GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1999

H	1 

HOUSE BILL 1823

Short Title:  Tobacco Settlement Receipts Bonds.	(Public)

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Sponsors: Representatives Baddour, Allen, Alexander, Hill (Primary Sponsors); Cox, Cunningham, McLawhorn, Owens, Redwine, Tucker, Wainwright, Warren, and Warwick.

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Referred to:  Select Committee on the Tobacco Settlement.

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May 30, 2000

A BILL TO BE ENTITLED
AN ACT TO AUTHORIZE THE ISSUANCE OF MASTER TOBACCO SETTLEMENT RECEIPTS BONDS AND TO PROVIDE FOR THE CREATION OF A TOBACCO TRUST FUND AND COMMISSION AND A HEALTH TRUST FUND AND COMMISSION.
The General Assembly of North Carolina enacts:
PART I. TOBACCO SETTLEMENT RECEIPTS BONDS
Section 1.  Chapter 142 of the General Statutes is amended by adding a new Article to read:
“ARTICLE 8.
"Master Tobacco Settlement Receipts Bonds.
"§ 142-55.  Legislative findings and determinations; purpose.
The General Assembly finds:
(1)	The State, together with 46 other states, has entered into the Master Settlement Agreement, pursuant to which the State expects to receive compensation for damages to the State on account of tobacco-related illnesses as more fully described in the Master Settlement Agreement.  Amounts received by the State under the Master Settlement Agreement will be available to fund various State programs for the health, safety, and prosperity of the people of the State.
(2)	Payments under the Master Settlement Agreement will be received by the State over a period of years.  While many of the projects and programs that the State will fund from payments received under the Master Settlement Agreement can be effectively funded as the payments are received under the Master Settlement Agreement, certain projects and programs to be funded from payments received under the Master Settlement Agreement require more immediate funding.
(3)	For those projects and programs that require immediate funding, it is possible for the State to access funds through the issuance of bonds secured solely by, and payable solely from, future payments to be received by the State under the Master Settlement Agreement.
(4)	The purpose of this Article is to establish a uniform system of procedures and conditions for, and limitations upon, the issuance of bonds by the State secured solely by, and payable solely from, future payments to be received by the State under the Master Settlement Agreement.
"§ 142-56.  Definitions.
The following definitions apply in this Article:
(1)	Bonds. – Bonds issued by the State pursuant to this Article.
(2)	Master Settlement Agreement. – The settlement agreement among certain tobacco manufacturers and certain states, including this State, as incorporated in the consent decree entered in the action of State of North Carolina v. Phillip Morris, Incorporated, et al., 98 CVS 14377 in the General Court of Justice, Superior Court Division, Wake County, North Carolina.
(3)	Settlement receipts. – The amount the State actually receives each year from payments under the Master Settlement Agreement in accordance with the terms of the Master Settlement Agreement.
(4)	State. – The State of North Carolina.
(5)	State-authorized program. – Any project, program, or activity that is to be funded with the proceeds of bonds issued under this Article and has been approved by legislation enacted by the General Assembly that specifies the project, program, or activity, and provides that it is to be funded with the proceeds of bonds issued under this Article.
(6)	Trust agreement. – Any trust agreement or similar instrument or agreement authorizing and securing bonds issued under this Article.
"§ 142-57.  Bonds.
(a)	The State Treasurer may, by and with the consent of the Council of State, issue and sell from time to time special limited obligation bonds of the State to pay the cost of State-authorized programs.  The principal of, premium, if any, and interest on the bonds shall be payable solely from funds provided under this Article for their payment.
(b)	Notwithstanding any other provision of this Article, no action authorizing the issuance of bonds under this Article shall be taken until the effective date of legislation enacted by the General Assembly that (i) designates the State-authorized program to be funded from the proceeds of that particular issue of bonds, (ii) fixes the maximum aggregate principal amount of bonds to be issued for the particular State-authorized program, and (iii) designates the portion of the settlement receipts that are to secure the particular issue of bonds.
(c)	The bonds of each issue shall be dated, and may be made redeemable before maturity at the option of the State at any price or prices and upon any terms and conditions, as may be determined by the State Treasurer at the time of sale of the bonds.  The bonds may also be made payable from time to time on demand or tender for purchase by the owner upon any terms and conditions as may be determined by the State Treasurer.  The bonds shall bear interest at any rate or rates (including variable rates) as may be determined by the State Treasurer.  Bonds shall mature at any time or times not exceeding 25 years from their date or dates, as may be determined by the Council of State, subject to the limitations provided in this Article.  The Council of State shall determine the form and manner of execution of the bonds, and shall fix the denominations and the places of payment of principal and interest, which may be any bank or trust company within or without the State.  If an officer whose signature or a facsimile of whose signature appears on any bonds ceases to be that officer before the delivery of the bonds, the signature or facsimile is nevertheless valid for all purposes as if the officer had remained in office until the delivery.  The Council of State may also provide for the authentication of the bonds by a trustee or fiscal agent.
(d)	Bonds may be sold in any manner, either at public or private sale, and for any price as the State Treasurer determines to be for the best interests of the State and to effectuate best the purposes of this Article, as long as the sale has been approved by the Council of State. The State Treasurer may authorize, execute, obtain, or otherwise provide for bond insurance, investment agreements, credit and liquidity facilities, interest rate swap agreements, and similar risk hedging agreements, and other related instruments as the State Treasurer determines are desirable in connection with the issuance of bonds under this Article.  The State Treasurer is authorized to employ and designate any financial consultants, underwriters, and bond attorneys to be associated with any bond issue under this Article.  The proceeds of any bonds shall be used solely for the purposes for which they are issued and shall be disbursed in any manner and under any restrictions the Council of State may provide in the resolution authorizing the issuance of, or any trust agreement securing, the bonds, subject to the provisions of the legislation described in subsection (b) of this section.
(e)	Except as otherwise expressly provided in this Article, bonds may be issued under this Article without obtaining the consent of any department, division, commission, board, body, bureau, or agency of the State, and without any other proceedings or the happening of any conditions or things other than those proceedings, conditions, or things that are specifically required by this Article and the provisions of the resolution authorizing the issuance of, or any trust agreement securing, the bonds.
"§ 142-58.  Trust agreement or resolution.
(a)	Any bonds issued under the provisions of this Article may be secured by a trust agreement by and between the State and a corporate trustee, which may be any trust company or bank having the powers of a trust company within or without the State.  The resolution or trust agreement authorizing and securing the bonds may pledge or assign all or any portion of the settlement receipts to pay the principal of, premium, if any, or interest on the bonds in the manner provided by this Article.  The resolution or trust agreement may contain any provisions for protecting and enforcing the rights and remedies of the holders of any bonds as may be reasonable and proper and not in violation of law, including covenants setting forth the duties of the State in relation to the purposes to which bond proceeds may be applied, the disposition or pledging of the settlement receipts, the terms and conditions for the issuance of additional bonds, and the custody, safeguarding, and application of all moneys.
(b)	Any resolution or trust agreement may restrict the individual right of action by an individual owner of bonds.  In addition to the foregoing, any resolution or trust agreement may contain any other provisions as the Council of State considers reasonable and proper for the security of the holders of any bonds.  Expenses incurred by the State in carrying out the provisions of the resolution or trust agreement may be paid from the settlement receipts as provided for in such document.
"§ 142-59.  Pledge of settlement receipts; limited obligations.
