this section, the State Board of Education shall allocate funds appropriated for small school system supplemental funding (i) to each county school administrative unit with an average daily membership of fewer than 3,175 students and (ii) to each county school administrative unit with an average daily membership from 3,175 to 4,000 students if the county in which the local school administrative unit is located has a county‑adjusted property tax base per student that is below the State‑adjusted property tax base per student and if the total average daily membership of all local school administrative units located within the county is from 3,175 to 4,000 students. The allocation formula shall:
(1)	Round all fractions of positions to the next whole position.
(2)	Provide five and one‑half additional regular classroom teachers in counties in which the average daily membership per square mile is greater than four, and seven additional regular classroom teachers in counties in which the average daily membership per square mile is four or fewer.
(3)	Provide additional program enhancement teachers adequate to offer the standard course of study.
(4)	Change the duty‑free period allocation to one teacher assistant per 400 average daily membership.
(5)	Provide a base for the consolidated funds allotment of at least five hundred seventy‑seven thousand one hundred eleven dollars ($577,111), excluding textbooks.
(6)	Allot vocational education funds for grade 6 as well as for grades 7‑12.
If funds appropriated for each fiscal year for small school system supplemental funding are not adequate to fund fully the program, the State Board of Education shall reduce the amount allocated to each county school administrative unit on a pro rata basis. This formula is solely a basis for distribution of supplemental funding for certain county school administrative units and is not intended to reflect any measure of the adequacy of the educational program or funding for public schools. The formula is also not intended to reflect any commitment by the General Assembly to appropriate any additional supplemental funds for such county administrative units.
SECTION 7.7.(b)  Nonsupplant Requirement. – A county in which a local school administrative unit receives funds under this section shall use the funds to supplement local current expense funds and shall not supplant local current expense funds. For the 2003‑2005 fiscal biennium, the State Board of Education shall not allocate funds under this section to a county found to have used these funds to supplant local per student current expense funds.  The State Board of Education shall make a finding that a county has used these funds to supplant local current expense funds in the prior year, or the year for which the most recent data are available, if:
(1)	The current expense appropriation per student of the county for the current year is less than ninety‑five percent (95%) of the average of the local current expense appropriations per student for the three prior fiscal years; and
(2)	The county cannot show:  (i) that it has remedied the deficiency in funding, or (ii) that extraordinary circumstances caused the county to supplant local current expense funds with funds allocated under this section.
The State Board of Education shall adopt rules to implement this section.
SECTION 7.7.(c)  Phase‑Out Provisions. – If a local school administrative unit becomes ineligible for funding under this formula solely because of an increase in the county‑adjusted property tax base per student of the county in which the local school administrative unit is located, funding for that unit shall be phased out over a two‑year period.  For the first year of ineligibility, the unit shall receive the same amount it received for the prior fiscal year.  For the second year of ineligibility, it shall receive one‑half of that amount.
If a local school administrative unit becomes ineligible for funding under this formula solely because of an increase in the population of the county in which the local school administrative unit is located, funding for that unit shall be continued for five years after the unit becomes ineligible.
SECTION 7.7.(d)  Definitions. – As used in this section:
(1)	"Average daily membership" means within two percent (2%) of the average daily membership as defined in the North Carolina Public Schools Allotment Policy Manual, adopted by the State Board of Education.
(2)	"County‑adjusted property tax base per student" means the total assessed property valuation for each county, adjusted using a weighted average of the three most recent annual sales assessment ratio studies, divided by the total number of students in average daily membership who reside within the county.
(2a)	"Local current expense funds" means the most recent county current expense appropriations to public schools, as reported by local boards of education in the audit report filed with the Secretary of the Local Government Commission pursuant to G.S. 115C‑447.
(3)	"Sales assessment ratio studies" means sales assessment ratio studies performed by the Department of Revenue under G.S. 105‑289(h).
(4)	"State‑adjusted property tax base per student" means the sum of all county adjusted property tax bases divided by the total number of students in average daily membership who reside within the State.
(4a)	"Supplant" means to decrease local per student current expense appropriations from one fiscal year to the next fiscal year.
(5)	"Weighted average of the three most recent annual sales assessment ratio studies" means the weighted average of the three most recent annual sales assessment ratio studies in the most recent years for which county current expense appropriations and adjusted property tax valuations are available. If real property in a county has been revalued one year prior to the most recent sales assessment ratio study, a weighted average of the two most recent sales assessment ratios shall be used. If property has been revalued during the year of the most recent sales assessment ratio study, the sales assessment ratio for the year of revaluation shall be used.
SECTION 7.7.(e)  Reports. – The State Board of Education shall report to the Joint Legislative Education Oversight Committee prior to May 1, 2004, if it determines that counties have supplanted funds.
SECTION 7.7.(f)  Use of Funds. – Local boards of education are encouraged to use at least twenty percent (20%) of the funds they receive pursuant to this section to improve the academic performance of children who are performing at Level I or II on either reading or mathematics end‑of‑grade tests in grades 3‑8 and children who are performing at Level I or II on the writing tests in grades 4 and 7.  Local boards of education shall report to the State Board of Education on an annual basis on funds used for this purpose and the State Board shall report this information to the Joint Legislative Education Oversight Committee.  These reports shall specify how these funds were targeted and used to implement specific improvement strategies of each local school administrative unit and its schools such as teacher recruitment, closing the achievement gap, improving student accountability, addressing the needs of at‑risk students, and establishing and maintaining safe schools.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
APPROPRIATIONS FOR CONTINUALLY LOW‑PERFORMING  SCHOOLS
SECTION 7.8.  Of funds appropriated from the General Fund to State Aid to Local School Administrative Units, the sum of one million nine hundred fifty‑six thousand one hundred fifteen dollars ($1,956,115) for the 2003‑2004 and 2004‑2005 fiscal years shall be used to provide the State's chronically low‑performing schools with tools needed to dramatically improve student achievement. These funds shall be used to implement any of the following strategies at the schools that have not previously been implemented with State or other funds:
(1)	The sum of one million six hundred fifty‑seven thousand three hundred forty‑five dollars ($1,657,345) for the 2003‑2004 and 2004‑2005 fiscal years shall be used to reduce class size at a continually low‑performing school to ensure that the number of teachers allotted for students in grades four and five is one for every 17 students, and that the number of teachers allotted in grades six through eight is one for every 17 students, and that the number of teachers allotted in grades nine through twelve is one for every 20 students; and
(2)	The sum of two hundred ninety‑eight thousand seven hundred seventy dollars ($298,770) for the 2003‑2004 and 2004‑2005 fiscal years shall be used to extend teachers' contracts for a total of 10 days, including five days of additional instruction with related costs for other than teachers' salaries for the 2003‑2004 and 2004‑2005 school years.
Notwithstanding any other provision of law, the State Board of Education may implement intervention strategies for the 2003‑2004 and 2004‑2005 school years that it deems appropriate.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
IMMEDIATE ASSISTANCE TO THE HIGHEST PRIORITY ELEMENTARY SCHOOLS
SECTION 7.9.  Of funds appropriated from the General Fund to State Aid to Local School Administrative Units, the sum of ten million one hundred thirty‑four thousand six hundred seven dollars ($10,134,607) for the 2003‑2004 and 2004‑2005 fiscal years shall be budgeted to provide the State's lowest performing elementary schools with the tools needed to dramatically improve student achievement.  These funds shall be used for the 37 elementary schools at which, for the 1999‑2000 school year over eighty percent (80%) of the students qualified for free or reduced‑price lunches, and no more than fifty‑five percent (55%) of the students performed at or above grade level.  Of these funds:
(1)	The sum of six million ninety‑three thousand one hundred eighty‑one dollars ($6,093,181) for the 2003‑2004 and 2004‑2005 fiscal years shall be used to reduce class size at each of these schools to ensure that no class kindergarten through third grade has more than 15 students;
(2)	The sum of two million two hundred sixty‑six thousand twenty‑six dollars ($2,266,026) for the 2003‑2004 and 2004‑2005 fiscal years shall be used to extend all teachers' contracts at these schools for a total of 10 days, with five days for staff development, including staff development on methods to individualize instruction in smaller classes, and preparation for the 2003‑2004 and 2004‑2005 school years, and five additional days of instruction with related costs for other than teachers' salaries;  and
(3)	The sum of one million seven hundred seventy‑five thousand four hundred dollars ($1,775,400) for the 2003‑2004 and 2004‑2005 fiscal years shall be used to provide one additional instructional support position at each priority school.
No funds from the teacher assistant allotment category may be allotted to the local school administrative units for students assigned to these schools. Any teacher assistants displaced from jobs in these high‑priority elementary schools shall be given preferential consideration for vacant teacher assistant positions at other schools, provided their job performance has been satisfactory. Nothing in this section prevents the local school administrative unit from placing teacher assistants in these schools.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
EVALUATION OF INITIATIVES TO ASSIST HIGH‑PRIORITY SCHOOLS
SECTION 7.10.(a)  In order for the high‑priority schools identified in Section 7.9 of this act to remain eligible for the additional resources provided in this section, the schools must meet the expected growth for each year and must achieve high growth for at least two out of three years based on the State Board of Education's annual performance standards set for each school.  No adjustment in the allotment of resources based on performance shall be made until the 2004‑2005 school year.
SECTION 7.10.(b)  All teaching positions allotted for students in high‑priority schools and continually low‑performing schools in those grades targeted for smaller class sizes shall be assigned to and teach in those grades and in those schools.  The maximum class size in grades K‑3 in high‑priority schools and in grades K‑5 in continually low‑performing schools shall be no more than one student above the allotment ratio in that grade.  The Department of Public Instruction shall monitor class sizes at these schools at the end of the first month of school and report to the State Board of Education on the actual class sizes at these schools.  If the local school administrative unit notifies the State Board of Education that they do not have sufficient resources to adhere to the class size maximum requirements and requests additional teaching positions, the State Board shall verify the need for additional positions.  If the additional resources are determined necessary, the State Board of Education may allocate additional teaching positions to the unit from the Reserve for Average Daily Membership adjustments.
SECTION 7.10.(c)  Of funds appropriated from the General Fund to State Aid to Local School Administrative Units, the sum of five hundred thousand dollars ($500,000) for fiscal year 2003‑2004 and the sum of five hundred thousand dollars ($500,000) for fiscal year 2004‑2005 shall be used by the State Board of Education to contract with an outside organization to evaluate the initiatives set forth in this section.  The evaluation shall include:
(1)	An assessment of the overall impact these initiatives have had on student achievement;
(2)	An assessment of the effectiveness of each individual initiative set for this section in improving student achievement;
(3)	An identification of changes in staffing patterns, instructional methods, staff development, and parental involvement as a result of these initiatives;
(4)	An accounting of how funds and personnel resources made available for these schools were utilized and the impact of varying patterns of utilization on changes in student achievement;
(5)	An assessment of the impact of bonuses for mathematics, science, and special education teachers on (i) the retention of these teachers in the targeted schools, (ii) the recruitment of teachers in these specialties into targeted schools, (iii) the recruitment of teachers certified in these disciplines, and (iv) student achievement in schools at which these teachers receive these bonuses; and
(6)	Recommendations for the continuance and improvement of these initiatives.
The State Board of Education shall make a report to the Joint Legislative Education Oversight Committee regarding the results of this evaluation by December 1 of each year. The State Board of Education shall submit its recommendations for changes to these initiatives to the Committee at anytime.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
AT‑RISK STUDENT SERVICES/ALTERNATIVE SCHOOLS
SECTION 7.11.  The State Board of Education may use up to two hundred thousand dollars ($200,000) of the funds in the Alternative Schools/At‑Risk Student allotment each year for the 2003‑2004 fiscal year and for the 2004‑2005 fiscal year to implement G.S. 115C-12(24).

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
ADDITIONAL TEACHER POSITIONS FOR SECOND GRADE
SECTION 7.12.(a)  The maximum class size limits for second grade established by the State Board of Education for the 2003‑2004 school year shall be reduced by two from the 2002‑2003 limits, based on an allotment ratio of one teacher for every 18 students.
SECTION 7.12.(b)  For the 2003‑2004 school year, local school administrative units shall use these additional teacher positions to reduce class size in second grade.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
children with disabilities
SECTION 7.13.  The State Board of Education shall allocate funds for children with disabilities on the basis of two thousand six hundred seventy dollars and twenty‑eight cents ($2,670.28) per child for a maximum of 165,266 children for the 2003‑2004 school year.  Each local school administrative unit shall receive funds for the lesser of (i) all children who are identified as children with disabilities or (ii) twelve and five‑tenths percent (12.5%) of the 2003‑2004 allocated average daily membership in the local school administrative unit.
The dollar amounts allocated under this section for children with disabilities shall also adjust in accordance with legislative salary increments, retirement rate adjustments, and health benefit adjustments for personnel who serve children with disabilities.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
funds for academically gifted children
SECTION 7.14.  The State Board of Education shall allocate funds for academically or intellectually gifted children on the basis of eight hundred eighty‑four dollars and fifty‑five cents ($884.55) per child.  A local school administrative unit shall receive funds for a maximum of four percent (4%) of its 2003‑2004 allocated average daily membership, regardless of the number of children identified as academically or intellectually gifted in the unit. The State Board shall allocate funds for no more than 53,712 children for the 2003‑2004 school year.
The dollar amounts allocated under this section for academically or intellectually gifted children shall also adjust in accordance with legislative salary increments, retirement rate adjustments, and health benefit adjustments for personnel who serve academically or intellectually gifted children.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
students with limited english proficiency
SECTION 7.15.(a)  The State Board of Education shall develop guidelines for identifying and providing services to students with limited proficiency in the English language.
The State Board shall allocate these funds to local school administrative units and to charter schools under a formula that takes into account the average percentage of students in the units or the charters over the past three years who have limited English proficiency. The State Board shall allocate funds to a unit or a charter school only if (i) average daily membership of the unit or the charter school includes at least 20 students with limited English proficiency or (ii) students with limited English proficiency comprise at least two and one‑half percent (2.5%) of the average daily membership of the unit or charter school. For the portion of the funds that is allocated on the basis of the number of identified students, the maximum number of identified students for whom a unit or charter school receives funds shall not exceed 10 and six‑tenths percent (10.6%) of its average daily membership.
Local school administrative units shall use funds allocated to them to pay for classroom teachers, teacher assistants, tutors, textbooks, classroom materials/instructional supplies/equipment, transportation costs, and staff development of teachers for students with limited English proficiency.
A county in which a local school administrative unit receives funds under this section shall use the funds to supplement local current expense funds and shall not supplant local current expense funds.
SECTION 7.15.(b)  The Department of Public Instruction shall prepare a current head count of the number of students classified with limited English proficiency by December 1 of each year.
Students in the head count shall be assessed at least once every three years to determine their level of English proficiency. A student who scores "superior" on the standard English language proficiency assessment instrument used in this State shall not be included in the head count of students with limited English proficiency.
SECTION 7.15.(c)  The State Board of Education shall review the allotment formula for funding for students with limited English proficiency.  In its review, the Board shall consider whether the proportion of funds allotted on the basis of concentration of students with limited English proficiency in a local school administrative unit is at the proper level or should be revised.  The Board shall report the results of its review and its recommendations to the Joint Legislative Education Oversight Committee by November 15, 2003.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
funds to implement the abcs of public education
SECTION 7.16.(a)  The State Board of Education shall use funds appropriated for State  Aid to Local School Administrative Units for the 2003‑2004 fiscal year to provide incentive funding for schools that met or exceeded the projected levels of improvement in student performance during the 2002‑2003 school year, in accordance with the ABCs of Public Education Program.  In accordance with State Board of Education policy:
(1)	Incentive awards in schools that achieve higher than expected improvements may be up to:
a.	One thousand five hundred dollars ($1,500) for each teacher and for certified personnel; and
b.	Five hundred dollars ($500.00) for each teacher assistant.
(2)	Incentive awards in schools that meet the expected improvements may be up to:
a.	Seven hundred fifty dollars ($750.00) for each teacher and for certified personnel; and
b.	Three hundred seventy‑five dollars ($375.00) for each teacher assistant.
SECTION 7.16.(b)  The State Board of Education may use funds appropriated to State Aid to Local School Administrative Units for assistance teams to low‑performing schools.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
lea assistance program
SECTION 7.17.  Of funds appropriated from the General Fund to State Aid to Local School Administrative Units, the sum of five hundred thousand dollars ($500,000) for fiscal year 2003‑2004 shall be used to provide assistance to the State's low‑performing Local School Administrative Units (LEAs) and to assist schools in meeting adequate yearly progress in each subgroup identified in the No Child Left Behind Act of 2001. The State Board of Education shall report to the Office of State Budget and Management, the Fiscal Research Division, and the Joint Legislative Education Oversight Committee on the expenditure of these funds by May 15, 2004, and by December 15, 2005.  The report shall contain: (1) the criteria for selecting LEAs and schools to receive assistance, (2) measurable goals and objectives for the assistance program, (3) an explanation of the assistance provided, (4) findings from the assistance program, (5) actual expenditures by category, (6) recommendations for the continuance of this program, and (7) any other information the State Board deems necessary.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
expenditure of funds to improve student accountability
SECTION 7.18.(a)  Funds appropriated for the 2003‑2004 and 2004‑2005 fiscal years for Student Accountability Standards shall be used to assist students to perform at or above grade level in reading and mathematics in grades 3‑8 as measured by the State's end‑of‑grade tests. The SBE shall allocate these funds to LEAs based on the number of students who score at Level I or Level II on either reading or mathematics end‑of‑grade tests in grades 3‑8. Funds in the allocation category shall be used to improve the academic performance of (i) students who are performing at Level I or II on either reading or mathematics end‑of‑grade tests in grades 3‑8 or (ii) students who are performing at Level I or II on the writing tests in grades 4 and 7. These funds may also be used to improve the academic performance of students who are performing at Level I or II on the high school end‑of‑course tests. These funds shall not be transferred to other allocation categories or otherwise used for other purposes.  Except as otherwise provided by law, local boards of education may transfer other funds available to them into this allocation category.
The principal of a school receiving these funds, in consultation with the faculty and the site‑based management team, shall implement plans for expending these funds to improve the performance of students.
Local boards of education are encouraged to use federal funds such as Title I Comprehensive School Reform Development Funds and to examine the use of State funds to ensure that every student is performing at or above grade level in reading and mathematics.
These funds shall be allocated to local school administrative units for the 2003‑2004 fiscal year within 30 days of the date this act becomes law.
SECTION 7.18.(b)  Funds appropriated for Student Accountability Standards shall not revert at the end of each fiscal year but shall remain available for expenditure until August 31 of the subsequent fiscal year.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
funds for teacher recruitment initiatives
SECTION 7.19.  The State Board of Education may use up to two hundred thousand dollars ($200,000) of the funds appropriated for State Aid to Local School Administrative Units each year for the 2003‑2004 fiscal year and for the 2004‑2005 fiscal year to enable teachers who have received NBPTS certification or who have otherwise received special recognition to advise the State Board of Education on teacher recruitment and other strategic priorities of the State Board.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
recruitment and retention initiative TO ADDRESS TEACHER SHORTAGE
SECTION 7.20.(a)  Of the funds appropriated from the General Fund to State Aid to Local School Administrative Units, the sum of two million eight hundred ninety thousand dollars ($2,890,000) for the 2003‑2004 and 2004‑2005 fiscal years shall be used to provide annual bonuses of one thousand eight hundred dollars ($1,800) to teachers certified in and teaching in the fields of mathematics, science, or special education in grades 6 through 12 at middle and high schools with eighty percent (80%) or more of the students eligible for free or reduced lunch or with fifty percent (50%) or more of students performing below grade level in Algebra I and Biology. The bonus shall be paid monthly with matching benefits. Teachers shall remain eligible for the bonuses so long as they continue to teach in one of these disciplines at a school that was eligible for the bonus program when the teacher first received this bonus.
SECTION 7.20.(b)  In accordance with G.S. 115C‑325 and by way of clarification, it shall not constitute a demotion as that term is defined in G.S. 115C‑325(a)(4) if:
(1)	A teacher who receives a bonus pursuant to this section is reassigned to a school at which there is no such bonus;
(2)	A teacher who receives a bonus pursuant to this section is reassigned to teach in a field for which there is no such bonus; or
(3)	A teacher receives a bonus pursuant to this section and the bonus is subsequently discontinued or reduced.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
FUNDS FOR THE TESTING AND IMPLEMENTATION OF THE NEW STUDENT INFORMATION SYSTEM
SECTION 7.21.(a)  The State Board of Education may transfer up to one million dollars ($1,000,000) in funds appropriated for the Uniform Education Reporting System for the 2003‑2004 fiscal year and up to one million dollars ($1,000,000) in funds appropriated for the Uniform Education Reporting System for the 2004‑2005 fiscal year to the Department of Public Instruction to lease or purchase equipment necessary for the testing and implementation of NC WISE, the new student information system in the public schools.
Testing shall include an emphasis on the security of the system.
SECTION 7.21.(b)  Funds appropriated for the Uniform Education Reporting System shall not revert at the end of the 2003‑2004 and 2004‑2005 fiscal years, but shall remain available until expended.
SECTION 7.21.(c)  This section becomes effective June 30, 2003.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
litigation reserve funds
SECTION 7.22.  The State Board of Education may expend up to five hundred thousand dollars ($500,000) each year for the 2003‑2004 and 2004‑2005 fiscal years from unexpended funds for certified employees' salaries to pay expenses related to pending litigation.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
LOCAL EDUCATION AGENCY FLEXIBILITY
SECTION 7.23.  Within 14 days of the date this act becomes law, the State Board of Education shall notify each local school administrative unit of the amount the unit must reduce from State General Fund appropriations.  The State Board shall determine the amount of the reduction for each unit on the basis of average daily membership.
Each unit shall report to the Department of Public Instruction on the discretionary budget reductions it has identified for the unit within 30 days of the date this act becomes law. No later than December 31, 2003, the State Board of Education shall make a summary report to the Office of State Budget and Management and the Fiscal Research Division on all reductions made by the LEAs to achieve this reduction.
For fiscal year 2003‑2004, the Governor urges local school administrators to make every effort to reduce spending whenever and wherever such budget reductions are appropriate as long as the targeted reductions do not directly impact classroom services or any services for students at risk or children with special needs, including those services or supports that are called for in students' Personal Education Plans (PEP) and/or Individual Education Plans (IEP). If reductions to the allotment categories listed in this paragraph are necessary in order to meet the reduction target, the local board of education shall submit an explanation of the anticipated impact of the reductions to student services along with the budget reductions to the Department of Public Instruction. By February 15, 2004, for fiscal year 2004‑2005, the State Board of Education will determine the changes to the allotment categories to make such reductions permanent.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
BASE BUDGET REDUCTION TO DEPARTMENT OF PUBLIC INSTRUCTION
SECTION 7.24.  Notwithstanding any other provision of law, the Department of Public Instruction may use salary reserve funds and other funds, and may transfer funds within the Department's continuation budget to implement budget reductions for the 2003‑2004 fiscal year.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
replacement school buses funds
SECTION 7.25.(a)  Of the funds appropriated to the State Board of Education, the Board may use up to fifteen million dollars ($15,000,000) for the 2003‑2004 fiscal year and up to forty‑seven million seven hundred fifty‑two thousand eight hundred thirteen dollars ($47,752,813) for the 2004‑2005 fiscal year for allotments to local boards of education for replacement school buses under G.S. 115C‑249(c) and (d). In making these allotments, the State Board of Education may impose any of the following conditions:
(1)	The local board of education must use the funds only to make the first or second year's payment on a financing contract entered into pursuant to G.S. 115C‑528.
(2)	The term of a financing contract entered into under this section shall not exceed three years.
(3)	The local board of education must purchase the buses only from vendors selected by the State Board of Education and on terms approved by the State Board of Education.
(4)	The State Board of Education shall solicit bids for the direct purchase of buses and for the purchasing of buses through financing. The State Board of Education may solicit separate bids for financing if the Board determines that multiple financing options are more cost‑efficient.
(5)	A bus financed pursuant to this section must meet all federal motor vehicle safety regulations for school buses.
(6)	Any other condition the State Board of Education considers appropriate.
SECTION 7.25.(b)  Any term contract for the purchase or lease‑purchase of school buses or school activity buses shall not require vendor payment of the electronic procurement transaction fee of the North Carolina E‑Procurement Service.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
EXPENDITURES FOR DRIVING Eligibility CERTIFICATES
SECTION 7.26.  The State Board of Education may use funds appropriated for drivers education for the 2003‑2004 fiscal year and for the 2004‑2005 fiscal year for driving eligibility certificates.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
DISCREPANCIES BETWEEN ANTICIPATED AND ACTUAL ADM
SECTION 7.27.(a)  If the State Board of Education does not have sufficient resources in the ADM Contingency Reserve line item to make allotment adjustments in accordance with the Allotment Adjustments for ADM Growth provisions of the North Carolina Public Schools Allotment Policy Manual, the State Board of Education may use funds appropriated to State Aid for Public Schools for this purpose.
SECTION 7.27.(b)  If the higher of the first or second month average daily membership in a local school administrative unit is at least two percent (2%) or 100 students lower than the anticipated average daily membership used for allotments for the unit, the State Board of Education shall reduce allotments for the unit.  The reduced allotments shall be based on the higher of the first or second month average daily membership plus one‑half of the number of students overestimated in the anticipated average daily membership.
The allotments reduced pursuant to this subsection shall include only those allotments that may be increased pursuant to the Allotment Adjustments for ADM Growth provisions of the North Carolina Public Schools Allotment Policy Manual.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
CHARTER SCHOOL ADVISORY COMMITTEE/CHARTER SCHOOL EVALUATION
SECTION 7.28.  The State Board of Education may spend up to fifty thousand dollars ($50,000) a year from the State Aid to Local School Administrative Units for the 2003‑2004 and 2004‑2005 fiscal years to continue support of a charter school advisory committee and to continue to evaluate charter schools.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
study of issues related to rapid growth in student population
SECTION 7.29.  The Joint Legislative Education Oversight Committee shall study the effects of rapid growth in student population on local school administrative units.  In the course of the study, the Committee shall consider issues related to rapid growth and strategies for addressing these issues. The Committee shall report to the 2004 Regular Session of the General Assembly on its findings and recommendations.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
Mentor Teacher Funds May be used for full‑time mentors
SECTION 7.30.(a)  The State Board of Education shall grant flexibility to a local board of education regarding the use of mentor funds to provide mentoring support, provided the local board submits a detailed plan on the use of the funds to the State Board and the State Board approves that plan. The plan shall include information on how all mentors in the local school administrative unit have been or will be adequately trained to provide mentoring support.
Local boards of education shall use funds allocated for mentor teachers to provide mentoring support to all State‑paid newly certified teachers, second‑year teachers who were assigned mentors during the prior school year, and entry‑level instructional support personnel who have not previously been teachers.
SECTION 7.30.(b)  The State Board of Education, after consultation with the Professional Teaching Standards Commission, shall adopt standards for mentor training.
SECTION 7.30.(c)  Each local board of education with a plan approved pursuant to subsection (a) of this section shall report to the State Board of Education on the impact of its mentor program on teacher retention.  The State Board of Education shall report to the Joint Legislative Education Oversight Committee by October 1, 2004, on the characteristics of mentor programs that are most effective in retaining teachers.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
Explornet audit
SECTION 7.31.  No State funds appropriated for distribution to ExplorNet, Incorporated, shall be disbursed until the State Auditor and the Office of State Budget and Management certify that ExplorNet, Incorporated, has received an audit report for the 2001‑2002 fiscal year that is free of audit exceptions. A copy of the certification by the State Auditor and the Office of State Budget and Management shall be sent to the Joint Legislative Education Oversight Committee and to the Joint Legislative Commission on Governmental Operations.

PART VIII. COMMUNITY COLLEGES

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
COMMUNITY COLLEGE FUNDING FLEXIBILITY
SECTION 8.1.  A local community college may use all State funds allocated to it, except for Literacy Funds and Funds for New and Expanding Industries, for any authorized purpose that is consistent with the college's Institutional Effectiveness Plan.  Each local community college shall include in its Institutional Effectiveness Plan a section on how funding flexibility allows the college to meet the demands of the local community and to maintain a presence in all previously funded categorical programs.
No more than two percent (2%) systemwide shall be transferred from faculty salaries without the approval of the State Board of Community Colleges. The State Board shall report on any such transfers above two percent (2%) systemwide to the Office of State Budget and Management and the Joint Legislative Commission on Governmental Operations at its next meeting.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
FLEXIBILITY TO IMPLEMENT BUDGET REDUCTIONS
SECTION 8.2.  Notwithstanding G.S. 143‑23 or any other provision of law, the State Board of Community Colleges may use salary reserve funds and other funds, and may transfer funds within the Community College System Office continuation budget to the extent necessary to implement budget reductions for the 2003‑2004 fiscal year.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
STATE BOARD OF COMMUNITY COLLEGE MANAGEMENT FLEXIBILITY
SECTION 8.3.  Within 30 days of the date this act becomes law, the State Board of Community Colleges shall notify each college of the amount the college must reduce from State General Fund appropriations.  The State Board shall determine the amount of the reduction for each unit on the basis of FTE or another method that accounts for the unique needs of specific colleges.
Each college shall report to the State Board of Community Colleges on the discretionary budget reductions it has identified for the college within 60 days of the date this act becomes law. No later than December 31, 2003, the State Board of Community Colleges shall make a summary report to the Office of State Budget and Management and the Fiscal Research Division on all reductions made by the colleges to achieve this reduction.
For fiscal year 2003‑2004, the General Assembly urges local college administrators to make every effort to reduce spending whenever and wherever such budget reductions are appropriate and as long as the targeted reductions do not directly impact classroom services or those services that are identified in this act as a high‑need area for the State. If reductions to the allotment categories listed in this paragraph are necessary in order to meet the reduction target, the local college administration shall submit an explanation of the anticipated impact of the reductions to student services along with the budget reductions to the State Board of Community Colleges.
By February 15, 2004, for fiscal year 2004‑2005, the State Board of Community Colleges will determine the changes to the allotment categories to make such reductions permanent.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
REGISTRATION FEES FOR OCCUPATIONAL CONTINUING EDUCATION OR Focused Industrial Training 
SECTION 8.4.  Of the funds appropriated to the North Carolina Community College System for the 2003‑2005 biennium, the State Board of Community Colleges may use up to one hundred thousand dollars ($100,000) each year to pay registration fees and material costs for Occupational Continuing Education or Focused Industrial Training safety courses provided to companies that (i) are eligible to participate in the Focused Industrial Training Program, (ii) have less than 150 employees, and (iii) are found by community college representatives and regional customized training directors to face challenges in paying these fees and costs.  These funds shall not be expended without the prior approval of the North Carolina Community College System Office, Division of Economic and Workforce Development.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
summer school funding
SECTION 8.5.  The General Assembly encourages the North Carolina Community Colleges System to use funds appropriated to support summer term curriculum FTE to address issues associated with worker shortages in high‑needs industries such as (i) Business Technology, (ii) Health Sciences, (iii) Child Care Training, and (iv) Public Service Technologies including law enforcement, fire protection, and education.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
carry forward for equipment
SECTION 8.6.(a)  Subject to cash availability, the North Carolina Community Colleges System may carry forward an amount not to exceed fifteen million dollars ($15,000,000) of the operating funds held in reserve that were not reverted in fiscal year 2002‑2003 to be reallocated to the State Board of Community Colleges' Equipment Reserve Fund.  These funds should be distributed to colleges consistent with G.S. 115D‑31.
SECTION 8.6.(b)  This section becomes effective June 30, 2003.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
hosiery center funds
SECTION 8.7.  Notwithstanding any other provision of law, all fees collected by the Hosiery Technology Center of Catawba Valley Community College for the testing of hosiery products shall be retained by the Center and used for the operations of the Center.  Purchases made by the Center using these funds are not subject to the provisions of Article 3 of Chapter 143 of the General Statutes.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
scholarships for prospective teachers
SECTION 8.8.  Of the funds appropriated in this act to the State Board of Community Colleges, the State Board may use up to one million dollars ($1,000,000) for a nonrecurring grant to the North Carolina Community College Foundation.  These funds shall be used to match the Glaxo Smith Kline Foundation challenge grant establishing a two million dollar ($2,000,000) endowment for the creation of a new scholarship program for prospective teachers enrolled in baccalaureate completion programs at State community college campuses and for the development of teacher preparation courses.
This provision is contingent upon receipt of one million dollars ($1,000,000) for this purpose from the Glaxo Smith Kline Foundation and applies only to the 2003‑2004 fiscal year.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
management information system funds
SECTION 8.9.(a)  Funds appropriated for the Community Colleges System Office Management Information System shall not revert at the end of the 2002‑2003 and 2003‑2004 fiscal years but shall remain available until expended.
SECTION 8.9.(b)  This section becomes effective June 30, 2003.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
Use of Literacy Funds for literacy labs
SECTION 8.10.  Notwithstanding any other provision of law, a local community college may use up to five percent (5%) of the Literacy Funds allocated to it by the State Board of Community Colleges to procure computers for literacy labs.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Faculty and professional Staff Salaries
SECTION 8.11.  Three million two hundred fifty thousand dollars ($3,250,000) in the Reserve for Compensation Increases in Section 2.1 of this act shall be used to increase faculty and professional staff salaries by an average of one‑half percent (0.5%). These increases are in addition to the one and six‑tenths percent (1.6%) provided by Section 30.11 of this act. Colleges may provide additional increases from funds available.
The State Board of Community Colleges shall adopt rules to ensure that these funds are used only to move faculty and professional staff to the respective national averages. The funds shall not be transferred by the State Board or used for any other budget purpose by the community colleges.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
evaluation of the comprehensive ARTICULATION AGREEMENT
SECTION 8.12.(a)  The General Assembly finds that (i) there is a general sentiment expressed by students that the Comprehensive Articulation Agreement adopted by the Board of Governors of The University of North Carolina and the State Board of Community Colleges should be improved and (ii) over the past five years, there have been many suggestions for improving the Comprehensive Articulation Agreement as well as recommendations for new directions in which the Comprehensive Articulation Agreement should be developed.
SECTION 8.12.(b)  The Joint Legislative Education Oversight Committee shall contract with a credible independent source, individual, or organization, to study the Comprehensive Articulation Agreement.  The contractor shall not be (i) a current employee of The University of North Carolina, Office of the President, the North Carolina Community College System, or any of the North Carolina independent schools/colleges participating in the Comprehensive Articulation Agreement or (ii) a current or past member of the Transfer Advisory Committee.
SECTION 8.12.(c)  The study by the contractor shall:
(1)	Be consistent with the standards of Southern Association of Colleges and Schools, Commission on Colleges, on educational quality and institutional effectiveness;
(2)	Be designed to provide an accurate and credible assessment of the effectiveness of the Comprehensive Articulation Agreement during its initial five years of existence relative to the intent of its authorizing legislation;
(3)	Be based on qualitative as well as quantitative information and data;
(4)	Take no more than four months from initiation to completion.
(5)	Include input from college transfer students, counselors, faculty, and administration from both systems.
SECTION 8.12.(d)  The contractor's report shall:
(1)	Adequately reflect the study's methodology, sources of information, purpose and scope, analyses, evaluative assessments, recommendations, and conclusions;
(2)	State any known deficiencies or limitations of the study;
(3)	Be presented in both a printed form and an electronic version; and
(4)	Provide recommendations for improving the Comprehensive Articulation Agreement.
SECTION 8.12.(e)  The contractor shall submit a written progress report every four weeks to the vice‑president of academic affairs of The University of North Carolina, Office of the President, the vice‑president of academic affairs of the North Carolina Community College System Office, and the cochairs of the Transfer Advisory Committee. The contractor shall complete the report within four months. At the completion of the study, the contractor shall submit a draft of the report document to the vice‑president of academic affairs of The University of North Carolina, Office of the President, the vice‑president of academic affairs of the North Carolina Community College System Office, and the cochairs of the Transfer Advisory Committee for review.
SECTION 8.12.(f)  The vice‑president of academic affairs of The University of North Carolina, Office of the President, the vice‑president of academic affairs of the North Carolina Community College System Office, and the cochairs of the Transfer Advisory Committee shall respond to the draft report within 30 days of receiving the draft.
SECTION 8.12.(g)  Within 60 days of completing the study, the contractor shall submit a final report to the vice‑president of academic affairs of The University of North Carolina, Office of the President, the vice‑president of academic affairs of the North Carolina Community College System Office, and the cochairs of the Transfer Advisory Committee. The vice‑president of academic affairs of The University of North Carolina, Office of the President, and the vice‑president of academic affairs of the North Carolina Community College System Office may, in their discretion, schedule a formal presentation of the report when it is submitted.
SECTION 8.12.(h)  Designees of the vice‑president of academic affairs of The University of North Carolina, Office of the President, and the vice‑president of academic affairs of the North Carolina Community College System Office shall be the liaisons for matters related to the execution of the study.
SECTION 8.12.(i)  The University of North Carolina, Office of the President, and the North Carolina Community College System shall provide the contractor with access and use of information databases to the extent that such access and use is necessary for the study and does not violate legal and ethical codes or create disruptions of normal operations.
SECTION 8.12.(j)  The University of North Carolina, Office of the President, and the North Carolina Community College System shall each transfer thirty‑five thousand dollars ($35,000) to the Joint Legislative Education Oversight Committee to carry out this study.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
automotive training incentive
SECTION 8.13.  Of the funds appropriated in this act for the State Board of Community Colleges for the 2003‑2004 fiscal year, the sum of one hundred twenty‑five thousand dollars ($125,000) shall be used for a nonrecurring grant to the North Carolina Community College Foundation provided that a like amount is provided by the North Carolina Automotive Dealers Association to match these funds on a dollar‑for‑dollar basis.  The North Carolina Community College Foundation shall use these funds to provide incentive programming at the colleges that offer Automotive Systems Technology.  The funds shall be used to:
(1)	Increase awareness of careers available in the franchised automobile and truck industry in North Carolina;
(2)	Increase awareness within North Carolina's middle school and high school guidance counselors and workforce development coordinators;
(3)	Increase public awareness of teaching opportunities in North Carolina's high schools and community colleges in the area of automotive technology;
(4)	Increase opportunities in continuing education for automotive technology high school and community college instructors;
(5)	Provide a program coordinator to work with the franchised car and truck dealers and with community college and high school automotive professionals to ensure that the automotive curriculum is uniform and appropriate; and
(6)	Increase resources to assist high schools and community colleges in gaining and maintaining certification for their respective automotive technology programs.

PART IX. UNIVERSITIES

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
UNC FLEXIBILITY GUIDELINES
SECTION 9.1.  The Chancellor of each constituent institution shall report to the Board of Governors of The University of North Carolina on the reductions made to the General Fund budget codes in order to meet the reduction reserve amounts for that institution. The President of The University of North Carolina shall report to the Board of Governors of The University of North Carolina on the reductions made to the General Fund budget codes controlled by the Board in order to meet the reduction reserve amounts for those entities.  The Board of Governors shall make a summary report to the Office of State Budget and Management and the Fiscal Research Division by December 31, 2003, on all reductions made by these entities and constituent institutions in order to reduce the budgets by the targeted amounts.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
Escheat Funds
SECTION 9.2.(a)  There is appropriated from the Escheat Fund income to the Board of Governors of The University of North Carolina the sum of eighteen million six hundred seven thousand two hundred ninety‑three dollars ($18,607,293) for each year of the 2003‑2005 fiscal biennium and to the State Board of Community Colleges the sum of seven million sixty‑two thousand eight hundred six dollars ($7,062,806) for each year of the 2003‑2005 fiscal biennium. These funds shall be allocated by the State Educational Assistance Authority for need‑based student financial aid in accordance with G.S. 116B‑7.
SECTION 9.2.(b)  The Director of the Budget shall include General Fund appropriations in the amounts provided in subsection (a) of this section in the proposed 2005‑2007 fiscal biennium continuation budget for the purposes provided in G.S. 116B‑7. 
SECTION 9.2.(c)  The State Education Assistance Authority (SEAA) shall perform all of the administrative functions necessary to implement the program of financial aid. The SEAA shall conduct periodic evaluations of expenditures of the scholarship programs to determine if allocations are utilized to ensure access to institutions of higher learning and to meet the goals of the respective programs.  The SEAA may make recommendations for redistribution of funds to The University of North Carolina and the President of the Community College System regarding their respective scholarship programs, who then may authorize redistribution of unutilized funds for a particular fiscal year.
SECTION 9.2.(d)  All obligations to students for uses of the funds set out in subsection (a) of this section that were made prior to the effective date of this section shall be fulfilled as to students who remain eligible under the provisions of the respective programs.

