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, and to Implement A State Budget That enables the State to Provide a sustainable recovery through strong educational and economic tools.
The General Assembly of North Carolina enacts:

PART I. INTRODUCTION AND TITLE OF ACT

Requested by:	Senators Garrou, Dalton, Hagan 
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:	Senators Garrou, Dalton, Hagan 
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:	Senators Garrou, Dalton, Hagan 
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	659,476,062	662,736,376

Department of Public Instruction	6,029,629,683	6,025,274,564

University of North Carolina – Board of Governors	1,794,573,717	1,829,669,657

HEALTH AND HUMAN SERVICES

Department of Health and Human Services
	Office of the Secretary	82,168,433	80,968,433
	Division of Aging	27,685,838	27,685,838
	Division of Blind Services/Deaf/HH	9,302,670	9,387,008
	Division of Child Development	259,017,167	259,210,693
	Division of Education Services	31,806,862	31,670,076
	Division of Facility Services	10,071,055	10,071,055
	Division of Medical Assistance	2,269,060,187	2,584,744,370
	Division of Mental Health	576,408,911	579,261,762
	NC Health Choice	50,368,030	56,426,280
	Division of Public Health	125,791,904	123,963,324
	Division of Social Services	176,189,220	186,039,814
	Division of Vocation Rehabilitation	40,042,124	40,834,858
Total			3,657,912,401	3,990,263,511

NATURAL AND ECONOMIC RESOURCES

Department of Agriculture and Consumer Services	48,477,909	48,604,240

Department of Commerce
	Commerce	45,125,448	33,695,769
	Commerce State‑Aid	10,316,728	10,266,728
	NC Biotechnology Center	5,883,395	5,883,395
	Rural Economic Development Center	4,491,587	4,491,587

Department of Environment and Natural Resources
	Environment and Natural Resources	147,683,265	153,527,049
	Clean Water Management Trust Fund	100,000,000	100,000,000

Department of Labor	13,265,454	13,274,104

JUSTICE AND PUBLIC SAFETY

Department of Correction	940,198,075	959,902,282

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

Judicial Department	303,317,883	310,514,697
Judicial Department – Indigent Defense	72,674,829	70,741,793

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

Department of Juvenile Justice and 
	Delinquency Prevention	130,910,473	130,730,498

GENERAL GOVERNMENT

Department of Administration	52,005,520	52,583,907

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

Department of State Auditor	10,293,801	10,293,801

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

Department of Cultural Resources
	Cultural Resources	54,532,248	54,253,598
	Roanoke Island Commission	1,634,905	1,636,559

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	4,976,503	4,826,503
	Office of State Budget and Management	4,211,805	4,216,110
	OSBM – Reserve for Special Appropriations	3,130,000	3,130,000
	Housing Finance Agency	4,750,945	4,750,945

Department of Insurance
	Insurance	26,307,054	23,187,587
	Insurance – Volunteer Safety Workers' 
		Compensation	4,500,000	4,500,000

Office of Lieutenant Governor	601,722	601,722

Department of Revenue	73,964,774	74,062,627

Rules Review Commission	310,454	310,454

Department of Secretary of State	7,857,198	7,816,198

Department of State Treasurer
	State Treasurer	7,575,029	7,577,784
	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	141,350,000	135,250,000

Reserve for State Health Plan	113,418,000	151,225,000

Reserve for Retiree Health Benefits	36,800,000	36,800,000

Reserve for Teachers' and State Employees' 
	Retirement Contribution	29,555,000	157,200,000

Reserve for Transfer of Various Benefit Plans	(86,250,000)	(3,250,000)

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	15,000,000	0

Reserve to Implement HIPAA	2,000,000	0

Reserve for Easley Health Initiatives	2,500,000	2,500,000

Debt Service
	General Debt Service	387,785,920	503,639,452
	Federal Reimbursement	1,155,948	1,155,948

TOTAL CURRENT OPERATIONS –
	GENERAL FUND	15,048,827,667	15,773,602,539

Requested by:	Senators Garrou, Dalton, Hagan 
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 
	Remaining from FY 2002‑2003	103,885	0

Beginning Unreserved Credit Balance	375,000,000	0

Revenues Based on Existing Tax Structure	13,384,600,000	14,203,713,917

Nontax Revenues
	Investment Income	113,900,000	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/Sales Tax on Vehicles
		Reimbursement Transfer	252,422,125	231,774,330
	Highway Fund Transfer	16,379,000	16,166,400

Subtotal Nontax Revenues	788,171,125	798,427,531

Total General Fund Availability	14,547,875,010	15,002,141,448

Adjustments to Availability:  2003 Session
	Maintain Sales Tax Rate at 4.5%	346,500,000	388,200,000
	Maintain Top Income Tax Bracket at 8.25%	37,500,000	92,700,000
	Delay Increase in the Child Tax Credit	20,300,000	54,100,000
	Conform to Federal Definition of 
		Child for State Child Tax Credit	16,800,000	17,000,000
	Delay Increase in Standard Deduction 
		(Marriage Penalty)	33,400,000	47,000,000
	Equalize Insurance Tax Rate 
		on Article 65 Corporations	19,300,000	14,700,000
	Conform to Streamline Sales Tax Provision 
		(Candy, Soft Drinks, Prepared Food & 
		Modified Software)	30,200,000	30,600,000
	Tax Soft Drinks in Vending Machines 
		at 50% of General Rate	(4,700,000)	(4,700,000)
	Restore Use Tax Line on Individual Returns	3,100,000	3,100,000
	Revenue:  Project Tax Collect	10,000,000	10,000,000
	Revenue:  Project Compliance	38,340,500	74,009,500
	Divert MSA Settlement Proceeds 
		from Tobacco Trust Fund	30,000,000	30,000,000
	Divert MSA Settlement Proceeds 
		from Health & Wellness Trust Fund	10,000,000	10,000,000
	Fee Increases	4,959,418	4,959,418
	Adjust Transfer from 
		Insurance Regulatory Fund	2,942,777	(207,827)
	Credit to Repairs & Renovations 
		Reserve Account	(50,000,000)	0
	Credit to Savings Reserve Account	(19,089,038)	0

Subtotal Adjustments to Availability:
	2003 Session	529,553,657	771,461,091

Revised General Fund Availability	15,077,428,667	15,773,602,539

Less: Total General Fund Appropriations	(15,077,428,667)	(15,773,602,539)

Unappropriated Balance Remaining	0	0

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 thirty million dollars ($30,000,000) 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 during the 2003‑2004 and 2004‑2005 fiscal years, the sum of ten million dollars ($10,000,000) 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 eight million seven hundred ninety‑six thousand eight hundred forty‑five dollars ($108,796,845) from the Disaster Reserve Fund, Budget Code 13017, to the Savings Reserve Account, in accordance with Section 3.1 of S.L. 1999‑463, Extra Session 1999.  This is not an "appropriation made by law", as that phrase is used in Article V, Section 7(1) of the Constitution.
SECTION 2.2.(e)  When the Highway Trust Fund was created in 1989, the revenue from the sales tax on motor vehicles was transferred from the General Fund to the Highway Trust Fund.  To offset this loss of revenue from the General Fund, the Highway Trust Fund was required to transfer one hundred seventy million dollars ($170,000,000) to the General Fund each year, an amount equal to the revenue in 1989 from the sales tax on motor vehicles.  This transfer did not, however, make the General Fund whole after the transfer of the sales tax revenue because no provision has been made to adjust the amount for the increased volume of transactions and increased vehicle prices.  The additional funds transferred from the Highway Trust Fund to the General Fund by this act is an effort to recover a portion of the sales tax revenues that would have gone to the General Fund over the last 14 years.
Notwithstanding G.S. 105‑187.9(b)(1), the sum to be transferred from the Highway Trust Fund to the General Fund for each of the fiscal years 2003‑2004 and 2004‑2005 is two hundred fifty million dollars ($250,000,000). The sum to be transferred to the General Fund for the 2004‑2005 fiscal year shall be adjusted to reflect the scheduled repayment of previously transferred funds in accordance with Section 26.14 of S.L. 2002‑126.
Any funds transferred from the Highway Trust Fund to the General Fund in this act in addition to the transfer authorized by G.S. 105‑187.9(b) shall be fully repaid to the Highway Trust Fund, including interest at the net rate of return generated by the State Treasurer's Short Term Investment Fund.
SECTION 2.2.(f)  Notwithstanding G.S. 143‑15.2 and G.S. 143‑15.3, the State Controller shall transfer only nineteen million eighty‑nine thousand thirty‑eight dollars ($19,089,038) 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 Constitution. This subsection becomes effective June 30, 2003.
SECTION 2.2.(g)  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 the Health and Wellness Trust Fund nonreserved funds in the 2002‑2003 fiscal year 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.
SECTION 2.2.(h)  Notwithstanding G.S. 143‑15.2 and G.S. 143‑15.3A, the State Controller shall transfer 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.

PART III. CURRENT OPERATIONS AND EXPANSION/HIGHWAY FUND

Requested by:	Senators Garrou, Dalton, Hagan 
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)	72,825,987	72,948,211
(2)		Transportation Operations (84220)	28,190,393	28,150,605
(3)		Transportation programs (84230)		
		State Construction		
			Secondary	89,600,000	90,590,000
			Urban	28,000,000	14,000,000
			Public access	2,000,000	2,000,000
			Spot safety	9,100,000	9,100,000
			Contingency	15,000,000	10,000,000
		Federal Aid Match	4,160,000	4,280,000
		Maintenance	579,757,883	570,231,046
		Asphalt plant/OSHA	425,000	425,000
		Capital	‑	
		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	79,705,266	80,302,926
(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)	217,249,117	224,514,347
TOTAL		1,350,930,000	1,332,957,052

Requested by:	Senators Garrou, Dalton, Hagan 
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:	Senators Garrou, Dalton, Hagan 
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	$  422,754,783	$  459,363,570
Urban Loops	170,944,428	185,747,496
Aid to Municipalities	44,356,838 	48,197,953
Total for Secondary Roads	79,559,266 	84,350,953
Program Administration	40,001,560 	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:	Senators Purcell, Reeves , Garrou, Dalton, Hagan
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 Office of the Secretary – 
	N.C. Inter‑agency Council for Coordinating
	Homeless Programs							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	$ 4,546,916

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

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

04.	Group Home Tracking System	986,600

05.	Administration	693,193

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	11,452,391

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	1,500,000

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

23.	Reduction of Out‑of‑Wedlock Births	1,000,000

TOTAL TEMPORARY ASSISTANCE TO NEEDY FAMILIES
(TANF) BLOCK GRANT	$365,153,411

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	$3,132,810

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

06.	Osteoporosis Task Force Activities	150,000

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, Division of Social Services and 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, Division of Social Services and Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, shall report on its 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, 2004, 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 eleven million four hundred fifty‑two thousand three hundred ninety‑one dollars ($11,452,391) 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:	Senators Weinstein, Metcalf, Queen, Dalton , Garrou, Hagan
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	1,000,000

03.	Scattered Site Housing	13,200,000

04.	Economic Development	8,710,000

05.	Community Revitalization	13,500,000

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 dollars ($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.
SECTION 5.2.(g)  Department of Commerce Demonstration Grants in Partnership with Rural Economic Development Center, Inc. – The Department of Commerce, in partnership with the Rural Economic Development Center, Inc., shall award up to two million two hundred fifty thousand dollars ($2,250,000) in demonstration grants to local governments in very distressed rural areas of the State.  These grants shall be used to address critical infrastructure and entrepreneurial needs and to provide small business assistance.
SECTION 5.2.(h)  The Department of Commerce shall, in consultation with local government officials and the University of North Carolina School of Government, design a regional distribution system for making grants in the Community Revitalization category in program year 2005.  The system shall take into account the relative lower income, poverty, and housing conditions in every region, target the most critical needs, and ensure that local governments in every region have equal and fair access to these funds.

PART VI. GENERAL PROVISIONS

Requested by:	Senators Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan 
BUDGET DIRECTOR TO REVIEW PRACTICES
SECTION 6.2A.(a)  The Office of State Budget and Management, in consultation with the State Controller, shall conduct a review and evaluation of current practices relative to the following issues:
(1)	The proliferation of nonreverting funds and accounts. 
(2)	The designation of selected funds as "off‑budget".
(3)	The sources of authority, consistent with Article V, Section 7(1) of the Constitution, under which expenditures are being made from each special fund, trust fund, internal service fund, or enterprise fund. 
(4)	The proper classification and management of funds as special funds, trust funds, internal service funds, or enterprise funds consistent with criteria adopted by the Governmental Accounting Standards Board.
(5)	Appropriate budget planning within special funds, trust funds, internal service funds, and enterprise funds, including, in particular, the accurate projection of receipts, expenditures, and fund balances and the presentation of that information for legislative review and appropriation action.
(6)	The administration of G.S. 143‑27, which requires in part that the over collection of departmental receipts be accompanied by a corresponding reduction in the allotments to institutions, departments, and agencies.
SECTION 6.2A.(b)  Where the review and evaluation reveals problems or other failures, the Office of State Budget and Management shall report its findings and recommendations to the Chairs of the Appropriations Committees of the Senate and House of Representatives as soon as practicable. In particular, the Office of State Budget and Management shall transmit to the General Assembly a list of special funds properly classified together with their estimated beginning balances, estimated receipts and expenditures, and estimated ending balances, and a list of funds currently classified as special funds for which the receipts are more appropriately reflected as offsets to total requirements in General Fund budget codes. The list of special funds properly classified should include funds currently classified as trust funds that are more appropriately classified as special funds.

Requested by:	Senators Garrou, Dalton, Hagan
BUDGET CODE ADJUSTMENTS
SECTION 6.3.(a) The Office of State Budget and Management shall determine and prepare for each General Fund budget code such adjustments as may be necessary to re‑budget line items to reflect historical spending patterns and anticipated revenues based on actual collections and to provide for more accurate budgeting of salaries.
SECTION 6.3.(b) The Office of State Budget and Management shall report the necessary adjustments to the General Assembly no later than 10 days after the convening of the 2004 Regular Session of the 2003 General Assembly.  The Director of the Budget shall include the adjustments prepared in accordance with subsection (a) of this section in the recommended adjustments to the authorized budget for the 2004‑2005 fiscal year.

Requested by:	Senators Garrou, Dalton, Hagan
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 are appropriated in this act to the Contingency and Emergency Fund.  Of these funds, no more than two hundred fifty thousand dollars ($250,000) shall be expended for statutory purposes other than those set out in G.S. 143‑23(a1)(2). The remainder of these funds shall be expended only for the purposes outlined in G.S. 143‑23(a1)(2).

Requested by:	Senators Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan, Purcell, Reeves
HIPAA IMPLEMENTATION
SECTION 6.7.(a)  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.(b)  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.(c)  Funds appropriated to the Reserve to Implement HIPAA 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:	Senators Swindell, Garrou, Dalton, Hagan
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.
SECTION 6.8.(b)  Prior to disposal of any property under the system, the Department shall consider the following factors in making the analysis:
(1)	The condition of the property;
(2)	The extent to which it meets the purpose for which it was intended;
(3)	The future needs of the Agency to perform the service intended at the location;
(4)	The best and most cost effective manner in which these future needs can be serviced;
(5)	The practicability of moving the function of the services performed at a location to another area that might reduce acquisition, construction, and labor cost without diminishing the quality of service;
(6)	A recommendation as to whether a respective property should be (i) sold or retained, (ii) renovated, (iii) expanded for future use, or (iv) sold with a lease bond for a period not more than 10 years in order to allow transition; and
(7)	Other recommendations regarding use of the property.
These recommendations are by way of illustration and not by way of limitation.
SECTION 6.8.(c)  The Department may retain consultants to assist the accomplishment of the objectives set forth in subsection (a) of this section. The Department shall report its findings and recommendations to the General Assembly no later than March 1, 2004.

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
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 or the sale and subsequent lease back 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.  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:	Senators Garrou, Dalton, Hagan 
GOVERNMENT AGENCIES TO USE PRODUCTS OF RECYCLED STEEL
SECTION 6.10.(a)  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."
SECTION 6.10.(b)  The Department of Administration shall report to the Joint Legislative Commission on Governmental Operations on agencies' compliance with this section.

Requested by:	Senators Garrou, Dalton, Hagan
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 8 members, four of whom shall be Representatives who are members of the Appropriations Committee appointed by the Speaker of the House of Representatives and four of whom shall be Senators who are members of the Appropriations Committee 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:	Senators Garrou, Dalton, Hagan
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 May 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:	Senators Garrou, Dalton, Hagan 
expenditures of funds in reserves limited
SECTION 6.19.  All funds appropriated by this act into reserves may be expended only for the purposes for which the reserves were established.

Requested by:	Senators Hagan, Garrou, Dalton
transfer of land for the Millennium Campuses of UNC‑Greensboro and NC A&T State University
SECTION 6.20.  Notwithstanding G.S. 143‑341(4)g. or any other provision of law, the property currently allocated to the Department of Administration and previously allocated to the Department of Health and Human Services for the Central School for the Deaf at Greensboro is hereby reallocated to the Board of Governors of The University of North Carolina.  This property shall be used for the establishment of Millennium Campuses of the University of North Carolina at Greensboro and North Carolina Agricultural and Technical State University.

Requested by:	Senators Hagan, Garrou, Dalton
REVISE LAW ON NON‑STATE ENTITY REPORTS ON USE OF STATE FUNDS
SECTION 6.21.(a)  G.S. 143‑6.1 reads as rewritten:
"§ 143‑6.1.  Report on use of State funds by non‑State entities.
(a)	Disbursement and Use of State Funds. – Every corporation, organization, and institution that receives, uses, or expends any State funds shall use or expend the funds only for the purposes for which they were appropriated by the General Assembly or collected by the State. State funds include federal funds that flow through the State. For the purposes of this section, the term "grantee" means a corporation, organization, or institution that receives, uses, or expends any State funds.
The State shall not disburse State funds appropriated by the General Assembly to any grantee or collected by the State for use by any grantee unless that grantee:
(1)	Provides all reports and financial information required under this section to the appropriate State agencies and officials; and
(2)	Provides any additional information that the Office of State Budget and Management deems necessary demonstrating that such grantee is capable of managing the funds in accordance with law and has established adequate financial procedures and controls.
All financial statements furnished to the State Auditor pursuant to this section, and any audits or other reports prepared by the State Auditor, are public records.
(b)	State Agency Responsibilities. – A State agency that receives State funds and then disburses the State funds to a grantee shall:
(1)	Submit documents to the State Auditor in a prescribed format describing standards of compliance and suggested audit procedures sufficient to give adequate direction to independent auditors performing audits.
(2)	Annually notify each grantee, in writing, of the reporting requirements set forth in this section and that the State agency is not authorized to disburse funds to grantees that fail to comply with the reporting requirements for funds received during the prior fiscal year;
(3)	Provide each grantee with the accounting form and other requirements prescribed by the State Auditor.
(4)	Submit a list to the State Auditor by October 31 each year of every grantee to which the agency disbursed State funds in the prior fiscal year, except when the funds were for purchases of goods and services, the amount disbursed to each grantee and other such information as required by the State Auditor to comply with the requirements set forth in this section. 
(5)	Submit a list to the Office of State Budget and Management by January 31 each year of every grantee to which the agency disbursed State funds in the prior fiscal year except when the funds were for purchases of goods and services and, for each grantee, whether that grantee has filed the sworn accounting required by subsection (c) of this section and whether the sworn accounting is in compliance with subsection (c) of this section.
(c)	Grantee Receipt and Expenditure Reports. – A grantee that receives, uses, or expends between fifteen thousand dollars ($15,000) and three hundred thousand dollars ($300,000) in State funds annually, except when the funds are for the purchase of goods or services, must file annually with the State agency that disbursed the funds a sworn accounting of receipts and expenditures of the State funds and a description of activities and accomplishments undertaken by the grantee with State funds. This accounting must be attested to by the treasurer of the grantee and one other authorizing officer of the grantee. The accounting must be filed within 90 days after the end of the grantee's fiscal year in which the State funds were received. The accounting shall be in the form required by the State Auditor and provided to the grantee by the disbursing agency. (d)	Grantee Audit Reports. – A grantee that receives, uses, or expends State funds in the amount of three hundred thousand dollars ($300,000) or more annually, except when the funds are for the purchase of goods or services, must file annually with the State Auditor a financial statement in the form and on the schedule prescribed by the State Auditor. These audit reports shall be filed no later than nine months after the close of the grantee's fiscal year. The financial statement 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.
A grantee that receives, uses, or expends State funds in the amount of three hundred thousand dollars ($300,000) or more annually, except when the funds are for the purchase of goods or services, must file annually with the State agency that disbursed the funds a description of activities and accomplishments undertaken by the grantee with State funds. This description must be filed within 90 days after end of the grantee's fiscal year in which the State funds were received.
(d1)	State Auditor's Responsibilities. – The State Auditor shall:
(1)	Review each audit submitted pursuant to subsection (d) of this section and determine that it has been conducted in accordance with generally accepted audit standards and that the grantee has received a clean audit opinion.
(2)	Notify disbursing agencies by January 31 each year of all grantees that are not in compliance with the reporting requirements set forth in this section.
(3)	Notify disbursing agencies of any material audit findings in the audits of their grantees.
(4)	Submit a list to the Office of State Budget and Management by January 31 each year of every grantee that received State funds in the prior fiscal year and, for each grantee, whether that grantee has complied with this subsection.
(d2)	Before a State agency disburses any funds for the fourth quarter of a fiscal year, the agency shall, in consultation with the Office of State Budget and Management, verify that the grantee has complied with the reporting requirements of this section. A State agency shall not disburse funds during the fourth quarter of the fiscal year to any grantee that has not complied with this section by March 31 of each year.
(d3)	The Office of State Budget and Management shall report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division by May 1 on all grantees that failed to comply with this section for the prior fiscal year, the amount of State funds that were disbursed to each of those grantees during that fiscal year, and the amount of State funds that were withheld.
(e)	Federal Reporting Requirements. – Federal law may require a grantee to make additional reports with respect to funds for which reports are required under this section. Notwithstanding the provisions of this section, a grantee may satisfy the reporting requirements of subsection (c) of this section by submitting a copy of the report required under federal law with respect to the same funds or by submitting a copy of the report described in subsection (d) of this section.
(f)	Audit Oversight. – The State Auditor has audit oversight, pursuant to Article 5A of Chapter 147 of the General Statutes, of every grantee that receives, uses, or expends State funds. Such a grantee must, upon request, furnish to the State Auditor for audit all books, records, and other information necessary for the State Auditor to account fully for the use and expenditure of State funds. The grantee must furnish any additional financial or budgetary information requested by the State Auditor."
SECTION 6.21.(b)  G.S. 143‑26 reads as rewritten:
"§ 143‑26.  Director to have discretion as to manner of paying annual appropriations.
(a)	Except as provided in subsection (b) of this section or as otherwise provided by State or federal law, it shall be discretionary with the Director of the Budget whether any annual appropriation shall be paid in monthly, quarterly or semiannual installments or in a single payment.
(b)	Except as otherwise provided by State or federal law, an annual appropriation of less than fifteen thousand dollars ($15,000) to or for the use of a nonprofit corporation shall be paid in a single annual payment. An annual appropriation of fifteen thousand dollars ($15,000) or more to or for the use of a nonprofit corporation shall be paid in quarterly or monthly installments, in the discretion of the Director of the Budget."

PART VII. PUBLIC SCHOOLS

Requested by:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
SCHOOL‑BASED ADMINISTRATOR SALARY SCHEDULE
SECTION 7.2.(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 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. For the 2003‑2004 fiscal year, the stipend shall not exceed the difference between the beginning salary of an assistant principal and fifty percent (50%) of any fellowship funds received by the intern as a full‑time student, including awards of the Principal Fellows Program. For the 2004‑2005 fiscal year and subsequent fiscal years, 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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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 are increased by one and eighty‑one hundredths percent (1.81%) annually for full‑time employees.
School Administrator I	$2,932	$5,308
School Administrator II	$3,112	$5,634
School Administrator III	$3,303	$5,979
School Administrator IV	$3,436	$6,221
School Administrator V	$3,574	$6,473
School Administrator VI	$3,792	$6,869
School Administrator VII	$3,945	$7,147
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 are increased by one and eighty‑one hundredths percent (1.81%) annually for full‑time employees.
Superintendent I	$4,187	$7,586
Superintendent II	$4,445	$8,047
Superintendent III	$4,716	$8,541
Superintendent IV	$5,005	$9,062
Superintendent V	$5,312	$9,618
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 eighty‑one hundredths percent (1.81%), 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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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 eighty‑one hundredths percent (1.81%), 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 eighty‑one hundredths percent (1.81%), 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 eighty‑one hundredths percent (1.81%) for the 2003‑2004 school year.

Requested by:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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.	Sales tax hold harmless reimbursement received by the county under G.S. 105‑521, and
d.	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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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 six hundred sixty‑nine thousand seven hundred four dollars ($669,704), 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 fully fund 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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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.
SECTION 7.16.(c)  It is the intent of the General Assembly, in future fiscal years, to address efforts in schools to close the achievement gap by providing an incentive for schools that make adequate yearly progress as required by the No Child Left Behind Act of 2001.

Requested by:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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 General Assembly 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 December 15, 2003, 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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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 15, 2004, on the characteristics of mentor programs that are most effective in retaining teachers.
SECTION 7.30.(d)  The Winston‑Salem Forsyth, Charlotte Mecklenburg, and Wake County Public School systems may continue with their existing pilot mentor programs, but shall submit plans as required in subsection (a) of this section. These three local boards of education shall report as required in subsection (c) of this section.

Requested by:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
SCHOOL NURSE SERVICES
SECTION 7.32.  The State Board of Education shall review the standards for the number of school nurses recommended in the Basic Education Program to determine whether these standards are being met by the local school administrative units. The State Board shall compare the current standards with standards recommended by national health organizations to determine whether the current standards are adequate to meet the changing needs and demands for health services of the current and projected school populations. In its review, the Board shall consider the need to change legal requirements for the provision of health related services to public school students in its review.
The State Board of Education shall make recommendations on the ratio of school nurses to student populations that it considers necessary, as well as recommendations for the provision of school nurse services, to the Joint Legislative Education Oversight Committee by February 15, 2004.

Requested by:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
transfer of public school capital fund
SECTION 7.33.(a)  The Public School Building Capital Fund is transferred from the Office of State Budget and Management to the Department of Public Instruction, as if by a Type I transfer as defined in G.S. 143A‑6, with all the elements of such a transfer.
SECTION 7.33.(b)  G.S. 115C‑546.1(c) reads as rewritten:
"(c)	The Fund shall be administered by the  Department of Public Instruction."

Requested by:	Senators Metcalf, Garrou, Dalton, Hagan
funds for regional educational services alliances
SECTION 7.34.  Local boards of education may use up to ten percent (10%) of State funds allocated for staff development to contract with Regional Education Services Alliances without such funds being subject to the provisions of G.S. 115C‑105.30.
Additional funds distributed pursuant to G.S. 115C‑105.30 may also be used to contract with Regional Education Services Alliances.

Requested by:	Senators Hagan, Lucas, Metcalf, Garrou, Dalton
pilot programs on financial literacy
SECTION 7.35.  The State Board of Education shall establish a pilot program authorizing and assisting up to five local school administrative units in the implementation of programs on teaching personal financial literacy.  The purpose of the pilot program is to determine the best methods of equipping students with the knowledge and skills they need, before they become self‑supporting, to make critical decisions regarding their personal finances.  The components of personal financial literacy covered in the pilot program shall include, at a minimum, consumer financial education, personal finance, and personal credit.
Prior to selecting the pilot units, the State Board of Education shall develop a curriculum, materials, and guidelines for local boards of education to use in implementing a program of instruction on personal financial literacy. The State Board shall also provide information to local boards of education on securing public and private grant funds and on using other public and private assets to implement the instructional program.
The State Board of Education shall report to the Joint Legislative Education Oversight Committee prior to January 1, 2004, on the implementation of the program in the pilot units.

PART VIII. COMMUNITY COLLEGES

Requested by:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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 five million dollars ($5,000,000) 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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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 eighty‑one hundredths percent (1.81%) provided by Section 30.11 of this act. These funds shall be used to increase faculty and professional staff salaries by an average of at least two and thirty‑one hundredths percent (2.31%). 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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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 Joint Legislative Education Oversight Committee, 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 Joint Legislative Education Oversight Committee, 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)  Within 30 days of completing the study, the contractor shall submit a final report to the Joint Legislative Education Oversight Committee, 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 Joint Legislative Education Oversight Committee, 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.(g)  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.(h)  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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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 incentive programming shall consist of one or more of the following:
(1)	Increasing awareness of careers available in the franchised automobile and truck industry in North Carolina;
(2)	Increasing awareness within North Carolina's middle school and high school guidance counselors and workforce development coordinators;
(3)	Increasing public awareness of teaching opportunities in North Carolina's high schools and community colleges in the area of automotive technology;
(4)	Increasing opportunities in continuing education for automotive technology high school and community college instructors;
(5)	Providing 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)	Increasing resources to assist high schools and community colleges in gaining and maintaining certification for their respective automotive technology programs.

Requested by:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
community colleges trust fund
SECTION 8.14.(a)  Article 3 of Chapter 115D of the General Statutes is amended by adding a new section to read:
"§ 115D-42.  North Carolina Community Colleges Instructional Trust Fund.
(a)	There is established the North Carolina Community Colleges Instructional Trust Fund. The purpose of this Trust Fund is to supplement the funds raised by community college foundations to enhance the academic missions of community colleges.(b)	The State Board of Community Colleges is authorized to allocate funds from the Instructional Trust Fund to the community colleges and to adopt rules to implement the provisions of this section.
(c)	State funds from the Trust Fund and matching funds raised by foundations shall be used by the board of trustees of a community college only to enhance the academic mission of the college. State funds shall be used only for scholarships or financial aid for needy students.
Expenditures of the matching funds raised by foundations shall directly relate to education and shall be used only for:
(1)	Resource center materials;
(2)	Professional development of instructional faculty and staff in cases in which (i) professional development will improve the quality of performance provided by the employee and (ii) the employee makes a commitment to remain at the college for a prescribed period of time;
(3)	Professional development of instructional faculty and staff in cases in which professional development is necessary to enhance the employee's ability to meet newly mandated instructional or performance requirements; and
(4)	Other purposes authorized by the State Board of Community Colleges that are consistent with the college's mission.
(d)	Every two dollars ($2.00) raised by the community college foundations for the Trust Fund during the 2003-2004 fiscal year shall be matched with one dollar ($1.00) of State funds. The maximum matching contribution from the State shall not exceed twenty-five thousand dollars ($25,000) for each of the 58 community colleges. These funds shall be reserved for each community college and held in escrow in the Trust Fund. A community college foundation may apply for matching funds after it raises twenty-five thousand dollars ($25,000). The chairperson of each community college foundation shall certify to the North Carolina Community College System Office that (i) new funds have been raised by the community college foundation to match the amount of funds held in escrow in the Trust Fund, (ii) the amount raised by the community college foundation has not been used previously for matching purposes, (iii) the amount raised by the college shall be used only as provided in subsection (c) of this section, and (iv) matching State funds shall be used only for scholarships or financial aid for needy students.
(e)	The State Board of Community Colleges may request an audit of the State funds expended under this section from any community college foundation."
SECTION 8.14.(b)  There is appropriated from the Escheat Fund to the State Board of Community Colleges the sum of one million four hundred fifty thousand dollars ($1,450,000) for the 2003‑2004 fiscal year to provide matching State funds for the Community Colleges Instructional Trust Fund established in subsection (a) of this section.

Requested by:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan 
focused industrial training funds
SECTION 8.15.  Notwithstanding any other provision of law, for the 2003‑2004 fiscal year only, the State Board of Community Colleges may transfer up to one million four hundred fifty thousand dollars ($1,450,000) from New and Expanding Industry Training to Focused Industrial Training.

PART IX. UNIVERSITIES

Requested by:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
ESCHEAT FUNDS
SECTION 9.2.(a)  There is appropriated from the Escheat Fund to the Board of Governors of The University of North Carolina the sum of twenty‑three million seven hundred fifty thousand dollars ($23,750,000) for each year of the 2003‑2005 fiscal biennium and to the State Board of Community Colleges the sum of ten million two hundred sixty‑two thousand eight hundred six dollars ($10,262,806) 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 and this act.
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:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
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 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 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. 
SECTION 9.3.(h)  This section becomes effective January 1, 2004.