(a)	The State is authorized to pledge all or any portion of the settlement receipts to the payment of the principal of, premium, if any, and interest on bonds issued under this Article as they become due and payable, and to create and maintain any reserves therefor, and to fulfill the terms of any agreements made with the holders of bonds issued under this Article.  Notwithstanding the foregoing, any settlement receipts not required to pay the principal of, premium, if any, and interest on the bonds secured by the receipts as they become due and payable, or to create and maintain any reserves for them, or to fulfill the terms of any agreements made with the holders of bonds issued under this Article, shall be available to the State for expenditure for any lawful purpose, subject to the terms and provisions of any resolution or trust agreement authorizing and securing the bonds.
(b)	Any pledge of the settlement receipts made by the State under the provisions of this Article shall be set forth in the resolution or trust agreement authorizing the issuance of the bonds.  The pledge of the settlement receipts made by the State shall be valid and binding from the time when the pledge is made.  All settlement receipts so pledged and thereafter received by the State are immediately subject to the lien of the pledge without any physical delivery or further act, and the lien of the pledge is valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the State, irrespective of whether the parties have notice of the lien.  The resolution or trust agreement by which a pledge is created need not be filed or recorded except in the records of the Council of State.
(c)	All bonds issued under this Article shall be equally and ratably secured by a pledge, charge, and lien upon the settlement receipts pledged to the payment of those bonds, without priority by reason of number, or of dates of bonds, execution, or delivery, in accordance with the provisions of this Article and of the resolution or trust agreement authorizing and securing such bonds; except that the State may provide in the resolution or trust agreement that the bonds shall, to the extent and in the manner prescribed in the resolution or trust agreement, be subordinated and junior in standing with respect to the payment of principal of, premium, if any, and interest on any other bonds.
(d)	All bonds issued under this Article shall be special limited obligations of the State. The principal of, premium, if any, and interest on the bonds shall not be payable from the general funds of the State, nor shall they constitute a legal or equitable pledge, charge, lien, or encumbrance upon any of its property or upon any of its income, receipts, or revenues, except the settlement receipts that are pledged under the resolution or trust agreement authorizing and securing the bonds.  Neither the credit nor the taxing power of the State is pledged for the payment of the principal of, premium, if any, or interest on the bonds, and no holder of bonds has the right to compel the exercise of the taxing power by the State or the forfeiture of any of its property in connection with any default on the bonds, except for the settlement receipts that are pledged under the resolution or trust agreement authorizing and securing the bonds.  Every bond issued under this Article shall recite in substance that the principal of, premium, if any, and interest on the bond is payable solely from the settlement receipts pledged to its payment and that the State is not obligated to pay the principal, premium, or interest, except from the settlement receipts so pledged.
"§ 142-60.  Agreement of the State.
The State pledges to and agrees with the holders of any bonds issued by the State pursuant to this Article that so long as any of the bonds are outstanding and unpaid, the State will not limit or alter the rights vested in the State at the time of issuance of the bonds to collect and apply the settlement receipts in the manner provided in the resolution or trust agreement authorizing and securing the bonds to pay the principal of, premium, if any, and interest on the bonds as they become due and payable, and to create and maintain any reserves for payment, and to fulfill the terms of any agreements made with the holders of the bonds.  The State will not in any way impair the rights and remedies of the holders of the bonds until the bonds and all costs and expenses in connection with any action or proceedings by or on behalf of the holders of the bonds, are fully paid, met, and discharged.
"§ 142-61.  Trust funds.
Notwithstanding any other provisions of law to the contrary, all moneys received pursuant to the authority of this Article, including proceeds of the bonds and settlement receipts, are trust funds to be held and applied solely as provided in this Article.  The resolution authorizing the issuance of, or any trust agreement securing, any bonds issued under this Article may provide that any of these moneys may be temporarily invested pending their disbursement and shall provide that any officer with whom, or any bank or trust company with which, the moneys are deposited shall act as trustee of the moneys and shall hold and apply them for the purposes of this Article, subject to any limitations this Article and the resolution or trust agreement provide.  These moneys may be invested in any investment authorized by law for investment of trust funds held by the State Treasurer.
"§ 142-62.  Remedies.
Any holder of bonds issued under the provisions of this Article, and the trustee under any resolution or trust agreement authorizing and securing the bonds, except to the extent the rights given in this Article may be restricted by the resolution or trust agreement, may, either at law or in equity, by suit, action, mandamus, or other proceeding, protect and enforce any and all rights under the laws of the State or granted under this Article or under the resolution or trust agreement, or under any other contract executed by the Council of State or the State Treasurer pursuant to this Article, and may enforce and compel the performance of all duties required by this Article or by the resolution or trust agreement to be performed by the State or by any officer of the State.
"§ 142-63.  Investment securities.
All bonds and interest coupons appertaining to them issued under this Article are investment securities within the meaning of and for all the purposes of Article 8 of Chapter 25 of the General Statutes, whether or not they are of the form and character as to be investment securities under that Article, subject only to the provisions of the bonds pertaining to registration.
"§ 142-64.  Bonds eligible for investment.
Bonds issued under the provisions of this Article are securities in which all public officers and public bodies of the State and its political subdivisions, all insurance companies, trust companies, banking associations, investment companies, executors, administrators, trustees, and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them.   The bonds are securities that may properly and legally be deposited with and received by any State or municipal officer or any agency or political subdivision of the State for any purpose for which the deposit of bonds, notes, or obligations of the State is authorized by law.
"§ 142-65.  Refunding bonds.
The State Treasurer may, by and with the consent of the Council of State, issue and sell from time to time refunding bonds for the purpose of refunding any bonds issued under this Article and then outstanding, including the payment of any redemption premium on them and any interest accrued or to accrue to the date of redemption of the refunded bonds.  The principal of, premium, if any, and interest on the refunding bonds shall be payable solely from funds provided under this Article for payment of bonds.
The issuance of refunding bonds, their maturities and other details, the rights of their holders, and the rights, duties, and obligations of the State in respect of them are governed by the provisions of this Article that relate to the issuance of bonds, insofar as those provisions are appropriate.
Refunding bonds may be sold or exchanged for outstanding bonds issued under this Article and, if sold, their proceeds may be applied, in addition to any other authorized purposes, to the purchase, redemption, or payment of the bonds, with any other available funds, or to the payment of the principal, accrued interest, and any redemption premium on the bonds being refunded, and, if so provided or permitted in the resolution authorizing the issuance of, or in the trust agreement securing, the bonds, to the payment of any interest on the refunding bonds and any expenses in connection with the refunding. These proceeds may be invested in direct obligations of, or obligations the principal of and the interest on which are unconditionally guaranteed by, the United States of America, if they mature or are subject to redemption by their holders, at the holders' option, not later than the respective dates when the proceeds, together with the interest accrued on them, will be required for the purposes intended.
"§ 142-66.  Officers and employees not liable.
No member of the Council of State or officer or employee of the State shall be subject to any personal liability or accountability by reason of the execution or issuance of any bonds under this Article.
"§ 142-67.  Tax exemption.
Any bonds issued by the State under the provisions of this Article shall at all times be free from taxation by the State or any local unit or political subdivision or other instrumentality of the State, excepting inheritance or gift taxes, income taxes on the gain from the transfer of the bonds, and franchise taxes.  Interest on the bonds is not subject to taxation as income."

