A BILL TO BE ENTITLED
AN ACT TO MAKE BASE BUDGET APPROPRIATIONS FOR CURRENT OPERATIONS OF STATE DEPARTMENTS, INSTITUTIONS, AND AGENCIES, AND FOR OTHER PURPOSES. 

The General Assembly of North Carolina enacts:

PART i. INtroduction and title of act

Requested by:	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 in accordance with the Executive Budget Act.  Savings shall be effected where the total amounts appropriated are not required to perform these services and accomplish these purposes and the savings shall revert to the appropriate fund at the end of each fiscal year, except as otherwise provided by law.

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 2005."

PART iI. current operations and expansion/general fund

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, 2007, according to the following schedule:

Current Operations – General Fund	2005‑2006	2006‑2007

EDUCATION

Community Colleges System Office	$  792,784,715 	$  746,844,357 

Department of Public Instruction	6,686,828,445 	6,694,525,352 

University of North Carolina – Board of Governors		
	Appalachian State University	97,985,189 	98,017,482 
	East Carolina University		
		Academic Affairs	163,117,460 	165,825,346 
		Health Affairs	45,236,835 	45,199,318 
	Elizabeth City State University	27,836,223 	27,945,857 
	Fayetteville State University	42,457,022 	42,888,221 
	NC Agricultural and Technical University	76,760,995 	77,033,079 
	North Carolina Central University	58,670,213 	58,651,761 
	North Carolina School of the Arts	19,903,778 	19,887,953 
	North Carolina State University
		Academic Affairs	298,649,068 	303,604,023 
		Agricultural Extension	35,806,488 	35,806,688 
		Agricultural Research	45,270,285 	45,549,731 
	University of North Carolina at Asheville	28,616,607 	29,645,303 
	University of North Carolina at Chapel Hill
		Academic Affairs	212,811,809 	221,386,937 
		Health Affairs	163,536,496 	165,717,793 
		Area Health Education Centers	44,519,506 	44,519,506 
	University of North Carolina at Charlotte	125,946,379 	132,426,616 
	University of North Carolina at Greensboro	112,494,664 	113,358,313 
	University of North Carolina at Pembroke	40,978,831 	41,646,390 
	University of North Carolina at Wilmington	74,233,617 	76,212,723 
	Western Carolina University	71,221,796 	71,938,286 
	Winston‑Salem State University	48,827,490 	48,923,209 
	General Administration	47,357,834 	47,356,334 
	University Institutional Programs	24,985,466 	28,970,466 
	Related Educational Programs	112,128,293 	113,991,033 
	North Carolina School of Science and Mathematics	13,840,377 	13,840,377 
	UNC Hospitals at Chapel Hill	39,231,482 	39,231,482 
Total University of North Carolina – 
	Board of Governors	2,072,424,203 	2,109,574,227 

HEALTH AND HUMAN SERVICES			
Department of Health and Human Services
	Office of the Secretary	114,180,919 	130,744,045 
	Division of Aging	29,495,139 	29,495,139 
	Division of Blind Services/Deaf/HH	9,636,797 	9,681,220 
	Division of  Child Development	264,750,017 	267,356,799 
	Division of Education Services	33,852,267 	34,281,895 
	Division of Facility Services	16,045,403 	17,795,105 
	Division of Medical Assistance	2,461,281,279	2,606,201,525 
	Division of Mental Health	600,373,655 	602,298,655 
	NC Health Choice	62,035,981 	62,035,981 
	Division of Public Health	139,796,232 	141,314,496 
	Division of Social Services	185,339,061 	186,973,442 
	Division of Vocation Rehabilitation	41,755,526 	42,142,193 
Total Health and Human Services	$  3,958,542,276 	$  4,130,320,495 

NATURAL AND ECONOMIC RESOURCES		
			
Department of Agriculture and Consumer Services	49,829,113 	49,456,901 

Department of Commerce
	Commerce	44,407,935 	36,759,201 
	Commerce State‑Aid	11,222,085 	11,222,085 
	NC Biotechnology Center	12,083,395 	10,583,395 
	Rural Economic Development Center	24,802,607 	24,802,607 
			
Department of Environment and Natural Resources	171,187,401 	163,712,105 

Department of Labor	14,154,785 	14,169,511 
			
JUSTICE AND PUBLIC SAFETY
			
Department of Correction	$  1,023,193,451 	$  1,041,825,169 
			
Department of Crime Control and Public Safety	33,509,206 	33,899,206 
			
Judicial Department	338,914,267 	341,627,255 
Judicial Department – Indigent Defense	90,879,188 	85,879,188 
			
Department of Justice	76,555,200 	77,190,756 
			
Department of Juvenile Justice and 
		Delinquency Prevention	135,174,503 	135,774,503 
			
GENERAL GOVERNMENT
			
Department of Administration	62,419,016 	58,783,228 
			
Office of Administrative Hearings	2,987,410 	2,969,712 
			
Department of State Auditor	10,850,737 	10,840,918 
			
Office of State Controller	10,043,268 	10,044,511 
			
Department of Cultural Resources		
	Cultural Resources	63,541,449 	61,950,582 
	Roanoke Island Commission	1,783,374 	1,783,374 
			
State Board of Elections	5,067,543 	5,069,307 
			
General Assembly	42,984,588 	46,965,432 
			
Office of the Governor		
	Office of the Governor	5,324,590 	5,344,528 
	Office of State Budget and Management	5,019,735 	5,021,795 
	OSBM – Reserve for Special Appropriations	4,430,000 	4,180,000 
	Housing Finance Agency	5,750,945 	4,750,945 
			
Department of Insurance		
	Insurance	28,088,214 	28,110,582 
	Insurance – Volunteer Safety Workers'
		Compensation	2,500,000 	4,500,000 
			
Office of Lieutenant Governor	754,737 	753,037 
			
Department of Revenue	78,238,895 	77,858,775 
			
Department of Secretary of State	8,657,943 	8,638,857 
			
Department of State Treasurer	
	State Treasurer	8,690,595 	8,295,843 
	State Treasurer – Retirement for Fire and Rescue 
		Squad Workers	8,551,457 	8,551,457 
			
TRANSPORTATION			
Department of Transportation	0 	0 
			
RESERVES, ADJUSTMENTS AND DEBT SERVICE			
Reserve for Compensation Increases	192,876,000 	499,876,000 
			
Salary Adjustment Fund:  2005‑2007 Biennium	4,500,000 	4,500,000 
			
Salary Adjustment Fund:  2004‑2005 Fiscal Year	4,500,000 	4,500,000 
			
Reserve for Teachers' and State Employees' 
	Retirement Contribution	14,617,000 	14,617,000 
			
Reserve for Retirement System Payback	25,000,000 	0 
			
Reserve for Death Benefit Trust	12,899,200 	12,899,200 
			
Reserve for Disability Income Plan	6,586,500 	6,586,500 
			
Reserve for State Health Plan	125,000,000 	167,000,000 
			
Contingency and Emergency Fund	5,000,000 	5,000,000 
			
Reserve for Information Technology 
	Rate Adjustments	(2,300,000)	(2,300,000)
			
Information Technology Fund	24,375,000 	8,025,000 
			
MH/DD/SAS Trust Fund	5,000,000 	0 
			
Health and Wellness Trust Fund	10,000,000 	0 
			
Reserve for Job Development Investment Grants (JDIG) 	8,000,000 	12,400,000 
			
Reserve for Healthy NC	2,000,000 	0 
			
Reserve for Increased Fuel Costs 	3,000,000 	0 
			
Debt Service		
	General Debt Service	489,544,211 	619,291,140 
	Federal Reimbursement	1,616,380 	1,616,380 