Requested by:	Senators Hagan, Garrou, Dalton
School of Science Math/College Scholarships
SECTION 9.4.(a)  Article 29 of Chapter 116 of the General Statutes is amended by adding a new section to read:
"§ 116-238.1.  Full tuition grant for graduates who attend a State university.
(a)	There is granted to each State resident who graduates from the North Carolina School of Science and Mathematics and who enrolls as a full-time student in a constituent institution of The University of North Carolina a sum to be determined by the General Assembly as a tuition grant. The tuition grant shall be for four consecutive academic years and shall cover the tuition cost at the constituent institution in which the student is enrolled. The tuition grant shall be distributed to the student as provided by this section.
(b)	The tuition grants provided for in this section shall be administered by the State Education Assistance Authority pursuant to rules adopted by the State Education Assistance Authority not inconsistent with this section. The State Education Assistance Authority shall not approve any grant until it receives proper certification from the appropriate constituent institution that the student applying for the grant is an eligible student. Upon receipt of the certification, the State Education Assistance Authority shall remit at the times it prescribes the grant to the constituent institution on behalf, and to the credit, of the student.
(c)	In the event a student on whose behalf a grant has been paid is not enrolled and carrying a minimum academic load as of the tenth classroom day following the beginning of the school term for which the grant was paid, the institution shall refund the full amount of the grant to the State Education Assistance Authority. 
(d)	In the event there are not sufficient funds to provide each eligible student with a full grant:
(1)	The Board of Governors of The University of North Carolina, with the approval of the Office of State Budget and Management, may transfer available funds to meet the needs of the programs provided by subsections (a) and (b) of this section; and
(2)	Each eligible student shall receive a pro rata share of funds then available for the remainder of the academic year within the fiscal period covered by the current appropriation.
(e)	Any remaining funds shall revert to the General Fund."
SECTION 9.4.(b)  This section applies to students graduating in the 2004‑2005 academic year and each subsequent academic year.

Requested by:	Senators Garrou, Dalton, Hagan
Film Industry Feasibility Study
SECTION 9.5.  The Board of Governors of The University of North Carolina shall conduct a feasibility study to assess the strategic opportunities in the arts and entertainment industry in Forsyth County and its environs in the creation of programs, facilities, job opportunities, and tourism demand related to the film industry. The study shall include, but not be limited to: (i) the development of a program in digital media, and (ii) the development of a tourist destination film industry studio backlot.
The Board of Governors shall consult with the faculty and staff of the North Carolina School of the Arts and other experts in the arts and entertainment fields in conducting the feasibility study. The Board of Governors shall report the results of the study and any recommendations the Board makes related to the study to the 2003 General Assembly by April 1, 2004.

Requested by:	Senators Lucas, Metcalf, Garrou, Dalton, Hagan
DISTINGUISHED PROFESSORS ENDOWMENT TRUST FUND
SECTION 9.6.(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 9.6.(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 X. DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUBPART 1. ADMINISTRATION

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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.

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
DHHS CENTRALIZE INFORMATION TECHNOLOGY OPERATIONS
SECTION 10.8A.(a)  The Department of Health and Human Services shall conduct a thorough, department‑wide examination and analysis of its Information Technology (IT) infrastructure, including IT expenditures and management functions. The purpose of the examination is to enable the General Assembly and the Office of State Budget to readily determine the amount of State funds being expended annually on each and all IT functions.   Upon completion of its examination and analysis, the Department shall develop a plan for the establishment of a Central IT Operations Unit encompassing all IT operations and functions that are common to all divisions, offices, and programs of the Department.  The Central IT Operations Unit shall be organized such that all IT expenditures and personnel are readily identifiable.  The Department may exclude from the Central IT Operations Unit those IT functions that are unique to one or more individual divisions, offices, or programs, provided that such separate IT functions are readily identifiable in terms of expenditures and personnel, and the separation allows for combining the expenditures and personnel data with expenditures and personnel data of the Central IT Operations Unit.  The Department shall identify all excluded IT functions and provide reasons why it is more beneficial to the State to exclude those functions from the Central IT Operations Unit.
SECTION 10.8A.(b)  The Office of State Budget and Management and the Department of Health and Human Services shall identify the amount of State appropriations necessary to fully fund from the General Fund the current budget for the Division of Information Resources.  Having determined the amount of General Fund dollars needed, the Office of State Budget and Management shall develop and recommend a plan for providing the necessary funds.
SECTION 10.8A.(c)  The Department of Health and Human Services shall report on the development of the Central IT Operations Unit 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 January 1, 2004.  The Office of State Budget and Management shall report on the identification of funds required under subsection (b) 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 by January 1, 2004.

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
education and awareness of infant homicide prevention act
SECTION 10.8B.(a)  The Department of Health and Human Services, Division of Public Health and the Division of Social Services, shall incorporate education and awareness of the Infant Homicide Prevention Act pursuant to S.L. 2001‑291, into other State‑funded programs at the local level.
SECTION 10.8B.(b)  The Department shall report on its activities 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 April 1, 2004.

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
MEDICAL CARE COMMISSION TEMPORARY RULE‑making AUTHORITY  EXTENDED
SECTION 10.8C.  Section 6.(d) of S.L. 2002‑160 reads as rewritten:
"SECTION 6.(d)  Notwithstanding 26 NCAC 2C .0102(11), the Medical Care Commission may adopt temporary rules as provided in this section until 1 July 2004."

Requested by:	Senators Purcell, Reeves , Garrou, Dalton, Hagan
IMPLEMENT A PILOT PROJECT FOR LONG‑TERM CARE COMMUNITY SERVICE COORDINATION
SECTION 10.8D.(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 10.8D.(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.

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

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
TRANSITION PLANNING FOR STATE PSYCHIATRIC HOSPITALS
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.(d)  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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
MENTAL RETARDATION CENTER TRANSITION 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 provide for the elimination of self‑referrals by the mental retardation centers and shall include the following:
(1)	The area and county mental health programs shall have exclusive authority for referring to the mental retardation centers persons in the community who are in need of specialized services.
(2)	The mental retardation centers shall coordinate the transition of residents from the mental retardation centers to area and county mental health programs, and shall provide technical assistance to community service providers and families who care for transitioned residents, and to others in the community, as appropriate, for the purpose of furthering community services and placement.
(3)	The method for allocating savings in State appropriations from the mental retardation centers across the area and county mental health programs.
SECTION 10.15.(b)  In accordance with the plan established in subsection (a) of this section, any recurring and nonrecurring savings in State appropriations that result from the transfer of referral activities in the mental retardation centers to area and county mental health programs shall be transferred from the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services to area and county mental health programs for referral activities.
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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 the 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‑21.1(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 sub‑subdivisions 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 Medicaid to 19‑, 20‑, and 21‑year‑olds in accordance with federal rules and regulations.
SECTION 10.19.(o)  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 eighty‑five percent (185%) 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 eighty‑five percent (185%) 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.
(6)	Infants under the age of one whose family income is above one hundred eighty‑five percent (185%) through two hundred percent (200%) of the federal poverty level. Coverage under this subdivision shall be paid for from federal funds received under Title XXI of the Social Security Act, and State matching funds, to implement the Health Insurance Program for Children under Part 8 of Article 2 of Chapter 108A of the General Statutes.
(7)	Children aged one through five whose family income is above one hundred thirty‑three percent (133%) through two hundred percent (200%) of the federal poverty level. Coverage under this subdivision shall be paid for from federal funds received under Title XXI of the Social Security Act, and State matching funds, to implement the Health Insurance Program for Children under Part 8 of Article 2 of Chapter 108A of the General Statutes.
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.(p)  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.(q)  The Department of Health and Human Services shall disregard earned income for recipients who would otherwise lose Medicaid eligibility under section 1931 of Title XIX of the Social Security Act due to earnings.  This disregard shall be applied for a maximum of 12 consecutive months.
SECTION 10.19.(r)  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.(s)  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.(t)  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.(u)  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.(v)  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.(w)  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.(x)  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.(y)  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 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.(z)  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.(aa)  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.  
SECTION 10.19.(bb)  The Department shall develop, amend, and adopt  medical coverage policy in accordance with the following:
(1)	During the development of new medical coverage policy or amendment to existing medical coverage policy, consult with and seek the advice of the Physician Advisory Group of the North Carolina Medical Society and other organizations the Secretary deems appropriate.
(2)	At least 45 days prior to the adoption of new or amended medical coverage policy, the Department shall:
a.	Publish the proposed new or amended medical coverage policy on the Department's web site;
b.	Notify all Medicaid providers of the proposed, new, or amended policy; and
c.	Upon request, provide persons copies of the proposed medical coverage policy.
(3)	During the 45‑day period immediately following publication of the proposed new or amended medical coverage policy, accept oral and written comments on the proposed new or amended policy.
(4)	If, following the comment period, the proposed new or amended medical coverage policy is modified, then the Department shall, at least 15 days prior to its adoption:
a.	Notify all Medicaid providers of the proposed policy;
b.	Upon request, provide persons notice of amendments to the proposed policy; and
c.	Accept additional oral or written comments during this 15‑day period.

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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‑seven million five hundred thousand dollars ($37,500,000) for the 2003‑2004 fiscal year and the sum of thirty‑seven million five hundred thousand dollars ($37,500,000) 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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Pittenger, Garrou, Dalton, Hagan
MEDICAID COST CONTAINMENT ACTIVITIES
SECTION 10.23.(a)  The Department of Health and Human Services may use not more than six million dollars ($6,000,000) for the 2003‑2004 fiscal year 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, plastic magnetic stripped Medicaid identification cards for issuance to Medicaid enrollees, fraud detection software or other fraud detection activities, 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.
SECTION 10.23.(b)  As part of any efforts to contain Medicaid Program costs, the Department of Health and Human Services, Division of Medical Assistance, shall establish reimbursement rates that will allow efficient Medicaid providers to comply with certification requirements, licensure rules, or other mandated quality or safety standards.

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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.
(	"

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
HEALTH CHOICE
SECTION 10.29.(a)  G.S. 108A‑70.19 reads as rewritten:
"§ 108A‑70.19.  Short title; purpose; no entitlement.
This Part may be cited as "The Health Insurance Program for Children Act of 1998." The purpose of this Part is to provide comprehensive health insurance coverage to uninsured low‑income children who are residents of this State. Coverage shall be provided from federal funds received, State funds appropriated, and other nonappropriated funds made available for this purpose. Funds received, appropriated, or otherwise made available for the Program shall be used to cover:
(1)	Children eligible under G.S. 108A-70.21;
(2)	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 who receive services under the State Medical Assistance Program;  and 
(3)	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 who receive service under the State Medical Assistance Program. 
Except for infants and children described in subdivisions (2) and (3) of this section who receive services under the State Medical Assistance Program, nothing in this Part shall be construed as obligating the General Assembly to appropriate funds for the Program or as entitling any person to coverage under the Program."
SECTION 10.29.(b)  G.S. 108A‑70.21(a) reads as rewritten:
"(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 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."
SECTION 10.29.(c)  G.S. 108A‑70.21(b) reads as rewritten: 
"(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. All 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 opthamologists, 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.
The Department may provide services to children enrolled in the Program through the State Medical Assistance managed care program. Services provided through the managed care program shall be paid for from Program funds."
SECTION 10.29.(d)  G.S. 108A‑70.21(d) reads as rewritten:
"(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 fees for outpatient prescription drugs are applicable and shall be one dollar ($1.00) 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 three dollars ($3.00). 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."
SECTION 10.29.(e)  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.
(b)	After reserving sufficient funds made available for this Program to cover the cost of State Medical Assistance Program services to 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, and 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, 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.(f)  G.S. 108A‑70.23(c) reads as rewritten:
"(c)	Services Provided. – The services authorized to be provided to children eligible under this section are as follows:
(1)	The same level of services as provided for special needs children under the Medical Assistance Program as authorized in the Current Operations Appropriations Act except that:
a.	No services for long‑term care shall be provided under this section;
b.	Services for respite care shall be provided only under emergency circumstances; and
c.	The Department may limit services for special needs children after consultation with the Commission on Children with Special Health Care Needs.
(2)	Only those services eligible under this section that are not covered or otherwise provided under Part 5 of Article 3 of Chapter 135 of the General Statutes."

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
COLLABORATION AMONG DHHS, DPI, AND LEAS TO ENSURE MEDICAID‑RELATED SERVICES FOR ELIGIBLE PUBLIC SCHOOL STUDENTS WITH DISABILITIES
SECTION 10.29A.  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. Collaboration among agencies to ensure Medicaid-related services payments to eligible students with disabilities in public schools.
The Department shall work with the Department of Public Instruction and local education agencies to develop efficient, effective, and appropriate administrative procedures and guidelines to provide maximum funding for Medicaid-related services for Medicaid-eligible students with disabilities. The procedures and guidelines shall be streamlined to ensure that local education agencies receive Medicaid reimbursement in a timely manner for Medicaid-related services and administrative outreach to Medicaid‑eligible students with disabilities."

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
AUDIT OF CAP/DA PROGRAMS BY STATE AUDITOR
SECTION 10.29B.(a)  The State Auditor shall perform an audit of the Community Alternatives Program for Disabled Adults (CAP/DA).  The audit shall build upon the results of the study conducted in accordance with S.L. 2002‑126, Section 10.16(c), by the North Carolina Institute of Medicine and shall provide information necessary to determine whether CAP/DA is operating within waiver guidelines and program goals. The State Auditor shall report the results of the audit to the North Carolina Study Commission on Aging by January 1, 2004.
SECTION 10.29B.(b)  The Department of Health and Human Services shall continue to examine CAP/DA and shall make a report of its findings to the North Carolina Study Commission on Aging by January 1, 2004.  The report shall include the following information:
(1)	A review of the current assessment process for CAP/DA clients, including an explanation of how assessments are conducted and a comparison of the assessment process for CAP/DA clients with the assessment process for nursing home and adult care home clients.
(2)	A description of total program costs to the State and counties for clients receiving CAP/DA payments and an analysis of per‑client costs in CAP/DA to per‑client costs in nursing homes and adult care homes. This analysis shall include the costs of all forms of assistance received by CAP/DA clients, such as food stamps and housing assistance.
(3)	A description of total program costs and an analysis of per‑participant costs for individuals in the State‑County In‑Home Program. The analysis shall include a comparison of per‑client costs for participants in the In‑Home Program to pe‑client costs in adult care homes.
(4)	A description of the monitoring of quality of care for CAP/DA clients.
(5)	An evaluation of the current waiting list procedures.

Requested by:	Senators Purcell, Reeves , Garrou, Dalton, Hagan
BLUE RIBBON COMMISSION ON MEDICAID REFORM
SECTION 10.29C.(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)	The impact on the Medicaid program of expanding eligibility and services in order to maximize federal funds to replace State and county funds for Medicaid programs.
(7)	The role of Medicaid in the State's economy, including:
a.	The role played by Medicaid in ensuring an adequate and effective health care delivery system;
b.	The role of an adequate and effective health care delivery system in economic development;
c.	Jobs created by Medicaid programs; and
d.	The adverse effects of inadequate Medicaid payments and reduced Medicaid eligibility on private sector health benefit plans.
(8)	Any other matter relating to reform of the State Medicaid program.
SECTION 10.29C.(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, 138‑5, or 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. The Department of Health and Human Services shall transfer funding from the Medicaid program to cover the cost of the Commission's study.
SECTION 10.29C.(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.

SUBPART 4. DIVISION OF PUBLIC HEALTH

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
Rename North Carolina Heart Disease and Stroke Prevention Task Force
SECTION 10.33B.  G.S. 143B‑216.60 reads as rewritten:
"§ 143B‑216.60.  The Ed Warren Heart Disease and Stroke Prevention Task Force.
(a)	The Ed Warren Heart Disease and Stroke Prevention Task Force is created in the Department of Health and Human Services.
(b)	The Task Force shall have 27 members. The Governor shall appoint the Chair, and the Vice‑Chair shall be elected by the Task Force. The Director of the Department of Health and Human Services, the Director of the Division of Medical Assistance in the Department of Health and Human Services, and the Director of the Division of Aging in the Department of Health and Human Services, or their designees, shall be members of the Task Force. Appointments to the Task Force shall be made as follows:
(1)	By the General Assembly upon the recommendation of the President Pro Tempore of the Senate, as follows:
a.	Three members of the Senate;
b.	A heart attack survivor;
c.	A local health director;
d.	A certified health educator;
e.	A hospital administrator; and
f.	A representative of the North Carolina Association of Area Agencies on Aging.
(2)	By the General Assembly upon the recommendation of the Speaker of the House of Representatives, as follows:
a.	Three members of the House of Representatives;
b.	A stroke survivor;
c.	A county commissioner;
d.	A licensed dietitian/nutritionist;
e.	A pharmacist; and
f.	A registered nurse.
(3)	By the Governor, as follows:
a.	A practicing family physician, pediatrician, or internist;
b.	A president or chief executive officer of a business upon recommendation of a North Carolina wellness council which is a member of the Wellness Councils of America;
c.	A news director of a newspaper or television or radio station;
d.	A volunteer of the North Carolina Affiliate of the American Heart Association;
e.	A representative from the North Carolina Cooperative Extension Service;
f.	A representative of the Governor's Council on Physical Fitness and Health; and
g.	Two members at large.
(c)	Each appointing authority shall assure insofar as possible that its appointees to the Task Force reflect the composition of the North Carolina population with regard to ethnic, racial, age, gender, and religious composition.
(d)	The General Assembly and the Governor shall make their appointments to the Task Force not later than 30 days after the adjournment of the 1995 General Assembly, Regular Session 1995. A vacancy on the Task Force shall be filled by the original appointing authority, using the criteria set out in this section for the original appointment.
(e)	The Task Force shall meet at least quarterly or more frequently at the call of the Chair.
(f)	The Task Force Chair may establish committees for the purpose of making special studies pursuant to its duties, and may appoint non‑Task Force members to serve on each committee as resource persons. Resource persons shall be voting members of the committees and shall receive subsistence and travel expenses in accordance with G.S. 138‑5 and G.S. 138‑6. Committees may meet with the frequency needed to accomplish the purposes of this section.
(g)	Members of the Task Force shall receive per diem and necessary travel and subsistence expenses in accordance with G.S. 120‑3.1, 138‑5 and 138‑6, as applicable.
(h)	A majority of the Task Force shall constitute a quorum for the transaction of its business.
(i)	The Task Force may use funds allocated to it to establish two positions and for other expenditures needed to assist the Task Force in carrying out its duties.
(j)	The  Task Force has the following duties:
(1)	To undertake a statistical and qualitative examination of the incidence of and causes of heart disease and stroke deaths and risks, including identification of subpopulations at highest risk for developing heart disease and stroke, and establish a profile of the heart disease and stroke burden in North Carolina.
(2)	To publicize the profile of the heart disease and stroke burden and its preventability in North Carolina.
(3)	To identify priority strategies which are effective in preventing and controlling risks for heart disease and stroke.
(4)	To identify, examine limitations of, and recommend to the Governor and the General Assembly changes to existing laws, regulations, programs, services, and policies to enhance heart disease and stroke prevention by and for the people of North Carolina.
(5)	To determine and recommend to the Governor and the General Assembly the funding and strategies needed to enact new or to modify existing laws, regulations, programs, services, and policies to enhance heart disease and stroke prevention by and for the people of North Carolina.
(6)	To adopt and promote a statewide comprehensive Heart Disease and Stroke Prevention Plan to the general public, State and local elected officials, various public and private organizations and associations, businesses and industries, agencies, potential funders, and other community resources.
(7)	To identify and facilitate specific commitments to help implement the Plan from the entities listed in subdivision (6) above.
(8)	To facilitate coordination of and communication among State and local agencies and organizations regarding current or future involvement in achieving the aims of the Heart Disease and Stroke Prevention Plan.
(9)	To receive and consider reports and testimony from individuals, local health departments, community‑based organizations, voluntary health organizations, and other public and private organizations statewide, to learn more about their contributions to heart disease and stroke prevention, and their ideas for improving heart disease and stroke prevention in North Carolina.
(k)	Notwithstanding Section 11.57 of S.L. 1999‑237, the Task Force shall submit a final report to the Governor and the General Assembly by June 30, 2003, and a report to each subsequent regular legislative session within one week of its convening."

SUBPART 5. DIVISION OF CHILD DEVELOPMENT

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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 seventy‑five percent (75%) of the State median income, 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. 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)	Except as applicable in subdivision (2) of this subsection, 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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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 seventy‑five percent (75%) of the State median income.
(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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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 eight percent (8%) 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)  For the 2003‑2004 fiscal year, the local partnerships shall spend an amount for child care subsidies that provides at least fifty‑two million dollars ($52,000,000) for the TANF maintenance of effort requirement and the Child Care Development Fund and Block Grant match requirement.
SECTION 10.38.(h)  The North Carolina Partnership for Children, Inc., shall develop a plan to focus on quality child 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.(i)  The North Carolina Partnership for Children, Inc., shall develop a plan to incorporate a penalty into a local partnership's allocation based upon poor audit results.
SECTION 10.38.(j)  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.
SECTION 10.38.(k)  G.S. 143B‑168.12(a)(1) reads as rewritten:
"(1)	The North Carolina Partnership shall have a Board of Directors consisting of the following 25 members:
a.	The Secretary of Health and Human Services, ex officio, or the Secretary's designee;
b.	Repealed by Session Laws 1997, c. 443, s. 11A.105.
c.	The Superintendent of Public Instruction, ex officio, or the Superintendent's designee;
d.	The President of the Community Colleges System, ex officio, or the President's designee;
e.	Three members of the public, including one child care provider, one other who is a parent, and one other who is a board chair of a local partnership serving on the North Carolina Partnership local partnership advisory committee, appointed by the General Assembly upon recommendation of the President Pro Tempore of the Senate;
f.	Three members of the public, including one who is a parent, one other who is a representative of the faith community, and one other who is a board chair of a local partnership serving on the North Carolina Partnership local partnership advisory committee, appointed by the General Assembly upon recommendation of the Speaker of the House of Representatives;
g.	Twelve members, appointed by the Governor. Three of these 12 members shall be members of the party other than the Governor's party, appointed by the Governor. Seven of these 12 members shall be appointed as follows: one who is a child care provider, one other who is a pediatrician, one other who is a health care provider, one other who is a parent, one other who is a member of the business community, one other who is a member representing a philanthropic agency, and one other who is an early childhood educator;
h.	Repealed by Session Laws 1998‑212, s. 12.37B(a), effective October 30, 1998.
h1.	The Chair of the North Carolina Partnership Board shall be appointed by the Governor;
i.	Repealed by Session Laws 1998‑212, s. 12.37B(a), effective October 30, 1998.
j.	One member of the public appointed by the General Assembly upon recommendation of the Majority Leader of the Senate;
k.	One member of the public appointed by the General Assembly upon recommendation of the Majority Leader of the House of Representatives;
l. 	One member of the public appointed by the General Assembly upon recommendation of the Minority Leader of the Senate; and
m.	One member of the public appointed by the General Assembly upon recommendation of the Minority Leader of the House of Representatives.
		All members appointed to succeed the initial members and members appointed thereafter shall be appointed for three‑year terms. Members may succeed themselves.
		All appointed board members shall avoid conflicts of interests and the appearance of impropriety. Should instances arise when a conflict may be perceived, any individual who may benefit directly or indirectly from the North Carolina Partnership's disbursement of funds shall abstain from participating in any decision or deliberations by the North Carolina Partnership regarding the disbursement of funds.
		All ex officio members are voting members. Each ex officio member may be represented by a designee. These designees shall be voting members. No members of the General Assembly shall serve as members.
		The North Carolina Partnership may establish a nominating committee and, in making their recommendations of members to be appointed by the General Assembly or by the Governor, the President Pro Tempore of the Senate, the Speaker of the House of Representatives, the Majority Leader of the Senate, the Majority Leader of the House of Representatives, the Minority Leader of the Senate, the Minority Leader of the House of Representatives, and the Governor shall consult with and consider the recommendations of this nominating committee.
		The North Carolina Partnership may establish a policy on members' attendance, which policy shall include provisions for reporting absences of at least three meetings immediately to the appropriate appointing authority.
		Members who miss more than three consecutive meetings without excuse or members who vacate their membership shall be replaced by the appropriate appointing authority, and the replacing member shall serve either until the General Assembly and the Governor can appoint a successor or until the replaced member's term expires, whichever is earlier.
		The North Carolina Partnership shall establish a policy on membership of the local boards. No member of the General Assembly shall serve as a member of a local board. Within these requirements for local board membership, the North Carolina Partnership shall allow local partnerships that are regional to have flexibility in the composition of their boards so that all counties in the region have adequate representation.
		All appointed local board members shall avoid conflicts of interests and the appearance of impropriety. Should instances arise when a conflict may be perceived, any individual who may benefit directly or indirectly from the partnership's disbursement of funds shall abstain from participating in any decision or deliberations by the partnership regarding the disbursement of funds."
SECTION 10.38.(l)  G.S. 143B‑168.12(a)(8) reads as rewritten:
"…
(8)	The North Carolina Partnership shall establish a local partnership advisory committee comprised of 15 members. Eight of the members shall be chosen from past board chairs or duly elected officers currently serving on local partnerships' board of directors at the time of appointment and shall serve three-year terms. Seven of the members shall be staff of local partnerships. Members shall be chosen by the Chair of the North Carolina Partnership from a pool of candidates nominated by their respective boards of directors. The local partnership advisory committee shall serve in an advisory capacity to the North Carolina Partnership and shall establish a schedule of regular meetings. Members shall be chosen from local partnerships on a rotating basis. The advisory committee shall annually elect a chair from among its members.
…."
SECTION 10.38.(m)  G.S. 143B‑168.12 is amended by adding a new subsection to read:
"(f)	The North Carolina Partnership for Children, Inc., shall establish uniform guidelines and reporting format for local partnerships to document the qualifying expenses occurring at the contractor level. Local partnerships shall monitor qualifying expenses to ensure they have occurred and meet the requirements prescribed in this subsection."

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
DEPARTMENT  PLAN FOR FAMILY CHILD CARE HOME FEES
SECTION 10.39A.  The Department of Health and Human Services, Division of Child Development, shall develop a plan proposing fees for the licensing of family child care homes. The Department shall report on the plan 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.

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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 one hundred twenty‑one thousand eight hundred dollars ($43,121,800) in the 2003‑2004 fiscal year and the sum of forty‑one million nine hundred twenty‑one thousand eight hundred dollars ($41,921,800) 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 shall establish the "More At Four" Pre‑K Task Force to oversee development and implementation of the pilot program. The membership shall include:
(1)	Parents of at‑risk children.
(2)	Representatives with expertise in early childhood development.
(3)	Classroom teachers who are certified in early childhood education.
(4)	Representatives of the private not‑for‑profit and for‑profit child care providers in North Carolina.
(5)	Employees of the Department of Health and Human Services who are knowledgeable in the areas of early childhood development, current State and federally funded efforts in child development, and providing child care.
(6)	Representatives of local Smart Start partnerships.
(7)	Representatives of local school administrative units.
(8)	Representatives of Head Start prekindergarten programs in North Carolina.
(9)	Employees of the Department of Public Instruction.
SECTION 10.40.(c)  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.(d)  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 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 individual receives funding from more than one source for the same purpose or activity during the same funding period. For purposes of this subsection, sources shall include 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 for the 2003‑2004 fiscal year 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.(e)  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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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 seventy‑five percent (75%) of reimbursable costs.

SUBPART 8. DIVISION OF SOCIAL SERVICES

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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)	$365.00 per child per month for children aged birth through 5;
(2)	$415.00 per child per month for children aged 6 through 12; and
(3)	$465.00 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)	$365.00 per child per month for children aged birth through 5;
(2)	$415.00 per child per month for children aged 6 through 12; and
(3)	$465.00 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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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‑five percent (25%) 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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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, Iredell, Lenoir, Lincoln, Macon, McDowell, Sampson, 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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
SPECIAL ASSISTANCE IN‑HOME PROGRAM
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. The standard monthly payment to individuals enrolled in the Special Assistance in‑home program 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 in‑home program participants are those individuals who need and, but for the in‑home program, would seek placement in an adult care home facility. The Department's policies and procedures shall include the use of a functional assessment.  The Department shall make this in‑home option available to all counties on a voluntary basis.  To the maximum extent possible, the Department shall consider geographic balance in the dispersion of payments to individuals across the State.
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 January 1, 2005. This report shall include the following information:
(1)	A description of cost savings that result from allowing individuals eligible for State‑county Special Assistance the option of remaining in the home.
(2)	A complete fiscal analysis of the in‑home option to include all federal, State, and local funds expended.
(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 in‑home 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.
SECTION 10.51.(c)  The Department shall incorporate data collection tools designed to compare quality of life among institutionalized versus 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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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 forty dollars ($1,040) 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. 
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 reduced 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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
STATE/COUNTY SPECIAL ASSISTANCE TRANSFER OF ASSETS
SECTION 10.53.(a)  G.S. 108A‑46 is repealed.
SECTION 10.53.(b)  Part 3 of Article 2 of Chapter 108A is amended by adding the following new section to read:
"§ 108A-46A. Transfer of assets for purposes of qualifying for State-county Special Assistance for adults.
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
LIMITATION ON STATE ABORTION FUNDING
SECTION 10.54.  The limitations on funding of the performance of abortion established in Section 23.27 of Chapter 324 of the 1995 Session Laws, as amended by Section 23.8A of Chapter 507 of the 1995 Session Laws, apply to the 2003‑2004 and 2004‑2005 fiscal years.

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
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.

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
Eliminate Reporting Requirements for Work First Program
SECTION 10.57.  G.S. 108A‑27.2 reads as rewritten:
"§ 108A‑27.2.  General duties of the Department.
The Department shall have the following general duties with respect to the Work First Program:
(1)	Ensure that the specifications of the general provisions of the State Plan regarding the procedures required when recipients are sanctioned, prescribed in G.S. 108A‑27.9(c), are uniformly developed and implemented across the State;
(1a)	Provide technical assistance to counties developing and implementing their County Plans, including providing information concerning applicable federal law and regulations and changes to federal law and regulations that affect the permissible use of federal funds and scope of the Work First Program in a county;
(1b)	Reserved for future codification purposes.
(1c)	Ensure that two‑parent families receive cash assistance for three months after qualifying for assistance without being subject to pay for performance requirements, in order to encourage families to stay together and to overcome barriers to self‑sufficiency and gainful employment. Cash assistance or diversion assistance received prior to being subject to pay for performance requirements is limited to one time within a 12‑month period.
(2)	Describe authorized federal and State work activities. For up to twenty percent (20%) of Work First recipients, authorized State work activities shall include at least part‑time enrollment in a postsecondary education program. In Standard Counties, recipients enrolled on at least a part‑time basis in a postsecondary education program and maintaining a 2.5 grade point average or its equivalent shall have their two‑year time limit suspended for up to three years.
(3)	Define requirements for assignment of child support income and compliance with child support activities;
(4)	Establish a schedule for counties to submit their County Plans to ensure that all Standard County Plans are adopted by the Standard Program Counties by January 15 of each odd‑numbered year and all Electing County Plans are adopted by Electing Counties by February 1 of each odd‑numbered year and review and then recommend a State Plan to the General Assembly;
(5)	Ensure that the County Plans comply with federal and State laws, rules, and regulations, are consistent with the overall purposes and goals of the Work First Program, and maximize federal receipts for the Work First Program;
(6)	Prepare the State Plan in accordance with G.S. 108A‑27.9 and federal laws and regulations and submit it to the Budget Director for approval;
(7)	Submit the State Plan, as approved by the Budget Director, to the General Assembly for approval;
	
(9)	Develop and implement a system to monitor and evaluate the impact of the Work First Program on children and families, including the impact of the Work First Program on job retention and advancement, child abuse and neglect, caseloads for child protective services and foster care, school attendance, academic and behavioral performance, and other measures of the economic security and health of children and families. The system should be developed to allow monitoring and evaluation of impact based on both aggregated and disaggregated data. State and county agencies shall cooperate in providing information needed to conduct these evaluations, sharing data and information except where prohibited specifically by federal law or regulation;
(10)	Monitor the performance of counties relative to their County Plans and the overall goals of the Work First Program;
	
(12)	Report to the Senate Appropriations Committee on Health and Human Services and the House of Representatives Appropriations Subcommittee on Health and Human Services the counties which have requested Electing status; provide copies of the proposed Electing County Plans to  the Senate Appropriations Committee on Health and Human Services and the House of Representatives Appropriations Subcommittee on Health and Human Services, if requested; and make recommendations to the Senate Appropriations Committee on Health and Human Services and the House of Representatives Appropriations Subcommittee on Health and Human Services on which of the proposed Electing County Plans ensure compliance with federal and State laws, rules, and regulations and are consistent with the overall purposes and goals for the Work First Program; and
(13)	Make recommendations to the General Assembly for approval of counties to become Electing Counties which represent, in aggregate, no more than fifteen and one‑half percent (15.5%) of the total Work First caseload at September 1 of each year and, for each county submitting a plan, the reasons individual counties were or were not recommended.
(14)	Review the county Work First Program of each electing county and recommend whether the county should continue to be designated an electing county or whether it should be redesignated as a standard county. In conducting its review and making its recommendation, the Department shall:
a.	Examine and consider the results of the Department's monitoring and evaluation of the impact of the electing county's Work First Program as required under subdivision (9) of this section;
b.	Determine whether the electing county's Work First Program's unique design requires implementation by an electing county or whether the Work First Program could be implemented by a county designated as a standard county;
c.	Determine whether the electing county's Work First Program and policies are unique and innovative in meeting the purpose of the Work First Program as stated under G.S. 108A‑27, and State and federal laws, rules, and regulations, as compared to other standard and electing county Work First programs.
The Department shall make its recommendation and the reasons therefor to the Senate Appropriations Committee on Health and Human Services and the House of Representatives Appropriations Subcommittee on Health and Human Services not later than three months prior to submitting the State Plan to the Commission for review as required under G.S. 108A‑27.9(a)."