Requested by:	Representatives L. Johnson, Preston, Tolson, Yongue
UNC Bond Project Modifications
SECTION 9.3.(a)  Pursuant to Section 2(b) of S.L. 2000‑3, the General Assembly finds that it is in the best interest of the State to respond to current educational and research program requirements at Elizabeth City State University by substituting a project entitled "Campus Infrastructure Improvements" for "Doles Residence Hall – Comprehensive Renovation" as contained in Section 2(a) of S.L. 2000‑3, as a residence hall that has been provided for from housing receipts and campus infrastructure improvements will allow energy conservation and savings. Section 2(a) of S.L. 2000‑3 is therefore amended in the portion under Elizabeth City State University by deleting "Doles Residence Hall – Comprehensive Renovation…$1,722,500" and by substituting "Campus Infrastructure Improvements…$1,722,500".
SECTION 9.3.(b)  Pursuant to Section 2(b) of S.L. 2000‑3, the General Assembly finds that it is in the best interest of the State to respond to current educational and research program requirements at North Carolina Central University, due to increasing enrollment growth, by substituting a project entitled "Pearson Cafeteria – Expansion" for "Pearson Cafeteria – Comprehensive Renovation" as contained in Section 2(a) of S.L. 2000‑3, by deleting a project entitled "Old Senior Dorm – Conversion to Academic Use" as contained in Section 2(a) of S.L. 2000‑3 and by transferring the funds of two million one hundred thirty thousand seven hundred dollars ($2,130,700) from the project entitled "Old Senior Dorm – Conversion to Academic Use", as contained in Section 2(a) of S.L. 2000‑3, and by transferring a portion of the funds from a project entitled "Farrison‑Newton Building – Comprehensive Renovation of Classroom Building", as contained in Section 2(a) of S.L. 2000‑3, to this substitute project.  Section 2(a) of S.L. 2000‑3 is therefore amended as follows:
(1)	In the portion entitled "Pearson Cafeteria – Comprehensive Renovation" under North Carolina Central University, by deleting "Comprehensive Renovation" and by substituting "Expansion" and by adding $7,730,700 for the project so that it reads "Pearson Cafeteria – Expansion…$8,994,300".
(2)	In the portion under North Carolina Central University, by deleting "Old Senior Dorm – Conversion to Academic Use…$2,130,700".
(3)	In the portion entitled "Farrison‑Newton Building – Comprehensive Renovation of Classroom Building" under North Carolina Central University, by decreasing by $5,600,000 the $7,048,700 for the project so that it reads "Farrison‑Newton Building – Comprehensive Renovation of Classroom Building…$1,448,700".
SECTION 9.3.(c)  Pursuant to Section 2(b) of S.L. 2000‑3, the General Assembly finds that it is in the best interest of the State to respond to current educational and research program requirements at the University of North Carolina at Asheville by substituting a project entitled "Carmichael Hall Classroom Building – Demolition and New Construction" for "Carmichael Hall Classroom Building – Comprehensive Renovation" as contained in Section 2(a) of S.L. 2000‑3, as it has been determined that it is more cost‑effective to replace this facility than to renovate it. Section 2(a) of S.L. 2000‑3 is therefore amended in the portion under the University of North Carolina at Asheville by deleting "Carmichael Hall Classroom Building – Comprehensive Renovation" and by adding "Carmichael Hall Classroom Building – Demolition and New Construction".
SECTION 9.3.(d)  Pursuant to Section 2(b) of S.L. 2000‑3, the General Assembly finds that it is in the best interest of the State to respond to current educational and research program requirements at the University of North Carolina at Pembroke, due to enrollment growth higher than projected, by adding a project entitled "General Purpose Classroom Building" to Section 2(a) of S.L. 2000‑3 and by transferring a portion of the funds from the project entitled "Residence/Dining Hall – Replacement of Jacobs & Wellons Halls", as contained in Section 2(a) of S.L. 2000‑3, to this substitute project. Section 2(a) of S.L. 2000‑3 is therefore amended in the portion under the University of North Carolina at Pembroke by substituting "Residence/Dining Hall – Replacement of Jacobs & Wellons Halls…$325,300" and by adding "General Purpose Classroom Building…$7,375,000".
SECTION 9.3.(e)  Pursuant to Section 2(b) of S.L. 2000‑3, the General Assembly finds that it is in the best interest of the State to respond to current educational and research program requirements at Winston‑Salem State University by substituting a project entitled "Anderson Center – Comprehensive Renovation" for "Anderson Center – Comprehensive Renovation & Change of Use for Early Childhood/Gerontology Programs", as contained in Section 2(a) of S.L. 2000‑3, by adding a project entitled "Coltrane Hall – Renovation to House Gerontology", by transferring a portion of the funds from the project entitled "Anderson Center – Comprehensive Renovation & Change of Use for Early Childhood/Gerontology Programs", as contained in Section 2(a) of S.L. 2000‑3, to the new project entitled "Coltrane Hall – Renovation to House Gerontology", by adding a project entitled "New Facility for the Early Childhood Program", and by transferring a portion of the funds from the project entitled "Anderson Center – Comprehensive Renovation & Change of Use for Early Childhood/Gerontology Programs", as contained in Section 2(a) of S.L. 2000‑3, to the new project entitled "New Facility for the Early Childhood Program".  Section 2(a) of S.L. 2000‑3 is therefore amended as follows:
(1)	In the portion entitled "Anderson Center – Comprehensive Renovation & Change of Use for Early Childhood/Gerontology Programs" under Winston‑Salem State University, by deleting "& Change of Use for Early Childhood/Gerontology Programs" and by decreasing by $1.9 million the $6,917,900 for the project so that it reads "Anderson Center – Comprehensive Renovation…$5,017,900".
(2)	In the portion under Winston‑Salem State University, by adding a new project "Coltrane Hall – Renovation to House Gerontology…$400,000".
(3)	In the portion under Winston‑Salem State University, by adding a new project "New Facility for the Early Childhood Program…$1,500,000".
SECTION 9.3.(f)  Pursuant to Section 2(b) of S.L. 2000‑3, the General Assembly finds that it is in the best interest of the State to respond to current educational and research program requirements at Winston‑Salem State University by substituting a project entitled "New Student Health Center" for "Health Center Bldg. & Old Nursing Bldg. – Comprehensive Renovation for Student Health", as contained in Section 2(a) of S.L. 2000‑3, and by using the existing project budget for a new health facility, as it has been determined that the two existing buildings are in poor condition and have been recommended for future demolition.  Section 2(a) of S.L. 2000‑3 is therefore amended in the portion under Winston‑Salem State University by deleting "Health Center Bldg. and Old Nursing Bldg. – Comprehensive Renovation for Student Health" and by substituting "New Student Health Center".
SECTION 9.3.(g)  Nothing in this section is intended to supersede any other requirement of law or policy for approval of the substituted capital improvement projects. 

PART X. DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUBPART 1. ADMINISTRATION

Requested by:	Representatives Barnhart, Nye
PETROLEUM OVERCHARGE FUNDS ALLOCATION
SECTION 10.1.(a)  There is appropriated from funds and interest thereon received from the case of United States v. Exxon that remain in the Special Reserve for Oil Overcharge Funds to the Department of Health and Human Services the sum of one million dollars ($1,000,000) for the 2003‑2004 fiscal year to be allocated for the Weatherization Assistance Program.
SECTION 10.1.(b) Any funds remaining in the Special Reserve for Oil Overcharge Funds after the allocation made pursuant to subsection (a) of this section may be expended only as authorized by the General Assembly.  All interest or income accruing from all deposits or investments of cash balances shall be credited to the Special Reserve for Oil Overcharge Funds.

Requested by:	Representatives Barnhart, Nye
OFFICE OF POLICY AND PLANNING
SECTION 10.2.(a)  To promote coordinated policy development and strategic planning for the State's health and human services systems, the Secretary of Health and Human Services shall establish an Office of Policy and Planning from existing resources across the Department.  The Director of the Office of Policy and Planning shall report directly to the Secretary and shall have the following responsibilities:
(1)	Coordinate the development of departmental policies, plans, and rules, in consultation with the Divisions of the Department.
(2)	Development of a departmental process for the development and implementation of new policies, plans, and rules.
(3)	Development of a departmental process for the review of existing policies, plans, and rules to ensure that departmental policies, plans, and rules are relevant.
(4)	Coordination and review of all departmental policies before dissemination to ensure that all policies are well‑coordinated within and across all programs.
(5)	Implementation of ongoing strategic planning that integrates budget, personnel, and resources with the mission and operational goals of the Department.
(6)	Review, disseminate, monitor, and evaluate best practice models.
SECTION 10.2.(b)  Under the direction of the Secretary of Health and Human Services, the Director of the Office of Policy and Planning shall have the authority to direct Divisions, offices, and programs within the Department to conduct periodic reviews of policies, plans, and rules and shall advise the Secretary when it is determined to be appropriate or necessary to modify, amend, and repeal departmental policies, plans, and rules.  All policy and management positions within the Office of Policy and Planning are exempt positions as that term is defined in G.S. 126‑5.

Requested by:	Representatives Barnhart, Nye 
WEATHERIZATION ASSISTANCE PROGRAM
SECTION 10.3.  Article 2 of Chapter 108A of the General Statutes is amended by adding the following new Part to read:
"Part 9. Weatherization Assistance Program and Heating/Air Repair and Replacement Program.
"§ 108A-70.30.  Weatherization Assistance Program and Heating/Air Repair and Replacement Program.
The Department may administer the Weatherization Assistance Program for Low‑Income Families and the Heating/Air Repair and Replacement Program functions. Nothing in this Part shall be construed as obligating the General Assembly to appropriate funds for the Program or as entitling any person to services under the Program."

Requested by:	Representatives Barnhart, Nye
NONMEDICAID REIMBURSEMENT CHANGES
SECTION 10.4.  Providers of medical services under the various State programs, other than Medicaid, offering medical care to citizens of the State shall be reimbursed at rates no more than those under the North Carolina Medical Assistance Program.
The Department of Health and Human Services may reimburse hospitals at the full prospective per diem rates without regard to the Medical Assistance Program's annual limits on hospital days. When the Medical Assistance Program's per diem rates for inpatient services and its interim rates for outpatient services are used to reimburse providers in nonmedicaid medical service programs, retroactive adjustments to claims already paid shall not be required.
Notwithstanding the provisions of paragraph one, the Department of Health and Human Services may negotiate with providers of medical services under the various Department of Health and Human Services programs, other than Medicaid, for rates as close as possible to Medicaid rates for the following purposes:  contracts or agreements for medical services and purchases of medical equipment and other medical supplies. These negotiated rates are allowable only to meet the medical needs of its nonmedicaid eligible patients, residents, and clients who require such services which cannot be provided when limited to the Medicaid rate.
Maximum net family annual income eligibility standards for services in these programs shall be as follows:
	Medical Eye	Rehabilitation Except
Family Size	Care Adults	DSB Over 55 Grant	Other
	1	$4,860	$8,364	$4,200
	2	5,940	10,944	5,300
	3	6,204	13,500	6,400
	4	7,284	16,092	7,500
	5	7,821	18,648	7,900
	6	8,220	21,228	8,300
	7	8,772	21,708	8,800
	8	9,312	22,220	9,300
The eligibility level for children in the Medical Eye Care Program in the Division of Services for the Blind shall be one hundred percent (100%) of the federal poverty guidelines, as revised annually by the United States Department of Health and Human Services and in effect on July 1 of each fiscal year. The eligibility level for adults 55 years of age or older who qualify for services through the Division of Services for the Blind, Independent Living Rehabilitation Program, shall be two hundred percent (200%) of the federal poverty guidelines, as revised annually by the United States Department of Health and Human Services and in effect on July 1 of each fiscal year. The eligibility level for adults in the Atypical Antipsychotic Medication Program in the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services shall be one hundred fifty percent (150%) of the federal poverty guidelines, as revised annually by the United States Department of Health and Human Services and in effect on July 1 of each fiscal year. Additionally, those adults enrolled in the Atypical Antipsychotic Medication Program who become gainfully employed may continue to be eligible to receive State support, in decreasing amounts for the purchase of atypical antipsychotic medication and related services up to three hundred percent (300%) of the poverty level.
State financial participation in the Atypical Antipsychotic Medication Program for those enrollees who become gainfully employed is as follows:
	Income	State Participation	Client Participation
	(% of poverty)
	0‑150%	100%	0%
	151‑200%	75%	25%
	201‑250%	50%	50%
	251‑300%	25%	75%
	300% and over	0%	100%
The Department of Health and Human Services shall contract at, or as close as possible to, Medicaid rates for medical services provided to residents of State facilities of the Department.

Requested by:	Representatives Barnhart, Nye
SENIOR CARES PROGRAM ADMINISTRATION
SECTION 10.5.  The Department of Health and Human Services may administer the "Senior Cares" prescription drug access program approved by the Health and Wellness Trust Fund Commission and funded from the Health and Wellness Trust Fund.

Requested by:	Representatives Barnhart, Nye
PHYSICIAN SERVICES
SECTION 10.6.  With the approval of the Office of State Budget and Management, the Department of Health and Human Services may use funds appropriated in this act for across‑the‑board salary increases and performance pay to offset similar increases in the costs of contracting with private and independent universities for the provision of physician services to clients in facilities operated by the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services.  This offsetting shall be done in the same manner as is currently done with the constituent institutions of The University of North Carolina.

Requested by:	Representatives Barnhart, Nye
Liability Insurance
SECTION 10.7.(a)  The Secretary of the Department of Health and Human Services, the Secretary of the Department of Environment and Natural Resources, and the Secretary of the Department of Correction may provide medical liability coverage not to exceed one million dollars ($1,000,000) per incident on behalf of employees of the Departments licensed to practice medicine or dentistry, all licensed physicians who are faculty members of The University of North Carolina who work on contract for the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services for incidents that occur in Division programs, and on behalf of physicians in all residency training programs from The University of North Carolina who are in training at institutions operated by the Department of Health and Human Services.  This coverage may include commercial insurance or self‑insurance and shall cover these individuals for their acts or omissions only while they are engaged in providing medical and dental services pursuant to their State employment or training.
SECTION 10.7.(b)  The coverage provided under this section shall not cover any individual for any act or omission that the individual knows or reasonably should know constitutes a violation of the applicable criminal laws of any state or the United States, or that arises out of any sexual, fraudulent, criminal, or malicious act, or out of any act amounting to willful or wanton negligence. 
SECTION 10.7.(c)  The coverage provided pursuant to this section shall not require any additional appropriations and shall not apply to any individual providing contractual service to the Department of Health and Human Services, the Department of Environment and Natural Resources, or the Department of Correction, with the exception that coverage may include physicians in all residency training programs from The University of North Carolina who are in training at institutions operated by the Department of Health and  Human  Services  and  licensed physicians who are faculty members of  The University of North Carolina who work for the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services.

Requested by:	Representatives Barnhart, Nye 
BUTNER COMMUNITY LAND RESERVATION
SECTION 10.8.  The Department of Health and Human Services shall reserve and dedicate the following described land for the construction of a community building and related facilities to serve the Butner Reservation:
"Approximately 2 acres, on the east side it borders Central Avenue with a line running along the Wallace Bradshur property on the north back to the tree line next to the ADATC. From there it follows the tree line south and west to and including the softball field. From the softball field it turns east to the State Employees Credit Union and follows the Credit Union property on the south side back to Central Avenue."
This land shall be reserved and dedicated for the project which shall be funded with contributions from Granville County, contributions from the residents of the Butner Reservation, the use of cablevision franchise rebate funds received by the Department of Health and Human Services on behalf of the Butner Reservation, and other public and private sources.

SUBPART 2. DIVISION OF MENTAL HEALTH, DEVELOPMENTAL DISABILITIES, AND SUBSTANCE ABUSE SERVICES

Requested by:	Representatives Barnhart, Nye 
Mental Health, Developmental Disability, and Substance abuse services trust fund for system reform bridge and capital funding needs and olmstead
SECTION 10.9.  Moneys in the Trust Fund established pursuant to G.S. 143‑15.3D shall be used to establish or expand community‑based services only if sufficient recurring funds can be identified within the Department of Health and Human Services from funds currently budgeted for mental health, developmental disabilities, and substance abuse services, area mental health programs or county programs, or local government.

Requested by:	Representatives Barnhart, Nye 
EXTEND MENTAL HEALTH CONSUMER ADVOCACY PROGRAM CONTINGENt upon funds appropriated by the 2005 general assembly
SECTION 10.10.  Section 4 of S.L. 2001‑437, as amended by Section 10.30 of S.L. 2002‑126, reads as rewritten:
"SECTION 4. Sections 1.1 through 1.21(b) of this act become effective July 1, 2002. Section 2 of this act becomes effective only if funds are appropriated by the 2005 General Assembly for that purpose. Section 2 of this act becomes effective July 1 of the fiscal year for which funds are appropriated by the 2005 General Assembly for that purpose. The remainder of this act is effective when it becomes law."

Requested by:	Representatives Barnhart, Nye
SUBSTANCE ABUSE PREVENTION SERVICES REPORTING
SECTION 10.11.  The Department of Health and Human Services shall report on its activities under Section 10.24 of S.L. 2002‑126 to the House of Representatives Appropriations Subcommittee on Health and Human Services, the Senate Appropriations Committee on Health and Human Services, and the Fiscal Research Division not later than December 1, 2003.

Requested by:	Representatives Barnhart, Nye 
DOROTHEA DIX HOSPITAL
SECTION 10.12.(a)  In keeping with the United States Supreme Court decision in Olmstead vs. L.C. & E.W. and State policy to provide appropriate services to clients in the least restrictive and most appropriate environment, the Department of Health and Human Services shall develop and implement a plan for the construction of a replacement facility for Dorothea Dix Hospital and for the transition of patients to the community or to other long‑term care facilities, as appropriate. The goal is to develop mechanisms and identify resources needed to enable patients and their families to receive the necessary services and supports based on the following guiding principles:
(1)	Individuals shall be provided acute psychiatric care in non‑State facilities when appropriate.
(2)	Individuals shall be provided acute psychiatric care in State facilities only when non‑State facilities are unavailable.
(3)	Individuals shall receive evidenced‑based psychiatric services and care that are cost‑efficient.
(4)	The State shall minimize cost shifting to other State and local facilities or institutions.
SECTION 10.12.(b)  The Department of Health and Human Services shall conduct an analysis of the individual patient service needs and shall develop and implement an individual transition plan, as appropriate, for patients in each hospital.  The State shall ensure that each individual transition plan, as appropriate, shall take into consideration the availability of appropriate alternative placements based on the needs of the patient and within resources available for the mental health, developmental disabilities, and substance abuse services system. In developing each plan, the Department shall consult with the patient and the patient's family or other legal representative. 
SECTION 10.12.(c)  In accordance with the plan established in subsections (a) and (b) of this section, any nonrecurring savings in State appropriations that result from reductions in beds or services shall be placed in the Trust Fund for Mental Health, Developmental Disabilities, and Substance Abuse Services and Bridge Funding Needs.  These funds shall be used to facilitate the transition of clients into appropriate community‑based services and supports in accordance with G.S. 143‑15.3D. Recurring savings realized through implementation of this section shall be retained by the Department of Health and Human Services, Division of Mental Health, Developmental Disabilities, and Substance Abuse Services (i) for implementation of subsections (a) and (b) of this section, and (ii) to support the recurring costs of additional community‑based placements from Division facilities in accordance with Olmstead vs. L.C. & E.W.
SECTION 10.12.(e)  The Department of Health and Human Services shall submit reports on the status of implementation of this section to the Joint Legislative Commission on Governmental Operations, the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division.  These reports shall be submitted on December 1, 2003, and May 1, 2004.

Requested by:	Representatives Barnhart, Nye 
COMPREHENSIVE TREATMENT SERVICES PROGRAM
SECTION 10.13.  The Department of Health and Human Services shall report on its continuing implementation of the Comprehensive Treatment Services Program established pursuant to Section 21.60 of S.L. 2001‑424.  The Department shall submit an interim report on December 1, 2003, and a final report not later than April 1, 2004, to the House of Representatives Appropriations Subcommittee on Health and Human Services, the Senate Appropriations Committee on Health and Human Services, and the Fiscal Research Division.

Requested by:	Representatives Barnhart, Nye 
Mental Retardation Center Downsizing
SECTION 10.14.(a) In accordance with the Department of Health and Human Services' plan for downsizing the State's regional mental retardation facilities by four percent (4%) each year, the Department shall implement cost‑containment and reduction strategies to ensure the corresponding financial and staff downsizing of each facility. The Department shall manage the client population of the mental retardation centers in order to ensure that placements for ICF/MR level of care shall be made in non‑State facilities. Admissions to State ICF/MR facilities are permitted only as a last resort and only upon approval of the Department. The corresponding budgets for each of the State mental retardation centers shall be reduced, and positions shall be eliminated as the census of each facility decreases. At no time shall mental retardation center positions be transferred to other units within a facility or assigned nondirect care activities such as outreach.
SECTION 10.14.(b)  Any savings in State appropriations in each year of the 2003‑2005 fiscal biennium that result from reductions in beds or services shall be applied as follows:
(1)	Nonrecurring savings shall be placed in the Trust Fund for Mental Health, Developmental Disabilities, and Substance Abuse Services and Bridge Funding Needs and shall be used to facilitate the transition of clients into appropriate community‑based services and support in accordance with G.S. 143‑15.3D, and
(2)	Recurring savings realized through implementation of this section shall be retained by the Department of Health and Human Services, Division of Mental Health, Developmental Disabilities, and Substance Abuse Services to support the recurring costs of additional community‑based placements from Division facilities in accordance with Olmstead vs. L.C. & E.W. In determining the savings in this section, savings shall include all savings realized from the downsizing of the State mental retardation centers including both the savings in direct State appropriations in the budgets of the State mental retardation centers as well as the savings in the State matching portion of reduced Medicaid payments associated with downsizing.
SECTION 10.14.(c)  The Department of Health and Human Services shall report on its progress in complying with this section to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division. The progress report shall be submitted not later than January 15, 2004, and a final report submitted not later than May 1, 2004.
SECTION 10.14.(d)  Downsizing of mental retardation centers which occurs in the 2003‑2004 fiscal year shall be maintained for the 2004‑2005 fiscal year. Effective July 1, 2003, downsizing shall be accomplished in accordance with this section and the State Plan for Mental Health, Developmental Disabilities, and Substance Abuse Services. All savings resulting from downsizing occurring on and after July 1, 2003, shall be utilized as set forth in subsection (b) of this section.

Requested by:	Representatives Barnhart, Nye 
Mental Retardation Center Outreach Plan
SECTION 10.15.(a)  The Department of Health and Human Services shall develop and implement a plan for the reorganization of outreach services performed by the State mental retardation centers.  The plan shall include the following:
(1)	The elimination of all activities in the State mental retardation centers centered on the identification and referral of persons in the community in need of specialized services to the mental retardation centers. 
(2)	The transfer of responsibility to area and county mental health programs for all community referral functions for specialized services at the mental retardation centers.
(3)	The method for allocating savings in State appropriations from the mental retardation centers across the area and county mental health programs.
(4)	The retention in the mental retardation centers of community transition activities currently performed as part of outreach. These activities include coordinating for transition of residents from the mental retardation centers to the area and county mental health programs and technical assistance for community service providers and families who will care for the transitioned residents.
SECTION 10.15.(b)  In accordance with the plan established in subsection (a) of this section, any recurring and nonrecurring savings in State appropriations in excess of five hundred thirty‑seven thousand three hundred twenty‑eight dollars ($537,328) in each year of the 2003‑2005 fiscal biennium that result from reductions in outreach activities in the mental retardation centers shall be transferred from the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services to area and county mental health programs for the purpose of performing community referral activities designated in subsection (a) of this section.
SECTION 10.15.(c)  The Department of Health and Human Services shall report on the implementation of this section to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division.  This report shall be submitted on February 1, 2004.

Requested by:	Representatives Barnhart, Nye 
Services to Multiply‑Diagnosed Adults
SECTION 10.16.(a)  In order to ensure that multiply‑diagnosed adults are appropriately served by the mental health, developmental disabilities, and substance abuse services system, the Department of Health and Human Services, Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, shall do the following with respect to services provided to these adults:
(1)	Implement the following guiding principles for the provision of services:
a.	Service delivery system must be outcome oriented and evaluation based.
b.	Services should be delivered as close as possible to the consumer's home.
c.	Services selected should be those that are most efficient in terms of cost and effectiveness.
d.	Services should not be provided solely for the convenience of the provider or the client.
e.	Families and consumers should be involved in decision making throughout treatment planning and delivery; and
(2)	Provide those treatment services that are medically necessary.
(3)	Implement utilization review of services provided.
SECTION 10.16.(b)  The Department of Health and Human Services shall implement all of the following cost‑reduction strategies:
(1)	Preauthorization for all services except emergency services.
(2)	Criteria for determining medical necessity.
(3)	Clinically appropriate services.
(4)	Not later than May 1, 2004, conduct a State review of (i) individualized service plans for former Thomas S. class members and for adults whose service plan exceeds one hundred thousand dollars ($100,000) to ensure that service plans focus on delivery of appropriate services rather than optimal treatment and habilitation plans, and (ii) staffing patterns of residential services.
SECTION 10.16.(c)  No State funds shall be used for the purchase of single‑family or other residential dwellings to house multiply‑diagnosed adults.
SECTION 10.16.(d)  The Department shall submit a progress report on implementation of this section not later than February 1, 2004, and a final report not later than May 1, 2004, to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division.

Requested by:	Representatives Barnhart, Nye 
Area Mental Health Administrative Costs
SECTION 10.17.(a)  Area mental health, developmental disabilities, and substance abuse authorities or counties administering mental health, developmental disabilities, and substance abuse services shall develop and implement plans to reduce local administrative costs. The plans shall be developed in accordance with guidelines adopted by the Secretary, in consultation with the Local Government Commission and the North Carolina Association of County Commissioners, and in accordance with the following:
(1)	Administrative costs for area mental health, developmental disabilities, and substance abuse services programs shall not exceed thirteen percent (13%).
(2)	Administrative costs for counties administering mental health, developmental disabilities, and substance abuse services through a county program shall not exceed thirteen percent (13%).
SECTION 10.17.(b)  The Department of Health and Human Services shall report its progress in complying with this section not later than January 1, 2004, and April 15, 2004. The reports shall be submitted to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division and shall include:
(1)	A description of the process used and the participants involved in complying with subsection (a) of this section.
(2)	The guidelines developed under subsection (a) of this section.
(3)	A description of local compliance initiatives and efforts including program or function consolidation.
(4)	A list of area programs at or below the targeted thirteen percent (13%) for the 2003‑2004 fiscal year.
(5)	Projected savings in administrative costs as a result of implementation of the targeted limits required under this section. 
SECTION 10.17.(c)  The Department may implement alternative approaches to establish reasonable administrative cost limitations for Local Management Entities (LMEs), including both county programs and area authority models, and service providers in accordance with system reform and changes in system funding structures.

Requested by:	Representatives Barnhart, Nye 
PRIVATE AGENCY UNIFORM COST FINDING REQUIREMENT
SECTION 10.18.(a)  To ensure uniformity in rates charged to area programs and funded with State‑allocated resources, the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services of the Department of Health and Human Services may require a private agency that provides services under contract with an area program or county program, except for hospital services that have an established Medicaid rate, to complete an agency‑wide uniform cost finding in accordance with G.S.122C‑147.2.  The resulting cost shall be the maximum included for the private agency in the contracting area program's unit cost finding.
SECTION 10.18.(b)  If a private agency fails to timely and accurately complete the required agency‑wide uniform cost finding in a manner acceptable to the Department's controller's office, the Department may suspend all Department funding and payment to the private agency until such time as an acceptable cost finding has been completed by the private agency and approved by the Department's controller's office.

SUBPART 3. DIVISION OF MEDICAL ASSISTANCE

Requested by:	Representatives Barnhart, Nye 
MEDICAID
SECTION 10.19.(a)  Funds appropriated in this act for services provided in accordance with Title XIX of the Social Security Act (Medicaid) are for both the categorically needy and the medically needy. Funds appropriated for these services shall be expended in accordance with the following schedule of services and payment bases. All services and payments are subject to the language at the end of this subsection.
Services and payment bases:
(1)	Hospital‑Inpatient. – Payment for hospital inpatient services will be prescribed in the State Plan as established by the Department of Health and Human Services.
(2)	Hospital‑Outpatient. – Eighty percent (80%) of allowable costs or a prospective reimbursement plan as established by the Department of Health and Human Services.
(3)	Nursing Facilities. – Payment for nursing facility services will be prescribed in the State Plan as established by the Department of Health and Human Services. Nursing facilities providing services to Medicaid recipients who also qualify for Medicare must be enrolled in the Medicare program as a condition of participation in the Medicaid program. State facilities are not subject to the requirement to enroll in the Medicare program. Residents of nursing facilities who are eligible for Medicare coverage of nursing facility services must be placed in a Medicare certified bed. Medicaid shall cover facility services only after the appropriate services have been billed to Medicare. The Division of Medical Assistance shall allow nursing facility providers sufficient time from the effective date of this act to certify additional Medicare beds if necessary. In determining the date that the requirements of this subdivision become effective, the Division of Medical Assistance shall consider the regulations governing certification of Medicare beds and the length of time required for this process to be completed.
(4)	Intermediate Care Facilities for the Mentally Retarded. – As prescribed in the State Plan as established by the Department of Health and Human Services.
(5)	Drugs. – Drug costs as allowed by federal regulations plus a professional services fee per month excluding refills for the same drug or generic equivalent during the same month. Reimbursement shall be available for up to six prescriptions per recipient, per month, including refills. Payments for drugs are subject to the provisions of subsection (h) of this section and to the provisions at the end of subsection (a) of this section, or in accordance with the State Plan adopted by the Department of Health and Human Services consistent with federal reimbursement regulations. Payment of the professional services fee shall be made in accordance with the State Plan adopted by the Department of Health and Human Services, consistent with federal reimbursement regulations. The professional services fee shall be five dollars and sixty cents ($5.60) per prescription for generic drugs and four dollars ($4.00) per prescription for brand name drugs. Adjustments to the professional services fee shall be established by the General Assembly.
(6)	Physicians, Chiropractors, Podiatrists, Optometrists, Dentists, Certified Nurse Midwife Services, Nurse Practitioners. – Fee schedules as developed by the Department of Health and Human Services. Payments for dental services are subject to the provisions of subsection (g) of this section.
(7)	Community Alternative Program, EPSDT Screens. – Payment to be made in accordance with rate schedule developed by the Department of Health and Human Services.
(8)	Home Health and Related Services, Private Duty Nursing, Clinic Services, Prepaid Health Plans, Durable Medical Equipment. – Payment to be made according to reimbursement plans developed by the Department of Health and Human Services.
(9)	Medicare Buy‑In. – Social Security Administration premium.
(10)	Ambulance Services. – Uniform fee schedules as developed by the Department of Health and Human Services. Public ambulance providers will be reimbursed at cost.
(11)	Hearing Aids. – Actual cost plus a dispensing fee.
(12)	Rural Health Clinic Services. – Provider‑based, reasonable cost; nonprovider‑based, single‑cost reimbursement rate per clinic visit.
(13)	Family Planning. – Negotiated rate for local health departments. For other providers, see specific services, for instance, hospitals, physicians.
(14)	Independent Laboratory and X‑Ray Services. – Uniform fee schedules as developed by the Department of Health and Human Services.
(15)	Optical Supplies. – One hundred percent (100%) of reasonable wholesale cost of materials.
(16)	Ambulatory Surgical Centers. – Payment as prescribed in the reimbursement plan established by the Department of Health and Human Services.
(17)	Medicare Crossover Claims. – An amount up to the actual coinsurance or deductible or both, in accordance with the State Plan, as approved by the Department of Health and Human Services.
(18)	Physical Therapy and Speech Therapy. – Services limited to EPSDT eligible children. Payments are to be made only to qualified providers at rates negotiated by the Department of Health and Human Services. Physical therapy (including occupational therapy) and speech therapy services are subject to prior approval and utilization review.
(19)	Personal Care Services. – Payment in accordance with the State Plan approved by the Department of Health and Human Services.
(20)	Case Management Services. – Reimbursement in accordance with the availability of funds to be transferred within the Department of Health and Human Services.
(21)	Hospice. – Services may be provided in accordance with the State Plan developed by the Department of Health and Human Services.
(22)	Other Mental Health Services. – Unless otherwise covered by this section, coverage is limited to:
a.	Services as defined by the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services and approved by the Centers for Medicare and Medicaid Services (CMS) when provided in agencies meeting the requirements of the rules established by the Commission for Mental Health, Developmental Disabilities, and Substance Abuse Services, and reimbursement is made in accordance with a State Plan developed by the Department of Health and Human Services not to exceed the upper limits established in federal regulations, and
b.	For children eligible for EPSDT services:
1.	Licensed or certified psychologists, licensed clinical social workers, certified clinical nurse specialists in psychiatric mental health advanced practice, and nurse practitioners certified as clinical nurse specialists in psychiatric mental health advanced practice, when Medicaid‑eligible children are referred by the Carolina ACCESS primary care physician or the area mental health program, and
2.	Institutional providers of residential services as defined by the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services and approved by the Centers for Medicare and Medicaid Services (CMS) for children and Psychiatric Residential Treatment Facility services that meet federal and State requirements as defined by the Department.
Notwithstanding G.S. 150B‑121.1(a), the Department of Health and Human Services may adopt temporary rules in accordance with Chapter 150B of the General Statutes further defining the qualifications of providers and referral procedures in order to implement this subdivision. Coverage policy for services defined by the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services under paragraphs a. and b.2 of this subdivision shall be established by the Division of Medical Assistance.
(23)	Medically Necessary Prosthetics or Orthotics for EPSDT Eligible Children. – Reimbursement in accordance with the State Plan approved by the Department of Health and Human Services.
(24)	Health Insurance Premiums. – Payments to be made in accordance with the State Plan adopted by the Department of Health and Human Services consistent with federal regulations.
(25)	Medical Care/Other Remedial Care. – Services not covered elsewhere in this section include related services in schools; health professional services provided outside the clinic setting to meet maternal and infant health goals; and services to meet federal EPSDT mandates. Services addressed by this paragraph are limited to those prescribed in the State Plan as established by the Department of Health and Human Services.
(26)	Pregnancy Related Services. – Covered services for pregnant women shall include nutritional counseling, psychosocial counseling, and predelivery and postpartum home visits by maternity care coordinators and public health nurses.
Services and payment bases may be changed with the approval of the Director of the Budget.
Payment is limited to Medicaid enrolled providers that purchase a performance bond in an amount not to exceed one hundred thousand dollars ($100,000) naming as beneficiary the Department of Health and Human Services, Division of Medical Assistance, or provide to the Department a validly executed letter of credit or other financial instrument issued by a financial institution or agency honoring a demand for payment in an equivalent amount. The Department may waive or limit the requirements of this paragraph for one or more classes of Medicaid enrolled providers based on the provider's dollar amount of monthly billings to Medicaid or the length of time the provider has been licensed in this State to provide services. In waiving or limiting requirements of this paragraph the Department shall take into consideration the potential fiscal impact of the waiver or limitation on the State Medicaid Program. The Department may adopt temporary rules in accordance with G.S. 150B‑21.1 as necessary to implement this provision.
Reimbursement is available for up to 24 visits per recipient per year to any one or combination of the following: physicians, clinics, hospital outpatient, optometrists, chiropractors, and podiatrists. Prenatal services, all EPSDT children, emergency rooms, and mental health services subject to independent utilization review are exempt from the visit limitations contained in this paragraph. Exceptions may be authorized by the Department of Health and Human Services where the life of the patient would be threatened without such additional care. Any person who is determined by the Department to be exempt from the 24‑visit limitation may also be exempt from the six‑prescription limitation.
SECTION 10.19.(b)  Allocation of Nonfederal Cost of Medicaid. – The State shall pay eighty‑five percent (85%); the county shall pay fifteen percent (15%) of the nonfederal costs of all applicable services listed in this section.
SECTION 10.19.(c)  Copayment for Medicaid Services. – The Department of Health and Human Services may establish copayment up to the maximum permitted by federal law and regulation.
SECTION 10.19.(d)  Medicaid and Work First Family Assistance, Income Eligibility Standards. – The maximum net family annual income eligibility standards for Medicaid and Work First Family Assistance and the Standard of Need for Work First Family Assistance shall be as follows:

	Categorically Needy	Medically Needy
	WFFA*
	Family	Standard	Families and
	Size	of Need	Children Income
	Level	AA, AB, AD*
	1	$4,344	$2,172	$2,900
	2	5,664	2,832	3,800
	3	6,528	3,264	4,400
	4	7,128	3,564	4,800
	5	7,776	3,888	5,200
	6	8,376	4,188	5,600
	7	8,952	4,476	6,000
	8	9,256	4,680	6,300
*Work First Family Assistance (WFFA); Aid to the Aged (AA); Aid to the Blind (AB); and Aid to the Disabled (AD).