PART II. ALLOCATION OF FUNDS
Section 2.  G.S. 143-16.4 reads as rewritten:
"§ 143-16.4.  Settlement Reserve Fund.
(a)	The ‘Settlement Reserve Fund' is established as a restricted reserve in the General Fund.  Except as otherwise provided in this section, funds shall be expended from the Settlement Reserve Fund only by specific appropriation by the General Assembly. 
(a1)	A Health Trust Account is established in the Settlement Reserve Fund.  The portion of each Master Settlement Agreement payment identified in Section 6(2) of S.L. 1999-2 shall be credited to the Health Trust Account.  The State Controller shall transfer all funds in the Health Trust Account to the Health Trust Fund created in Article 21 of Chapter 130A of the General Statutes.
(a2)	A Tobacco Trust Account is established in the Settlement Reserve Fund.  The portion of each Master Settlement Agreement payment identified in Section 6(3) of S.L. 1999-2 shall be credited to the Tobacco Trust Account.  If all or part of these Master Settlement Agreement receipts have been pledged to secure the payment of bonds issued under Article 8 of Chapter 142 of the General Statutes, funds in the account are subject to the lien of the pledge as provided in G.S. 142-59, shall be expended only in accordance with any resolution or trust agreement authorizing and securing the bonds, and shall not be released from the account until their release is authorized by any resolution or trust agreement authorizing and securing the bonds.  Subject to the restrictions of any applicable resolution or trust agreement under Article 8 of Chapter 142 of the General Statutes, the State Controller shall transfer any unrestricted funds in the Tobacco Trust Account to the Tobacco Trust Fund created in Article 75 of Chapter 143 of the General Statutes.
(b)	Unless prohibited by federal law, federal funds provided to the State by block grant or otherwise as part of federal legislation implementing a settlement between United States tobacco companies and the states shall be credited to the Settlement Reserve Fund.  Unless otherwise encumbered or distributed under a settlement agreement or final order or judgment of the court, funds paid to the State or a State agency pursuant to a tobacco litigation settlement agreement, or a final order or judgment of a court in litigation between tobacco companies and the states, shall be credited to the Settlement Reserve Fund."