TOTAL CURRENT OPERATIONS – 
	GENERAL FUND	$ 16,824,391,562 	$ 17,416,590,416 

Requested by:	Senators Garrou, Dalton, Hagan 
GENERAL FUND AVAILABILITY STATEMENT
SECTION 2.2.(a)  The General Fund availability used in developing the 2005‑2007 biennial budget is shown below:
	FY 2005‑2006	FY 2006‑2007

Unappropriated Balance Remaining 
	from Previous Year	$	0 	$ 247,722,490 
Projected Over Collections FY 2004‑2005	428,400,000 	0 
Projected Reversions FY 2004‑2005	75,000,000 	0 
Less Earmarkings of Year End Credit Balance	0 	0 
	Savings Reserve Account	(125,850,000)	0 
	Repairs and Renovations	(50,000,000)	0 
Beginning Unreserved Credit Balance	$  327,550,000 	$  247,722,490 

Revenues Based on Existing Tax Structure	$ 15,250,100,000 	$ 15,903,000,000 

Nontax Revenues		
	Investment Income	75,300,000 	78,500,000 
	Judicial Fees	142,200,000 	147,900,000 
	Disproportionate Share	100,000,000 	100,000,000 
	Insurance	56,600,000 	58,800,000 
	Other Nontax Revenues	150,400,000 	161,800,000 
	Highway Trust Fund/Use Tax Reimbursement 
		Transfer	252,558,117 	252,663,009 
	Highway Fund Transfer	16,200,000 	16,200,000 
		Subtotal Nontax Revenues	793,258,117 	815,863,009 
		
Total General Fund Availability	$  16,370,908,117 	$ 16,966,585,499 
		
Adjustments to Availability:  2005 Session		
	Streamlined Sales Tax Changes	72,200,000 	87,800,000 
	Maintain 4.5% Sales Tax Rate	413,400,000 	458,700,000 
	Other Sales Tax Changes		
		Apply Sales Tax to Service Contracts and 
			Warranties	9,100,000 	16,800,000 
		Apply Sales Tax to Candy	11,000,000 	15,800,000 
		Exempt Potting Soil for Farmers	(200,000)	(300,000)
	Tobacco Tax Rate Changes	201,300,000	229,900,000 
	Reduce Highest Marginal Individual 
		Income Tax Rate to 7.75% Over Two Years 	20,100,000 	24,600,000 
	Continue Use Tax Line on Individual Returns	3,200,000 	3,200,000 
	Conform Estate Tax to Federal Sunset	30,700,000 	121,600,000 
	Reduce Corporate Income Tax Rate	0 	0 
	Corporate Tax "Throwout" Rule	9,800,000 	10,300,000 
	Film Industry Jobs Incentives	(4,800,000)	(4,800,000)
	IRC Update – Partial Conformance	(8,000,000)	(10,700,000)
	Increase Earmarking for NC Grape Growers Council	(150,000)	(150,000)
	Justice and Public Safety Fees	20,428,271 	20,428,271 
	Transfer from Tobacco Trust Fund	34,000,000 	30,000,000 
	Transfers from Special Revenue and Other Funds	8,953,950 	0 

Reimburse Debt Service for Certain Capital Facilities 
	and Land Acquisition per SL 2004‑179	5,958,723 	21,060,827 
Adjust Transfer from Insurance Regulatory Fund	256,513 	243,813 
Adjust Transfer from Treasurer's Office	68,478 	67,478 
	Subtotal Adjustments to Availability:
	2005 Session	$  827,315,935 	$  1,024,550,389 

Revised General Fund Availability	$ 17,198,224,052 	$ 17,991,135,888 

Less: General Fund Appropriations 		
	SB 622 (2005 Appropriations Act )	(16,850,501,562)	(17,416,590,416)
	G.S. 143‑15.3B:  Clean Water Management 
		Trust Fund 	(100,000,000)	(100,000,000)
Total General Fund Appropriations 2005‑2007 
	Biennium	($16,950,501,562)	($17,516,590,416)
		
Unappropriated Balance Remaining	$  247,722,490 	$  474,545,472 

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 2005‑2007 fiscal biennium, the sum of thirty‑four million dollars ($34,000,000) for the 2005‑2006 fiscal year and the sum of thirty million dollars ($30,000,000) for the 2006‑2007 fiscal year 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 (Intrastate Transfers) to support General Fund appropriations for the 2005‑2006 and 2006‑2007 fiscal years.
SECTION 2.2.(c)  G.S. 143‑15.3 is amended by adding a new subsection to read:
"(a2)	The transfer of funds to the Savings Reserve Account in accordance with this section or any other provision of law is not an "appropriation made by law", as that phrase is used in Article V, Section 7(1) of the North Carolina Constitution."
This subsection becomes effective June 30, 2005.
SECTION 2.2.(d)  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, 2005. Funds transferred under this section to the Repairs and Renovations Reserve Account are appropriated for the 2005‑2006 fiscal year to be used in accordance with G.S. 143‑15.3A.  This subsection becomes effective June 30, 2005.
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 eighty million dollars ($80,000,000) 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 16 years.
SECTION 2.2.(f)  Notwithstanding G.S. 105‑187.9(b)(1), the sum to be transferred under that subdivision for the 2005‑2006 fiscal year and for the 2006‑2007 fiscal year is two hundred fifty million dollars ($250,000,000).
SECTION 2.2.(g)  Section 2.2(g) of S.L. 2002‑126 is repealed.
SECTION 2.2.(h)  Notwithstanding any other provision of law to the contrary, effective July 1, 2005, cash balances remaining in special funds on June 30, 2005, shall be transferred to the State Controller to be deposited in Nontax Budget Code 19978 (Intrastate Transfers) according to the schedule that follows.  These funds shall be used to support General Fund appropriations for the 2005‑2006 fiscal year.

Fund	Amount Transferred
Department of Environment and Natural Resources
Budget Code 24300, Fund Code 2338 (DAQ‑Inspections
	 and Maintenance – Air Pollution)	$	300,000
Budget Code 24300, Fund Code 2106 (DEH – Sleep Products)	200,000
Budget Code 24300, Fund Code 2735 (DLR – Sedimentation Fees)	200,000
Budget Code 24306, Fund Code 2127 (DWQ – Clean‑Up Dry
	Cleaning Solvent) 	3,000,000
Budget Code 24300, Fund Code 2130 (DWQ – Well Construction Fund) 	100,000
Budget Code 24300, Fund Code 2335 (DWQ – Lab Certification Fees) 	100,000
Budget Code 24300, Fund Code 2341 (DWQ – Water Permits)	500,000
Budget Code 64306, Fund Code 6341 (DWQ – WW Treatment 
	Maintenance and Repair)	100,000
Budget Code 24304, Fund Code 2982 (DWQ – Riparian Buffer
	Restoration)	2,000,000

Department of Commerce
Budget Code 24600, Fund Code 2711 (Industrial Development Fund)	500,000

Department of Corrections
Budget Code 24502, (Inmate Canteen/Welfare Fund)	440,000

Judicial Department
Budget Code 22005, Fund Code 2263 (Worthless Check Fund)	100,000

Department of Administration
Budget Code 24160, Fund Code 2000 (NC Flex)	913,950

SECTION 2.2.(i)  The transfer of cash from Department of Correction, Budget Code 74500, Fund Code 7100 (Prison Enterprises) to Nontax Budget Code 19978 (Intrastate Transfers) shall be increased by five hundred thousand dollars ($500,000), effective July 1, 2005, for the 2005‑2006 fiscal year.