The payment level for Work First Family Assistance shall be fifty percent (50%) of the standard of need.
These standards may be changed with the approval of the Director of the Budget with the advice of the Advisory Budget Commission.
SECTION 10.19.(e)  The Department of Health and Human Services, Division of Medical Assistance, shall provide Medicaid coverage to all elderly, blind, and disabled people who have incomes equal to or less than one hundred percent (100%) of the federal poverty guidelines, as revised each April 1.
SECTION 10.19.(f)  ICF and ICF/MR Work Incentive Allowances. – The Department of Health and Human Services may provide an incentive allowance to Medicaid‑eligible recipients of ICF and ICF/MR facilities who are regularly engaged in work activities as part of their developmental plan and for whom retention of additional income contributes to their achievement of independence. The State funds required to match the federal funds that are required by these allowances shall be provided from savings within the Medicaid budget or from other unbudgeted funds available to the Department. The incentive allowances may be as follows:

Monthly Net Wages	Monthly Incentive Allowance
	$1.00 to $100.99	Up to $50.00
	$101.00 to $200.99	$80.00
	$201.00 to $300.99	$130.00
	$301.00 and greater	$212.00.
SECTION 10.19.(g)  Dental Coverage Limits. – Dental services shall be provided on a restricted basis in accordance with rules adopted by the Department to implement this subsection.
SECTION 10.19.(h)  Dispensing of Generic Drugs. – Notwithstanding G.S. 90‑85.27 through G.S. 90‑85.31, or any other law to the contrary, under the Medical Assistance Program (Title XIX of the Social Security Act), and except as otherwise provided in this subsection for atypical antipsychotic drugs and drugs listed in the narrow therapeutic index, a prescription order for a drug designated by a trade or brand name shall be considered to be an order for the drug by its established or generic name, except when the prescriber has determined, at the time the drug is prescribed, that the brand name drug is medically necessary and has written on the prescription order the phrase "medically necessary". An initial prescription order for an atypical antipsychotic drug or a drug listed in the narrow therapeutic drug index that does not contain the phrase "medically necessary" shall be considered an order for the drug by its established or generic name, except that a pharmacy shall not substitute a generic or established name prescription drug for subsequent brand or trade name prescription orders of the same prescription drug without explicit oral or written approval of the prescriber given at the time the order is filled. Generic drugs shall be dispensed at a lower cost to the Medical Assistance Program rather than trade or brand name drugs. As used in this subsection, "brand name" means the proprietary name the manufacturer places upon a drug product or on its container, label, or wrapping at the time of packaging; and "established name" has the same meaning as in section 502(e)(3) of the Federal Food, Drug, and Cosmetic Act as amended, 21 U.S.C. § 352(e)(3).
SECTION 10.19.(i)  The Department of Health and Human Services shall not impose prior authorization requirements or other restrictions under the State Medical Assistance Program on medications prescribed for Medicaid recipients for the treatment of : (i) mental illness, including, but not limited to, medications for schizophrenia, bipolar disorder, and major depressive disorder, or (ii) HIV/AIDS.
SECTION 10.19.(j)  Exceptions to Service Limitations, Eligibility Requirements, and Payments. – Service limitations, eligibility requirements, and payments bases in this section may be waived by the Department of Health and Human Services, with the approval of the Director of the Budget, to allow the Department to carry out pilot programs for prepaid health plans, contracting for services, managed care plans, or community‑based services programs in accordance with plans approved by the United States Department of Health and Human Services, or when the Department determines that such a waiver will result in a reduction in the total Medicaid costs for the recipient. The Department of Health and Human Services may proceed with planning and development work on the Program of All‑Inclusive Care for the Elderly.
SECTION 10.19.(k)  Volume Purchase Plans and Single Source Procurement. – The Department of Health and Human Services, Division of Medical Assistance, may, subject to the approval of a change in the State Medicaid Plan, contract for services, medical equipment, supplies, and appliances by implementation of volume purchase plans, single source procurement, or other contracting processes in order to improve cost containment.
SECTION 10.19.(l)  Cost‑Containment Programs. – The Department of Health and Human Services, Division of Medical Assistance, may undertake cost containment programs in accordance with Section 3 of S.L. 2001‑395, including contracting for services, preadmissions to hospitals, and prior approval for certain outpatient surgeries before they may be performed in an inpatient setting.
SECTION 10.19.(m)  For all Medicaid eligibility classifications for which the federal poverty level is used as an income limit for eligibility determination, the income limits will be updated each April 1 immediately following publication of federal poverty guidelines.
SECTION 10.19.(n)  The Department of Health and Human Services shall provide coverage to pregnant women and to children according to the following schedule:
(1)	Pregnant women with incomes equal to or less than one hundred fifty percent (150%) of the federal poverty guidelines as revised each April 1 shall be covered for Medicaid benefits. In determining income eligibility under this subdivision, the income of a minor's parents shall be counted if the minor is residing in the home.
(2)	Infants under the age of one with family incomes equal to or less than one hundred fifty percent (150%) of the federal poverty guidelines as revised each April 1 shall be covered for Medicaid benefits.
(3)	Children aged one through five with family incomes equal to or less than one hundred thirty‑three percent (133%) of the federal poverty guidelines as revised each April 1 shall be covered for Medicaid benefits. 
(4)	Children aged six through 18 with family incomes equal to or less than the federal poverty guidelines as revised each April 1 shall be covered for Medicaid benefits.
(5)	The Department of Health and Human Services shall provide Medicaid coverage for adoptive children with special or rehabilitative needs regardless of the adoptive family's income.
Services to pregnant women eligible under this subsection continue throughout the pregnancy but include only those related to pregnancy and to those other conditions determined by the Department as conditions that may complicate pregnancy. In order to reduce county administrative costs and to expedite the provision of medical services to pregnant women, to infants, and to children described in subdivisions (3) and (4) of this subsection, no resources test shall be applied.
SECTION 10.19.(o)  Medicaid enrollment of categorically needy families with children shall be continuous for one year without regard to changes in income or assets.
SECTION 10.19.(p)  The Division of Medical Assistance, Department of Health and Human Services, may provide incentives to counties that successfully recover fraudulently spent Medicaid funds by sharing State savings with counties responsible for the recovery of the fraudulently spent funds.
SECTION 10.19.(q)  If first approved by the Office of State Budget and Management, the Division of Medical Assistance, Department of Health and Human Services, may use funds that are identified to support the cost of development and acquisition of equipment and software through contractual means to improve and enhance information systems that provide management information and claims processing. The Department of Health and Human Services shall identify adequate funds to support the implementation and first year's operational costs that exceed the currently allocated funds for the new contract for the fiscal agent for the Medicaid Management Information System.
SECTION 10.19.(r)  The Department of Health and Human Services may adopt temporary rules according to the procedures established in G.S. 150B‑21.1 when it finds that these rules are necessary to maximize receipt of federal funds within existing State appropriations, to reduce Medicaid expenditures, and to reduce fraud and abuse. Prior to the filing of these temporary rules with the Office of Administrative Hearings, the Department shall consult with the Office of State Budget and Management on the possible fiscal impact of the temporary rule and its effect on State appropriations and local governments.
SECTION 10.19.(s)  The Department shall report to the Fiscal Research Division of the Legislative Services Office and to the House of Representatives Appropriations Subcommittee on Health and Human Services and the Senate Appropriations Committee on Health and Human Services or the Joint Legislative Health Care Oversight Committee on any change it anticipates making in the Medicaid program that impacts the type or level of service, reimbursement methods, or waivers, any of which require a change in the State Plan or other approval by the Centers for Medicare and Medicaid Services (CMS). The reports shall be provided at the same time they are submitted to CMS for approval.
SECTION 10.19.(t)  Upon approval of a demonstration waiver by the Centers for Medicare and Medicaid Services (CMS), the Department of Health and Human Services may provide Medicaid coverage for family planning services to men and women of child‑bearing age with family incomes equal to or less than one hundred eighty‑five percent (185%) of the federal poverty level. Coverage shall be contingent upon federal approval of the waiver and shall begin no earlier than January 1, 2001.
SECTION 10.19.(u)  The Department of Health and Human Services, Division of Medical Assistance, shall use the latest audited cost reporting data available when establishing Medicaid provider rates or when making changes to the reimbursement methodology. For hospital services, the division shall use the latest audited cost reporting data available, supplemented by additional financial information available to the Division if and to the extent that the Division concludes that the information is reliable and relevant, when establishing rates or when making changes to the reimbursement methodology.
SECTION 10.19.(v)  The Department of Health and Human Services, Division of Medical Assistance, shall implement a new coding system for therapeutic mental health services as required by the Health Insurance Portability and Accountability Act of 1996. In implementing the new coding system, the Division shall ensure that the new coding system does not discriminate between providers of therapeutic mental health services with similar qualifications and training. In meeting the requirements of this subsection, the Division shall consult with the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services and the professional licensing boards responsible for licensing the affected professionals.
SECTION 10.19.(w)  The Department of Health and Human Services may apply federal transfer of assets policies, as described in Title XIX, section 1917(c) of the Social Security Act, including the attachment of liens, to real property excluded as  "income producing", tenancy‑in‑common, or as nonhomesite property made "income producing" under Title XIX, section 1902(r)(2) of the Social Security Act. The transfer of assets policy shall apply only to an institutionalized individual or the individual's spouse as defined in Title XIX, section 1917(c) of the Social Security Act. This subsection becomes effective no earlier than October 1, 2001. Federal transfer of asset policies and attachment of liens to properties excluded as tenancy‑in‑common or as nonhomesite property made "income producing" in accordance with this subsection shall become effective not earlier than November 1, 2002.
SECTION 10.19.(x)  When implementing the Supplemental Security Income (SSI) method  for considering equity value of income producing property, the Department shall, to the maximum extent possible, employ procedures to mitigate the hardship to Medicaid enrollees occurring from application of the Supplemental Security Income (SSI) method.
SECTION 10.19.(y)  The Department shall not change medical policy affecting the amount, sufficiency, duration, and scope of health care services and who may provide services until the Division of Medical Assistance has prepared a five‑year fiscal analysis documenting the increased cost of the proposed change in medical policy and submitted it for Departmental review.  If the fiscal impact indicated by the fiscal analysis for any proposed medical policy change exceeds three million dollars ($3,000,000) in total requirements for a given fiscal year, then the Department shall submit the proposed policy change with the fiscal analysis to the Office of State Budget and Management and the Fiscal Research Division.  The Department shall not implement any proposed medical policy change exceeding three million dollars ($3,000,000) in total requirements for a given fiscal year unless the source of State funding is identified and approved by the Office of State Budget and Management.  The Department shall provide the Office of State Budget and Management and the Fiscal Research Division a quarterly report itemizing all medical policy changes with total requirements of less than three million dollars ($3,000,000).

Requested by:	Representatives Barnhart, Nye 
MEDICAID RESERVE FUND TRANSFER
SECTION 10.20.  Of the funds transferred to the Department of Health and Human Services for Medicaid programs pursuant to G.S. 143‑23.2, the sum of thirty million dollars ($30,000,000) for the 2003‑2004 fiscal year and the sum of thirty million dollars ($30,000,000) for the 2004‑2005 fiscal year shall be allocated as prescribed by G.S. 143‑23.2(b) for Medicaid Programs. Notwithstanding the prescription in G.S. 143‑23.2(b) that these funds not reduce State general revenue funding, these funds shall replace the reduction in general revenue funding effected in this act.

Requested by:	Representatives Barnhart, Nye 
DISPOSITION OF DISPROPORTIONATE SHARE RECEIPTS
SECTION 10.21.(a)  Disproportionate share receipts reserved at the end of the 2003‑2004 and 2004‑2005 fiscal years shall be deposited with the Department of State Treasurer as nontax revenue for each of those fiscal years.
SECTION 10.21.(b)  For each year of the 2003‑2005 fiscal biennium, as it receives funds associated with Disproportionate Share Payments from State hospitals, the Department of Health and Human Services, Division of Medical Assistance, shall deposit up to one hundred million dollars ($100,000,000) of these Disproportionate Share Payments to the Department of State Treasurer for deposit as nontax revenue.  Any Disproportionate Share Payments collected in excess of one hundred million dollars ($100,000,000) shall be reserved by the State Treasurer for future appropriations.

Requested by:	Representatives Barnhart, Nye 
COUNTY MEDICAID COST SHARE
SECTION 10.22.(a)  Effective July 1, 2000, the county share of the cost of Medicaid services currently and previously provided by area mental health authorities shall be increased incrementally each fiscal year until the county share reaches fifteen percent (15%) of the nonfederal share by State fiscal year 2009‑2010.
SECTION 10.22.(b)  Effective July 1, 2000, the county share of the cost of Medicaid Personal Care Services paid to adult care homes shall be decreased incrementally each fiscal year until the county share reaches fifteen percent (15%) of the nonfederal share by State fiscal year 2009‑2010.

Requested by:	Representatives Barnhart, Nye 
MEDICAID COST CONTAINMENT ACTIVITIES
SECTION 10.23.  The Department of Health and Human Services may use not more than three million dollars ($3,000,000) in each year of the 2003‑2005 fiscal biennium in Medicaid funds budgeted for program services to support the cost of administrative activities when cost‑effectiveness and savings are demonstrated.  The funds shall be used to support activities that will contain the cost of the Medicaid Program, including contracting for services or hiring additional staff.  Medicaid cost‑containment activities may include prospective reimbursement methods, incentive‑based reimbursement methods, service limits, prior authorization of services, periodic medical necessity reviews, revised medical necessity criteria, service provision in the least costly settings, and other cost‑containment activities.  Funds may be expended under this section only after the Office of State Budget and Management has approved a proposal for the expenditure submitted by the Department. Proposals for expenditure of funds under this section shall include the cost of implementing the cost‑containment activity and documentation of the amount of savings expected to be realized from the cost‑containment activity.  The Department shall provide a copy of proposals for expenditures under this section to the Fiscal Research Division.

Requested by:	Representatives Barnhart, Nye 
INCREASES IN FEDERAL MEDICAID FUNDS
SECTION 10.24.(a)  Notwithstanding any other provision of law to the contrary, the total amount of State funds that become available to the Department of Health and Human Services for the 2003‑2004 fiscal year due to an increase in federal Medicaid funds resulting from increases in the Federal Financial Participation rate shall be used to increase funds appropriated to the Department for the 2003‑2004 fiscal year for the Medicaid program without any reduction in what is otherwise allocated to the Department from appropriated funds.
SECTION 10.24.(b)  The Department of Health and Human Services, Division of Medical Assistance, may reinstate eligibility policies changed by this act when all of the following conditions are met:
(1)	Congress approves enhanced Federal Financial Participation for State Medicaid programs.
(2)	Receipt of the enhanced Federal Financial Participation is dependent on a State's maintenance of effort in Medicaid eligibility.
(3)	The Department has concluded that the enacted policy changes render the State ineligible for the enhanced Federal Financial Participation.
(4)	Enhanced Federal Financial Participation receipts exceed the anticipated savings in State funds from the enacted policy changes.

Requested by:	Representatives Barnhart, Nye 
PUBLIC ASSISTANCE AND SOCIAL SERVICES APPEALS AND access to records 
SECTION 10.25.  G.S. 108A‑79 reads as rewritten:
"§ 108A‑79.  Appeals.
(a)	A public assistance applicant or recipient shall have a right to appeal the decision of the county board of social services, county department of social services, or the board of county commissioners granting, denying, terminating, or modifying assistance, or the failure of the county board of social services or county department of social services to act within a reasonable time under the rules and regulations of the Social Services Commission or the Department. Each applicant or recipient shall be notified in writing of his right to appeal upon denial of his application for assistance and at the time of any subsequent action on his case.
(b)	In cases involving termination or modification of assistance, no action shall become effective until 10 workdays after notice of this action and of the right to appeal is mailed or delivered by hand to the recipient; provided, however, termination or modification of assistance may be effective immediately upon the mailing or delivery of notice in the following circumstances:
(1)	When the modification is beneficial to the recipient; or
(2)	When federal regulations permit immediate termination or modification upon mailing or delivery of notice and the Social Services Commission or the Department of Health and Human Services promulgates regulations adopting said federal law or regulations. When federal and State regulations permit immediate termination or modification, the recipient shall have no right to continued assistance at the present level pending a hearing, as would otherwise be provided by subsection (d) of this section.
(c)	The notice of action and the right to appeal shall comply with all applicable federal and State law and regulations; provided, such notice shall, at a minimum contain a clear statement of:
(1)	The action which was or is to be taken;
(2)	The reasons for which this action was or is to be taken;
(3)	The regulations supporting this action;
(4)	The applicant's or recipient's right to both a local and State level hearing, or to a State level hearing in the case of the food stamp program and cases involving disability, on the decision to take this action and the method for obtaining these hearings;
(5)	The right to be represented at the hearings by a personal representative, including an attorney obtained at the applicant's or recipient's expense;
(6)	In cases involving termination or modification of assistance, the recipient's right upon timely request to continue receiving assistance at the present level pending an appeal hearing and decision on that hearing.
An applicant or recipient may give notice of appeal by written or oral statement to the county department of social services, which shall record such notice by completing a form developed by the Department.
Such notice of appeal must be given within 60 days from the date of the action, or 90 days from the date of notification in the case of the food stamp program. Failure to give timely notice of appeal constitutes a waiver of the right to a hearing except that, for good cause shown, the county department of social services may permit an appeal notwithstanding the waiver. The waiver shall not affect the right to reapply for benefits.
(d)	If there is such timely appeal in cases not involving disability, in the first instance the hearing shall consist of a local appeal hearing before the county director or a designated representative of the county director, provided whoever hears the local appeal shall not have been involved directly in the initial decision giving rise to the appeal. If there is such timely appeal in cases involving disability, the county director or a designated representative of the county director shall within five days of the request for an appeal forward the request to the Department of Health and Human Services, and the Department shall designate a hearing officer who shall promptly hold a hearing in the county according to the provisions of subsections (i) and (j) of this section. The issue of disability determination is governed by federal law as codified in 42 § C.F.R. 435.541. In cases involving termination or modification of assistance (other than cases of immediate termination or modification of assistance pursuant to subsection (b)(2) of this section), the recipient shall continue to receive assistance at the present level pending the decision at the initial hearing, whether that be the local appeal hearing decision or, in cases involving questions of disability, the Department of Health and Human Services hearing decision, provided that in order to continue receiving assistance pending the initial hearing decision the recipient must request a hearing on or before the effective date of the termination or modification of assistance.
(e)	The local appeal hearing shall be held not more than five days after the request for it is received. The recipient may, for good cause shown as defined by rule or regulation of the Social Services Commission or the Department, petition the county department of social services, in writing, for a delay, but in no event shall the local appeal hearing be held more than 15 days after the receipt of the request for hearing. At the local appeal hearing:
(1)	The appellant and the county department may be represented by personal representatives, including attorneys, obtained at their expense.
(2)	The appellant or his personal representative and the county department shall present such sworn evidence and law or regulations as bear upon the case. The hearing need not be recorded or transcribed, but the director or his representative shall summarize in writing the substance of the hearing.
(3)	The appellant or his personal representative and the county department may cross‑examine witnesses and present closing arguments summarizing their views of the case and the law.
(4)	Prior to and during the hearing, the appellant or his personal representative shall have adequate opportunity to examine the contents of his case file for the matter pending together with those portions of other public assistance or social services case files which pertain to the appeal, and all documents and records which the county department of social services intends to use at the hearing. Those portions of the public assistance or social services case file which do not pertain to the appeal or which are required by federal statutes or regulations or by State statutes or regulations to be held confidential shall not be released to the appellant or his personal representative. In cases where the appellant has been denied access to the public assistance or social services case file the hearing officer shall certify as part of the official record that the hearing officer has examined the case files and that no portion of those files pertain to the appeal. Such certification may be subject to judicial review as provided in subsection (k) of this section. Nothing in this section is intended to restrict an applicant or recipient access to information if that access is allowed by rules and regulations promulgated pursuant to G.S. 108A‑80.
(f)	The director or his designated representative shall make the decision based upon the evidence presented at the hearing and all applicable regulations, and shall prepare a written statement of his decision citing the regulations and evidence to support it. This written statement of the decision will be served by certified mail on the appellant within five days of the local appeal hearing. If the decision terminating or modifying the appellant's benefits is affirmed, the assistance shall be terminated or modified, not earlier than the date the decision is mailed, and any assistance received during the time of the appeal is subject to recovery.
(g)	If the appellant is dissatisfied with the decision of the local appeal hearing, he may within 15 days of the mailing notification of the decision take a further appeal to the Department. However, assistance may not be received pending this further appeal. Failure to give timely notice of further appeal constitutes a waiver of the right to a hearing before an official of the Department except that, for good cause shown, the Department may issue an order permitting a review of the local appeal hearing notwithstanding the waiver. The waiver shall not affect the right to reapply for benefits.
(h)	Subsections (d)‑(g) of this section shall not apply to the food stamp program. The first appeal for a food stamp recipient or his representative shall be to the Department. Pending hearing, the recipient's assistance shall be continued at the present level upon timely request.
(i)	If there is an appeal from the local appeal hearing decision, or from a food stamp recipient or his representative where there is no local hearing, or if there is an appeal of a case involving questions of disability the county director shall notify the Department according to its rules and regulations. The Department shall designate a hearing officer who shall promptly hold a de novo administrative hearing in the county after giving reasonable notice of the time and place of such hearing to the appellant and the county department of social services. Such hearing shall be conducted according to federal law as codified in 42 C.F.R. § 431, Subpart E and Article 3 of Chapter 150B of the General Statutes. Appeals from local evidentiary hearings shall be de novo. The Department shall adopt rules and regulations to ensure the following:
(1)	Prior to and during the hearing, the appellant or his personal representative shall have adequate opportunity to examine his case file and all documents and records which the county department of social services intends to use at the hearing together with those portions of other public assistance or social services case files which pertain to the appeal. Those portions of the public assistance or social services case files which do not pertain to the appeal or which are required by federal statutes or regulations or by State statutes or regulations to be held confidential shall not be released to the appellant or his personal representative. In cases where the appellant has been denied access to portions of the public assistance or social services case file, the hearing officer shall certify as part of the official record that the hearing officer has examined the case files and that no portion of those files pertain to the appeal. Such certification may be subject to judicial review as provided in subsection (k) of this section. Nothing in this section is intended to restrict an applicant or recipient access to information if that access is allowed by rules or regulations promulgated pursuant to G.S. 108A‑80.
(2)	At the appeal hearing, the appellant and personnel of the county department of social services may present such sworn evidence, law and regulations as bear upon the case.
(3)	The appellant and county department shall have the right to be represented by the person of his choice, including an attorney obtained at his own expense.
(4)	The appellant and county department shall have the right to cross‑examine the other party as well as make a closing argument summarizing his view of the case and the law.
(5)	The appeal hearing shall be recorded; however, no transcript will be prepared unless a petition for judicial review is filed pursuant to subsection (k) herein, in which case, the transcript will be made a part of the official record. In the absence of the filing of a petition for a judicial review, the recording of the appeal hearing may be erased or otherwise destroyed 180 days after the final decision is mailed.
(6)	Notwithstanding G.S. 150B‑28 or any other provision of State law, discovery shall be no more extensive or formal than that required by federal law and regulations applicable to such hearings.
(j)	After the administrative hearing, the hearing officer shall prepare a proposal for decision, citing pertinent law, regulations, and evidence, which shall be served upon the appellant and the county department of social services or their personal representatives. The appellant and the county department of social services shall have the opportunity to present oral and written arguments in opposition to or in support of the proposal for decision to the designated official of the Department who is to make the final decision. The final decision shall be based on, conform to, and set forth in detail the relevant evidence, pertinent State and federal law and regulations, and matters officially noticed. The decision shall be rendered not more than 90 days, or 45 days in the case of the food stamp program, from the date of request for the hearing, unless the hearing was delayed at the request of the appellant. If the hearing was delayed at the appellant's request, the decision may only be delayed for the length of time the appellant requested a delay. The final decision shall be served upon the appellant and upon the county department of social services by certified mail, with a copy furnished to either party's attorney of record. In the absence of a petition for judicial review filed pursuant to subsection (k) herein, the final decision shall be binding upon the appellant, the county department of social services, the county board of social services, and the board of county commissioners.
(k)	Any applicant or recipient who is dissatisfied with the final decision of the Department may file, within 30 days of the receipt of notice of such decision, a petition for judicial review in superior court of the county from which the case arose. Failure to file a petition within the time stated shall operate as a waiver of the right of such party to review, except that, for good cause shown, a judge of the superior court resident in the district or holding court in the county from which the case arose may issue an order permitting a review of the agency decision under this Chapter notwithstanding such waiver. The hearing shall be conducted according to the provisions of Article 4, Chapter 150B, of the North Carolina General Statutes. The court shall, on request, examine the evidence excluded at the hearing under G.S. 108A‑79(e)(4) or G.S. 108A‑79(i)(1) and if the evidence was improperly excluded, the court shall consider it. Notwithstanding the foregoing provisions, the court may take testimony and examine into the facts of the case, including excluded evidence, to determine whether the final decision is in error under federal and State law, and under the rules and regulations of the Social Services Commission or the Department of Health and Human Services. Furthermore, the court shall set the matter for hearing within 15 days from the filing of the record under G.S. 150B‑47 and after reasonable written notice to the Department of Health and Human Services and the applicant or recipient. Nothing in this subsection shall be construed to abrogate any rights that the county may have under Article 4 of Chapter 150B.
(l)	In the event of conflict between federal law or regulations and State law or regulations, the federal law or regulations shall control."

Requested by:	Representatives Barnhart, Nye 
TRANSFER OF PROPERTY TO QUALIFY FOR MEDICAID
SECTION 10.26.  G.S. 108A‑58 reads as rewritten:
"§ 108A‑58.  Transfer of property for purposes of qualifying for medical assistance; periods of ineligibility.
(a)	Any person, otherwise eligible, who, either while receiving medical assistance benefits or within the time period mandated by controlling federal law, sells, gives, assigns or transfers countable real or personal property or an interest in real or personal property for the purpose of retaining or establishing eligibility for medical assistance benefits, shall be ineligible to receive medical assistance benefits as set forth in section 1917(c) of the Social Security Act. Countable real and personal property includes real property, excluding a homesite, unless other applicable federal or State law requires the homesite to be counted for transfer of property purposes, intangible personal property, nonessential motor and recreational vehicles, nonincome producing business equipment, boats and motors. The provisions of this act shall not apply to the sale, gift, assignment or transfer of real or personal property if and to the extent that the person applying for medical assistance would have been eligible for such assistance notwithstanding ownership of such property or an interest therein.
(b)	Any sale, gift, assignment or transfer of real or personal property or an interest in real or personal property, as provided in subsection (a) of this section, shall be presumed to have been made for the purpose of retaining or establishing eligibility for medical assistance benefits unless the person, or the person's legal representative, who sells, gives, assigns or transfers the property or interest, receives valuable consideration at least equal to the fair market value, less encumbrances, of the property or interest.
(c)	Any person who sells, gives, assigns or transfers real or personal property or an interest in real or personal property for the purpose of retaining or establishing eligibility for medical assistance benefits, as provided in subsection (a) of this section, shall, after the time of transfer, be ineligible to receive these benefits until an amount equal to the uncompensated value of the property or interest has been expended by or on behalf of the person for the person's maintenance and support, including medical expenses, paid or incurred, or shall be ineligible based on the period of time required under section 1917(c) of the Social Security Act. 			
(d)	The sale, gift, assignment or transfer for a consideration less than fair market value, less encumbrances, of any tangible personal property which was acquired with the proceeds of sale, assignment or transfer of real or intangible personal property described in subsection (a) of this section or in exchange for such real or intangible personal property shall be presumed to have been for the purpose of evading the provisions of this section if the acquisition and sale, gift, assignment or transfer of the tangible personal property is by or on behalf of a person receiving medical assistance or within the time period mandated by controlling federal law and the consequences of the sale, gift, assignment of transfer of such tangible personal property shall be determined under the provisions of subsections (c) and (f) of this section.
(e)	The presumptions created by subsections (b) and (d) may be overcome if the person receiving or applying for medical assistance, or the person's legal representative, establishes by the greater weight of the evidence that the sale, gift, assignment or transfer was exclusively for some purpose other than retaining or establishing eligibility for medical assistance benefits.
(f)	For the purpose of establishing uncompensated value under subsection (c), the value of property or an interest therein shall be the fair market value of the property or interest at the time of the sale, gift, assignment or transfer, less the amount of compensation, if any, received for the property or interest. There shall be a rebuttable presumption that the fair market value of real property is the most recent property tax value of the property, as ascertained according to Subchapter II of Chapter 105 of the General Statutes. Fair market value for purpose of this subsection shall be such value, determined as above set out, less any legally enforceable encumbrances to which the property is subject.
	(h)	This section shall not apply to applicants for or recipients of Work First Family Assistance or to persons entitled to medical assistance by virtue of their eligibility for Work First Family Assistance.
(i)	This section shall apply only to transfers made before July 1, 1988."

Requested by:	Representatives Barnhart, Nye 
MEDICARE ENROLLMENT REQUIRED
SECTION 10.27.  Part 6 of Article 2 of Chapter 108A of the General Statutes is amended by adding the following new section to read:
"§ 108A-55.1.  Medicare enrollment required.
The Department shall require State Medical Assistance Program recipients who qualify for Medicare to enroll in Medicare, in accordance with Title XIX of the Social Security Act, in order to pay medical expenditures that qualify for payment under Medicare Part B. Failure to enroll in Medicare shall result in nonpayment of these expenditures under the State Medical Assistance Program. A provider may seek payment for services from Medicaid enrollees who are eligible for but not enrolled in Medicare Part B."

Requested by:	Representatives Barnhart, Nye 
MEDICAID assessment program FOR SKILLED NURSING Facilities
SECTION 10.28.(a)  The Secretary of Health and Human Services shall implement a Medicaid assessment program for skilled nursing facilities licensed under Chapter 131E of the General Statutes.  The assessment shall be imposed in a manner consistent with federal regulations under 42 C.F.R. Part 433, Subpart B.  The Department shall impose the assessment effective October 1, 2003.  Funds realized from assessments imposed shall be used only to draw down federal Medicaid matching funds for implementing the new reimbursement plan for nursing homes and for increasing nursing facility rates in accordance with the plan.
SECTION 10.28.(b)  Funds realized from the Medicaid assessment program established pursuant to subsection (a) of this section shall not be used to supplant State funds appropriated for nursing facility services.
SECTION 10.28.(c)  Funds realized from the assessment shall be used to pay one hundred percent (100%) of the nonfederal share for the new reimbursement plan for nursing homes.

Requested by:	Representatives Barnhart, Nye
HEALTH CHOICE
SECTION 10.29.(a)  G.S. 108A‑70.20 reads as rewritten:
"§ 108A‑70.20.  Program established.
The Health Insurance Program for Children is established. The Program shall be administered by the Department of Health and Human Services in accordance with this Part and as required under Title XXI and related federal rules and regulations. Except as otherwise provided in this section, administration of Program benefits and claims processing shall be as provided under Part 5 of Article 3 of Chapter 135 of the General Statutes. Notwithstanding any other provision of law to the contrary, when applying Medicaid reimbursement rates to services provided under the Program, the Department may administer Program benefits and claims processing when the Secretary determines that Department administration of benefits and claims processing would be more efficient and cost-effective."
SECTION 10.29.(b)  G.S. 108A‑70.21 reads as rewritten:
"§ 108A‑70.21.  Program eligibility; benefits; enrollment fee and other cost‑sharing; coverage from private plans; purchase of extended coverage.
(a)	Eligibility. – The Department may enroll eligible children based on availability of funds. Following are eligibility and other requirements for participation in the Program:
(1)	Children must:
a.	Be under the age of 19;
b.	Be ineligible for Medicaid, Medicare, or other federal government‑sponsored health insurance;
c.	Be uninsured;
d.	Be in a family that meets the following family income requirements:
1.	Infants under the age of one year whose family income is from one hundred eighty‑five percent (185%) through two hundred percent (200%) of the federal poverty level;
2.	Children age one year through five years whose family income is above one hundred thirty‑three percent (133%) through two hundred percent (200%) of the federal poverty level; and
3.	Children age six years through eighteen years whose family income is above one hundred percent (100%) through two hundred percent (200%) of the federal poverty level;
e.	Be a resident of this State and eligible under federal law; and
f.	Have paid the Program enrollment fee required under this Part.
(2)	Proof of family income and residency and declaration of uninsured status shall be provided by the applicant at the time of application for Program coverage. The family member who is legally responsible for the children enrolled in the Program has a duty to report any change in the enrollee's status within 60 days of the change of status.
(3)	If a responsible parent is under a court order to provide or maintain health insurance for a child and has failed to comply with the court order, then the child is deemed uninsured for purposes of determining eligibility for Program benefits if at the time of application the custodial parent shows proof of agreement to notify and cooperate with the child support enforcement agency in enforcing the order.
		If health insurance other than under the Program is provided to the child after enrollment and prior to the expiration of the eligibility period for which the child is enrolled in the Program, then the child is deemed to be insured and ineligible for continued coverage under the Program. The custodial parent has a duty to notify the Department within 10 days of receipt of the other health insurance, and the Department, upon receipt of notice, shall disenroll the child from the Program. As used in this paragraph, the term "responsible parent" means a person who is under a court order to pay child support.
(4)	Except as otherwise provided in this section, enrollment shall be continuous for one year. At the end of each year, applicants may reapply for Program benefits.
(b)	Benefits. – Except as otherwise provided for eligibility, fees, deductibles, copayments, and other cost‑sharing charges, health benefits coverage provided to children eligible under the Program shall be equivalent to coverage provided for dependents under the North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan, including optional prepaid plans. Prescription drug providers shall accept as payment in full, for outpatient prescriptions filled, ninety percent (90%) of the average wholesale price for the prescription drug or the amounts published by the Centers for Medicare and Medicaid Services plus a dispensing fee of five dollars and sixty cents ($5.60) per prescription for generic drugs and four dollars ($4.00) per prescription for brand name drugs. All other health care providers providing services to Program enrollees shall accept as payment in full for services rendered the maximum allowable charges under the North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan for services less any copayments assessed to enrollees under this Part. No child enrolled in the Plan's self‑insured indemnity program shall be required by the Plan to change health care providers as a result of being enrolled in the Program.
In addition to the benefits provided under the Plan, the following services and supplies are covered under the Health Insurance Program for Children established under this Part:
(1)	Dental: Oral examinations, teeth cleaning, and scaling twice during a 12‑month period, full mouth X‑rays once every 60 months, supplemental bitewing X‑rays showing the back of the teeth once during a 12‑month period, fluoride applications twice during a 12‑month period, sealants, simple extractions, therapeutic pulpotomies, prefabricated stainless steel crowns, and routine fillings of amalgam or other tooth‑colored filling material to restore diseased teeth. No benefits are to be provided for services under this subsection that are not performed by or upon the direction of a dentist, doctor, or other professional provider approved by the Plan nor for services and materials that do not meet the standards accepted by the American Dental Association.
(2)	Vision: Scheduled routine eye examinations once every 12 months, eyeglass lenses or contact lenses once every 12 months, routine replacement of eyeglass frames once every 24 months, and optical supplies and solutions when needed. Optical services, supplies, and solutions must be obtained from licensed or certified ophthalmologists, optometrists, or optical dispensing laboratories. Eyeglass lenses are limited to single vision, bifocal, trifocal, or other complex lenses necessary for a Plan enrollee's visual welfare. Coverage for oversized lenses and frames, designer frames, photosensitive lenses, tinted contact lenses, blended lenses, progressive multifocal lenses, coated lenses, and laminated lenses is limited to the coverage for single vision, bifocal, trifocal, or other complex lenses provided by this subsection. Eyeglass frames are limited to those made of zylonite, metal, or a combination of zylonite and metal. All visual aids covered by this subsection require prior approval of the Plan. Upon prior approval by the Plan, refractions may be covered more often than once every 12 months.
(3)	Hearing: Auditory diagnostic testing services and hearing aids and accessories when provided by a licensed or certified audiologist, otolaryngologist, or other hearing aid specialist approved by the Plan. Prior approval of the Plan is required for hearing aids, accessories, earmolds, repairs, loaners, and rental aids.
(c)	Annual Enrollment Fee. – There shall be no enrollment fee for Program coverage for enrollees whose family income is at or below one hundred fifty percent (150%) of the federal poverty level. The enrollment fee for Program coverage for enrollees whose family income is above one hundred fifty percent (150%) of the federal poverty level shall be fifty dollars ($50.00) per year per child with a maximum annual enrollment fee of one hundred dollars ($100.00) for two or more children. The enrollment fee shall be collected by the county department of social services and retained to cover the cost of determining eligibility for services under the Program. County departments of social services shall establish procedures for the collection of enrollment fees.
(d)	Cost‑Sharing. – There shall be no deductibles, copayments, or other cost‑sharing charges for families covered under the Program whose family income is at or below one hundred fifty percent (150%) of the federal poverty level, except that the fees for outpatient prescription drugs described in subdivision (3) of this subsection shall apply to covered families whose family income is at or below one hundred fifty percent (150%) of the federal poverty level. Families covered under the Program whose family income is above one hundred fifty percent (150%) of the federal poverty level shall be responsible for copayments to providers as follows:
(1)	Five dollars ($5.00) per child for each visit to a provider, except that there shall be no copayment required for well‑baby, well‑child, or age‑appropriate immunization services;
(2)	Five dollars ($5.00) per child for each outpatient hospital visit;
(3)	A one dollar ($1.00) fee for each outpatient generic prescription drug and for each outpatient brand name prescription drug for which there is no generic substitution available. The fee for each outpatient brand name prescription drug for which there is a generic substitution available is ten dollars ($10.00).(4)	Twenty dollars ($20.00) for each emergency room visit unless:
a.	The child is admitted to the hospital, or
b.	No other reasonable care was available as determined by the Claims Processing Contractor of the North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan.
Copayments required under this subsection for prescription drugs apply only to prescription drugs prescribed on an outpatient basis.
(e)	Cost‑Sharing Limitations. – The total annual aggregate cost‑sharing, including fees, with respect to all children in a family receiving Program benefits under this Part shall not exceed five percent (5%) of the family's income for the year involved. To assist the Department in monitoring and ensuring that the limitations of this subsection are not exceeded, the Executive Administrator and Board of Trustees of the North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan shall provide data to the Department showing cost‑sharing paid by Program enrollees.
(f)	Coverage From Private Plans. – The Department shall, from funds available for the Program, pay the cost for dependent coverage provided under a private insurance plan for persons eligible for coverage under the Program if all of the following conditions are met:
(1)	The person eligible for Program coverage requests to obtain dependent coverage from a private insurer in lieu of coverage under the Program and shows proof that coverage under the private plan selected meets the requirements of this subsection;
(2)	The dependent coverage under the private plan is actuarially equivalent to the coverage provided under the Program and the private plan does not engage in the exclusive enrollment of children with favorable health care risks;
(3)	The cost of dependent coverage under the private plan is the same as or less than the cost of coverage under the Program; and
(4)	The total annual aggregate cost‑sharing, including fees, paid by the enrollee under the private plan for all dependents covered by the plan, do not exceed five percent (5%) of the enrollee's family income for the year involved.
The Department may reimburse an enrollee for private coverage under this subsection upon a showing of proof that the dependent coverage is in effect for the period for which the enrollee is eligible for the Program.
(g)	Purchase of Extended Coverage. – An enrollee in the Program who loses eligibility due to an increase in family income above two hundred percent (200%) of the federal poverty level and up to and including two hundred twenty‑five percent (225%) of the federal poverty level may purchase at full premium cost continued coverage under the Program for a period not to exceed one year beginning on the date the enrollee becomes ineligible under the income requirements for the Program. The same benefits, copayments, and other conditions of enrollment under the Program shall apply to extended coverage purchased under this subsection.
(h)	No State Funds for Voluntary Participation. – No State or federal funds shall be used to cover, subsidize, or otherwise offset the cost of coverage obtained under subsection (g) of this section."
SECTION 10.29.(c)  G.S. 108A‑70.24 reads as rewritten:
"§ 108A‑70.24.  Claims processing; payments.
(a)	The North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan shall be responsible for the administration and processing of claims for benefits under the Program, as provided under Part 5 of Article 3 of Chapter 135 of the General Statutes, except when the Secretary determines that administration and claims processing should be done by the Department as authorized in G.S. 108A-70.20.
(b)	The Department shall, from State and federal appropriations, and from any other funds made available for this purpose, make premium payments to the North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan as determined by the Plan for its administration, claims processing, and other services authorized to provide coverage for acute medical care to children eligible for benefits under this Part.
(c)	The North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan shall also be responsible for the administration and processing of claims for benefits provided under G.S. 108A‑70.23 and not covered by Part 5 of Article 3 of Chapter 135 of the General Statutes. Such claims payments shall be made against accounts maintained by the Department."
SECTION 10.29.(d)  The total amount of State funds expended for the Health Insurance Program for Children (NC Health Choice) in the 2003‑2004 fiscal year and the 2004‑2005 fiscal year shall not exceed the amount of State funds appropriated to match federal funds for the Program for the 2003‑2004 fiscal year and the 2004‑2005 fiscal year.  The Department shall manage Program enrollment in a way that maximizes the number of children served within existing funds.

SUBPART 4. DIVISION OF PUBLIC HEALTH

Requested by:	Representatives Barnhart, Nye.
Immunization Program Funding
SECTION 10.30.(a)  Of the funds appropriated in this act to the Department of Health and Human Services for childhood immunization programs for positions, operating support, equipment, and pharmaceuticals, the sum of one million dollars ($1,000,000) for the 2003‑2004 fiscal year and the sum of one million dollars ($1,000,000) for the 2004‑2005 fiscal year may be used for projects and activities that are also designed to increase childhood immunization rates in North Carolina. These projects and activities shall include the following:
(1)	Outreach efforts at the State and local levels to improve service delivery of vaccines. Outreach efforts may include educational seminars, media advertising, support services to parents to enable children to be transported to clinics, longer operating hours for clinics, and mobile vaccine units.
(2)	Continued development of an automated immunization registry.
SECTION 10.30.(b)  Funds authorized to be used for immunization efforts under subsection (a) of this section shall not be used to fund additional State positions in the Department of Health and Human Services or contracts, except for contracts to develop an automated immunization registry or with local health departments for outreach.

Requested by:	Representatives Barnhart, Nye
AIDS DRUG ASSISTANCE PROGRAM (ADAP)
SECTION 10.31.(a)  For the 2003‑2004 fiscal year and for the 2004‑2005 fiscal year, HIV‑positive individuals with incomes at or below one hundred twenty‑five percent (125%) of the federal poverty level are eligible for participation in ADAP. Eligibility for participation in ADAP during the 2003‑2005 fiscal biennium shall not be extended to individuals with incomes above one hundred twenty‑five percent (125%) of the federal poverty level.
SECTION 10.31.(b)  The Department of Health and Human Services shall make an interim report on ADAP program utilization by January 1, 2004, and a final report on ADAP program utilization by May 1, 2004, to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division on ADAP. The reports shall include the following:
(1)	ADAP program utilization:
a.	Monthly data on total cumulative AIDS/HIV cases reported in North Carolina.
b.	Monthly data on the number of individuals who have applied to participate in ADAP that have been determined to be ineligible.
c.	Monthly data on the income level of participants in ADAP and of individuals who have applied to participate in ADAP who have been determined to be ineligible.
d.	Monthly data on fiscal year‑to‑date expenditures of ADAP. The interim report shall contain monthly data on the calendar year‑to‑date expenditures of ADAP.
e.	An update on the status of the information management system.
f.	Monthly data on ADAP usage patterns and demographics of participants in ADAP.
g.	Fiscal year‑to‑date budget information.

Requested by:	Representatives Barnhart, Nye
Newborn Hearing Screening Program Report
SECTION 10.32.  The Department of Health and Human Services shall report the following information on the newborn hearing screening program:
(1)	Unduplicated number of infants screened.
(2)	Number of infants who failed the second hearing screening.
(3)	Number of infants receiving the diagnostic evaluation.
(4)	Number and types of services provided.
(5)	Number and types of follow‑up services provided to children.
The Department shall submit the report not later than May 1, 2004, to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division.

Requested by:	Representatives Barnhart, Nye 
EMPLOYEES EXAMINED FOR ASBESTOSIS OR SILICOSIS UNDER WORKERS COMPENSATION STATUTE.
SECTION 10.33.(a)  G.S. 97‑61.1 reads as rewritten:
§ 97‑61.1.  First examination of and report on employee having asbestosis or silicosis.
When an employee and the Industrial Commission are advised that an employee has asbestosis or silicosis, the employer shall be notified by the Industrial Commission, and the employee, when ordered by the Industrial Commission, shall go to a place designated by the Industrial Commission and submit to X rays and a physical examination by the advisory medical committee, at least one of whom shall conduct the examination, and the member or members of the advisory medical committee conducting the examination shall forward the X rays and findings to the member or members of the committee not present for the physical examination. The employer shall pay the expenses connected with the examination in such amounts as shall be directed by the Industrial Commission. Within 30 days after the completion of the examination, the advisory medical committee shall make a written report signed by all of its members setting forth:
(1)	The X rays and clinical procedures used by the committee in arriving at its findings.
(2)	Whether or not the claimant has contracted asbestosis or silicosis.
(3)	The committee's opinion expressed in percentages of the impairment of the employee's ability to perform normal labor in the same or any other employment.
(4)	Any other matter deemed pertinent by the committee.
When a competent physician certifies to the Industrial Commission that the employee's physical condition is such that his movement to the place of examination ordered by the Industrial Commission as herein provided in G.S. 97‑61.1, 97‑61.3 and 97‑61.4 would be harmful or injurious to the health of the employee, the Industrial Commission shall cause the examination of the employee to be made by the advisory medical committee as herein provided at some place in the vicinity of the residence of the employee suitable for the purposes of making such examination."
SECTION 10.33.(b)  G.S. 97‑72(b) reads as rewritten:
"(b)	The members of the advisory medical committee shall be paid one hundred dollars ($100.00) per month plus not more than forty dollars ($40.00) per film examined. The fee per film shall be established by the Commissioner of Labor, as guided by the current Medicaid/Medicare reimbursement schedules for North Carolina."
SECTION 10.33.(c)  G.S. 97‑73(b) reads as rewritten:
"(b)	The Commissioner of Labor shall establish a schedule of fees for examinations conducted by the Department of Health and Human Services pursuant to G.S. 97‑60. The fees shall be collected in accordance with rules adopted by the Commissioner of Labor."