PART III. HEALTH TRUST FUND AND HEALTH COMMISSION
Section 3.  Chapter 130A of the General Statutes is amended by adding a new Article to read:
“ARTICLE 21.
"Health Trust Fund and Commission.
"§ 130A-470.  Purpose; funding initiatives.
(a)	The purpose of this Article is to improve the health and wellness of the people of North Carolina through the establishment of a North Carolina Health Trust Fund that will fund initiatives in prevention, education, treatment, research, and related areas in addressing health problems and in increasing the capacity of communities to respond to the public's health needs.
(b)	The Health Trust Fund shall be used to develop a comprehensive, community-based plan with goals and objectives to improve the health and wellness of the people of North Carolina with a priority on preventing, reducing, and remedying the negative health effects of tobacco use and with an emphasis on reducing youth tobacco use.  The goals and objectives shall have measurable health and wellness outcomes and a proposed timetable to achieve these outcomes.
(c)	The priority in funding all initiatives pursuant to this Article shall be to address the health needs of vulnerable and underserved populations.  Advice and technical support shall be provided in addressing those needs.
"§ 130A-471. Definitions.
The following definitions apply in this Article:
(1)	Board of Trustees. – The Board of Trustees of the Health Trust Fund Commission.
(2)	Council. – The Advisory Council for the Health Trust Fund.
(3)	Commission. – The Health Trust Fund Commission.
(4)	Fund. – The Health Trust Fund.
(5)	‘Principal' means the annual payment allocated to the Health Trust Fund pursuant to G.S. 143-16.4.
"§ 130A-472. Commission.
(a)	Creation. – The Health Trust Fund Commission is created.  The Commission has the powers and duties set forth in G.S. 130A-473.
(b)	Membership. – The Board of Trustees of the Commission shall consist of 15 members.  The Board of Trustees members shall not be employed by or be agents of tobacco product manufacturing companies.  The Board of Trustees shall be appointed as follows: five members by the Governor, five members by the General Assembly upon the recommendation of the President Pro Tempore of the Senate, and five members by the General Assembly upon the recommendation of the Speaker of the House of Representatives.  These members shall be appointed as follows:
(1)	The Governor shall make the following appointments:
a.	A community leader.
b.	A person involved in public health.
c.	A person involved in health research.
d.	A person involved in the operation of health care delivery systems.
e.	A health care practitioner.
(2)	The General Assembly shall make the following appointments upon the recommendation of the President Pro Tempore of the Senate:
a.	A community leader.
b.	A person involved in the health care needs of special populations.
c.	A person involved in health policy trends.
d.	A person involved in tobacco-related health care issues.
e.	A person involved in health promotion and disease prevention.
(3)	The General Assembly shall make the following appointments upon the recommendation of the Speaker of the House of Representatives:
a.	A community leader.
b.	A person involved in health policy trends.
c.	A person involved in tobacco-related health care issues.
d.	A person involved with health care for underserved populations.
e.	A person involved with child health care.
Except as provided for the initial Board of Trustees under subsection (c)	of this section, members shall serve four-year terms.  No member may serve more than two full consecutive terms.  A vacancy in a position appointed by the Governor shall be filled for the unexpired term by the Governor.  A vacancy in a position appointed by the General Assembly shall be filled in accordance with G.S. 120-122.
The Board of Trustees shall select its chair for a two-year term.
It is the intent of the General Assembly that the appointing authorities, in appointing members, shall appoint members who represent the geographic, gender, and racial diversity of the State.
(c)	Initial Membership; Staggering. – To provide for a staggered membership, the members initially appointed pursuant to sub-subdivisions (b)(1)a., (1)b., (2)d., and (3)a. of this section shall serve one-year terms.  The members initially appointed pursuant to sub-subdivisions (b)(1)c., (2)a., (3)b., and (3)c. shall serve two-year terms.  The members initially appointed pursuant to sub-subdivisions (b)(1)d., (2)c., and (3)e. shall serve three-year terms.  The remaining members initially appointed pursuant to subsection (b) of this section shall serve four-year terms.
(d)	Compensation. – The members of the Board of Trustees shall receive per diem and travel and subsistence expenses in accordance with G.S. 138-5.  Per diem, subsistence, and travel expenses of the members shall be paid from the Fund.
(e)	Frequency of Meetings. – The Board of Trustees shall meet at least quarterly each year and may hold special meetings at the call of the chair or a majority of members.
(f)	Conflict of Interest. – Members of the Board of Trustees shall comply with the provisions of G.S. 14-234 prohibiting conflicts of interest.  A member shall not vote on, participate in the deliberation of, or otherwise attempt through his or her official capacity to influence the vote on a grant or other financial assistance award by the Board of Trustees to a nonprofit entity of which the member is an officer, director, or employee or to a governmental entity of which the member is an employee or a member of the governing board.
(g)	Limit on Operating and Administrative Expenses. – No more than two and one-half percent (2 1/2%) of the annual balance of the Fund on July 1 or a total sum of one million dollars ($1,000,000), whichever is less, may be used each fiscal year for administrative and operating expenses of the Board of Trustees and its staff.  All administrative expenses of the Commission shall be paid from the Fund.
"§ 130A-473. Powers and duties.
The Commission shall have the following powers and duties:
(1)	To administer the provisions of this Article.
(2)	To disburse funds or otherwise provide financial assistance to eligible State agencies, local governments, and other political subdivisions of the State, or a combination of these entities, or nonprofit organizations, consistent with the purposes of this Article and pursuant to the recommendations of the Board of Trustees, and to develop guidelines or criteria for eligibility and disbursement of funds and the provision of financial assistance.
(3)	To hire staff or contract for other expertise for the administration of the Fund.
(4)	To accept gifts or grants from other sources.
(5)	To require grant or financial assistance recipients that are non-State agencies to submit an annual report to the Board of Trustees.  The report shall include information concerning how the funds are used, the intended goals and objectives of the recipient's grant proposal or program initiative, and the results of an evaluation of the extent to which the outcomes of the initiative or proposal achieved those goals and objectives.
"§ 130A-474. Health Trust Fund.
(a)	Fund Established. – The Health Trust Fund is established in the State Treasurer's Office.  The Fund shall be used to promote the health and wellness of the people of North Carolina in accordance with this Article.
(b)	Fund Earnings, Assets, and Balances. – The State Treasurer shall hold the Fund separate and apart from all other moneys, funds, and accounts. The State Treasurer shall be the custodian of the Fund and shall invest its assets in accordance with G.S. 147-69.2 and G.S. 147-69.3.  Investment earnings credited to the Fund shall become part of the Fund.  Any balance remaining in the Fund at the end of any fiscal year shall be carried forward in the Fund for the next succeeding fiscal year.  Payments from the Fund shall be made on the warrant of the chair of the Board of Trustees, pursuant to the directives of the Board of Trustees.  The Board of Trustees may expend moneys in the Fund only as provided in subsection (c) of this section.
(c)	Use of Fund Principal. – The Board of Trustees shall reserve, and not expend, fifty percent (50%) of each annual payment allocated to the Health Trust Fund pursuant to G.S. 143-16.4 during years 2000 through 2025 to create a Reserve Account.  The Board of Trustees shall not expend the Reserve Account but may expend any investment earnings on the Reserve Account.  Notwithstanding any other provision of this section, the Board of Trustees may not expend more than forty million dollars ($40,000,000) a year through the year 2005.
The Board of Trustees may expend the remaining principal that is not reserved pursuant to this subsection.  Any unexpended portion of the nonreserved portion of the principal for years 2000 through 2025 that could have been expended under this subsection may be carried forward to subsequent years and may be expended during any subsequent year in addition to the nonreserved portion of the principal allowed to be expended under this subsection.
"§ 130A-475. Reporting.
(a)	The chair of the Board of Trustees shall report each year by November 1 to the Joint Legislative Commission on Governmental Operations and the chairs of the Joint Health Care Oversight Committee regarding the implementation of this Article.  The report shall include a summary of each recipient's annual report submitted to the Health Trust Fund Commission pursuant to G.S. 130A-473 and an analysis of the extent to which the Commission is achieving its goals, objectives, and outcomes established pursuant to G.S. 130A-470(b).  A written copy of the report shall also be sent to the Legislative Library by November 1 each year.
(b)	No later than November 1, 2000, and quarterly thereafter, the chair of the Board of Trustees shall submit to the Joint Legislative Commission on Governmental Operations a list of the initiatives funded from the Fund for the previous quarter.  The list shall include a description of each initiative, including the recipient, the amount of the grant awarded or financial assistance provided, the evaluation methods or process the recipient will use to measure whether the initiative's purpose is achieved, and the extent to which it is anticipated each initiative will be funded through each recipient.  A written copy of the list and other information regarding the initiatives shall also be sent to the Legislative Library by November 1, 2000, and for each subsequent quarter.
(c)	Any non-State agency that receives, uses, or expends any funds from the Commission is subject to the applicable reporting requirements of G.S. 143-6.1.
"§ 130A-476.  Advisory Council.
The Board of Trustees shall create an Advisory Council to advise it with regard to issues as requested by the Board of Trustees.  The Advisory Council shall include the Secretary of the Department of Health and Human Services, the State Health Director, the Dean of the School of Public Health, and others the Board of Trustees considers necessary.
"§ 130A-477.  Open meetings and public records requirements.
The Open Meetings Law (Article 33 of Chapter 143 of the General Statutes) and the Public Records Act (Chapter 132 of the General Statutes) apply to the Commission.  The Commission is subject to audit by the State Auditor as provided by law."