PART iII. current operations and expansion/highway fund

Requested by:	Senators Jenkins, 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, 2007, according to the following schedule:

Current Operations – Highway Fund	2005‑2006	2006‑2007

Department of Transportation
	Administration	$	93,888,317	$	95,100,980

Division of Highways
	Administration	30,621,612	30,632,164
	Construction	140,470,000	143,080,000
	Maintenance	715,895,029	665,722,211
	Planning and Research	4,280,000	4,280,000
	OSHA Program	425,000	425,000

Ferry Operations	21,264,811	21,264,811

State Aid
	Municipalities	93,370,000	95,980,000
	Public Transportation	66,466,447	89,866,447
	Railroads	16,531,153	15,531,153

Governor's Highway Safety	293,118	293,118

Division of Motor Vehicles	95,447,914	95,268,137

Other State Agencies	237,392,745	230,530,729

Reserves and Transfers	20,798,052	36,958,052

TOTAL		$1,537,144,198	$ 1,524,932,802

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
highway fund availability statement
SECTION 3.2.  The Highway Fund availability used in developing the 2005‑2007 biennial budget is shown below:

Highway Fund Availability Statement	2005‑2006	2006‑2007

Beginning Credit Balance	‑	‑
Estimated Revenue	$ 1,631,640,000	$ 1,661,240,000
Estimated Reversions	‑	‑

Total Highway Fund Availability	$ 1,631,640,000	$ 1,661,240,000

PART iv. highway trust fund appropriations

Requested by:	Senators Jenkins, 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, 2007 according to the following schedule:

Current Operations – Highway Trust Fund	2005‑2006	2006‑2007

Intrastate System	$469,925,196	$486,590,730
Urban Loops	190,018,179	196,757,026
Aid to Municipalities	49,306,114	51,054,717
Secondary Roads	86,596,114	89,274,717
Program Administration	41,156,280	42,259,800
Transfer to General Fund	252,558,117	252,663,009

GRAND TOTAL CURRENT OPERATIONS 
	AND EXPANSION	$1,089,560,000	$1,118,600,000

PART V. BLOCK GRANTS

Requested by:	Senators Purcell, Malone, 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, 2006, according to the following schedule:

COMMUNITY SERVICES BLOCK GRANT

01.	Community Action Agencies	$ 15,071,666

02.	Limited Purpose Agencies	837,315

03.	Department of Health and Human Services
to administer and monitor
the activities of the
Community Services Block Grant	837,315

TOTAL COMMUNITY SERVICES BLOCK GRANT	$ 16,746,296

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.	Adult day care services	2,155,301

04.	Child Protective Services/CPS Investigative
	Services/Child Medical Evaluation Program	238,321

05.	Foster Care Services – CCIS	1,500,000

06.	Division of Aging and Adult Services – Home and Community
	Care Block Grant	1,834,077

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

08.	Mental Health Services Program	422,003

09.	Division of Mental Health, Developmental Disabilities, and
	Substance Abuse Services – Developmentally Disabled
	Services Program	5,000,000

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

11.	Division of Services for the Blind – Independent
	Living Program	3,182,987

12.	Division of Vocational Rehabilitation Services – 
	Easter Seals Society/UCP	188,263

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

14.	Child Care Subsidies	3,356,063

15.	Division of Facility Services – 
Adult Care Licensure Program	411,897

16.	Division of Facility Services – 
Mental Health Licensure	205,668

17.	State administration	1,706,017

18.	Division of Mental Health, Developmental
	Disabilities, and Substance Abuse Services – 
	Administration	18,098

19.	Division of Facility Services	37,204

20.	Office of the Secretary – NC Interagency Council
	for Coordinating Homeless Programs	250,000

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

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

TOTAL SOCIAL SERVICES BLOCK GRANT	$ 55,348,041

LOW‑INCOME ENERGY BLOCK GRANT

01.	Energy Assistance Programs	$ 13,208,740

02.	Crisis Intervention	9,592,387

03.	Administration	3,186,258
	County DSS  $1,930,734
	Division of Social Services  $300,000
	Division of Mental Health, Developmental
	Disabilities, and Substance Abuse
	Services  $7,146
	Local Residential Energy Efficiency
	Service Providers  $353,820
	Office of the Secretary  $594,558

04.	Weatherization Program	4,343,072

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

06.	Heating Air Repair and Replacement Program	2,025,687

TOTAL LOW‑INCOME ENERGY BLOCK GRANT	$ 32,410,984

MENTAL HEALTH SERVICES BLOCK GRANT

01.	Provision of community‑based
services for severe and persistently
mentally ill adults	$ 6,983,202

02.	Provision of community‑based
services to children	3,921,991

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

04.	Administration	568,911

TOTAL MENTAL HEALTH SERVICES BLOCK GRANT	$ 12,974,104

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	$ 20,441,082

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	4,816,378

04.	Child Substance Abuse Prevention	5,835,701

05.	Provision of services to children
and adolescents	4,940,500

06.	Juvenile Services – Family Focus	851,156

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

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

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

10.	Administration	2,596,307

TOTAL SUBSTANCE ABUSE PREVENTION
AND TREATMENT BLOCK GRANT	$ 48,181,983

CHILD CARE AND DEVELOPMENT FUND BLOCK GRANT

01.	Child care subsidies	$158,708,393

02.	Quality and availability initiatives	33,059,644

03.	Administrative expenses	7,163,654

04.	Transfer from TANF Block Grant for 
child care subsidies	81,292,880

TOTAL CHILD CARE AND DEVELOPMENT FUND
BLOCK GRANT	$280,224,571

TEMPORARY ASSISTANCE TO NEEDY FAMILIES
(TANF) BLOCK GRANT 

01.	Work First Cash Assistance	$107,794,365

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

03.	Child Protective Services – 
Child Welfare Workers for local DSS	12,452,391

04.	Support Our Students – Department of
	Juvenile Justice and Delinquency
	Prevention	2,749,642

05.	Family Violence Prevention	1,200,000

06.	Work First – After‑School Services for
At‑Risk Children	2,249,642

07.	Division of Social Services – 
Administration	356,291

08.	Office of the Secretary – 
Administration	60,249

09.	Child Welfare Training	2,550,000

10.	Boys and Girls Clubs	1,000,000

11.	Work Central Career Advancement Center	550,000

12.	Special Children's Adoption Fund	3,000,000

13.	Maternity Homes	838,000

14.	After‑School Programs for At‑Risk Youth in
	Middle Schools	500,000

15.	Teen Pregnancy Prevention Initiatives	2,500,000

16.	Subsidized Child Care Program	36,601,205

17.	TANF Automation Projects	592,500

18.	NC FAST Implementation	1,447,640

19.	Transfer to the Child Care and
	Development Fund Block Grant
	for child care subsidies	81,292,880

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

TOTAL TEMPORARY ASSISTANCE TO NEEDY FAMILIES
(TANF) BLOCK GRANT	$356,888,120

MATERNAL AND CHILD HEALTH BLOCK GRANT

01.	Healthy Mothers/Healthy Children
Block Grants to Aid‑to‑County	9,359,236

02.	Children's Health Services Aid‑to‑County	7,364,216

03.	Healthy Beginnings Aid‑to‑County	404,559

04.	Maternal Health Aid‑to‑County	397,761

05.	Children's Health Services	2,878,883

06.	Office of Women's Health and
	Maternal Health Activities	114,063

07.	State Center for Health Statistics	28,874

08.	Local Technical Assistance & Training	46,866

09.	Injury and Violence Prevention	149,438

10.	Office of Minority Health	99,352

11.	Special Supplemental Nutrition Program
	for Women, Infants and Children (WIC)	25,713

12.	Immunization Program – Vaccine Distribution	819,997

13.	Administration	518,137

TOTAL MATERNAL AND CHILD
HEALTH BLOCK GRANT	$ 22,207,095

PREVENTIVE HEALTH SERVICES BLOCK GRANT

01.	Statewide Health Promotion Programs	$3,637,771

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.	Adolescent Pregnancy Prevention Coalition of NC	150,000