Requested by:	Representative Clary
ELIMINATE HOME HEALTH PURCHASE OF CARE PROGRAM
SECTION 10.33A.  The Department of Health and Human Services, Division of Public Health, shall eliminate the Home Health Purchase of Care Program and transfer three million one thousand two hundred fifty-three dollars ($3,001,253) from the Division of Public Health's budget to the Division of Medical Assistance. These funds and any additional administrative funds identified by closing this program shall be used only to maximize federal Medicaid matching funds for Home Care Personal Care Services. Funds realized from this transfer shall not be used to supplant State funds appropriated for Home Care Personal Care Services.

SUBPART 5. DIVISION OF CHILD DEVELOPMENT

Requested by:	Representatives Barnhart, Nye 
Child care funds matching requirement
SECTION 10.34.  No local matching funds may be required by the Department of Health and Human Services as a condition of any locality's receiving any State child care funds appropriated by this act unless federal law requires a match. This shall not prohibit any locality from spending local funds for child care services.

Requested by:	Representatives Barnhart, Nye 
child care subsidy rates
SECTION 10.35.(a)  The maximum gross annual income for initial eligibility, adjusted biennially, for subsidized child care services shall be two hundred percent (200%) at the federal poverty level, adjusted for family size.
SECTION 10.35.(b)  Fees for families who are required to share in the cost of care shall be established based on a percent of gross family income and adjusted for family size. Effective October 1, 2003, fees shall be determined as follows:
FAMILY SIZE	PERCENT OF GROSS FAMILY INCOME
1‑3	10%
4‑5	9%
6 or more	8%.
SECTION 10.35.(c)  Payments for the purchase of child care services for low‑income children shall be in accordance with the following requirements:
(1)	Religious‑sponsored child care facilities operating pursuant to G.S. 110‑106 and licensed child care centers and homes that meet the minimum licensing standards that are participating in the subsidized child care program shall be paid the one‑star county market rate or the rate they charge privately paying parents, whichever is lower.
(2)	Licensed child care centers and homes with two or more stars shall receive the market rate for that rated license level for that age group or the rate they charge privately paying parents, whichever is lower.
(3)	Nonlicensed homes shall receive fifty percent (50%) of the county market rate or the rate they charge privately paying parents, whichever is lower.
(4)	Maximum payment rates shall also be calculated periodically by the Division of Child Development for transportation to and from child care provided by the child care provider, individual transporter, or transportation agency, and for fees charged by providers to parents. These payment rates shall be based upon information collected by market rate surveys.
SECTION 10.35.(d)  Provision of payment rates for child care providers in counties that do not have at least 50 children in each age group for center‑based and home‑based care are as follows:
(1)	Payment rates shall be set at the statewide or regional market rate for licensed child care centers and homes.
(2)	If it can be demonstrated that the application of the statewide or regional market rate to a county with fewer than 50 children in each age group is lower than the county market rate and would inhibit the ability of the county to purchase child care for low‑income children, then the county market rate may be applied.
SECTION 10.35.(e)  A market rate shall be calculated for child care centers and homes at each rated license level for each county and for each age group or age category of enrollees and shall be representative of fees charged to unsubsidized privately paying parents for each age group of enrollees within the county. The Division of Child Development shall also calculate a statewide rate and regional market rates for each rated license level for each age category.
SECTION 10.35.(f)  Facilities licensed pursuant to Article 7 of Chapter 110 of the General Statutes and facilities operated pursuant to G.S. 110‑106 may participate in the program that provides for the purchase of care in child care facilities for minor children of needy families. No separate licensing requirements shall be used to select facilities to participate. In addition, child care facilities shall be required to meet any additional applicable requirements of federal law or regulations. Child care arrangements exempt from State regulation pursuant to Article 7 of Chapter 110 of the General Statutes shall meet the requirements established by other State law and by the Social Services Commission.
County departments of social services or other local contracting agencies shall not use a provider's failure to comply with requirements in addition to those specified in this subsection as a condition for reducing the provider's subsidized child care rate.
SECTION 10.35.(g)  Payment for subsidized child care services provided with Work First Block Grant funds shall comply with all regulations and policies issued by the Division of Child Development for the subsidized child care program.
SECTION 10.35.(h)  Noncitizen families who reside in this State legally shall be eligible for child care subsidies if all other conditions of eligibility are met. If all other conditions of eligibility are met, noncitizen families who reside in this State illegally shall be eligible for child care subsidies only if at least one of the following conditions is met:
(1)	The child for whom a child care subsidy is sought is receiving child protective services or foster care services.
(2)	The child for whom a child care subsidy is sought is developmentally delayed or at risk of being developmentally delayed.
(3)	The child for whom a child care subsidy is sought is a citizen of the United States.

Requested by:	Representatives Barnhart, Nye 
Child care allocation formula
SECTION 10.36.(a)  The Department of Health and Human Services shall allocate child care subsidy voucher funds to pay the costs of necessary child care for minor children of needy families. The mandatory thirty percent (30%) Smart Start subsidy allocation under G.S. 143B‑168.15(g) shall constitute the base amount for each county's child care subsidy allocation. The Department of Health and Human Services shall use the following method when allocating federal and State child care funds, not including the aggregate mandatory thirty percent (30%) Smart Start subsidy allocation:
(1)	Funds shall be allocated based upon the projected cost of serving children in a county under age 11 in families with all parents working who earn less than two hundred percent (200%) of the federal poverty level.
(2)	No county's allocation shall be less than ninety percent (90%) of its State Fiscal Year 2001‑2002 initial child care subsidy allocation.
SECTION 10.36.(b)  The Department of Health and Human Services may reallocate unused child care subsidy voucher funds in order to meet the child care needs of low‑income families. Any reallocation of funds shall be based upon the expenditures of all child care subsidy voucher funding, including Smart Start funds, within a county.

Requested by:	Representatives Barnhart, Nye 
Child care revolving loan
SECTION 10.37.  Notwithstanding any law to the contrary, funds budgeted for the Child Care Revolving Loan Fund may be transferred to and invested by the financial institution contracted to operate the Fund. The principal and any income to the Fund may be used to make loans, reduce loan interest to borrowers, serve as collateral for borrowers, pay the contractor's cost of operating the Fund, or pay the Department's cost of administering the program.

Requested by:	Representatives Barnhart, Nye 
early childhood education and development initiatives enhancements
SECTION 10.38.(a)  Administrative costs shall be equivalent to, on an average statewide basis for all local partnerships, not more than seven percent (7%) of the total statewide allocation to all local partnerships. For purposes of this subsection, administrative costs shall include costs associated with partnership oversight, business and financial management, general accounting, human resources, budgeting, purchasing, contracting, and information systems management.
SECTION 10.38.(b)  The North Carolina Partnership for Children, Inc., and all local partnerships shall use competitive bidding practices in contracting for goods and services on contract amounts as follows:
(1)	For amounts of five thousand dollars ($5,000) or less, the procedures specified by a written policy to be developed by the Board of Directors of the North Carolina Partnership for Children, Inc.
(2)	For amounts greater than five thousand dollars ($5,000), but less than fifteen thousand dollars ($15,000), three written quotes.
(3)	For amounts of fifteen thousand dollars ($15,000) or more, but less than forty thousand dollars ($40,000), a request for proposal process.
(4)	For amounts of forty thousand dollars ($40,000) or more, request for proposal process and advertising in a major newspaper.
SECTION 10.38.(c)  The North Carolina Partnership for Children, Inc., and all local partnerships shall, in the aggregate, be required to match no less than fifty percent (50%) of the total amount budgeted for the program in each fiscal year of the biennium as follows:  contributions of cash equal to at least fifteen percent (15%) and in‑kind donated resources equal to no more than five percent (5%) for a total match requirement of twenty percent (20%) for each fiscal year. The North Carolina Partnership for Children, Inc., may carry forward any amount in excess of the required match for a fiscal year in order to meet the match requirement of the succeeding fiscal year. Only in‑kind contributions that are quantifiable shall be applied to the in‑kind match requirement. Volunteer services may be treated as an in‑kind contribution for the purpose of the match requirement of this subsection. Volunteer services that qualify as professional services shall be valued at the fair market value of those services. All other volunteer service hours shall be valued at the statewide average wage rate as calculated from data compiled by the Employment Security Commission in the Employment and Wages in North Carolina Annual Report for the most recent period for which data are available. Expenses, including both those paid by cash and in‑kind contributions, incurred by other participating non‑State entities contracting with the North Carolina Partnership for Children, Inc., or the local partnerships, also may be considered resources available to meet the required private match. In order to qualify to meet the required private match, the expenses shall:
(1)	Be verifiable from the contractor's records.
(2)	If in‑kind, other than volunteer services, be quantifiable in accordance with generally accepted accounting principles for nonprofit organizations.
(3)	Not include expenses funded by State funds.
(4)	Be supplemental to and not supplant preexisting resources for related program activities.
(5)	Be incurred as a direct result of the Early Childhood Initiatives Program and be necessary and reasonable for the proper and efficient accomplishment of the Program's objectives.
(6)	Be otherwise allowable under federal or State law.
(7)	Be required and described in the contractual agreements approved by the North Carolina Partnership for Children, Inc., or the local partnership.
(8)	Be reported to the North Carolina Partnership for Children, Inc., or the local partnership by the contractor in the same manner as reimbursable expenses.
Failure to obtain a twenty percent (20%) match by June 30 of each fiscal year shall result in a dollar‑for‑dollar reduction in the appropriation for the Program for a subsequent fiscal year. The North Carolina Partnership for Children, Inc., shall be responsible for compiling information on the private cash and in‑kind contributions into a report that is submitted to the Joint Legislative Commission on Governmental Operations in a format that allows verification by the Department of Revenue. The same match requirements shall apply to any expansion funds appropriated by the General Assembly.
SECTION 10.38.(d)  The Department of Health and Human Services shall continue to implement the performance‑based evaluation system.
SECTION 10.38.(e)  The Department of Health and Human Services and the North Carolina Partnership for Children, Inc., shall ensure that the allocation of funds for Early Childhood Education and Development Initiatives for State fiscal years 2003‑2004 and 2004‑2005 shall be administered and distributed in the following manner:
(1)	The North Carolina Partnership for Children, Inc., shall develop a policy to allocate the reduction of funds for Early Childhood Education and Development Initiatives for the 2003‑2004 and 2004‑2005 fiscal years.
(2)	Capital expenditures and playground equipment expenditures are prohibited for fiscal years 2003‑2004 and 2004‑2005. For the purposes of this section, "capital expenditures" means expenditures for capital improvements as defined in G.S. 143‑34.40.
(3)	Expenditures of State funds for advertising and promotional activities are prohibited for fiscal years 2003‑2004 and 2004‑2005.
SECTION 10.38.(f)  For the 2003‑2004 and 2004‑2005 fiscal years, the North Carolina Partnership for Children, Inc., shall not approve local partnership plans that allocate State funds to child care providers for one‑time quality improvement initiatives in the following circumstances:
(1)	Child care facilities with licensure of four or five stars, unless the expenditure of funds is to expand capacity for low‑income children.
(2)	Child care facilities that do not accept child care subsidy funds.
SECTION 10.38.(g)  The North Carolina Partnership for Children, Inc., shall not reduce the level of expenditures for subsidies below the State fiscal year 2002‑2003 level.
SECTION 10.38.(h)  The eligibility for child care subsidies shall be in accordance with child care eligibility established in this act, effective January 1, 2004.
SECTION 10.38.(i)  The North Carolina Partnership for Children, Inc., shall develop a plan to focus on quality day care initiatives and child care subsidies, and shall study any duplication of health services, family support, and program support activities, and report same to the House and Senate Appropriations Chairs.
SECTION 10.38.(j)  The North Carolina Partnership for Children, Inc., shall impose a ten percent (10%) penalty against a local partnership's allocation when the local partnership's audit is classified as a "needs improvement performance assessment".
SECTION 10.38.(k)  The North Carolina Partnership for Children, Inc., shall report on activities and directives of this act by March 1, 2004, to the House of Representatives Appropriations Subcommittee on Health and Human Services, the Senate Appropriations Committee on Health and Human Services, and the Fiscal Research Division.

Requested by:	Representative Barnhart, Nye
Early Childhood Education and Development Initiatives evaluation
SECTION 10.39.  The Department of Health and Human Services, Division of Child Development, may evaluate the Early Childhood Education and Development Initiatives.  The evaluation may include:
(1)	Evaluation of the Early Childhood Education and Development Initiatives, including the ongoing review of quality child care efforts and child care providers' progress in preparing children to be ready to enter school and succeed.
(2)	Continuation of technical assistance to local partnerships in data collection and evaluation.

Requested by:	Representatives Barnhart, Nye
more at four program
SECTION 10.40.(a)  Of the funds appropriated to the Department of Health and Human Services the sum of forty‑three million fifty‑six thousand five hundred dollars ($43,056,500) in the 2003‑2004 fiscal year and the sum of forty‑one million eight hundred fifty‑six thousand five hundred dollars ($41,856,500) in the 2004‑2005 fiscal year shall be used to implement "More At Four", a voluntary prekindergarten program for at‑risk four‑year‑olds.
SECTION 10.40.(b)  The Department of Health and Human Services and the Department of Public Instruction, with guidance from the Task Force, shall continue the implementation of the "More At Four" prekindergarten program for at‑risk four‑year‑olds who are at risk of failure in kindergarten. The program is available statewide to all counties that choose to participate, including underserved areas. The goal of the program is to provide quality prekindergarten services to a greater number of at‑risk children in order to enhance kindergarten readiness for these children. The program shall be consistent with standards and assessments established jointly by the Department of Health and Human Services, the Department of Public Instruction, and the Task Force and may consider the "More At Four" Pre‑K Task Force recommendations. The program shall include:
(1)	A process and system for identifying children at risk of academic failure.
(2)	A process and system for identifying children who are not being served first priority in formal early education programs, such as child care, public or private preschools, Head Start, Early Head Start, early intervention programs, or other such programs, who demonstrate educational needs, and who are eligible to enter kindergarten the next school year, as well as children who are underserved.
(3)	A curriculum or several curricula that are recommended by the Task Force. The Task Force will identify and approve appropriate research‑based curricula. These curricula shall: (i) focus primarily on oral language and emergent literacy; (ii) engage children through key experiences and provide background knowledge requisite for formal learning and successful reading in the early elementary years; (iii) involve active learning; (iv) promote measurable kindergarten language‑readiness skills that focus on emergent literacy and mathematical skills; and (v) develop skills that will prepare children emotionally and socially for kindergarten.
(4)	An emphasis on ongoing family involvement with the prekindergarten program.
(5)	Evaluation of child progress through pre‑ and post‑assessment of children in the statewide evaluation, as well as ongoing assessment of the children by teachers.
(6)	Guidelines for a system to reimburse local school boards and systems, private child care providers, and other entities willing to establish and provide prekindergarten programs to serve at‑risk children.
(7)	A system built upon existing local school boards and systems, private child care providers, and other entities that demonstrate the ability to establish or expand prekindergarten capacity.
(8)	A quality‑control system. Participating providers shall comply with standards and guidelines as established by the Department of Health and Human Services, the Department of Public Instruction, and the Task Force. The Department may use the child care rating system to assist in determining program participation.
(9)	Standards for minimum teacher qualifications. A portion of the classroom sites initially funded shall have at least one teacher who is certified or provisionally certified in birth to kindergarten education.
(10)	A local contribution. Programs must demonstrate that they are accessing resources other than "More At Four".
(11)	A system of accountability.
(12)	Collaboration with State agencies and other organizations. The Department of Health and Human Services, the Department of Public Instruction, and the Task Force shall collaborate with State agencies and other organizations such as the North Carolina Partnership for Children, Inc., in the design and implementation of the program.
(13)	Consideration of the reallocation of existing funds. In order to maximize current funding and resources, the Department of Health and Human Services, the Department of Public Instruction, and the Task Force shall consider the reallocation of existing funds from State and local programs that provide prekindergarten related care and services.
(14)	Recommendations for long‑term organizational placement and administration of the program.
SECTION 10.40.(c)  During the 2003‑2004 fiscal year, the Department of Health and Human Services shall plan for expansion of the "More At Four" program within existing resources to include four and five star rated centers, homes, and schools serving four‑year‑olds and develop guidelines for these programs. The Department shall analyze guidelines for use of the "More At Four" funds, State subsidy funds, and Smart Start subsidy funds and devise a complementary plan for administration of funds for all four‑year‑old classrooms. The four and five star centers that choose to become a "More at Four" program shall, at a minimum, receive curricula and access to training and workshops for "More at Four" programs and be considered along with other "More at Four" programs for T.E.A.C.H. funding. The Department shall ensure that no duplication exists among the T.E.A.C.H., W.A.G.E.$., and T.E.A.C.H. Health Insurance programs for individual recipients.
The Department may use nonobligated "More At Four" funds to reduce the waiting list for subsidy, with priority given to four‑year‑olds attending three star or better centers. If there are funds remaining after the waiting list for four‑year‑olds has been satisfied, then the waiting list for other children may be addressed with the remaining funds.
SECTION 10.40.(d)  The Department of Health and Human Services, the Department of Public Instruction, and the Task Force shall submit a progress report by January 1, 2004, and May 1, 2004, to the Joint Legislative Commission on Governmental Operations, the Joint Legislative Education Oversight Committee, the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division. This final report shall include the following:
(1)	The number of children participating in the program.
(2)	The number of children participating in the program who have never been served in other early education programs, such as child care, public or private preschool, Head Start, Early Head Start, or early intervention programs.
(3)	The expected expenditures for the programs and the source of the local match for each grantee.
(4)	The location of program sites and the corresponding number of children participating in the program at each site.
(5)	Activities involving Child Find in counties.
(6)	A comprehensive cost analysis of the program, including the cost per child served by the program.
(7)	The plan for expansion of "More At Four" through existing resources as outlined in this section.

SUBPART 6. OFFICE OF EDUCATIONAL SERVICES

Requested by:	Representatives Barnhart, Nye 
Residential Schools Reporting
SECTION 10.41.  The Office of Education Services shall report not later than December 1, 2003, to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division on the activities of the Eastern North Carolina School for the Deaf at Wilson, the North Carolina School for the Deaf at Morganton, and the Governor Morehead School for the Blind. The report shall include enrollment numbers at the schools, the budgets, and the academic status of the schools as defined under the ABCs program.

SUBPART 7. dIVISION OF aGing

Requested by:	Representatives Barnhart, Nye 
SENIOR CENTER OUTREACH
SECTION 10.42.(a)  Funds appropriated to the Department of Health and Human Services, Division of Aging, for the 2003‑2005 fiscal biennium, shall be used by the Division of Aging to enhance senior center programs as follows:
(1)	To expand the outreach capacity of senior centers to reach unserved or underserved areas; or
(2)	To provide start‑up funds for new senior centers.
All of these funds shall be allocated by October 1 of each fiscal year.
SECTION 10.42.(b)  Prior to funds being allocated pursuant to this section for start‑up funds for a new senior center, the county commissioners of the county in which the new center will be located shall: 
(1)	Formally endorse the need for such a center;
(2)	Formally agree on the sponsoring agency for the center; and
(3)	Make a formal commitment to use local funds to support the ongoing operation of the center.
SECTION 10.42.(c)  State funding shall not exceed sixty‑five percent (65%) of reimbursable costs.

SUBPART 8. DIVISION OF SOCIAL SERVICES

Requested by:	Representatives Barnhart, Nye 
ADULT CARE HOME MODEL FOR COMMUNITY‑BASED SERVICES
SECTION 10.43.(a)  In keeping with the United States Supreme Court Decision in Olmstead vs. L.C. & E.W. and with State policy to provide appropriate services to clients in the least restrictive and most appropriate environment, the Department of Health and Human Services shall develop a model project for delivering community‑based mental health, developmental disabilities, and substance abuse housing and services through adult care homes that have excess capacity.  The model shall be designed for implementation on a pilot basis and shall address the following:
(1)	Services that will be provided by the facility or under contract with the facility, including assistance with daily medication.
(2)	Access of clients to mental health, developmental disabilities, and substance abuse services provided in the community, including transportation to services outside of the client's residence in the adult care home facility.
(3)	Physical plant additions or changes necessary to provide for independent living of residents.
(4)	Methods for assuring quality of services, resident safety, and cost‑effectiveness.
(5)	Consistency with the Department's Olmstead plan, other policies on community‑integration, and disability plans adopted by the State. 
SECTION 10.43.(b)  The Department shall submit a final report on the development of the model to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division on or before March 1, 2004. The report shall address the following:
(1)	Proposed time and location for implementation of the pilot.
(2)	Proposed number of residents to be placed and services to be provided directly by the facility or under contract with the facility.
(3)	Method for evaluating the pilot, including services provided, on a regular basis.
(4)	A description of the living environment for each resident and a comparison of how the living environment compares to that of other residents in the adult care home.
(5)	Changes to State law necessary to implement the pilot.
(6)	Projected cost to the State for pilot and statewide implementation.

Requested by:	Representatives Barnhart, Nye
CHILD SUPPORT PROGRAM/ENHANCED STANDARDS
SECTION 10.44.(a)  It is the intent of the General Assembly to increase the productivity and enhance the performance of child support enforcement offices statewide.
SECTION 10.44.(b)  The Department of Health and Human Services shall develop and implement performance standards for each of the State and county child support enforcement offices across the State. To develop these performance standards, the Department of Health and Human Services shall evaluate other private and public child support models and national standards as well as other successful collections models. These performance standards shall include the following:
(1)	Cost per collections.
(2)	Consumer satisfaction.
(3)	Paternity establishments.
(4)	Administrative costs.
(5)	Orders established.
(6)	Collections on arrearages.
(7)	Location of absent parents.
(8)	Other related performance measures.
The Department of Health and Human Services shall monitor the performance of each office and shall implement a system of reporting that allows each local office to review its performance as well as the performance of other local offices. The Department of Health and Human Services shall publish an annual performance report that shall include the statewide and local office performance of each child support office.
SECTION 10.44.(c)  The Department of Health and Human Services shall report on its progress, in compliance with this section, to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division by May 1, 2005.

Requested by:	Representatives Barnhart, Nye 
SPECIAL NEEDS ADOPTIONs INCENTIVE FUND
SECTION 10.45.  Part 4 of Article 2 of Chapter 108A of the General Statutes is amended by adding a new section to read:
"§ 108A-50A.  Special Needs Adoptions Incentive Fund.
(a)	There is created a Special Needs Adoptions Incentive Fund to provide financial assistance to facilitate the adoption of certain children residing in licensed foster care homes. These funds shall be used to remove financial barriers to the adoption of these children and shall be available to foster care families who adopt children with special needs, as defined by the Social Services Commission. These funds shall be matched by county funds.
(b)	This program shall not constitute an entitlement and is subject to the availability of funds.
(c)	The Social Services Commission shall adopt rules to implement the provisions of this section."

Requested by:	Representatives Barnhart, Nye 
FOSTER CARE AND ADOPTION ASSISTANCE PAYMENTS
SECTION 10.46.(a)  The maximum rates for State participation in the foster care assistance program are established on a graduated scale as follows:
(1)	$415.00 per child per month for children aged birth through 5;
(2)	$465.00 per child per month for children aged 6 through 12; and
(3)	$515.00 per child per month for children aged 13 through 18.
Of these amounts, fifteen dollars ($15.00) is a special needs allowance for the child.
SECTION 10.46.(b)  The maximum rates for State participation in the adoption assistance program are established on a graduated scale as follows:
(1)	$415.00 per child per month for children aged birth through 5;
(2)	$465.00 per child per month for children aged 6 through 12; and
(3)	$515.00 per child per month for children aged 13 through 18.
SECTION 10.46.(c)  In addition to providing board payments to foster and adoptive families of HIV‑infected children, as prescribed in Section 23.28 of Chapter 324 of the 1995 Session Laws, any additional funds remaining that were appropriated for this purpose shall be used to provide medical training in avoiding HIV transmission in the home.
SECTION 10.46.(d)  The maximum rates for the State participation in HIV foster care and adoption assistance are established on a graduated scale as follows:
(1)	$800.00 per month per child with indeterminate HIV status;
(2)	$1,000 per month per child confirmed HIV‑infected, asymptomatic;
(3)	$1,200 per month per child confirmed HIV‑infected, symptomatic; and
(4)	$1,600 per month per child terminally ill with complex care needs.

Requested by:	Representatives Barnhart, Nye 
SPECIAL CHILDREN ADOPTION FUND
SECTION 10.47.(a)  Of the funds appropriated to the Department of Health and Human Services in this act, the sum of one million one hundred thousand dollars ($1,100,000) shall be used to support the Special Children Adoption Fund for each year of the 2003‑2005 fiscal biennium. The Division of Social Services, in consultation with the North Carolina Association of County Directors of Social Services and representatives of licensed private adoption agencies, shall develop guidelines for the awarding of funds to licensed public and private adoption agencies upon the adoption of children described in G.S. 108A‑50 and in foster care. Payments received from the Special Children Adoption Fund by participating agencies shall be used exclusively to enhance the adoption services. No local match shall be required as a condition for receipt of these funds. In accordance with State rules for allowable costs, the Special Children Adoption Fund may be used for post‑adoption services for families whose income exceed two hundred percent (200%) of the federal poverty level.
SECTION 10.47.(b)  Of the total funds appropriated for the Special Children Adoption Fund each year, twenty percent (20%) of the total funds available shall be reserved for payment to participating private adoption agencies. If the funds reserved in this subsection for payments to private agencies have not been spent on or before March 31, 2004, the Division of Social Services may reallocate those funds, in accordance with this section, to other participating adoption agencies.

Requested by:	Representatives Barnhart, Nye 
Intensive Family Preservation Services Funding and performance enhancements
SECTION 10.48.(a)  The Department of Health and Human Services shall review the Intensive Family Preservation Services Program (IFPS) to enhance and implement initiatives that focus on increasing the sustainability and effectiveness of the Program.
SECTION 10.48.(b)  Notwithstanding the provisions of G.S. 143B‑150.6, the Program shall provide intensive services to children and families in cases of abuse, neglect, and dependency where a child is at imminent risk of removal from the home and to children and families in cases of abuse where a child is not at imminent risk of removal. The Program shall be developed and implemented statewide on a regional basis. The revised IFPS shall ensure the application of standardized assessment criteria for determining imminent risk and clear criteria for determining out‑of‑home placement.
SECTION 10.48.(c)  The Department of Health and Human Services shall require that any program or entity that receives State, federal, or other funding for the purpose of Intensive Family Preservation Services shall provide information and data that allows for:
(1)	An established follow‑up system with a minimum of six months of follow‑up services.
(2)	Detailed information on the specific interventions applied including utilization indicators and performance measurement.
(3)	Cost‑benefit data.
(4)	Data on long‑term benefits associated with Intensive Family Preservation Services. This data shall be obtained by tracking families through the intervention process.
(5)	The number of families remaining intact and the associated interventions while in IFPS and 12 months thereafter.
(6)	The number and percentage by race of children who received Intensive Family Preservation Services compared to the ratio of their distribution in the general population involved with Child Protective Services.
SECTION 10.48.(d)  The Department shall establish performance‑based funding protocol and shall only provide funding to those programs and entities providing the required information specified in subsection (c) of this section. The amount of funding shall be based on the individual performance of each program.
SECTION 10.48.(e)  The Department of Health and Human Services shall report to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division not later than April 1, 2004. The report shall include information and data collected pursuant to subsection (c) of this section.

Requested by:	Representatives Barnhart, Nye 
TANF State Plan
SECTION 10.49.(a)  The General Assembly approves the plan titled "North Carolina Temporary Assistance for Needy Families State Plan FY 2003‑2005", prepared by the Department of Health and Human Services and presented to the General Assembly on May 15, 2003, as revised in accordance with subsection (b) of this section. The North Carolina Temporary Assistance for Needy Families State Plan covers the period October 1, 2003, through September 30, 2005. The Department shall submit the State Plan, as revised in accordance with subsection (b) of this section, to the United States Department of Health and Human Services as amended by this act or any other act of the 2003 General Assembly.
SECTION 10.49.(b)  The Department of Health and Human Services shall revise the North Carolina Temporary Assistance for Needy Families State Plan FY 2003‑2005, submitted to the General Assembly for approval on May 15, 2003. The revisions shall be made to the following Plan components:
(1)	Enhanced Employee Assistance Program to reflect changes in funding.
(2)	Services for Families to remove reference to start‑up activities.
(3)	Work Responsibility to remove reference to start‑up activities.
(4)	Cabarrus County Waiver to reflect changes in the law made by the 2003 General Assembly.
(5)	Goal number eight to provide that caseload reduction goals are subject to economic conditions in the county.
SECTION 10.49.(c)  The counties approved as Electing Counties in North Carolina's Temporary Assistance for Needy Families State Plan FY 2003‑2005 as approved by this section are:  Beaufort, Caldwell, Catawba, Iredell, Lenoir, Lincoln, Macon, McDowell, Sampson, Surry, and Wilkes.
SECTION 10.49.(d)  Counties designated as Electing Counties pursuant to G.S. 108A‑27(d) and who submitted the letter of intent to be redesignated as a standard county and the accompanying county plan for fiscal years 2003 through 2005, pursuant to G.S. 108A‑27(e), shall operate under the standard county budget requirements effective July 1, 2003. Counties that submitted the letter of intent to remain as an electing county or to be redesignated as an electing county and the accompanying county plan for fiscal years 2003 through 2005, pursuant to G.S. 108A‑27(e), shall operate under the electing county budget requirements effective July 1, 2003. For programmatic purposes, all counties referred to in this subsection shall remain under their current county designation through September 30, 2003.

Requested by:	Representatives Barnhart, Nye 
ELECTING COUNTY TANF FUNDS REVERT
SECTION 10.50.  G.S. 108A‑27.11(c) reads as rewritten:
"(c)	Each Electing County's allocation for Work First Family Assistance shall be computed based on the percentage of each Electing County's total expenditures for cash assistance to statewide actual expenditures for cash assistance in 1995‑96. The resulting percentage shall be applied to the federal TANF block grant funds appropriated for cash assistance by the General Assembly each fiscal year. The Department shall transmit the federal funds contained in the county block grants to Electing Counties as soon as practicable after they become available to the State and in accordance with federal cash management laws and regulations. "

Requested by:	Representatives Barnhart, Nye 
SPECIAL ASSISTANCE DEMONSTRATION PROJECT
SECTION 10.51.(a)  The Department of Health and Human Services may use funds from the existing State/County Special Assistance for Adults budget to provide Special Assistance payments to eligible individuals in in‑home living arrangements. These payments may be made for up to 800 individuals during the 2003‑2004 fiscal year and the 2004‑2005 fiscal year. These payments may be made for as long as the individuals who are receiving payments on June 30, 2005, remain eligible. The standard monthly payment to individuals enrolled in the Special Assistance demonstration project shall be fifty percent (50%) of the monthly payment the individual would receive if the individual resided in an adult care home and qualified for Special Assistance, except if a lesser payment amount is appropriate for the individual as determined by the local case manager. For State fiscal year 2003-2004, qualified individuals shall not receive payments at rates less than they would have been eligible to receive in State fiscal year 2002-2003. The Department shall implement Special Assistance in‑home eligibility policies and procedures to assure that demonstration project participants are those individuals who need and, but for the demonstration project, would seek placement in an adult care home facility. The Department shall make an interim report to the cochairs of the House of Representatives Appropriations Committee, the cochairs of the House of Representatives Appropriations Subcommittee on Health and Human Services, the cochairs of the Senate Appropriations Committee, and the cochairs of the Senate Appropriations Committee on Health and Human Services by May 1, 2004. 
SECTION 10.51.(b)  The Department shall report to the cochairs of the House of Representatives Appropriations Committee, the House of Representatives Appropriations Subcommittee on Health and Human Services, the cochairs of the Senate Appropriations Committee, and the cochairs of the Senate Appropriations Committee on Health and Human Services by April 1, 2004. This report shall include the following information:
(1)	A description of cost savings that could occur by allowing individuals eligible for State/County Special Assistance the option of remaining in the home.
(2)	Which activities of daily living or other need criteria are reliable indicators for identifying individuals with the greatest need for income supplements for in‑home living arrangements.
(3)	How much case management is needed and which types of individuals are most in need of case management.
(4)	The geographic location of individuals receiving payments under this section.
(5)	A description of the services purchased with these payments.
(6)	A description of the income levels of individuals who receive payments under this section and the impact on the Medicaid program.
(7)	Findings and recommendations as to the feasibility of continuing or expanding the demonstration program.
(8)	The level and quantity of services (including personal care services) provided to the demonstration project participants compared to the level and quantity of services for residents in adult care homes.
(9)	A fiscal analysis and programmatic results of increasing the demonstration project participant's monthly assistance payment to fifty percent (50%) of the Special Assistance monthly payment.
SECTION 10.51.(c)  The Department shall incorporate data collection tools designed to compare quality of life among institutionalized vs. noninstitutionalized populations (i.e., an individual's perception of his or her own health and well‑being, years of healthy life, and activity limitations). To the extent national standards are available, the Department shall utilize those standards.

Requested by:	Representatives Barnhart, Nye 
STATE/COUNTY SPECIAL ASSISTANCE
SECTION 10.52.(a)  The eligibility of Special Assistance recipients residing in adult care homes on August 1, 1995, shall not be affected by an income reduction in the Special Assistance eligibility criteria resulting from adoption of the Rate Setting Methodology Report and Related Services, providing these recipients are otherwise eligible.  The maximum monthly rate for these residents in adult care home facilities shall be one thousand two hundred thirty‑one dollars ($1,231) per month per resident.
SECTION 10.52.(b)  The maximum monthly rate for residents in adult care home facilities shall be one thousand ninety‑one dollars ($1,091) per month per resident through September 30, 2003. 
SECTION 10.52.(c)   Effective October 1, 2003, the maximum monthly rate for residents in adult care home facilities shall be one thousand sixty‑six dollars ($1,066) per month per resident unless adjusted by the Department in accordance with subsection (f) of this section.
SECTION 10.52.(d)  The eligibility of Special Assistance recipients who reside in adult care homes on September 30, 2003, and remain continuously eligible shall not be affected by an income reduction in the Special Assistance eligibility criteria, providing these recipients are otherwise eligible.  The maximum monthly rate for these residents in adult care home facilities shall be one thousand ninety‑one dollars ($1,091) per month per resident. The standard of need level for coverage eligibility under State/County Special Assistance, for individuals not enrolled or recipients of the program on September 30, 2003, shall be not less than one thousand ninety-one dollars ($1,091) per month per individual, but the monthly reimbursement rate for such individuals shall be the amount established under subsections (c) and (f) of this section.
SECTION 10.52.(e)  The sum of three million one hundred eighty‑nine thousand six hundred seventy‑five dollars ($3,189,675) for the 2003‑2004 fiscal year and the sum of four million four hundred thirty‑one thousand eight hundred forty‑six dollars ($4,431,846) for the 2004‑2005 fiscal year appropriated to the Department of Health and Human Services shall be transferred from the Division of Social Services to the Division of Medical Assistance and used as State match to draw down federal matching funds to help pay for Medicaid's personal care services for adult care homes (ACH‑PCS) rather than the State/County Special Assistance Program.
SECTION 10.52.(f)  Notwithstanding any other provision of this section, the Department of Health and Human Services shall review activities and costs related to the provision of care in adult care homes and shall determine what costs may be considered to properly maximize allowable reimbursement available through Medicaid personal care services for adult care homes (ACH-PCS) under federal law.  As determined, and with any necessary approval from the Centers for Medicare and Medicaid Services (CMS), and the approval of the Office of State Budget and Management, the Department may transfer necessary funds from the State/County Special Assistance program within the Division of Social Services to the Division of Medical Assistance and may use those funds as State match to draw down federal matching funds to pay for such activities and costs under Medicaid's personal care services for adult care homes (ACH-PCS), thus maximizing available federal funds.  The established rate for State/County Special Assistance set forth in subsection (c) of this section shall be adjusted by the Department to reflect any transfer of funds from the Division of Social Services to the Division of Medical Assistance, and related transfer costs and responsibilities from State/County Special Assistance to the Medicaid personal care services for adult care homes (ACH-PCS).  Such rate adjustments to the Special Assistance rate shall be effective with the effective date of increased reimbursement under ACH-PCS.  In no event shall the reimbursement for services through the ACH-PCS exceed the average cost of such services as determined by the Department from review of cost reports as required and submitted by adult care homes.  The Department shall report any transfers of funds and modifications of rates to the House of Representatives Appropriations Subcommittee on Health and Human Services, the Senate Appropriations Committee on Health and Human Services, and the Fiscal Research Division.

Requested by:	Representatives Barnhart, Nye 
STATE/COUNTY SPECIAL ASSISTANCE TRANSFER OF ASSETS
SECTION 10.53.(a)  Notwithstanding any other provision of law to the contrary, Supplemental Security Income (SSI) policy applicable to transfer of assets and estate recovery, as prescribed by federal  law, shall apply to applicants for State/County Special Assistance.
SECTION 10.53.(b)  The Department of Health and Human Services shall continue to review whether policy for State/County Special Assistance should be changed to permit an assisted living facility to accept from a family member of a resident who qualifies for State/County Special Assistance payment for the difference in the monthly rate for room, board, and services available.  In reviewing current policy, the Department shall consider the following conditions on family contributions to the resident's cost of care:
(1)	Ensuring that the resident meets all income and resource eligibility requirements for State/County Special Assistance.
(2)	Not counting payments made by family members to the facility as income to the resident or as an in‑kind contribution when calculating the monthly rate applicable to the resident.
(3)	Ensuring that supplemental payments are made on a voluntary basis as specified in the resident agreement.
Not later than March 1, 2004, the Department shall report on its activities under this subsection to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division.

Requested by:	Representatives Nye, Barnhart
Limitation on State Abortion Funding
SECTION 10.54.(a)  No State funds shall be used for the performance of abortions. However, the Department of Health and Human Services may expend funds to the extent necessary to comply with federal law and regulations governing Medicaid.

Requested by:	Representatives Barnhart, Nye 
Funds for Food Banks
SECTION 10.55.(a)  Of the funds appropriated to the Department of Health and Human Services in this act, the sum of one million dollars ($1,000,000) for the 2003‑2004 fiscal year shall be allocated equally among the six Second Harvest North Carolina food banks.
SECTION 10.55.(b)  Each organization shall report to the Department of Health and Human Services and the Fiscal Research Division on the activities performed and the impact on local communities directly associated with the funds allocated in subsection (a) of this section by April 1, 2004. Each organization shall provide to the Department of Health and Human Services and the Fiscal Research Division a copy of its annual audited financial statement within 30 days of issuance of the statement.

Requested by:	Representative Clary
CHILD WELFARE SYSTEM PILOTS SYSTEM
SECTION 10.56.(a)  The Department of Health and Human Services, Division of Social Services, shall continue working with local departments of social services to implement an alternative response system of child protection in no fewer than 10 and no more than 33 demonstration areas in this State. The Division of Social Services may exceed the maximum number of demonstration areas if a county specifically requests inclusion and the Division determines that resources are available. The demonstration projects in place in the 2003-2004 fiscal year shall continue. The alternative response system shall provide for a family-centered approach to child protective services which local departments of social services utilize family assessment tools and family support principles when responding to selected reports of suspected child neglect and dependency.
SECTION 10.56.(b)  The Department of Health and Human Services shall evaluate the original pilot demonstration areas to determine the impact the alternative response system to child protective services has had in the following areas:
(1)	Child safety.
(2)	Timeliness of response.
(3)	Timeliness of service.
(4)	Coordination of local human services.
SECTION 10.56.(c)  The Department of Health and Human Services shall proceed to expand this demonstration project if non-State funds are identified for this purpose.
SECTION 10.56.(d)  The Department of Health and Human Services shall report on the outcome of the evaluation of the original pilot demonstration areas pursuant to subsection (b) of this section and the expansion of the demonstration areas. The Department shall make recommendations for statewide implementation of an alternative response system to child protective services. The report shall include any statutory changes required for full implementation. Any recommendations for statutory changes contained in the report shall be eligible for consideration by the 2003 General Assembly in the 2004 Regular Session. The report shall be submitted to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division not later than April 1, 2004.