PART IV.  TOBACCO TRUST FUND AND TOBACCO COMMISSION
Section 4.  Chapter 143 of the General Statutes is amended by adding a new Article to read:
“ARTICLE 75.
"Tobacco Trust Fund.
"§ 143-715. Policy; purpose.
The General Assembly finds:
(1)	For many years, the State and its prosperity have been supported by its agricultural economy and particularly by the tobacco-related segment of the agricultural economy.  The Master Settlement Agreement is expected to cause significant economic hardship upon the tobacco-related segment of the agricultural economy in that it is expected to result in reduced demand, sales, and prices for tobacco as an agricultural product.
(2)	Tobacco growers, tobacco allotment holders, and persons engaged in tobacco-related businesses are entitled to indemnification for the adverse economic effects resulting from the Master Settlement Agreement, tobacco growers and allotment holders are entitled to compensation for the economic losses resulting from lost quota value, and tobacco growers are entitled to compensation for the decline in value of tobacco-related personal property assets and declining market conditions resulting from the Master Settlement Agreement, to the extent that funds are available in the Tobacco Trust Fund to address those purposes.
(3)	Even in the absence of the Master Settlement Agreement, the tobacco-related segment of the State's economy is experiencing severe economic hardship as it confronts a national decline in the use of, and demand for, tobacco products, which decline is expected to continue.  At present, the tobacco growers, tobacco allotment holders, and persons engaged in tobacco-related businesses are facing an economic crisis that threatens their health and survival. Therefore, in addition to indemnification and compensation for losses resulting from the Master Settlement Agreement, the public interest will be served by the funding of qualified agricultural programs that support, foster, encourage, and facilitate a strong agricultural economy in North Carolina.  To the extent that funds are available in the Tobacco Trust Fund, expenditure of those funds to finance qualified agricultural programs is in the public interest.
(4)	It is a public purpose for these funds to be expended in this manner, and it is public service for these persons to accept these funds to the end that conditions of unemployment and fiscal distress may be alleviated or avoided, more stable local economies may be created, local tax bases may be stabilized and maintained, natural resources may be optimally used, and the general public may be benefited.
"§ 143-716. Definitions.
The following definitions apply in this Article:
(1)	Board of Trustees. – The Board of Trustees of the Tobacco Trust Fund Commission.
(2)	Bonds. – Bonds of the State issued pursuant to the provisions of Article 8 of Chapter 142 of the General Statutes.
(3)	Bond funds. – Amounts derived from the sale of bonds by the State pursuant to Article 8 of Chapter 142 of the General Statutes.
(4)	Commission. – The Tobacco Trust Fund Commission.
(5)	Compensatory programs. – Programs developed by the Commission to identify, locate, compensate, and indemnify tobacco growers, allotment holders, and persons engaged in tobacco-related businesses who have suffered actual economic losses due to lost quota, the decline in value of tobacco-related personal property assets, and declining market conditions resulting from the Master Settlement Agreement or declines in the tobacco-related segment of the State's economy.
(6)	Fund. – The Tobacco Trust Fund.
(7)	Master Settlement Agreement. – The settlement agreement between certain tobacco manufacturers and the states, as incorporated in the consent decree entered in the action of State of North Carolina v. Philip Morris, Incorporated, et al.,  98 CVS 14377, in the General Court of Justice, Superior Court Division, Wake County, North Carolina.
(8)	National Tobacco Grower Settlement Trust. – The National Tobacco Grower Settlement Trust established by tobacco companies to provide payments to tobacco growers and allotment holders in 14 states for the purposes of ameliorating potential adverse economic consequences of likely reduction in demand, sales, and prices for tobacco as an agricultural product as a result of the Master Settlement Agreement.
(9)	Non-bond settlement funds. – Amounts received by the Commission for deposit to the Fund that are derived from sources other than the proceeds of bonds, including amounts received by the State under the Master Settlement Agreement that are transferred to the Commission for deposit to the Fund pursuant to G.S. 143-16.4.
(10)	Qualified agricultural programs. – Programs developed by the Commission to support and foster the vitality and solvency of the tobacco-related segment of the State's agricultural economy, particularly the segment adversely affected by the Master Settlement Agreement, with the objective of alleviating and avoiding unemployment, preserving and increasing local tax bases, and encouraging the economic stability of participants in the State's agricultural economy.  Examples of qualified agricultural programs include  programs to finance the modernization of farming equipment, programs to finance the conversion of existing equipment to conform to environmental and other regulatory requirements, and programs to finance the conversion or replacement of equipment in order to cultivate crops that are more profitable than are currently being cultivated.
(11)	Tobacco-related business. – The term does not include the manufacturing of tobacco products or the sale of tobacco products at wholesale or retail.
"§ 143-717.  Commission.
(a)	Creation. – The Tobacco Trust Fund Commission is created.  The Commission shall be administratively located within the Department of Agriculture and Consumer Services but shall exercise its powers independently of the Commissioner of Agriculture and the Department.  All administrative expenses of the Commission shall be paid from the Fund.
(b)	Membership. – The Board of Trustees of the Commission shall consist of 16 members.  The Board of Trustees shall be appointed as follows: five members by the Governor, five members by the General Assembly upon the recommendation of the President Pro Tempore of the Senate, and five members by the General Assembly upon the recommendation of the Speaker of the House of Representatives.  The Commissioner of Agriculture shall serve as an ex officio member.  The appointed members shall be appointed as follows:
(1)	The Governor shall make the following appointments:
a.	A flue-cured tobacco farmer.
b.	A flue-cured tobacco farmer.
c.	A burley tobacco farmer.
d.	A person in or displaced from employment in a tobacco-related business.
e.	An at-large appointee.
(2)	The General Assembly shall make the following appointments upon the recommendation of the President Pro Tempore of the Senate:
a.	A flue-cured tobacco farmer.
b.	A flue-cured tobacco farmer.
c.	A burley allotment holder who is not also a burley tobacco farmer.
d.	A person in or displaced from employment in a tobacco-related business.
e.	An at-large appointee.
(3)	The General Assembly shall make the following appointments upon the recommendation of the Speaker of the House of Representatives:
a.	A flue-cured tobacco farmer.
b.	A flue-cured tobacco farmer.
c.	A flue-cured allotment holder who is not also a flue-cured tobacco farmer.
d.	A burley tobacco farmer.
e.	An at-large appointee.
Except as provided for the initial members under subsection (c)	of this section, members shall serve four-year terms.  No member may serve more than two full consecutive terms.  A vacancy in a position appointed by the Governor shall be filled for the unexpired term by the Governor.  A vacancy in a position appointed by the General Assembly shall be filled in accordance with G.S. 120-122.  A member may be removed from office for cause by the authority that appointed that member.
(c)	Initial Membership; Staggering. – To provide for a staggered membership, the members initially appointed pursuant to sub-subdivisions (b)(1)a., (1)b., (2)d., and (3)a. of this section shall serve one-year terms.  The members initially appointed pursuant to sub-subdivisions (b)(1)c., (2)a., (3)b., and (3)c. shall serve two-year terms.  The members initially appointed pursuant to sub-subdivisions (b)(1)d., (2)c., and (3)e. of this section shall serve three-year terms.  The remaining members initially appointed pursuant to subsection (b) of this section shall serve four-year terms.