Requested by: Senator Holloman
SOCIAL SERVICES COMMISSION RULES ON RATE-SETTING FOR ADULT DAY CENTERS AND ADULT DAY HEALTH CENTERS
SECTION 10.58.  The Social Services Commission shall consider adopting rules increasing the rates for adult day centers and adult day health centers.  Any rate increase adopted by the Social Services Commission for adult day centers and adult day health centers shall be implemented within existing funds.

PART XI. DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan, Rand
GRASSROOTS SCIENCE PROGRAM
SECTION 11.1.(a)  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 five hundred fifty‑one thousand seven hundred sixty dollars ($2,551,760) for fiscal year 2003‑2004 and the sum of two million five hundred fifty‑one thousand seven hundred sixty dollars ($2,551,760) for fiscal year 2004‑2005 are allocated as grants‑in‑aid for each fiscal year as follows:

	2003‑2004	2004‑2005

Aurora Fossil Museum	$56,504	$56,504
Cape Fear Museum	$181,711	$181,711
Catawba Science Center	$132,557	$132,557
Colburn Gem and Mineral Museum, Inc.	$66,390	$66,390
Discovery Place	$608,466	$608,466
Granville County Museum Commission,
Inc. ‑ Harris Gallery	$55,721	$55,721
The Health Adventure Museum of Pack
Place Education, Arts and
Science Center, Inc.	$119,141	$119,141
Imagination Station	$84,328	$84,328
Iredell County Children's Museum	$56,433	$56,433
Museum of Coastal Carolina	$68,775	$68,775
Natural Science Center of Greensboro	$179,713	$179,713
North Carolina Museum of Life
and Science	$378,895	$378,895
Rocky Mount Children's Museum	$72,177	$72,177
Schiele Museum of Natural History	$229,403	$229,403
Sci Works Science Center and
Environmental Park of Forsyth County	$144,870	$144,870
Western North Carolina Nature Center	$116,675	$116,675

Total	$2,551,760	$2,551,760
SECTION 11.1.(b)  Of the funds appropriated in this act to the Department of Environment and Natural Resources for the Grassroots Science Program, the sum of two hundred fifty thousand dollars ($250,000) for the 2003‑2004 fiscal year is allocated as initial grants‑in‑aid of fifty thousand dollars ($50,000) to each of the following unfunded members of the Grassroots collaborative:
(1)	Wilmington Children's Museum, Inc.
(2)	Carolina Raptor Center, Inc.
(3)	Highlands Nature Center
(4)	Fascinate‑U Children's Museum
(5)	KidSenses, Inc.
SECTION 11.1.(c)  It is the intent of the General Assembly that the museums receiving initial allocations under subsection (b) of this section shall receive recurring allocations in subsequent fiscal years based on the formula used to calculate the allocations under subsection (a) of this section.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
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:	Senators Weinstein, Garrou, Dalton, Hagan, Holliman
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:	Senators Weinstein, Garrou, Dalton, Hagan, Jenkins
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:	Senators Weinstein, Garrou, Dalton, Hagan
express review pilot program
SECTION 11.4A.(a)  The Department of Environment and Natural Resources may develop the Express Review Pilot Program, a pilot program to provide express permit and certification reviews. Participation in the Express Review Pilot Program is voluntary, and the program is to become supported by the fees determined pursuant to subsection (b) of this section. The Department of Environment and Natural Resources shall determine the project applications to review under the Express Review Pilot Program from those who request to participate in the Pilot Program. The Express Review Pilot Program may be applied to any one or all of the permits, approvals, or certifications in the following programs: the erosion and sedimentation control program, the coastal management program, and the water quality programs, including water quality certifications and stormwater management. The Express Review Pilot Program shall focus on the following permits or certifications:
(1)	Stormwater permits under Part 1 of Article 21 of Chapter 143 of the General Statutes.	
(2)	Stream origination certifications under Article 21 of Chapter 143 of the General Statutes.
(3)	Water quality certification under Article 21 of Chapter 143 of the General Statutes.
(4)	Erosion and sedimentation control permits under Article 4 of Chapter 113A of the General Statutes.
(5)	Permits under the Coastal Area Management Act (CAMA), Part 4 of Article 7 of Chapter 113A of the General Statutes.
SECTION 11.4A.(b)  The Department of Environment and Natural Resources may establish up to eight positions to administer the Express Review Pilot Program and may determine the fees for express application review under the Pilot Program. Notwithstanding G.S. 143‑215.3D, the maximum permit application fee to be charged under subsection (a) of this section for the express review of a project application requiring all of the permits under subdivisions (1) through (5) of subsection (a) of this section shall not exceed five thousand five hundred dollars ($5,500). Notwithstanding G.S. 143‑215.3D, the maximum permit application fee to be charged for the express review of a project application requiring all of the permits under subdivisions (1) through (4) of subsection (a) of this section shall not exceed four thousand five hundred dollars ($4,500). Notwithstanding G.S. 143‑215.3D, the maximum permit application fee charged for the express review of a project application for any other combination of permits under subdivisions (1) through (5) of subsection (a) of this section shall not exceed four thousand dollars ($4,000). Express review of a project application involving additional permits or certifications issued by the Department of Environment and Natural Resources other than those under subdivisions (1) through (5) of subsection (a) of this section may be allowed by the Department, and, notwithstanding G.S. 143‑215.3D or any other statute or rule that sets a permit fee, the maximum permit application fee charged for the express review of a project application shall not exceed four thousand dollars ($4,000), plus one hundred fifty percent (150%) of the fee that would otherwise apply by statute or rule for that particular permit or certification. Additional fees, not to exceed fifty percent (50%) of the original permit application fee under this section, may be charged for subsequent reviews due to the insufficiency of the permit applications. The Department of Environment and Natural Resources may establish the procedure by which the amount of the fees under this subsection is determined, and the fees and procedures are not rules under G.S. 150B‑2(8a) for the Express Review Pilot Program under this section. 
SECTION 11.4A.(c)  The funds appropriated to the Department of Environment and Natural Resources in this act for the 2003‑2004 fiscal year shall be used for the costs of implementing the Express Review Pilot Program under this section during the 2003‑2004 fiscal year.
SECTION 11.4A.(d)  The Express Review Fund is created as a special nonreverting fund.  The Express Review Fund shall be used for the costs of implementing the Express Review Pilot Program under this section. All fees collected under this section shall be credited to the Express Review Fund. If the Express Review Pilot Program is abolished, the funds in the Express Review Fund shall be credited to the General Fund.
SECTION 11.4A.(e)  No later than May 1, 2004, the Department of Environment and Natural Resources shall report to the General Assembly its findings on the success of the Express Review Pilot Program and whether it recommends that the Pilot Program be continued or expanded.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan, Albertson
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:	Senators Weinstein, Garrou, Dalton, Hagan
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 one hundred million dollars ($100,000,000) as provided by this act and is only one hundred million dollars ($100,000,000) 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:	Senators Garrou, Dalton, Hagan, Albertson, Weinstein 
CLEAN WATER MANAGEMENT TRUST FUND MAY FUND FARMLAND PRESERVATION PROJECTS
SECTION 11.8A.  G.S. 113‑145.3(c) is amended by adding a new subdivision to read:
"(2a)	To match federal, State, local, and private farmland preservation and forestland preservation funds and to acquire permanent conservation easements on working farms and forests."

PART XII. DEPARTMENT OF COMMERCE

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
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 section becomes effective June 30, 2003.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
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:	Senators Weinstein, Garrou, Dalton, Hagan
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:	Senators Weinstein, Clodfelter, Garrou, Dalton, Hagan
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. It is the policy of the State of North Carolina to stimulate economic activity and to create new jobs for the citizens of the State by encouraging and promoting the growth and expansion of businesses and industries within the State. Accordingly, the Department of Commerce shall allocate one million dollars ($1,000,000) from the Fund to Johnson & Wales University for the creation of jobs in this State as a credit against any recruitment incentives heretofore extended to Johnson & Wales University by the State, if any there be.  Johnson & Wales shall reimburse the Fund if the projected number of jobs are not created.
SECTION 12.4.(b)  Moneys allocated from the One North Carolina ‑ Industrial Recruitment 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. 
(3)	Construction of or improvements to new or existing water, sewer, gas or electric utility distribution lines, or equipment for existing buildings.
(4)	Any other purposes specifically provided by an act of the General Assembly.
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.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan, Queen
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 a training program in entrepreneurial skills to be operated by North Carolina REAL Enterprises.
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:	Senators Weinstein, Garrou, Dalton, Hagan
Film Industry Development Account
SECTION 12.6A.(a)  G.S. 143B‑434.3 is repealed.
SECTION 12.6A.(b)  Part 2 of Article 10 of Chapter 143B is amended by adding the following new section to read:
"§ 143B-434.4.  Film Industry Development Account.
(a)	Legislative Findings and Purpose. – The General Assembly finds that: 
(1)	It is the policy of the State of North Carolina to stimulate economic activity and to create new jobs for the citizens of the State by encouraging and promoting the growth and expansion of businesses and industries within the State.
(2)	The North Carolina film production industry barely existed in the late 1970s.
(3)	Since that time, the North Carolina film production industry has grown to employ thousands of North Carolinians and to support seven studio complexes, hundreds of production service and support companies, and a substantial permanent resident crew base of film professionals, all of which contribute to the economy of the State and are a source of tax revenue for the State and local governments.
(4)	North Carolina, through its film industry, has hosted over 600 productions over the past 20 years, is regarded as the country's third largest film-making State behind California and New York, and has hosted productions in at least 75 out of our 100 counties.
(5)	Because of the nature of the national film production industry, the success and economic viability of North Carolina's film production industry depend in many respects on the State's ability to attract productions originating from other states such as California and New York to undertake production activity in North Carolina utilizing the State's existing film industry infrastructure.
(6)	The national film production industry is a highly creative industry in which decisions to film productions in North Carolina are typically made outside of the State and are frequently based upon factors such as cost of production.
(7)	However, current trends in the industry, including trends in foreign countries such as Canada, to develop new and creative means to attract and cut production costs for the type of productions that, in the past, have sustained North Carolina's film industry, threaten the viability of the State's investments in its film industry and film production infrastructure.
(8)	The economic condition of the State is not static, and recent changes in the State's economic condition have created a level of economic distress that requires a reevaluation of certain existing State programs, and the enactment and funding of programs such as the Film Industry Development Account are designed to stimulate new economic activity and to create new jobs and opportunities for employment within the State.
(9)	The enactment, funding, and administration of this program is necessary to stimulate the economy, facilitate economic recovery, create new jobs in North Carolina, and help sustain and preserve the State's investments in the film production industry, and will promote the general welfare and confer, as its primary purpose and effect, benefits on citizens throughout the State through the creation of new jobs and opportunities for employment, an enlargement of the overall tax base, an expansion and diversification of the State's industrial base, and an increase in revenue to the State and its political subdivisions, in accord with the policies declared in G.S. 143B-428.
(10)	The purpose of the Film Industry Development Account is to stimulate economic activity and to create jobs and employment opportunities within the State.
(b)	Creation of Account. – There is created in the Department of Commerce, Division of Tourism, Film, and Sports Development, the Film Industry Development Account to provide annual grants as incentives to production companies that engage in production activities in this State. The Division of Tourism, Film, and Sports Development shall administer this program in accordance with the following provisions:
(1)	To be eligible for a grant, a production company must engage in production activities in this State with expenditures in this State of at least one million dollars ($1,000,000). A grant may not be used for political or issue advertising.
(2)	A grant may not exceed fifteen percent (15%) of the amount the production company spends for goods and services in this State during the calendar year.
(3)	A grant may not exceed two hundred thousand dollars ($200,000) per production.
(4)	Grants shall be awarded to productions that substantially utilize North Carolina's film industry infrastructure and workforce, that stimulate economic activity within the State, and that create employment opportunities within the State.
(c)	Production Company Defined. – As used in this section, the term "production company" has the meaning provided in G.S. 105‑164.3.
(d)	Limitation on Eligibility. – No production company shall be eligible for a grant under this section if an original motion picture, television, or radio image for theatrical, commercial, advertising, or educational purposes made by that company contains material that is considered obscene, as defined by G.S. 14‑190.1(b).
(e)	Reports. – The Department of Commerce shall report annually to the General Assembly concerning the applications made to the account, the payments made from the account, and the effect of the payments on job creation in the State. The Department of Commerce shall also report quarterly to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division on the use of the moneys in the account, including information regarding to whom payments were made and in what amounts."
SECTION 12.6A.(c)  This section is effective on and after August 2, 2000.

Requested by:	Senators Garrou, Dalton, Hagan
Study Workforce Development Programs 
SECTION 12.6B.  The Department of Commerce and the Employment Security Commission shall report not later than January 1, 2004, to the House of Representatives and Senate Appropriations Committees on proposals to improve the efficiency and effectiveness of State workforce development programs.  The Department and Commission may consult with other State agencies and departments in the formulation of the proposals. The proposals may include, but shall not be limited to, the following:
(1)	Changes in the membership of the Employment Security Commission to include other State officials with significant responsibility for the provision of workforce development services;
(2)	Co‑location of workforce development officials across agencies and departments to improve efficiency and coordination of service provision;
(3)	Organizational structure changes to improve efficiency, planning, accountability, and coordination of service provision. The approval of the Secretary or the equivalent of any affected agency shall be required as part of any organizational structure change proposal; and
(4)	Other relevant recommendations that would result in the improvement of efficiency and effectiveness of State workforce development programs.

Requested by:	Senators Reeves, Garrou, Dalton, Hagan
Industrial Commission Fees/Computer System Replacement
SECTION 12.6C.(a)  The North Carolina Industrial Commission may retain up to five hundred thousand dollars ($500,000) in the fiscal year 2003‑2004 and five hundred thousand dollars ($500,000) in the fiscal year 2004‑2005 in additional fees charged to parties for the filing of compromise settlements to be used to replace existing computer hardware and software used for the operations of the Commission.  These funds may also be used to prepare any assessment of hardware and software needs prior to purchase. Any fees retained under this section must be in excess of the current two‑hundred‑dollar ($200.00) fee charged by the Commission for filing a compromise settlement.  All plans and purchases by the Commission utilizing these funds are subject to project certification by the Information Resources Management Commission.
SECTION 12.6C.(b)  The Commission may retain additional fees as authorized in this section only in the 2003‑2005 fiscal biennium and shall not retain any additional fees after the 2003‑2005 fiscal biennium.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
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:	Senators Weinstein, Garrou, Dalton, Hagan
Regional Commission Reports
SECTION 12.7A.  Each regional economic development commission receiving a grant‑in‑aid from the Department of Commerce shall:
(1)	By January 15, 2004, and more frequently as requested, report to the Joint Legislative Commission on Governmental Operations, the Fiscal Research Division, and the Department of Commerce 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 as specified in sub‑sub‑subdivisions 1. through 8. of sub‑subdivision (2)a. of this section including actual results through December 31, 2003;
d.	State fiscal year 2003‑2004 estimated itemized expenditures and fund sources including actual expenditures and fund sources through December 31, 2003.
(2)	Report by January 15, 2004, on the first and second quarters of the 2003‑2004 fiscal year, and by July 15, 2004, on the third and fourth quarters of the 2003‑2004 fiscal year, regarding the following:
a.	Program activities, objectives, and accomplishments for its region, to include:
1.	Specific businesses and/or industries that have been recruited.
2.	Businesses and/or industries that have located as a result of recruitment efforts and number of new jobs created as a result of that location decision.
3.	Existing businesses and/or industries that have expanded as a result of assistance and number of new jobs created as a result of that expansion.
4.	Existing businesses and/or industries that have remained as a result of retention efforts and number of jobs saved as a result of that retention.
5.	For sub‑sub‑subdivisions 1. through 4. of this sub‑subdivision, each Commission shall describe its role in the activities and identify the relative contributions of the Commission and the Department of Commerce to the activities.
6.	Number and description of marketing outreach events, including trade shows, recruitment missions, and related activities.
7.	Initiatives undertaken to establish certified sites and shell buildings.
8.	Number of referrals or leads handled that were generated by the Department of Commerce and number that were generated by the Commission.
b.	Total itemized actual revenues and expenditures, by fund source.
The report required by this subdivision shall be made to the Department of Commerce, the Joint Legislative Commission on Governmental Operations, and the Fiscal Research Division.
(3)	Report by January 15, 2005, to the Joint Legislative Commission on Governmental Operations, the Fiscal Research Division, and the Department of Commerce on the following:
a.	State fiscal year 2003‑2004 program activities, objectives, and accomplishments.
b.	State fiscal year 2003‑2004 itemized expenditures, including salary and benefits for all employees regardless of funding sources, and fund sources.
(4)	Report by January 15, 2005, to the Department of Commerce on the number and listing of available sites and buildings within the region.
(5)	Provide to the Fiscal Research Division and the Department of Commerce a copy of its annual audited financial statement within 30 days of issuance of the statement.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
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., Coalition of Farm and Rural Families, 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:	Senators Weinstein, Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan
Piedmont Triad Research Park
SECTION 12.10A.  Of the funds appropriated in this act to the North Carolina Biotechnology Center, the sum of two hundred fifty thousand dollars ($250,000) for the fiscal year 2003‑2004 shall be transferred to !dealliance for the expansion of the Piedmont Triad Research Park.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
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 four hundred fifteen thousand nine hundred ten dollars ($2,415,910) for the 2003‑2004 fiscal year and the sum of two million four hundred fifteen thousand nine hundred ten dollars ($2,415,910) for the 2004‑2005 fiscal year shall be allocated as follows:
(1)	$1,047,410 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.	$197,410 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 subsection. 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:	Senators Weinstein, Garrou, Dalton, Hagan
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 sixty‑one thousand dollars ($361,000) for the 2003‑2004 fiscal year and the sum of three hundred sixty‑one thousand dollars ($361,000) for the 2004‑2005 fiscal year shall be allocated as follows:
(1)	$90,250 in each fiscal year to the Opportunities Industrialization Center of Wilson, Inc., for its ongoing job training programs;
(2)	$90,250 in each fiscal year to the Opportunities Industrialization Center, Inc., in Rocky Mount, for its ongoing job training programs;
(3)	$90,250 in each fiscal year to the Opportunities Industrialization Centers Kinston and Lenoir County, North Carolina, Inc.; and
(4)	$90,250 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:	Senators Thomas, Garrou, Dalton, Hagan
AOC OPERATIONAL efficiency study
SECTION 13.1.  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 of 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.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan 
MANAGEMENT FLEXIBILITY RESERVES
SECTION 13.1A.  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 management flexibility reserves authorized for any agency in this act. The departments shall report to the Joint Legislative Commission on Governmental Operations before implementing management flexibility reserves by eliminating positions or abolishing programs.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
DRUG TREATMENT COURT PROGRAM
SECTION 13.4.(a)  It is the intent of the General Assembly that, allowing for established local differences in implementation, 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:	Senators Thomas, Garrou, Dalton, Hagan
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.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
No COURT‑ORDERED ARBITRATION on appeal from magistrate
SECTION 13.9.  G.S. 7A‑37.1 is amended by adding a new subsection to read:
"(b1)	A court may not order arbitration under this section on appeal from a magistrate's decision."

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
NORTH CAROLINA STATE BAR FUNDS
SECTION 13.10.  Of the funds appropriated in the continuation budget as a grant‑in‑aid to the North Carolina State Bar for the 2003‑2005 biennium, the North Carolina State Bar may in its discretion use up to the sum of five hundred ninety thousand dollars ($590,000) for the 2003‑2004 fiscal year and up to the sum of five hundred ninety thousand dollars ($590,000) for the 2004‑2005 fiscal year to contract with the Center for Death Penalty Litigation to provide training, consultation, brief banking, and other assistance to attorneys representing indigent capital defendants. The Office of Indigent Defense Services shall report by February 1, 2004, to the Chairs of the Senate and House Appropriations Subcommittees on Justice and Public Safety on the activities funded by the grant‑in‑aid authorized by this section.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
CLARIFY partial payment of APPOINTMENT FEE for criminal defendants
SECTION 13.11.  G.S. 7A‑455.1 reads as rewritten:
"§ 7A‑455.1.  Appointment fee in criminal cases.
(a)	Each person who requests the appointment of counsel in a criminal case shall pay to the clerk of court a nonrefundable appointment fee of fifty dollars ($50.00) at the time of appointment.  No fee shall be due if the court finds that the person is not entitled to the appointment of counsel.
(b)	The appointment fee in this section is due regardless of the outcome of the proceedings. If paid in full at the time of appointment, the fifty dollars ($50.00) paid shall be credited against any amounts the court determines to be owed for the value of legal services rendered to the defendant. If not paid  in full at the time of appointment, the fifty‑dollar ($50.00) fee shall be added to any amounts the court determines to be owed for the value of legal services rendered to the defendant and shall be collected in the same manner as attorneys' fees are collected for such representation. If the fee is not paid in full at the time of appointment, and no attorneys' fees are found due when the action is finally determined at the trial level, a judgment shall be entered, docketed, and indexed pursuant to G.S. 1‑233 in the amount of  fifty dollars ($50.00) and shall constitute a lien as prescribed by the general law of the State applicable to judgments.
(c)	The attorney representing the defendant when the action is finally determined at the trial level shall advise the court whether the appointment fee required by this section has been paid.
(d)	Inability, failure, or refusal to pay the appointment fee shall not be grounds for denying appointment of counsel, for withdrawal of counsel, or for contempt.
(e)	The appointment fee required by this section shall be assessed only once for each affidavit of indigency submitted by a defendant or other determination of indigency by the court, regardless of the number of cases for which an attorney is appointed. An additional appointment fee shall not be assessed for any additional cases thereafter assigned to an attorney if any cases for which a defendant was previously assessed an appointment fee are still pending. Nor shall an additional appointment fee be assessed if the charges for which an attorney was appointed are dismissed and subsequently refiled or if the defendant is appointed an attorney on appeal on a matter for which the defendant was assessed an appointment fee at the trial level.
(f)	Of each appointment fee collected under this section, the sum of forty‑five dollars ($45.00) shall be credited to the Indigent Persons' Attorney Fee Fund and the sum of five dollars ($5.00) shall be credited to the Court Information Technology Fund under G.S. 7A‑343.2. These fees shall not revert.
(g)	The Office of Indigent Defense Services shall adopt rules and develop forms to govern implementation of this section."

Requested by:	Senators Thomas, Clodfelter, Garrou, Dalton, Hagan
Pilot Project on ASSIGNMENt of civil cases
SECTION 13.12.(a)  The Administrative Office of the Courts may conduct a pilot project in up to four judicial districts to assess a system for the assignment and processing of general civil cases filed in the General Court of Justice. No district may be selected without the concurrence of the senior resident superior court judge and the chief district court judge.
The project shall evaluate methods of assigning cases to individual judges or sessions of court in the district court division or the superior court division, considering the nature of the case, the amount in controversy, the complexity of the issues, the likelihood of settlement, the availability and suitability of alternative dispute resolution programs, and any other appropriate factors relevant to just resolution of the cases and efficient use of court resources. In pilot districts designated by the Administrative Office of the Courts under this section, general civil cases may be assigned or transferred to alternative dispute resolution programs used within the district court or superior court, notwithstanding the provisions of G.S. 7A‑37.1, G.S. 7A‑38.1, or Articles 20 and 21 of Chapter 7A of the General Statutes.
SECTION 13.12.(b)  This section expires June 30, 2005.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
DISPUTE RESOLUTION FEE CLARIFICATION
SECTION 13.13.  G.S. 7A‑38.7 reads as rewritten:
"§ 7A‑38.7.  Dispute resolution fee for cases resolved in mediation.
(a)	In each criminal case filed in the General Court of Justice that is resolved through referral to a community mediation center, a dispute resolution fee shall be assessed in the sum of sixty dollars ($60.00) per mediation for the support of the General Court of Justice. Fees assessed under this section shall be paid to the clerk of superior court in the county where the case was filed and remitted by the clerk to the State Treasurer.
(b)	Before providing the district attorney with a dismissal form, the community mediation center shall require proof that the defendant has paid the dispute resolution fee as required by subsection (a) of this section."

PART XIV. DEPARTMENT OF JUSTICE

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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. The Foundation shall report by March 1 of each year to the Joint Legislative Commission on Governmental Operations on the expenditure of State funds, the number of attorneys receiving funds, the average award amount, the average student loan amount, the number of attorneys on the waiting list, and the average number of years for which attorneys receive loan assistance.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
COMPUTER CRIMES GRANT FUNDS
SECTION 14.8.  On July 1, 2004, the Department of Justice may transfer the seven State Bureau of Investigation agents funded in the 2003‑2004 fiscal year with federal funds from Computer Crimes grants to agent positions in the State Bureau of Investigation that are (i) vacant, (ii) funded through the General Fund, and (iii) in existence on July 1, 2003.

Requested by:	Senators Thomas, Hagan, Garrou, Dalton
RAPE KIT ANALYSES BY PRIVATE VENDORS
SECTION 14.9.  The Department of Justice shall issue a Request for Information to determine (i) the interest of private vendors in providing analyses of forensic samples of DNA from rape kits in which there is no suspect, (ii) the qualifications of any private vendors who demonstrate such an interest, and (iii) the estimated costs of contracting with private vendors to provide analyses of forensic DNA samples.

PART XV. DEPARTMENT OF JUVENILE JUSTICE AND DELINQUENCY PREVENTION

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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 (i) establish or reestablish Youth Development Center beds, (ii) establish up to 16 new sex offender beds, and (iii) 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.
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; 
(2)	Establishing bed capacity greater than 740 total beds, including beds converted at Eckerd Wilderness Camps, during the 2003‑2004 fiscal year; or
(3)	Establishing new sex offender beds.
The report shall include the sources of funding for any additional beds.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
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 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 status of the planning and design of the new facilities. The first status report shall address (i) the number of youth development centers to be designed, (ii) the number of beds at each facility, (iii) the rationale for the number of beds to be built at each facility, and (iv) the proposed sites for the facilities.
Prior to completing the design development phase of the plan for new youth development centers, the Department shall 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:
(1)	How the plan and design will meet the mandate of ensuring effective security and programming while improving staff efficiencies.
(2)	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.
(3)	The anticipated total cost of each youth development center proposed, including the cost per bed and per square foot, as well as the rationale for the proposed projected cost.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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 2003‑2004 fiscal year 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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
INMATE COSTS/BUDGET FOR PRESCRIPTION DRUGS and inmate clothing and laundry services
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 2003‑2004 fiscal year 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.
SECTION 16.6.(c)  Notwithstanding the provisions of G.S. 143‑23(a2), the Department of Correction may use funds available during the 2003‑2004 fiscal year for the purchase of clothing and laundry services for inmates if expenditures are projected to exceed the Department's budget for clothing and laundry services. The Department shall consult with the Joint Legislative Commission on Governmental Operations prior to exceeding the continuation budget amount.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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 2003‑2004 fiscal year 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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
ENERGY COMMITTED to OFFENDERS/CONTRACT AND REPORT
SECTION 16.13.  The Department of Correction may continue to contract with Energy Committed To Offenders, Inc., for the purchase of prison beds for minimum security female inmates during the 2003‑2005 biennium. Energy Committed To 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 Committed To 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:	Senators Thomas, Garrou, Dalton, Hagan
ELECTRONIC MONITORING COSTS
SECTION 16.14.  The Department of Correction shall issue a Request for Information to determine the interest and qualifications of private vendors to provide electronic monitoring services for the Department and the estimated costs of outsourcing those services. 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 the results of the Request for Information and 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. The Department shall also analyze the reasons for the underutilization of the electronic monitoring program and include its findings in the report.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan 
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.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
PROBATION AND PAROLE CASELOADS
SECTION 16.18.(a)  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.
SECTION 16.18.(b)  The Department of Correction shall conduct a study of  probation/parole officer workload at least biannually, the first such study to be completed during the 2003‑2004 fiscal year. The initial study shall be conducted jointly by Department staff and a consultant, external to the Department, and shall include analysis of the type of offenders supervised, the distribution of the probation/parole officers’ time by type of activity, the caseload carried by the officers, and comparisons to practices in other states. The study shall be used to determine whether the caseload goals established by the Structured Sentencing Act are still appropriate, based on the nature of the offenders supervised and the time required to supervise those offenders.
SECTION 16.18.(c)  The Department of Correction shall report the results of the initial study and recommendations for any adjustments to caseload goals to the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by April 1, 2004.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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. The report should also include a more specific analysis of those inmates who were parole‑eligible and assigned to minimum custody classification but not released;
(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:	Senators Thomas, Garrou, Dalton, Hagan
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, 2004, to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on a plan for restructuring the organization and operation of the Commission to reflect both declines and changes in workload.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
HOUSING OF INMATES
SECTION 16.22.  The Department of Correction shall develop an operating plan for generating the appropriate mix of close, medium, and minimum custody beds. The plan shall, at a minimum, address the future construction of new beds, conversion of facilities from one custody level to another, and the housing of two inmates per cell. The starting point for this plan shall be the Sentencing and Policy Advisory Commission inmate population projections and the Department of Correction's custody population projection model. 
The portion of the plan regarding the housing of two inmates per cell shall include a facility‑by‑facility assessment of the pros and cons of housing inmates in that manner. The Department of Correction shall identify those facilities that would be most conducive to housing two inmates per cell. The Department of Correction should focus its review particularly on the potential to house two inmates per cell at Pamlico, Mountain View, Eastern, Southern, Pasquotank, and Marion. The Department should also review the potential to house two inmates per cell in at least one of any new prisons authorized by the 2003 General Assembly.
The overall operating plan should address budgetary, security, and other operational needs and, in particular, should note how the plan adheres to or deviates from the Department of Correction's custody population projection model.
The Department of Correction shall report by February 1, 2004, to the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee, the Chairs of the Senate and House Appropriations Committees, and the Chairs of the Senate and House Appropriations Subcommittees on Justice and Public Safety on the plan developed pursuant to this section.

PART XVII. DEPARTMENT OF CRIME CONTROL AND PUBLIC SAFETY

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
THE JUVENILE JUSTICE INFORMATION SYSTEM
SECTION 17.2.(a)  G.S. 143B‑516(b)(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:	Senators Thomas, Albertson, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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:	Senators Thomas, Garrou, Dalton, Hagan
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.

Requested by:	Senators Thomas, Rand, Garrou, Dalton, Hagan
ALE AGENTS SUBJECT TO STATE PERSONNEL ACT
SECTION 17.6.  Chapter 126 of the General Statutes, the State Personnel System, applies to all Alcohol Law Enforcement agents of the Department of Crime Control and Public Safety.  The Office of State Personnel shall study salary classifications of Alcohol Law Enforcement agents to determine the appropriate classifications and salary ranges for those agents and shall report the results of the study, including any recommendations or legislative proposals, to the Chairs of the Senate and House of Representatives Subcommittees on Justice and Public Safety.

PART XVIII. DEPARTMENT OF ADMINISTRATION

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
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, ensures timely delivery of mail, and ensures no loss of federal funds."

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
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.