05.	Administration and Program Support	121,271

06.	Osteoporosis Task Force Operating Costs	150,000

TOTAL PREVENTIVE HEALTH SERVICES BLOCK GRANT	$4,401,973

GENERAL PROVISIONS
SECTION 5.1.(b)  Information to Be Included in Block Grant Plans. – The Department of Health and Human Services shall submit a separate plan for each Block Grant received and administered by the Department, and each plan shall include the following:
(1)	A delineation of the proposed allocations by program or activity, including State and federal match requirements.
(2)	A delineation of the proposed State and local administrative expenditures.
(3)	An identification of all new positions to be established through the Block Grant, including permanent, temporary, and time‑limited positions.
(4)	A comparison of the proposed allocations by program or activity with two prior years' program and activity budgets and two prior years' actual program or activity expenditures.
(5)	A projection of current year expenditures by program or activity.
(6)	A projection of federal Block Grant funds available, including unspent federal funds from the current and prior fiscal years.
SECTION 5.1.(c)  Changes in Federal Fund Availability. – If the United States Congress reduces or increases the federal fund availability for any of the Block Grants administered by the Department of Health and Human Services from the amounts appropriated in this section, the Department shall allocate the increase or decrease proportionally across the program and activity appropriations identified for that Block Grant in this section. In allocating a decrease in federal fund availability, the Department shall not eliminate the funding for a program or activity appropriated in this section. In allocating an increase in federal fund availability, the Department shall not propose funding for new programs or activities not appropriated in this section or increase administrative expenditures.
Prior to allocating the change in federal fund availability, the proposed allocation must be approved by the Office of State Budget and Management. If the Department adjusts the allocation of any Block Grant due to changes in federal fund availability, then a report shall be made to the Joint Legislative Committee on Governmental Operations, 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 5.1.(d)  All changes to the budgeted allocations to the Block Grants administered by the Department of Health and Human Services that are not specifically addressed in this section shall be approved by the Office of State Budget and Management, and a report shall be submitted to the Joint Legislative Commission on Governmental Operations for review prior to implementing the changes. All changes to the budgeted allocations to the Block Grant shall be reported immediately 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 5.1.(e)  The Department of Health and Human Services shall develop a monitoring and oversight plan for all recipients, both public and private, and subrecipients of the federal Block Grant funding. The plan shall be modeled after the Department's performance contracting initiative and include the following:
(1)	Performance standards for recipients.
(2)	Financial audit standards for non‑State entities equivalent to the requirements in G.S. 143‑6.1 for non‑State entities receiving State funds.
(3)	Means for collecting performance data from recipients.
(4)	Any other information necessary for monitoring and overseeing the use of Block Grant funding.
The Department shall provide the plan to the Fiscal Research Division by January 1, 2006.
SECTION 5.1.(f)  The Department of Health and Human Services shall report 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 on positions funded from federal Block Grants. The report shall include the following for each Block Grant:
(1)	All State positions currently funded through the Block Grant, including permanent, temporary, and time‑limited positions.
(2)	Budgeted salary and fringe benefits for each position.
(3)	Identify the percentage of Block Grant funds used to fund each position.
The report shall be submitted no later than December 1, 2005.
SOCIAL SERVICES BLOCK GRANT
SECTION 5.1.(g)  Social Services Block Grant funds appropriated to the North Carolina Inter‑Agency Council for Coordinating Homeless Program are exempt from the provisions of 10A NCAC 71R.0201(3).
LOW‑INCOME HOME ENERGY ASSISTANCE PROGRAM
SECTION 5.1.(h)  Additional emergency contingency funds received may be allocated for Energy Assistance Payments or Crisis Intervention Payments without prior consultation with the Joint Legislative Commission on Governmental Operations. Additional funds received shall be reported to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division upon notification of the award. The Department of Health and Human Services shall not allocate funds for any activities, including increasing administration, other than assistance payments, without prior consultation with the Joint Legislative Commission on Governmental Operations.
MENTAL HEALTH BLOCK GRANT
SECTION 5.1.(i)  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 2005‑2006 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 2005‑2006 fiscal year shall be used to continue a Comprehensive Treatment Services Program for Children in accordance with Section 10.25 of this act.
SECTION 5.1.(j)  The Department of Health and Human Services shall contract with the University of North Carolina at Chapel Hill for the purpose of providing psychology student stipends in the amount of fifty thousand dollars ($50,000) for the 2005‑2006 fiscal year. Twenty‑five thousand dollars ($25,000) of this contract shall be paid from the Mental Health Block Grant.
CHILD CARE AND DEVELOPMENT FUND BLOCK GRANT
SECTION 5.1.(k)  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 for the operations of the Medical Child Care Pilot.
SECTION 5.1.(l)  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 and School Readiness for the subsidized child care program.
SECTION 5.1.(m)  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.
TEMPORARY ASSISTANCE FOR NEEDY FAMILIES BLOCK GRANT (TANF)
SECTION 5.1.(n)  The sum of four hundred sixteen thousand five hundred forty dollars ($416,540) appropriated in this section in the TANF Block Grant to the Department of Health and Human Services, Division of Social Services, for the 2005‑2006 fiscal year shall be used to support administration of TANF‑funded programs.
SECTION 5.1.(o)  The sum of two million seven hundred forty‑nine thousand six hundred forty‑two dollars ($2,749,642) 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 2005‑2006 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.(p)  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 2005‑2006 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 support 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, 2005. 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, 2005, 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, 2005. 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, 2006, 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 5.1.(q)  The sum of two million two hundred forty‑nine thousand six hundred forty‑two dollars ($2,249,642) 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 fund 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, 2006, on its progress in complying with this section to the House of Representatives Appropriations Subcommittee on Health and Human Services, the Senate Committee on Health and Human Services, and the Fiscal Research Division.
SECTION 5.1.(r)  The sum of twelve million four hundred fifty‑two thousand three hundred ninety‑one dollars ($12,452,391) appropriated in this section to the Department of Health and Human Services, Division of Social Services, in the TANF Block Grant for the 2005‑2006 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.(s)  The sum of two million five hundred fifty thousand dollars ($2,550,000) appropriated in this section in the TANF Block Grant to the Department of Health and Human Services, Division of Social Services, for fiscal year 2005‑2006 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.(t)  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.(u)  The sum of three million dollars ($3,000,000) appropriated in this section in the TANF Block Grant to the Department of Health and Human Services, Special Children Adoption Fund, for the 2005‑2006 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.(v)  The sum of one million five hundred thousand dollars ($1,500,000) appropriated in this section 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 2005‑2006 fiscal year shall be allocated to the State Private Child Caring Agencies Fund.
SECTION 5.1.(w)  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.
SECTION 5.1.(x)  The sum of five hundred fifty thousand dollars ($550,000) appropriated in this section to the Department of Health and Human Services in the TANF Block Grant shall be transferred to Work Central, Inc. Work Central, Inc. shall report on the number of people served and the services received as a result of the receipt of funds. The report shall contain expenditure data, including the amount of funds used for administration and direct training. The report shall also include the number of people who have been employed as a direct result of services provided by Work Central, Inc., including the length of employment in the new position. The Department of Health and Human Services shall evaluate the program and ensure that services provided are not duplicative of local employment security commissions in the nine counties served by Work Central, Inc. The evaluation report shall be submitted 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 no later than May 1, 2006.
SECTION 5.1.(y)  The sum of one million four hundred forty‑seven thousand six hundred forty dollars ($1,447,640) in this section appropriated to the Department of Health and Human Services in the TANF Block Grant shall be used to implement the component of N.C. FAST that specifically deals with the creation and implementation of a statewide automated child welfare information system. The statewide system shall be implemented in compliance with federal regulations in order to avoid any potential payback of funds due to noncompliance. The Department of Health and Human Services shall report on its compliance with this subsection 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 no later than January 1, 2006.
SECTION 5.1.(z)  The sum of five hundred thousand dollars ($500,000) appropriated in this section to the Department of Health and Human Services, Division of Social Services, in the TANF Block Grant shall be used to expand after‑school programs for at‑risk children attending middle school. The Department shall develop and implement a grant program to award funds to community‑based programs demonstrating the capacity to reach children at risk of teen pregnancy and school dropout. These funds shall not be used for training or administration at the State level. All funds shall be distributed to community‑based programs, focusing on those communities where similar programs do not exist in middle schools. The Department shall report 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 on its progress in complying with this subsection no later than May 1, 2006.
MATERNAL AND CHILD HEALTH BLOCK GRANT
SECTION 5.1.(aa)  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 2005‑2006 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.
SECTION 5.1.(bb)  The Department of Health and Human Services shall ensure that there will be follow‑up testing in the Newborn Screening Program.
SECTION 5.1.(cc)  Of the funds budgeted in the Maternal and Child Health Block Grant, three million two hundred fifty thousand dollars ($3,250,000) shall be used for a school nurse funding initiative for the 2005‑2006 fiscal year. The Department of Health and Human Services, Division of Public Health, in conjunction with the Department of Public Instruction, shall provide funds to communities to hire school nurses. The program will fund approximately 65 time‑limited nurses.  The criteria shall include determining the areas in the greatest need for school nurses with the greatest inability to pay for these nurses.  Among other criteria, consideration shall also be given to (i) the current nurse‑to‑student ratio; (ii) the economic status of the community; and (iii) the health needs of area children.
There shall be no supplanting of local or Title I funds with these block grant funds. Communities shall maintain their current level of effort and funding for school nurses. No block grant funds shall be used for funding nurses for State agencies. All funding shall be used for direct services.
The Department of Health and Human Services shall report on the use of funds allocated under this section by December 1, 2005, 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 Weinstein, Garrou, Dalton, Hagan
NER BLOCK GRANTS
SECTION 5.2.(a)  Appropriations from federal block grant funds are made for fiscal year ending June 30, 2006, 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 – 2006 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 one million dollars ($1,000,000) 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 eight million seven hundred ten thousand dollars ($8,710,000) may be used for Economic Development, including Urban Redevelopment Grants and Small Business or Entrepreneurial Assistance; not less than thirteen million five hundred thousand dollars ($13,500,000) 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)  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.(g)  The Department of Commerce shall consult with the Joint Legislative Commission on Governmental Operations prior to reallocating Community Development Block Grant Funds.  Notwithstanding the provisions of this subsection, whenever the Director of the Budget finds that:
(1)	A reallocation is required because of an emergency that poses an imminent threat to public health or public safety, the Director of the Budget may authorize the reallocation without consulting the Commission. The Department of Commerce shall report to the Commission on the reallocation no later than 30 days after it was authorized and shall identify in the report the emergency, the type of action taken, and how it was related to the emergency.
(2)	The State will lose federal block grant funds or receive less federal block grant funds in the next fiscal year unless a reallocation is made, the Department of Commerce shall provide a written report to the Commission on the proposed reallocation and shall identify the reason that failure to take action will result in the loss of federal funds. If the Commission does not hear the issue within 30 days of receipt of the report, the Department may take the action without consulting the Commission.