	(d)	Officers. –  The Board of Trustees shall elect from its membership a chair and other officers as necessary.  The term of office for a chair or another officer is two years.
"§ 143-718.  Powers and duties.
The Commission shall have the following powers and duties:
(1)	To administer the provisions of this Article.
(2)	To develop compensatory programs and qualified agricultural programs, including guidelines and criteria for eligibility for and disbursement of funds, the forms of direct and indirect economic assistance to be awarded, and procedures for applying for and reviewing applications for assistance from the Fund.  In developing guidelines and criteria for eligibility and disbursement of funds, the Commission may consult with and otherwise obtain assistance from the State and local offices of the Farm Service Agency and other agencies of the United States Department of Agriculture.  The Commission shall publish the proposed guidelines and criteria under this subdivision in the North Carolina Register and any other publications it considers appropriate at least 30 days before adopting them.  The Commission shall hold a public hearing on the proposed guidelines and criteria before adopting them.
(3)	To provide financial assistance to eligible recipients, in carrying out compensatory programs and qualified agricultural programs.
(4)	To hire staff for the administration of the Fund.
(5)	To accept gifts or grants from other sources.
"§ 143-719. Tobacco Trust Fund; creation; investment.
(a)	Fund Established. – The Tobacco Trust Fund is established in the State Treasurer's Office.  The Fund shall be used to provide financial assistance in accordance with this Article. The State Treasurer may provide for the creation of various accounts and subaccounts within the Fund as the State Treasurer considers necessary to account for separately the various non-bond settlement funds and bond funds deposited in the Fund.  Investment earnings on moneys deposited in the Fund pursuant to subsection (b) of this section shall be allocated to the various accounts and subaccounts as determined by the State Treasurer.
(b)	Fund Earnings, Assets, and Balances. – The State Treasurer shall hold the Fund separate and apart from all other moneys, funds, and accounts. The State Treasurer shall be the custodian of the Fund and shall invest the assets in accordance with G.S. 147-69.2 and G.S. 147-69.3.  Investment earnings credited to the Fund shall become part of the Fund.  Any balance remaining in the Fund at the end of any fiscal year shall be carried forward in the Fund for the next succeeding fiscal year.  Payments from the Fund shall be made on the warrant of the chair of the Board of Trustees.
"§ 143-720. Benefits and administration of Fund for compensatory programs.
(a)	Non-bond settlement funds held in the Fund may be expended on compensatory programs as provided in this section.
(b)	The Fund may provide direct and indirect financial assistance, in accordance with criteria established by the Board of Trustees and to the extent allowed by law, to accomplish the following:
(1)	Indemnify tobacco producers, allotment holders, and persons engaged in tobacco-related businesses from the adverse economic effects of the Master Settlement Agreement.
(2)	Compensate tobacco producers and allotment holders for economic loss resulting from lost quota value and compensate tobacco producers for the decline in value of tobacco-related personal property assets and declining market conditions resulting from the Master Settlement Agreement.
(c)	Only tobacco producers, tobacco allotment holders, and persons engaged in tobacco-related businesses are eligible to apply for and receive assistance pursuant to subsection (b) of this section.  An applicant may be a natural person, partnership, limited liability company, or corporation. Direct payments made to tobacco producers and tobacco allotment holders shall be based on losses resulting in 1998 and thereafter.  Lost quota value shall be a primary determinative factor in calculating the amount of compensable economic loss for tobacco farmers and allotment holders.
	(d) The Board of Trustees shall determine the priority of awards among the categories in subsection (b) of this section and within each of those categories.
(e)	Financial assistance awards shall be for no more than one year at a time.  An award may be renewed annually, without limitation.
(f)	The Board of Trustees may require applicants to provide copies of documents necessary to determine compensable economic loss.
(g)	In no event shall the amount paid to a tobacco producer or allotment holder pursuant to this Article, when combined with the amount received through the National Tobacco Grower Settlement Trust, exceed the compensable economic loss of the producer or allotment holder.
	(h) The Board of Trustees may consider the criteria used for National Tobacco Grower Settlement Trust payments and may correspond with the National Tobacco Grower Settlement Trust certification entity to ensure that tobacco farmers and allotment holders are treated fairly.
"§ 143-721. Benefits and administration of Fund for qualified agricultural programs.
(a)	Non-bond settlement funds and bond funds held in the Fund may be expended on qualified agricultural programs as provided in this section.
(b)	Non-bond settlement funds and, subject to the provisions of any resolution or trust agreement authorizing and securing bonds issued by the State pursuant to the provisions of Article 8 of Chapter 142 of the General Statutes, bond funds may be expended to fund the costs of qualified agricultural programs.  In implementing qualified agricultural programs, the Commission shall endeavor to identify those areas of the tobacco-related segment of the State's economy in need of assistance to be provided by the Fund in order to assure the continued vitality and solvency of those areas. The Commission shall endeavor to select for funding qualified agricultural programs that will have the greatest favorable impact on the long-term health of the tobacco-related economy of the State.
(c)	The benefits of qualified agricultural programs are not limited to persons suffering economic loss resulting from the Master Settlement Agreement, but these programs shall be designed to foster, support, and assist the tobacco-related segment of the agricultural economy.
(d)	The Commission may solicit and accept proposals from agencies and departments of the State, including institutions of The University of North Carolina, local units of government, the federal government, and members of the private sector for qualified agricultural programs to be funded with money held in the Fund.
"§ 143-722.  Reporting.
The chair of the Commission shall report each year by November 1 to the Joint Legislative Commission on Governmental Operations regarding the implementation of this Article, including a report on funds disbursed during the fiscal year by amount and by category of recipient.
"§ 143-723.  Open meetings; public records; audit.
The Open Meetings Law (Article 33 of Chapter 143 of the General Statutes) and the Public Records Act (Chapter 132 of the General Statutes) shall apply to the Commission, and the Commission shall be subject to audit by the State Auditor as provided by law."
Section 4.1.  The initial qualified agricultural program to be undertaken by the Tobacco Trust Fund Commission, established in Article 75 of Chapter 143 of the General Statutes, shall be a program to provide funding assistance to tobacco producers to convert tobacco curing barns from direct-fired heating systems to indirect-fired heating systems pursuant to a program being designed for this purpose by the Flue-Cured Tobacco Stabilization Corporation.  Upon written request by the Commission, the State may issue bonds pursuant to Article 8 of Chapter 142 of the General Statutes in a principal amount not to exceed seventy-five million dollars ($75,000,000) for this purpose, which purpose constitutes a State-authorized program within the meaning of Article 8 of Chapter 142 of the General Statutes.  The bonds issued pursuant to this section may be secured solely by the funds credited to the Tobacco Trust Account of the Settlement Reserve Fund created under G.S. 143-16.4.  The bond funds received from the sale of the bonds shall be credited to the Tobacco Trust Fund created by G.S. 143-719 and shall be invested and expended as provided in Article 75 of Chapter 143 of the General Statutes for the purposes provided in this section.

