GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

H	1 

HOUSE BILL 1283*

Short Title:  Budget Adjustments/Conforming.	(Public)

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Sponsors: Representatives Gray, Arnold, Cansler, and Holmes.

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Referred to:  Rules, Calendar and Operations of the House.

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May 22, 1996

A BILL TO BE ENTITLED
AN ACT TO MAKE CONFORMING CHANGES TO IMPLEMENT BUDGET ADJUSTMENTS AND ALLOCATIONS.
The General Assembly of North Carolina enacts:
Section 1. (a) Article 1 of Chapter 143 of the General Statutes is amended by adding a new section to read:
"§ 143-4.2.  Budget Adjustment and Allocation Commission.
(a)	There is established within the Legislative Branch the Budget Adjustment and Allocation Commission.
(b)	The Budget Adjustment and Allocation Commission shall consist of 17 members as follows:
(1)	The Speaker of the House of Representatives or a member of the House of Representatives designated by that officer.
(2)	The President Pro Tempore of the Senate or a member of the Senate designated by that officer.
(3)	Five members of the House of Representatives appointed by the Speaker of the House of Representatives.
(4)	Five members of the Senate appointed by the President Pro Tempore of the Senate.
(5)	Five members of the General Assembly appointed by the Governor, at least two of whom shall be members of the House of Representatives, and at least two of whom shall be members of the Senate.
An appointed member serves a term beginning 10 days after convening of the regular session and ending 10 days after convening of the next regular session, except that: (i)	the appointing officer may remove a member with cause satisfactory to the appointing officer, and (ii) resignation or removal from office of a member of the General Assembly vacates that person's membership on the Commission.
A member may serve beyond the end of that member's term of office as a member of the General Assembly, and an appointing officer may continue to make appointments until the successor to that office is chosen.  A person designated under subdivisions (1)	or (2) of this subsection serves at the pleasure of the designating officer.
(c)	The President Pro Tempore and the Speaker of the House of Representatives shall serve as cochairs of the Budget Adjustment and Allocation Commission, except that either of them may designate a person they appointed or designated to the Budget Adjustment and Allocation Commission to serve as cochair at their pleasure.
(d)	The Budget Adjustment and Allocation Commission shall meet monthly at a time and place designated by the Budget Adjustment and Allocation Commission and shall meet on the joint call of the cochairs.  A quorum is a majority of the members of the Budget Adjustment and Allocation Commission.
(e)	The Budget Adjustment and Allocation Commission has the following powers and duties under Article III, Section 5(3) of the Constitution of North Carolina:
(1)	Approval of allocations from the Contingency and Emergency Fund.
(2)	Approval of an overexpenditure of the total requirements of a program as enacted by the General Assembly.
(3)	Approval of any procedures to reduce programs subsequent to a reduction of ten percent (10%) or more in the federal fund level certified to a department and any subsequent changes in distribution formulas.
(4)	Approval for extraordinary measures under Article III, Section 5(3) of the Constitution to effect necessary economies in State expenditures required for balancing the budget due to a revenue shortfall, including, but not limited to, the following:  loans among funds, personnel freezes or layoffs, capital project reversions, program eliminations, and use of reserves.
(5)	Approval of new capital improvement projects funded from gifts, grants, receipts, special funds, self-liquidating indebtedness, and other funds or any combination of funds for any project not specifically authorized by the General Assembly.  The budget for each capital project must include projected revenues in an amount not less than projected expenditures.
The Budget Adjustment and Allocation Commission has oversight of other revenues and expenditures when it finds it appropriate.
(f)	Notwithstanding subsection (e) of this section or any other provision of law requiring the approval of the Commission, whenever an expenditure is required because of an emergency that poses an imminent threat to public health or public safety, and is either the result of a natural event, such as a hurricane or a flood, or an accident, such as an explosion or a wreck, the Governor may take action under this subsection without approval of the Commission if the action is determined by the Governor to be related to the emergency.  The Governor shall report to the Commission on any expenditures made under this subsection no later than 30 days after making the expenditure and shall identify in the report the emergency, the type of action taken, and how it was related to the emergency."
(b) The initial appointments under G.S. 143-4.2(b) as enacted by subsection (a) of this section shall be for terms beginning on the effective date of that section and ending on the tenth day after convening of the 1997 Regular Session of the General Assembly.