PART XI. DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES

Requested by:	Representatives Fox, West
Grass Roots Science Program
SECTION 11.1.  Of the funds appropriated in this act to the Department of Environment and Natural Resources for the Grassroots Science Program, the sum of two million six hundred five thousand six hundred thirty‑seven dollars ($2,605,637) for fiscal year 2003‑2004 and the sum of two million six hundred five thousand six hundred thirty‑seven dollars ($2,605,637) for fiscal year 2004‑2005 are allocated as grants‑in‑aid for each fiscal year as follows:

	2003‑2004	2004‑2005

Aurora Fossil Museum	$56,704		$56,704
Cape Fear Museum	 $185,762		$185,762
Catawba Science Center	$135,096		$135,096
Colburn Gem and Mineral Museum, Inc.	$66,894		$66,894
Discovery Place	$625,643		$625,643
Granville County Museum Commission,
Inc. ‑ Harris Gallery	$55,897		$55,897
The Health Adventure Museum of Pack
Place Education, Arts and
Science Center, Inc.	$121,268		$121,268
Imagination Station	$85,384		$85,384
Iredell County Children's Museum	$56,631		$56,631
Museum of Coastal Carolina	$69,352		$69,352
Natural Science Center of Greensboro	$183,703		$183,703
North Carolina Museum of Life
and Science	$389,011		$389,011
Rocky Mount Children's Museum	$72,859		$72,859
Schiele Museum of Natural History	$234,921		$234,921
Sci Works Science Center and
Environmental Park of Forsyth County	$147,788		$147,788
Western North Carolina Nature Center	$118,726		$118,726

Total	$2,605,637		$2,605,637

Requested by:	Representatives Fox, West
Statewide Beaver Damage Control Program Fund
SECTION 11.2.  Of the funds appropriated to the Wildlife Resources Fund in this act, the sum of four hundred forty‑nine thousand dollars ($449,000) for the 2003‑2004 fiscal year and the sum of four hundred forty‑nine thousand dollars ($449,000) for the 2004‑2005 fiscal year shall be used to provide the State share necessary to support the beaver damage control program established in G.S. 113‑291.10, provided the sum of at least twenty‑five thousand dollars ($25,000) in federal funds is available each fiscal year of the biennium to provide the federal share.

Requested by:	Representatives Fox, West
Funds for Cleanup of Warren County PCB Landfill
SECTION 11.3.(a)  Notwithstanding the provisions of G.S. 143‑215.3A, the Department of Environment and Natural Resources may use up to five hundred thousand dollars ($500,000) for the 2003‑2004 fiscal year from the fees collected for water quality permits under G.S. 143‑215.3D and credited to the Water Permits Fund if both of the following conditions are satisfied:
(1)	The detoxification and remediation of the landfill located in Warren County cannot be completed without these additional funds. 
(2)	All other funds, including all contingency funds, available to the Department for the detoxification and remediation of the landfill located in Warren County that contains polychlorinated biphenyl (PCBs) and dioxin/furan contaminated materials have been spent or encumbered.
SECTION 11.3.(b)  It is the intent of the General Assembly that the funds authorized under subsection (a) of this section will be sufficient to complete the detoxification and remediation of this landfill, based on representations made to the General Assembly.

Requested by:	Representatives Fox, West
commercial and noncommercial Underground storage tank funds
SECTION 11.4.(a)  Section 19 of S.L. 1989‑652, Section 67 of S.L. 1991‑1044, Section 15(a) and Section 15(b) of S.L. 1995‑377, and Section 1 of S.L. 2001‑454 are repealed, which has the effect of repealing two million six hundred twenty‑five thousand dollars ($2,625,000) in appropriations from the Commercial Leaking Petroleum Underground Storage Tank Cleanup Fund to the Department of Environment and Natural Resources and one million two hundred ninety‑five thousand dollars ($1,295,000) in appropriations from the Noncommercial Leaking Petroleum Underground Storage Tank Cleanup Fund to the Department of Environment and Natural Resources.
SECTION 11.4.(b)  There is appropriated from the Commercial Leaking Petroleum Underground Storage Tank Cleanup Fund to the Department of Environment and Natural Resources the sum of two million six hundred twenty‑five thousand dollars ($2,625,000) for the 2003‑2004 fiscal year and the sum of two million six hundred twenty‑five thousand dollars ($2,625,000) for the 2004‑2005 fiscal year to administer the underground storage tank program under Parts 2A and 2B of Article 21A of Chapter 143 of the General Statutes.
SECTION 11.4.(c)  It is the intent of the General Assembly that the funds under subsection (b) of this section are recurring funds.
SECTION 11.4.(d)  There is appropriated from the Noncommercial Leaking Petroleum Underground Storage Tank Cleanup Fund to the Department of Environment and Natural Resources the sum of one million two hundred ninety‑five thousand dollars ($1,295,000) for the 2003‑2004 fiscal year and the sum of one million two hundred ninety‑five thousand dollars ($1,295,000) for the 2004‑2005 fiscal year to administer the underground storage tank program under Parts 2A and 2B of Article 21A of Chapter 143 of the General Statutes.
SECTION 11.4.(e)  It is the intent of the General Assembly that the funds under subsection (c) of this section are recurring funds.
SECTION 11.4.(f)  The Office of State Budget and Management shall certify the appropriations under subsections (b) and subsection (d) of this section in the budget codes for the Commercial and Noncommercial Leaking Petroleum Underground Storage Tank Cleanup Funds and in the General Fund budget code for the Department of Environment and Natural Resources.

Requested by:	Representatives Fox, West
Eliminate DENR Position
SECTION 11.5.(a)  The position of Environmental Regulatory Supervisory II (Position Number 4332‑000‑0032‑700) in the Department of Environment and Natural Resources is eliminated.
SECTION 11.5.(b)  This section becomes effective June 30, 2003.

Requested by:	Representatives Fox, West, LaRoque
Cost Share Funds for Limited Resource/New Farmers
SECTION 11.6.  G.S. 143‑215.74(b) reads as rewritten:
"(b)	The program shall be subject to the following requirements and limitations:
(1)	The purpose of the program shall be to reduce the input of agricultural nonpoint source pollution into the water courses of the State.
(2)	The program shall initially include the present 16 nutrient sensitive watershed counties and 17 additional counties.
(3)	Subject to subdivision (7) of this subsection, priority designations for inclusions in the program shall be under the authority of the Soil and Water Conservation Commission. The Soil and Water Conservation Commission shall retain the authority to allocate the cost share funds.
(4)	Areas shall be included in the program as the funds are appropriated and the technical assistance becomes available from the local Soil and Water Conservation District.
(5)	Funding may be provided to assist practices including conservation tillage, diversions, filter strips, field borders, critical area plantings, sedimentation control structures, sod‑based rotations, grassed waterways, strip‑cropping, terraces, cropland conversion to permanent vegetation, grade control structures, water control structures, closure of lagoons, emergency spillways, riparian buffers or equivalent controls, odor control best management practices, insect control best management practices, and animal waste management systems and application. Funding for animal waste management shall be allocated for practices in river basins such that the funds will have the greatest impact in improving water quality.
(6)	Except as provided in subdivision (8) and subdivision (9) of this subsection, State funding shall be limited to seventy‑five percent (75%) of the average cost for each practice with the assisted farmer providing twenty‑five percent (25%) of the cost, which may include in‑kind support of the practice, with a maximum of seventy‑five thousand dollars ($75,000) per year to each applicant.
(7)	Priority designation for inclusion in the program for State funding shall be given to projects that improve water quality. To be eligible for cost share funds under this subdivision, a project shall be evaluated before funding is awarded and after the project is completed to determine the impact on water quality.
(8)	For practices that are eligible for funding from the federal Conservation Reserve Enhancement Program, State funding from the program shall be limited to seventy‑five percent (75%) of the average cost of each practice, with the remainder paid from funding from the Conservation Reserve Enhancement Program, other available federal funds, other State funds, or the assisted farmer, whose contribution may include in‑kind support of the practice. This subdivision is subject to subdivision (9) of this subsection.
(9)	When the applicant is either a limited-resource farmer or a beginning farmer, State funding shall be limited to ninety percent (90%) of the average cost for each practice with the assisted farmer providing ten percent (10%) of the cost, which may include in‑kind support of the practice, with a maximum of one hundred thousand dollars ($100,000) per year to each applicant. The following definitions apply in this subdivision:
a.	Beginning farmer. – A farmer who has not operated a farm or who has operated a farm for not more than 10 years and who will materially and substantially participate in the operation of the farm.
b.	Limited-resource farmer. – A farmer with direct and indirect gross farm sales that do not exceed one hundred thousand dollars ($100,000). 
c.	Materially and substantially participate. –
1.	In the case of an individual, for the individual, including members of the immediate family of the individual, to provide substantial day-to-day labor and management of the farm, consistent with the practices in the county in which the farm is located.
2.	In the case of an entity, for all members of the entity, to participate in the operation of the farm, with some members providing management and some members providing labor and management necessary for day-to-day activities such that if the members did not provide the management and labor, the operation of the farm would be seriously impaired." 

Requested by:	Representatives Fox, West
Clean Water Management Trust Fund/No acquisition of real estate interests in certain counties.
SECTION 11.7.  G.S. 113‑145.3 reads as rewritten:
"§ 113‑145.3.  Clean Water Management Trust Fund: established.
(a)	Fund Established. – There is established a Clean Water Management Trust Fund in the State Treasurer's Office that shall be used to finance projects to clean up or prevent surface water pollution in accordance with this Article.
(b)	Fund Earnings, Assets, and Balances. – The State Treasurer shall hold the Fund separate and apart from all other moneys, funds, and accounts. Investment earnings credited to the assets of the Fund shall become part of the Fund. Any balance remaining in the Fund at the end of any fiscal year shall be carried forward in the Fund for the next succeeding fiscal year. Payments from the Fund shall be made on the warrant of the Chair of the Board of Trustees.
(c)	Fund Purposes. – Except as provided in subsection (c1) of this section, moneys from the Fund may be used for any of the following purposes:
(1)	To acquire land for riparian buffers for the purposes of providing environmental protection for surface waters and urban drinking water supplies and establishing a network of riparian greenways for environmental, educational, and recreational uses.
(2)	To acquire conservation easements or other interests in real property for the purpose of protecting and conserving surface waters and urban drinking water supplies.
(3)	To coordinate with other public programs involved with lands adjoining water bodies to gain the most public benefit while protecting and improving water quality.
(4)	To restore previously degraded lands to reestablish their ability to protect water quality.
(5)	To repair failing waste treatment systems if: (i) an application has first been submitted to receive a loan or grant from the Clean Water Revolving Loan and Grant Fund and the application was denied during the latest review cycle; (ii) the repair is a reasonable remedy for resolving an existing waste treatment problem; and (iii) the repair is not for the purpose of expanding the system to accommodate future anticipated growth of a community. Priority shall be given to economically distressed units of local government.
(6)	To repair and eliminate failing septic tank systems, to eliminate illegal drainage connections, and to expand waste treatment systems if the system is being expanded as a remedy to eliminate failing septic tank systems or illegal drainage connections. Priority shall be given to economically distressed units of local government.
(7)	To improve stormwater controls and management practices.
(8)	To facilitate planning that targets reductions in surface water pollution.
(9)	To fund operating expenses of the Board of Trustees and its staff.
(c1)	Moneys from the Fund shall not be used to acquire any interest in real property for any purpose in any county in which the sum total of land owned by either the federal or State government exceeds forty percent (40%). This subsection does not apply to a county if the board of commissioners of the county adopts a resolution consenting to the acquisition.
(d)	Limit on Operating and Administrative Expenses. – No more than two percent (2%) of the annual balance of the Fund on July 1 or a total sum of one million two hundred fifty thousand dollars ($1,250,000), whichever is greater, may be used each fiscal year for administrative and operating expenses of the Board of Trustees and its staff."

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Wright
Clean Water Management Trust Fund Appropriation
SECTION 11.8.  Notwithstanding  G.S. 143‑15.3B(a) for the 2003‑2005 fiscal biennium only, the appropriation to the Clean Water Management Trust Fund for the 2003‑2004 fiscal year is only twenty‑five million dollars ($25,000,000) as provided by this act and is only twenty five‑million dollars ($25,000,000) for the 2004‑2005 fiscal year as provided by this act.  The funds appropriated by this act to the Clean Water Management Trust Fund shall be used as provided by G.S. 143‑15.3B(b).

Requested by:	Representative Gillespie
STUDY REALLOCATION OF BAILEY FORK WATERSHED PROPERTY TO STATE PARK/ACCESS TO STATE PARK 
SECTION 11.9.(a)  The Department of Environment and Natural Resources and the Department of Health and Human Services shall study the desirability of reallocating the 454 acres that comprise the Bailey Fork watershed property located in Burke County that is currently owned by the Department of Health and Human Services and shall study whether to provide access to new facilities at the South Mountains State Park to students at the North Carolina School for the Deaf at Morganton.  After considering these matters under this section, the Departments may submit a request to the Council of State to reallocate the 454 acres that comprise the Bailey Fork watershed property located in Burke County to the South Mountains State Park as an addition to the South Mountains State Park. No later than January 1, 2004, the Department of Environment and Natural Resources and the Department of Health and Human Services shall report the results of the study, including any findings and recommendations, to the House of Representatives and Senate Appropriations Subcommittees on Natural and Economic Resources.
SECTION 11.9.(b)  Prior to July 1, 2005, the 454 acres that comprise the Bailey Fork watershed property located in Burke County that is currently owned by the Department of Health and Human Services shall not be transferred or sold without review and approval by the General Assembly.

PART XII. DEPARTMENT OF COMMERCE

Requested by:	Representatives Fox, West
Wanchese Seafood Industrial Park/Oregon Inlet Funds
SECTION 12.1.(a)  Of the funds appropriated in this act to the Department of Commerce for the Wanchese Seafood Industrial Park, the sum of one hundred twenty‑seven thousand eight hundred seventy dollars ($127,870) for the 2003‑2004 fiscal year and the sum of one hundred twenty‑seven thousand eight hundred seventy dollars ($127,870) for the 2004‑2005 fiscal year may be expended by the North Carolina Seafood Industrial Park Authority for operations, maintenance, repair, and capital improvements in accordance with Article 23C of Chapter 113 of the General Statutes, in addition to funds available to the Authority for these purposes.
SECTION 12.1.(b)  Funds appropriated to the Department of Commerce for the 2002‑2003 fiscal year for the Oregon Inlet Project that are unexpended and unencumbered as of June 30, 2003, shall not revert to the General Fund on June 30, 2003, but shall remain available to the Department for legal costs associated with the Project.  This subsection becomes effective June 30, 2003.

Requested by:	Representatives Fox, West
Council of Government Funds
SECTION 12.2.(a)  Of the funds appropriated in this act to the Department of Commerce, eight hundred thirty‑two thousand one hundred fifty dollars ($832,150) for the 2003‑2004 fiscal year and eight hundred thirty‑two thousand one hundred fifty dollars ($832,150) for the 2004‑2005 fiscal year shall only be used as provided by this section.  Each regional council of government or lead regional organization is allocated up to forty‑eight thousand nine hundred fifty dollars ($48,950) for the 2003‑2004 and the 2004‑2005 fiscal years.
SECTION 12.2.(b)  A regional council of government may use funds appropriated by this section only to assist local governments in grant applications, economic development, community development, support of local industrial development activities, and other activities as deemed appropriate by the member governments.
SECTION 12.2.(c)  Funds appropriated by this section shall be paid by electronic transfer in two equal installments, the first no later than September 1, 2003, and the second subsequent to acceptable submission of the annual report due to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division by January 15, 2005, as specified in subdivision (e)(2) of this section.
SECTION 12.2.(d)  Funds appropriated by this section shall not be used for payment of dues or assessments by the member governments and shall not supplant funds appropriated by the member governments.
SECTION 12.2.(e)  Each council of government or lead regional organization shall do the following:
(1)	By January 15, 2004, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
a.	State fiscal year 2002‑2003 program activities, objectives, and accomplishments;
b.	State fiscal year 2002‑2003 itemized expenditures and fund sources;
c.	State fiscal year 2003‑2004 planned activities, objectives, and accomplishments, including actual results through December 31, 2003; and
d.	State fiscal year 2003‑2004 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2003;
(2)	By January 15, 2005, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
a.	State fiscal year 2003‑2004 program activities, objectives, and accomplishments;
b.	State fiscal year 2003‑2004 itemized expenditures and fund sources;
c.	State fiscal year 2004‑2005 planned activities, objectives, and accomplishments, including actual results through December 31, 2004; and
d.	State fiscal year 2004‑2005 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2004; and
(3)	Provide to the Fiscal Research Division a copy of the organization's annual audited financial statement within 30 days of issuance of the statement.

Requested by:	Representatives Fox, West
Tourism Promotion funds
SECTION 12.3.  Funds appropriated in this act to the Department of Commerce for tourism promotion grants shall be allocated to counties in an effort to direct funds to counties most in need.  Determinations of which counties are most in need shall focus on those with the lowest per capita income, highest unemployment, and slowest population growth, in the following manner:
(1)	Counties 1 through 20 are each eligible to receive a maximum grant of seven thousand five hundred dollars ($7,500) for each fiscal year, provided these funds are matched on the basis of one non‑State dollar for every four State dollars.
(2)	Counties 21 through 50 are each eligible to receive a maximum grant of three thousand five hundred dollars ($3,500) for two of the next three fiscal years, provided these funds are matched on the basis of one non‑State dollar for every three State dollars.
(3)	Counties 51 through 100 are each eligible to receive a maximum grant of three thousand five hundred dollars ($3,500) for alternating fiscal years, beginning with the 1991‑1992 fiscal year, provided these funds are matched on the basis of four non‑State dollars for every State dollar.

Requested by:	Representatives Fox, West
One North Carolina – Industrial recruitment Competitive Fund 
SECTION 12.4.(a)  Funds appropriated to the Department of Commerce for the One North Carolina ‑ Industrial Recruitment Competitive Fund shall be used to continue the Fund.  The purpose of the Fund is to provide financial assistance to those businesses or industries deemed by the Governor to be vital to a healthy and growing State economy and that are making significant efforts to establish or expand in North Carolina.
SECTION 12.4.(b)  Moneys allocated from the Competitive Fund shall be used for the following purposes:
(1)	Installation or purchase of equipment;
(2)	Structural repairs, improvements, or renovations of existing buildings to be used for expansion; and
(3)	Construction of or improvements to new or existing water, sewer, gas or electric utility distribution lines, or equipment for existing buildings.
Moneys may also be used for construction of or improvements to new or existing water, sewer, gas or electric utility distribution lines, or equipment to serve new or proposed industrial buildings used for manufacturing and industrial operations. The Governor shall adopt guidelines and procedures for the commitment of moneys from the Fund.
SECTION 12.4.(c)  The Department of Commerce shall report on or before September 30, 2003, and quarterly thereafter, to the Joint Legislative Commission on Governmental Operations and to the Fiscal Research Division on the commitment, allocation, and use of funds allocated from the One North Carolina ‑ Industrial Recruitment Competitive Fund.
SECTION 12.4.(d)  Funds appropriated to the Department of Commerce for the 2002‑2003 fiscal year for the One North Carolina ‑ Industrial Recruitment Competitive Fund that are unexpended and unencumbered as of June 30, 2003, shall not revert to the General Fund on June 30, 2003, but shall remain available to the Department for providing financial assistance to those businesses and industries deemed by the Governor to be vital to a healthy and growing State economy and that are making significant efforts to establish or expand in North Carolina.
SECTION 12.4.(e)  This section becomes effective June 30, 2003.

Requested by:	Representatives Fox, West
Industrial Development Fund
SECTION 12.5.(a)  The Department of Commerce shall reduce the cash balance of the Industrial Development Fund by one million one hundred sixty‑nine thousand four hundred thirty‑eight dollars ($1,169,438).
SECTION 12.5.(b)  This section becomes effective June 30, 2002.

Requested by:	Representatives Fox, West
Worker Training Trust Fund
SECTION 12.6.(a)  There is appropriated from the Worker Training Trust Fund to the Employment Security Commission of North Carolina the sum of five million dollars ($5,000,000) for the 2003‑2004 fiscal year for the operation of local offices.
SECTION 12.6.(b)  Notwithstanding the provisions of G.S. 96‑5(f), there is appropriated from the Worker Training Trust Fund to the following agencies the following sums for the 2003‑2004 fiscal year for the following purposes:
(1)	One hundred ninety‑three thousand eight hundred seventy‑nine dollars ($193,879) for the 2003‑2004 fiscal year to the Employment Security Commission for the State Occupational Information Coordinating Committee to develop and operate an interagency system to track former participants in State education and training programs;
(2)	Fifty‑three thousand eight hundred fifty‑six dollars ($53,856) for the 2003‑2004 fiscal year to the Employment Security Commission to maintain compliance with Chapter 96 of the General Statutes, which directs the Commission to employ the Common Follow‑Up Management Information System to evaluate the effectiveness of the State's job training, education, and placement programs;
(3)	Eight hundred sixty‑one thousand six hundred eighty‑four dollars ($861,684) for the 2003‑2004 fiscal year to the Department of Labor to continue the Apprenticeship Program; and
(4)	Two hundred forty thousand dollars ($240,000) for the 2003‑2004 fiscal year to the Community Colleges System Office for the operation of the Hosiery Technology Center.
SECTION 12.6.(c)  The agencies listed in subsections (a) and (b) of this section shall, by January 15, 2004, and more frequently as requested, for the programs for which funds are appropriated in this section, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
(1)	State fiscal year 2003‑2004 program activities, objectives, and accomplishments;
(2)	State fiscal year 2003‑2004 itemized expenditures and fund sources;
(3)	State fiscal year 2004‑2005 planned activities, objectives, and accomplishments including actual results through December 31, 2003; and
(4)	State fiscal year 2004‑2005 estimated itemized expenditures and fund sources including actual expenditures and fund sources through December 31, 2003.
SECTION 12.6.(d)  Notwithstanding the provisions of G.S. 96‑5(f), funds appropriated for 2002‑2003 from the Worker Training Trust Fund to the Community Colleges System Office for both the Focused Industrial Training Program and the Training Initiatives shall not revert, but shall remain available to the System Office for the support of each program in fiscal year 2003‑2004.

Requested by:	Representatives Fox, West
Regional Economic Development Commission Allocations
SECTION 12.7.(a)  Funds appropriated in this act to the Department of Commerce for regional economic development commissions shall be allocated to the following commissions in accordance with subsection (b) of this section: Western North Carolina Regional Economic Development Commission, Research Triangle Regional Commission, Southeastern North Carolina Regional Economic Development Commission, Piedmont Triad Partnership, Northeastern North Carolina Regional Economic Development Commission, Global TransPark Development Commission, and Carolinas Partnership, Inc.
SECTION 12.7.(b)  Funds appropriated pursuant to subsection (a) of this section shall be allocated to each regional economic development commission as follows:
(1)	First, the Department shall establish each commission's allocation by determining the sum of allocations to each county that is a member of that commission. Each county's allocation shall be determined by dividing the county's enterprise factor by the sum of the enterprise factors for eligible counties and multiplying the resulting percentage by the amount of the appropriation. As used in this subdivision, the term "enterprise factor" means a county's enterprise factor as calculated under G.S. 105‑129.3; seven million five hundred thousand dollars ($7,500,000) appropriated to the Global TransPark Development Zone in Section 6 of Chapter 561 of the 1993 Session Laws; and
(2)	Next, the Department shall subtract from funds allocated to the Global TransPark Development Zone the sum of one hundred seventy‑one thousand nine hundred seventy‑nine dollars ($171,979) in each fiscal year, which sum represents the interest earnings in each fiscal year on the estimated balance of seven million five hundred thousand dollars ($7,500,000) appropriated to the Global TransPark Development Zone in Section 6 of Chapter 561 of the 1993 Session Laws; and
(3)	Next, the Department shall redistribute the sum of one hundred seventy‑one thousand nine hundred seventy‑nine dollars ($171,979) in each fiscal year to the seven regional economic development commissions named in subsection (a) of this section. Each commission's share of this redistribution shall be determined according to the enterprise factor formula set out in subdivision (1) of this subsection. This redistribution shall be in addition to each commission's allocation determined under subdivision (1) of this subsection.

Requested by:	Representatives Fox, West
Regional Economic Development Commission Reports
SECTION 12.8.(a)  By February 15 of each fiscal year, beginning in 2004, the seven regional economic development commissions shall report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
(1)	The preceding fiscal year's program activities, objectives, and accomplishments.
(2)	The preceding fiscal year's itemized expenditures and fund sources.
(3)	Demonstration of how the commission's regional economic development and marketing strategy aligns with the State's overall economic development and marketing strategies.
(4)	To the extent they are involved in promotion activities such as trade shows, visits to prospects and consultants, advertising and media placement, the commissions shall demonstrate how they have generated qualified leads.
SECTION 12.8.(b)  Each of the commissions shall provide to the Fiscal Research Division a copy of their annual audited financial statement within 30 days of issuance of the statement.
SECTION 12.8.(c)  The reporting requirements for regional economic development commissions, as provided in subsection (a) of this section, shall be reviewed annually by the North Carolina Partnership for Economic Development and recommendations for changes to the reporting requirements shall be made to the Fiscal Research Division, the President Pro Tempore of the Senate, and the Speaker of the House of Representatives.
SECTION 12.8.(d)  Regional economic development commissions shall receive quarterly allocations of the funds appropriated in this act to the Department of Commerce for regional economic development commissions.
SECTION 12.8.(e)  Regional economic development commissions shall remain in the Department of Commerce's Budget Code 14601 with other State‑aided nonprofit entities.
SECTION 12.8.(f)  The Board Structure of the Global TransPark Development Commission shall be studied in accordance with the recommendations found in the UNC Kenan‑Flagler study, to determine if the board structure should be reconstituted and made similar to the boards of the Northeastern or Southeastern North Carolina Regional Economic Development Commissions.  In conducting the study, the following conditions shall be met:
(1)	The Global TransPark Development Commission shall contribute to the cost of the study by retaining a consultant familiar with the partnership.
(2)	The Study shall be conducted by a designee of the North Carolina Partnership for Economic Development determined by the Partnership Presidents, a designee of the UNC Kenan‑Flager School of Business, and the consultant retained by the Global TransPark Development Commission.
(3)	None of the eastern regional commissions shall be consolidated.
(4)	The results of the study shall be submitted to the Fiscal Research Division and members of the North Carolina Partnership for Economic Development prior to the beginning of the 2004 Regular Session of the 2003 General Assembly.

Requested by:	Representatives Fox, West
Nonprofit Reporting Requirements
SECTION 12.9.(a)  The N.C. Institute for Minority Economic Development, Inc., Land Loss Prevention Project, North Carolina Minority Support Center, North Carolina Community Development Initiative, Inc., North Carolina Association of Community Development Corporations, Inc., and Partnership for the Sounds, Inc., shall do the following:
(1)	By January 15, 2004, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
a.	State fiscal year 2002‑2003 program activities, objectives, and accomplishments;
b.	State fiscal year 2002‑2003 itemized expenditures and fund sources;
c.	State fiscal year 2003‑2004 planned activities, objectives, and accomplishments including actual results through December 31, 2003; and
d.	State fiscal year 2003‑2004 estimated itemized expenditures and fund sources including actual expenditures and fund sources through December 31, 2003;
(2)	By January 15, 2005, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
a.	State fiscal year 2003‑2004 program activities, objectives, and accomplishments;
b.	State fiscal year 2003‑2004 itemized expenditures and fund sources;
c.	State fiscal year 2004‑2005 planned activities, objectives, and accomplishments including actual results through December 31, 2004; and
d.	State fiscal year 2004‑2005 estimated itemized expenditures and fund sources including actual expenditures and fund sources through December 31, 2004; and
(3)	Provide to the Fiscal Research Division a copy of the organization's annual audited financial statement within 30 days of issuance of the statement.
SECTION 12.9.(b)  No funds appropriated under this act shall be released to a nonprofit organization listed in subsection (a) of this section until the organization has satisfied the reporting requirement for January 15, 2003.  Fourth quarter allotments shall not be released to any nonprofit organization that does not satisfy the reporting requirements by January 15, 2004, or January 15, 2005.

Requested by:	Representatives Fox, West
Biotechnology Center 
SECTION 12.10.(a)  The North Carolina Biotechnology Center shall recapture funds spent in support of successful research and development efforts in the for‑profit private sector.
SECTION 12.10.(b)  The North Carolina Biotechnology Center shall provide funding for biotechnology, biomedical, and related bioscience applications under its Business and Science Technology Programs.
SECTION 12.10.(c)  The North Carolina Biotechnology Center shall:
(1)	By January 15, 2004, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
a.	State fiscal year 2002‑2003 program activities, objectives, and accomplishments;
b.	State fiscal year 2002‑2003 itemized expenditures and fund sources;
c.	State fiscal year 2003‑2004 planned activities, objectives, and accomplishments including actual results through December 31, 2003; and
d.	State fiscal year 2003‑2004 estimated itemized expenditures and fund sources including actual expenditures and fund sources through December 31, 2003;
(2)	By January 15, 2005, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
a.	State fiscal year 2003‑2004 program activities, objectives, and accomplishments;
b.	State fiscal year 2003‑2004 itemized expenditures and fund sources;
c.	State fiscal year 2004‑2005 planned activities, objectives, and accomplishments including actual results through December 31, 2004; and
d.	State fiscal year 2004‑2005 estimated itemized expenditures and fund sources including actual expenditures and fund sources through December 31, 2004; and
(3)	Provide to the Fiscal Research Division a copy of the organization's annual audited financial statement within 30 days of issuance of the statement.
SECTION 12.10.(d)  The North Carolina Biotechnology Center shall provide a report containing detailed budget, personnel, and salary information to the Office of State Budget and Management and to the Fiscal Research Division in the same manner as State departments and agencies in preparation for biennium budget requests.

Requested by:	Representatives Fox, West
Rural Economic Development Center
SECTION 12.11.(a)  Of the funds appropriated in this act to the Rural Economic Development Center, Inc., the sum of one million seven hundred fourteen thousand six hundred seventy‑seven dollars ($1,714,677) for the 2003‑2004 fiscal year and the sum of one million seven hundred fourteen thousand six hundred seventy‑seven dollars ($1,714,677) for the 2004‑2005 fiscal year shall be allocated as follows:
	2003‑2004 FY	2004‑2005 FY

Research and Demonstration Grants	$370,000	$370,000
Technical Assistance and Center
	Administration of Research
	and Demonstration Grants	444,399	444,399
Center Administration, Oversight,
	and Other Programs	437,278	437,278
Administration of Clean Water/
	Natural Gas Critical Needs
	Bond Act of 1998	199,722	199,722
Additional Administration of Supplemental
	Funding Program	138,278	138,278
Administration of Capacity Building
	Assistance Program (1998 Bond Act)	125,000	125,000.
SECTION 12.11.(b)  The Rural Economic Development Center, Inc., shall provide a report containing detailed budget, personnel, and salary information to the Office of State Budget and Management in the same manner as State departments and agencies in preparation for biennium budget requests.
SECTION 12.11.(c)  For purposes of this section, the term "community development corporation" means a nonprofit corporation:
(1)	Chartered pursuant to Chapter 55A of the General Statutes;
(2)	Tax‑exempt pursuant to section 501(c)(3) of the Internal Revenue Code of 1986;
(3)	Whose primary mission is to develop and improve low‑income communities and neighborhoods through economic and related development;
(4)	Whose activities and decisions are initiated, managed, and controlled by the constituents of those local communities; and
(5)	Whose primary function is to act as deal maker and packager of projects and activities that will increase their constituencies' opportunities to become owners, managers, and producers of small businesses, affordable housing, and jobs designed to produce positive cash flow and curb blight in the targeted community.
SECTION 12.11.(d)  Of the funds appropriated in this act to the Rural Economic Development Center, Inc., the sum of two million three hundred fifty‑nine thousand five hundred dollars ($2,359,500) for the 2003‑2004 fiscal year and the sum of two million three hundred fifty‑nine thousand five hundred dollars ($2,359,500) for the 2004‑2005 fiscal year shall be allocated as follows:
(1)	$991,000 in each fiscal year for community development grants to support development projects and activities within the State's minority communities. Any community development corporation as defined in this section is eligible to apply for funds. The Rural Economic Development Center, Inc., shall establish performance‑based criteria for determining which community development corporation will receive a grant and the grant amount. The Rural Economic Development Center, Inc., shall allocate these funds as follows:
a.	$800,000 in each fiscal year for direct grants to the local community development corporations that have previously received State funds for this purpose to support operations and project activities;
b.	$141,000 in each fiscal year for direct grants to local community development corporations that have not previously received State funds; and
c.	$50,000 in each fiscal year to the Rural Economic Development Center, Inc., to be used to cover expenses in administering this section.
(2)	$195,000 in each fiscal year to the Microenterprise Loan Program to support the loan fund and operations of the Program; and
(3)	$983,000 in each fiscal year shall be used for a program to provide supplemental funding for matching requirements for projects and activities authorized under this subdivision. The Center shall allocate these funds as follows:
a.	$775,000 in each fiscal year to make grants to local governments and nonprofit corporations to provide funds necessary to match federal grants or other grants for:
1.	Necessary economic development projects and activities in economically distressed areas;
2.	Necessary water and sewer projects and activities in economically distressed communities to address health or environmental quality problems except that funds shall not be expended for the repair or replacement of low‑pressure pipe wastewater systems. If a grant is awarded under this sub‑subdivision, then the grant shall be matched on a dollar‑for‑dollar basis in the amount of the grant awarded; or
3.	Projects that demonstrate alternative water and waste management processes for local governments. Special consideration should be given to cost‑effectiveness, efficacy, management efficiency, and the ability of the demonstration project to be replicated.
b.	$208,000 in each fiscal year to make grants to local governments and nonprofit corporations to provide funds necessary to match federal grants or other grants related to water, sewer, or business development projects.
(4)	$190,500 in each fiscal year for the Agricultural Advancement Consortium. These funds shall be placed in a reserve and allocated as follows:
a.	$75,000 in each fiscal year for operating expenses associated with the Consortium; and 
b.	$115,500 in each fiscal year for research initiatives funded by the Consortium. 
The Consortium shall facilitate discussions among interested parties and shall develop recommendations to improve the State's economic development through farming and agricultural interests.
The grant recipients in this subsection shall be selected on the basis of need.
SECTION 12.11.(e)  The Rural Economic Development Center, Inc., shall:
(1)	By January 15, 2004, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
a.	State fiscal year 2002‑2003 program activities, objectives, and accomplishments;
b.	State fiscal year 2002‑2003 itemized expenditures and fund sources;
c.	State fiscal year 2003‑2004 planned activities, objectives, and accomplishments including actual results through December 31, 2003; and
d.	State fiscal year 2003‑2004 estimated itemized expenditures and fund sources including actual expenditures and fund sources through December 31, 2003.
(2)	By January 15, 2005, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
a.	State fiscal year 2003‑2004 program activities, objectives, and accomplishments;
b.	State fiscal year 2003‑2004 itemized expenditures and fund sources;
c.	State fiscal year 2004‑2005 planned activities, objectives, and accomplishments including actual results through December 31, 2004; and
d.	State fiscal year 2004‑2005 estimated itemized expenditures and fund sources including actual expenditures and fund sources through December 31, 2004.
(3)	Provide to the Fiscal Research Division a copy of each grant recipient's annual audited financial statement within 30 days of issuance of the statement.
SECTION 12.11.(f)  No funds appropriated under this act shall be released to a community development corporation, as defined in this act, unless the corporation can demonstrate that there are no outstanding or proposed assessments or other collection actions against the corporation for any State or federal taxes, including related penalties, interest, and fees.

Requested by:	Representatives Fox, West
OPPORTUNITIES INDUSTRIALIZATION CENTER FUNDS
SECTION 12.12.(a)  Of the funds appropriated in this act to the Rural Economic Development Center, Inc., the sum of three hundred fifty‑one thousand five hundred dollars ($351,500) for the 2003‑2004 fiscal year and the sum of three hundred fifty‑one thousand five hundred dollars ($351,500) for the 2004‑2005 fiscal year shall be allocated as follows:
(1)	$87,875 in each fiscal year to the Opportunities Industrialization Center of Wilson, Inc., for its ongoing job training programs;
(2)	$87,875 in each fiscal year to the Opportunities Industrialization Center, Inc., in Rocky Mount, for its ongoing job training programs;
(3)	$87,875 in each fiscal year to the Opportunities Industrialization Centers Kinston and Lenoir County, North Carolina, Inc.; and
(4)	$87,875 in each fiscal year to the Opportunities Industrialization Center of Elizabeth City, Inc.
SECTION 12.12.(b)  For each of the Opportunities Industrialization Centers receiving funds pursuant to subsection (a) of this section, the Rural Economic Development Center, Inc., shall:
(1)	By January 15, 2004, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
a.	State fiscal year 2002‑2003 program activities, objectives, and accomplishments;
b.	State fiscal year 2002‑2003 itemized expenditures and fund sources;
c.	State fiscal year 2003‑2004 planned activities, objectives, and accomplishments, including actual results through December 31, 2003; and
d.	State fiscal year 2003‑2004 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2003.
(2)	By January 15, 2005, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
a.	State fiscal year 2003‑2004 program activities, objectives, and accomplishments;
b.	State fiscal year 2003‑2004 itemized expenditures and fund sources;
c.	State fiscal year 2004‑2005 planned activities, objectives, and accomplishments, including actual results through December 31, 2004; and
d.	State fiscal year 2004‑2005 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2004.
(3)	Notwithstanding G.S. 143‑6.1(d), file annually with the State Auditor a financial statement in the form and on the schedule prescribed by the State Auditor. The financial statements must be audited in accordance with standards prescribed by the State Auditor to assure that State funds are used for the purposes provided by law.
(4)	Provide to the Fiscal Research Division a copy of the annual audited financial statement required in subdivision (3) of this subsection within 30 days of issuance of the statement.
SECTION 12.12.(c)  No funds appropriated under this act shall be released to an Opportunities Industrialization Center (hereinafter Center) listed in subsection (a) of this section unless the Center can demonstrate that there are no outstanding or proposed assessments or other collection actions against the Center for any State or federal taxes, including related penalties, interest, and fees.

PART XIII. JUDICIAL DEPARTMENT

Requested by:	Representatives Kiser, Haire
OPERATIONAL SAVINGS/FUNDING RESERVES
SECTION 13.1.(a)  The Judicial Department shall report by September 1, 2003, to the Chairs of the Senate and House of Representatives Appropriations Committees and the Chairs of the Senate and House Representatives Appropriations Subcommittees on Justice and Public Safety on the positions identified in the Administrative Office of the Courts in order to implement operational savings.
SECTION 13.1.(b)  The Judicial Department, the Department of Correction, the Department of Crime Control and Public Safety, the Department of Juvenile Justice and Delinquency Prevention, and the Department of Justice shall report quarterly to the Chairs of the Senate and House of Representatives Appropriations Committees and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on the implementation of negative reserves authorized for each agency in this budget. The departments shall report to the Joint Legislative Commission on Governmental Operations before implementing negative reserves by eliminating positions or abolishing programs.

Requested by:	Representatives Kiser, Haire
COLLECTION OF WORTHLESS CHECK FUNDS
SECTION 13.2.  Notwithstanding the provisions of G.S. 7A‑308(c), the Judicial Department may use any balance remaining in the Collection of Worthless Checks Fund on June 30, 2003, for the purchase or repair of office or information technology equipment during the 2003‑2004 fiscal year. Prior to using any funds under this section, the Judicial Department shall report to the Joint Legislative Commission on Governmental Operations and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on the equipment to be purchased or repaired and the reasons for the purchases.

Requested by:	Representatives Kiser, Haire
OFFICE OF INDIGENT DEFENSE SERVICES REPORT
SECTION 13.3.  The Office of Indigent Defense Services shall report to the Chairs of the Senate and House of Representatives Appropriations Committees and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by March 1 of each year on:
(1)	The volume and cost of cases handled in each district by assigned counsel or public defenders;
(2)	Actions taken by the Office to improve the cost‑effectiveness and quality of indigent defense, including the capital case program;
(3)	Plans for changes in rules, standards, or regulations in the upcoming year; and
(4)	Any recommended changes in law or funding procedures that would assist the Office in improving the management of funds expended for indigent defense services.

Requested by:	Representatives Kiser, Haire
DRUG TREATMENT COURT PROGRAM
SECTION 13.4.(a)  It is the intent of the General Assembly that State Drug Treatment Court funds not be used to fund case manager positions when the services provided by those positions can be reasonably provided by the Treatment Alternatives to Street Crime (TASC) program in the Department of Health and Human Services or by other existing resources. The Drug Treatment Court Program shall identify areas of potential cost savings in the local programs that would result from reducing the number of case manager positions. The Program shall also identify areas in which federal funding might absorb administrative costs.
The Drug Treatment Court Program shall report by February 1, 2004, to the Chairs of the Senate and House of Representatives Appropriations Committees and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on the savings identified.
SECTION 13.4.(b)  Prior to the establishment of any new local drug treatment court programs, the local drug treatment court management committee shall consult with the TASC program as to the availability of case management services in that community.