PART V.  APA RULE-MAKING EXEMPTION (TOBACCO)
Section 5.  G.S. 150B-1(d) reads as rewritten:
"(d)	Exemptions from Rule Making. – Article 2A of this Chapter does not apply to the following:
(1)	The Commission.
(2)	The North Carolina Low-Level Radioactive Waste Management Authority in administering the provisions of G.S. 104G-10 and G.S. 104G-11.
(3)	The North Carolina Hazardous Waste Management Commission in administering the provisions of G.S. 130B-13 and G.S. 130B-14.
(4)	The Department of Revenue, with respect to the notice and hearing requirements contained in Part 2 of Article 2A.
(5)	The North Carolina Global TransPark Authority with respect to the acquisition, construction, operation, or use, including fees or charges, of any portion of a cargo airport complex.
(6)	The Department of Correction, with respect to matters relating solely to persons in its custody or under its supervision, including prisoners, probationers, and parolees.
(7)	The North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan in administering the provisions of Parts 2 and 3 of Article 3 of Chapter 135 of the General Statutes.
(8)	The Tobacco Trust Fund Commission established in Article 75 of Chapter 143 of the General Statutes."

PART VI.  STATE PERSONNEL ACT EXEMPTION
Section 6. G.S. 126-5(c1) reads as rewritten:
"(c1)	Except as to the provisions of Articles 6 and 7 of this Chapter, the provisions of this Chapter shall not apply to:
(1)	Constitutional officers of the State.
(2)	Officers and employees of the Judicial Department.
(3)	Officers and employees of the General Assembly.
(4)	Members of boards, committees, commissions, councils, and advisory councils compensated on a per diem basis.
(5)	Officials or employees whose salaries are fixed by the General Assembly, or by the Governor, or by the Governor and Council of State, or by the Governor subject to the approval of the Council of State.
(6)	Employees of the Office of the Governor that the Governor, at any time, in his discretion, exempts from the application of the provisions of this Chapter by means of a letter to the State Personnel Director designating these employees.
(7)	Employees of the Office of the Lieutenant Governor, that the Lieutenant Governor, at any time, in his discretion, exempts from the application of the provisions of this Chapter by means of a letter to the State Personnel Director designating these employees.
(8)	Instructional and research staff, physicians, and dentists of The University of North Carolina.
(9)	Employees whose salaries are fixed under the authority vested in the Board of Governors of The University of North Carolina by the provisions of G.S. 116-11(4), 116-11(5), and 116-14.
(10)	Repealed by Session Laws 1991, c. 84, s. 1.
(11)	North Carolina School of Science and Mathematics' employees whose salaries are fixed in accordance with the provisions of G.S. 116-235(c)(1) and G.S. 116-235(c)(2).
(12)	Employees of the North Carolina Low-Level Radioactive Waste Management Authority whose salaries are fixed pursuant to G.S. 104G-5(g)(1) and G.S. 104G-5(g)(2).
(13)	Employees of the North Carolina Hazardous Waste Management Commission whose salaries are fixed pursuant to G.S. 130B-6(g)(1) and G.S. 130B-6(g)(2).
(14)	Employees of the North Carolina State Ports Authority.
(15)	Employees of the North Carolina Global TransPark Authority.
(16)	The executive director and one associate director of the North Carolina Center for Nursing established under Article 9F of Chapter 90 of the General Statutes.
(17)	The executive director of the independent staff of the Information Resources Management Commission established under G.S. 143B-472.41A.
(18)	Employees of the Tobacco Trust Fund Commission established in Article 75 of Chapter 143 of the General Statutes.
(19)	Employees of the Health Trust Fund Commission established in Article 21 of Chapter 130A of the General Statutes."