PART VI. general provisions

Requested by:	Senators Garrou, Dalton, Hagan
APPROPRIATION OF CASH BALANCES AND RECEIPTS
SECTION 6.1.(a)  Expenditures of cash balances, federal funds, departmental receipts, grants, and gifts from the various General Fund, Special Revenue Fund, Enterprise Fund, Internal Service Fund, and Trust and Agency Fund budget codes are appropriated and authorized for the 2005‑2007 fiscal biennium as follows:
(1)	For all budget codes listed in "State of North Carolina, Recommended Continuation Budget 2005‑2007, Volumes 1 through 6", cash balances and receipts are appropriated up to the amounts specified in Volumes 1 through 6, as adjusted by the General Assembly, for the 2005‑2006 fiscal year and the 2006‑2007 fiscal year. Funds may be expended only for the programs and purposes and objects and line items specified in Volumes 1 through 6, or otherwise authorized by the General Assembly.
(2)	For all budget codes that are not listed in "State of North Carolina, Recommended Continuation Budget 2005‑2007, Volumes 1 through 6", cash balances and receipts are appropriated for each year of the 2005‑2007 fiscal biennium up to the level of actual expenditures for the 2004‑2005 fiscal year, unless otherwise provided by law. Funds may be expended only for the programs and purposes and objects and line items authorized for the 2004‑2005 fiscal year.
(3)	Notwithstanding subdivisions (1) and (2) of this subsection, any receipts that are required to be used to pay debt service requirements for various outstanding bond issues and certificates of participation are appropriated up to the actual amounts received for the 2005‑2006 fiscal year and the 2006‑2007 fiscal year and shall be used only to pay debt service requirements. 
(4)	Notwithstanding subdivisions (1) and (2) of this subsection, cash balances and receipts of funds that meet the definition issued by the Governmental Accounting Standards Board of a trust or agency fund, are appropriated for and in the amounts required to meet the legal requirements of the trust agreement for the 2005‑2006 fiscal year and the 2006‑2007 fiscal year.
All these cash balances, federal funds, departmental receipts, grants, and gifts shall be expended and reported in accordance with the provisions of the Executive Budget Act, except as otherwise provided by law and this section.
SECTION 6.1.(b)  Receipts collected in a fiscal year in excess of the amounts authorized by this section shall remain unexpended and unencumbered until appropriated by the General Assembly in a subsequent fiscal year, unless the expenditure of over‑realized receipts in the fiscal year in which the receipts were collected is authorized by the Executive Budget Act.
Over‑realized receipts are appropriated up to the amounts necessary to implement this subsection.
In addition to the consultation and reporting requirements set out in G.S. 143‑23 and G.S. 143‑27, 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 any over‑realized receipts approved for expenditure under this subsection by the Director of the Budget. The report shall include the source of the receipt, the amount over‑realized, the amount authorized for expenditure, and the rationale for expenditure.
SECTION 6.1.(c)  Notwithstanding subsections (a) and (b) of this section, there is appropriated from the Reserve for Reimbursements to Local Governments and Shared Tax Revenues for each fiscal year an amount equal to the amount of the distributions required by law to be made from that reserve for that fiscal year.
SECTION 6.1.(d)  Notwithstanding subsections (a) and (b) of this section, if Senate Bill 1126, 2005 Session, or substantially similar legislation revising the Coastal Recreational Fishing License program or establishing a unified fishing license for hunting and fishing in coastal, joint, and inland waters, becomes law, any receipts from license revenues generated pursuant to such legislation are hereby appropriated for the 2005‑2006 fiscal year and the 2006‑2007 fiscal year for programs and purposes authorized by law.
SECTION 6.1.(e)  Notwithstanding subsections (a)(2) and (b) of this section, the cash balances and receipts of any occupational licensing board, as defined in G.S. 93B‑1, that are not included in the budget codes listed in "State of North Carolina, Recommended Continuation Budget 2005‑2007, Volumes 1 through 6," are hereby appropriated for the 2005‑2006 fiscal year and the 2006‑2007 fiscal year and may be expended for programs and purposes authorized by law.