Requested by:	Senators Swindell, Dorsett, Garrou, Dalton, Hagan
LOW‑INCOME RESIDENTIAL ENERGY PROGRAM
SECTION 18.3.  G.S. 113B‑6 reads as rewritten:
"§ 113B‑6.  General duties and responsibilities.
The Energy Policy Council shall have the following general duties and responsibilities:
(1)	To develop and recommend to the Governor a comprehensive long‑range State energy policy to achieve maximum effective management and use of present and future sources of energy, such policy to include but not be limited to an energy efficiency program, an energy management plan, an emergency energy program, and an energy research and development program;
(2)	To conduct an ongoing assessment of the opportunities and constraints presented by various uses of all forms of energy and to encourage the efficient use of all such energy forms in a manner consistent with State energy policy;
(3)	To continually review and coordinate all State government research, education and management programs relating to energy matters and to continually educate and inform the general public regarding such energy matters;
(4)	To recommend to the Governor and to the General Assembly needed energy legislation and to recommend for implementation such modifications of energy policy, plans and programs as the Council considers necessary and desirable.
(5)	To develop and administer the Low‑Income Residential Energy Program. Nothing in this subdivision 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:	Senators Swindell, Dorsett, Garrou, Dalton, Hagan
PETROLEUM OVERCHARGE FUNDS ALLOCATION
SECTION 18.4.(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 Administration the sum of one million dollars ($1,000,000) for the 2003‑2004 fiscal year to be allocated for the Low Income Residential Energy Program.  
SECTION 18.4.(b)  Any funds remaining in the Special Reserve for Oil Overcharge Funds after the allocation is made pursuant to subsection (a) of this section may be expended only as authorized by the General Assembly and upon recommendations of the State Energy Policy Council.  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:	Senators Swindell, Garrou, Dalton, Hagan
VETERANS SCHOLARSHIPS PARTIALLY FUNDED FROM ESCHEAT Fund
SECTION 18.5.(a)  G.S. 165‑22.1(b) reads as rewritten:
"(b)	Funds for the support of this program shall be appropriated to the Department of Administration as a reserve for payment of the allocable costs for room, board, tuition, and other charges, and shall be placed in a separate budget code from which disbursements shall be made. Funds to support the program shall be supported by receipts from the Escheat Fund, as provided by G.S. 116B-7, but those funds may be used only for worthy and needy residents of this State who are enrolled in public institutions of higher education of this State. In the event the said appropriation for any year is insufficient to pay the full amounts allocable under the provisions of this Article, such supplemental sums as may be necessary shall be allocated from the Contingency and Emergency Fund. The method of disbursing and accounting for funds allocated for payments under the provisions of this section shall be in accordance with those standards and procedures prescribed by the Director of the Budget, pursuant to the Executive Budget Act."
SECTION 18.5.(b)  G.S. 116B‑7 reads as rewritten:
"§ 116B‑7.  Distribution of fund.
(a)	The income derived from the investment or deposit of the Escheat Fund shall be distributed annually on or before July 15 to the State Education Assistance Authority for grants and loans to aid worthy and needy students who are residents of this State and are enrolled in public institutions of higher education in this State. Such grants and loans shall be made upon terms, consistent with the provisions of this Chapter, pursuant to which the State Education Assistance Authority makes grants and loans to other students under G.S. 116‑201 to 116‑209.23, Article 23 of Chapter 116 of the General Statutes, policies of the Board of Governors of The University of North Carolina regarding need‑based grants for students of The University of North Carolina, and policies of the State Board of Community Colleges regarding need‑based grants for students of the community colleges.
(b)	An amount specified in the Current Operations Appropriations Act shall be transferred annually from the Escheat Fund to the Department of Administration to partially fund the program of Scholarships for Children of War Veterans established by Article 4 of Chapter 165 of the General Statutes. Those funds may be used only for residents of this State who (i) are worthy and needy as determined by the Department of Administration, and (ii) are enrolled in public institutions of higher education of this State."
SECTION 18.5.(c)  In accordance with G.S. 116B‑7(b) as enacted by this act, for the 2003‑2004 and 2004‑2005 fiscal years, there is appropriated from the Escheat Fund to the Department of Administration the amount of three million seven hundred twenty‑eight thousand three hundred twenty‑four dollars ($3,728,324).

PART XIX. OFFICE OF THE STATE AUDITOR

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
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 XiX‑b. general assembly

Requested by:	Senators Dalton, Garrou, Hagan, Swindell
LEGISLATIVE FOOD SERVICE DONATE FOOD
SECTION 19B.1.  The General Assembly food service shall on a daily basis donate to a nonprofit organization food that would otherwise be discarded.  

PART XX. OFFICE OF THE GOVERNOR

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
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:	Senators Swindell, Garrou, Dalton, Hagan
IT legacy systems and it efficiencies studies and its budget structure review/report
SECTION 21.1.(a)  The Office of Information Technology Services (ITS) 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, ITS 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, ITS shall complete the analysis and shall make a report of the assessment to the Information Resources Management Commission (IRMC), 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 (OSBM) 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 shall work in conjunction with ITS and the IRMC to study the ITS and the IRMC budget structures. As part of this study, OSBM shall prepare at least three alternative budget transition plans for ITS and IRMC. Two of the transition plans shall, at minimum, address the feasibility of (i) making portions or all of the ITS and the IRMC budgets General Fund appropriations and including a proposal for how a nontax revenue source to reimburse the General Fund for appropriations could be made from agency receipts for ITS services utilized and (ii) maintaining ITS and IRMC budgets as Internal Service Funds, but having the budgets approved by the Office of State Budget and Management and the General Assembly instead of being approved by the IRMC as they are currently.
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:	Senators Swindell, Garrou, Dalton, Hagan
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.

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
Extend the Sunset for funding certain operations of the department of insurance through the insurance regulatory fund
SECTION 22.2.  Section 12 of S.L. 2002‑144 reads as rewritten:
"SECTION 12. This act becomes effective July 1, 2002. Sections 1 through 8 of this act expire June 30, 2004."

PART XXIII. DEPARTMENT OF REVENUE

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
DOR TAXPAYER TELECOMMUNICATIONS SERVICE
SECTION 23.1.  Section 22.6 of S.L. 2002‑126 reads as rewritten:
"SECTION 22.6.(a)  There is appropriated from the collection assistance fee account created in G.S. 105‑243.1 to the Department of Revenue the sum of one million six hundred twenty‑two thousand eight hundred ninety‑six dollars ($1,622,896) for the 2003‑2004 fiscal year and the sum of two million one hundred fifty‑four thousand five hundred ninety‑three dollars ($2,154,593) for the 2004‑2005 fiscal year 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:	Senators Swindell, Garrou, Dalton, Hagan
CERTAIN DOR POSITIONS FEE‑SUPPORTED
SECTION 23.2.  There is appropriated from the collection assistance fee account created in G.S. 105‑243.1 to the Department of Revenue the sum of five hundred thirty‑one thousand five hundred twelve dollars ($531,512) for the 2003‑2004 fiscal year and the sum of five hundred thirty‑one thousand five hundred twelve dollars ($531,512) for the 2004‑2005 fiscal year 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 

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
DOR TAXPAYER CALL CENTER FUND CODE
SECTION 23.3.  Funds appropriated to the Department of Revenue for a central taxpayer telecommunications service center for collections and assistance shall be transferred to a separate, receipts‑supported Fund Code in the Department's budget. The Fund Code number is 1662.

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
DOR Report on Project Compliance
SECTION 23.4.  The Department of Revenue must report to the Joint Legislative Commission on Governmental Operations and to the Revenue Laws Study Committee on its efforts to address abuse of the voluntary tax compliance system, including fraudulent activity, which has resulted in undercollections. Reports must be submitted quarterly beginning February 1, 2004, through July 30, 2006. Each report must include a breakdown of the Department's additional initiatives resulting directly from the Project Compliance funding provided for the 2003‑2005 fiscal biennium. The report must itemize additional collections by type of tax as compared to an objectively determined baseline of collections resulting from preexisting collection activities. Each report must also include a long‑term plan, a time line for implementing each step of the plan, a summary of steps taken since the last report and their results, and any other data requested by the Commission or the Committee.

PART XXIV. SECRETARY OF STATE

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
Study of the Feasibility of transferring the Consultation Requirement from the Business License information office to the small business centers
SECTION 24.1.(a)  The Department of the Secretary of State (Department) and the North Carolina Community College System (System) shall study the feasibility of transferring 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 study shall consider the feasibility of the following:
(1)	Establishing a Statewide Coordinator position that will develop and maintain a web‑based master application system of all State licensing and regulatory requirements.
(2)	Developing and maintaining a web‑based master application system of all State licensing and regulatory requirements.
(3)	Training the Small Business Center employees to provide the consultation function to their clients.
(4)	Providing public access to the web‑based master application system.
SECTION 24.1.(b)  The Department and the System shall present their 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 January 1, 2004.

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
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:	Senators Swindell, Garrou, Dalton, Hagan
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 established by S.L. 2003‑12 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).

PART XXVI. OFFICE OF STATE BUDGET AND MANAGEMENT

Requested by:	Senators Garrou, Swindell, Dalton, Hagan
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:	Senators Swindell, Garrou, Dalton, Hagan
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:	Senators Swindell, Garrou, Dalton, Hagan
Report of the Status of the Technology Infrastructure Enhancements
SECTION 28.3.  The Department of the State Treasurer shall report to the Joint Legislative Commission on Governmental Operations and to the Chairs of the Appropriations Committees for the Senate and the House of Representatives on the status of the replacement of the multitude of information technology systems with an integrated system for all the retirement plans and other programs administered by the Retirement Systems Division. The Department shall report semiannually by October 1 and April 1 until the enhancements are fully implemented.

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
Staffing Analysis Follow‑up
SECTION 28.4.(a)  The Office of State Budget and Management shall conduct semiannual follow‑up analyses to the Staffing Analysis that was completed in April 2003 on the Retirement Systems Division within the Department of State Treasurer by October 1 and April 1 of each year to assure that the staffing levels remain appropriate. The semiannual analyses shall be conducted throughout the implementation of the enhancements to the information technology infrastructure within the Retirement Systems Division that were authorized by this act. The follow‑up analyses shall also continue for a reasonable time after the completion of the enhancements to ensure that the staffing levels are adjusted based on the increased efficiency provided by the enhancements.
SECTION 28.4.(b)  The Retirement Systems Division shall maintain monthly workload statistics and productivity data for the various functions within the Division. The Department of State Treasurer shall report the workload statistics and productivity data to the Fiscal Research Division and to the Office of State Budget and Management on a quarterly basis.

PART XXIX. DEPARTMENT OF TRANSPORTATION

Requested by:	Senators Gulley, Garrou, Dalton, Hagan
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:	Senators Gulley, Garrou, Dalton, Hagan, Jenkins, Hargett
SMALL URBAN CONTINGENCY FUNDS
SECTION 29.2.  Of the funds appropriated in this act to the Department of Transportation:
(1)	Twenty‑eight million dollars ($28,000,000) in fiscal year 2003‑2004 and fourteen million dollars ($14,000,000) in fiscal year 2004‑2005 shall be allocated 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 two‑mile radius of the municipal corporate limits.
(2)	Fifteen million dollars ($15,000,000) 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:	Senators Gulley, Garrou, Dalton, Hagan
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 four percent (4%) of the amount of revenue deposited in the Trust Fund under subdivisions (a)(1), (2), and (3) of this section for the 2003-2004 fiscal year and three and eight‑tenths percent (3.8%) thereafter, 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:	Senators Gulley, Garrou, Dalton, Hagan
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:	Senators Reeves, Garrou, Dalton, Hagan
Department of Transportation may not develop the I‑40/Duraleigh Road Connector
SECTION 29.9.  The Department of Transportation shall permanently remove from all thoroughfare or other plans the proposed route commonly known as the "Duraleigh Connector", adjacent to Umstead Park from the intersection of Interstate 40 to existing Duraleigh Road in northwestern Wake County, more precisely described in Project U‑2110 in the 1997‑2003 Transportation Improvement Program. 
The Department shall not expend any State or federal funds on feasibility studies, planning, right‑of‑way acquisition, or construction on this route.

Requested by:	Senators Gulley, Garrou, Dalton, Hagan
funds for repair, renovation, and REPLACEMENT
SECTION 29.10.  The Department of Transportation may use funds not to exceed one and eight‑tenths percent (1.8%) of the funds appropriated in this act to the Department for maintenance to repair, renovate, or replace facilities that fail to meet safety standards or that are obsolete for current or future use.  Prior to expending these funds, the Department shall submit its proposed budget for these expenditures to the Senate Appropriations Subcommittee on Department of Transportation, the House of Representatives Appropriations Subcommittee on Transportation, and the Joint Legislative Transportation Oversight Committee each year.

Requested by:	Senators Gulley, Garrou, Dalton, Hagan
modify description of the durham NORTHERN loop AND INTRASTATE improvement projectS
SECTION 29.11.(a)  G.S. 136‑180(a) reads as rewritten:
"(a)	Funds allocated from the Trust Fund for urban loops may be used only for the following urban loops:

	Affected
Loop	Description	Counties

Asheville Western	Multilane facility on new	Buncombe
Loop	location from I‑26 west of
Asheville to US‑19/23
north of Asheville for the
purpose of connecting these
roads. The funds may be
used to improve existing
corridors.
Charlotte Outer Loop	Multilane facility on	Mecklenburg
new location encircling
City of Charlotte
Durham Northern Loop		Durham, Wake

The projects listed below are eligible for funding under this section as part of the Durham Northern Loop. The priorities for planning and constructing these projects will be established by mutual agreement of the Metropolitan Planning Organization (MPO) and the Department of Transportation through the federally mandated Transportation Improvement Program development process. The cross‑sections for these projects will be established by mutual agreement of the MPO and the Department of Transportation through the State and federal environmental review process.(1) East end connector, from N.C. 147 to U.S. 70 East.
(2) U.S. 70, from Lynn Rd. to the Northern Durham Parkway.
(3) I-85, from U.S. 70 to Red Mill Rd.
(4) Northern Durham Parkway, Section B, from Old Oxford Rd. to I-85.
(5) Northern Durham Parkway, Section A, from I‑85 to I-540.
(6) Northern Durham Parkway, Section C, from Old Oxford Rd. to Roxboro Rd.
(7) Roxboro Rd. from Duke St. to Goodwin Rd.
Greensboro Loop	Multilane facility on new	Guilford
location encircling City 
of Greensboro
Raleigh Outer Loop	Multilane facility on	Wake
new location from US‑1
southwest of Cary 
northerly to US‑64 in 
eastern Wake County
Wilmington Bypass	Multilane facility on new	New Hanover
location from US‑17 
northeast of Wilmington
to US‑17 southwest 
of  Wilmington,
including the Blue Clay Road
interchange
Winston‑Salem	Multilane facility on 	Forsyth
Northbelt	new location from I‑40 west
of Winston‑Salem northerly
to US‑311/Future I‑74
in eastern Forsyth County"
SECTION 29.11.(b)  G.S. 136‑179 reads as rewritten:
"§ 136‑179.  Projects of Intrastate System funded from Trust Fund.
Funds allocated from the Trust Fund for the Intrastate System may be used only for the following projects of the Intrastate System:

Route	Improvements	Affected Counties
I‑40	Widening	Buncombe, Haywood,
Guilford, Wake, Durham

I‑77	Widening	Mecklenburg

I‑85	Widening	Durham, Orange, Alamance,
Guilford, Cabarrus,
Mecklenburg, Gaston

I‑95 	Widening	Halifax

US‑1	Complete 4‑laning from	Vance, Franklin,
Henderson to South	Wake, Chatham, Lee,
Carolina Line	Moore, Richmond
(including 6‑laning of
Raleigh Beltline)

US‑13	 Connectors from I‑95	
to NC‑87	Cumberland, Robeson	

US‑13	Complete 4‑laning from	Gates, Hertford,
Virginia Line to US‑17	Bertie

US‑17	Complete 4‑laning from	Camden, Pasquotank,
Virginia Line to South	Perquimans, Chowan,
Carolina Line (including	Bertie, Martin,
Washington, New Bern,	Beaufort, Craven,
and Jacksonville	Jones, Onslow,
Bypasses)	Pender, New Hanover,
	Brunswick

US‑19/	Complete 4‑laning from	Madison, Yancey,
US‑19E	US‑23 to NC 194 in	Mitchell, Avery
Ingalls

US‑19	Complete 4‑laning	Cherokee, Macon,
Swain

US‑23	Complete 4‑laning and	Madison, Buncombe
upgrading existing 
4‑lanes from Tennessee
Line to I‑240

US‑23‑441	Complete 4‑laning from	Macon
US‑19/US‑74 to Georgia
Line

US‑52	Complete 4‑laning from	Surry, Davidson
I‑77 to Lexington
(including new I‑77
Connector)

US‑64	Complete 4‑laning from	Edgecombe, Pitt,
Raleigh to Coast	Martin, Washington,
(including freeway	Tyrrell, Dare
construction from I‑95
to US‑17)

US‑64	Complete 4‑laning from	Davidson, Randolph,
Lexington to Raleigh	Chatham, Wake

US‑70	Complete 4‑laning from	Wake, Johnston,
Raleigh to Morehead City	Wayne, Lenoir,
(including Clayton,	Craven
Goldsboro, Kinston,
Smithfield‑Selma, and
Havelock Bypasses
predominately freeways
on predominately new
locations)

US‑74	Complete 4‑laning from	Mecklenburg, Union,
Charlotte to US‑17	Richmond, Robeson,
(including multilaning	Columbus
of Independence Blvd. in
Charlotte, and Bypasses 
of Monroe, Rockingham,
and Hamlet)

US‑74	Complete 4‑laning from	Polk, Rutherford
I‑26 to I‑85

US‑158	Complete 4‑laning	Forsyth, Guilford,
from Winston‑Salem	Rockingham, Caswell,
to Whalebone	Person, Granville,
Vance, Warren,
Halifax,
Northampton, Gates,
Hertford,
Pasquotank, Camden,
Currituck, Dare

New bridge over	Currituck
Currituck Sound

US‑221	Complete 4‑laning from	Avery, McDowell,
Linville to South 	Rutherford
Carolina

US‑220	Complete 4‑laning from	Guilford, Randolph,
I‑40 to US‑1	Montgomery, Richmond

US‑220/NC‑68	Complete 4‑laning from	Rockingham, Guilford
Virginia Line to I‑40

US‑264	Complete 4‑laning from	Wilson, Greene,
US‑64 to Washington	Pitt
(including Wilson and
Greenville Bypasses)
(including freeway
construction from I‑95
to Greenville)

US‑321	Complete 4‑laning from	Caldwell, Catawba,
Boone to South Carolina	Lincoln, Gaston
Line

US‑421	Complete 4‑laning from	Watauga, Wilkes,
Tennessee Line to I‑40	Yadkin

US‑421	Complete 4‑laning from	Chatham, Lee
Greensboro to Sanford
(including Bypass of 
Sanford)

NC‑24	Complete 4‑laning from	Mecklenburg,
Charlotte to Morehead 	Cabarrus, Stanly,
City	Montgomery, Moore,
Harnett, Cumberland,
Sampson, Duplin,
Onslow, Carteret

NC‑87	Complete 4‑laning from	Lee, Harnett,
Sanford to US‑74	Cumberland, Bladen,
Columbus

NC‑105	Complete 4‑laning from	Watauga, Avery
Boone to Linville

NC‑168	Complete multilaning	Currituck
from Virginia Line
to US‑158

NC‑194	Complete 4‑laning from	Avery
US‑19E to US‑221"
SECTION 29.11.(c)  This section is effective when it becomes law.

Requested by:	Senators Gulley, Garrou, Dalton, Hagan
highway trust fund study committee
SECTION 29.12.(a)  Study Committee Established. – There is established a Highway Trust Fund Study Committee to report to the Joint Legislative Transportation Oversight Committee.
SECTION 29.12.(b)  Membership. – The Study Committee shall be composed of 20 members as follows:
(1)	The Chairs of the Joint Legislative Transportation Oversight Committee.
(2)	Five Representatives and four public members appointed by the Speaker of the House of Representatives.
(3)	Five Senators and four public members appointed by the President Pro Tempore of the Senate. 
The appointing authorities shall make their appointments to reflect the urban‑rural diversity of the population of the State.
SECTION 29.12.(c)  Duties of the Study Committee. – The Study Committee may study all aspects of the Highway Trust Fund. The study shall include the examination of all the following:
(1)	The current status, cost estimates, and feasibility of Highway Trust Fund projects currently listed in Article 14 of Chapter 136 of the General Statutes.
(2)	Unanticipated problems with the structure of the Highway Trust Fund.
(3)	The gap between transportation funding structures and the actual transportation needs of the State.
(4)	Allocation issues raised by the structure of the transportation funding equity distribution formula in G.S. 136‑17.2A.
(5)	The feasibility of altering the project eligibility requirements of the Highway Trust Fund, including permitting the Department of Transportation to add projects as long as adding those projects does not delay projects already to be funded by the Highway Trust Fund, projects scheduled under the 2002‑2008 Transportation Improvement Program, and does not impair the cash‑flow provisions of G.S. 136‑176(a1).
(6)	The feasibility of altering the funding allocation structure of the Highway Trust Fund, including the possible use of the Highway Trust Fund to provide the State match for available federal aid highway funds as long as using the funds in this manner does not delay projects already funded by the Highway Trust Fund, projects scheduled under the 2002‑2008 Transportation Improvement Program, and does not impair the cash‑flow provisions of G.S. 136‑176(a1).
(7)	Any other issue related to the Highway Trust Fund or transportation funding.
SECTION 29.12.(d)  Vacancies. – The appointing authority shall fill any vacancy on the Study Committee.
SECTION 29.12.(e)  Cochairs. – The Cochairs of the Study Committee shall be the cochairs of the Joint Legislative Transportation Oversight Committee. The Study Committee shall meet upon the call of the Cochairs. A quorum of the Study Committee shall be nine members.
SECTION 29.12.(f)  Expenses of Members. – Members of the Study Committee shall receive per diem, subsistence, and travel allowances in accordance with G.S. 120‑3.1, 138‑5, or 138‑6, as appropriate.
SECTION 29.12.(g)  Staff. – The Legislative Services Office shall assign professional and clerical staff to the assist the Study Committee in its work.
SECTION 29.12.(h)  Consultants. – The Study Committee may hire consultants to examine specific issues and subjects related to the study, in accordance with G.S. 120‑32.02.
SECTION 29.12.(i)  Meetings During Legislative Session. – The Study Committee may meet during a regular or extra session of the General Assembly.
SECTION 29.12.(j)  Meeting Location. – The Study Committee may meet at various locations around the State in order to promote greater public participation in its deliberations. The Legislative Services Commission shall grant adequate meeting space to the Study Committee in the State Legislative Building or the Legislative Office Building.
SECTION 29.12.(k)  Report. – The Study Committee may make interim reports and shall make a final report to the Joint Legislative Transportation Oversight Committee no later than November 1, 2004. Regardless of whether it has filed an interim or final report, the Committee shall terminate on November 1, 2004.
SECTION 29.12.(l)  Funding. – The Study Committee shall be funded from funds available to the Joint Legislative Transportation Oversight Committee, in accordance with G.S. 120‑70.52.
SECTION 29.12.(m)  This section is effective when it becomes law.

Requested by:	Senators Gulley, Garrou, Dalton, Hagan, Rand, Thomas, Kerr, Hargett
waive 1/3 of the military base gas tax
SECTION 29.13.(a)  Part 7 of Article 36C of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-449.128. Distribution of part of Highway Fund allocation to military installations.
(a)	Distribution. – The Secretary must annually distribute to the morale, welfare, and recreation program of each military installation located in this State an amount equal to the amount of motor fuel sold by exchange service stations within that military installation during the previous fiscal year, as reported pursuant to subsection (c) of this section, multiplied by the distribution rate. The Secretary must make this distribution within 90 days after the morale, welfare, and recreation program submits a timely report.
(b)	Rate. – The distribution rate is one‑third of the sum of the flat cents‑per‑gallon rate in effect during the year for which the distribution is made and the average of the two variable cents‑per‑gallon rates in effect during that year.
(c)	Report. – The morale, welfare, and recreation program of each military installation in this State must report to the Secretary by October 15 of each year the amount of motor fuel sold by exchange service stations within that military installation during the previous fiscal year. The report must be in the form required by the Secretary. No distribution will be made for reports filed after the due date.
(d)	Use. – Funds distributed to a morale, welfare, and recreation program under this section must be used only for community services and other expenditures to improve quality-of-life programs for military members and their families in North Carolina."
SECTION 29.13.(b)  G.S. 105‑449.62 reads as rewritten:
"§ 105‑449.62.  Nature of tax.
This Article imposes a tax on motor fuel to provide revenue for the State's transportation needs, for the other purposes listed in Part 7 of this Article, and for the purposes provided in G.S. 105‑449.128. The tax is collected from the supplier or importer of the fuel because this method is the most efficient way to collect the tax. The tax is designed, however, to be paid ultimately by the person who consumes the fuel. The tax becomes a part of the cost of the fuel and is consequently paid by those who subsequently purchase and consume the fuel."
SECTION 29.13.(c)  This act becomes effective July 1, 2004, and applies to motor fuel sold on or after that date. The first reports under G.S. 105‑449.128, as enacted by this act, are due by October 14, 2005.

Requested by:	Senators Gulley, Garrou, Dalton, Hagan, Clodfelter
MPO/RTO TRANSPORTATION PLANNING FUNDING
SECTION 29.14.(a)  Of the funds allocated for Highway Trust Fund Administration for the 2003‑2004 fiscal year:
(1)	The sum of seven hundred fifty thousand dollars ($750,000) shall be used to fund the activities of Rural Transportation Planning Organizations created pursuant to Article 17 of Chapter 136 of the General Statutes;
(2)	The sum of two million dollars ($2,000,000) shall be used to implement the provisions of subsection (b) of this section; and
(3)	The sum of seven hundred fifty thousand dollars ($750,000) shall be used to implement the provisions of subsection (c) of this section.
SECTION 29.14.(b)  Article 16 of Chapter 136 of the General Statutes is amended by adding a new section to read:
"§ 136-200.5.  Matching funds for Metropolitan Planning Organizations located in nonattainment areas or maintenance areas.
(a)	Application. – The lead planning agency for any Metropolitan Planning Organization located in an area designated as a nonattainment or maintenance area under the federal Clean Air Act (42 U.S.C. § 7401, et seq.) may apply to the Department of Transportation for funds to avoid a plan conformity lapse. 
(b)	Matching Required. – Funds provided under this section shall be matched one‑for‑one by the local applicant agency.
(c)	Use of Funds. – Funds provided under this section shall be used by the local applicant agency only to avoid a plan conformity lapse.
(d)	Limit on Funds. – The Department shall not provide more than one million dollars ($1,000,000) per fiscal year to any lead planning organization of a Metropolitan Planning Organization pursuant to this section.
(e)	Payback Required. – Any funds provided to a lead planning organization of a Metropolitan Planning Organization under this section shall be repaid within five years, either from local sources or as an offset against planning funds that might otherwise have been made available from the Department  to the lead planning organization." 
SECTION 29.14.(c)  Article 16 of Chapter 136 of the General Statutes is amended by adding a new section to read:
"§ 136-200.6.  Funds for local transportation planning efforts in areas designated nonattainment areas or maintenance areas.
(a)	Application. – A regional transportation planning agency in an area designated as a nonattainment or maintenance area under the federal Clean Air Act (42 U.S.C. § 7401, et seq.) that has policy-setting authority for the entire designated area and that is representative of all local governments within the area, may apply to the Department of Transportation for funds to support local transportation planning efforts in that local government's region.
(b)	Matching Required. – Funds provided under this section shall be matched one‑for‑one by the applicant agency.
(c)	Use of Funds. – Funds provided under this section shall only be used by the local applicant agency to support regional transportation planning within the designated area.
(d)	Local Staff Required. – Funds shall be provided under this section only if local governments in the designated area support and supply staff to the regional transportation planning agency.
(e)	Limit on Funds. – The Department shall not provide more than five hundred thousand dollars ($500,000) in any fiscal year to any agency pursuant to this section."

Requested by:	Senators Gulley, Garrou, Dalton, Hagan, Jenkins, Thomas
ferry employee positionS
SECTION 29.15.  The Ferry Division shall use funds available from increased toll revenues to convert a maximum of 38 temporary employees to permanent positions.

Requested by:	Senators Gulley, Garrou, Dalton, Hagan
motorist assistance program personnel
SECTION 29.16.  All full‑time employees of the Interstate Motorist Assistance Program shall be designated as permanent employees.

Requested by:	Senator Hagan
TRANSPORtATION SERVICES and improvements FOR trade shows
SECTION 29.17.  The Department of Transportation may, from funds available, provide transportation services and improvements for annual or semiannual trade shows of international significance.

PART XXX. SALARIES AND EMPLOYEE BENEFITS

Requested by:	Senators Garrou, Dalton, Hagan
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 five hundred seventy‑four dollars ($120,574) 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	$  106,415
	Attorney General	106,415
	Secretary of State	106,415
	State Treasurer	106,415
	State Auditor	106,415
	Superintendent of Public Instruction	106,415
	Agriculture Commissioner	106,415
	Insurance Commissioner	106,415
	Labor Commissioner	106,415

Requested by:	Senators Garrou, Dalton, Hagan
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	$  103,967
	Secretary of Correction	103,967
	Secretary of Crime Control and Public Safety	103,967
	Secretary of Cultural Resources	103,967
	Secretary of Commerce	103,967
	Secretary of Environment and Natural Resources	103,967
	Secretary of Health and Human Services	103,967
	Secretary of Juvenile Justice and Delinquency Prevention	103,967
	Secretary of Revenue	103,967
	Secretary of Transportation	103,967

Requested by:	Senators Garrou, Dalton, Hagan
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	$   94,628
	State Controller	132,432
	Commissioner of Motor Vehicles	94,628
	Commissioner of Banks	106,415
	Chairman, Employment Security Commission	132,264
	State Personnel Director	103,967
	Chairman, Parole Commission	86,407
	Members of the Parole Commission	79,774
	Chairman, Utilities Commission	118,512
	Members of the Utilities Commission	106,415
	Executive Director, Agency for Public Telecommunications	79,774
	General Manager, Ports Railway Commission	72,036
	Director, Museum of Art	96,964
	Executive Director, North Carolina Housing Finance Agency	117,113
	Executive Director, North Carolina Agricultural Finance Authority	92,108
	State Chief Information Officer	132,353

Requested by:	Senators Garrou, Dalton, Hagan
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	$  120,574
	Associate Justice, Supreme Court	117,424
	Chief Judge, Court of Appeals	114,487
	Judge, Court of Appeals	112,531
	Judge, Senior Regular Resident Superior Court	109,473
	Judge, Superior Court	106,415
	Chief Judge, District Court	96,630
	Judge, District Court	93,573
	Administrative Officer of the Courts	109,473
	Assistant Administrative Officer of the Courts	99,994
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 two hundred eighty dollars ($61,280) and the minimum salary of any assistant district attorney or assistant public defender is at least thirty‑one thousand five hundred ninety‑seven dollars ($31,597) 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 eighty‑one hundredths percent (1.81%).

Requested by:	Senators Garrou, Dalton, Hagan
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		$71,176
100,000 to 149,999		79,872
150,000 to 249,999		88,569
250,000 and above		97,266.

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:	Senators Garrou, Dalton, Hagan, Thomas
ASSISTANT AND DEPUTY CLERKS OF COURT/SALARY INCREASES/CLERK OF COURT PERSONNEL FLEXIBILITY
SECTION 30.6.(a)  Effective July 1, 2003, assistant and deputy clerks shall receive salary increases in the amount of one and eighty‑one hundredths percent (1.81%), except that any person entitled to a step increase pursuant to G.S. 7A‑102 for the 2003‑2004 fiscal year shall not receive the one and eighty‑one hundredths percent (1.81%) increase provided by this act.
SECTION 30.6.(b)  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		$26,995
Maximum		47,305

Deputy Clerks	Annual Salary
Minimum		$22,973
Maximum		36,584.
(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:	Senators Garrou, Dalton, Hagan
MAGISTRATES/SALARY INCREASES/LIMIT
SECTION 30.7.(a)  Effective July 1, 2003, magistrates shall receive salary increases in the amount of one and eighty‑one hundredths percent (1.81%), except that any person entitled to a step increase pursuant to G.S. 7A‑171.1 for the 2003‑2004 fiscal year shall not receive the one and eighty‑one hundredths (1.81%) percent increase provided by this act.
SECTION 30.7.(b)  Effective July 1, 2003, G.S. 7A‑171.1 reads as rewritten:
"§ 7A‑171.1.  Duty hours, salary, and travel expenses within county.
(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			$27,376
Step 1		30,059
Step 2		32,979
Step 3		36,166
Step 4		39,657
Step 5		43,494
Step 6		47,712.

(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		$21,711
1 or more but less than 3 years of service		22,794
3 or more but less than 5 years of service		24,974.
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:	Senators Garrou, Dalton, Hagan
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 nine hundred four dollars ($89,904) 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:	Senators Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan
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 eighty‑one hundredths percent (1.81%).  Nothing in this act limits any of the provisions of G.S. 120‑32.

Requested by:	Senators Garrou, Dalton, Hagan
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 eighty‑one hundredths percent (1.81%) 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:	Senators Garrou, Dalton, Hagan
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 eighty‑one hundredths percent (1.81%), 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 average 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:	Senators Garrou, Dalton, Hagan
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 eighty‑one hundredths percent (1.81%).
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 eighty‑one hundredths percent (1.81%), 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 eighty‑one hundredths percent (1.81%) 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 eighty‑one hundredths percent (1.81%) salary increase provided for permanent full‑time employees covered by the provisions of subsection (a) of this section, commencing July 1, 2003.