Sec. 2.  G.S. 143-15.3A is amended by adding a new subsection to read:
"( c)	Allocations by the Governor from the Repairs and Renovations Reserve Account require the approval of the Joint Legislative Commission on Governmental Operations under Article III, Section 5(3) of the Constitution of North Carolina.
Notwithstanding this subsection, whenever an expenditure is required because of an emergency that poses an imminent threat to public health or public safety, and is either the result of a natural event, such as a hurricane or a flood, or an accident, such as an explosion or a wreck, the Governor may take action under this subsection without approval of the Commission if the action is determined by the Governor to be related to the emergency.  The Governor shall report to the Commission on any expenditures made under this subsection no later than 30 days after making the expenditure and shall identify in the report the emergency, the type of action taken, and how it was related to the emergency."
Sec. 3.  G.S. 143-12 reads as rewritten:
"§ 143-12.  Bills containing proposed appropriations.
(a)	The Director shall cause to be prepared and submitted to the General Assembly the following bills:
(1)	A bill containing all proposed current operations appropriations of the budget for each year in the ensuing biennium, which shall be known as the 'Current Operations Appropriations Bill', and a bill containing all proposed capital appropriations of the budget for each year in the ensuing biennium, which shall be known as the 'Capital Improvement Appropriations Bill'.
(2)	If necessary, a bill containing the Director of the Budget's views on revenue for the ensuing biennium, which shall be known as the 'Budget Revenue Bill', and shall provide an amount of revenue for the ensuing biennium sufficient, in the opinion of the Director and the Commission, to meet the appropriations contained in the Current Operations Appropriations Bill and the Capital Improvement Appropriations Bill.
(3)	Repealed by Session Laws 1983 (Regular Session, 1984), c. 1034, s. 153.
(b)	To the end that all expenses of the State may be brought and kept within the budget, the Current Operations Appropriations Bill shall contain a specific sum as a contingent or emergency appropriation, and shall allocate a specific portion of that sum to a special reserve to be used solely for purposes as outlined in G.S. 143-23(a1)(2). Notwithstanding any other provision of law, the manner of the allocation of such contingent or emergency appropriation shall be as follows: Any institution, department, commission, or other agency or activity of the State, or other activity in which the State is interested, desiring an allotment out of such contingent or emergency appropriation, shall upon forms prescribed and furnished by the Director of the Budget, present such request in writing to the Director of the Budget, with such information as he may require, and if the Director of the Budget shall approve such request, in whole or in part, and with the prior consent of the Budget Adjustment and Allocation Commission, he shall forthwith present the same to the Governor and Council of State, and upon their order only shall such allotment be made.  If the Director shall disapprove the request of such an allotment out of the emergency or contingent appropriation, he shall transmit his refusal and his reason therefor to the Governor and Council of State, for their information.
Funds allocated from the contingent or emergency appropriation may be used only for the purpose for which they were allocated and may not be reallocated for another purpose by the Governor.  If the funds are not spent or encumbered for the purpose for which they were allocated by the end of the fiscal biennium and if the Governor and the Council of State do not reallocate them for that same purpose, the funds shall revert to the fund from which the contingent or emergency appropriation was made. Also, if the funds are not needed for the purpose for which they were allocated, the funds shall revert to the fund from which the contingent or emergency appropriation was made.
(c)	The Director of the Budget may, in preparation of the Appropriations and Revenue Bills, seek the advice of the Advisory Budget Commission. If the Director and the Commission shall not agree as to the Appropriations and Revenue Bills in substantial particulars, the Director shall prepare the same, based on his conclusions and judgment, and the Commission or any of its members retain the right to submit separately to the General Assembly such statement of disagreement and the particulars thereof as they shall find proper to submit as representing their own views."