Requested by:	Senators Garrou, Dalton, Hagan
contingency and emergency fund allocations
SECTION 6.2.  Funds in the amount of five million dollars ($5,000,000) for the 2005‑2006 fiscal year and five million dollars ($5,000,000) for the 2006‑2007 fiscal year are appropriated in this act to the Contingency and Emergency Fund.  Of these funds:
(1)	Up to two million dollars ($2,000,000) for the 2005‑2006 fiscal year may be used for purposes related to the Base Realignment and Closure Act (BRAC); and
(2)	Up to five hundred thousand dollars ($500,000) for the 2005‑2006 fiscal year and up to five hundred thousand dollars ($500,000) for the 2006‑2007 fiscal year may be expended for purposes other than those set out in G.S.143‑23(a1)(2) or in subdivision (1) of this section.
The remainder of these funds shall be expended for purposes outlined in G.S. 143‑23(a1)(2).

Requested by:	Senators Garrou, Dalton, Hagan
expenditures of funds in reserves limited
SECTION 6.3.  All funds appropriated by this act into reserves may be expended only for the purposes for which the reserves were established.

Requested by:	Senators Garrou, Dalton, Hagan
Budget Reports accurately reflect projected receipts, expenditures, fund balances, and actual collections
SECTION 6.4.  G.S. 143‑11(a) reads as rewritten:
"§ 143‑11.  Survey of  departments and recommended budget report.
(a)	On or before the fifteenth day of December, biennially in the even‑numbered years, the Director shall make a complete, careful survey of the operation and management of all the departments, bureaus, divisions, officers, boards, commissions, institutions, and agencies and undertakings of the State and all persons or corporations who use or expend State funds, in the interest of economy and efficiency, and of obtaining a working knowledge upon which to base recommendations to the General Assembly as to appropriations for maintenance and special funds and capital expenditures for the succeeding biennium. If the Director and the Commission shall agree in their recommendations for the budget for the next biennial period, he shall prepare their report in the form of a proposed budget, together with such comment and recommendations as they may deem proper to make. If the Director and Commission shall not agree in substantial particulars, the Director shall prepare the proposed budget based on his own 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 representing their views. The budget report shall contain a complete and itemized plan of all proposed expenditures for each State department, bureau, board, division, institution, commission, State agency or undertaking, person or corporation who receives or may receive for use and expenditure any State funds, in accordance with the classification of funds and accounts adopted by the State Controller, and of the estimated revenues and borrowings for each year in the ensuing biennial period beginning with the first day of July thereafter. Opposite each line item of the proposed expenditures, the budget shall show in separate parallel columns:
(1)	Proposed expenditures and receipts for each fiscal year of the biennium;
(2)	The certified budget for the preceding fiscal year;
(3)	The currently authorized budget for the preceding fiscal year;
(4)	Actual expenditures and receipts for the most recent fiscal year for which actual expenditure information is available; and
(5)	Proposed increases and decreases.
Revenue and expenditure information shall be no less specific than the two‑digit level in the State Accounting System Chart of Accounts as prescribed by the State Controller. The budget shall clearly differentiate between general fund expenditures for operating and maintenance, special fund expenditures for any purpose, and proposed capital improvements. The budget report shall include accurate projections of receipts, expenditures, and fund balances for all budget codes, funds, and accounts. Estimated receipts, including tuition collected by university or community college institutions, shall be adjusted to reflect actual collections from the previous fiscal year, unless the Director either (i) recommends a change that will result in collections in the budget year that differ from the actual collections of the prior year or (ii) otherwise determines there is a more reasonable basis upon which to accurately project receipts."

Requested by:	Senators Garrou, Dalton, Hagan
AUTHORIZATION TO ESTABLISH RECEIPT‑SUPPORTED POSITIONS
SECTION 6.5.  Notwithstanding G.S. 143‑34.1(a1), a department, institution, or other agency of State government may establish receipt‑supported positions authorized in this act upon approval by the Director of the Budget.  The Director, if necessary, may establish a receipt‑supported position pursuant to this section at an annual salary amount different from the salary amount set out in this act if (i) funds are available from the proposed funding source and (ii) the alternative salary amount remains within the established salary range grade identified for the job classification of the affected receipt‑supported position established in this act. The Director shall not change the job classifications or increase the number of receipt‑supported positions specified in this act without prior consultation with the Joint Legislative Commission on Governmental Operations.

Requested by:	Senators Garrou, Dalton, Hagan 
Overhead Cost Recovery
SECTION 6.6.(a)  The General Assembly finds that the General Fund  supports many state agencies that provide services and administer programs that impact all of State government.  These agencies include the Office of the Governor, the Office of State Controller, the Department of Administration, including the Office of State Personnel, State Property Office, Office of State Construction, and the Division of Purchase and Contract, the Secretary of State, the Office of State Treasurer, and the Office of State Auditor.  The General Assembly also finds that the General Fund supports the departmental administrative overhead costs for many receipt‑supported programs, activities, boards, and commissions.  The General Assembly further finds that only federally funded programs routinely reimburse the State for such administrative overhead activities through an indirect cost allocation method.  The General Assembly finds that an indirect cost allocation program should be established to recover overhead and indirect costs from all receipt‑supported programs, activities, boards, and commissions.
SECTION 6.6.(b)  The Office of State Budget and Management shall study the collection of overhead receipts and develop an overhead cost recovery program. In implementing this section, the Office of State Budget and Management shall do the following:
(1)	For each receipt, determine the authority and requirements for the allocation of overhead costs and collection of overhead receipts.
(2)	For each receipt for which the State currently redirects a portion for overhead costs, ensure that all future receipts revert to the General Fund in accordance with the State Budget Manual, except as otherwise required by law.
(3)	For each receipt for which the State does not currently redirect a portion for overhead costs, establish an indirect cost allocation methodology and redirect a portion of future receipts for overhead costs to the General Fund, except as otherwise required by law.
(5)	Estimate the anticipated reimbursement to the General Fund for the 2006‑2007 fiscal year.
(6)	Effective with the 2006‑2007 fiscal year, the Office of State Budget and Management shall implement the overhead cost recovery program to maximize reimbursement of statewide indirect costs supported by the General Fund.
SECTION 6.6.(c)  The Office of State Budget and Management shall report on its progress in implementing this section to the Chairs of the Senate Committee on Appropriations/Base Budget, the Chairs of the House of Representatives Committee on Appropriations, and the Fiscal Research Division by April 1, 2006.  The report shall recommend any statutory changes required to implement the requirements of this section.  
SECTION 6.6.(d)  This section does not apply to overhead cost reimbursements collected under any grant agreement by The University of North Carolina or any of its affiliated institutions.  
SECTION 6.6.(e)  The requirements of this section shall apply to all receipts credited to a State agency, special revenue fund, enterprise fund, internal service fund or trust fund, except as otherwise provided by law and subsection (d) of this section.