Requested by:	Representatives Kiser, Haire
FEDERAL GRANT FUNDS
SECTION 13.5.  The Judicial Department shall use up to the sum of one million two hundred fifty thousand dollars ($1,250,000) from funds available to the Department to provide the State match needed in order to receive federal grant funds. Prior to using funds for this purpose, the Department shall report to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety and the Joint Legislative Commission on Governmental Operations on the grants to be matched using these funds. The Judicial Department shall also use proceeds from the Court Information Technology Fund to fulfill prior obligations to criminal justice information projects receiving federal funds.

Requested by:	Representatives Kiser, Haire
PUBLIC DEFENDER STUDY
SECTION 13.6.  The Office of Indigent Defense Services shall study the establishment of additional public defender districts in the State, identifying the areas of the State in which savings could be realized by the establishment of such districts and the projected savings in each area. The Office of Indigent Defense Services shall report to the Chairs of the Senate and House of Representatives Appropriations Committees and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by March 1, 2004, on the results of its study.

Requested by:	Representatives Kiser, Haire
TRANSFER OF EQUIPMENT AND SUPPLY FUNDS
SECTION 13.7.  Funds appropriated to the Judicial Department in the 2003‑2005 biennium for equipment and supplies shall be certified in a reserve account.  The Administrative Office of the Courts may transfer these funds to the appropriate programs and between programs as the equipment priorities and supply consumptions occur during the operating year. These funds shall not be expended for any other purpose.

Requested by:	Representatives Kiser, Haire
ADJUST MAGISTRATE AUTHORIZATIONS
SECTION 13.8.  G.S. 7A‑133(c) reads as rewritten:
"(c)	Each county shall have the numbers of magistrates and additional seats of district court, as set forth in the following table:
	Additional
	Magistrates	Seats of
County	Min. – Max.	Court
Camden	1	3
Chowan	2	3
Currituck	1	4
Dare	3	8
Gates	2	3
Pasquotank	3	5
Perquimans	2	4
Martin	4	8
Beaufort	4	8
Tyrrell	1	3
Hyde	2	4
Washington	3	4
Pitt	10	12	Farmville
	Ayden
Craven	7	10	Havelock
Pamlico	2	4
Carteret	5	8
Sampson	6	8
Duplin	8	11
Jones	2	3
Onslow	8	14
New Hanover	6	11
Pender	4	6
Halifax	9	14	Roanoke
	Rapids,
	Scotland Neck
Northampton	5	7
Bertie 	4	6
Hertford	5	7
Nash	7	10	Rocky Mount
Edgecombe	4	7	Rocky Mount
Wilson	4	7
Wayne	5	12	Mount Olive
Greene	2	4
Lenoir	4	10	La Grange
Granville	3	7
Vance	3	6
Warren	3	5
Franklin	3	7
Person	3	4
Caswell	2	5
Wake	12	21	Apex,
	Wendell,
	Fuquay‑
	Varina,
	Wake Forest
Harnett	7	11	Dunn
Johnston	10	12	Benson,
	Clayton,
	Selma
Lee	4	6
Cumberland	10	19
Bladen	4	6
Brunswick	4	9
Columbus	6	10	Tabor City
Durham	8	13
Alamance	7	11	Burlington
Orange	4	11	Chapel Hill
Chatham	3	9	Siler City 
Scotland	3	5
Hoke	4	5
Robeson	8	16	Fairmont,
	Maxton,
	Pembroke,
	Red Springs,
	Rowland,
	St. Pauls
Rockingham	4	9	Reidsville,
	Eden,
	Madison
Stokes	2	5
Surry	5	9	Mt. Airy
Guilford	20	27	High Point
Cabarrus	5	9	Kannapolis
Montgomery 	2	4
Randolph	5	10	Liberty
Rowan	5	10
Stanly	5	6
Union	4	7
Anson	4	6
Richmond	5	6	Hamlet
Moore	5	8	Southern
	Pines
Forsyth	3	15	Kernersville
Alexander	2	4
Davidson	7	10	Thomasville
Davie	2	3
Iredell	4	9	Mooresville
Alleghany	1	2
Ashe	3	4
Wilkes	4	6
Yadkin	3	5
Avery	3	5
Madison	4	5
Mitchell	3	4
Watauga	4	6
Yancey	2	4
Burke	4	7
Caldwell	4	7
Catawba	6	10	Hickory
Mecklenburg	15	28
Gaston	11	22
Cleveland	5	8
Lincoln	4	7
Buncombe	6	15
Henderson	4	7
McDowell	3	6
Polk	3	4
Rutherford	6	8
Transylvania	2	4
Cherokee	3	4
Clay	1	2
Graham	2	3
Haywood	5	7	Canton
Jackson	3	5
Macon	3	4
Swain				   2	    4"

Requested by:	Representatives Kiser, Haire 
SUSPENSION OF COURT‑ORDERED ARBITRATION PROGRAM
SECTION 13.9.  The Director of the Administrative Office of the Courts shall suspend the court‑ordered arbitration program authorized under G.S. 7A‑37.1 in any or all districts or counties to the extent that personnel to operate the program or funds to pay arbitrators are not available from any source. The Director may reinstate the program in one or more districts or counties to the extent that such personnel or funds become available.

PART XIV. DEPARTMENT OF JUSTICE

Requested by:	Representatives Kiser, Haire
USE OF SEIZED AND FORFEITED PROPERTY TRANSFERRED TO STATE LAW ENFORCEMENT AGENCIES BY THE FEDERAL GOVERNMENT
SECTION 14.1.(a)  Assets transferred to the Departments of Justice, Correction, and Crime Control and Public Safety during the 2003‑2005 biennium pursuant to applicable federal law shall be credited to the budgets of the respective departments and shall result in an increase of law enforcement resources for those departments.  The Departments of Justice, Correction, and Crime Control and Public Safety shall report to the Joint Legislative Commission on Governmental Operations upon receipt of the assets and, before using the assets, shall report on the intended use of the assets and the departmental priorities on which the assets may be expended.
SECTION 14.1.(b)  The General Assembly finds that the use of assets transferred pursuant to federal law for new personnel positions, new projects, acquisition of real property, repair of buildings where the repair includes structural change, and construction of or additions to buildings may result in additional expenses for the State in future fiscal periods.  Therefore, the Department of Justice, the Department of Correction, and the Department of Crime Control and Public Safety are prohibited from using these assets for such purposes without the prior approval of the General Assembly.
SECTION 14.1.(c)  Nothing in this section prohibits North Carolina law enforcement agencies from receiving funds from the United States Department of Justice, the United States Department of the Treasury, and the United States Department of Health and Human Services.

Requested by:	Representatives Kiser, Haire
PRIVATE PROTECTIVE SERVICES AND ALARM SYSTEMS LICENSING BOARDS PAY FOR USE OF STATE FACILITIES AND SERVICES
SECTION 14.2.  The Private Protective Services and Alarm Systems Licensing Boards shall pay the appropriate State agency for the use of physical facilities and services provided to those Boards by the State.

Requested by:	Representatives Kiser, Haire
CERTAIN LITIGATION EXPENSES TO BE PAID BY CLIENTS
SECTION 14.3.   Client departments, agencies, and boards shall reimburse the Department of Justice for reasonable court fees, attorney travel and subsistence costs, and other costs directly related to litigation in which the Department of Justice is representing the department, agency, or board.

Requested by:	Representatives Kiser, Haire
REIMBURSEMENT FOR UNC BOARD OF GOVERNORS LEGAL REPRESENTATION
SECTION 14.4.  The Department of Justice shall be reimbursed by the Board of Governors of The University of North Carolina for two Attorney III positions to provide legal representation to The University of North Carolina System.

Requested by:	Representatives Kiser, Haire
REPORT ON CRIMINAL RECORDS CHECKS CONDUCTED FOR CONCEALED HANDGUN PERMITS/STUDY FEE ADJUSTMENT FOR CRIMINAL RECORDS CHECKS
SECTION 14.5.(a)  The Department of Justice shall report by January 15 each year to the Joint Legislative Commission on Governmental Operations, the Chairs of the Senate and House of Representatives Appropriations Committees, and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on the receipts, costs for, and number of criminal records checks performed in connection with applications for concealed weapons permits. The report by the Department of Justice shall also include information on the number of applications received and approved for firearms safety courses.
SECTION 14.5.(b)  The Office of State Budget and Management, in consultation with the Department of Justice, shall study the feasibility of adjusting the fees charged for criminal records checks conducted by the Division of Criminal Information of the Department of Justice as a result of the increase in receipts from criminal records checks.  The study shall include an assessment of the Division's operational, personnel, and overhead costs related to providing criminal records checks and how those costs have changed since the prior fiscal year. The Office of State Budget and Management shall report its findings and recommendations to the Chairs of the Senate and House of Representatives Appropriations Committees, the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety, and the Fiscal Research Division on or before March 1, 2004.

Requested by:	Representatives Kiser, Haire
NC Legal education assistance foundation Report on funds disbursed
SECTION 14.6.  The North Carolina Legal Education Assistance Foundation shall report by March 1, 2004, to the Chairs of the House of Representatives and Senate Appropriations Committees and the Chairs of the House of  Representatives and Senate Justice and Public Safety Subcommittees on its internal controls and procedures for ensuring that all funds designated for payoff of education loans are used for that purpose.

Requested by:	Representative Kiser
RAPE KIT FUNDS A PRIORITY
SECTION 14.7.  In expending funds appropriated in this act to the Department of Justice for the Molecular Genetics Section of the State Bureau of Investigation, the Department shall give priority to the analysis of forensic samples from rape kits for the investigation and prosecution of criminal offenses over the analysis of DNA samples taken from convicted offenders for entry into the DNA database.

PART XV. DEPARTMENT OF JUVENILE JUSTICE AND DELINQUENCY PREVENTION

Requested by:	Representatives Kiser, Haire
S.O.S. ADMINIsTRATIVE COST LIMITS 
SECTION 15.1.  Of the funds appropriated to the Department of Juvenile Justice and Delinquency Prevention in this act, not more than four hundred fifty thousand dollars ($450,000) for the 2003‑2004 fiscal year and not more than four hundred fifty thousand dollars ($450,000) for the 2004‑2005 fiscal year may be used to administer the S.O.S. Program, to provide technical assistance to applicants and to local S.O.S. programs, and to evaluate the local S.O.S. programs.  The Department may contract with appropriate public or nonprofit agencies to provide the technical assistance, including training and related services.

Requested by:	Representatives Kiser, Haire
JUVENILE CRIME PREVENTION COUNCIL GRANT REPORTING and CERTIFICATION
SECTION 15.2.(a)  On or before May 1 each year, the Department of Juvenile Justice and Delinquency Prevention shall submit to the Joint Legislative Commission on Governmental Operations and the Appropriations Committees of the Senate and House of Representatives a list of the recipients of the grants awarded, or preapproved for award, from funds appropriated to the Department for local Juvenile Crime Prevention Council grants. The list shall include for each recipient the amount of the grant awarded, the membership of the local committee or council administering the award funds on the local level, and a short description of the local services, programs, or projects that will receive funds.  The list shall also identify any programs that received grant funds at one time but for which funding has been eliminated by the Department of Juvenile Justice and Delinquency Prevention.  A written copy of the list and other information regarding the projects shall also be sent to the Fiscal Research Division of the General Assembly.
SECTION 15.2.(b)  Each county in which local programs receive Juvenile Crime Prevention Council grant funds from the Department of Juvenile Justice and Delinquency Prevention shall certify annually through its local council to the Department that funds received are not used to duplicate or supplant other programs within the county.

Requested by:	Representatives Kiser, Haire
REPORTS ON CERTAIN PROGRAMS
SECTION 15.3.(a)  Project Challenge North Carolina, Inc., shall report to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by April 1 each year on the operation and the effectiveness of its program in providing alternative dispositions and services to juveniles who have been adjudicated delinquent or undisciplined.  The report shall include information on the source of referrals for juveniles, the types of offenses committed by juveniles participating in the program, the amount of time those juveniles spend in the program, the number of juveniles who successfully complete the program, and the number of juveniles who commit additional offenses after completing the program.
SECTION 15.3.(b)  The Department of Juvenile Justice and Delinquency Prevention shall report to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on the effectiveness of the Juvenile Assessment Center by April 1 each year.  The report on the Juvenile Assessment Center shall include information on the number of juveniles served and an evaluation of the effectiveness of juvenile assessment plans and services provided as a result of these plans.
SECTION 15.3.(c)  Communities in Schools shall report to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety, the Joint Legislative Commission on Governmental Operations, the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee, and the Joint Legislative Education Oversight Committee by April 1 each year on the operation and the effectiveness of its program.  The report shall include information on the number of children served, the number of volunteers used, the impact on the children who have received services from Communities in Schools, and the operating budget of Communities in Schools.

Requested by:	Representatives Kiser, Haire
STATE FUNDS MAY BE USED AS FEDERAL MATCHING FUNDS
SECTION 15.4.  Funds appropriated in this act to the Department of Juvenile Justice and Delinquency Prevention for the 2003‑2004 fiscal year may be used as matching funds for the Juvenile Accountability Incentive Block Grants. If North Carolina receives Juvenile Accountability Incentive Block Grants, or a notice of funds to be awarded, the Office of State Budget and Management and the Governor's Crime Commission shall consult with the Department of Juvenile Justice and Delinquency Prevention regarding the criteria for awarding federal funds.  The Office of State Budget and Management, the Governor's Crime Commission, and the Department of Juvenile Justice and Delinquency Prevention shall report to the Appropriations Committees of the Senate and House of Representatives and the Joint Legislative Commission on Governmental Operations prior to allocation of the federal funds.  The report shall identify the amount of funds to be received for the 2003‑2004 fiscal year, the amount of funds anticipated for the 2004‑2005 fiscal year, and the allocation of funds by program and purpose.

Requested by:	Representatives Kiser, Haire
ANNUAL EVALUATION OF COMMUNITY PROGRAMS
SECTION 15.5.  The Department of Juvenile Justice and Delinquency Prevention shall conduct an evaluation of the Eckerd and Camp Woodson wilderness camp programs, the teen court programs, the program that grants funds to the local organizations of the Boys and Girls Clubs established pursuant to Section 21.10 of S.L. 1999‑237, the Save Our Students program, the Governor's One‑on‑One Programs, and multipurpose group homes.  The teen court report shall include statistical information on the number of juveniles served, the number and type of offenses considered by teen courts, referral sources for teen courts, and the number of juveniles that become court‑involved after participation in teen courts.  The report on the Boys and Girls Clubs program shall include information on:
(1)	The expenditure of State appropriations on the program;
(2)	The operations and the effectiveness of the program; and
(3)	The number of juveniles served under the program.
In conducting the evaluation of each of these programs, the Department shall consider whether participation in each program results in a reduction of court involvement among juveniles. The Department shall also identify whether the programs are achieving the goals and objectives of the Juvenile Justice Act, S.L. 1998‑202. The Department shall report the results of the evaluation to the Chairs of the House of Representatives and Senate Appropriations Committees and the Chairs of the Subcommittees of Justice and Public Safety of the House of Representatives and Senate Appropriations Committees by March 1 of each year.

Requested by:	Representatives Kiser, Haire
USE OF FUNDS FOR YOUTH DEVELOPMENT CENTER  beds
SECTION 15.6.(a)  The Department of Juvenile Justice and Delinquency Prevention may use funds available during the 2003‑2004 fiscal year to establish or reestablish Youth Development Center beds and convert up to 50 beds in one Eckerd Wilderness Camp for use as a Youth Development Center, as defined in G.S. 7B‑1501.  Any conversion shall be effectuated with existing contract funds.  If the Department of Juvenile Justice and Delinquency Prevention determines it needs additional youth development center beds during the 2003‑2004 fiscal year, it shall consider reestablishing beds at Samarkand Manor Youth Development Center.
SECTION 15.6.(b)  The Department shall report to the Chairs of the Justice and Public Safety Subcommittees of the House of Representatives and the Senate and the Joint Legislative Commission on Governmental Operations and the Corrections, Crime Control, and Juvenile Justice Oversight Committee prior to:
(1)	Converting any Eckerd Wilderness Camp beds to secure confinement beds during the 2003‑2004 fiscal year; or
(2)	Establishing bed capacity greater than 740 total beds, including beds converted at Eckerd Wilderness Camps, during the 2003‑2004 fiscal year.
The report shall include the sources of funding for any additional beds.

Requested by:	Representatives Kiser, Haire
PLANNING FOR NEW YOUTH DEVELOPMENT CENTERs
SECTION 15.7.  The Department of Juvenile Justice and Delinquency Prevention may use funds appropriated to the Department in this act to continue the planning and design of new youth development centers with up to 500 total beds. The Department shall design facilities that are conducive to effective security and programming while ensuring improved staffing efficiencies.
The Department of Juvenile Justice and Delinquency Prevention shall provide a quarterly status report to the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee and to the Chairs of the House of Representatives Appropriations Subcommittee on Justice and Public Safety and the Senate Appropriations Committee on Justice and Public Safety on the number of youth development centers to be designed and the number of beds at each, as well as the rationale for the number of beds to be built at each facility. The report shall also include:
(1)	The status of the plan and design of the new facilities.
(2)	The proposed sites for the facilities.
(3)	How the plan and design will meet the mandate of ensuring effective security and programming while improving staff efficiencies.
(4)	The Department's long‑range plan for closing other youth development centers or individual cottages at selected youth development centers or revising the mission or objective of individual youth development centers.

Requested by:	Representatives Kiser, Haire
OPERATION OF BUNCOMBE YOUTH DETENTION CENTER
SECTION 15.8.  The Department of Juvenile Justice and Delinquency Prevention shall continue to operate the Buncombe Youth Detention Center at its current site during the 2003‑2004 fiscal year. To the extent practicable during the 2003‑2004 fiscal year, the Department shall operate the Buncombe Youth Detention Center at the same average population and staffing levels and at the same budget as the 2002‑2003 fiscal year.

PART XVI. DEPARTMENT OF CORRECTION

Requested by:	Representatives Kiser, Haire
FEDERAL GRANT REPORTING
SECTION 16.1.  The Department of Correction, the Department of Justice, the Department of Crime Control and Public Safety, the Judicial Department, and the Department of Juvenile Justice and Delinquency Prevention shall report by May 1 of each year to the Joint Legislative Commission on Governmental Operations, the Chairs of the Senate and House of Representatives Appropriations Committees, and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on federal grant funds received or preapproved for receipt by those departments.  The report shall include information on the amount of grant funds received or preapproved for receipt by each department, the use of the funds, the State match expended to receive the funds, and the period to be covered by each grant.  If the department intends to continue the program beyond the end of the grant period, the department shall report on the proposed method for continuing the funding of the program at the end of the grant period. Each department shall also report on any information it may have indicating that the State will be requested to provide future funding for a program presently supported by a local grant.

Requested by:	Representatives Kiser, Haire
REIMBURSE COUNTIES FOR HOUSING AND EXTRAORDINARY MEDICAL COSTS FOR INMATES, PAROLEES, AND POST‑RELEASE SUPERVISEES AWAITING TRANSFER TO STATE PRISON SYSTEM
SECTION 16.2.  The Department of Correction may use funds available to the Department for the 2003‑2005 biennium to pay the sum of forty dollars ($40.00) per day as reimbursement to counties for the cost of housing convicted inmates, parolees, and post‑release supervisees awaiting transfer to the State prison system, as provided in G.S. 148‑29. The Department shall report quarterly to the Joint Legislative Commission on Governmental Operations, the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee, the Chairs of the Senate and House of Representatives Appropriations Committees, and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on the expenditure of funds to reimburse counties for prisoners awaiting transfer and on its progress in reducing the jail backlog.

Requested by:	Representatives Kiser, Haire
SHIFT PAY FOR SECURITY STAFF
SECTION 16.3.  The Department of Correction may use funds available for the 2003‑2004 fiscal year for the payment to security staff of special supplemental weekend shift premium pay that exceeds standard weekend shift pay by up to ten percent (10%). The Department shall also continue to take steps to hold down the cost of shift pay by converting prisons from three eight‑hour shifts to two 12‑hour shifts whenever practical.
The Department of Correction shall report to the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by April 1, 2004, on its progress in converting prison work shifts from eight hours to 12 hours. The report shall include information on savings generated to date and potential future savings, as well as any changes in employee morale and leave usage, as a result of converting to 12‑hour shifts.

Requested by:	Representatives Kiser, Haire
DEPARTMENT OF CORRECTION SECURITY STAFFING FORMULAS
SECTION 16.4.(a)  The Department of Correction shall conduct annual security staffing postaudits of each prison.
SECTION 16.4.(b)  The Department of Correction shall annually update the security staffing relief formula. Each update shall include a review of all annual training requirements for security staff to determine which of these requirements should be mandatory and the appropriate frequency of the training.
SECTION 16.4.(c)  The Department of Correction shall report on its progress in implementing the staffing recommendations of the National Institute of Corrections to the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by February 1, 2004. The report shall include a status report on the implementation of a centralized postaudit control system and the automation of leave records.

Requested by:	Representatives Kiser, Haire
USE OF CLOSED PRISON FACILITIES
SECTION 16.5.  In conjunction with the closing of prison facilities, including small expensive prison units recommended for consolidation by the Government Performance Audit Committee, the Department of Correction shall consult with the county or municipality in which the unit is located, with the elected State and local officials, and with State agencies about the possibility of converting that unit to other use. The Department may also consult with any private for‑profit or nonprofit firm about the possibility of converting the unit to other use. In developing a proposal for future use of each unit, the Department shall give priority to converting the unit to other criminal justice use. Consistent with existing law and the future needs of the Department of Correction, the State may provide for the transfer or the lease of any of these units to counties, municipalities, State agencies, or private firms wishing to convert them to other use. The Department of Correction may also consider converting some of the units recommended for closing from one security custody level to another, where that conversion would be cost‑effective. A prison unit under lease to a county pursuant to the provisions of this section for use as a jail is exempt for the period of the lease from any of the minimum standards adopted by the Secretary of Health and Human Services pursuant to G.S. 153A‑221 for the housing of adult prisoners that would subject the unit to greater standards than those required of a unit of the State prison system.
Prior to any transfer or lease of these units, the Department of Correction shall report on the terms of the proposed transfer or lease to the Joint Legislative Commission on Governmental Operations and the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee. The Department of Correction shall also provide annual summary reports to the Joint Legislative Commission on Governmental Operations and the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee on the conversion of these units to other use and on all leases or transfers entered into pursuant to this section.

Requested by:	Representatives Kiser, Haire
inmate costs/MEDICAL BUDGET FOR PRESCRIPTION DRUGS
SECTION 16.6.(a)  If the cost of providing food and health care to inmates housed in the Division of Prisons is anticipated to exceed the continuation budget amounts provided for that purpose in this act, the Department of Correction shall report the reasons for the anticipated cost increase and the source of funds the Department intends to use to cover those additional needs to the Joint Legislative Commission on Governmental Operations, the Chairs of the Senate and House of Representatives Appropriations Committees, and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety.
SECTION 16.6.(b)  Notwithstanding the provisions of G.S. 143‑23(a2), the Department of Correction may use funds available during the 2003‑2005 biennium for the purchase of prescription drugs for inmates if expenditures are projected to exceed the Department's inmate medical continuation budget for prescription drugs. The Department shall consult with the Joint Legislative Commission on Governmental Operations prior to exceeding the continuation budget amount.

Requested by:	Representatives Kiser, Haire
MOBILE MEDICAL OPERATING ROOM
SECTION 16.7.  The Department of Correction shall continue the contract for a mobile medical operating room at Central Prison for the 2003‑2004 fiscal year at a reduced fixed rate that more clearly reflects the usage. However, the Department shall use the mobile unit for additional procedures, as authorized by the terms of the agreement, whenever the Department's Utilization Review Team determines that (i) a specific procedure can be performed at a cost below that charged by a public or private hospital; and (ii) there is no compelling medical reason for performing the procedure in a hospital instead of using the mobile medical unit.
The Department shall also study the use of this mobile operating room and report by April 1, 2004, to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety. The report shall recommend whether the mobile unit should be continued, eliminated, or expanded in terms of capacity of the current unit and the potential for establishing an additional mobile unit. The report shall also include information on the number and type of procedures performed over and above the fixed‑rate contract and the savings generated.

Requested by:	Representatives Kiser, Haire
CONVERSION OF CONTRACTED MEDICAL POSITIONS
SECTION 16.8.(a)  The Department of Correction may convert contract medical positions to permanent State medical positions at individual correctional facilities if the Department can document that the total savings generated will exceed the total cost of the new positions for each facility. Where practical, the Department shall convert contract positions to permanent positions by using existing vacancies in medical positions.
SECTION 16.8.(b)  The Department of Correction shall report by April 1, 2004, to the Joint Legislative Commission on Governmental Operations and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on all conversions made pursuant to this section, by type of position and location, and on the savings generated at each correctional facility.

Requested by:	Representatives Kiser, Haire
LIMIT USE OF OPERATIONAL FUNDS
SECTION 16.9.  Funds appropriated in this act to the Department of Correction for operational costs for additional facilities shall be used for personnel and operating expenses set forth in the budget approved by the General Assembly in this act.  These funds shall not be expended for any other purpose, except as provided for in this act, and shall not be expended for additional prison personnel positions until the new facilities are within 120 days of projected completion, except for certain management, security, and support positions necessary to prepare the facility for opening, as authorized in the budget approved by the General Assembly.

Requested by:	Representatives Kiser, Haire
FEDERAL GRANT MATCHING FUNDS
SECTION 16.10.  Notwithstanding the provisions of G.S. 148‑2, the Department of Correction may use up to the sum of nine hundred thousand dollars ($900,000) from funds available to the Department to provide the State match needed in order to receive federal grant funds.  Prior to using funds for this purpose, the Department shall report to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety and the Joint Legislative Commission on Governmental Operations on the grants to be matched using these funds.

Requested by:	Representatives Kiser, Haire
COMPUTER/DATA PROCESSING SERVICES FUNDS
SECTION 16.11.  Notwithstanding the provisions of G.S. 143‑23(a2), the Department of Correction may use funds available during the 2003‑2005 biennium for expenses for computer/data processing services if expenditures exceed the Department's continuation budget amount for those services. The Department shall report to the Joint Legislative Commission on Governmental Operations prior to exceeding the continuation budget amount.

Requested by:	Representatives Kiser, Haire
Medium custody road crew compensation/COMMUNITY WORK CREWS
SECTION 16.12.(a)  Of funds appropriated to the Department of Transportation by this act, the sum of ten million dollars ($10,000,000) per year shall be transferred by the Department of Transportation to the Department of Correction during the 2003‑2005 biennium for the actual costs of highway‑related labor performed by medium‑custody prisoners, as authorized by G.S. 148‑26.5. This transfer shall be made quarterly in the amount of two million five hundred thousand dollars ($2,500,000). The Department of Transportation may use funds appropriated by this act to pay an additional amount exceeding the ten million dollars ($10,000,000), but those payments shall be subject to negotiations among the Department of Transportation, the Department of Correction, and the Office of State Budget and Management prior to payment by the Department of Transportation.
SECTION 16.12.(b)  The Department of Correction may use up to 39 work crews for Department of Transportation litter control projects. The Department of Transportation shall transfer at least one million three hundred thousand dollars ($1,300,000) per year from the Highway Fund to the Department of Correction during the 2003‑2005 biennium to cover the cost of those work crews. Should the two departments determine that the actual cost of operating 39 work crews exceeds that amount, the Department of Transportation shall transfer an additional amount as agreed upon by the two departments and the Office of State Budget and Management.

Requested by:	Representatives Kiser, Haire
ENERGY FOR COMMITTED OFFENDERS/CONTRACT AND REPORT
SECTION 16.13.  The Department of Correction may continue to contract with Energy for Committed Offenders, Inc., for the purchase of prison beds for minimum security female inmates during the 2003‑2005 biennium. Energy for Committed Offenders, Inc., shall report by February 1 of each year to the Joint Legislative Commission on Governmental Operations on the annual cost per inmate and the average daily inmate population compared to bed capacity using the same methodology as that used by the Department of Correction. Energy for Committed Offenders, Inc., shall also provide information on the rearrest rate and the return‑to‑prison rate for inmates participating in the program who are paroled or released from prison.

Requested by:	Representatives Kiser, Haire
ELECTRONIC MONITORING COSTS
SECTION 16.14.  The Department of Correction shall report by March 1, 2004, to the Chairs of the Senate and House of Representatives Appropriations Committees and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on efforts to increase the use of electronic monitoring of sentenced offenders in the community as an alternative to the incarceration of probation violators. The report shall also document the geographical distribution of electronic monitoring use compared to other intermediate sanctions.

Requested by:	Representatives Kiser, Haire
COLLECTION OF OFFENDER FEES
SECTION 16.15.  The Department of Correction and the Judicial Department shall report by April 1, 2004, to the Chairs of the Senate and House of Representatives Appropriations Committees and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on the success of their efforts to improve the collection rate of offender fees for probationers and for nonprobationers sentenced to community service and on any recommendations for statutory or procedural changes that will improve the collection of financial obligations from offenders.
The report shall include a comparison of the percentage of offender fees collected in the most recent year compared to prior years, including the percentage of offenders who were ordered to pay fees and the percentage of offenders who actually paid those fees. The report shall also include the total offender fees collected, in dollars and as a percentage of the fees ordered, and the fees that could have been ordered based on the sentence and conditions imposed by the judge. If any of this information cannot be collected, the report shall include a description of the data collection issues and a plan for addressing those issues.

Requested by:	Representatives Kiser, Haire
CRIMINAL JUSTICE PARTNERSHIP PROGRAM
SECTION 16.16.(a)  It is the intent of the General Assembly that State Criminal Justice Partnership Program funds not be used to fund case manager positions when those services can be reasonably provided by Division of Community Corrections personnel or by the Treatment Alternatives to Street Crime (TASC) Program in the Department of Health and Human Services.
SECTION 16.16.(b)  Notwithstanding the provisions of G.S. 143B‑273.15 specifying that grants to participating counties are for the full fiscal year and that unobligated funds are returned to the State‑County Criminal Justice Partnership Account at the end of the grant period, the Department of Correction may reallocate unspent or unclaimed funds distributed to counties participating in the State‑County Criminal Justice Partnership Program in an effort to maintain the level of services realized in previous fiscal years.
SECTION 16.16.(c)  The Department of Correction may not deny funds to a county to support both a residential program and a day reporting center if the Department of Correction determines  that the county has a demonstrated need and a fully developed plan for each type of sanction.
SECTION 16.16.(d)  The Department of Correction shall report by February 1 of each year to the Chairs of the Senate and House of Representatives Appropriations Committees, the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety, and the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee on the status of the State‑County Criminal Justice Partnership Program. The report shall include the following information:
(1)	The amount of funds carried over from the prior fiscal year;
(2)	The dollar amount and purpose of grants awarded to counties as discretionary grants for the current fiscal year;
(3)	Any counties the Department anticipates will submit requests for new implementation grants;
(4)	An update on efforts to ensure that all counties make use of the electronic reporting system, including the number of counties submitting offender participation data via the system;
(5)	An analysis of offender participation data received, including data on each program's utilization and capacity; and
(6)	An analysis of comparable programs, prepared by the Research and Planning Division of the Department of Correction, and a summary of the reports prepared by county Criminal Justice Partnerships Advisory Boards.

Requested by:	Representatives Kiser, Haire
REPORTS ON NONPROFIT PROGRAMS
SECTION 16.17.(a)  Funds appropriated in this act to the Department of Correction to support the programs of Harriet's House may be used for program operating costs, the purchase of equipment, and the rental of real property.  Harriet's House shall report by February 1 of each year to the Joint Legislative Commission on Governmental Operations on the expenditure of State appropriations and on the effectiveness of the program, including information on the number of clients served and the number of clients who successfully complete the Harriet's House program.
SECTION 16.17.(b)  Summit House shall report by February 1 of each year to the Joint Legislative Commission on Governmental Operations on the expenditure of State appropriations and on the effectiveness of the program, including information on the number of clients served, the number of clients who have had their probation revoked, and the number of clients who successfully complete the program while housed at Summit House, Inc.
SECTION 16.17.(c)  Women at Risk shall report by February 1 of each year to the Joint Legislative Commission on Governmental Operations on the expenditure of State funds and on the effectiveness of the program, including information on the number of clients served, the number of clients who have had their probation revoked, and the number of clients who have successfully completed the program.
SECTION 16.17.(d)  The John Hyman Foundation shall report by February 1 of each year to the Joint Legislative Commission on Governmental Operations on the expenditure of State funds and on the effectiveness of the program, including information on the number of clients served, the number of clients who have had their probation revoked, and the number of clients who have successfully completed the program.

Requested by:	Representatives Kiser, Haire
REPORT ON PROBATION AND PAROLE CASELOADS
SECTION 16.18.  The Department of Correction shall report by March 1 of each year to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety and the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee on caseload averages for probation and parole officers.  The report shall include:
(1)	Data on current caseload averages for Probation Parole Officer I, Probation Parole Officer II, and Probation Parole Officer III positions;
(2)	An analysis of the optimal caseloads for these officer classifications; and
(3)	An assessment of the role of surveillance officers.

Requested by:	Representatives Kiser, Haire
COMMUNITY SERVICE WORK PROGRAM
SECTION 16.19.  The Department of Correction shall report to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by May 1, 2004, on the integration of the Community Service Work Program into the Division of Community Corrections, including the Department's ability to monitor the collection of offender payments from unsupervised offenders sentenced to community service. The Department shall also report to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by May 1, 2004, and by February 1 annually beginning in 2005, on the average caseloads of Community Service Work Program coordinators, by district, division, and statewide. The report shall also include the money collected, the type and value of the work performed, and the number of offenders in the Community Service Work Program, by type of referral (i.e. parole, supervised probation, unsupervised probation or community punishment, DWI, any other agency referrals).

Requested by:	Representatives Kiser, Haire
REPORT ON INMATES ELIGIBLE FOR PAROLE
SECTION 16.20.  The Post‑Release Supervision and Parole Commission shall report by January 15 and July 15 of each year to the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety and the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee on inmates eligible for parole. These reports shall include at least the following:
(1)	The total number of Fair Sentencing and Pre‑Fair Sentencing inmates that were parole‑eligible during the current fiscal year and the total number of those inmates that were paroled. The report should group these inmates by offense  type, custody classification, and type of parole;
(2)	The average time served, by offense class, of Fair Sentencing and Pre‑Fair Sentencing inmates compared to inmates sentenced under Structured Sentencing; and
(3)	The projected number of parole‑eligible inmates to be paroled or released by the end of the 2003‑2004 fiscal year and by the end of the 2004‑2005 fiscal year.

Requested by:	Representatives Kiser, Haire
POST‑RELEASE SUPERVISION AND PAROLE COMMISSION/report on staffing reorganization and REDUCTION
SECTION 16.21.  The Post‑Release Supervision and Parole Commission shall report by March 1 of each year to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on an updated transition plan for implementing staff reductions.

PART XVII. DEPARTMENT OF CRIME CONTROL AND PUBLIC SAFETY

Requested by:	Representatives Kiser, Haire
Transfer CJIN to the Department of Crime Control and public safety
SECTION 17.1.(a)  G.S. 143‑661(a) reads as rewritten:
"(a)	The Criminal Justice Information Network Governing Board is established within the Department of  Crime Control and Public Safety, to operate the State's Criminal Justice Information Network, the purpose of which shall be to provide the governmental and technical information systems infrastructure necessary for accomplishing State and local governmental public safety and justice functions in the most effective manner by appropriately and efficiently sharing criminal justice and juvenile justice information among law enforcement, judicial, and corrections agencies. The Board is established within the Department of  Crime Control and Public Safety, for organizational and budgetary purposes only and the Board shall exercise all of its statutory powers in this Article independent of control by the Department of Crime Control and Public Safety."
SECTION 17.1.(b)  G.S. 143‑664(b) reads as rewritten:
"(b)	Pending permanent staffing, the Department shall provide the Board with professional and clerical staff and any additional support the Board needs to fulfill its mandate. The Board may meet in an area provided by the Department of Crime Control and Public Safety and the Board's staff shall use space provided by the Department."
SECTION 17.1.(c)  The Criminal Justice Information Network as provided in Article 69 of Chapter 143 of the General Statutes is hereby transferred by a Type II transfer, as defined in G.S. 143A‑6, to the Department of Crime Control and Public Safety.

Requested by:	Representatives Kiser, Haire
the juvenile justice information system
SECTION 17.2.(a)  G.S. 143B‑516(13) reads as rewritten:
"(13)	Develop and administer a comprehensive juvenile justice information system to collect data and information about delinquent juveniles for the purpose of developing treatment and intervention plans and allowing reliable assessment and evaluation of the effectiveness of rehabilitative and preventive services provided to delinquent juveniles."
SECTION 17.2.(b)  G.S. 143‑663(a)(1) reads as rewritten:
"(1)	To establish and operate the Network as an integrated system of State and local government components for effectively and efficiently storing, communicating, and using criminal justice information at the State and local levels throughout North Carolina's law enforcement, judicial, juvenile justice, and corrections agencies, with the components of the Network to include electronic devices, programs, data, and governance and to set the Network's policies and procedures."

Requested by:	Representatives Kiser, Haire
ANNUAL EVALUATION OF THE TARHEEL CHALLENGE PROGRAM
SECTION 17.3.  The Department of Crime Control and Public Safety shall report to the Chairs of the House of Representatives and Senate Appropriations Committees and the Chairs of the House of Representatives and Senate Appropriations Subcommittees on Justice and Public Safety by April 1 of each year on the operations and effectiveness of the National Guard Tarheel Challenge Program.  The report should evaluate the program's effectiveness as an intervention method for preventing juveniles from becoming undisciplined or delinquent.  The report shall also evaluate the Program's role in improving individual skills and employment potential for participants and shall include:
(1)	The source of referrals for individuals participating in the Program;
(2)	The summary of types of actions or offenses committed by the participants of the Program;
(3)	An analysis outlining the cost of providing services for each participant, including a breakdown of all expenditures related to the administration and operation of the Program and the education and treatment of the Program participants;
(4)	The number of individuals who successfully complete the Program; and
(5)	The number of participants who commit offenses after completing the Program.

Requested by:	Representatives Kiser, Haire
LEGISLATIVE REVIEW OF DRUG LAW ENFORCEMENT AND OTHER GRANTS
SECTION 17.4.(a)  Section 1303(4) of the Omnibus Crime Control and Safe Streets Act of 1968 provides that the State application for Drug Law Enforcement Grants is subject to review by the State legislature or its designated body. Therefore, the Governor's Crime Commission of the Department of Crime Control and Public Safety shall report on the State application for grants under the State and Local Law Enforcement Assistance Act of 1986, Part M of the Omnibus Crime Control and Safe Streets Act of 1968 as enacted by Subtitle K of P.L. 99‑570, the Anti‑Drug Abuse Act of 1986, to the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety when the General Assembly is in session.  When the General Assembly is not in session, the Governor's Crime Commission shall report on the State application to the Joint Legislative Commission on Governmental Operations.
SECTION 17.4.(b)  Unless a State statute provides a different forum for review, when a federal law or regulation provides that an individual State application for a grant shall be reviewed by the State legislature or its designated body and at the time of the review the General Assembly is not in session, that application shall be reviewed by the Joint Legislative Commission on Governmental Operations.

Requested by:	Representatives Kiser, Haire
VICTIMS ASSISTANCE NETWORK REPORT
SECTION 17.5.  The Department of Crime Control and Public Safety shall report on the expenditure of funds allocated pursuant to this section for the Victims Assistance Network.  The Department shall also report on the Network's efforts to gather data on crime victims and their needs, act as a clearinghouse for crime victims' services, provide an automated crime victims' bulletin board for subscribers, coordinate and support activities of other crime victims' advocacy groups, identify the training needs of crime victims' services providers and criminal justice personnel, and coordinate training for these personnel.  The Department shall submit its report to the Chairs of the Appropriations Subcommittees on Justice and Public Safety of the Senate and House of Representatives by December 1 of each year of the biennium.

PART XVIII. DEPARTMENT OF ADMINISTRATION

Requested by:	Representatives Jeffus, Walend
agencies to use mail service center
SECTION 18.1.  G.S. 143‑341(8)g. reads as rewritten:
"§ 143‑341.  Powers and duties of Department.
The Department of Administration has the following powers and duties:
…
(8)	General Services:
…
g.	To establish and operate a  mail service center that shall be used by all State agencies other than the Employment Security Commission, and in connection therewith and in the discretion of the Secretary, to do all things necessary in connection with the maintenance of the mail service center. The Secretary shall allocate and charge against the respective departments and agencies their proportionate parts of the cost of the maintenance of the mail service center. The Secretary shall develop a plan for the efficient operation of the center that meets the needs of State agencies and ensures timely delivery of mail.