Requested by:	Senators Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan
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. By April 15, 2004, OSP and OSBM shall report their findings and recommendations to the Joint Legislative Commission on Governmental Operations.

Requested by:	Senators Garrou, Dalton, Hagan, Albertson
TEMPORARY SALES TAX TRANSFER FOR Temp Sales tax for Wildlife RESOURCES COMMISSION SALARIES
SECTION 30.15A.  For the 2003‑2004 and 2004‑2005 fiscal years, the Secretary of Revenue shall transfer at the end of each quarter from the State sales and use tax net collections received by the Department of Revenue under Article 5 of Chapter 105 of the General Statutes to the State Treasurer for the Wildlife Resources Fund to fund the cost of a salary increase authorized by the General Assembly for employees of the Wildlife Resources Commission.

Requested by:	Senators Garrou, Dalton, Hagan
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) four and fourteen hundredths percent (4.14%) ‑ Teachers and State Employees; (ii) nine and fourteen hundredths percent (9.14%) ‑ State Law Enforcement Officers; (iii) ten and fifty‑six hundredths percent (10.56%) ‑ University Employees' Optional Retirement System; (iv) ten and fifty‑six hundredths percent (10.56%) ‑ Community College Optional Retirement Program; (v) fifteen and twelve hundredths percent (15.12%) ‑ Consolidated Judicial Retirement System; and (vi) three and twenty hundredths percent (3.20%) ‑ Legislative Retirement System.  Each of the foregoing contribution rates includes three and twenty hundredths percent (3.20%) 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 ninety‑seven hundredths percent (5.97%) ‑ Teachers and State Employees; (ii) ten and ninety‑seven hundredths percent (10.97%) ‑ State Law Enforcement Officers; (iii) ten and fifty‑six hundredths percent (10.56%) ‑ University Employees' Optional Retirement System; (iv) ten and fifty‑six hundredths percent (10.56%) ‑ Community College Optional Retirement Program; (v) fifteen and twelve hundredths percent (15.12%) ‑ Consolidated Judicial Retirement System; and (vi) three and twenty hundredths percent (3.20%) ‑ Legislative Retirement System.  Each of the foregoing contribution rates includes three and twenty hundredths percent (3.20%) 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 five hundred eighteen dollars ($2,518), and (ii) non‑Medicare‑eligible employees and retirees ‑ three thousand three hundred seven dollars ($3,307).
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 six hundred twelve dollars ($2,612), and (ii) non‑Medicare‑eligible employees and retirees ‑ three thousand four hundred thirty‑two dollars ($3,432).

Requested by:	Senators Garrou, Dalton, Hagan
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 forty-five hundredths percent (1.45%) 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 forty-five hundredths percent (1.45%) 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 forty-five hundredths percent (1.45%) 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 forty-five hundredths percent (1.45%) 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 forty-five hundredths percent (1.45%) 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 forty-five hundredths percent (1.45%) 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:	Senators Garrou, Dalton, Hagan, Kerr
INCREASE MONTHLY PENSION FOR MEMBERS OF THE FIREMEN'S AND RESCUE SQUAD WORKERS' PENSION FUND
SECTION 30.19.  G.S. 58‑86‑55 reads as rewritten:
"§ 58‑86‑55.  Monthly pensions upon retirement.
Any member who has served 20 years as an "eligible fireman" or "eligible rescue squad worker" in the State of North Carolina, as provided in G.S. 58‑86‑25 and G.S. 58‑86‑30, and who has attained the age of 55 years is entitled to be paid a monthly pension from this fund. The monthly pension shall be in the amount of  one hundred fifty-eight dollars ($158.00) per month. Any retired fireman receiving a pension shall, effective  July 1, 2003, receive a pension of  one hundred fifty-eight dollars ($158.00) per month.
Members shall pay ten dollars ($10.00) per month as required by G.S. 58‑86‑35 and G.S. 58‑86‑40 for a period of no longer than 20 years. No "eligible rescue squad member" shall receive a pension prior to July 1, 1983. No member shall be entitled to a pension hereunder until the member's official duties as a fireman or rescue squad worker for which the member is paid compensation shall have been terminated and the member shall have retired as such according to standards or rules fixed by the board of trustees.
A member who is totally and permanently disabled while in the discharge of the member's official duties as a result of bodily injuries sustained or as a result of extreme exercise or extreme activity experienced in the course and scope of those official duties and who leaves the fire or rescue squad service because of this disability shall be entitled to be paid from the fund a monthly benefit in an amount of  one hundred fifty-eight dollars ($158.00) per month beginning the first month after the member's fifty‑fifth birthday. All applications for disability are subject to the approval of the board who may appoint physicians to examine and evaluate the disabled member prior to approval of the application, and annually thereafter. Any disabled member shall not be required to make the monthly payment of ten dollars ($10.00) as required by G.S. 58‑86‑35 and G.S. 58‑86‑40.
A member who is totally and permanently disabled for any cause, other than line of duty, who leaves the fire or rescue squad service because of this disability and who has at least 10 years of service with the pension fund, may be permitted to continue making a monthly contribution of ten dollars ($10.00) to the fund until the member has made contributions for a total of 240 months. The member shall upon attaining the age of 55 years be entitled to receive a pension as provided by this section. All applications for disability are subject to the approval of the board who may appoint physicians to examine and evaluate the disabled member prior to approval of the application and annually thereafter.
A member who, because his residence is annexed by a city under Part 2 or Part 3 of Article 4 of Chapter 160A of the General Statutes, or whose department is closed because of an annexation by a city under Part 2 or Part 3 of Article 4 of Chapter 160A of the General Statutes, or whose volunteer department is taken over by a city or county, and because of such annexation or takeover is unable to perform as a fireman or rescue squad worker of any status, and if the member has at least 10 years of service with the pension fund, may be permitted to continue making a monthly contribution of ten dollars ($10.00) to the fund until the member has made contributions for a total of 240 months. The member upon attaining the age of 55 years and completion of such contributions shall be entitled to receive a pension as provided by this section. Any application to make monthly contributions under this section shall be subject to a finding of eligibility by the Board of Trustees upon application of the member.
The pensions provided shall be in addition to all other pensions or benefits under any other statutes of the State of North Carolina or the United States, notwithstanding any exclusionary provisions of other pensions or retirement systems provided by law."

Requested by:	Senators Rand , Garrou, Dalton, Hagan
TRANSFER the DISABILITY INCOME PLAN and the DEATH BENEFIT plan FOR TEACHERS AND STATE EMPLOYEES and the separate insurance benefits plan for law enforcement officers to the executive administrator and board of trustees of the teachers' and state employees' major medical plan
SECTION 30.20.(a)  G.S. 135‑101 reads as rewritten:
"§ 135‑101.  Definitions.
The following words and phrases as used in this Article, unless a different meaning is plainly required by the context, shall have the following meanings:
(1)	"Base rate of compensation" shall mean the regular monthly rate of compensation not including pay for shift premiums, overtime, or other types of extraordinary pay; in all cases of doubt, the Executive Administrator and the Board of Trustees shall determine what is "base rate of compensation".
(2)	"Beneficiary" shall mean any person in receipt of a disability allowance or other benefit as provided in this Article.
(3)	"Benefits" shall mean the monthly disability income payments made pursuant to the provisions of this Article. In the event of death on or after the first day of a month, or in the event the short‑term disability benefit ends on or after the first day of a month where the beneficiary is eligible and applies for an early service or a service retirement allowance the first of the following month, the monthly benefit shall not be prorated and shall equal the benefits paid in the previous month.
(4)	"Board of Trustees" shall mean the Board of Trustees of the Teachers' and State Employees' Comprehensive Major Medical Plan as provided in G.S. 135-39. 
(5)	"Compensation" shall mean any compensation as the term is defined in G.S. 135‑1(7a).
(6)	"Disability" or "Disabled" shall mean the physical or cognitive limitations that prevent working as determined by the Executive Director and the Board of Trustees; provided that such incapacity was not the result of terrorist activity, active participation in a riot, committing or attempting to commit a felony, or intentionally self‑inflicted injury.
(7)	"Earnings" shall mean all income for personal services rendered or otherwise receivable, including, but not limited to, salaries and wages, fees, commissions, royalties, awards and other similar items and self‑employment; in all cases of doubt, the Board of Trustees shall determine what are "earnings".
(8)	"Employee" shall mean any employee as the term is defined in G.S. 135‑1(10).
(9)	"Employer" shall mean any employer as the term is defined in G.S. 135‑1(11).
(10)	"Medical Board" shall mean the board of physicians as provided in G.S. 135‑102(d).
(11)	"Member" shall mean any member as the term is defined in G.S. 135‑1(13).
(12)	"Membership service" shall mean any service as defined in G.S. 135‑1(14).
(13)	"Participant" shall mean any teacher or employee eligible to participate in the Plan as provided in G.S. 135‑103.
(14)	"Plan" shall mean the Disability Income Plan of North Carolina as provided in this Article.
(15)	"Retirement" shall mean the withdrawal from active service with a retirement allowance granted under the provisions of Article 1 of this Chapter.
(16)	"Retirement System" shall mean the Teachers' and State Employees' Retirement System of North Carolina as defined in G.S. 135‑2.
(17)	"Service" shall mean service as a teacher or employee as defined in G.S. 135‑1(10) or G.S. 135‑1(25).
(18)	"State" shall mean the State of North Carolina.
(19)	"Teacher" shall mean any teacher as the term is defined in G.S. 135‑1(25).
(20)	"Trial Rehabilitation" shall mean a return to service in any capacity, if the return occurs within the waiting period as provided in G.S. 135‑104 and shall mean a return to service in the same capacity that existed prior to the  disability, or in any occupation for which the beneficiary or participant is reasonably qualified for by training or experience, if the return occurs within the short‑term disability period as provided in G.S. 135‑105.
(21)	"Workers' Compensation" shall mean any disability income benefits provided under the North Carolina Workers' Compensation Act, excluding any payments for a permanent partial disability rating."
SECTION 30.20.(b)  G.S. 135‑102 reads as rewritten:
"§ 135‑102.  Administration.
(a)	The provisions of this Article shall be administered by the  Executive Administrator and the Board of Trustees of the Teachers' and State Employees'  Comprehensive Major Medical Plan and all expenses in connection with the administration of the Plan, except for expenses incurred by and properly charged to the employer, shall be charged against and paid from the trust fund as created and provided in this Article.
(b)	The Plan shall have the power and privileges of a corporation and under the name of Disability Income Plan of North Carolina shall all of its business be transacted, all of its funds invested and all of its cash, securities and other property be held.
(c)	The  Executive Administrator and the Board of Trustees shall have the full power and authority to adopt rules for the administration of the Plan not inconsistent with the provisions of this Article. The  Executive Administrator and the Board of Trustees may contract with a third-party administrator or insurer to carry out the terms and conditions of the Plan after a competitive bidding process.(d)	The  Executive Administrator and the Board of Trustees shall designate a Medical Board to be composed of not fewer than three nor more than five physicians not eligible for benefits under the Plan. Other physicians, medical clinics, institutions or agencies may be employed to conduct such medical examinations and tests necessary to provide the Medical Board with clinical evidence as may be needed to determine eligibility for benefits under the Plan. The Medical Board shall investigate the results of medical examinations, clinical evidence, all essential statements and certifications by and on behalf of applicants for benefits and shall report in writing to the Board of Trustees the conclusions and recommendations upon all matters referred to it.
(e)	The  Executive Administrator and the Board of Trustees may provide the benefits according to the terms and conditions of the Plan as provided in this Article either by purchasing a contract or contracts with any insurance company licensed to do business in this State or by establishing a separate trust fund qualified under Section 501(c)(9) of the Internal Revenue Code of 1986."
SECTION 30.20.(c)  G.S. 135‑105(a) reads as rewritten:
"(a)	Any participant who  is unable to perform the duties of the participant's job or any other available jobs with the State may, after at least 365 calendar days succeeding his date of initial employment as a teacher or employee and at least one year of contributing membership service, receive a benefit commencing on the first day succeeding the waiting period; provided that the participant's employer and attending physician shall certify that such participant  cannot perform the duties of the participant's job or any other jobs available with the State, that such incapacity was incurred at the time of active employment and has been continuous thereafter; provided further that the requirement for one year of contributing membership service must have been earned within 36 calendar months immediately preceding the date of disability and further, salary continuation used during the period as provided in G.S. 135‑104 shall count toward the aforementioned one year requirement.
Notwithstanding the requirement that the incapacity was incurred at the time of active employment, any participant who becomes disabled while on an employer approved leave of absence and who is eligible for and in receipt of temporary total benefits under The North Carolina Workers' Compensation Act, Article 1 of Chapter 97 of the General Statutes, will be eligible for all benefits provided under this Article."
SECTION 30.20.(d)  G.S. 135‑106(a) reads as rewritten:
"(a)	Upon the application of a beneficiary or participant or of his legal representative or any person deemed by the Board of Trustees to represent the participant or beneficiary, any beneficiary or participant who has had five or more years of membership service may receive long‑term disability benefits from the Plan upon approval by the Board of Trustees, commencing on the first day succeeding the conclusion of the short‑term disability period provided for in G.S. 135‑105, provided the beneficiary or participant makes application for such benefit within 180 days after the short‑term disability period ceases, after salary continuation payments cease, or after monthly payments for Workers' Compensation cease, whichever is later; Provided, that the beneficiary or participant withdraws from active service by terminating employment as a teacher or State employee; Provided, that the Medical Board shall certify that such beneficiary or participant is  unable to perform any occupation for which the beneficiary or participant is reasonably qualified for by training or experience, that such incapacity was incurred at the time of active employment and has been continuous thereafter, that such incapacity is likely to be permanent; Provided further that the Medical Board shall not certify any beneficiary or participant as disabled who is in receipt of any payments on account of the same incapacity which existed when the beneficiary first established membership in the Retirement System. The Board of Trustees may extend this 180‑day filing requirement upon receipt of clear and convincing evidence that application was delayed through no fault of the disabled beneficiary or participant and was delayed due to the employers' miscalculation of the end of the 180‑day filing period. However, in no instance shall the filing period be extended beyond an additional 180 days.
The Board of Trustees may require each beneficiary who becomes eligible to receive a long‑term disability benefit to have an annual medical review or examination for the first five years and thereafter once every three years after the commencement of benefits under this section. However, the Board of Trustees may require more frequent examinations and upon the advice of the Medical Board shall determine which cases require such examination. Should any beneficiary refuse to submit to any examination required by this subsection or by the Medical Board, his long‑term disability benefit shall be suspended until he submits to an examination, and should his refusal last for one year, his benefit may be terminated by the Board of Trustees. If the Medical Board finds that a beneficiary is no longer  unable to perform any occupation for which the beneficiary or participant is reasonably qualified for by training or experience, the Medical Board shall so certify this finding to the Board of Trustees, and the Board of Trustees may terminate the beneficiary's long‑term disability benefits effective on the last day of the month in which the Medical Board certifies that the beneficiary is no longer disabled.
As to the requirement of five years of membership service, any participant or beneficiary who does not have five years of membership service within the 96 calendar months prior to conclusion of the short‑term disability period or cessation of salary continuation payments, whichever is later, shall not be eligible for long‑term disability benefits.
Notwithstanding the requirement that the incapacity was incurred at the time of active employment, any participant who becomes disabled while on an employer approved leave of absence and who is eligible for and in receipt of temporary total benefits under The North Carolina Workers' Compensation Act, Article 1 of Chapter 97 of the General Statutes, will be eligible for all benefits provided under this Article."
SECTION 30.20.(e)  G.S. 135‑109 reads as rewritten:
"§ 135‑109.  Reports of earnings.
The  Executive Administrator and Board of Trustees shall require each beneficiary to annually provide a copy of the beneficiary's federal income tax return certified by the beneficiary to be a true and exact copy of such tax return filed with the United States Internal Revenue Service and shall require such other statements of earnings as may be necessary to administer the provisions of this Article. The benefit payable to a beneficiary who does not or refuses to provide the information requested within 60 days after such request shall not be paid a benefit until the information so requested is provided, and should such refusal or failure to provide such information continue for 180 days after such request the right of a beneficiary to a benefit under the Article shall be terminated."
SECTION 30.20.(f)  G.S. 135‑5(l) reads as rewritten:
"(l)																	
Upon receipt of proof, satisfactory to the Board of Trustees in its capacity under this subsection, of the death of a retired member of the Retirement System on or after July 1, 1988, but before January 1, 1999, there shall be paid a death benefit to the surviving spouse of the deceased retired member or to the deceased retired member's legal representative if not survived by a spouse; provided the retired member has elected, when first eligible, to make, and has continuously made, in advance of his death required contributions as determined by the Board of Trustees on a fully contributory basis, through retirement allowance deductions or other methods adopted by the Board of Trustees, to a group death benefit trust fund administered by the Board of Trustees separate and apart from the Retirement System's Annuity Savings Fund and Pension Accumulation Fund. This death benefit shall be a lump‑sum payment in the amount of five thousand dollars ($5,000) upon the completion of twenty‑four months of contributions required under this subsection. Should death occur before the completion of twenty‑four months of contributions required under this subsection, the deceased retired member's surviving spouse or legal representative if not survived by a spouse shall be paid the sum of the retired member's contributions required by this subsection plus interest to be determined by the Board of Trustees.
Upon receipt of proof, satisfactory to the Board of Trustees in its capacity under this subsection, of the death of a retired member of the Retirement System on or after January 1, 1999, there shall be paid a death benefit to the surviving spouse of the deceased retired member or to the deceased retired member's legal representative if not survived by a spouse; provided the retired member has elected, when first eligible, to make, and has continuously made, in advance of his death required contributions as determined by the Board of Trustees on a fully contributory basis, through retirement allowance deductions or other methods adopted by the Board of Trustees, to a group death benefit trust fund administered by the Board of Trustees separate and apart from the Retirement System's Annuity Savings Fund and Pension Accumulation Fund. This death benefit shall be a lump‑sum payment in the amount of six thousand dollars ($6,000) upon the completion of 24 months of contributions required under this subsection. Should death occur before the completion of 24 months of contributions required under this subsection, the deceased retired member's surviving spouse or legal representative if not survived by a spouse shall be paid the sum of the retired member's contributions required by this subsection plus interest to be determined by the Board of Trustees."
SECTION 30.20.(g)  G.S. 135‑5(l1) is repealed.
SECTION 30.20.(h)  Article 3 of Chapter 135 of the General Statutes is amended by adding a new Part to read:
"Part 6. Death Benefit Plan for Teachers and State Employees.
"§ 135-43.  Death benefits.
(a)	The provisions of this Part shall be administered by the Executive Administrator and Board of Trustees of the Teachers' and State Employees' Comprehensive Major Medical Plan.
(b)	Death Benefit Plan. – There is hereby created a Group Life Insurance Plan (hereinafter called the "Plan") which is established as an employee welfare benefit plan that is separate and apart from the Retirement System and under which the members of the Teachers' and State Employees' Retirement System shall participate in and be eligible for group life insurance benefits. Upon receipt of proof, satisfactory to the Board of Trustees in their capacity as trustees under the Plan, of the death, in service, of a member who had completed at least one full calendar year of membership in the Retirement System, there shall be paid to such person as he shall have nominated by written designation duly acknowledged and filed with the Executive Administrator and the Board of Trustees, if such person is living at the time of the member's death, otherwise to the member's legal representatives, a death benefit. Such death benefit shall be equal to fifty thousand dollars ($50,000). Such death benefit shall be payable apart and separate from the payment of the member's accumulated contributions under the System on his death pursuant to the provisions of G.S. 135-5(f). For the purpose of the Plan, a member shall be deemed to be in service at the date of his death if his death occurs within 180 days from the last day of his actual service.
Notwithstanding the above provisions, the Executive Administrator and the Board of Trustees may and is specifically authorized to provide the death benefit according to the terms and conditions otherwise appearing in this Plan in the form of group life insurance, either (i) by purchasing a contract or contracts of group life insurance with any life insurance company or companies licensed and authorized to transact business in this State for the purpose of insuring the lives of members in service, after a competitive bidding process as provided for under Article 3 of Chapter 143 of the General Statutes, or (ii) by establishing a separate trust fund qualified under section 501(c)(9) of the Internal Revenue Code of 1954, as amended, for such purpose. To that end, the Board of Trustees is authorized, empowered, and directed to investigate the desirability of utilizing group life insurance by either of the foregoing methods for the purpose of providing the death benefit. If a separate trust fund is established, it shall be operated in accordance with rules and regulations adopted by the Board of Trustees, and all investment earnings on the trust fund shall be credited to such fund.
(c)	Administration of Death Benefit Plan. – In administration of the death benefit, the following shall apply:
(1)	For the purpose of determining eligibility only, in this subsection "calendar year" shall mean any period of 12 consecutive months or, if less, the period covered by an annual contract of employment. For all other purposes, in this subsection "calendar year" shall mean the 12 months beginning January 1 and ending December 31.
(2)	Last day of actual service shall be:
a.	When employment has been terminated, the last day the member actually worked.
b.	When employment has not been terminated, the date on which an absent member's sick and annual leave expire, unless he is on approved leave of absence and is in service under the provisions of G.S. 135‑4(h).
(3)	For a period when a member is on leave of absence, his status with respect to the death benefit will be determined by the provisions of G.S. 135‑4(h).
(4)	A member on leave of absence from his position as a teacher or State employee for the purpose of serving as a member or officer of the General Assembly shall be deemed to be in service during sessions of the General Assembly and thereby covered by the provisions of the death benefit. The amount of the death benefit for such member shall be fifty thousand dollars ($50,000).
A member who is a beneficiary of the Disability Income Plan provided for in Article 6 of this Chapter shall be eligible for group life insurance benefits as provided in this subsection, notwithstanding that the member is no longer an employee or teacher or that the member's death occurs after the eligibility period after active service. The basis of the death benefit payable hereunder shall be the higher of the death benefit computed as above or a death benefit based on compensation used in computing the benefit payable under G.S. 135‑105 and G.S. 135‑106, as may be adjusted for percentage postdisability increases, all subject to the maximum dollar limitation as provided above. A member in receipt of benefits from the Disability Income Plan under the provisions of G.S. 135‑112 whose right to a benefit accrued under the former Disability Salary Continuation Plan shall not be covered under the provisions of this paragraph.
(d)	Reciprocity of Death Benefit Plan. – Only for the purpose of determining eligibility for the death benefit provided for in subsection (b) of this section, membership service standing to the credit of a member of the Legislative Retirement System or the Consolidated Judicial Retirement System shall be added to the membership service standing to the credit of a member of the Teachers' and State Employees' Retirement System. However, in the event that a participant or beneficiary is a retired member of the Legislative Retirement System or the Consolidated Judicial Retirement System whose retirement benefit was suspended upon entrance into membership in the Teachers' and State Employees' Retirement System, such membership service standing to the credit of the retired member prior to retirement shall be likewise counted. Membership service under this section shall not be counted twice for the same period of time. In no event shall a death benefit provided for in G.S. 135‑5(l) be paid if a death benefit is paid under G.S. 135‑63."
SECTION 30.20.(i)  G.S. 143‑166.60(b) reads as rewritten:
"(b)	The Executive Administrator and the Board of Trustees of the Teachers' and State Employees' Comprehensive Major Medical Plan shall administer the Plan and shall, under the terms and conditions otherwise appearing in this Article, provide Plan benefits either (i) by establishing a separate trust fund in conformance with Section 501(c)(9) of the Internal Revenue Code of 1954 as amended or, (ii) by causing the Plan to affiliate with a master trust providing the same benefits for participants."
SECTION 30.20.(j)  G.S. 135‑39.5 is amended by adding three new subdivisions to read:
"(28)	Administering the Disability Income Plan under Article 6 of Chapter 135 of the General Statutes.
(29)	Administering the Death Benefit Plan for teachers and State employees under Part 6 of Article 3 of Chapter 135 of the General Statutes.
(30)	Administering the Separate Insurance Benefits Plan under Article 12F of Chapter 143 of the General Statutes."

SECTION 30.20.(k)  This section becomes effective January 1, 2004.

Requested by:	Senators Rand, Garrou, Dalton, Hagan
STATEWIDE BENEFIT COMMITTEE ESTABLISHED TO PROVIDE A MENU OF PORTABLE SUPPLEMENTAL BENEFITS FOR ALL STATE EMPLOYEES
SECTION 30.21.  G.S. 58‑31‑60 reads as rewritten:
"§ 58‑31‑60.  Payroll deduction insurance products paid for by State employees.
(a)	State Employee Benefit Committee. – The Department of Administration shall establish a State Employee Benefit Committee (hereinafter "Committee") for the following purposes:
(1)	To review insurance products currently offered through payroll deduction to  all State employees to determine if those products meet the needs and desires of  State employees.
(2)	To select the types of insurance products that reflect the needs and desires of  all State employees.
(3)	To competitively select the best insurance  products.
As used in this section, "insurance product" includes a prepaid legal services plan registered under G.S. 84‑23.1.
(b)	Appointment of State Employee Benefit Committee. – The Governor shall appoint the members of the State Employee Benefit Committee. The Committee shall consist of not less than five or more than nine individuals a majority of whom have been employed by the State for at least one year. The committee members shall, except where necessary initially to establish the rotation herein prescribed, serve three‑year terms with approximately one‑third of the terms expiring annually. Committee membership make‑up shall fairly represent the work force and be selected without regard to any political or other affiliations. It shall be the duty of the Department of Administration to assure that the Committee is completely autonomous in its selection of insurance products and insurance companies and that no member of the Committee has any conflict of interest in serving on the Committee. Any decision rendered by the Committee where the autonomy of the Committee or a conflict of interest is questioned shall be subject to appeal pursuant to the Administrative Procedure  Act.
(c)	Payroll Deduction Slots. – Each payroll unit shall be entitled to not less than four payroll deduction slots to be used for payment of insurance premiums for products selected by the Committee and offered to the employees of the payroll unit. The Committee shall select only one company per payroll deduction slot. The Company selected by the Committee shall be permitted to sell through payroll deduction only the products specifically approved by the Committee. The assignment by the Committee of a payroll deduction slot shall be for a period of not less than two years unless the insurance company shall be in violation of the terms of the written agreement specified in this subsection. The insurance company awarded a payroll deduction slot shall, pursuant to a written agreement setting out the rights and duties of the insurance company, be afforded an adequate opportunity to solicit employees of the payroll unit by making such employees aware that a representative of the company will be available at a specified time and at a location convenient to the employees.
Notwithstanding any other provision of the General Statutes, once an employee has selected an insurance product for payroll deduction, that product may not be removed from payroll deduction for that employee without his or her specific written consent.
When an employee retires from State employment and payroll deduction under this section is no longer available, the insurance company may not terminate life insurance products purchased under the payroll deduction plan without the retiree's specific written consent solely because the premium is no longer deducted from payroll.
(c1)	Procedure for Selection of Insurance Product Proposals. – All insurance product proposals shall be sealed. The Committee shall open all proposals in public and record them in the minutes of the Committee, at which time the proposals become public records open to public inspection.
After the public opening, the Committee shall review the proposals, examining the cost and quality of the products, the reputation and capabilities of the insurance companies submitting the proposals, and other appropriate criteria. The Committee may reject any or all proposals.
A company may seek to modify or withdraw a proposal only after the public opening and only on the basis that the proposal contains an unintentional clerical error as opposed to an error in judgment. A company seeking to modify or withdraw a proposal shall submit to the Committee a written request, with facts and evidence in support of its position, prior to the award of the payroll deduction slot, but not later than two days after the public opening of the proposals. The Committee shall promptly review the request, examine the nature of the error, and determine whether to permit or deny the request.
(d)	Criminal Penalty. – It shall be a Class 3 misdemeanor for any State employee, who has supervisory authority over any member of the Committee, to attempt to influence the autonomy of the Committee either in the appointment of members to such Committee or in the operation of such Committee; or for anyone to open a sealed insurance product proposal or disclose or exhibit the contents of a sealed insurance product proposal, prior to the public opening of the proposal. The Commissioner of Insurance shall have the authority to investigate complaints alleging acts subject to the criminal penalty and shall report his findings to the Attorney General of North Carolina."

Requested by:	Senators Garrou, Dalton, Hagan
salary study
SECTION 30.22.  The Senate Appropriations/Base Budget Committee and the House Appropriations Committee shall study the compensation plans for State employees.  In the course of the study, the Committees shall (i) review the compensation plans currently in effect for State employees, (ii) consider differences in the longevity compensation, special pay plans, performance pay plans, and other components of the plans, and (iii) consider ways to modify the plans to promote equity and efficiency in State government.

PART XXXI. CAPITAL APPROPRIATIONS

Requested by:	Senators Garrou, Hagan, Dorsett
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 Resources Development Projects 	$27,601,000
Department of Cultural Resources
	International Civil Rights Museum	1,000,000

TOTAL CAPITAL APPROPRIATION	$28,601,000

Requested by:	Senators Garrou, Dalton, Hagan, Thomas
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:	Senators Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan 
expenditures of funds from the reserve for repairs and renovations
SECTION 31.5.  Of the funds in the Reserve for Repairs and Renovations for the 2003‑2004 fiscal year, forty‑six percent (46%) shall be allocated to the Board of Governors of The University of North Carolina for repairs and renovations pursuant to G.S. 143‑15.3A, in accordance with guidelines developed in The University of North Carolina Funding Allocation Model for Reserve for Repairs and Renovations, as approved by the Board of Governors of The University of North Carolina, and fifty‑four percent (54%) shall be allocated to the Office of State Budget and Management for repairs and renovations pursuant to G.S. 143‑15.3A.
Notwithstanding G.S. 143‑15.3A, the Board of Governors may allocate funds for the repair and renovation of facilities not supported from the General Fund if the Board determines that sufficient funds are not available from other sources and that conditions warrant General Fund assistance. Any such finding shall be included in the Board's submission to the Joint Legislative Commission on Governmental Operations on the proposed allocation of funds.
Notwithstanding G.S. 143‑15.3A, the Office of State Budget and Management shall allocate funds from the Reserve to complete the construction of State‑owned facilities that are partially completed; the remainder of funds shall be allocated for other repairs and renovations projects.
The Board of Governors and the Office of State Budget and Management shall submit to the Joint Legislative Commission on Governmental Operations and to the Fiscal Research Division of the Legislative Services Office, for their review, the proposed allocations of these funds. Subsequent changes in the proposed allocations shall be reported prior to expenditure to the Joint Legislative Commission on Governmental Operations and to the Fiscal Research Division of the Legislative Services Office.

Requested by:	Senators Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan
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:	Senators Garrou, Dalton, Hagan
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.

PART XXXII. REGULATORY FEE FOR UTILITIES COMMISSION

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
SECTION 32.1.(a)  The percentage rate to be used in calculating the public utility regulatory fee under G.S. 62‑302(b)(2) is twelve hundredths of a percent (0.12%) for each public utility's North Carolina jurisdictional revenues earned during each quarter that begins on or after July 1, 2003.
SECTION 32.1.(b)  The electric membership corporation regulatory fee imposed under G.S. 62‑302(b1) for the 2003‑2004 fiscal year is two hundred thousand dollars ($200,000).
SECTION 32.1.(c)  This section becomes effective July 1, 2003.

PART XXXIII. INSURANCE REGULATORY CHARGE

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
SECTION 33.1.(a)  The percentage rate to be used in calculating the insurance regulatory charge under G.S. 58-6-25 is five percent (5%) for the 2003 calendar year.
SECTION 33.1.(b)  This section is effective when it becomes law.