PART VII. NO LEGISLATORS ON COMMISSIONS
Section 7. G.S. 120-123 is amended by adding two new subdivisions to read:
"§ 120-123.  Service by members of the General Assembly on certain boards and commissions.
No member of the General Assembly may serve on any of the following boards or commissions:
… 
(70)	The Tobacco Trust Fund Commission established in Article 75 of Chapter 143 of the General Statutes.
(71)	The Health Trust Fund Commission established in Article 21 of Chapter 130A of the General Statutes."

PART VIII.  CONFLICT OF INTEREST (TOBACCO)
Section 8. G.S. 14-234 is amended by adding a new subsection to read:
"( d4)	Subsection (a) of this section does not apply to an application for or the receipt of a grant or other financial assistance from the Tobacco Trust Fund created under Article 75 of Chapter 143 of the General Statutes by a member of the Board of Trustees of the Tobacco Trust Fund Commission, if both of the following conditions are met:
(1)	The member of the Board of Trustees applying for assistance does not participate in the discussion of, or vote on, the application.
(2)	The Commissioner of Agriculture determines that the award is in accordance with general criteria adopted by the Commission for the distribution of funds from the Tobacco Trust Fund."

PART IX.  EFFECTIVE DATE
Section 9. Interpretation of Act. – (a) The foregoing sections of this act provide an additional and alternative method for the doing of the things authorized by the act, are supplemental and additional to powers conferred by other laws, and do not derogate any powers now existing.
Section 9.(b) References in this act to specific sections or Chapters of the General Statutes are intended to be references to those sections or Chapters as amended and as they may be amended from time to time by the General Assembly.
Section 9.(c) This act, being necessary for the health and welfare of the people of the State, shall be liberally construed to effect its purposes.
Section 9.(d) If any provision of this act or its application is held invalid, the invalidity does not affect other provisions or applications of this act that can be given effect without the invalid provisions or application, and to this end the provisions of this act are severable.
Section 10. Effective Date. – This act is effective when it becomes law.