Requested by:	Representatives Jeffus, Walend
Study of Advocacy Programs in the Department of Administration
SECTION 18.2.  The Secretary of the Department of Administration, in collaboration with appropriate entities which concentrate on public policy and business management, shall study the functions of the advocacy programs that are housed in the Department of Administration to determine the appropriate organizational placement of the programs within State government. The study shall also consider whether the functions of the programs could be more efficiently and effectively performed by an appropriate nonprofit organization. The Secretary shall report the findings and recommendations to the Joint Legislative Commission on Governmental Operations and to the Chairs of the Senate and House of Representatives Appropriations Committees by May 1, 2004.

PART XIX. OFFICE OF THE STATE AUDITOR

Requested by:	Representatives Jeffus, Walend
SMART START AUDITS
SECTION 19.1.  G.S. 143B‑168.14(b) reads as rewritten:
"(b)	Each local partnership shall be subject to audit and review by the State Auditor under Article 5A of Chapter 147 of the General Statutes. The State Auditor shall conduct annual financial and compliance audits of local partnerships that are rated "needs improvement" in performance assessments authorized in G.S. 143B‑168.12(a)(7). Local partnerships that are rated "superior" or "satisfactory" in performance assessments authorized in G.S. 143B-168.12(a)(7) shall undergo biennial financial and compliance audits by the State Auditor."

PART XX. OFFICE OF THE GOVERNOR

Requested by:	Representatives Jeffus, Walend
Housing finance agency home Matching Funds
SECTION 20.1.(a)  Funds appropriated in this act to the Housing Finance Agency for the federal HOME Program shall be used to match federal funds appropriated for the HOME Program. In allocating State funds appropriated to match federal HOME Program funds, the Agency shall give priority to HOME Program projects, as follows:
(1)	First priority to projects that are located in counties designated as Tier One, Tier Two, or Tier Three Enterprise Counties under G.S. 105‑129.3; and
(2)	Second priority to projects that benefit persons and families whose incomes are fifty percent (50%) or less of the median family income for the local area, with adjustments for family size, according to the latest figures available from the United States Department of Housing and Urban Development.
The Housing Finance Agency shall report to the Joint Legislative Commission on Governmental Operations by April 1 of each year concerning the status of the HOME Program and shall include in the report information on priorities met, types of activities funded, and types of activities not funded.
SECTION 20.1.(b)  If the United States Congress changes the HOME Program such that matching funds are not required for a given program year, then the Agency shall not spend the matching funds appropriated under this act for that program year.
SECTION 20.1.(c)  Funds appropriated in this act to match federal HOME Program funds shall not revert to the General Fund on June 30, 2004, or on June 30, 2005.

PART XXI. INFORMATION TECHNOLOGY

Requested by:	Representatives Jeffus, Walend
ITS Budget Structure review/report
SECTION 21.1.(a)  The Office of Information Technology Services shall analyze the State's legacy information technology systems and develop a plan to ascertain the needs, costs, and time frame required for State agencies to progress to more modern information technology systems. In conducting this legacy system assessment and analysis, the Office shall:
(1)	Examine the hierarchical structure and interrelated relationships within and between State agency legacy systems.
(2)	Catalog and analyze the portfolio of legacy applications in use in State agencies and consider the extent to which new applications could be used concurrently with, or should replace, legacy systems.
(3)	Consider issues related to migration from legacy environments to Internet-based and client/server environments and related to the availability of programmers and other information technology professionals with the skills to migrate legacy applications to other environments.
(4)	Study any other issue relative to the assessment of legacy information technology systems in State agencies, except that the analysis shall not include matters within the purview of the studies authorized in S.L. 2001-491 or S.L. 2002-126.
State departments, agencies, and institutions shall give to ITS all information and all data within their possession, or ascertainable from their records, that ITS deems necessary to carry out the analysis.
By March 1, 2004, the Office shall complete the analysis and shall make a report of the assessment to the Information Resources Management Commission, the Joint Legislative Commission on Governmental Operations, and the Joint Select Committee on Information Technology.
SECTION 21.1.(b)  The Office of State Budget and Management shall conduct a study of information technology (IT) expenditures across all of State government, with focused attention to identification and elimination of duplicative IT expenditures, operations, and inventory, to identify and recommend potential cost savings and efficiencies in State agency IT operations. In this study, OSBM should address the following questions:
(1)	Is State government's IT budgeting and organizational structure the most efficient approach?
(2)	What alternative IT budgeting and organizational structures could help North Carolina realize cost savings?
OSBM is also directed to work in conjunction with the Office of Information Technology Services (ITS) and the Information Resource Management Commission (IRMC) to study the ITS and IRMC budget structures, and, in addition to recommending efficiencies, OSBM, ITS, and the IRMC shall develop a plan to propose how the ITS and IRMC budgets should be transitioned to General Fund agency supported operations. By April 1, 2004, OSBM shall make reports on these matters to the Joint Legislative Commission on Governmental Operations, the Chairs of the Joint Appropriations Subcommittee on General Government, and the Fiscal Research Division.

PART XXII. DEPARTMENT OF INSURANCE

Requested by:	Representatives Jeffus, Walend
INSURANCE FUND TRANSFER TO GENERAL FUND
SECTION 22.1.  The Commissioner of Insurance shall transfer funds quarterly from the Department of Insurance Fund to the General Fund to repay the funds appropriated to the Department of Insurance from the General Fund for each fiscal year, plus accrued interest at a rate determined by the State Treasurer.

PART XXIII. DEPARTMENT OF REVENUE

Requested by:	Representatives Jeffus, Walend
DOR Taxpayer Telecommunications Service
SECTION 23.1.  Section 22.6 of S.L. 2002‑126 reads as rewritten:
"SECTION 22.6.(a)  The Department of Revenue may draw up to seven million eight hundred forty thousand five hundred thirteen dollars ($7,840,513) through June 30, 2005, from the collection assistance fee account created in G.S. 105‑243.1 in order to pay for the costs of establishing and equipping a central taxpayer telecommunications service center for collections and assistance and for the costs associated with aligning local field offices with the new center.
"
"SECTION 22.6.(c)  Beginning January 1, 2003, and ending on the second quarter following completion of the projects described in subsection (a) of this section, the Department of Revenue must report quarterly to the Joint Legislative Commission on Governmental Operations on the use of the funds and the progress of establishing the new center."

Requested by:	Representatives Jeffus, Walend
Certain DOR Positions Fee‑Supported
SECTION 23.2.  Of the funds in the collection assistance fee account created in G.S. 105‑243.1, the Department of Revenue may use up to five hundred thirty‑one thousand five hundred twelve dollars ($531,512) in each year of the 2003‑2005 fiscal biennium for salary and related fringe benefits for the following positions formerly supported from the General Fund:
Position No. 4784‑0000‑0076‑621 ‑ Revenue Officer II
Position No. 4784‑0000‑0076‑622 ‑ Revenue Officer II
Position No. 4784‑0000‑0076‑636 ‑ Revenue Officer I
Position No. 4784‑0000‑0076‑637 ‑ Revenue Officer I
Position No. 4784‑0000‑0076‑638 ‑ Revenue Officer I
Position No. 4784‑0000‑0076‑639 ‑ Revenue Officer I
Position No. 4784‑0000‑0076‑640 ‑ Revenue Officer I
Position No. 4784‑0000‑0076‑641 ‑ Revenue Officer I
Position No. 4784‑0000‑0076‑642 ‑ Revenue Officer I
Position No. 4784‑0000‑0076‑643 ‑ Revenue Officer I
Position No. 4784‑0000‑0076‑644 ‑ Revenue Officer I
Position No. 4784‑0000‑0076‑645 ‑ Revenue Officer I
Position No. 4784‑0000‑0076‑647 ‑ Revenue Officer I 

PART XXIV. SECRETARY OF STATE

Requested by:	Representatives Jeffus, Walend
transfer Consultation Requirement Under Business License information office to small business centers
SECTION 24.1.(a)  The Department of the Secretary of State (Department) and the North Carolina Community College System (System) shall develop and implement a plan to transfer the consultation function of the Business License Information Office (BLIO) in the Department to the Small Business Centers that are located within each of the community colleges in the System. The plan shall provide for the following:
(1)	Establishment of a Statewide Coordinator position who will develop and maintain a web‑based master application system of all State licensing and regulatory requirements.
(2)	Development and ongoing maintenance of a web‑based master application system of all State licensing and regulatory requirements.
(3)	Training for the Directors of the Small Business Centers.
(4)	Phase‑out of the BLIO consultant positions.
SECTION 24.1.(b)  The Department shall use funds appropriated for the 2003‑2004 fiscal year for the Business License Information Office (Fund 1240) in Budget Code 13200 to develop the web‑based master application and for training.
SECTION 24.1.(c)  The Department and the System shall present their plan to the Joint Legislative Commission on Governmental Operations and to the Chairs of the Appropriations Committees of the Senate and the House of Representatives by October 1, 2003. After presenting the plan, the Department and the System shall report on the implementation of the plan to the Joint Legislative Commission on Governmental Operations and to the Chairs of the Appropriations Committees of the Senate and the House of Representatives on a quarterly basis. The plan shall be fully implemented by June 30, 2004.

Requested by:	Representatives Jeffus, Walend
Publication of North Carolina Manual
SECTION 24.2.  The Department of the Secretary of State shall support the publication of the North Carolina Manual with receipts from sales of the manual when budgeting for the 2005‑2007 biennium. The Department shall consider the feasibility of providing the manual by Internet.

PART XXV. STATE BOARD OF ELECTIONS

Requested by:	Representatives Jeffus, Walend
Help America Vote Act matching funds
SECTION 25.1.(a)  Of the funds appropriated to the State Board of Elections for the 2003‑2004 fiscal year by Section 2.1 of this act:
(1)	The sum of $1,791,936 is transferred to a Reserve Fund to meet the Maintenance of Effort requirements of section 254(a)(7) of the Help America Vote Act, Public Law 107‑252.
(2)	The sum of $1,665,650 currently appropriated to Fund 1100 Administration for the SEIMS RCC is transferred to a Reserve Fund for the State Board of Elections.
(3)	The sum of $2,524,400 is transferred to the Election Fund to meet the five percent (5%) matching requirement of Title II Help America Vote Act, Public Law 107‑252. It is estimated that the amount needed for the 2003‑2004 fiscal year will be $1,130,000. The funds shall be available only for matching federal funds under HAVA for the 2003‑2004, 2004‑2005, and 2005‑2006 fiscal years. The money shall only be expended as federal funds are available to match, and if the amount available to the State is less than projected, the unexpended remainder of the $2,524,400 shall revert to the General Fund on the earlier of:
a.	June 30, 2006; or
b.	A determination by the Office of State Budget and Management that the unexpended remainder will not be needed.
SECTION 25.1.(b)  The 107th Congress established the Help America Vote Act (HAVA) as Public Law 107‑252 establishing a program to assist in the administration of Federal elections and provide assistance with the administration of certain Federal elections laws and programs; establish minimum election administration standards for States and units of local government with the responsibility for the administration of Federal elections.  In HAVA, Congress authorized appropriations for elections assistance in the form of a matching grant program (Title II of HAVA, Requirements Payments) for which states are required as one condition of the Election Assistance Requirements Payments to match federal allocations with a five percent (5%) match of State dollars.  The federal government has additional requirements, including a required state plan and a stipulation for each participating state to implement the Maintenance of Effort (MOE) requirements of Title II, section 254(a)(7) of HAVA. The MOE requires that the state maintain the expenditures of the state for activities funded by the payment at a level that is not less than the level of such expenditures maintained by the state for the fiscal year ending prior to November 2000.  Congress authorized up to $1.4 billion for Requirements Payments, and $810 million for Title II requirements grants was funded for fiscal year 2003.  Title II requirements funding has not been passed by Congress for fiscal years 2004‑2005 and 2005‑2006 but is currently proposed at $500 million for each year.
Based upon the 2003 approved funding, it is estimated that North Carolina will receive $22.6 million of the Title II funding if North Carolina meets all the conditions of the Election Assistance program, including not only the five percent (5%) state match but also maintenance of its expenditure level on HAVA activities at the expense level the State Board of Elections had in State fiscal year 1999‑2000. Actual expenditures for the State Elections Information Management System (SEIMS), which is a qualified HAVA activity, in 1999‑2000 was three million four hundred fifty‑seven thousand five hundred eighty‑five dollars and six cents ($3,457,585.06). The authorized expenditures on SEIMS in 2002‑2003 by the State Board of Elections is one million six hundred sixty‑five thousand six hundred fifty dollars ($1,665,650). The difference in expenditure levels is one million seven hundred ninety‑one thousand nine hundred thirty‑five dollars and six cents ($1,791,935.06). To meet HAVA's Title II MOE requirement, North Carolina has to appropriate from its General Fund to a Reserve on a recurring basis (or for as long as Congress requires the MOE as a condition of states' being eligible to receive Requirements Payments), the amount of three million four hundred fifty‑seven thousand five hundred eighty‑five dollars and six cents ($3,457,585.06) annually.
For the State to meet its obligatory five percent (5%) match for HAVA's Title II Requirements Payment, North Carolina has to match twenty‑two million six hundred thousand dollars ($22,600,000) estimated federal funds in 2003‑2004; thirteen million nine hundred forty‑four thousand dollars ($13,944,000) estimated federal funds in both 2004‑2005 and 2005‑2006. The State's match is one million one hundred thirty thousand dollars ($1,130,000) in 2003‑2004; six hundred ninety‑seven thousand two hundred dollars ($697,200) in 2004‑2005 and six hundred ninety‑seven thousand two hundred dollars ($697,200) in 2005‑2006. The nonrecurring match total required from the General Fund is two million five hundred twenty‑four thousand four hundred dollars ($2,524,400).
SECTION 25.1.(c) There is established a special fund to be known as the Election Fund. All funds received for implementation of the Help America Vote Act of 2002, Public Law 107‑252, shall be deposited in that fund. The State Board of Elections shall use funds in the Election Fund only to implement HAVA.
SECTION 25.1.(d)  G.S. 147‑69.2(a) is amended by adding a new subdivision to read:
"(17d)	The Election Fund."
SECTION 25.1.(e)  Subsections (c) and (d) of this section are effective when this act becomes law.

PART XXVI. OFFICE OF STATE BUDGET AND MANAGEMENT

Requested by:	Representatives Jeffus, Walend
NC HUMANITIES COUNCIL
SECTION 26.1.  The North Carolina Humanities Council shall:
(1)	By January 15, 2004, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
a.	State fiscal year 2002‑2003 program activities, objectives, and accomplishments;
b.	State fiscal year 2002‑2003 itemized expenditures and fund sources;
c.	State fiscal year 2003‑2004 planned activities, objectives, and accomplishments including actual results through December 31, 2003; and
d.	State fiscal year 2003‑2004 estimated itemized expenditures and fund sources including actual expenditures and fund sources through December 31, 2003.
(2)	Provide to the Fiscal Research Division a copy of the organization's annual audited financial statement within 30 days of issuance of the statement.

PART XXVII. OFFICE OF THE STATE CONTROLLER

Requested by:	Representatives Jeffus, Walend
OVERPAYMENTS AUDIT
SECTION 27.1.(a)  During the 2003‑2004 fiscal year, receipts generated by the collection of inadvertent overpayments by State agencies to vendors as a result of pricing errors, neglected rebates and discounts, miscalculated freight charges, unclaimed refunds, erroneously paid excise taxes, and related errors as required by G.S. 147‑86.22(c) are to be deposited in the Special Reserve Account 24172.
SECTION 27.1.(b)  For the 2003‑2004 fiscal year, two hundred thousand dollars ($200,000) of the funds transferred from the Special Reserve Account 24172 shall be used by the Office of the State Controller for data processing, debt collection, or e‑commerce costs.
SECTION 27.1.(c)  All funds available in the Special Reserve Account 24172 on July 1, 2003, are transferred to the General Fund on that date.
SECTION 27.1.(d)  Any unobligated funds in the Special Reserve Account 24172 that are realized above the allowance in subsection (b) of this section are subject to appropriation by the General Assembly in the 2004 Regular Session of the 2003 General Assembly.
SECTION 27.1.(e)  The State Controller shall report quarterly to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division on the revenue deposited into the Special Reserve Account and the disbursement of that revenue.

PART XXVIII. DEPARTMENT OF THE STATE TREASURER

Requested by:	Representatives Jeffus, Walend
Amending Funding for Retirement and Escheat Operations
SECTION 28.1.(a)  G.S. 116B‑6(h) reads as rewritten:
"(h)	Expenditures. – The Treasurer may expend the funds in the Escheat Fund, other than funds in the Escheat Account, for the payment of claims for refunds to owners, holders and claimants under G.S. 116B‑4; for the payment of costs of maintenance and upkeep of abandoned or escheated property; costs of preparing lists of names of owners of abandoned property to be furnished to clerks of superior court; costs of notice and publication; costs of appraisals; fees of persons employed pursuant to G.S. 116B‑8 costs involved in determining whether a decedent died without heirs; costs of a title search of real property that has escheated; and costs of auction or sale under this Chapter. All other costs, including salaries of personnel, necessary to carry out the duties of the Treasurer under this Chapter, shall be covered by an appropriation to the State Treasurer for this purpose in the Current Appropriations Act. The Escheat Fund shall deposit as nontax revenue to the General Fund the amount appropriated from the General Fund to cover the cost of the administration, management, and operations of the Escheats program."
SECTION 28.1.(b)  G.S. 135‑6(g) reads as rewritten:
"(g)	Officers and Other Employees; Salaries and Expenses. – The State Treasurer shall be ex officio chairman of the Board of Trustees. The Board of Trustees shall, by a majority vote of all the members, appoint a director, who may be, but need not be, one of its members. The salary of the director of the Retirement System is subject to the provisions of Chapter 126 of the General Statutes of North Carolina. The Board of Trustees shall engage such actuarial and other service as shall be required to transact the business of the Retirement System. The compensation of all persons, other than the director, engaged by the Board of Trustees, and all other expenses of the Board necessary for the operation of the Retirement System, shall be paid at such rates and in such amounts as the Board of Trustees shall approve, subject to the approval of the Director of the Budget. The cost of the administration, management, and operation of the Retirement System shall be covered by an appropriation to the State Treasurer in the Current Appropriations Act. The Retirement System shall deposit its apportioned share of the cost to the General Fund as nontax revenue."
SECTION 28.1.(c)  G.S. 128‑28(h) reads as rewritten:
"(h)	Officers and Other Employees, Salaries and Expenses. – The Board of Trustees shall elect from its membership a chairman, and shall, by a majority vote of all the members, appoint a director, who may be, but need not be, one of its members. The Board of Trustees shall engage such actuarial and other service as shall be required to transact the business of the Retirement System. The compensation of all persons engaged by the Board of Trustees, and all other expenses of the Board necessary for the operation of the Retirement System, shall be paid at such rates and in such amounts as the Board of Trustees shall approve. The cost of the administration, management, and operation of the Retirement System shall be covered by an appropriation to the State Treasurer in the Current Appropriations Act. The Retirement System shall deposit its apportioned share of the cost to the General Fund as nontax revenue."
SECTION 28.1.(d)  Subsections (a) through (c) of this section become effective July 1, 2003.

Requested by:	Representatives Jeffus, Walend
State Treasurer Subject to Executive Budget Act
SECTION 28.2.(a)  G.S. 147‑68(e) reads as rewritten:
"(e)	The State Treasurer, in carrying out the responsibilities of this section, shall  be independent of any fiscal control exercise by the Director of the Budget or the Department of Administration and shall be responsible to the Advisory Budget Commission, the General Assembly and the people of North Carolina for the efficient and faithful exercise of the responsibilities of his office. The State Treasurer, for all other purposes, is subject to Article 1 of Chapter 143 of the General Statutes."
SECTION 28.2.(b)  Subsection (a) of this section becomes effective July 1, 2003.

PART XXIX. DEPARTMENT OF TRANSPORTATION

Requested by:	Representatives Cole, Gillespie
Cash‑flow highway fund and highway trust fund appropriations
SECTION 29.1.(a). The General Assembly authorizes and certifies anticipated revenues of the Highway Fund as follows:
For Fiscal Year 2005‑2006	$1,409.2 Million
For Fiscal Year 2006‑2007	$1,458.9 Million
For Fiscal Year 2007‑2008	$1,509.4 Million
For Fiscal Year 2008‑2009	$1,558.8 Million
SECTION 29.1.(b) The General Assembly authorizes and certifies anticipated revenues of the Highway Trust Fund as follows:
For Fiscal Year 2005‑2006	$1,096.3 Million
For Fiscal Year 2006‑2007	$1,148.0 Million
For Fiscal Year 2007‑2008	$1,202.6 Million
For Fiscal Year 2008‑2009	$1,252.4 Million

Requested by:	Representatives Cole, Gillespie
Small Urban Contingency Funds
SECTION 29.2.  Of the funds appropriated in this act to the Department of Transportation:
(1)	Fourteen million dollars ($14,000,000) shall be allocated in each fiscal year for small urban construction projects. These funds shall be allocated equally in each fiscal year of the biennium among the 14 Highway Divisions for the small urban construction program for small construction projects that are located within the area covered by a one‑mile radius of the municipal corporate limits.
(2)	Ten million dollars ($10,000,000) in fiscal year 2003‑2004 and ten million dollars ($10,000,000) in fiscal year 2004‑2005 shall be used statewide for rural or small urban highway improvements and related transportation enhancements to public roads and public facilities, industrial access roads, and spot safety projects as approved by the Secretary of Transportation.
None of these funds used for rural secondary road construction are subject to the county allocation formulas in G.S. 136‑44.5(b) and (c).
These funds are not subject to G.S. 136‑44.7.
The Department of Transportation shall report to the members of the General Assembly on projects funded pursuant to this section in each member's district prior to the Board of Transportation's action. The Department shall make a quarterly comprehensive report on the use of these funds to the Joint Legislative Transportation Oversight Committee and the Fiscal Research Division.

Requested by:	Representatives Cole, Gillespie
department of transportation Productivity Pilot Programs
SECTION 29.3.  The Department of Transportation may establish two pilot programs to test incentive pay for employees as a means for increasing efficiency and productivity.
One of the pilot programs shall involve the highway resurfacing program using road oil. Up to one‑fourth of one percent (0.25%) of the budget allocation for this program may be used to provide employee incentive payments.
The other pilot project may be selected by the Department of Transportation, and up to twenty‑five thousand dollars ($25,000) may be used from existing budgets for incentives.
Incentive payments shall be based on quantifiable measures and production schedules determined prior to the implementation of the pilot programs that shall last no more than two years.
The Department of Transportation shall report to the Joint Legislative Transportation Oversight Committee on the pilot programs at least 30 days prior to their implementation.

Requested by:	Representatives Cole, Gillespie
Reduce Highway Trust Fund Administration Allocation
SECTION 29.4.  G.S. 136‑176(b) reads as rewritten:
"(b)	Funds in the Trust Fund are annually appropriated to the Department of Transportation to be allocated and used as provided in this subsection. A sum, not to exceed three and eight‑tenths percent (3.8%) of the amount of revenue deposited in the Trust Fund under subdivisions (a)(1), (2), and (3) of this section, may be used each fiscal year by the Department for expenses to administer the Trust Fund. Operation and project development costs of the North Carolina Turnpike Authority are eligible administrative expenses under this subsection. Any funds allocated to the Authority pursuant to this subsection shall be repaid by the Authority from its toll revenue as soon as possible, subject to any restrictions included in the agreements entered into by the Authority in connection with the issuance of the Authority's revenue bonds. Beginning one year after the Authority begins collecting tolls on a completed Turnpike Project, interest shall accrue on any unpaid balance owed to the Highway Trust Fund at a rate equal to the State Treasurer's average annual yield on its investment of Highway Trust Fund funds pursuant to G.S. 147‑6.1. Interest earned on the unpaid balance shall be deposited in the Highway Trust Fund upon repayment. The rest of the funds in the Trust Fund shall be allocated and used as follows:
(1)	Sixty‑one and ninety‑five hundredths percent (61.95%) to plan, design, and construct the projects of the Intrastate System described in G.S. 136‑179 and to pay debt service on highway bonds and notes that are issued under the State Highway Bond Act of 1996 and whose proceeds are applied to these projects.
(2)	Twenty‑five and five hundredths percent (25.05%) to plan, design, and construct the urban loops described in G.S. 136‑180 and to pay debt service on highway bonds and notes that are issued under the State Highway Bond Act of 1996 and whose proceeds are applied to these urban loops.
(3)	Six and one‑half percent (6.5%) to supplement the appropriation to cities for city streets under G.S. 136‑181.
(4)	Six and one‑half percent (6.5%) for secondary road construction as provided in G.S. 136‑182 and to pay debt service on highway bonds and notes that are issued under the State Highway Bond Act of 1996 and whose proceeds are applied to secondary road construction.
The Department must administer funds allocated under subdivisions (1), (2), and (4) of this subsection in a manner that ensures that sufficient funds are available to make the debt service payments on bonds issued under the State Highway Bond Act of 1996 as they become due."

Requested by:	Representatives Cole, Gillespie
Use of Excess Overweight/Oversize Funds
SECTION 29.5.  Funds generated by overweight/oversize permit fees in excess of the cost of administering the program, as determined pursuant to G.S. 20‑119(e), shall be used for highway and bridge maintenance required as a result of damages caused from overweight/oversize loads.

Requested by:	Representatives Cole, Gillespie
Environmental Permits on department of transportation construction projects
SECTION 29.6.  Chapter 136 of the General Statutes is amended by adding a new section to read:
"§ 136‑44.7B.  Permit issuance by Department of Environment and Natural Resources transportation construction projects.
(a)	Once the Department of Environment and Natural Resources or any agency within the Department of Environment and Natural Resources has received a complete application for a permit that is required for a transportation construction project to be undertaken by or on behalf of the Department of Transportation, the Department of Environment and Natural Resources shall expedite the review of the application and shall issue or deny the permit within 90 days of receipt of the submission. All permits not denied within that time limit shall be deemed approved. The Secretary of Environment and Natural Resources and the Secretary of Transportation shall jointly decide any question as to whether an application for a permit is complete. If the Secretary of Environment and Natural Resources and the Secretary of Transportation are unable to jointly decide any question, the Governor shall decide the question.
(b)	Once the Department of Environment and Natural Resources or any agency within the Department of Environment and Natural Resources has issued a permit that is required for a transportation construction project to be undertaken by or on behalf of the Department of Transportation, that permit shall remain in effect until the project is completed. The permit shall not expire and shall not be modified or canceled for any reason, including a subsequent change in federal law or regulations or in State law or rules, unless at least one of the following occurs:
(1)	The modification or cancellation is requested by the Department of Transportation.
(2)	The modification or cancellation is clearly required by a change in federal law or regulations and a failure to modify or cancel the permit by the Department of Environment and Natural Resources would result in a loss of federal program delegation or a significant reduction in the availability of federal funds to the Department of Environment and Natural Resources or to the Department of Transportation.
(3)	The modification or cancellation is clearly required by a change in State law as a result of an act of the General Assembly that includes a statement that the General Assembly specifically intends the change in State law to apply to ongoing transportation construction projects.
(4)	The modification or cancellation is ordered by a court of competent jurisdiction.
(5)	The nature or scope of the transportation construction project is significantly expanded or otherwise altered."

Requested by:	Representatives Cole, Gillespie
Driver Education Privatization
SECTION 29.7.  The State Board of Education shall study statewide privatization of State-funded driver education programs. The State Board of Education shall report to the Joint Legislative Education Oversight Committee and the joint Legislative Transportation Oversight Committee by November 30, 2003, on proposals for statewide privatization and cost reduction.

Requested by:	Representatives Cole, Gillespie
Department of Transportation general Administration Reductions.
SECTION 29.8.  The Department of Transportation shall reduce expenditures for General Administration by one million eight hundred thousand dollars ($1,800,000) during fiscal year 2003‑2004 and by three million six hundred thousand dollars ($3,600,000) in fiscal year 2004‑2005. At least seventy‑five percent (75%) of the savings shall be achieved through reductions in personnel. Savings shall be used for maintenance. The Department of Transportation shall report to the Joint Legislative Transportation Oversight Committee on or before November 30, 2003, on actions it will be taking to implement the provisions of this section. 

PART XXX. SALARIES AND EMPLOYEE BENEFITS

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
GOVERNOR AND COUNCIL OF STATE
SECTION 30.1.(a)  Effective July 1, 2003, G.S. 147‑11(a) reads as rewritten:
"(a)	The salary of the Governor shall be one hundred twenty thousand three hundred twenty‑five dollars ($120,325) annually, payable monthly."
SECTION 30.1.(b)  Effective July 1, 2003, the annual salaries for the members of the Council of State, payable monthly, for the 2003‑2004 and 2004‑2005 fiscal years are:
Council of State	Annual Salary
	Lieutenant Governor	$  106,195
	Attorney General	106,195
	Secretary of State	106,195
	State Treasurer	106,195
	State Auditor	106,195
	Superintendent of Public Instruction	106,195
	Agriculture Commissioner	106,195
	Insurance Commissioner	106,195
	Labor Commissioner	106,195

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
NONELECTED DEPARTMENT HEADS/SALARY INCREASES
SECTION 30.2.  In accordance with G.S. 143B‑9, the maximum annual salaries, payable monthly, for the nonelected heads of the principal State departments for the 2003‑2004 and 2004‑2005 fiscal years are:
Nonelected Department Heads	Annual Salary
	Secretary of Administration	$  103,753
	Secretary of Correction	103,753
	Secretary of Crime Control and Public Safety	103,753
	Secretary of Cultural Resources	103,753
	Secretary of Commerce	103,753
	Secretary of Environment and Natural Resources	103,753
	Secretary of Health and Human Services	103,753
	Secretary of Juvenile Justice and Delinquency Prevention	103,753
	Secretary of Revenue	103,753
	Secretary of Transportation	103,753

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
CERTAIN EXECUTIVE BRANCH OFFICIALS/SALARY INCREASES
SECTION 30.3.  Effective July 1, 2003, the annual salaries, payable monthly, for the 2003‑2004 and 2004‑2005 fiscal years for the following executive branch officials are:
Executive Branch Officials	Annual Salary
	Chairman, Alcoholic Beverage Control Commission	$   94,433
	State Controller	132,159
	Commissioner of Motor Vehicles	94,433
	Commissioner of Banks	106,195
	Chairman, Employment Security Commission	131,992
	State Personnel Director	103,753
	Chairman, Parole Commission	86,229
	Members of the Parole Commission	79,610
	Chairman, Utilities Commission	118,267
	Members of the Utilities Commission	106,195
	Executive Director, Agency for Public Telecommunications	79,610
	General Manager, Ports Railway Commission	71,887
	Director, Museum of Art	96,764
	Executive Director, North Carolina Housing Finance Agency	116,872
	Executive Director, North Carolina Agricultural Finance Authority	91,918
	State Chief Information Officer	132,080

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
JUDICIAL BRANCH OFFICIALS/SALARY INCREASE
SECTION 30.4.(a)  Effective July 1, 2003, the annual salaries, payable monthly, for specified judicial branch officials for the 2003‑2004 and 2004‑2005 fiscal years are:
Judicial Branch Officials	Annual Salary
	Chief Justice, Supreme Court	$  120,325
	Associate Justice, Supreme Court	117,181
	Chief Judge, Court of Appeals	114,251
	Judge, Court of Appeals	112,298
	Judge, Senior Regular Resident Superior Court	109,247
	Judge, Superior Court	106,195
	Chief Judge, District Court	96,431
	Judge, District Court	93,380
	Administrative Officer of the Courts	109,247
	Assistant Administrative Officer of the Courts	99,787
SECTION 30.4.(b)  The district attorney or public defender of a judicial district, with the approval of the Administrative Officer of the Courts or the Commission on Indigent Defense Services, respectively, shall set the salaries of assistant district attorneys or assistant public defenders, respectively, in that district such that the average salaries of assistant district attorneys or assistant public defenders in that district do not exceed sixty‑one thousand one hundred fifty‑four dollars ($61,154) and the minimum salary of any assistant district attorney or assistant public defender is at least thirty‑one thousand five hundred thirty‑two dollars ($31,532) effective July 1, 2003.
SECTION 30.4.(c)  Effective July 1, 2003, the salaries in effect for the 2003‑2004 and 2004‑2005 fiscal years for permanent, full‑time employees of the Judicial Department, except for those whose salaries are itemized in this Part, shall be increased by one and six‑tenths percent (1.6%)

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
CLERK OF SUPERIOR COURT/SALARY INCREASES
SECTION 30.5.  Effective July 1, 2003, G.S. 7A‑101(a) reads as rewritten:
"(a)	The clerk of superior court is a full‑time employee of the State and shall receive an annual salary, payable in equal monthly installments, based on the population of the county as determined in subsection (a1) of this section, according to the following schedule:
Population	Annual Salary
Less than 100,000		$71,030
100,000 to 149,999		79,707
150,000 to 249,999		88,386
250,000 and above		97,066.

The salary schedule in this subsection is intended to represent the following approximate percentage of the salary of a chief district court judge:
Population	Annual Salary
Less than 100,000	73%
100,000 to 149,999	82%
150,000 to 249,999	91%
250,000 and above	100%.

When a county changes from one population group to another, the salary of the clerk shall be changed, on July 1 of the fiscal year for which the change is reported, to the salary appropriate for the new population group, except that the salary of an incumbent clerk shall not be decreased by any change in population group during his continuance in office."

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright 
ASSISTANT AND DEPUTY CLERKS OF COURT/SALARY INCREASES/clerk of court personnel flexibility
SECTION 30.6.  Effective July 1, 2003, G.S. 7A‑102 reads as rewritten:
"§ 7A‑102.  Assistant and deputy clerks; appointment; number; salaries; duties.
(a)	The numbers and salaries of assistant clerks, deputy clerks, and other employees in the office of each clerk of superior court shall be determined by the Administrative Officer of the Courts after consultation with the clerk concerned. All personnel in the clerk's office are employees of the State. The clerk appoints the assistants, deputies, and other employees in the clerk's office to serve at his or her pleasure. Assistant and deputy clerks shall take the oath of office prescribed for clerks of superior court, conformed to the office of assistant or deputy clerk, as the case may be. Except as provided by subsection (c2) of this section, the job classifications and related salaries of each employee within the office of each superior court clerk shall be subject to the approval of the Administrative Officer of the Courts after consultation with each clerk concerned and shall be subject to the availability of funds appropriated for that purpose by the General Assembly.
(b)	An assistant clerk is authorized to perform all the duties and functions of the office of clerk of superior court, and any act of an assistant clerk is entitled to the same faith and credit as that of the clerk. A deputy clerk is authorized to certify the existence and correctness of any record in the clerk's office, to take the proofs and examinations of the witnesses touching the execution of a will as required by G.S. 31‑17, and to perform any other ministerial act which the clerk may be authorized and empowered to do, in his own name and without reciting the name of his principal. The clerk is responsible for the acts of his assistants and deputies. With the consent of the clerk of superior court of each county and the consent of the presiding judge in any proceeding, an assistant or deputy clerk is authorized to perform all the duties and functions of the office of the clerk of superior court in another county in any proceeding in the district or superior court that has been transferred to that county from the county in which the assistant or deputy clerk is employed.
(c)	Notwithstanding the provisions of subsection (a), the Administrative Officer of the Courts shall establish an incremental salary plan for assistant clerks and for deputy clerks based on a series of salary steps corresponding to the steps contained in the Salary Plan for State Employees adopted by the Office of State Personnel, subject to a minimum and a maximum annual salary as set forth below. On and after July 1, 1985, each assistant clerk and each deputy clerk shall be eligible for an annual step increase in his salary plan based on satisfactory job performance as determined by each clerk. Notwithstanding the foregoing, if an assistant or deputy clerk's years of service in the office of superior court clerk would warrant an annual salary greater than the salary first established under this section, that assistant or deputy clerk shall be eligible on and after July 1, 1984, for an annual step increase in his salary plan. Furthermore, on and after July 1, 1985, that assistant or deputy clerk shall be eligible for an increase of two steps in his salary plan, and shall remain eligible for a two‑step increase each year as recommended by each clerk until that assistant or deputy clerk's annual salary corresponds to his number of years of service. Any person covered by this subsection who would not receive a step increase in fiscal year 1995‑96 because that person is at the top of the salary range as it existed for fiscal year 1994‑95 shall receive a salary increase to the maximum annual salary provided by subsection (c1) of this section.
(c1)	A full‑time assistant clerk or a full‑time deputy clerk, and up to one full‑time deputy clerk serving as head bookkeeper per county, shall be paid an annual salary subject to the following minimum and maximum rates:

Assistant Clerks and Head Bookkeeper	Annual Salary
Minimum	$26,939
Maximum	47,207

Deputy Clerks	Annual Salary
Minimum	$22,926
Maximum	36,508.

(c2)	The clerk of superior court may appoint assistant clerks, deputy clerks, and a head bookkeeper and set their salaries above the minimum rate established for the positions by subsection (c1) of this section if, in the clerk's discretion, (i) the needs of the clerk's office would be best served by an appointment above the minimum rate, (ii) the appointee's skills and experience support the higher rate, and (iii) the Administrative Office of the Courts certifies that there are sufficient funds available.
(d)	Full‑time assistant clerks, licensed to practice law in North Carolina, who are employed in the office of superior court clerk on and after July 1, 1984, and full‑time assistant clerks possessing a masters degree in business administration, public administration, accounting, or other similar discipline from an accredited college or university who are employed in the office of superior court clerk on and after July 1, 1997, are authorized an annual salary of not less than three‑fourths of the maximum annual salary established for assistant clerks; the clerk of superior court, with the approval of the Administrative Office of the Courts, may establish a higher annual salary but that salary shall not be higher than the maximum annual salary established for assistant clerks. Full‑time assistant clerks, holding a law degree from an accredited law school, who are employed in the office of superior court clerk on and after July 1, 1984, are authorized an annual salary of not less than two‑thirds of the maximum annual salary established for assistant clerks; the clerk of superior court, with the approval of the Administrative Office of the Courts, may establish a higher annual salary, but the entry‑level salary may not be more than three‑fourths of the maximum annual salary established for assistant clerks, and in no event may be higher than the maximum annual salary established for assistant clerks. Except as provided by subsection (c2) of this section, the entry‑level annual salary for all other assistant and deputy clerks employed on and after July 1, 1984, shall be at the minimum rates as herein established.
(e)	A clerk of superior court may apply to the Director of the Administrative Office of the Courts to enter into contracts with local governments for the provision by the State of services of assistant clerks, deputy clerks, and other employees in the office of each clerk of superior court pursuant to G.S. 153A‑212.1 or G.S. 160A‑289.1.
(f)	The Director of the Administrative Office of the Courts may provide assistance requested pursuant to subsection (e) of this section only upon a showing by the senior resident superior court judge, supported by facts, that the overwhelming public interest warrants the use of additional resources for the speedy disposition of cases involving drug offenses, domestic violence, or other offenses involving a threat to public safety.
(g)	The terms of any contract entered into with local governments pursuant to subsection (e) of this section shall be fixed by the Director of the Administrative Office of the Courts in each case. Nothing in this section shall be construed to obligate the General Assembly to make any appropriation to implement the provisions of this section or to obligate the Administrative Office of the Courts to provide the administrative costs of establishing or maintaining the positions or services provided for under this section. Further, nothing in this section shall be construed to obligate the Administrative Office of the Courts to maintain positions or services initially provided for under this section."

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
MAGISTRATES/SALARY INCREASES
SECTION 30.7.  Effective July 1, 2003, G.S. 7A‑171.1 reads as rewritten:
"(a)	The Administrative Officer of the Courts, after consultation with the chief district judge and pursuant to the following provisions, shall set an annual salary for each magistrate.
(1)	A full‑time magistrate shall be paid the annual salary indicated in the table set out in this subdivision. A full‑time magistrate is a magistrate who is assigned to work an average of not less than 40 hours a week during the term of office. The Administrative Officer of the Courts shall designate whether a magistrate is full‑time. Initial appointment shall be at the entry rate. A magistrate's salary shall increase to the next step every two years on the anniversary of the date the magistrate was originally appointed for increases to Steps 1 through 3, and every four years on the anniversary of the date the magistrate was originally appointed for increases to Steps 4 through 6.

	Table of Salaries of Full‑Time Magistrates

Step Level	Annual Salary
Entry Rate			$27,319
Step 1		29,997
Step 2		32,911
Step 3		36,091
Step 4		39,575
Step 5		43,405
Step 6		47,614.