Requested by:	Senators Garrou, Dalton, Hagan
prior consultation with the joint legislative commission on governmental operations
SECTION 6.7.(a)  The last paragraph of G.S. 120‑76(8) is recodified as G.S. 120‑76.1 and reads as rewritten:
"§ 120‑76.1.  Prior consultation with the Commission.
(a)	Notwithstanding the provisions of G.S. 120‑76(8) or any other provision of law requiring prior consultation by the Governor with 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 without consulting 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)	Any agency, board, commission, or other entity required under G.S. 120‑76(8) or any other provision of law to consult with the Commission prior to taking an action shall submit a detailed report of the action under consideration to the Chairs of the Commission, the Commission Assistant, and the Fiscal Research Division of the General Assembly. If the Commission does not hold a meeting to hear the consultation within 60 days of receiving the submission of the detailed report, the consultation requirement is satisfied." 
SECTION 6.7.(b)  G.S. 143‑23(a1) reads as rewritten:
"(a1)	Notwithstanding the provisions of subsection (a) of this section, a department, institution, or other spending agency may, with 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 from all sources for the purpose or program for the fiscal period;
(2)	A purpose or program, without consultation with the Joint Legislative Commission on Governmental Operations, 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 quarterly basis to the Joint Legislative Commission on Governmental Operations on any overexpenditures under this subdivision; or
(3)	A purpose or program, after consultation with the Joint Legislative Commission on Governmental Operations in accordance with G.S. 120‑76(8), and only if: (i) the overexpenditure is required to continue the purpose or programs due to complications or changes in circumstances that could not have been foreseen when the budget for the fiscal period was enacted and (ii) the scope of the purpose or program is not increased. The consultation is required as follows:
a.	For a purpose or program with a certified budget of up to five million dollars ($5,000,000), consultation is required when the authorization for the overexpenditure exceeds ten percent (10%) of the certified budget;
b.	For a purpose or program with a certified budget of from five million dollars ($5,000,000) up to twenty million dollars ($20,000,000), consultation is required when the authorization for the overexpenditure exceeds five hundred thousand dollars ($500,000) or seven and one‑half percent (7.5%) of the certified budget, whichever is greater;
c.	For a purpose or program with a certified budget of twenty million dollars ($20,000,000) or more, consultation is required when the authorization for the overexpenditure exceeds one million five hundred thousand dollars ($1,500,000) or five percent (5%) of the certified budget, whichever is greater;
d.	For a purpose or program supported by federal funds or when expenditures are required for the reasons set out in subdivision (2) of this subsection, no consultation is required.
"

Requested by:	Senators Garrou, Dalton, Hagan
consultation not required prior to establishing or increasing fees in accordance with budget act
SECTION 6.8.(a)  Notwithstanding G.S. 12‑3.1(a), an agency is not required to consult with the Joint Legislative Commission on Governmental Operations prior to establishing or increasing a fee as authorized or anticipated in the Current Operations and Capital Improvements Appropriations Act of 2005 or the Senate Appropriations Committee Report on the Continuation, Expansion and Capital Budgets, which was distributed in the Senate and the House of Representatives and used to explain this act.
SECTION 6.8.(b)  This section expires June 30, 2007.

Requested by:	Senators Garrou, Dalton, Hagan 
State Money Recipients/Conflict of Interest Policy
SECTION 6.9.(a)  G.S. 143‑6.2 is amended by adding a new subsection to read:
"(a1)	Every non‑State entity that receives, uses, or expends State funds, either by General Assembly appropriation, or by grant, loan, or other allocation from a State agency shall file with the State department or agency disbursing funds to the entity a copy of that entity's policy addressing conflicts of interest that may arise involving the entity's management employees and the members of its board of directors or other governing body before funds may be disbursed to the entity. The policy shall address situations in which any of these individuals may directly or indirectly benefit, except as the entity's employees or members of the board or other governing body, from the entity's disbursing of State funds, and shall include actions to be taken by the entity or the individual, or both, to avoid conflicts of interest and the appearance of impropriety."
SECTION 6.9.(b)  G.S. 143‑6.2(d) is amended by adding a new subdivision to read:
"(13)	Require grantees to report their policies addressing conflicts of interest that may arise involving the entity's management employees and the members of its board of directors or other governing body before funds may be disbursed to the entity."
SECTION 6.9.(c)  This section applies to non‑State entities that receive State funds on or after July 1, 2005, and State funds shall not be disbursed to those entities on or after July 1, 2005, until the entity files the policy required by this section with the disbursing agency or department.

Requested by:	Senators Garrou, Dalton, Hagan 
Non‑State Entities Shall Not Have Outstanding Tax Assessments/Applicability of Reporting Requirements
SECTION 6.10.(a)  G.S. 143‑6.2 is amended by adding a new subsection to read:
"(c1)	No Overdue Tax Debts. – No grantee or subgrantee shall receive a grant of State funds from a State agency, department, or institution if the grantee or subgrantee has any overdue tax debts, as defined by G.S. 105‑243.1, at the federal, State, or local level."
SECTION 6.10.(b)  This section shall apply to all State grant funds appropriated or awarded on or after July 1, 2005.  Grants awarded prior to July 1, 2005, shall be subject to the reporting requirements in effect at the time the grant was made.

Requested by:	Senators Garrou, Dalton, Hagan, Kerr, Hoyle
RESERVE FOR SMALL EMPLOYER HEALTH INSURANCE
SECTION 6.11.(a)  It is the intent of the General Assembly to establish Healthy NC, a program to assist small employers in purchasing affordable health insurance coverage for their employees.  It is further the intent of the General Assembly that Healthy NC will be modeled after the Healthy NY program operating successfully in that state since 2001.  Healthy NC will be designed to encourage small employers with 50 or fewer employees to offer health insurance coverage to their employees and dependents and other qualified individuals.  Uninsured sole proprietors and workers whose employers do not provide health insurance may also purchase coverage directly from insurers participating in Healthy NC.  Coverage under Healthy NC will be streamlined, yet comprehensive.  Benefits available will include inpatient and outpatient hospital services, physician services, maternity care, preventive health services, diagnostic and X‑ray services, and emergency services. Employers may select a benefit package that offers limited prescription drug coverage, or one that does not include coverage for prescription drugs.  A feature of  Healthy NC  that will enable premiums to be set at affordable rates is the availability of stop‑loss coverage to protect insurers from excessive claims.  Stop‑loss coverage is an insurance policy or other arrangement whereby stop‑loss funds are used to pay claims or indemnify the health plan insurer for losses incurred under the health plan in excess of specified loss limits for individual claims or for all claims combined.  It is anticipated that successes of Healthy NC will be marked by, among other things, affordable premiums and an increase in the number of small employers and their employees that have health care coverage.
SECTION 6.11.(b)  There is created in the Office of State Budget and Management a nonreverting Reserve for Healthy NC.  Funds appropriated in this act to the Reserve for Healthy NC shall be allocated by the Commissioner of Insurance exclusively for the purpose of reimbursing insurers providing health insurance to small employers under Part 5A of Article 50 of Chapter 58 of the General Statutes, Healthy NC Program, if enacted by the 2005 General Assembly.
SECTION 6.11.(c)  Subsection (b) of this section becomes effective only if the 2005 General Assembly enacts the Healthy NC program and appropriates funds to the Reserve for Healthy NC.