PART XXXIV. DEPARTMENT OF HEALTH AND HUMAN SERVICES FEES

Requested by:	Senators Purcell, Reeves, Garrou, Dalton, Hagan
SECTION 34.1.(a)  G.S. 131D‑2(b)(1) reads as rewritten:
"(b)	Licensure; inspections. – 
(1)	The Department of Health and Human Services shall inspect and license, under rules adopted by the Medical Care Commission, all adult care homes for persons who are aged or mentally or physically disabled except those exempt in subsection (c) of this section. Licenses issued under the authority of this section shall be valid for one year from the date of issuance unless revoked earlier by the Secretary for failure to comply with any part of this section or any rules adopted hereunder. Licenses shall be renewed annually upon filing and the Department's approval of the renewal application. The Department shall charge each adult care home with six or fewer beds a nonrefundable annual license fee in the amount of two hundred fifty dollars ($250.00). The Department shall charge each adult care home with more than six beds a nonrefundable annual license fee in the amount of three hundred fifty dollars ($350.00) plus a nonrefundable annual per-bed fee of twelve dollars and fifty cents ($12.50). A license shall not be renewed if outstanding fees, fines, and penalties imposed by the State against the home have not been paid. Fines and penalties for which an appeal is pending are exempt from consideration. The renewal application shall contain all necessary and reasonable information that the Department may by rule require. Except as otherwise provided in this subdivision, the Department may amend a license by reducing it from a full license to a provisional license for a period of not more than 90 days whenever the Department finds that:
a.	The licensee has substantially failed to comply with the provisions of Articles 1 and 3 of Chapter 131D of the General Statutes and the rules adopted pursuant to these Articles;
b.	There is a reasonable probability that the licensee can remedy the licensure deficiencies within a reasonable length of time; and
c.	There is a reasonable probability that the licensee will be able thereafter to remain in compliance with the licensure rules for the foreseeable future.
The Department may extend a provisional license for not more than one additional 90‑day period upon finding that the licensee has made substantial progress toward remedying the licensure deficiencies that caused the license to be reduced to provisional status.
The Department may revoke a license whenever:
a.	The Department finds that:
1.	The licensee has substantially failed to comply with the provisions of Articles 1 and 3 of Chapter 131D of the General Statutes and the rules adopted pursuant to these Articles; and
2.	It is not reasonably probable that the licensee can remedy the licensure deficiencies within a reasonable length of time; or
b.	The Department finds that:
1.	The licensee has substantially failed to comply with the provisions of Articles 1 and 3 of Chapter 131D of the General Statutes and the rules adopted pursuant to these Articles; and
2.	Although the licensee may be able to remedy the deficiencies within a reasonable time, it is not reasonably probable that the licensee will be able to remain in compliance with licensure rules for the foreseeable future; or
c.	The Department finds that the licensee has failed to comply with the provisions of Articles 1 and 3 of Chapter 131D of the General Statutes and the rules adopted pursuant to these Articles, and the failure to comply endangered the health, safety, or welfare of the patients in the facility.
The Department may also issue a provisional license to a facility, pursuant to rules adopted by the Medical Care Commission, for substantial failure to comply with the provisions of this section or rules adopted pursuant to this section. Any facility wishing to contest the issuance of a provisional license shall be entitled to an administrative hearing as provided in the Administrative Procedure Act, Chapter 150B of the General Statutes. A petition for a contested case shall be filed within 30 days after the Department mails written notice of the issuance of the provisional license."
SECTION 34.1.(b)  This section becomes effective October 1, 2003.
SECTION 34.2.(a)  G.S. 131E‑77(d) reads as rewritten:
"(d)	Upon receipt of an application for a license, the Department shall issue a license if it finds that the applicant complies with the provisions of this Article and the rules of the Commission. The Department shall renew each license in accordance with the rules of the Commission. The Department shall charge the applicant a nonrefundable annual base license fee plus a nonrefundable annual per-bed fee as follows:
Facility Type	Number of Beds	Base Fee	Per-Bed Fee
General Acute Hospitals:	1-49 beds	$250.00	$12.50
	50-99 beds	$350.00	$12.50
	100-199 beds	$450.00	$12.50
	200-399 beds	$550.00	$12.50
	400-699 beds	$750.00	$12.50
	700+ beds	$950.00	$12.50
Other Hospitals:		$500.00	$12.50."
SECTION 34.2.(b)  This section becomes effective October 1, 2003.
SECTION 34.3.(a)  G.S. 131E‑102(b) reads as rewritten:
"(b)	Applications shall be available from the Department, and each application filed with the Department shall contain all necessary and reasonable information that the Department may by rule require. A license shall be granted to the applicant upon a determination by the Department that the applicant has complied with the provisions of this Part and the rules promulgated under this Part. The Department shall charge the applicant a nonrefundable annual license fee in the amount of four hundred fifty dollars ($450.00) plus a nonrefundable annual per‑bed fee of twelve dollars and fifty cents ($12.50)."
SECTION 34.3.(b)  This section becomes effective October 1, 2003.
SECTION 34.4.(a)  G.S. 131E‑138(c) reads as rewritten:
"(c)	An application for a license shall be available from the Department, and each application filed with the Department shall contain all information requested by the Department. A license shall be granted to the applicant upon a determination by the Department that the applicant has complied with the provisions of this Part and the rules promulgated by the Commission under this Part. The Department shall charge the applicant a nonrefundable annual license fee in the amount of three hundred fifty dollars ($350.00)."
SECTION 34.4.(b)  This section becomes effective October 1, 2003.
SECTION 34.5.(a)  G.S. 131E‑147(b) reads as rewritten:
"(b)	Applications shall be available from the Department, and each application filed with the Department shall contain all necessary and  reasonable information that the Department may by rule require. A license shall be granted to the applicant upon a determination by the Department that the applicant has complied with the provisions of this Part and the rules promulgated by the Commission under this Part. The Department shall charge the applicant a nonrefundable annual base license fee in the amount of seven hundred dollars ($700.00) plus a nonrefundable annual per-operating room fee in the amount of fifty dollars ($50.00)."
SECTION 34.5.(b)  This section becomes effective October 1, 2003.
SECTION 34.6.(a)  G.S. 131E‑167(a) reads as rewritten:
"(a)	Applications for certification shall be available from the Department, and each application filed with the Department shall contain all necessary and reasonable information that the Department may by rule require. A certificate shall be granted to the applicant for a period not to exceed one year upon a determination by the Department that the applicant has substantially complied with the provisions of this Article and the rules promulgated by the Department under this Article. The Department shall charge the applicant a nonrefundable annual certification fee in the amount of two hundred fifty dollars ($250.00)."
SECTION 34.6.(b)  This section becomes effective October 1, 2003.
SECTION 34.7.(a)  Article 16 of Chapter 131E of the General Statutes is amended by adding the following new section to read:
"§ 131E-269.  Authorization to charge fee for certification of facilities suitable to perform abortions.
The Department of Health and Human Services shall charge each hospital or clinic certified by the Department as a facility suitable for the performance of abortions, as authorized under G.S. 14-45.1, a nonrefundable annual certification fee in the amount of seven hundred dollars ($700.00)."
SECTION 34.7.(b)  This section becomes effective October 1, 2003.
SECTION 34.8.(a)  G.S. 122C‑23 is amended by adding the following new subsection to read: 
"(h)	The Department shall charge facilities licensed under this Chapter that have licensed beds a nonrefundable annual base license fee plus a nonrefundable annual per‑bed fee as follows:
Type of Facility	Number of Beds	Base Fee	Per-Bed Fee
Facilities (non-ICF/MR):	6 or fewer beds	$250.00	$0
	More than 6 beds	$250.00	$12.50
ICF/MR Only:	6 or fewer beds	$650.00	$0
	More than 6 beds	$650.00	$12.50."
SECTION 34.8.(b)  This section becomes effective October 1, 2003.
SECTION 34.9.(a)  Part 3 of Article 6 of Chapter 131E of the General Statues is amended by adding the following new section to read:
"§ 131E-138.1.  Licensure fees for nursing beds and adult care home beds in continuing care retirement communities.
The Department shall charge continuing care retirement communities licensed under Article 64 of Chapter 58 of the General Statutes that have nursing home beds or adult care home beds licensed by the Department a nonrefundable annual base license fee in the amount of four hundred fifty dollars ($450.00) plus a nonrefundable annual per-bed fee in the amount of twelve dollars and fifty cents ($12.50)."
SECTION 34.9.(b)  This section becomes effective October 1, 2003.
SECTION 34.10.  Reserved.
SECTION 34.11.(a)  Article 16 of Chapter 131E of the General Statutes is amended by adding the following new section to read:
"§ 131E-267.  Fees for departmental review of health care facility construction projects.
The Department of Health and Human Services shall charge a fee for the review of each health care facility construction project to ensure that project plans and construction are in compliance with State law. The fee shall be charged on a one-time, per-project basis, as follows, and shall not exceed twenty‑five thousand dollars ($25,000) for any single project:
Institutional Project	Project Fee
Hospitals	$300.00 plus $0.20/square foot of project space
Nursing Homes	$250.00 plus $0.15/square foot of project space
Ambulatory Surgical Facility	$200.00 plus $0.15/square foot of project space
Psychiatric Hospital 	$200.00 plus $0.15/square foot of project space
Adult Care Home more 
than 7 beds	$175.00 plus $0.10/square foot of project space

Residential Project	Project Fee
Family Care Homes	$175.00 flat fee
ICF/MR Group Homes	$275.00 flat fee
Group Homes: 1-3 beds	$100.00 flat fee
Group Homes: 4-6 beds	$175.00 flat fee
Group Homes: 7-9 beds	$225.00 flat fee
Other residential:
More than 9 beds	$225.00 plus $0.075/square foot of project space."
SECTION 34.11.(b)  This section becomes effective October 1, 2003.
SECTION 34.12.(a)  G.S. 110‑90 reads as rewritten:
"§ 110‑90.  Powers and duties of Secretary of Health and Human Services.
The Secretary shall have the following powers and duties under the policies and rules of the Commission:
(1)	To administer the licensing program for child care facilities.
(1a)	To establish a fee for the licensing of child care centers. The fee does not apply to a religious-sponsored child care center operated pursuant to a letter of compliance.  The amount of the fee may not exceed the amount listed in this subdivision.
	Capacity of Center	Maximum Fee
	12 or fewer children	$  35.00
	13-50 children	$125.00	51-100 children	$250.00
	101 or more children	$400.00
(2)	To obtain and coordinate the necessary services from other State departments and units of local government which are necessary to implement the provisions of this Article.
(3)	To employ the administrative personnel and staff as may be necessary to implement this Article where required services, inspections or reports are not available from existing State agencies and units of local government.
(4)	To issue a rated license to any child care facility which meets the standards established by this Article. The rating shall be based on program standards, education levels of staff, and compliance history of the child care facility.
(5)	To revoke the license of any child care facility that ceases to meet the standards established by this Article and rules on these standards adopted by the Commission, or that demonstrates a pattern of noncompliance with this Article or the rules, or to deny a license to any applicant that fails to meet the standards or the rules. These revocations and denials shall be done in accordance with the procedures set out in G.S. 150B and this Article and rules adopted by the Commission.
(6)	To prosecute or defend on behalf of the State, through the office of the Attorney General, any legal actions arising out of the administration or enforcement of this Article.
(7)	To promote and coordinate educational programs and materials for operators of child care facilities which are designed to improve the quality of child care available in the State, using the resources of other State and local agencies and educational institutions where appropriate.
(8)	Repealed by Session Laws 1997‑506, s. 5.
(9)	To levy a civil penalty pursuant to G.S. 110‑103.1, or an administrative penalty pursuant to G.S. 110‑102.2, or to order summary suspension of a license. These actions shall be done in accordance with the procedures set out in G.S. 150B and this Article and rules adopted by the Commission.
(10)	To issue final agency decisions in all G.S. 150B contested cases proceedings filed as a result of actions taken under this Article including, but not limited to the denial, revocation, or suspension of a license or the levying of a civil or administrative penalty.
(11)	To issue a license to any child care arrangement that does not meet the definition of child care facility in G.S. 110‑86 whenever the operator of the arrangement chooses to comply with the requirements of this Article and the rules adopted by the Commission and voluntarily applies for a child care facility license. The Commission shall adopt rules for the issuance or removal of the licenses."
SECTION 34.12.(b)  This section becomes effective October 1, 2003.
SECTION 34.13.  Reserved.

PART XXXV. FEES FOR DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES AND DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
SECTION 35.1.(a)  G.S. 113‑34(c) reads as rewritten: 
"(c)	The Department, with the approval of the Governor and Council of State, may enter into leases of lands and waters for State parks, State lakes and recreational purposes; and the Department may construct, operate, and maintain on the lands and waters suitable public service facilities and conveniences and may charge and collect reasonable fees for each of the following:
(1)	The erection, maintenance and use of docks, piers and other structures as may be permitted in or on the waters under its own rules.
(2)	Fishing privileges in the waters, provided that the privileges shall be extended only to holders of bona fide North Carolina fishing licenses, and provided further that all State fishing laws and rules are complied with.
(3)	Vehicle access for off-road driving at the beach at Fort Fisher State Recreation Area."
SECTION 35.1.(b)  Notwithstanding G.S. 150B‑21.1, the Department of Environment and Natural Resources may adopt temporary rules to establish fees under G.S. 113‑34(c)(3), as amended by subsection (a) of this section, within six months after the effective date of this section.
SECTION 35.1.(c)  This section becomes effective July 1, 2003.
SECTION 35.2.(a)  G.S. 130A‑294.1(e) reads as rewritten:
"(e)	A person who generates either one kilogram or more of any acute hazardous waste as listed in 40 C.F.R. § 261.30(d) or § 261.33(e) as revised 1 July 1987, or 1000 kilograms or more of hazardous waste, in any calendar month during the year beginning 1 July and ending 30 June shall pay an annual fee of one thousand dollars ($1,000)."
SECTION 35.2.(b)  G.S. 130A‑294.1(f) reads as rewritten:
"(f)	A person who generates 100 kilograms or more of hazardous waste in any calendar month during the year beginning 1 July and ending 30 June but less than 1000 kilograms of hazardous waste in each calendar month during that year shall pay an annual fee of one hundred twenty-five dollars ($125.00)."
SECTION 35.2.(c)  This section becomes effective July 1, 2003.
SECTION 35.3.(a) The Board of Agriculture shall charge the following fees for animal disease diagnostic tests or services:
		Test/Service							Fee

(1)	Pullorum	$0.10
(2)	M Synoviae	0.50
(3)	M. meleagridis	0.50
(4)	Necropsy	25.00
(5)	M Gallisep.	0.50
(6)	Mg,Ms,Mm‑HI	1.00
(7)	Histopathology	15.00
(8)	Cytology	10.00
(9)	Necropsy Disposal
	10 to 100 pounds	5.00
	101 to 500 pounds	15.00
	More than 500 pounds	30.00
(10)	Companion Animal Culture	10.00
SECTION 35.3.(b)  The Board of Agriculture shall, pursuant to G.S. 106‑420, charge a fee of fifty dollars ($50.00) for nursery dealer certification.
SECTION 35.3.(c)  This section becomes effective July 1, 2003.
SECTION 35.4.(a)  G.S. 143‑452(b) reads as rewritten:
"(b)	Applications for pesticide applicator license shall be in the form and shall contain the information prescribed by the Board. Each application shall be accompanied by a non‑refundable fee of fifty dollars ($50.00) for each pesticide applicator's license. In addition, an annual inspection fee of twenty-five dollars ($25.00) shall be submitted for each aircraft to be licensed. Should any aircraft fail to pass inspection, making it necessary for a second inspection to be made, the Board shall require an additional twenty‑five‑dollar ($25.00) inspection fee. In addition to the required inspection, unannounced inspections may be made without charge to determine if equipment is properly calibrated and maintained in conformance with the laws and regulations. All aircraft licensed to apply pesticides shall be identified by a license plate or decal furnished by the Board at no cost to the licensee, which plate or decal shall be affixed on the aircraft in a location and manner prescribed by the Board. No applicator inspection or license fee, original or renewal, shall be charged to State agencies or local governments or their employees. Inspections of ground pesticide application equipment may be made. Any such equipment determined to be faulty or unsafe shall not be used for the purpose of applying a pesticide(s) until such time as proper repairs and/or alterations are made."
SECTION 35.4.(b)  G.S. 143‑448(b) reads as rewritten:
"(b)	Applications for a pesticide dealer license shall be in the form and shall contain the information prescribed by the Board. Each application shall be accompanied by a non‑refundable fee of fifty dollars ($50.00). All licenses issued under this Part shall expire on December 31 of the year for which they are issued."
SECTION 35.4.(c)  G.S. 143‑448(c) reads as rewritten:
"(c)	The license for a pesticide dealer may be renewed annually upon application to the Board, accompanied by a fee of fifty dollars ($50.00) for each license, on or before the first day of January of the calendar year for which the license is issued."
SECTION 35.4.(d)  G.S. 143‑455(a) reads as rewritten:
"(a)	No person shall perform services as a pest control consultant without first procuring from the Board a license. Applications for a consultant license shall be in the form and shall contain the information prescribed by the Board. The application for a license shall be accompanied by a non‑refundable annual fee of fifty dollars ($50.00)."
SECTION 35.4.(e)  G.S. 143‑442(b) reads as rewritten:
"(b)	The applicant shall pay an annual registration fee of one hundred dollars ($100.00) plus an additional annual assessment for each brand or grade of pesticide registered. The annual assessment shall be fifty dollars ($50.00) if the applicant's gross sales of the pesticide in this State for the preceding 12 months for the period ending September 30th were more than five thousand dollars ($5,000.00) and twenty‑five dollars ($25.00) if gross sales were less than five thousand dollars ($5,000.00). An additional two hundred dollars ($200.00) delinquent registration penalty shall be assessed against the registrant for each brand or grade of pesticide which is marketed in North Carolina prior to registration as required by this Article. In the case of multi‑year registration, the annual fee and additional assessment for each year shall be paid at the time of the initial registration. The Board shall give a pro rata refund of the registration fee and additional assessment to the registrant in the event that registration is canceled by the Board or by the United States Environmental Protection Agency."
SECTION 35.4.(f)  This section becomes effective July 1, 2003.
SECTION 35.5.(a)  G.S. 113‑35(b) reads as rewritten:
"(b)	The Department may construct and operate within the State forests, State parks, State lakes and any other areas under its charge suitable public service facilities and conveniences, and may charge and collect reasonable fees for the use of same; it may also charge and collect reasonable fees for:
(1)	The erection, maintenance and use of docks, piers and such other structures as may be permitted in or on State lakes under its own rules.
(2)	Hunting privileges on State forests and fishing privileges in State forests, State parks and State lakes, provided that such privileges shall be extended only to holders of bona fide North Carolina hunting and fishing licenses, and provided further that all State game and fish laws are complied with.
(3)	The erection, maintenance, and use of a marina at Carolina Beach." 
SECTION 35.5.(b)  G.S. 113‑35(c) reads as rewritten:
"(c)	The Department may make reasonable rules for the operation  of boats or other craft on the surface of the lakes and other waters under its charge. The Department may charge and collect reasonable fees for the use of boats and other watercraft that are purchased and maintained by the Department; however, the Department shall not charge a fee for the use or operation of any other boat or watercraft on these waters." 
SECTION 35.5.(c)  The Department of Environment and Natural Resources shall, pursuant to G.S. 113‑35(b), as amended by subsections (a) and (b) of this section, charge the following fees for the use of public service facilities and conveniences located in State forests, State parks, State lakes, and other areas under the charge of the Division of Parks and Recreation:
Facility/Convenience	Fee 
Special activity permit		$	30.00
Swimming fees/Adult		$	4.00
Swimming fees/Child		$	3.00
State Lake private pier permit, based on length of pier, 
		Average per year	$	80.00
State Lake commercial pier permit, based on length of pier
		Average per year	$	200.00
Admission fee for Falls and Jordan Lakes per car	$	5.00
Sr. Citizen admission fee for Falls and Jordan Lakes per car 	$	4.00
Hammocks Beach Ferry fee/Adult	$	5.00
Hammocks Beach Ferry fee/Child	$	3.00
Fees for camping per night	$	15.00
Fees for camping with hookups per night	$	20.00
Fees for primitive camping per night	$	9.00
Fees for primitive group camping
		$ 1.00 Per person per night
		Minimum per night	$	9.00
Rental fees for improved group camping, maximum of 35	$	40.00
Rental fees for improved group camping, maximum of 100	$	105.00
Rental fees for family cabin per week	$	500.00
Rental fees for family cabin per day	$	100.00
Carolina Bch. Marina rental fee for transient rentals,
	based on length of boat
		Average fee per night	$	20.00
Carolina Bch. Marina rental fee for long‑term rentals,
	based on length of boat
		Average fee per year	$	2,500.00
Boat rental fee for rowboats	
		First hour	$	5.00
		Each additional hour	$	3.00
Boat rental fee for paddle boats
		First hour	$	5.00
		Each additional hour	$	3.00
Picnic shelter rental fee/2‑table shelter	$	25.00
Picnic shelter rental fee/4‑table shelter	$	40.00
Picnic shelter rental fee/8‑table shelter	$	60.00
Picnic shelter rental fee/12‑table shelter	$	85.00
SECTION 35.5.(d)  Nothing in this section shall prohibit the Department of Environment and Natural Resources from amending the fees under subsection (c) of this section pursuant to Chapter 150B of the General Statutes.
SECTION 35.5.(e)  Subsection (c) of this section becomes effective January 1, 2004. The remainder of this section becomes effective July 1, 2003.

PART XXXV‑a. department of cultural resources fees

Requested by:	Senators Swindell, Garrou, Dalton, Hagan
SECTION 35A.1.  G.S. 105‑129.35 reads as rewritten:
"§ 105‑129.35.  Credit for rehabilitating income‑producing historic structure.
(a)	Credit. – A taxpayer who is allowed a federal income tax credit under section 47 of the Code for making qualified rehabilitation expenditures for a certified historic structure located in this State is allowed a credit equal to twenty percent (20%) of the expenditures that qualify for the federal credit. To claim the credit allowed by this subsection, the taxpayer must provide a copy of the certification obtained from the State Historic Preservation Officer verifying that the historic structure has been rehabilitated in accordance with this subsection.
(b)	Allocation. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this section may allocate the credit among any of its owners in its discretion as long as the amount of credit allocated to an owner does not exceed the owner's adjusted basis in the pass‑through entity, as determined under the Code, at the end of the taxable year in which the certified historic structure is placed in service. Owners to whom a credit is allocated are allowed the credit as if they had qualified for the credit directly. A pass‑through entity and its owners must include with their tax returns for every taxable year in which an allocated credit is claimed a statement of the allocation made by the pass‑through entity and the allocation that would have been required under G.S. 105‑131.8 or G.S. 105‑269.15.
(c)	Definitions. – The following definitions apply in this section:
(1)	Certified historic structure. – Defined in section 47 of the Code.
(2)	Pass‑through entity. – An entity or business, including a limited partnership, a general partnership, a joint venture, a Subchapter S Corporation, or a limited liability company, all of which is treated as owned by individuals or other entities under the federal tax laws, in which the owners report their share of the income, losses, and credits from the entity or business on their income tax returns filed with this State. For the purpose of this section, an owner of a pass‑through entity is an individual or entity who is treated as an owner under the federal tax laws.
(3)	Qualified rehabilitation expenditures. – Defined in section 47 of the Code.
(4)	State Historic Preservation Officer. – Defined in G.S. 105‑129.6."
SECTION 35A.2.  G.S. 105‑129.36(c) is recodified as G.S. 105‑129.36A and reads as rewritten:
"§ 105‑129.36A.  Rules; fees.
(a)	Rules. – The North Carolina Historical Commission, in consultation with the State Historic Preservation Officer, may adopt rules needed to administer the certification process required by this section.
(b)	Fees. – The North Carolina Historical Commission, in consultation with the State Historic Preservation Officer, may adopt a schedule of fees for providing certifications required by this Article. In establishing the fee schedule, the Commission shall consider the administrative and personnel costs incurred by the Department of Cultural Resources. An application fee may not exceed one percent (1%) of the completed qualifying rehabilitation expenditures. The proceeds of the fees are receipts of the Department of Cultural Resources and must be used for performing its duties under this Article."
SECTION 35A.3.  G.S. 105‑129.36(a) reads as rewritten:
"(a)	Credit. – A taxpayer who is not allowed a federal income tax credit under section 47 of the Code and who makes rehabilitation expenses for a State‑certified historic structure located in this State is allowed a credit equal to thirty percent (30%) of the rehabilitation expenses. To qualify for the credit, the taxpayer's rehabilitation expenses must exceed twenty‑five thousand dollars ($25,000) within a 24‑month period. To claim the credit allowed by this subsection, the taxpayer must provide a copy of the certification obtained from the State Historic Preservation Officer verifying that the historic structure has been rehabilitated in accordance with this subsection."
SECTION 35A.4.  Article 1 of Chapter 121 of the General Statutes is amended by adding a new section to read:
"§ 121-7.3.  Admission fees.
The Department of Cultural Resources may charge a reasonable admission fee to any museum administered by the Department. Admission fees collected under this section are receipts of the Department and shall be deposited in a nonreverting account. The Department shall retain unbudgeted receipts at the end of each fiscal year, beginning June 30, 2004, and shall deposit these receipts into the account. Funds in the account shall be used to support a portion of each museum's operation. The Secretary may adopt rules necessary to carry out the provisions of this section. The Department shall provide a quarterly report to the Joint Legislative Commission on Governmental Operations as the Department's or museums' anticipated use of funds or expend funds pursuant to this section."

PART XXXV‑b. SECRETARY OF STATE fees
SECTION 35B.1.(a)  G.S. 25‑9‑525(a) reads as rewritten:
"(a)	Initial financing statement or other record: general rule. – Except as otherwise provided in subsection (e) of this section, the fee for filing and indexing a record under this Part is:
(1)	Thirty‑eight dollars ($38.00) if the record is communicated in writing and consists of one or two pages;
(2)	Forty‑five dollars ($45.00) if the record is communicated in writing and consists of more than two pages, plus two dollars ($2.00) for each page over 10 pages; and
(3)	Thirty dollars ($30.00) if the record is communicated by another medium authorized by filing‑office rule."
SECTION 35B.1.(b)  This section becomes effective July 1, 2003.

PART XXXVI. Reserved

part xxxvi‑A. Justice and Public Safety fees

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
SECTION 36A.1.  G.S. 7A‑37.1 is amended by adding a new subsection to read:
"(c1)	In cases referred to nonbinding arbitration as provided in this section, a fee of one hundred dollars ($100.00) shall be assessed per arbitration, to be divided equally among the parties, to cover the cost of providing arbitrators. Fees assessed under this section shall be paid to the clerk of superior court in the county where the case was filed and remitted by the clerk to the State Treasurer."
SECTION 36A.2.  G.S. 7A‑305(a)(2) reads as rewritten:
"(2)	For support of the General Court of Justice, the sum of  eighty-two dollars ($82.00) in the superior court, and the sum of  seventy-five dollars ($75.00) in the district court except that if the case is assigned to a magistrate the sum shall be forty‑three dollars ($43.00). Sums collected under this subdivision shall be remitted to the State Treasurer. The State Treasurer shall remit the sum of one dollar and five cents ($1.05)  of each fee collected under this subdivision  to the North Carolina State Bar for the provision of services described in G.S. 7A‑474.4."
SECTION 36A.3.  G.S. 7A‑306(a)(2) reads as rewritten:
"(2)	For support of the General Court of Justice the sum of forty-three dollars ($43.00). In addition, in proceedings involving land, except boundary disputes, if the fair market value of the land involved is over one hundred dollars ($100.00), there shall be an additional sum of thirty cents (30¢) per one hundred dollars ($100.00) of value, or major fraction thereof, not to exceed a maximum additional sum of two hundred dollars ($200.00). Fair market value is determined by the sale price if there is a sale, the appraiser's valuation if there is no sale, or the appraised value from the property tax records if there is neither a sale nor an appraiser's valuation. Sums collected under this subdivision shall be remitted to the State Treasurer. The State Treasurer shall remit the sum of one dollar and five cents ($1.05)  of each thirty‑dollar ($30.00) General Court of Justice fee collected under this subdivision  to the North Carolina State Bar for the provision of services described in G.S. 7A‑474.4."
SECTION 36A.4.  G.S. 7A‑307(a)(2) reads as rewritten:
"(2)	For support of the General Court of Justice, the sum of forty-three dollars ($43.00), plus an additional forty cents (40¢) per one hundred dollars ($100.00), or major fraction thereof, of the gross estate, not to exceed three thousand dollars ($3,000). Gross estate shall include the fair market value of all personalty when received, and all proceeds from the sale of realty coming into the hands of the fiduciary, but shall not include the value of realty. In collections of personal property by affidavit, the fee based on the gross estate shall be computed from the information in the final affidavit of collection made pursuant to G.S. 28A‑25‑3 and shall be paid when that affidavit is filed. In all other cases, this fee shall be computed from the information reported in the inventory and shall be paid when the inventory is filed with the clerk. If additional gross estate, including income, comes into the hands of the fiduciary after the filing of the inventory, the fee for such additional value shall be assessed and paid upon the filing of any account or report disclosing such additional value. For each filing the minimum fee shall be fifteen dollars ($15.00). Sums collected under this subdivision shall be remitted to the State Treasurer. The State Treasurer shall remit the sum of one dollar and five cents ($1.05)  of each thirty‑dollar ($30.00)  General Court of Justice fee collected under this subdivision  to the North Carolina State Bar for the provision of services described in G.S. 7A‑474.4."
SECTION 36A.5.  This Part becomes effective July 1, 2003, and applies to fees assessed or collected on or after that date.

PART XXXVII. adjust local government hold harmless

Requested by:	Senators Garrou, Dalton, Hagan
SECTION 37.1.  G.S. 105‑521 reads as rewritten:
"§ 105‑521.  Transitional local government hold harmless.
(a)	Definitions. – The following definitions apply in this section:
(1)	Local government. – A county or municipality that received a distribution of local sales taxes in the most recent fiscal year for which a local sales tax share has been calculated.
(2)	Local sales tax share. – A local government's percentage share of the two‑cent (2¢) sales taxes distributed during the most recent fiscal year for which data are available.
(3)	Repealed reimbursement amount. – The total amount a local government would have been entitled to receive during the 2002‑2003 fiscal year under G.S. 105‑164.44C, 105‑275.1, 105‑275.2, 105‑277.001, and 105‑277.1A, if the Governor had not withheld any distributions under those sections.
(4)	Two‑cent (2¢) sales taxes. – The first one‑cent (1¢) sales and use tax authorized in Article 39 of this Chapter and in Chapter 1096 of the 1967 Session Laws, the first one‑half cent (1/2¢) local sales and use tax authorized in Article 40 of this Chapter, and the second one‑half cent (1/2¢) local sales and use tax authorized in Article 42 of this Chapter.
(b)	Distributions. – On or before August 15, 2003, and each August 15 thereafter, the Secretary must multiply each local government's local sales tax share by the estimated amount that all local governments would be expected to receive during the current fiscal year under G.S. 105‑520 if every county levied the tax under this Article for the year. If the resulting amount is less than one hundred percent (100%) of the local government's repealed reimbursement amount, the Secretary must pay the local government the difference, but not less than one hundred dollars ($100.00). 
On or before May 1, 2003, and each May 1 thereafter, the Office of State Budget and Management and the Fiscal Research Division of the General Assembly must each submit to the Secretary and to the General Assembly a final projection of the estimated amount that all local governments would be expected to receive during the upcoming fiscal year under G.S. 105‑520 if every county levied the tax under this Article for the fiscal year. If, after May 1 and before a distribution is made, a law is enacted that would affect the projection, an updated projection must be submitted as soon as practicable. If the Secretary does not use the lower of the two final projections to make the calculation required by this subsection, the Secretary must report the reasons for this decision to the Joint Legislative Commission on Governmental Operations within 60 days after receiving the projections.
(c)	Source of Funds. – The Secretary must draw the funds distributed under this section from sales and use tax collections under Article 5 of this Chapter.
(d)	Reports. – The Secretary must report to the Revenue Laws Study Committee by January 31, 2004, and each January 31 thereafter, the amount distributed under this section for the current fiscal year."
SECTION 37.2.  Effective January 1, 2008, G.S. 105-521 is repealed.