(2)	A part‑time magistrate is a magistrate who is assigned to work an average of less than 40 hours of work a week during the term, except that no magistrate shall be assigned an average of less than 10 hours of work a week during the term. A part‑time magistrate is included, in accordance with G.S. 7A‑170, under the provisions of G.S. 135‑1(10) and G.S. 135‑40.2(a). The Administrative Officer of the Courts designates whether a magistrate is a part‑time magistrate. A part‑time magistrate shall receive an annual salary based on the following formula: The average number of hours a week that a part‑time magistrate is assigned work during the term shall be multiplied by the annual salary payable to a full‑time magistrate who has the same number of years of service prior to the beginning of that term as does the part‑time magistrate and the product of that multiplication shall be divided by the number 40. The quotient shall be the annual salary payable to that part‑time magistrate.
(3)	Notwithstanding any other provision of this subsection, an individual who, when initially appointed as a full‑time magistrate, is licensed to practice law in North Carolina, shall receive the annual salary provided in the Table in subdivision (1) of this subsection for Step 4. This magistrate's salary shall increase to the next step every four years on the anniversary of the date the magistrate was originally appointed. An individual who, when initially appointed as a part‑time magistrate, is licensed to practice law in North Carolina, shall be paid an annual salary based on that for Step 4 and determined according to the formula in subdivision (2) of this subsection. This magistrate's salary shall increase to the next step every four years on the anniversary of the date the magistrate was originally appointed. The salary of a full‑time magistrate who acquires a license to practice law in North Carolina while holding the office of magistrate and who at the time of acquiring the license is receiving a salary at a level lower than Step 4 shall be adjusted to Step 4 and, thereafter, shall advance in accordance with the Table's schedule. The salary of a part‑time magistrate who acquires a license to practice law in North Carolina while holding the office of magistrate and who at the time of acquiring the license is receiving an annual salary as determined by subdivision (2) of this subsection based on a salary level lower than Step 4 shall be adjusted to a salary based on Step 4 in the Table and, thereafter, shall advance in accordance with the provision in subdivision (2) of this subsection.
(a1)	Notwithstanding subsection (a) of this section, the following salary provisions apply to individuals who were serving as magistrates on June 30, 1994:
(1)	The salaries of magistrates who on June 30, 1994, were paid at a salary level of less than five years of service under the table in effect that date shall be as follows:
Less than 1 year of service		$21,666
1 or more but less than 3 years of service		22,747
3 or more but less than 5 years of service		24,922.
Upon completion of five years of service, those magistrates shall receive the salary set as the Entry Rate in the table in subsection (a).
(2)	The salaries of magistrates who on June 30, 1994, were paid at a salary level of five or more years of service shall be based on the rates set out in subsection (a) as follows:
Salary Level	Salary Level
on June 30, 1994	on July 1, 1994
5 or more but less than 7 years of service	Entry Rate
7 or more but less than 9 years of service	Step 1
9 or more but less than 11 years of service	Step 2
11 or more years of service	Step 3
Thereafter, their salaries shall be set in accordance with the provisions in subsection (a).
(3)	The salaries of magistrates who are licensed to practice law in North Carolina shall be adjusted to the annual salary provided in the table in subsection (a) as Step 4, and, thereafter, their salaries shall be set in accordance with the provisions in subsection (a).
(4)	The salaries of "part‑time magistrates" shall be set under the formula set out in subdivision (2) of subsection (a) but according to the rates set out in this subsection.
(a2)	The Administrative Officer of the Courts shall provide magistrates with longevity pay at the same rates as are provided by the State to its employees subject to the State Personnel Act.
(b)	Notwithstanding G.S. 138‑6, a magistrate may not be reimbursed by the State for travel expenses incurred on official business within the county in which the magistrate resides."

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
GENERAL ASSEMBLY PRINCIPAL CLERKS
SECTION 30.8.  Effective July 1, 2003, G.S. 120‑37(c) reads as rewritten:
"(c)	The principal clerks shall be full‑time officers. Each principal clerk shall be entitled to other benefits available to permanent legislative employees and shall be paid an annual salary of eighty-nine thousand seven hundred nineteen dollars ($89,719) payable monthly. The Legislative Services Commission shall review the salary of the principal clerks prior to submission of the proposed operating budget of the General Assembly to the Governor and Advisory Budget Commission and shall make appropriate recommendations for changes in those salaries. Any changes enacted by the General Assembly shall be by amendment to this paragraph."

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
SERGEANT‑AT‑ARMS AND READING CLERKS
SECTION 30.9.  Effective July 1, 2003, G.S. 120‑37(b) reads as rewritten:
"(b)	The sergeant‑at‑arms and the reading clerk in each house shall be paid a salary of two hundred ninety-seven dollars ($297.00) per week plus subsistence at the same daily rate provided for members of the General Assembly, plus mileage at the rate provided for members of the General Assembly for one round trip only from their homes to Raleigh and return. The sergeants‑at‑arms shall serve during sessions of the General Assembly and at such time prior to the convening of, and subsequent to adjournment or recess of, sessions as may be authorized by the Legislative Services Commission. The reading clerks shall serve during sessions only."

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
LEGISLATIVE EMPLOYEES
SECTION 30.10.  The Legislative Services Officer shall increase the salaries of nonelected employees of the General Assembly in effect for fiscal year 2002‑2003 by one and six‑tenths percent (1.6%).  Nothing in this act limits any of the provisions of G.S. 120‑32.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
COMMUNITY COLLEGES PERSONNEL/SALARY INCREASES
SECTION 30.11.  The Director of the Budget shall transfer from the Reserve for Compensation Increases, created in this act for fiscal years 2003‑2004 and 2004‑2005, funds to the North Carolina Community College System Office necessary to provide an annual salary increase of one and six‑tenths percent (1.6%) including funds for the employer's retirement and social security contributions, commencing July 1, 2003, for all permanent full‑time community college institutional personnel supported by State funds.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
UNIVERSITY OF NORTH CAROLINA SYSTEM/EPA SALARY INCREASES
SECTION 30.12.(a)  The Director of the Budget shall transfer to the Board of Governors of The University of North Carolina sufficient funds from the Reserve for Compensation Increases, created in this act for fiscal years 2003‑2004 and 2004‑2005, to provide an annual salary increase of one and six‑tenths percent (1.6%), including funds for the employer's retirement and social security contributions, commencing July 1, 2003, for all employees of The University of North Carolina, as well as employees other than teachers of the North Carolina School of Science and Mathematics, supported by State funds and whose salaries are exempt from the State Personnel Act (EPA).
SECTION 30.12.(b)   The Director of the Budget shall transfer to the Board of Governors of The University of North Carolina sufficient funds from the Reserve for Compensation Increases, created in this act for fiscal years 2003‑2004 and 2004‑2005, to provide an annual salary increase of one and eighty‑one hundredths percent (1.81%), including funds for the employer's retirement and social security contributions, commencing July 1, 2003, for all teaching employees of the North Carolina School of Science and Mathematics supported by State funds and whose salaries are exempt from the State Personnel Act (EPA).  These funds shall be allocated to individuals according to the rules adopted by the Board of Trustees of the North Carolina School of Science and Mathematics and may not be used for any purpose other than for salary increases and necessary employer contributions provided by this section.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
MOST STATE EMPLOYEES
SECTION 30.13.(a)  The salaries in effect June 30, 2003, of all permanent full‑time State employees whose salaries are set in accordance with the State Personnel Act and who are paid from the General Fund or the Highway Fund shall be increased on or after July 1, 2003, unless otherwise provided by this act, by one and six‑tenths percent (1.6%).
SECTION 30.13.(b)  Except as otherwise provided in this act, the fiscal year 2003‑2004 salaries for permanent full‑time State officials and persons in exempt positions that are recommended by the Governor or the Governor and the Advisory Budget Commission and set by the General Assembly shall be increased by one and six‑tenths percent (1.6%), commencing July 1, 2003.
SECTION 30.13.(c)  The salaries in effect for fiscal year 2003‑2004 for all permanent part‑time State employees shall be increased on and after July 1, 2003, by pro rata amounts of the one and six‑tenths percent (1.6%) salary increase provided for permanent full‑time employees covered under subsection (a) of this section.
SECTION 30.13.(d)  The Director of the Budget may allocate out of special operating funds or from other sources of the employing agency, except tax revenues, sufficient funds to allow a salary increase, on and after July 1, 2003, in accordance with subsection (a), (b), or (c) of this section, including funds for the employer's retirement and social security contributions, for the permanent full‑time and part‑time employees of the agency, provided the employing agency elects to make available the necessary funds.
SECTION 30.13.(e)  Within regular Executive Budget Act procedures as limited by this act, all State agencies and departments may increase on an equitable basis the rate of pay of temporary and permanent hourly State employees, subject to availability of funds in the particular agency or department, by pro rata amounts of the one and six‑tenths percent (1.6%) salary increase provided for permanent full‑time employees covered by the provisions of subsection (a) of this section, commencing July 1, 2003.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
ALL STATE‑SUPPORTED PERSONNEL
SECTION 30.14.(a)  Salaries and related benefits for positions that are funded partially from the General Fund or Highway Fund and partially from sources other than the General Fund or Highway Fund shall be increased from the General Fund or Highway Fund appropriation only to the extent of the proportionate part of the salaries paid from the General Fund or Highway Fund.
SECTION 30.14.(b)  The granting of the salary increases under this act does not affect the status of eligibility for salary increments for which employees may be eligible unless otherwise required by this act.
SECTION 30.14.(c)  The salary increases provided in this act are to be effective July 1, 2003, and do not apply to persons separated from State service due to resignation, dismissal, reduction in force, death, or retirement or whose last workday is prior to July 1, 2003.
Payroll checks issued to employees after July 1, 2003, which represent payment of services provided prior to July 1, 2003, shall not be eligible for salary increases provided for in this act. This subsection shall apply to all employees, subject to or exempt from the State Personnel Act, paid from State funds, including public schools, community colleges, and The University of North Carolina.
SECTION 30.14.(d)  The Director of the Budget shall transfer from the Reserve for Compensation Increases in this act for fiscal year 2003‑2004 all funds necessary for the salary increases provided by this act, including funds for the employer's retirement and social security contributions.
SECTION 30.14.(e)  Nothing in this act authorizes the transfer of funds between the General Fund and the Highway Fund for salary increases.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Study Compensation of Certain High‑Level Officers
SECTION 30.15.  The Office of State Personnel (OSP) and the Office of State Budget and Management (OSBM) shall study jointly the relative compensation of members of the Council of State, State department heads, and other high‑ranking elected and nonelected public officials whose salaries are set by the General Assembly to determine whether the officers are being compensated at rates in accordance with:
(1)	The officer's scope of responsibilities and span of control.
(2)	The critical nature of the officer's department, agency, institution, or function.
(3)	The relative size of the operations and budget under the officer's direct control.
(4)	The required credentials, knowledge, and experience necessary to competently manage the officer's organization or function.
In conducting this study, the OSP and OSBM shall focus on the relative compensation among these various officers to determine the appropriate salary levels for the officers given the factors identified in this section.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
SALARY‑RELATED CONTRIBUTIONS/EMPLOYER
SECTION 30.16.(a)  Required employer salary‑related contributions for employees whose salaries are paid from department, office, institution, or agency receipts shall be paid from the same source as the source of the employees' salary.  If an employee's salary is paid in part from the General Fund or Highway Fund and in part from department, office, institution, or agency receipts, required employer salary‑related contributions may be paid from the General Fund or Highway Fund only to the extent of the proportionate part paid from the General Fund or Highway Fund in support of the salary of the employee, and the remainder of the employer's requirements shall be paid from the source that supplies the remainder of the employee's salary.  The requirements of this section as to source of payment are also applicable to payments on behalf of the employee for hospital‑medical benefits, longevity pay, unemployment compensation, accumulated leave, workers' compensation, severance pay, separation allowances, and applicable disability income benefits.
SECTION 30.16.(b)  Effective July 1, 2003, the State's employer contribution rates budgeted for retirement and related benefits as percentage of covered salaries for the 2003‑2004 fiscal year are (i) three and ninety‑five hundredths percent (3.95%) ‑ Teachers and State Employees; (ii) eight and ninety‑five hundredths percent (8.95%) ‑ State Law Enforcement Officers; (iii) ten and forty‑one hundredths percent (10.41%) ‑ University Employees' Optional Retirement System; (iv) ten and forty‑one hundredths percent (10.41%) ‑ Community College Optional Retirement Program; (v) fourteen and ninety‑seven hundredths percent (14.97%) ‑ Consolidated Judicial Retirement System; and (vi) three and five hundredths percent (3.05%) ‑ Legislative Retirement System.  Each of the foregoing contribution rates includes three and five hundredths percent (3.05%) for hospital and medical benefits. The rate for Teachers and State Employees, State Law Enforcement Officers, the Community College Optional Retirement Program, and the University Employees' Optional Retirement Program includes fifty‑two hundredths percent (0.52%) for the Disability Income Plan.  The rates for Teachers and State Employees and State Law Enforcement Officers include sixteen hundredths percent (0.16%) for the Death Benefits Plan.  The rate for State Law Enforcement Officers includes five percent (5%) for Supplemental Retirement Income.
SECTION 30.16.(c)  Effective July 1, 2004, the State's employer contribution rates budgeted for retirement and related benefits as percentage of covered salaries for the 2004‑2005 fiscal year are (i) five and seventy‑eight hundredths percent (5.78%) ‑ Teachers and State Employees; (ii) ten and seventy‑eight hundredths percent (10.78%) ‑ State Law Enforcement Officers; (iii) ten and forty‑one hundredths percent (10.41%) ‑ University Employees' Optional Retirement System; (iv) ten and forty‑one hundredths percent (10.41%) ‑ Community College Optional Retirement Program; (v) fourteen and ninety‑seven hundredths percent (14.97%) ‑ Consolidated Judicial Retirement System; and (vi) three and five hundredths percent (3.05%) ‑ Legislative Retirement System.  Each of the foregoing contribution rates includes three and five hundredths percent (3.05%) for hospital and medical benefits. The rate for Teachers and State Employees, State Law Enforcement Officers, the Community College Optional Retirement Program, and the University Employees' Optional Retirement Program includes fifty‑two hundredths percent (0.52%) for the Disability Income Plan.  The rates for Teachers and State Employees and State Law Enforcement Officers include sixteen hundredths percent (0.16%) for the Death Benefits Plan.  The rate for State Law Enforcement Officers includes five percent (5%) for Supplemental Retirement Income.
SECTION 30.16.(d)  The maximum annual employer contributions, payable monthly, by the State for each covered employee or retiree for the 2003‑2004 fiscal year to the Teachers' and State Employees' Comprehensive Major Medical Plan are:  (i) Medicare‑eligible employees and retirees ‑ two thousand four hundred seventeen dollars ($2,417), and (ii) non‑Medicare‑eligible employees and retirees ‑ three thousand one hundred seventy‑five dollars ($3,175).
SECTION 30.16.(e)  The maximum annual employer contributions, payable monthly, by the State for each covered employee or retiree for the 2004‑2005 fiscal year to the Teachers' and State Employees' Comprehensive Major Medical Plan are:  (i) Medicare‑eligible employees and retirees ‑ two thousand four hundred seventy‑eight dollars ($2,478), and (ii) non‑Medicare‑eligible employees and retirees ‑ three thousand two hundred fifty‑six dollars ($3,256).

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
RETIREMENT COLAS
SECTION 30.17.(a)  G.S. 135‑5 is amended by adding a new subsection to read:
"(lll)	From and after July 1, 2003, the retirement allowance to or on account of beneficiaries whose retirement commenced on or before July 1, 2002, shall be increased by one and twenty-eight hundredths percent (1.28%) of the allowance payable on June 1, 2003, in accordance with G.S. 135‑5(o). Furthermore, from and after July 1, 2003, the retirement allowance to or on account of beneficiaries whose retirement commenced after July 1, 2002, but before June 30, 2003, shall be increased by a prorated amount of one and twenty-eight hundredths percent (1.28%) of the allowance payable as determined by the Board of Trustees based upon the number of months that a retirement allowance was paid between July 1, 2002, and June 30, 2003."
SECTION 30.17.(b)  G.S. 135‑65 is amended by adding a new subsection to read:
"(x)	From and after July 1, 2003, the retirement allowance to or on account of beneficiaries whose retirement commenced on or before July 1, 2002, shall be increased by one and twenty-eight hundredths percent (1.28%) of the allowance payable on June 1, 2003. Furthermore, from and after July 1, 2003, the retirement allowance to or on account of beneficiaries whose retirement commenced after July 1, 2002, but before June 30, 2003, shall be increased by a prorated amount of one and twenty-eight hundredths percent (1.28%) of the allowance payable as determined by the Board of Trustees based upon the number of months that a retirement allowance was paid between July 1, 2002, and June 30, 2003."
SECTION 30.17.(c)  G.S. 120‑4.22A is amended by adding a new subsection to read:
"(r)	In accordance with subsection (a) of this section, from and after July 1, 2003, the retirement allowance to or on account of beneficiaries whose retirement commenced on or before January 1, 2003, shall be increased by one and twenty-eight hundredths percent (1.28%) of the allowance payable on June 1, 2003. Furthermore, from and after July 1, 2003, the retirement allowance to or on account of beneficiaries whose retirement commenced after January 1, 2003, but before June 30, 2003, shall be increased by a prorated amount of one and twenty-eight hundredths percent (1.28%) of the allowance payable as determined by the Board of Trustees based upon the number of months that a retirement allowance was paid between January 1, 2003, and June 30, 2003."

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
TRANSFER OF SERVICE IN THE LEGISLATIVE RETIREMENT system to the teachers' and state employees' retirement system and the judicial retirement system
SECTION 30.18.(a)  G.S. 120‑4.13 reads as rewritten:
"§ 120‑4.13.  Transfer of membership and benefits.
(a)	The Board of Trustees shall set up procedures to transfer membership from the Legislative Retirement Fund to the Retirement System and to recompute benefits paid to retirees of the Legislative Retirement Fund who elect to transfer to the Retirement System.(b)	The accumulated contributions and creditable service of any member whose service as a member of the General Assembly has been or is terminated other than by retirement or death and who, while still a member of this Retirement System, became or becomes a member, as defined in G.S. 135-1(13), of the Teachers' and State Employees' Retirement System for a period of five or more years may, upon application of the member, be transferred from this Retirement System to the Teachers' and State Employees' Retirement System. In order to effect the transfer of a member's creditable service from the Legislative Retirement System to the Teachers' and State Employees' Retirement System, there shall be transferred from the Legislative Retirement System to the Teachers' and State Employees' Retirement System the sum of (i) the accumulated contributions of the member credited in the annuity savings fund and (ii) the amount of reserve held in the Legislative Retirement System as a result of previous contributions by the employer on behalf of the transferring member.
(c)	The accumulated contributions and creditable service of any member whose service as a member of the General Assembly has been or is terminated other than by retirement or death and who, while still a member of this Retirement System, became or becomes a member, as defined in G.S. 135-53(11), of the Consolidated Judicial Retirement System for a period of five or more years may, upon application of the member, be transferred from this Retirement System to the Consolidated Judicial Retirement System. In order to effect the transfer of a member's creditable service from the Legislative Retirement System to the Consolidated Judicial Retirement System, there shall be transferred from the Legislative Retirement System to the Consolidated Judicial Retirement System the sum of (i) the accumulated contributions of the member credited in the annuity savings fund and (ii) the amount of reserve held in the Legislative Retirement System as a result of previous contributions by the employer on behalf of the transferring member."
SECTION 30.18.(b)  G.S. 135‑4 reads as rewritten:
"(j2)	The creditable service of a member who was a member of the Local Governmental Employees' Retirement System, the Consolidated Judicial Retirement System, or the Legislative Retirement System, and whose accumulated contributions and reserves are transferred from that System to this System, includes service that was creditable in the Local Governmental Employees' Retirement  System, the Consolidated Judicial Retirement System, or the Legislative Retirement System, and membership service with those Retirement Systems is membership service with this Retirement System."
SECTION 30.18.(c)  Article 1 of Chapter 135 of the General Statutes is amended by adding new section to read:
"§ 135‑18.9  Transfer of members from the Legislative Retirement System or the Consolidated Judicial Retirement System.
(a)	The accumulated contributions, creditable service, and reserves, if any, of a member of the Legislative Retirement System, as provided for in Article 1A of G.S.120, or the Consolidated Judicial Retirement System, as provided for in Article 4 of G.S. 135, who later becomes a member of the Teachers' and State Employees' Retirement System for a period of five or more years may, upon application of the member, be transferred from the Legislative Retirement System or the Consolidated Judicial Retirement System. The accumulated contributions, creditable service, and reserves of any member whose service as a member of the Legislative Retirement System or the Consolidated Judicial Retirement System is terminated other than by retirement or death and who later becomes a member of the Teachers' and State Employees' Retirement System may, upon application of the member, be transferred from the Legislative Retirement System or the Consolidated Judicial Retirement System to the Teachers' and State Employees' Retirement System. In order to effect the transfer of a member's creditable service from the Legislative Retirement System or the Consolidated Judicial Retirement System to the Teachers' and State Employees' Retirement System, the accumulated contributions of each member credited in the annuity savings fund in the Legislative Retirement System or the Consolidated Judicial Retirement System shall be transferred and credited to the annuity savings fund in the Teachers' and State Employees' Retirement System.
(b)	The Board of Trustees shall effect such rules as it may deem necessary to administer the preceding subsection and to prevent any duplication of service credits or benefits that might otherwise occur."
SECTION 30.18.(d)  G.S. 135‑70 is amended by adding a new subsection to read:
"(a1)	The accumulated contributions and creditable service of any member whose service as a member of this Retirement System has been or is terminated other than by retirement or death and who, while still a member of this Retirement System, became or becomes a member, as defined in G.S. 135-1(13), of the Teachers' and State Employees' Retirement System for a period of five or more years may, upon application of the member, be transferred from this Retirement System to the Teachers' and State Employees' Retirement System. In order to effect the transfer of a member's creditable service from this Retirement System to the Teachers' and State Employees' Retirement System, there shall be transferred from this Retirement System to the Teachers' and State Employees' Retirement System the sum of (i) the accumulated contributions of the member credited in the annuity savings fund and (ii) the amount of reserve held in this Retirement System as a result of previous contributions by the employer on behalf of the transferring member."SECTION 30.18.(e)  G.S. 135‑70.1 reads as rewritten:
"§ 135‑70.1.  Transfer of members from the Local Governmental Employees' Retirement System, the Teachers' and State Employees' Retirement  System, or the Legislative Retirement System.
(a)	The accumulated contributions, creditable service, and reserves, if any, of a former teacher or employee, as defined in G.S. 135‑1(25), 135‑1(10), and 128‑21(10), respectively, or a former member of the General Assembly, who is a member of the Consolidated Judicial Retirement System for a period of five or more years may, upon application of the member, be transferred from the Local Governmental Employees' Retirement  System, the Teachers' and State Employees' Retirement System, or the Legislative Retirement System to the Consolidated Judicial Retirement System. The accumulated contributions, creditable service, and reserves of any member whose service as a teacher or employee or member of the General Assembly is terminated other than by retirement or death and who becomes a member of the Consolidated Judicial Retirement System may, upon application of the member, be transferred from the Local Governmental Employees' Retirement  System, the Teachers' and State Employees' Retirement System, or the Legislative Retirement System to the Consolidated Judicial Retirement System. In order to effect the transfer of a member's creditable service from the Local Governmental Retirement  System, the Teachers' and State Employees' Retirement  System, or the Legislative Retirement System, to the Consolidated Judicial Retirement System, the accumulated contributions of each member credited in the annuity savings fund in the Local Governmental Employees' Retirement  System, the Teachers' and State Employees' Retirement  System, or the Legislative Retirement System shall be transferred and credited to the annuity savings fund in the Consolidated Judicial Retirement System.
(b)	The Board of Trustees shall effect such rules as it may deem necessary to administer the preceding subsection and to prevent any duplication of service credits or benefits that might otherwise occur."
SECTION 30.18.(f)  G.S. 135‑56(f) reads as rewritten:
"(f)	The creditable service of a member who was a member of the Local Governmental Employees' Retirement  System, the Teachers' and State Employees' Retirement  System, or the Legislative Retirement System and whose accumulated contributions and reserves are transferred from that System to this System, includes service that was creditable in the Local Governmental Employees' Retirement  System, the Teachers' and State Employees' Retirement System, or the Legislative Retirement System, and membership service with those Retirement Systems is membership service with this Retirement System."
SECTION 30.18.(g)  G.S. 135‑58(a3) reads as rewritten:
"(a3)	Any member who retires under the provisions of G.S. 135‑57(a) or G.S. 135‑57(c) on or after July 1, 2001, but before January 1, 2004, after the member has either attained the member's 65th birthday or has completed 24 years or more of creditable service, shall receive an annual retirement allowance, payable monthly, which shall commence on the effective date of the member's retirement and shall be continued on the first day of each month thereafter during the member's lifetime, the amount of which shall be computed as the sum of the amounts in subdivisions (1), (2), (3), (4), and (5) following, provided that in no event shall the annual allowance payable to any member be greater than an amount which, when added to the allowance, if any, to which the member is entitled under the Teachers' and State Employees' Retirement System, the Legislative Retirement System, or the Local Governmental Employees' Retirement System (prior in any case to any reduction for early retirement or for an optional mode of payment) would total three‑fourths of the member's final compensation:
(1)	Four and two‑hundredths percent (4.02%) of the member's final compensation, multiplied by the number of years of creditable service rendered as a justice of the Supreme Court or judge of the Court of Appeals;
(2)	Three and fifty‑two hundredths percent (3.52%) of the member's final compensation, multiplied by the number of years of creditable service rendered as a judge of the superior court or as Administrative Officer of the Courts;
(3)	Three and two‑hundredths percent (3.02%) of the member's final compensation, multiplied by the number of years of creditable service, rendered as a judge of the district court, district attorney, or clerk of superior court;
(4)	A service retirement allowance computed in accordance with the service retirement provisions of Article 3 of Chapter 128 of the General Statutes using an average final compensation as defined in G.S. 135‑53(2a) and creditable service equal to the number of years of the member's creditable service that was transferred from the Local Governmental Employees' Retirement System to this System as provided in G.S. 135‑56; and
(5)	A service retirement allowance computed in accordance with the service retirement provisions of Article 1 of this Chapter using an average final compensation as defined in G.S. 135‑53(2a) and creditable service, including any sick leave standing to the credit of the member, equal to the number of years of the member's creditable service that was transferred from the Teachers' and State Employees' Retirement System to this System as provided in G.S. 135‑56."
SECTION 30.18.(h)  G.S. 135‑58 is amended by adding a new section to read:
"(a4)	Any member who retires under the provisions of G.S. 135‑57(a) or G.S. 135‑57(c) on or after January 1, 2004, after the member has either attained the member's 65th birthday or has completed 24 years or more of creditable service, shall receive an annual retirement allowance, payable monthly, which shall commence on the effective date of the member's retirement and shall be continued on the first day of each month thereafter during the member's lifetime, the amount of which shall be computed as the sum of the amounts in subdivisions (1), (2), (3), (4), and (5) following, provided that in no event shall the annual allowance payable to any member be greater than an amount which, when added to the allowance, if any, to which the member is entitled under the Teachers' and State Employees' Retirement System, the Legislative Retirement System, or the Local Governmental Employees' Retirement System (prior in any case to any reduction for early retirement or for an optional mode of payment) would total three‑fourths of the member's final compensation:
(1)	Four and two‑hundredths percent (4.02%) of the member's final compensation, multiplied by the number of years of creditable service rendered as a justice of the Supreme Court or judge of the Court of Appeals;
(2)	Three and fifty‑two hundredths percent (3.52%) of the member's final compensation, multiplied by the number of years of creditable service rendered as a judge of the superior court or as Administrative Officer of the Courts;
(3)	Three and two‑hundredths percent (3.02%) of the member's final compensation, multiplied by the number of years of creditable service, rendered as a judge of the district court, district attorney, or clerk of superior court;
(4)	A service retirement allowance computed in accordance with the service retirement provisions of Article 3 of Chapter 128 of the General Statutes using an average final compensation as defined in G.S. 135‑53(2a) and creditable service equal to the number of years of the member's creditable service that was transferred from the Local Governmental Employees' Retirement System to this System as provided in G.S. 135‑56; and
(5)	A service retirement allowance computed in accordance with the service retirement provisions of Article 1 of this Chapter of the General Statutes using an average final compensation as defined in G.S. 135‑53(2a) and creditable service, including any sick leave standing to the credit of the member, equal to the number of years of the member's creditable service that was transferred from the Teachers' and State Employees' Retirement System or the Legislative Retirement System to this System as provided in G.S. 135‑56."
SECTION 30.18.(i)  This section becomes effective January 1, 2004.

PART XXXI. CAPITAL APPROPRIATIONS

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Capital Appropriations/General Fund
SECTION 31.1.  There is appropriated from the General Fund for the 2003‑2004 fiscal year the following amount for capital improvements:
	2003‑2004
Department of Environment and Natural Resources
	Water Resource Projects	$27,601,000

TOTAL CAPITAL APPROPRIATION	$27,601,000

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Water Resources Development Project Funds
SECTION 31.2.(a)  The Department of Environment and Natural Resources shall allocate the funds appropriated in this act for water resources development projects to the following projects whose costs are as indicated:

	Name of Project	2003‑2004

(1)	Wilmington Harbor Deepening	$6,800,000
(2)	Morehead City Harbor Maintenance	100,000
(3)	Morehead City Harbor Section 933 Nourishment	4,661,000
(4)	Wilmington Harbor Maintenance	2,700,000
(5)	Manteo (Shallowbag) Bay Channel Maintenance	3,500,000
(6)	John H. Kerr Reservoir Operations Evaluation	200,000
(7)	Beaufort Harbor Maintenance Dredging	80,000
(8)	Carolina Beach Renourishment (New Hanover County)	1,125,000
(9)	Kure Beach Renourishment (New Hanover County)	1,177,000
(10)	Ocean Isle Beach Renourishment (Brunswick County)	813,000
(11)	Bogue Banks Shore Protection Study (Carteret County)	200,000
(12)	Surf City/North Topsail Beach Protection Study	150,000
(13)	Princeville Flood Control Study	400,000
(14)	West Onslow Beach (Topsail)	75,000
(15)	Deep Creek (Yadkin County) Watershed Management	1,500,000
(16)	State Local Projects	2,500,000
(17)	Currituck Sound Water Management Study	150,000
(18)	Aquatic Weed Control, Lake Gaston and Statewide	300,000
(19)	Swan Quarter (Hyde County) Flood Control Dikes	100,000
(20)	Little Sugar Creek Restoration (Mecklenburg County)	20,000
(21)	Neuse River Basin Feasibility Study	100,000
(22)	Environmental Restoration Projects	700,000
(23)	Projected Feasibility Studies	100,000
(24)	Planning Assistance to Communities	        150,000

TOTAL	$27,601,000

SECTION 31.2.(b)  Where the actual costs are different from the estimated costs under subsection (a) of this section, the Department may adjust the allocations among projects as needed.  If any projects funded under subsection (a) of this section are delayed and the budgeted State funds cannot be used during the 2003‑2004 fiscal year, or if the projects funded under subsection (a) of this section are accomplished at a lower cost, the Department may use the resulting fund availability to fund any of the following:
(1)	Corps of Engineers project feasibility studies.
(2)	Corps of Engineers projects whose schedules have advanced and require State‑matching funds in fiscal year 2003‑2004.
(3)	State‑local water resources development projects. Funds not expended or encumbered for these purposes shall revert to the General Fund at the end of the 2004‑2005 fiscal year.
SECTION 31.2.(c)  The Department shall make quarterly reports on the use of these funds to the Joint Legislative Commission on Governmental Operations, the Fiscal Research Division, and the Office of State Budget and Management.  Each report shall include all of the following:
(1)	All projects listed in this section.
(2)	The estimated cost of each project.
(3)	The date that work on each project began or is expected to begin.
(4)	The date that work on each project was completed or is expected to be completed.
(5)	The actual cost of each project.
The quarterly reports shall also show those projects advanced in schedule, those projects delayed in schedule, and an estimate of the amount of funds expected to revert to the General Fund.
SECTION 31.2.(d)  Notwithstanding G.S. 143‑23, if additional federal funds that require a State match are received for water resources projects or for beach renourishment projects for the 2003‑2004 fiscal year, the Director of the Budget may, after consultation with the Joint Legislative Commission on Governmental Operations, transfer funds from General Fund appropriations to match the federal funds.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
PROCEDURES FOR DISBURSEMENT OF CAPITAL FUNDS
SECTION 31.3.  The appropriations made by the 2003 General Assembly for capital improvements shall be disbursed for the purposes provided by this act.  Expenditure of funds shall not be made by any State department, institution, or agency until an allotment has been approved by the Governor as Director of the Budget.  The allotment shall be approved only after full compliance with the Executive Budget Act, Article 1 of Chapter 143 of the General Statutes.  Prior to the award of construction contracts for projects to be financed in whole or in part with self‑liquidating appropriations, the Director of the Budget shall approve the elements of the method of financing of those projects including the source of funds, interest rate, and liquidation period.  Provided, however, that if the Director of the Budget approves the method of financing a project, the Director shall report that action to the Joint Legislative Commission on Governmental Operations at its next meeting.
Where direct capital improvement appropriations include the purpose of furnishing fixed and movable equipment for any project, those funds for equipment shall not be subject to transfer into construction accounts except as authorized by the Director of the Budget. The expenditure of funds for fixed and movable equipment and furnishings shall be reviewed and approved by the Director of the Budget prior to commitment of funds.
Capital improvement projects authorized by the 2003 General Assembly shall be completed, including fixed and movable equipment and furnishings, within the limits of the amounts of the direct or self‑liquidating appropriations provided, except as otherwise provided in this act. Capital improvement projects authorized by the 2003 General Assembly for the design phase only shall be designed within the scope of the project as defined by the approved cost estimate filed with the Director of the Budget, including costs associated with site preparation, demolition, and movable and fixed equipment.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
ENCUMBERED APPROPRIATIONS AND PROJECT RESERVE FUNDS
SECTION 31.4.  When each capital improvement project appropriated by the 2003 General Assembly, other than those projects under the Board of Governors of The University of North Carolina, is placed under a construction contract, direct appropriations shall be encumbered to include all costs for construction, design, investigation, administration, movable equipment, and a reasonable contingency.  Unencumbered direct appropriations remaining in the project budget shall be placed in a project reserve fund credited to the Office of State Budget and Management.  Funds in the project reserve may be used for emergency repair and renovation projects at State facilities with the approval of the Director of the Budget.  The project reserve fund may be used, at the discretion of the Director of the Budget, to allow for award of contracts where bids exceed appropriated funds, if those projects supplemented were designed within the scope intended by the applicable appropriation or any authorized change in it, and if, in the opinion of the Director of the Budget, all means to award contracts within the appropriation were reasonably attempted.  At the discretion of the Director of the Budget, any balances in the project reserve fund shall revert to the original source.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
REPAIRS and renovations funds allocations
SECTION 31.5. As the bond referendum passed in 2000 provided funds for capital improvements, repairs, and renovations throughout The University of North Carolina System, no funds in the Reserve for Repairs and Renovations shall be used for projects of the System for the 2003‑2004 fiscal year.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
CAPITAL IMPROVEMENT PROJECTS/SUPPLEMENTAL FUNDING APPROVAL/REPORTING REQUIREMENT
SECTION 31.6.  Each department receiving capital improvement appropriations from the Highway Fund under this act shall report quarterly to the Director of the Budget on the status of those capital projects.  The reporting procedure to be followed shall be developed by the Director of the Budget.
Highway Fund capital improvement projects authorized in this act that have not been placed under contract for construction due to insufficient funds may be supplemented with funds identified by the Director of the Budget, provided:
(1)	That the project was designed and bid within the scope as authorized by the General Assembly;
(2)	That the funds to supplement the project are from the same source as authorized for the original project;
(3)	That the department to which the project was authorized has unsuccessfully pursued all statutory authorizations to award the contract; and
(4)	That the action be reported to the Fiscal Research Division of the Legislative Services Office.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
PROJECT COST INCREASE
SECTION 31.7.  Upon the request of the administration of a State agency, department, or institution, the Director of the Budget may, when in the Director's opinion it is in the best interest of the State to do so, increase the cost of a capital improvement project.  Provided, however, that if the Director of the Budget increases the cost of a project, the Director shall report that action to the Joint Legislative Commission on Governmental Operations at its next meeting.  The increase may be funded from gifts, federal or private grants, special fund receipts, excess patient receipts above those budgeted at the University of North Carolina Hospitals at Chapel Hill, or direct capital improvement appropriations to that department or institution.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
NEW PROJECT AUTHORIZATION
SECTION 31.8.  Upon the request of the administration of any State agency, department, or institution, the Director of the Budget may authorize the construction of a capital improvement project not specifically authorized by the General Assembly if such project is to be funded by gifts, federal or private grants, special fund receipts, excess patient receipts above those budgeted at the University of North Carolina Hospitals at Chapel Hill, or self‑liquidating indebtedness.  Prior to authorizing the construction of a capital improvement project pursuant to this section, the Director shall consult with the Joint Legislative Commission on Governmental Operations.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
ADVANCE PLANNING OF CAPITAL IMPROVEMENT PROJECTS
SECTION 31.9.  Funds that become available by gifts, excess patient receipts above those budgeted at the University of North Carolina Hospitals at Chapel Hill, federal or private grants, receipts becoming a part of special funds by act of the General Assembly, or any other funds available to a State department or institution may be utilized for advance planning through the working drawing phase of capital improvement projects, upon approval of the Director of the Budget.  The Director of the Budget may make allocations from the Advance Planning Fund for advance planning through the working drawing phase of capital improvement projects, except that this revolving fund shall not be utilized by the Board of Governors of The University of North Carolina or the State Board of Community Colleges.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
appropriations limits/reversion or lapse
SECTION 31.10.  Except as permitted in previous sections of this act, the appropriations for capital improvements made by the 2003 General Assembly may be expended only for specific projects set out by the 2003 General Assembly and for no other purpose.  Construction of all capital improvement projects enumerated by the 2003 General Assembly shall be commenced, or self‑liquidating indebtedness with respect to them shall be incurred, within 12 months following the first day of the fiscal year in which the funds are available.  If construction contracts on those projects have not been awarded or self‑liquidating indebtedness has not been incurred within that period, the direct appropriation for those projects shall revert to the original source, and the self‑liquidating appropriation shall lapse; except that direct appropriations may be placed in a reserve fund as authorized in this act.  This deadline with respect to both direct and self‑liquidating appropriations may be extended with the approval of the Director of the Budget up to an additional 12 months if circumstances and conditions warrant such extension.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Intent to Fund Partially Completed Capital Projects
SECTION 31.11.  It is the intent of the General Assembly that future appropriations for capital improvements shall include funding for new projects only after full funding for partially completed projects has been restored.

PART XXXII. MISCELLANEOUS PROVISIONS

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Executive Budget Act Applies
SECTION 32.1.  The provisions of the Executive Budget Act, Chapter 143, Article 1 of the General Statutes, are reenacted and shall remain in full force and effect and are incorporated in this act by reference.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Committee Report
SECTION 32.2.(a)  The House Appropriations Committee Report on the Continuation, Expansion and Capital Budgets, dated April 14, 2003, which was distributed in the House of Representatives and used to explain this act, shall indicate action by the General Assembly on this act and shall therefore be used to construe this act, as provided in G.S. 143‑15 of the Executive Budget Act, and for these purposes shall be considered a part of this act and as such shall be printed as a part of the Session Laws.
SECTION 32.2.(b)  The budget enacted by the General Assembly for the maintenance of the various departments, institutions, and other spending agencies of the State for the 2003‑2005 fiscal biennium is a line item budget, in accordance with the Budget Code Structure and the State Accounting System Uniform Chart of Accounts set out in the Administrative Policies and Procedures Manual of the Office of the State Controller.  This budget includes the appropriations made from all sources including the General Fund, Highway Fund, special funds, cash balances, federal receipts, and departmental receipts.
The General Assembly amended the itemized budget requests submitted to the General Assembly by the Director of the Budget and the Advisory Budget Commission, in accordance with the House Appropriations Committee Report on the Continuation, Expansion and Capital Budgets, dated April 14, 2003, together with any accompanying correction sheets.
The budget enacted by the General Assembly shall be interpreted in accordance with the special provisions in this act and in accordance with other appropriate legislation.
In the event that there is a conflict between the line item budget certified by the Director of the Budget and the budget enacted by the General Assembly, the budget enacted by the General Assembly shall prevail.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Most Text Applies Only to the 2003‑2005 fiscal biennium
SECTION 32.3.  Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2003‑2005 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2003‑2005 fiscal biennium.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Effect of Headings
SECTION 32.4.  The headings to the parts and sections of this act are a convenience to the reader and are for reference only.  The headings do not expand, limit, or define the text of this act, except for effective dates referring to a Part.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Severability Clause
SECTION 32.5.  If any section or provision of this act is declared unconstitutional or invalid by the courts, it does not affect the validity of this act as a whole or any part other than the part so declared to be unconstitutional or invalid.

Requested by:	Representatives Crawford, Sherrill, Baker, Clary, Earle, Grady, Owens, Wright
Effective Date
SECTION 32.6.  Except as otherwise provided, this act becomes effective July 1, 2003.