Sec. 4.  G.S. 143-15.3A(b) reads as rewritten:
"(b)	The funds in the Repairs and Renovations Reserve Account shall be used only for the repair and renovation of State facilities and related infrastructure that are supported from the General Fund. Funds from the Repairs and Renovations Reserve Account shall be used only for the following types of projects:
(1)	Roof repairs and replacements;
(2)	Structural repairs;
(3)	Repairs and renovations to meet federal and State standards;
(4)	Repairs to electrical, plumbing, and heating, ventilating, and air-conditioning systems;
(5)	Improvements to meet the requirements of the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq., as amended;
(6)	Improvements to meet fire safety needs;
(7)	Improvements to existing facilities for energy efficiency;
(8)	Improvements to remove asbestos, lead paint, and other contaminants, including the removal and replacement of underground storage tanks;
(9)	Improvements and renovations to improve use of existing space;
(10)	Historical restoration;
(11)	Improvements to roads, walks, drives, utilities infrastructure; and
(12)	Drainage and landscape improvements.
Funds from the Repairs and Renovations Reserve Account shall not be used for new construction or the expansion of the footprint of an existing facility unless required in order to comply with federal or State codes or standards.
The Director of the Budget shall not use funds in the Repairs and Renovations Reserve Account unless the use has been approved by an act of the General Assembly or by the Joint Legislative Commission on Governmental Operations under G.S. 143-15.3A(c)."
Sec. 5.  G.S. 143-18.1(c) reads as rewritten:
"(c)	Upon the request of the administration of any State agency or institution, the Director of the Budget may accept funds by gift or grant for the construction of a capital improvement project not specifically provided for or authorized by the General Assembly. These funds shall be placed in a special reserve account to be held by the State Treasurer until the end of the biennium in which the account was established or until the capital improvement project is authorized by the Director of the Budget, whichever occurs first. These funds shall be invested and the interest thereon shall be added to the reserve. If the project is not authorized by the end of that biennium, the State Treasurer shall pay the funds accumulated in the special reserve account to the grantor or donor. Upon the establishment of a special reserve account under this section, the Director of the Budget shall notify the Speaker of the House and President of the Senate of the receipt of the funds and the existence of the reserve account. Upon the request of the administration of any State agency or institution, the Governor may, under G.S. 143-4.2, authorize the construction of a capital improvement project not specifically authorized by the General Assembly if such project is to be fully funded by gifts, grants, receipts, special funds, self-liquidating indebtedness, other funds, or any combination of funds, but not including funds appropriated from the General Fund.  All expenditures under this authorization shall be handled in full compliance with the provisions of the Executive Budget Act.
The agency shall support its request for such capital improvement project, or projects, with the following information: the estimated annual operating costs for (i)	utilities; (ii) maintenance; (iii) repairs; (iv) additional personnel; (v) any and all other expenses to the State resulting from the addition of this facility to the plant of the institution. Prior to taking any action under this section to authorize a project, the Governor or the Director of the Budget may consult with the Advisory Budget Commission and the Capital Planning Commission."
Sec. 6.  G.S. 143-23 reads as rewritten:
"§ 143-23.  All maintenance funds for itemized purposes; transfers between objects or line items.
(a)	All appropriations now or hereafter made for the maintenance of the various departments, institutions and other spending agencies of the State, are for the (i) purposes or programs and (ii) objects or line items enumerated in the itemized requirements of such departments, institutions and other spending agencies submitted to the General Assembly by the Director of the Budget and the Advisory Budget Commission, as amended by the General Assembly. The function of the Advisory Budget Commission under this subsection applies only if the Director of the Budget consults with the Commission in preparation of the budget.
(a1)	
						Notwithstanding the provisions of subsection (a)	of this section, a department, institution, or other spending agency may, with the approval of the Director of the Budget, spend more than was appropriated for:
(1)	An object or line item within a purpose or program so long as the total amount expended for the purpose or program is no more than was appropriated for the purpose or program for the fiscal period;
(2)	A purpose or program, without the approval of the Budget Adjustment and Allocation Commission, if the overexpenditure of the purpose or program is:
a.	Required by a court, Industrial Commission, or administrative hearing officer's order;
b.	Required to respond to an unanticipated disaster such as a fire, hurricane, or tornado; or
c.	Required to call out the National Guard.
	The Director of the Budget shall report on a monthly basis to the Budget Adjustment and Allocation Commission on any overexpenditures under this subdivision; or
(3)	A purpose or program, with the approval of the Budget Adjustment and Allocation Commission in accordance with G.S. 143-4.2, for any other reason.