Part XXXVIII. TEMPORARILY MAINTAIN STATE SALES TAX RATE

Requested by:	Senators Garrou, Dalton, Hagan
SECTION 38.1.  Section 34.13(c) of S.L. 2001‑424 reads as rewritten:
"SECTION 34.13.(c)  This section becomes effective October 16, 2001, and applies to sales made on or after that date. This section is repealed effective for sales made on or after July 1, 2005. This section does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this section before the effective date of its amendment or repeal; nor does it affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal."

part XXXIX. tEMPORARILY MAINTAIN UPPER INCOME TAX RATE

Requested by:	Senators Garrou, Dalton, Hagan
SECTION 39.1.  Effective for taxable years beginning on or after January 1, 2006, G.S. 105‑134.2(a) reads as rewritten:
"(a)	A tax is imposed upon the North Carolina taxable income of every individual. The tax shall be levied, collected, and paid annually and shall be computed at the following percentages of the taxpayer's North Carolina taxable income.
(1)	For married individuals who file a joint return under G.S. 105‑152 and for surviving spouses, as defined in section 2(a) of the Code:

Over	Up To	Rate
‑0‑	$21,250	6%
$21,250	$100,000	7%
$100,000	NA	7.75%
		
(2)	For heads of households, as defined in section 2(b) of the Code:
		
Over	Up To	Rate
	‑0‑	$17,000	6%
$17,000	$80,000	7%
$80,000	NA	7.75%
		
(3)	For unmarried individuals other than surviving spouses and heads of households:
Over	Up To	Rate
‑0‑	$12,750	6%
$12,750	$60,000	7%
$60,000	NA	7.75%

(4)	For married individuals who do not file a joint return under G.S. 105‑152:
Over	Up To	Rate
‑0‑	$10,625	6%
$10,625	$50,000	7%
$50,000	NA	7.75%
		"
SECTION 39.2.  Section 34.18(b) of S.L. 2001‑424 reads as rewritten:
"SECTION 34.18.(b)  This section becomes effective for taxable years beginning on or after January 1, 2001. Notwithstanding G.S. 105‑163.15, no addition to tax may be made under that statute for a taxable year beginning on or after January 1, 2001, and before January 1, 2002, with respect to an underpayment of individual income tax to the extent the underpayment was created or increased by this section."

part xxxix‑a. Delay elimination of the marriage tax penalty for standard deduction

Requested by:	Senators Garrou, Dalton, Hagan
SECTION 39A.1.  The introductory language of Section 34.19(a) of S.L. 2001‑424, as amended by Section 30B.1(a) of S.L. 2002‑126, reads as rewritten:
"SECTION 34.19.(a)  Effective for taxable years beginning on or after January 1, 2006, G.S. 105‑134.6(c)(3) and (4) reads as rewritten:".
SECTION 39A.2.  The introductory language of Section 34.19(b) of S.L. 2001‑424, as amended by Section 30B.1(b) of S.L. 2002‑126, reads as rewritten:
"SECTION 34.19.(b)  Effective for taxable years beginning on or after January 1, 2007, G.S. 105‑134.6(c)(4), as amended by this section, reads as rewritten:".

part XXXix‑b. Conform Child tax credit to federal credit and delay increase in child tax credit

Requested by:	Senators Kerr, Hoyle, Garrou, Dalton, Hagan
SECTION 39B.1.  Section 34.20 of S.L. 2001‑424, as amended by Section 30B.2 of S.L. 2002‑126, is repealed.
SECTION 39B.2.  G.S. 105‑151.24, as amended by Section 39B.1 of this act, reads as rewritten:
"§ 105‑151.24.  Credit for children.
(a)	Eligibility. – An individual who is allowed a federal child tax credit under section 24 of the Code for the taxable year and whose adjusted gross income (AGI), as calculated under the Code, is less than the amount listed below is allowed a credit against the tax imposed by this Part for each dependent child for whom the individual is allowed the federal credit for the taxable year: 

Filing Status		AGI
Married, filing jointly	$100,000
Head of Household	80,000
Single			60,000
Married, filing separately	50,000.
(b)	Credit Amount. – The amount of the credit is as follows:
	Income Years Beginning	Credit

	After 2002 but before 2006	$  60.00
	In 2006	75.00
	After 2006	100.00
(c)	Nonresident or Part-Year Resident.  A nonresident or part‑year resident who claims the credit allowed by this section must reduce the amount of the credit by multiplying it by the fraction calculated under G.S. 105‑134.5(b) or (c), as appropriate. The credit allowed under this section may not exceed the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowed, except payments of tax made by or on behalf of the taxpayer."
SECTION 39B.3.  This part becomes effective for taxable years beginning on or after January 1, 2003.

PART XL.	Reserved

part XLI.	Reserved

PART XLII.	Reserved

pART XLIII. eQUALIZE iNSURANCE tAX rATES on article 65 corporations

Requested by:	Senators Kerr, Hoyle, Garrou, Dalton, Hagan
SECTION 43.1.  G.S. 105‑228.5(d) reads as rewritten:
"(d)	Tax Rates; Disposition. – 
(1)	Workers' Compensation. – The tax rate to be applied to gross premiums, or the equivalent thereof in the case of self‑insurers, on contracts applicable to liabilities under the Workers' Compensation Act is two and five‑tenths percent (2.5%). The net proceeds shall be credited to the General Fund.
(2)	Other Insurance Contracts. – The tax rate to be applied to gross premiums on all other taxable contracts issued by insurers and to be applied to gross premiums and gross collections from membership dues, exclusive of receipts from cost plus plans, received by Article 65 corporations is one and nine‑tenths percent (1.9%). The net proceeds shall be credited to the General Fund.
(3)	Additional Statewide Fire and Lightning Rate. – An additional tax shall be applied to gross premiums on contracts of insurance applicable to fire and lightning coverage, except in the case of marine and automobile policies, at the rate of one and thirty‑three hundredths percent (1.33%). Twenty‑five percent (25%) of the net proceeds of this additional tax shall be deposited in the Volunteer Fire Department Fund established in Article 87 of Chapter 58 of the General Statutes. The remaining net proceeds shall be credited to the General Fund.
(4)	Additional Local Fire and Lightning Rate. – An additional tax shall be applied to gross premiums on contracts of insurance applicable to fire and lightning coverage within fire districts at the rate of one‑half of one percent (1/2 of 1%). The net proceeds shall be credited to the Department of Insurance for disbursement pursuant to G.S. 58‑84‑25.
	(6)	(Effective January 1, 2004) Health Maintenance Organizations. – The tax rate to be applied to gross premiums on insurance contracts issued by health maintenance organizations is one percent (1%). The net proceeds shall be credited to the General Fund."
SECTION 43.2.  G.S. 58‑6‑25(a) and (e) read as rewritten:
"(a)	Charge Levied. – There is levied on each insurance company an annual charge for the purposes stated in subsection (d) of this section. The charge levied in this section is in addition to all other fees and taxes. The percentage rate of the charge is established pursuant to subsection (b) of this section. For each insurance company that is not a health maintenance organization, the rate is applied to the company's premium tax liability for the taxable year. For health maintenance organizations, the rate is applied to a premium tax liability for the taxable year calculated as if the corporation or organization were paying tax at the rate in G.S. 105‑228.5(d)(2). In determining an insurance company's premium tax liability for a taxable year, the following shall be disregarded:
(1)	Additional taxes imposed by G.S. 105‑228.8.
(2)	The additional local fire and lightning tax imposed by G.S. 105‑228.5(d)(4).
(3)	Any tax credits for guaranty or solvency fund assessments under G.S. 105‑228.5A or G.S. 97‑133(a).
(4)	Any tax credits allowed under Chapter 105 of the General Statutes other than tax payments made by or on behalf of the taxpayer.
…
(e)	Definitions. – The following definitions apply in this section:
	(2)	Insurance company. – A company that pays the gross premiums tax levied in G.S. 105‑228.5 and G.S. 105‑228.8.
(3)	Insurer. – Defined in G.S. 105‑228.3."
SECTION 43.3.  Notwithstanding the provisions of G.S 105‑228.5(f), the following provisions apply to Article 65 Corporations, as defined in G.S. 105‑228.3, for the 2004 and 2005 taxable years in lieu of the provisions of G.S. 105‑228.5(f):
Article 65 corporations that are subject to the tax imposed by G.S. 105‑228.5 and have an estimated premium tax liability for the 2004 or 2005 taxable year, not including the additional local fire and lightning tax, of ten thousand dollars ($10,000) or more for business done in North Carolina shall remit two estimated tax payments with each payment equal to fifty percent (50%) of the taxpayer's estimated premium tax liability for the relevant taxable year. The first estimated payment is due on or before April 15 of the relevant year and the second estimated payment is due on or before June 15 of the relevant year. The taxpayer must remit the balance by the following March 15 in the same manner provided in G.S. 105‑228.5(e) for annual returns. 
An underpayment of an estimated payment required by this section bears interest at the rate established under G.S. 105‑241.1(i). Any overpayment bears interest as provided in G.S. 105‑266(b) and, together with the interest, must be credited to the taxpayer and applied against the taxes imposed upon the company under G.S. 105‑228.5.
The penalties provided in Article 9 of Chapter 105 of the General Statutes apply to the estimated tax payments required by this section.
SECTION 43.4.  This part is effective for taxable years beginning on or after January 1, 2004. The Commissioner of Insurance must make a certification to the Secretary of Revenue and to the Revisor of Statutes when there are no Article 65 corporations that offer medical service plans or hospital service plans. This part is repealed effective for taxable years beginning on or after the January 1 immediately following the certification required by this section.

pART XLiV.	cONTINUE USE TAX LINE ITEM ON INCOME TAX FORM

Requested by:	Senators Kerr, Hoyle, Garrou, Dalton, Hagan
SECTION 44.1.  Section 18 of S.L. 2000‑120 reads as rewritten:
"Section 18. Section 7 of this act becomes effective January 1, 2001. Sections 10 and 11 of this act become effective for taxable years beginning on or after January 1, 2005. The remainder of this act is effective when it becomes law."

Part xlv.		Conform to Streamlined sales and use tax agreement

Requested by:	Senators Kerr, Hoyle, Garrou, Dalton, Hagan
SECTION 45.1.  The Streamlined Sales and Use Tax Agreement is a historic multistate agreement designed to simplify and modernize sales and use tax collection and administration.  The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections.  To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement.  This part makes many of those necessary changes.  It is the intent of the General Assembly to make any additional changes necessary to conform to the mandates of the Agreement, including changes to provide for a uniform local tax base.
SECTION 45.2.  G.S. 105‑164.3 reads as rewritten:
"§ 105‑164.3.  Definitions.
The following definitions apply in this Article:
…
(4a)	Computer. – An electronic device that accepts information in digital or similar form and manipulates it for a result based on a sequence of instructions.
(4b)	Computer software. – A set of coded instructions designed to cause a computer or automatic data processing equipment to perform a task.
(5c)	Custom computer software. – Computer software that is not prewritten computer software. The term includes a user manual or other documentation that accompanies the sale of the software.
(5d)	Delivered electronically. – Delivered to the purchaser by means other than tangible storage media.
…
(7a)	Direct mail. – Printed material delivered or distributed by the United States Postal Service or other delivery service to a mass audience or to addresses on a mailing list provided by the purchaser or at the direction of the purchaser when the cost of the items is not billed directly to the recipients. The term includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail seller for inclusion in the package containing the printed material. The term does not include multiple items of printed material delivered to a single address.
…
(8a)	Drug. – A compound, substance, or preparation or a component of one of these that meets any of the following descriptions and is not food, a dietary supplement, or an alcoholic beverage:
a.	Is recognized in the United States Pharmacopoeia, Homeopathic Pharmacopoeia of the United States, or National Formulary.
b.	Is intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease.
c.	Is intended to affect the structure or function of the body.
(8b)	Durable medical equipment. – Equipment that meets all of the conditions of this subdivision. The term includes repair and replacement parts for the equipment. The term does not include mobility enhancing equipment.
a.	Can withstand repeated use.
b.	Primarily and customarily used to serve a medical purpose.
c.	Generally not useful to a person in the absence of an illness or injury.
d.	Not worn in or on the body.
(8c)	Electronic. – Relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities. …
(17)	Lease or rental. – A transfer of possession or control of tangible personal property for a fixed or indeterminate term for consideration. The term does not include any of the following:
a.	A transfer of possession or control of property under a security agreement or deferred payment plan that requires the transfer of title upon completion of the required payments.
b.	A transfer of possession or control of property under an agreement that requires the transfer of title upon completion of required payments and payment of an option price that does not exceed the greater of one hundred dollars ($100.00) or one percent (1%) of the total required payments.
c.	The providing of tangible personal property along with an operator for a fixed or indeterminate period of time if the operator is necessary for the equipment to perform as designed. For the purpose of this sub-subdivision, an operator must do more than maintain, inspect, or set up the tangible personal property.
(17a)	Load and leave. – Delivery to the purchaser by use of a tangible storage media where the tangible storage media is not physically transferred to the purchaser.
…
(21a)	Mobility enhancing equipment. – Equipment that meets all of the conditions of this subdivision. The term includes repair and replacement parts for the equipment. The term does not include durable medical equipment.
a.	Primarily and customarily used to provide or increase the ability of an individual to move from one place to another.
b.	Appropriate for use either in a home or motor vehicle.
c.	Not generally used by a person with normal mobility.
d.	Not normally provided on a motor vehicle by a motor vehicle manufacturer.
…
(25a)	Over-the-counter drug. – A drug that can be dispensed under federal law without a prescription and is required by 21 C.F.R. § 210.66 to have a label containing a "Drug Facts" panel and a statement of its active ingredients.
…
(28)	Prepared food. – Food that meets at least one of the conditions of this subdivision. Prepared food does not include food the retailer sliced, repackaged, or pasteurized but did not otherwise process.
a.	It is sold in a heated state or it is heated by the retailer.
b.	It consists of two or more foods mixed or combined by the retailer for sale as a single item. This sub‑subdivision does not include foods containing raw eggs, fish, meat, or poultry that require cooking by the consumer as recommended by the Food and Drug Administration to prevent food borne illnesses. 
c.	It is sold with eating utensils provided by the retailer, such as plates, knives, forks, spoons, glasses, cups, napkins, and straws.

(29)	Prescription. – An order, formula, or recipe issued orally, in writing, electronically, or by another means of transmission by a physician, dentist, veterinarian, or another person licensed to prescribe drugs.
(29a)	Prewritten computer software. – Computer software, including prewritten upgrades, that is not designed and developed by the author or another creator to the specifications of a specific purchaser. The term includes software designed and developed by the author or another creator to the specifications of a specific purchaser when it is sold to a person other than the specific purchaser.…
(30a)	Prosthetic device. – A replacement, corrective, or supporting device worn on or in the body that meets one of the conditions of this subdivision. The term includes repair and replacement parts for the device.
a.	Artificially replaces a missing portion of the body.
b.	Prevents or corrects a physical deformity or malfunction.
c.	Supports a weak or deformed portion of the body.
…
(46)	Tangible personal property. – Personal property that may be seen, weighed, measured, felt, or touched or is in any other manner perceptible to the senses. The term includes electricity, water, gas, steam, and prewritten computer software."
SECTION 45.3.  G.S. 105‑164.4B reads as rewritten:
"§ 105‑164.4B.  Sourcing principles.
(a)	General Principles. – The following principles apply in determining where to source the sale of a product. These principles apply regardless of the nature of the product.
(1)	Over‑the‑counter. – When a purchaser receives a product at a business location of the seller, the sale is sourced to that business location.
(2)	Delivery to specified address. – When a purchaser receives a product at a location specified by the purchaser and the location is not a business location of the seller, the sale is sourced to the location where the purchaser receives the product.
(3)	Delivery address unknown. – When a seller of a product does not know the address where a product is received, the sale is sourced to the first address or location listed in this subdivision that is known to the seller:
a.	The business or home address of the purchaser.
b.	The billing address of the purchaser or, if the product is a prepaid telephone calling service that authorizes the purchase of mobile telecommunications service, the location associated with the mobile telephone number.
c.	The billing address of the purchaser.
(b)	Periodic Rental Payments. – When a lease or rental agreement requires recurring periodic payments, the payments are sourced as follows:
(1)	For leased or rented property, the first payment is sourced in accordance with the principles set out in subsection (a) of this section and each subsequent payment is sourced to the primary location of the leased or rented property for the period covered by the payment. This subdivision applies to all property except a motor vehicle, an aircraft, and transportation equipment.
(2)	For leased or rented property that is a motor vehicle or an aircraft but is not transportation equipment, all payments are sourced to the primary location of the leased or rented property for the period covered by the payment.
(3)	For leased or rented property that is transportation equipment, all payments are sourced in accordance with the principles set out in subsection (a) of this section.
(c)	Transportation Equipment Defined. – As used in the section, the term "transportation equipment" means any of the following used to carry persons or property in interstate commerce: a locomotive, a railway car, a commercial motor vehicle as defined in G.S. 20-4.01, or an aircraft. The term includes a container designed for use on the equipment and a component part of the equipment.
(d)	Exceptions. – This section does not apply to the following:
(1)	Telecommunications services. – Telecommunications services are sourced in accordance with G.S. 105‑164.4C.
(2)	Direct mail. – Direct mail that meets one of the conditions of this subdivision is sourced to the location where the property is delivered. In all other cases, direct mail is sourced in accordance with the principles set out in subsection (a) of this section.
a.	Direct mail purchased pursuant to a direct pay permit.
b.	When the purchaser provides the seller with information to show the jurisdictions to which the direct mail is to be delivered. "
SECTION 45.4.  G.S. 105‑164.6A(b) reads as rewritten:
"(b)	Mandatory Provisions. – The agreements must contain the following provisions:
(1)	The seller is not liable for use tax not paid to it by a customer.
(2)	A customer's payment of a use tax to the seller relieves the customer of liability for the use tax.
(3)	The seller must remit all use taxes it collects from customers on or before the due date specified in the agreement, which may not be later than 31 days after the end of a quarter or other collection period. The collection period cannot be more often than annually if the seller's State and local tax collections are less than one thousand dollars ($1,000) in a calendar year.
(4)	A seller who fails to remit use taxes collected on behalf of its customers by the due date specified in the agreement is subject to the interest and penalties provided in Article 9 of this Chapter with respect to the taxes to the same extent as if the seller were a retailer and were required to collect use taxes under this Article."
SECTION 45.5.  G.S. 105‑164.13 reads as rewritten:
"§ 105‑164.13.  Retail sales and use tax.
The sale at retail, the use, storage or consumption in this State of the following tangible personal property is specifically exempted from the tax imposed by this Article: 
…
(12)	Sales of any of the following items:
				
a.	Prosthetic devices.
b.	Mobility enhancing equipment sold on a prescription.
c.	Durable medical equipment sold on prescription.
(13)	All of the following drugs, including their packaging  materials and any instructions or information about the drugs included in the package with them:
a.	Drugs required by federal law to be dispensed only on prescription.
b.	Over-the-counter drugs sold on prescription.
c.	Insulin.
…
(43)	Custom computer software.  Custom computer software and the portion of prewritten computer software that is modified or enhanced if the modification or enhancement is designed and developed to the specifications of a specific purchaser and the charges for the modification or enhancement are separately stated.
(43a)	Computer software delivered electronically or delivered by load and leave.
…
(50)	Fifty percent (50%) of the sales price of tangible personal property sold through a coin‑operated vending machine, other than tobacco.
(51)	Water delivered by or through main lines or pipes for either commercial or domestic use or consumption."
SECTION 45.6.  G.S. 105‑164.13B reads as rewritten:
"§ 105‑164.13B.  Food exempt from tax.
Except as provided in this section, food is exempt from the taxes imposed by this Article. The taxes apply to the following:
								
(1)	Alcoholic beverages, as defined in G.S. 105-113.68.
(2)	Candy.
(3)	Dietary supplements.
(4)	Food sold through a vending machine.
(5)	Prepared food.
(6)	Soft drinks."
SECTION 45.7.  G.S. 105‑164.13C(c) is repealed.
SECTION 45.8.  G.S. 105‑164.16(b1) reads as rewritten:
"(b1)	Monthly. – A taxpayer who is consistently liable for more than one hundred dollars ($100.00) but less than ten thousand dollars ($10,000) a month in State and local sales and use taxes must file a return and pay the taxes due on a monthly basis. A monthly return is due by the  20th day of the month following the calendar month covered by the return."
SECTION 45.9.  G.S. 105‑164.27A(a) reads as rewritten:
"(a)	Tangible Personal Property. – A direct pay permit for tangible personal property authorizes its holder to purchase any tangible personal property without paying tax to the seller and authorizes the seller to not collect any tax on a sale to the permit holder. A person who purchases tangible personal property under a direct pay permit issued under this subsection is liable for use tax due on the purchase. The tax is payable when the property is placed in use. A direct pay permit issued under this subsection does not apply to taxes imposed under G.S. 105‑164.4(a)(1f) or G.S. 105‑164.4(a)(4a).
A person who purchases direct mail may apply to the Secretary for a direct pay permit for the purchase of direct mail. The direct pay permit issued for direct mail does not apply to any purchase other than the purchase of direct mail.
A person who purchases tangible personal property whose tax status cannot be determined at the time of the purchase because of one of the reasons listed below may apply to the Secretary for a direct pay permit for tangible personal property:
(1)	The place of business where the property will be used is not known at the time of the purchase and a different tax consequence applies depending on where the property is used.
(2)	The manner in which the property will be used is not known at the time of the purchase and one or more of the potential uses is taxable but others are not taxable."
SECTION 45.10.  G.S. 105‑466(c) reads as rewritten:
"(c)	Collection of the tax, and liability therefor, must begin and continue only on and after the first day of the month of either January or July, as set by the board of county commissioners in the resolution levying the tax. In no event may the tax be imposed, or the tax rate changed, earlier than the first day of the second succeeding calendar month after the date of the adoption of the resolution. The county must give the Secretary at least 90 days advance notice of a new tax levy or tax rate change. The applicability of a new tax or a tax rate change to purchases from printed catalogs becomes effective on the first day of a calendar quarter after a minimum of 120 days from the date the Secretary notifies the seller that receives orders by means of a catalog or similar publication of the new tax or tax rate change."
SECTION 45.11.  Sections 45.2 through 45.10 of this act become effective July 1, 2003. The remainder of this part is effective when it becomes law.

