A BILL TO BE ENTITLED
AN ACT to require zero‑based budgeting and to establish a zero‑based budgeting cycle.
Whereas, the General Assembly finds that the traditional method of budget development, which relies upon incremental adjustments to expenditures made in the previous financial period, insulates governmental activities from the thorough fiscal review expected by taxpaying citizens; and
Whereas, new and changing demands for public services are met through excessive budget growth rather than by pruning obsolete programs and redirecting existing funds; and
Whereas, some programs were established so long ago that the original statutory basis has either been forgotten or is out‑of‑date; and
Whereas, in time the budget is driven by inertia rather than by clear and defensible purposes; and 
Whereas, the General Assembly finds that zero‑based budgeting is an effective method to counter the tendency toward perpetuation of outdated State programs; Now, therefore,
The General Assembly of North Carolina enacts:
SECTION 1.  Article 1 of Chapter 143 of the General Statutes is amended by adding a new section to read:
"§ 143‑10.8.  Zero‑based budgeting.
(a)	The Director of the Budget shall subject every program in State government to zero‑based budget review according to the following schedule:
(1)	Calendar Year 2005 and every fifth year thereafter: the Department of Health and Human Services, Division of Medical Assistance, and NC Health Choice; the Department of Crime Control and Public Safety; the Office of Administrative Hearings; the Board of Elections; the Department of Labor; the Department of Community Colleges; and the Community College System.
(2)	Calendar Year 2006 and every fifth year thereafter: the Department of Health and Human Services, Divisions of Facilities Services, Vocational Rehabilitation, and Aging and Adult Services; the Department of Juvenile Justice and Delinquency Prevention; the Department of Environment and Natural Resources; the Department of Administration; the Department of Cultural Resources; and the Department of Revenue. 
(3)	Calendar Year 2007 and every fifth year thereafter:  the Department of Health and Human Services, Divisions of Education Services, Services for the Blind, and Services for the Deaf and Hard of Hearing; The University of North Carolina; the Department of Transportation; the Department of Agriculture and Consumer Services; the Department of State Auditor; the Housing Finance Agency; and the Department of State Treasurer.
(4)	Calendar Year 2008 and every fifth year thereafter:  the Department of Health and Human Services, Division of Mental Health, Developmental Disabilities, and Substance Abuse, and Office of the Secretary of Health and Human Services; the Department of Public Instruction; the public school system; the Judicial Department; the Department of Commerce; the Office of State Controller; the Department of Insurance; and the Office of the Secretary of State.
(5)	Calendar Year 2009 and every fifth year thereafter:  the Department of Health and Human Services, Divisions of Public Health, Child Development, and Social Services; the Office of Governor; the Office of State Budget and Management; the Office of Lieutenant Governor; the Department of Justice; and the Department of Correction.
(b)	To accommodate zero‑based budget review, the Director of the Budget shall require agencies to prepare and submit a zero‑based budget plan in addition to any other information that may be required by statute, rule, or directive. At a minimum, the plan shall contain the following information:
(1)	A description of those discrete activities that comprise the agency, and a justification for the existence of each activity by reference to statute or other legal authority.
(2)	For each activity, a quantitative estimate of any adverse impacts that could reasonably be expected should the activity be discontinued, together with a full description of the methods by which the adverse impact is estimated.
(3)	For each activity, an itemized account of expenditures that would be required to maintain the activity at the minimum level of service required by the statutory authority, together with a concise statement of the quantity and quality of services required at that minimum level.
(4)	For each activity, an itemized account of expenditures required to maintain the activity at current levels of service, together with a concise statement of the quantity and quality of services being provided.
(5)	A ranking of all activities that shows the relative contribution of each activity to the overall goals and purposes of the agency at current service levels."
SECTION 2.  This act becomes effective July 1, 2005.