(a2)	Funds appropriated for salaries and wages are also subject to the limitation that they may only be used for: 
(1)	Salaries and wages or for premium pay, overtime pay, longevity, unemployment compensation, workers' compensation, temporary wages, moving expenses of employees, payment of accumulated annual leave, certain awards to employees, tort claims, and employer's social security, retirement, and hospitalization payments;
(2)	Contracted personal services if (i) the contract is for temporary services or special project services, (ii) the term of the contract does not extend beyond the fiscal year, (iii) the contract does not impose obligations on the State after the end of the fiscal year; and (iv) the total of all overexpenditures for contracted personal services approved in a program for a fiscal year does not exceed the greater of five hundred thousand dollars ($500,000) or ten percent (10%) of the lapsed salary funds in the program for the fiscal year; and
(3)	Uses for which overexpenditures are permitted by subdivision (2) of subsection (a1) of this section but the Director of the Budget shall include such use and the reason for it in his monthly report to the Budget Adjustment and Allocation Commission.
Lapsed salary funds that become available from vacant positions are also subject to the limitation that they may not be used for new permanent employee positions or to raise the salary of existing employees.
		(b)	Repealed by Session Laws 1985, c. 290, s. 8.
(c)	Transfers or changes as between objects or line items in the budget of the Senate may be made by the President Pro Tempore of the Senate.
(d)	Transfers or changes as between objects or line items in the budget of the House of Representatives may be made by the Speaker of the House of Representatives.
(e)	Transfers or changes as between objects or line items in the budget of the General Assembly other than of the Senate and House of Representatives may be made jointly by the President Pro Tempore of the Senate and the Speaker of the House of Representatives.
(f)	As used in this section:
(1)	'Object or line item' means a budgeted expenditure or receipt in the budget enacted by the General Assembly that is designated by (i) a thirteen-digit code in the 1000-object code series or (ii) an eleven-digit code in all other object code series, 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.
(2)	'Purpose or program' means a group of objects or line items for support of a specific activity outlined in the budget adopted by the General Assembly that is designated by a nine-digit fund code 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."
Sec. 7.  G.S. 143-25 reads as rewritten:
"§ 143-25.  Maintenance appropriations dependent upon adequacy of revenues to support them.
All maintenance appropriations now or hereafter made are hereby declared to be maximum, conditional and proportionate appropriations, the purpose being to make the appropriations payable in full in the amounts named herein if necessary and then only in the event the aggregate revenues collected and available during each fiscal year of the biennium for which such appropriations are made, are sufficient to pay all of the appropriations in full; otherwise, the said appropriations shall be deemed to be payable in such proportion as the total sum of all appropriations bears to the total amount of revenue available in each of said fiscal years. The Director of the Budget is hereby given full power and authority to examine and survey the progress of the collection of the revenue out of which such appropriations are to be made, and to declare and determine the amounts that can be, during each quarter of each of the fiscal years of the biennium properly allocated to each respective appropriation. In making such examination and survey, he shall receive estimates of the prospective collection of revenues from the Secretary of Revenue and every other revenue collecting agency of the State. The Director of the Budget may reduce all of said appropriations pro rata when necessary to prevent an overdraft or deficit to the fiscal period for which such appropriations are made.  The Governor may also reduce all of said appropriations pursuant to Article III, Section 5(3)	of the Constitution with approval of the Budget Adjustment and Allocation Commission under G.S. 143-4.2 if approval is required by that section. The purpose and policy of this Article are to provide and insure that there shall be no overdraft or deficit in the general fund of the State at the end of the fiscal period, growing out of appropriations for maintenance and the Director of the Budget is directed and required to so administer this Article as to prevent any such overdraft or deficit. Prior to taking any action under this section to reduce appropriations pro rata, the Governor may consult with the Advisory Budget Commission."
Sec. 8.  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 or Highway 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, unless use of the excess for the overexpenditure is approved under G.S. 143-4.2. 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.
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Sec. 9.  G.S. 116-30.2 reads as rewritten:
"§ 116-30.2.  Appropriations to special responsibility constituent institutions.