paRT XLVI. SECURITY INTEREST DEBT

Requested by:	Senators Kerr, Hoyle, Garrou, Dalton, Hagan
SECTION 46.1.  Repair and Renovation. – This section authorizes the issuance or incurrence of special indebtedness in a maximum aggregate principal amount of two hundred fifty million dollars ($250,000,000) to be used only in accordance with this section for the repair and renovation of State facilities and related infrastructure that are supported from the General Fund. 
Proceeds of the Repair and Renovation special indebtedness shall be used only for the purposes and in accordance with the procedures provided in G.S. 143‑15.3A, the Repairs and Renovations Reserve Account. 
Except in the case of an emergency as provided in G.S. 143‑15.3A, the Director of the Budget shall use the Repair and Renovations funds only for repairs and renovations that have been approved by an act of the General Assembly or, if the General Assembly is not in session, for repairs and renovations about which the Director of the Budget has first consulted with the Joint Legislative Commission on Governmental Operations under G.S. 143‑15.3A(c). The Director of the Budget shall direct the State Treasurer to carry out the financing for repair and renovation projects selected pursuant to this section. Special indebtedness authorized by this section shall be issued or incurred only in accordance with Article 9 of Chapter 142 of the General Statutes, as enacted by this part.
SECTION 46.2.  Chapter 142 of the General Statutes is amended by adding a new Article to read:
"Article 9.
"State Capital Facilities Finance Act.
"§ 142‑80.  Short title.
This Article may be cited as the State Capital Facilities Finance Act.
"§ 142‑81.  Findings and purpose.
The General Assembly finds as follows:
(1)	There is a continuing need for capital facilities for the State, many of which will continue to be provided on a "pay‑as‑you‑go" basis by direct appropriations.
(2)	The State will also continue to provide capital facilities through the issuance of general obligation bonds.
(3)	There is a need, however, for the use of alternative financing methods, such as authorized in this Article, to facilitate the providing of capital facilities when circumstances and conditions warrant the providing of capital facilities through financing methods in addition to direct appropriations and the issuance of general obligation bonds.
(4)	The use of these alternative financing methods as authorized in this Article will provide financing flexibility to the State and permit the State to take advantage of changing financial and economic environments.
"§ 142‑82.  Definitions.
The following definitions apply in this Article:
(1)	Bonded indebtedness. – Limited obligation bonds and bond anticipation notes, including refunding bonds and notes, authorized to be issued under this Article.
(2)	Bonds or notes. – Limited obligation bonds and notes authorized to be issued under this Article.
(3)	Capital facility. – Any one or more of the following:
a.	Any one or more buildings, utilities, structures, or other facilities or property developments, including streets and landscaping, and the acquisition of equipment, machinery, and furnishings in connection with these items.
b.	Additions, extensions, enlargements, renovations, and improvements to existing buildings, utilities, structures, or other facilities or property developments, including streets and landscaping.
c.	Land or an interest in land.
d.	Other infrastructure.
e.	Furniture, fixtures, equipment, vehicles, machinery, and similar items.
(4)	Certificates of participation. – Certificates or other instruments delivered by a special corporation evidencing the assignment of proportionate undivided interests in rights to receive payments pursuant to a financing contract.
(5)	Certificates of participation indebtedness. – Financing contract indebtedness incurred by the State under a plan of finance in which a special corporation obtains funds to pay the cost of a capital facility to be financed through the delivery by the special corporation of certificates of participation.
(6)	Cost. – Any of the following in financing the cost of capital facilities as authorized by this Article:
a.	The cost of constructing, reconstructing, renovating, repairing, enlarging, acquiring, and improving capital facilities, including the acquisition of land, rights-of-way, easements, franchises, equipment, machinery, furnishings, and other interests in real or personal property acquired or used in connection with a capital facility.
b.	The cost of engineering, architectural, and other consulting services.
c.	The cost of providing personnel to ensure effective management of capital facilities.
d.	Finance charges, reserves for debt service, and other types of reserves required pursuant to the terms of any special indebtedness or related documents, interest before and during construction or acquisition of a capital facility and, if considered advisable by the State Treasurer, for a period not exceeding two years after the estimated date of completion of construction or acquisition.
e.	Administrative expenses and charges.
f.	The cost of bond insurance, investment contracts, credit enhancement facilities and liquidity facilities, interest rate swap agreements or other derivative products, financial and legal consultants, and related costs of the incurrence or issuance of special indebtedness.
g.	The cost of reimbursing the State, a State agency, or a special corporation for any payments made for any cost described in this subdivision.
h.	Any other costs and expenses necessary or incidental to the purposes of this Article.
(7)	Credit facility. – An agreement that:
a.	Is entered into by the State with a bank, savings and loan association, or other banking institution, an insurance company, reinsurance company, surety company, or other insurance institution, a corporation, investment banking firm, or other investment institution, or any financial institution or other similar provider of a credit facility, which provider may be located within or without the United States of America; and
b.	Provides for prompt payment of all or any part of the principal or purchase price (whether at maturity, presentment or tender for purchase, redemption, or acceleration), redemption premium, if any, and interest with respect to any special indebtedness payable on demand or tender by the owner in consideration of the State's agreeing to repay the provider of the credit facility in accordance with the terms and provisions of the agreement.
(8)	Department of Administration. – The North Carolina Department of Administration, created by Article 36 of Chapter 143 of the General Statutes, or if the Department is abolished or otherwise divested of its functions under this Article, the public body succeeding it in its principal functions or upon which are conferred by law the rights, powers, and duties given by this Article to the Department.
(9)	Financing contract. – A contract entered into pursuant to this Article to finance capital facilities and constituting a lease‑purchase contract, installment-purchase contract, or other similar type installment financing contract. The term does not include, however, a contract that meets any one of the following conditions:
a.	It constitutes an operating lease under generally accepted accounting principles.
b.	It provides for the payment under the contract over its full term, including periods that may be added to the original term through the exercise of options to renew or extend, of an aggregate principal amount of not in excess of five thousand dollars ($5,000) or any greater amount that may be established by the Council of State if the Council of State determines (i) the aggregate amount to be paid under these contracts will not have a significant impact on the State budgetary process or the economy of the State and (ii) the change will lessen the administrative burden on the State.
c.	It is executed and provides for the making of all payments under the contract, including payment to be made during any period that may be added to the original term through the exercise of options to renew or extend, in the same fiscal year.
(10)	Financing contract indebtedness. – Indebtedness incurred pursuant to a financing contract, including certificates of participation indebtedness.
(11)	Fiscal period. – A fiscal biennium or a fiscal year of the fiscal biennium.
(12)	Fiscal year. – The fiscal year of the State beginning on July 1 of one calendar year and ending on June 30 of the next calendar year.
(13)	Limited obligation bond. – A limited obligation bond issued pursuant to G.S. 142-88 and payable and secured as provided in G.S. 142-89.
(14)	Par formula. – A provision or formula adopted by the State to provide for the adjustment, from time to time, of the interest rate or rates borne or provided for by any special indebtedness, including any of the following:
a.	A provision providing for an adjustment so that the purchase price of special indebtedness in the open market would be as close to par as possible.
b.	A provision providing for an adjustment based upon a percentage or percentages of a prime rate or base rate, which percentages may vary or be applied for different periods of time.
c.	Any provision that the State Treasurer determines is consistent with this Article and will not materially and adversely affect the financial position of the State and the marketing of special indebtedness at a reasonable interest cost to the State.
(15)	Person. – An individual, a firm, a partnership, an association, a corporation, a limited liability company, or any other organization or group acting as a unit.
(16)	Special corporation. – Either of the following:
a.	A nonprofit corporation created under Chapter 55A of the General Statutes for the purpose of facilitating the incurrence of certificates of participation indebtedness by the State under this Article.
b.	A private corporation or other entity issuing certificates of participation pursuant to this Article.
(17)	Special indebtedness. – Financing contract indebtedness and bonded indebtedness issued or incurred pursuant to this Article.
(18)	State. – The State of North Carolina, including any State agency.
(19)	State agency. – Any agency, institution, board, commission, bureau, council, department, division, officer, or employee of the State. The term does not include counties, municipal corporations, political subdivisions, local boards of education, or other local public bodies.
(20)	State Treasurer. – The incumbent Treasurer, from time to time, of the State.
"§ 142‑83.  Authorization of special indebtedness; General Assembly approval.
The State may incur or issue special indebtedness subject to the terms and conditions provided in this Article for the purpose of financing the cost of capital facilities that meet one of the following conditions:
(1)	The General Assembly has enacted legislation describing the capital facility and authorizing its financing by the incurrence or issuance of special indebtedness up to a specific maximum amount.
(2)	The General Assembly has enacted legislation authorizing the incurrence or issuance of special indebtedness up to a specific maximum amount for a specific category of capital facilities, and the capital facility meets all of the conditions set in that legislation.
"§ 142‑84.  Procedure for incurrence or issuance of special indebtedness. 
(a)	Notice and Certificate. – Whenever the State or a State agency determines that special indebtedness is appropriate to finance capital facilities, it shall notify the Department of Administration. If the Department of Administration concurs, it shall provide written notice to the State Treasurer advising the State Treasurer of this determination.
After the filing of the notice and after any preliminary conference, the State Treasurer shall consult with the Office of State Budget and Management as to the revenues expected by that Office to be available to pay all sums to come due on the special indebtedness during its term. If, after consulting with the Office of State Budget and Management, the State Treasurer determines by written certificate that it may be desirable to use special indebtedness to finance the capital facilities, the Department of Administration shall request the Council of State to give its preliminary approval of the use of special indebtedness to finance the capital facilities. The Department of Administration must promptly file copies of the notice and certificate required by this subsection with the Governor and the Council of State.
(b)	Preliminary Approval. – The Council of State, upon receipt of the notice and certificate required by subsection (a) of this section, shall adopt a resolution granting or denying preliminary approval of the financing. A resolution granting preliminary approval may include any other terms, conditions, and restrictions the Council of State considers appropriate and not inconsistent with the provisions of this Article.
(c)	Final Approval. – Before any special indebtedness may be incurred or issued pursuant to this Article, the Council of State must authorize the indebtedness by resolution, either as part of or separate from the resolution required by subsection (b) of this section. The resolution must do all of the following:
(1)	Authorize the providing of a particular capital facility or, in general terms, the types or classifications of capital facilities to be provided.
(2)	Set the aggregate principal amount or maximum principal amount of the special indebtedness authorized.
(3)	Set the maturity or maximum maturity of the special indebtedness authorized.
(4)	Set the rate, rates, or maximum rate of interest, which may be fixed or vary over a period of time, of the special indebtedness authorized.
(5)	Include any other conditions or matters not inconsistent with the provisions of this Article in the discretion of the Council of State, which may include the adoption or approvals as may be authorized in G.S. 142‑88 and G.S. 142‑89.
(d)	Financing Terms. – No special indebtedness shall be incurred or issued without the prior written approval of the State Treasurer as provided in this subsection, which is in addition to the certificate given by the State Treasurer pursuant to subsection (a) of this section. In determining whether to approve the proposed financing, the State Treasurer may consider any factors the State Treasurer considers relevant in order to find and determine all of the following:
(1)	The amounts to become due under the special indebtedness, including the interest component or rate, are adequate and not excessive for the purpose proposed.
(2)	The increase, if any, in State revenues, including taxes, necessary to pay the sums to become due under the special indebtedness, is not excessive.
(3)	The special indebtedness can be incurred or issued on terms desirable to the State.
(e)	Designation of Facilities. – If the Council of State authorized in general terms the types or classifications of capital facilities to be financed, then the particular capital facilities and the principal amount of special indebtedness to be incurred or issued for each particular capital facility shall be determined by the Department of Administration after considering any factors it considers relevant in order to determine that the particular capital facility to be provided is desirable for the efficient operation of the State and its agencies and is in the best interests of the State.
(f)	Type of Debt and Security. – In the absence of a determination by the Council of State, the State Treasurer, after consultation with the Department of Administration, shall determine the specific security offered and whether the special indebtedness to be issued or incurred shall be financing contract indebtedness, certificates of participation indebtedness, bonded indebtedness, or some combination of these.
(g)	Administration. – The State Treasurer, after consultation with the Department of Administration, shall develop appropriate documents for use under this Article. The State Treasurer shall employ and designate the financial consultants, fiduciaries and other agents, underwriters, and bond attorneys to be associated with the incurrence or issuance of special indebtedness pursuant to this Article.
(h)	Oversight by Joint Legislative Commission. – After all the requirements for approval and oversight provided in this section have been met, and at least five days before the issuance or incurrence of the special indebtedness, the State Treasurer must report to the Joint Legislative Commission on Governmental Operations. This report must include the details of the proposed special indebtedness, including the capital facilities to be financed by the indebtedness, the amount of the proposed indebtedness, the type of indebtedness to be issued or incurred, and any other information required by the Commission.
"§ 142‑85.  Security; other requirements.
(a)	Security. – In order to secure (i) lease or installment payments to be made to the lessor, seller, or other person advancing moneys or providing financing under a financing contract, (ii) payment of the principal of and interest on bonded indebtedness, or (iii) payment obligations of the State to the provider of bond insurance, a credit facility, a liquidity facility, or a derivative agreement, special indebtedness may create any combination of the following:
(1)	A lien on or security interest in one or more, all, or any part of the capital facilities to be financed by the special indebtedness.
(2)	If the special indebtedness is to finance construction of improvements on real property, a lien on or security interest in all or any part of the land on which the improvements are to be located.
(3)	If the special indebtedness is to finance renovations or improvements to existing facilities or the installation of fixtures in existing facilities, a lien on or security interest in one or more, all, or any part of the facilities.
(b)	Value of Security; Multiple Liens. – The estimated value of the property subject to the lien or security interest need not bear any particular relationship to the principal amount of the special indebtedness or other obligation it secures. This Article does not limit the right of the State to grant multiple liens or security interests in a capital facility or other property to the extent not otherwise limited by the terms of any special indebtedness.
(c)	Governor's Budget. – Documentation relating to any special indebtedness may include provisions requesting the Governor to submit in the Governor's budget proposal or any amendments or supplements to the budget proposed appropriations necessary to make the payments required by the special indebtedness. 
(d)	Source of Repayment. – The payment of amounts payable by the State under special indebtedness or any related documents during any fiscal period shall be limited to funds appropriated for that purpose by the General Assembly in its discretion. 
(e)	No Deficiency Judgment or Pledge. – No deficiency judgment may be rendered against the State in any action for breach of any obligation under special indebtedness or any related documents. The taxing power of the State is not and may not be pledged directly or indirectly to secure any moneys due under special indebtedness or any related documents. In the event that the General Assembly does not appropriate sums sufficient to make payments required under any special indebtedness or any related documents, the net proceeds received from the sale or other disposition of the property subject to the lien or security interest shall be applied to satisfy these payment obligations in accordance with the deed of trust, security agreement, or other documentation relating to the lien or security interest. These net proceeds are appropriated for the purpose of making these payments. Any net proceeds in excess of the amount required to satisfy the obligations of the State under any special indebtedness or any related documents shall be paid to the State Treasurer for deposit to the General Fund.
(f)	Nonsubstitution Clause. – A financing contract, issue of bonded indebtedness, or other related document shall not contain a nonsubstitution clause that restricts the right of the State to (i) continue to provide a service or conduct an activity or (ii) replace or provide a substitute for any capital facility.
(g)	Protection of Lender. – Special indebtedness may contain any provisions for protecting and enforcing the rights and remedies of the person advancing moneys or providing financing under a financing contract, the owners of bonded indebtedness, or others to whom the State is obligated under special indebtedness or any related documents as may be reasonable and proper and not in violation of law. These provisions may include covenants setting forth the duties of the State in respect of any of the following:
(1)	The purposes to which the proceeds of special indebtedness may be applied.
(2)	The disposition and application of the revenues of the State, including taxes.
(3)	Insuring, maintaining, and other duties with respect to the capital facilities financed.
(4)	The disposition of any charges and collection of any revenues and administrative charges.
(5)	The terms and conditions of the issuance of additional special indebtedness.
(6)	The custody, safeguarding, investment, and application of all moneys.
(h)	State Property Law Exception. – Chapter 146 of the General Statutes does not apply to any transfer of the State's interest in property authorized by this Article, whether to a deed of trust trustee or other secured party as security for special indebtedness, or to a purchaser of property in connection with a foreclosure or similar conveyance of property to realize upon the security for special indebtedness following the State's default on its obligations under the special indebtedness.
"§ 142‑86.  Financing contract indebtedness.
(a)	Documentation. – Financing contract indebtedness shall not be incurred until all documentation providing for its incurrence has been approved by the State Treasurer, after the State Treasurer has consulted with the Department of Administration.
(b)	Interest Component. – A financing contract may provide for payments under the contract to represent principal and interest components of the cost of the capital facility to be financed, as determined by the State Treasurer.
(c)	Bidding. – Financing contracts may be entered into pursuant to any applicable public or competitive bidding process or any private or negotiated process, to the extent required by applicable law, and if not so required, as may be determined by the Department of Administration after consulting with the State Treasurer.
(d)	Party. – All financing contracts shall be executed on behalf of the State by the State Treasurer or, upon delegation by the State Treasurer after having approved the financing contract, by the Department of Administration.
(e)	Credit Facility. – If the State Treasurer determines that it is in the best interest of the State, the State Treasurer may arrange for the delivery of a credit facility to secure payment under any financing contract. The State Treasurer may also provide that payments by the State representing the interest component of the payments to be made under a financing contract may be calculated based upon a fixed or a variable rate of interest.
(f)	Terms and Conditions. – All other conditions set forth elsewhere in this Article with respect to financing contract indebtedness shall also be satisfied prior to incurring any financing contract indebtedness. To the extent applicable as conclusively determined by the State Treasurer, the provisions of G.S. 142‑89, 142‑90, and 142‑91 apply to financing contract indebtedness.
"§ 142‑87.  Additional requirements for certificates of participation indebtedness.
(a)	Documentation. – A financing contract shall not be used in connection with the delivery of certificates of participation by a special corporation until all documentation providing for its use has been approved by the State Treasurer, after the State Treasurer has consulted with the Department of Administration. All documentation providing for the delivery and sale of certificates of participation must be approved by the State Treasurer.
(b)	Procedure. – The special corporation, if used, shall request the approval of the State Treasurer in writing and shall furnish any information and documentation relating to the delivery and sale of the certificates of participation requested by the State Treasurer. In determining whether to approve the financing in the documentation, the State Treasurer shall consider the factors set forth in G.S. 142‑84(d), as well as the effect of the proposed financing upon any scheduled or proposed sale of debt obligations by the State or a unit of local government in the State.
(c)	Terms; Interest. – Certificates of participation may be sold by the State Treasurer in the manner, either at public or private sale, and for any price or prices that the State Treasurer determines to be in the best interest of the State and to effect the purposes of this Article, except that the terms of the sale must also be approved by the special corporation. Interest payable with respect to certificates of participation shall accrue at the rate or rates determined by the State Treasurer with the approval of the special corporation.
(d)	Trust Agreement. – Certificates of participation may be delivered pursuant to a trust agreement or similar instrument with a corporate trustee approved by the State Treasurer, and the provisions of G.S. 142‑89(h) apply to the trust agreement or similar instrument to the extent applicable.
(e)	Other Conditions. – All other conditions set forth elsewhere in this Article with respect to certificates of participation indebtedness, including the conditions set forth in G.S. 142‑86, must be satisfied before any certificates of participation indebtedness is incurred.
"§ 142‑88.  Bonded indebtedness.
The State Treasurer is authorized, by and with the consent of the Council of State as provided in this Article, to issue and sell at one time or from time to time bonds of the State to be designated "State of North Carolina Limited Obligation Bonds, Series____" or notes of the State as provided in this Article, for the purpose of providing funds, with any other available funds, for the uses authorized in this Article.
"§ 142‑89.  Issuance of limited obligation bonds and notes.
(a)	Terms and Conditions. – Bonds or notes may bear any dates, may be serial or term bonds or notes, or any combination of these, may mature in any amounts and at any times, not exceeding 40 years from their dates, may be payable at any places, either within or without the United States, in any coin or currency of the United States that at the time of payment is legal tender for payment of public and private debts, may bear interest at any rates, which may vary from time to time, and may be made redeemable before maturity, at the option of the State or otherwise as may be provided by the State, at any prices, including a price greater than the face amount of the bonds or notes, and under any terms and conditions, all as may be determined by the State Treasurer, by and with the consent of the Council of State.
(b)	Signatures; Form and Denomination; Registration. – Bonds or notes may be issued in certificated or uncertificated form. If issued in certificated form, bonds or notes shall be signed on behalf of the State by the Governor or shall bear the Governor's facsimile signature, shall be signed by the State Treasurer or shall bear the State Treasurer's facsimile signature, and shall bear the great seal of the State or a facsimile of the seal impressed or imprinted on them. If bonds or notes bear the facsimile signatures of the Governor and the State Treasurer, the bonds or notes shall also bear a manual signature which may be that of a bond registrar, trustee, paying agent, or designated assistant of the State Treasurer. If any officer whose signature or facsimile signature appears on bonds or notes issued under this Article ceases to be that officer before the delivery of the bonds or notes, the signature or facsimile signature shall nevertheless have the same validity for all purposes as if the officer had remained in office until delivery of the bonds or notes. Bonds or notes issued under this Article may bear the facsimile signatures of persons, who at the actual time of the execution of the bonds or notes, were the proper officers to sign any bond or note although at the date of the bond or note those persons may not have been officers.
The form and denomination of bonds or notes, including the provisions with respect to registration of the bonds or notes and any system for their registration, shall be as prescribed by the State Treasurer in conformity with this Article.
(c)	Manner of Sale; Expenses. – Subject to the approval by the Council of State as to the manner in which bonds or notes will be offered for sale, whether at public or private sale, whether within or without the United States, and whether by publishing notices in certain newspapers and financial journals, mailing notices, inviting bids by correspondence, negotiating contracts of purchase or otherwise, the State Treasurer is authorized to sell bonds or notes at one time or from time to time at any rates of interest, which may vary from time to time, and at any prices, including a price less than the face amount of the bonds or notes, as the State Treasurer may determine. All expenses incurred in the preparation, sale, and issuance of bonds or notes shall be paid by the State Treasurer from the proceeds of bonds or notes or other available moneys.
(d)	Application of Proceeds. – The proceeds of any bonds or notes shall be used solely for the purposes for which the bonds or notes were issued and shall be disbursed in the manner and under the restrictions, if any, that the Council of State may provide in the resolution authorizing the issuance of, or in any trust agreement securing, the bonds or notes.
Any additional moneys that may be received by means of a grant or grants from the United States or any agency or department thereof or from any other source to aid in financing the cost of a capital facility may be disbursed, to the extent permitted by the terms of the grant or grants, without regard to any limitations imposed by this Article.
(e)	Notes; Repayment. – By and with the consent of the Council of State, the State Treasurer is authorized to borrow money and to execute and issue notes of the State for the same, but only in any of the following circumstances and under the following conditions:
(1)	For anticipating the sale of bonds, the issuance of which the Council of State has approved, if the State Treasurer considers it advisable to postpone the issuance of the bonds.
(2)	For the payment of interest on or any installment of principal of any bonds then outstanding, if there are not sufficient funds in the State treasury with which to pay the interest or installment of principal as they respectively become due.
(3)	For the renewal of any loan evidenced by notes authorized in this Article.
(4)	For the purposes authorized in this Article.
(5)	For refunding bonds or notes or financing contract indebtedness as authorized in this Article.
Funds derived from the sale of limited obligation bonds or notes may be used in the payment of any bond anticipation notes issued under this Article. Funds provided by the General Assembly for the payment of interest on or principal of bonds shall be used in paying the interest on or principal of any notes and any renewals thereof, the proceeds of which have been used in paying interest on or principal of the bonds.
(f)	Refunding Bonds and Notes. – By and with the consent of the Council of State, the State Treasurer is authorized to issue and sell refunding bonds and notes for the purpose of refunding special indebtedness and to pay the cost of issuance of the refunding bonds or notes. The refunding bonds and notes may be combined with any other issues of State bonds and notes issued pursuant to this Article. Refunding bonds or notes may be issued at any time prior to the final maturity of the debt or obligation to be refunded. The proceeds from the sale of any refunding bonds or notes shall be applied to the immediate payment and retirement of the obligations being refunded or, if not required for the immediate payment of the obligations being refunded, the proceeds shall be deposited in trust to provide for the payment and retirement of the obligations being refunded and to pay any expenses incurred in connection with the refunding. Money in a trust fund may be invested in (i) direct obligations of the United States government, (ii) obligations the principal of and interest on which are guaranteed by the United States government, (iii) to the extent then permitted by law, obligations of any agency or instrumentality of the United States government, or (iv) certificates of deposit issued by a bank or trust company located in the State if the certificates are secured by a pledge of any of the obligations described in (i), (ii), or (iii) above having an aggregate market value, exclusive of accrued interest, equal at least to the principal amount of the certificates so secured. This section does not limit the duration of any deposit in trust for the retirement of obligations being refunded but that have not matured and are not presently redeemable, or if presently redeemable, have not been called for redemption.
(g)	Security. – Payment of the principal of and the interest on bonds and notes shall be secured as provided in G.S. 142‑85.
(h)	Trust Agreement. – In the discretion of the State Treasurer, any bonds and notes issued under this Article may be secured by a trust agreement or similar instrument between the State and a corporate trustee or by a resolution of the Council of State providing for the appointment of a corporate trustee. The corporate trustee may be, in either case, any trust company or bank that has the powers of a trust company within or without the State. The trust agreement or similar instrument or resolution, hereinafter referred to as "the trust", may provide for security and pledges and assignments that are permitted under this Article and may provide for the granting of a lien or security interest as authorized by G.S. 142‑85. The trust may contain any provisions for protecting and enforcing the rights and remedies of the owners of any bonds or notes issued under the trust that are reasonable and not in violation of law, including covenants setting forth the duties of the State with respect to the purposes for which bond or note proceeds may be applied, the disposition and application of the revenues or assets of the State, the duties of the State with respect to the capital facilities financed, the disposition of any charges and collection of any revenues and administrative charges, the terms and conditions of the issuance of additional bonds and notes, and the custody, safeguarding, investment, and application of all moneys. All bonds and notes issued under this Article pursuant to the same trust shall be equally and ratably secured as provided in the trust, without priority by reasons of number, dates of bonds or notes, execution, or delivery, in accordance with the provisions of this Article and of the trust. The trust may, however, provide that bonds or notes issued pursuant to the trust shall, to the extent and in the manner prescribed in the trust, be subordinated and junior in standing, with respect to the payment of principal and interest and to the security of the payment, to any other bonds or notes issued pursuant to the trust. It is lawful for any bank or trust company that may act as depositary of the proceeds of bonds or notes, revenues, or any other money under this Article to furnish any indemnifying bonds or to pledge any securities that may be required by the State Treasurer. The trust may set out the rights and remedies of the owners of any bonds or notes and of any trustee, and may restrict the individual rights of action by the owners. In addition to the foregoing, the trust may contain any other provisions the State Treasurer considers appropriate for the security of the owners of any bonds or notes. Expenses incurred in carrying out the provisions of the trust may be treated as a part of the cost of any capital facility or as an administrative charge and may be paid from the proceeds of the bonds or notes or from any other available funds.
"§ 142‑90.  Variable rate demand bonds and notes and financing contract indebtedness.
(a)	In fixing the details of special indebtedness, the State Treasurer may make the special indebtedness subject to any of the following conditions:
(1)	It is payable from time to time on demand or tender for purchase by the owner thereof, if a credit facility supports the special indebtedness, unless the State Treasurer specifically determines that a credit facility is not required upon a determination by the State Treasurer that the absence of a credit facility will not materially and adversely affect the financial position of the State or the marketing of the bonds or notes or financing contract indebtedness at a reasonable interest cost to the State.
(2)	It is additionally supported by a credit facility.
(3)	It is subject to redemption or mandatory tender for purchase prior to maturity.
(4)	It bears interest at a rate or rates that may be fixed or may vary over any period of time, as may be provided in the proceedings providing for the issuance or incurrence of the special indebtedness, including any variations that may be permitted pursuant to a par formula.
(5)	It is the subject of a remarketing agreement under which an attempt is made to remarket special indebtedness to new purchasers before its presentment for payment to the provider of the credit facility or to the State.
(b)	If the aggregate principal amount payable by the State under a credit facility is in excess of the aggregate principal amount of special indebtedness secured by the credit facility, whether as a result of the inclusion in the credit facility of a provision for the payment of interest for a limited period of time or the payment of a redemption premium or for any other reason, then the amount of authorized but unissued bonds or notes and financing contract indebtedness during the term of the credit facility shall not be less than the amount of the excess, unless the payment of the excess is otherwise provided for by agreement of the State executed by the State Treasurer.
"§ 142‑91.  Other agreements.
The State Treasurer may authorize, execute, obtain, or otherwise provide for bond insurance, investment contracts, credit and liquidity facilities, credit enhancement facilities, interest rate swap agreements and other derivative products, and any other related instruments and matters the State Treasurer determines are desirable in connection with the issuance of special indebtedness. The State Treasurer is authorized to employ and designate any financial consultants, underwriters, fiduciaries, and bond attorneys to be associated with any incurrence or issuance of special indebtedness under this Article as the State Treasurer considers appropriate.
"§ 142‑92.  Tax exemption.
Special indebtedness shall at all times be free from taxation by the State or any political subdivision or any of their agencies, excepting estate, inheritance, and gift taxes; income taxes on the gain from the transfer of the indebtedness; and franchise taxes. The interest component of any payments made by the State under special indebtedness, including the interest component of any certificates of participation, is not subject to taxation as to income.
"§ 142‑93.  Investment eligibility.
Special indebtedness are securities or obligations in which all of the following may invest, including capital in their control or belonging to them:  public officers, agencies, and public bodies of the State and its political subdivisions; insurance companies, trust companies, investment companies, banks, savings banks, savings and loan associations, credit unions, pension or retirement funds, and other financial institutions engaged in business in the State; and executors, administrators, trustees, and other fiduciaries. Special indebtedness are securities or obligations that may properly and legally be deposited with and received by any officer or agency of the State or political subdivision of the State for any purpose for which the deposit of bonds, notes, or obligations of the State or any political subdivision is now or may later be authorized by law.
"§ 142‑94.  Procurement of capital facilities.
The provisions of Articles 3, 3B, 3C, 3D, and 8 of Chapter 143 of the General Statutes and any other laws or rules of the State that relate to the acquisition and construction of State property apply to the financing of capital facilities through the use of special indebtedness pursuant to this Article. This section does not apply to the construction and lease‑purchase, including leases with an option to purchase at the end of the lease term for a nominal sum, of State office buildings pursuant to proposals submitted before the effective date of this Article in response to requests for proposals, to the extent any of those proposals, as they may be supplemented or amended, are approved by the Department of Administration and any of these leases or lease‑purchase agreements are approved by the Council of State in accordance with G.S. 143‑341(4)d2."
SECTION 46.3.  G.S. 143‑341(4) is amended by adding a new sub‑subdivision to read:
"d2.	To purchase or finance the purchase of buildings, utilities, structures, or other facilities or property developments, including streets and landscaping, the acquisition of land, equipment, machinery, and furnishings in connection therewith; additions, extensions, enlargements, renovations, and improvements to existing buildings, utilities, structures, or other facilities or property developments, including streets and landscaping; land or any interest in land; other infrastructure; furniture, fixtures, equipment, vehicles, machinery, and similar items; or any combination of the foregoing, through installment-purchase, lease-purchase, or other similar type installment financing agreements in the manner and to the extent provided in Article 9 of Chapter 142 of the General Statutes. Any contract entered into or any proceeding instituted contrary to the provisions of this paragraph is voidable in the discretion of the Council of State."
SECTION 46.4.  Interpretation of Part. (a)  Additional Method. – This Part provides an additional and alternative method for the doing of the things authorized by this Part and shall be regarded as supplemental and additional to powers conferred by other laws. Except where expressly provided, this Part shall not be regarded as in derogation of any powers now existing. The authority granted in this Part is in addition to other laws now or hereinafter enacted authorizing the State to issue or incur indebtedness.
SECTION 46.4.(b)  Statutory References. – References in this Part to specific sections or Chapters of the General Statutes are intended to be references to those sections or Chapters as they may be amended from time to time by the General Assembly.
SECTION 46.4.(c)  Liberal Construction. – This Part, being necessary for the health and welfare of the people of the State, shall be liberally construed to effect its purposes.
SECTION 46.4.(d)  Severability. – If any provision of this Part or its application to any person or circumstance is held invalid, that invalidity does not affect other provisions or applications of the Part that can be given effect without the invalid provision or application, and to this end the provisions of this Part are severable.

PART XLvII	LEASE‑PURCHASE THREE NEW PRISONS

Requested by:	Senators Thomas, Garrou, Dalton, Hagan, Kerr, Jenkins, Holliman, Soles
SECTION 47.1.  G.S. 148‑37.2 reads as rewritten:
"§ 148‑37.2.  Lease‑purchase of prison facilities.
(a)	Authorization. – The Secretary of Correction may, as provided in this section, enter contracts with private for‑profit or nonprofit firms for the construction of close security correctional facilities described in subsection (a1) of this section to be operated by the Department pursuant to a lease that contains a schedule for purchase of the facilities over a period of up to 20 years.
The State, with the prior approval of the Council of State and the State Treasurer as provided in this section, is authorized to execute and deliver one or more lease‑purchase agreements with a special nonprofit corporation providing for the lease‑purchase by the State of the Projects from the special nonprofit corporation in connection with and under an arrangement whereby certificates of participation are sold and delivered by the special nonprofit corporation in order to provide funds to pay the purchase price of the Projects. The Projects will be constructed by selected contractors designated to the special nonprofit corporation by the State Property Office of the Department of Administration in consultation with the Department of Correction. The selected contractors will be responsible for arranging for and obtaining their own construction financing, which will consist solely of private funds. The Projects will be sold to the special nonprofit corporation, with the purchase price paid by the special nonprofit corporation from the proceeds of the certificates of participation. The State may lease the real property upon which the Projects will be located, if owned by the State, to the selected contractors constructing the Projects and to the special nonprofit corporation for nominal consideration.
(a1)	Facilities Authorized. – The following facilities are authorized under this section:
(1)	2001 Facilities. – Three close security correctional facilities totaling up to 3,000 cells.
(2)	2003 Facilities. – Three close security correctional facilities substantially identical to the facilities described in subdivision (1) of this subsection and totaling up to 3,000 cells. If the State is able to negotiate a contract for one or more of these facilities with the selected contractor for the facilities described in subdivision (1) of this subsection on terms that are reasonable and desirable to the State as determined by the State Treasurer, the Secretary of Administration, and the Council of State, then a request for proposals under subsection (c) of this section is not required. The remaining provisions of this section continue to apply.
(b)	Definitions. – The following definitions apply in this section:
(1)	Certificates of participation. – Certificates or other instruments delivered by a special nonprofit corporation as provided in this section evidencing the assignment of proportionate and undivided interests in the rights to receive lease payments to be made by the State pursuant to a lease‑purchase agreement.
(2)	Construction contract agreement. – A contract between the Department of Correction and the selected contractors for construction of the Projects, under which the selected contractors will be responsible for arranging for and obtaining their own construction financing, which will consist solely of private funds.
(3)	Lease‑purchase agreement. – A lease‑purchase agreement entered into pursuant to this section, under which the State will lease the Projects from the special nonprofit corporation, with option to purchase.
(4)	Projects. –  Facilities described in subsection (a1) of this section to be constructed by selected contractors, sold to the special nonprofit corporation, and leased to the State pursuant to this section.
(5)	Purchase agreement. – A contract under which the special nonprofit corporation will purchase the Projects from the selected contractors.
(6)	Selected contractors. – One or more private firms selected to construct the Projects.
(7)	Special nonprofit corporation. – A nonprofit corporation created under Chapter 55A of the General Statutes and designated by the State Treasurer for entering into the transactions contemplated by this section.
(c)	Request for Proposals. – The Secretary of Correction may issue a request for proposals to private firms for the private firms to construct the Projects in accordance with plans and specifications developed by the Department of Correction and reviewed by the Office of State Construction. 
The Secretary of Correction shall make recommendations to the State Property Office of the Department of Administration on the final award decision. The Department of Correction and the State Property Office of the Department of Administration shall consult with the Joint Legislative Commission on Governmental Operations before making the final award decision. The Department of Administration shall make the final award decision, which shall then be subject to the approval of the Council of State.
The Department of Correction will enter into a construction contract agreement with the selected contractors for the construction of the Projects. The special nonprofit corporation will enter into a purchase agreement with the selected contractors for the sale of the constructed Projects to the special nonprofit corporation. The Department of Correction shall furnish plans and specifications for review by the State Construction Office. Construction contract agreements entered into under this section shall provide that the Department of Correction and the Office of State Construction shall inspect and review each facility during construction to ensure and determine jointly that the facility is suitable for use as a correctional facility and for future acquisition by the State. The Department of Correction may contract with a design consortium for construction administration services.
(d)	Approval of Lease‑Purchase Agreement. – A lease‑purchase agreement may not be entered into pursuant to this section unless the following conditions are met before the lease‑purchase agreement is entered into: (i) the Council of State, by resolution, approves the execution and delivery of the lease‑purchase agreement, and (ii) the State Treasurer approves the lease‑purchase agreement and all other documentation related to it, including any leasehold deed of trust or trust agreement in connection with it. The resolution of the Council of State may include any matters the Council of State determines. In determining whether to approve the lease‑purchase agreement, the State Treasurer may consider any factors as the State Treasurer considers relevant in order to find and determine that all of the following conditions are met:
(1)	The principal amount to be financed under the lease‑purchase agreement is adequate and not excessive for the purpose of paying the cost of the Projects.
(2)	The increase, if any, in State revenues necessary to pay the sums to become due under the lease‑purchase agreement is not excessive.
(3)	The lease‑purchase agreement can be entered into on terms desirable to the State.
(4)	The sale of certificates of participation will not have an adverse effect on any scheduled or proposed sale of obligations of the State or any State agency or of any unit of local government in the State.
(e)	Terms and Conditions. – The following provisions apply to a lease‑purchase agreement entered into under this section:
(1)	In order to secure the performance by the State of its obligations under the lease‑purchase agreement, the lease‑purchase agreement may require the eviction of the State from the occupancy of one or more of the Projects in the event that the State breaches its obligations and agreements under the lease‑purchase agreement.
(2)	No deficiency judgment may be rendered against the State or any agency, department, or commission of the State in any action for breach of any obligation contained in the lease‑purchase agreement or any other related documentation, and the taxing power of the State or any agency, department, or commission of the State is not and may not be pledged to secure any moneys due under the lease‑purchase agreement.
(3)	The lease‑purchase agreement shall not contain a nonsubstitution clause that restricts the right of the State to replace or provide a substitute for the Projects.
(4)	The lease‑purchase agreement may include provisions requesting the Governor to submit in the Governor's budget proposal, or any amendments or supplements to it, appropriations necessary to make the payments required under the lease‑purchase agreement.
(5)	The lease‑purchase agreement may contain any provisions for protecting and enforcing the rights and remedies of the special nonprofit corporation that are reasonable and proper and not in violation of law, including covenants setting forth the duties of the State with respect to the Projects, which may include provisions relating to insuring, operating, and maintaining the Projects and the custody, safeguarding, investment, and application of moneys.
(6)	The lease‑purchase agreement may designate the lease payments to be paid by the State under it to be "principal components" and "interest components." Any interest component of the lease payments may be calculated based upon a fixed or variable interest rate or rates as determined by the State Treasurer.
(7)	The lease‑purchase agreement may be entered into by the State, and certificates of participation may be delivered by the special nonprofit corporation, at any time, including at times prior to the delivery of the Projects to the special nonprofit corporation for purchase, and the related delivery of occupancy of the Projects to the State by the special nonprofit corporation. The costs incurred in connection with the preparation of the lease‑purchase agreement and related documents and the delivery of the certificates of participation may be paid from the proceeds of the certificates of participation.
(8)	The State is authorized to agree in the lease‑purchase agreement to indemnify the special corporation and its directors and agents for any liabilities that arise to the special corporation or directors or agents on account of their participation in the activities contemplated by this act.
(f)	Faith and Credit Not Pledged. – The payment of amounts payable by the State under the lease‑purchase agreement and other related documentation during any fiscal biennium or fiscal year is limited to funds appropriated for that purpose by the General Assembly in its discretion. No provision of this section and no lease‑purchase agreement creates any pledge of the faith and credit of the State or any agency, department, or commission of the State within the meaning of any constitutional debt limitation.
(g)	Certificates of Participation. – The State may cooperate as necessary to effectuate the delivery by the special nonprofit corporation of tax‑exempt certificates of participation, including participating in the preparation of offering documents, the filing of required tax forms and agreeing to comply with restrictions on the use of the Projects as required in order for the interest component of the lease payments to be tax‑exempt. Disclosures and compliance with other federal law requirements by the special nonprofit corporation shall be under the direction of the State Treasurer. Certificates of participation may be sold at the direction of the State Treasurer in the manner, either at public or private sale, and for any price or prices that the State Treasurer determines to be in the best interest of the State and to effect the purposes of this section. Interest payable with respect to certificates of participation shall accrue at the rate or rates determined by the State Treasurer with the approval of the special nonprofit corporation.
Certificates of participation may be delivered pursuant to a trust agreement with a corporate trustee approved by the State Treasurer. The corporate trustee may be any trust company or bank having the powers of a trust company within or without the State. A trust agreement may (i) provide for security and pledges and assignments with respect to the security as may be permitted under this section and further provide for the enforcement of any lien or security interest created pursuant to this section, and (ii) contain any provisions for protecting and enforcing the rights and remedies of the owners of any certificates of participation that are reasonable and proper and not in violation of law as determined by the State Treasurer. The State Treasurer shall designate the professionals providing legal or financial services relating to the lease‑purchase agreement and the delivery of certificates of participation, including the provider of any credit facility and the underwriter or placement agent for any certificates of participation.
(h)	Tax Exemption. – The lease purchase agreement and any certificates of participation relating to it shall at all times be free from taxation by the State or any political subdivision or any of their agencies, excepting estate, inheritance, or gift taxes, income taxes on the gain from the transfer of the lease‑purchase agreement and certificates of participation, and franchise taxes. The interest component of the lease payments made by the State under the lease‑purchase agreement, including the interest payable with respect to any certificates of participation, is not subject to taxation as income.
(i)	Licensing Requirements. – The private for‑profit or nonprofit firms authorized to respond to requests for proposals authorized by this section, or entitled to be a  selected contractor pursuant to  this section, need not be a licensed general contractor within the meaning of G.S. 87‑1 so that providing a response to  the request or entering a  construction contract agreement or purchase agreement is not general contracting within the meaning of G.S. 87‑1. This subsection  does not remove the actual construction of any prison facility from the provisions of G.S. 87‑1.
(j)	Minority Business Participation. – G.S. 143‑128.2 applies to the Projects authorized in this section."

part XLvIii. general provisions

Requested by:	Senators Garrou, Dalton, Hagan
SECTION 48.1.  Parts 32 through 47 of this act do not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by those parts before the effective date of its amendment or repeal; nor does it affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal.
SECTION 48.2.  Except as otherwise provided in this act, parts 32 through 48 of this act are effective when this act becomes law.

PART XLix. MISCELLANEOUS PROVISIONS

Requested by:	Senators Garrou, Dalton, Hagan
EXECUTIVE BUDGET ACT APPLIES
SECTION 49.1.  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:	Senators Garrou, Dalton, Hagan
COMMITTEE REPORT
SECTION 49.2.(a)  The Senate Appropriations/Base Budget Committee Report on the Continuation, Expansion and Capital Budgets, dated April 28, 2003, which was distributed in the Senate 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 49.2.(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 steps that follow and the line‑item detail in the budget enacted by the General Assembly may be derived accordingly:
(1)	The base budget was adjusted in accordance with the base budget cuts and additions that were set out in the Senate Appropriations/Base Budget Committee Report on the Continuation, Expansion and Capital Budgets, dated April 28, 2003, together with any accompanying correction sheets.
(2)	Transfers of funds supporting programs were made in accordance with the Senate Appropriations Committee Report on the Continuation, Expansion and Capital Budgets, dated April 28, 2003, together with any accompanying correction sheets.
SECTION 49.2.(c)  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:	Senators Garrou, Dalton, Hagan
MOST TEXT APPLIES ONLY TO THE 2003‑2005 FISCAL BIENNIUM
SECTION 49.3.  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:	Senators Garrou, Dalton, Hagan
EFFECT OF HEADINGS
SECTION 49.4.  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:	Senators Garrou, Dalton, Hagan
SEVERABILITY CLAUSE
SECTION 49.5.  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:	Senators Garrou, Dalton, Hagan
EFFECTIVE DATE
SECTION 49.6.  Except as otherwise provided, this act becomes effective July 1, 2003.