All General Fund appropriations made by the General Assembly for continuing operations of a special responsibility constituent institution of The University of North Carolina shall be made in the form of a single sum to each budget code of the institution for each year of the fiscal period for which the appropriations are being made. Notwithstanding G.S. 143-4.2, 143-23(a1), 143-23(a2), and 143-23(a3), each special responsibility constituent institution may expend the General Fund monies so appropriated to it in the manner deemed by the Chancellor to be calculated to maintain and advance the programs and services of the institutions, consistent with the directives and policies of the Board of Governors. The preparation, presentation, and review of General Fund budget requests of special responsibility constituent institutions shall be conducted in the same manner as are requests of other constituent institutions. The quarterly allotment procedure established pursuant to G.S. 143-17 shall apply to the General Fund appropriations made for the current operations of each special responsibility constituent institution. All General Fund monies so appropriated to each special responsibility constituent institution shall be recorded, reported, and audited in the same manner as are General Fund appropriations to other constituent institutions."
Sec. 10.  G.S. 143-16.3 reads as rewritten:
"§ 143-16.3.  No expenditures for purposes for which the General Assembly has considered but not enacted an appropriation.
Notwithstanding any other provision of law, no funds from any source, except for gifts, grants, and funds allocated from the Contingency and Emergency Fund in accordance with G.S. 143-12(b), may be expended for any purpose, position, or other expenditure for which the General Assembly has considered but not enacted an appropriation of funds for the current fiscal period. For the purpose of this section, the General Assembly has considered a purpose, position, or other expenditure when that purpose is included in a bill, amendment, or petition and when any committee of the Senate or the House of Representatives deliberates on that purpose."
Sec. 11.  G.S. 116-30.1 reads as rewritten:
"§ 116-30.1.  Special responsibility constituent institutions.
The Board of Governors of The University of North Carolina, acting on recommendation made by the President of The University of North Carolina after consultation by him with the State Auditor, may designate one or more constituent institutions of The University as special responsibility constituent institutions. That designation shall be based on an express finding by the Board of Governors that each institution to be so designated has the management staff and internal financial controls that will enable it to administer competently and responsibly all additional management authority and discretion to be delegated to it. The Board of Governors, on recommendation of the President, shall adopt rules prescribing management staffing standards and internal financial controls and safeguards, including the lack of any significant exceptions or audit findings in the annual financial audit by the State Auditor's Office, that must be met by a constituent institution before it may be designated a special responsibility constituent institution and must be maintained in order for it to retain that designation. These rules shall not be designed to prohibit participation by a constituent institution because of its size.  These rules shall establish procedures for the President and his staff to review the annual financial audit reports or any other special or performance audit reports issued by the State Auditor'*s Office for each special responsibility constituent institution.  The President shall take immediate action regarding reported weaknesses in the internal control structure, deficiencies in the accounting records, and noncompliance with rules and regulations.  In any instance where such audit exceptions are identified, the President shall notify the Chancellor and each member of the Board of Trustees of the particular special responsibility constituent institution that such exceptions must be resolved to the satisfaction of the State Auditor and the President of The University within a three-month period commencing with the date of receipt of the published financial audit report.  If the exceptions are not satisfactorily resolved within a three-month period, the President of The University shall recommend to the Board of Governors at its next meeting that the designation of the particular institution as a special responsibility constituent institution be terminated until such time as the exceptions are resolved to the satisfaction of the State Auditor and the President of The University of North Carolina.  The action of the Board of Governors terminating the designation shall state the reasons for the termination, and a copy shall be sent to each member of the Board of Trustees of that particular institution.  However, once the designation as a special responsibility constituent institution has been withdrawn by the Board of Governors, reinstatement may not be effective until the beginning of the following fiscal year at the earliest.  Any actions taken by the Board of Governors with respect to withdrawal or reinstatement of an institution's status as a special responsibility constituent institution shall be reported immediately to the Joint Legislative Education Oversight Committee.
The rules established under this section shall include review and consultation with the State Auditor, the Director of the Office of State Personnel, and the Director of the Division of State Purchasing and Contracts in ascertaining whether or not a constituent institution has the management staff and internal financial controls to administer the additional authorities authorized under G.S. 116-30.2, 116-30.4, and 143-53.1.  Such review and consultation must take place no less frequently than once each biennium."
Sec. 12.  Sections 1 through 11 of this act become effective only if the constitutional amendment proposed by Section 1.1 of Chapter 5 of the Session Laws of 1995 is approved as provided by Sections 3 and 4 of Chapter 5 of the Session Laws of 1995, and if so approved, Sections 1 through 11 of this act become effective upon certification of the results of that election.