Requested by:	Senators Garrou, Dalton, Hagan
Amend the Tobacco Reserve Fund to Promote the Health and Wellness of the State's Citizens and Economic Development
SECTION 6.12.(a)  G.S. 66‑291(b)(2) reads as rewritten:
"(2)	To the extent that a tobacco product manufacturer establishes that the amount it was required to place into escrow on account of units sold in the State in a particular year was greater than the Master Settlement Agreement payments, as determined pursuant to Section IX(i) of that agreement, including after final determination of all adjustments, that the manufacturer would have been required to make on account of the units sold had it been a participating manufacturer, the excess shall be released from escrow and revert back to such tobacco product manufacturer; or".
SECTION 6.12.(b)  If this section, or any portion of the amendment made to G.S. 66‑291(b)(2) by this section, is held by a court of competent jurisdiction to be unconstitutional, then G.S. 66‑291(b)(2) shall be deemed to be repealed in its entirety.  If G.S. 66‑291(b)(2) shall thereafter be held by a court of competent jurisdiction to be unconstitutional, then this section shall be repealed, and G.S. 66‑291(b)(2) shall be restored as if no amendments had been made by this section.  Neither any judicial holding of unconstitutionality nor the repeal of G.S. 66‑291(b)(2) shall affect, impair, or invalidate any other portion of Part 1 of Article 37 of Chapter 66 of the General Statutes or the application of Part 1 of Article 37 of Chapter 66 of the General Statutes to any other person or circumstance, and the remaining portions of Part 1 of Article 37 of Chapter 66 of the General Statutes shall at all times continue in full force and effect.
SECTION 6.12.(c)  This section becomes effective October 1, 2005.

Requested by:	Senators Garrou, Dalton, Hagan 
stATEWIDE INFORMATION TECHNOLOGY PROJECTS
SECTION 6.13.(a)  There is appropriated from the Information Technology Fund established in G.S. 147‑33.72H to the Office of Information Technology Services the sum of five million one hundred thousand dollars ($5,100,000) for the 2005‑2006 fiscal year and the sum of three million three hundred thousand dollars ($3,300,000) for the 2006‑2007 fiscal year to continue existing Information Technology Fund activities including project management assistance, security assessment remedial actions, asset management, related legal support, and legacy system assessment.
SECTION 6.13.(b)  There is appropriated from the Information Technology Fund established in G.S. 147‑33.72H to the Office of Information Technology Services the sum of one million six hundred thousand dollars ($1,600,000) for the 2005‑2006 fiscal year and the sum of one million four hundred thousand dollars ($1,400,000) for the 2006‑2007 fiscal year to establish two project management assistant positions and one enterprise licensing position and to purchase and maintain asset management software and enterprise licenses.
SECTION 6.13.(c)  There is appropriated from the Information Technology Fund established in G.S. 147‑33.72H to the Office of Information Technology Services the sum of six million three hundred thousand dollars ($6,300,000) for  the 2005‑2006 fiscal year and the sum of five million eight hundred thousand dollars ($5,800,000) for the 2006‑2007 fiscal year  to provide services previously supported by cross‑subsidies  in the information technology rate structure, including: (i) the operation of Enterprise Technology Services within the Office of Information Technology Services, (ii) security services, (iii) State portal maintenance, (iv) enterprise identity management, and (v) the operations of the Office of the State Chief Information Officer.
SECTION 6.13.(d)  There is appropriated from the Information Technology Fund established in G.S. 147‑33.72H to the Office of Information Technology Services the sum of five hundred thousand dollars ($500,000) for the 2005‑2006 fiscal year to facilitate consolidation of information technology activities in State agencies.

Requested by:	Senators Garrou, Dalton, Hagan 
STATE BUSINESS INFRASTRUCTURE PROGRAM
SECTION 6.14.(a)  According to a study conducted by the Office of State Controller, the State's personnel and payroll information systems are at risk of failure within five years.  This would result in delayed payments to over 80,000 state employees.  The current personnel and payroll information systems were designed and supported by agency staff, and staff members familiar with these information systems are near retirement from State government service.  Through the State Business Infrastructure Program, the State Controller identified the personnel and payroll information systems as priorities for replacement.
SECTION 6.14.(b)  There is appropriated from the Information Technology Fund established in G.S.147‑33.72H to the Office of State Controller the sum of twenty million eight hundred seventy‑five thousand dollars ($20,875,000) for the 2005‑2006 fiscal year and two million five hundred twenty‑five thousand dollars ($2,525,000) for the 2006‑2007 fiscal year to initiate the replacement of the State's personnel and payroll information systems.  These funds shall be used to procure software, hardware, integration services, project management, implementation activities, software license maintenance, hardware maintenance, contract support, and Information Technology Services Data Center activities. 
SECTION 6.14.(c)  Funds appropriated under this section are subject to the reporting requirement set out in G.S. 147‑33.72H.

Requested by:	Senators Garrou, Dalton, Hagan 
information technology fund
SECTION 6.15.(a)  Of the funds collected by the Office of Information Technology Services from the information technology enterprise fee approved by the Office of State Budget and Management pursuant to G.S. 147‑33.82, the Office shall deposit the sum of five million dollars ($5,000,000) for the 2005‑2006 fiscal year and for the 2006‑2007 fiscal year in the Information Technology Fund established in G.S. 147‑33.72H. 
SECTION 6.15.(b)  Effective July 1, 2005, the State Controller shall transfer to the Information Technology Fund established in G.S. 147‑33.72H the sum of five million dollars ($5,000,000) from the cash balance remaining in the Office of Information Technology Services Internal Service Fund on June 30, 2005.  These funds shall be used to support statewide information technology initiatives.

PART vII. PUBLIC SCHOOLS

Requested by:	Senator Lucas, Swindell, Garrou, Dalton, Hagan
teacher salary schedules
SECTION 7.1.(a)  Effective for the 2005‑2006 school year and for the 2006‑2007 school year, the Director of the Budget shall transfer from the Reserve for Experience Step Salary Increase for Teachers and Principals in Public Schools funds necessary to implement the teacher salary schedules set out in subsection (b) of this section and for longevity in accordance with subsection (d) of this section, including funds for the employer's retirement and social security contributions 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.
SECTION 7.1.(b)  The following monthly salary schedules shall apply for the 2005‑2006 and the 2006‑2007 fiscal years 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.

2005‑2006 Monthly Salary Schedule
"A" Teachers

Years of Experience	"A" Teachers	NBPTS Certification

	0	$2,545	N/A
	1	$2,587	N/A
	2	$2,631	N/A
	3	$2,786	$3,120
	4	$2,926	$3,278
	5	$3,059	$3,427
	6	$3,189	$3,571
	7	$3,292	$3,687
	8	$3,340	$3,740
	9	$3,389	$3,795
	10	$3,439	$3,851
	11	$3,488	$3,906
	12	$3,539	$3,963
	13	$3,589	$4,019
	14	$3,642	$4,079
	15	$3,696	$4,140
	16	$3,751	$4,202
	17	$3,806	$4,263
	18	$3,864	$4,328
	19	$3,922	$4,393
	20	$3,980	$4,458
	21	$4,042	$4,528
	22	$4,104	$4,596
	23	$4,169	$4,669
	24	$4,233	$4,740
	25	$4,298	$4,813
	26	$4,364	$4,887
	27	$4,432	$4,963
	28	$4,502	$5,043
	29	$4,573	$5,122

2005‑2006 Monthly Salary Schedule
"M" Teachers

Years of Experience	"M" Teachers	NBPTS Certification

	0	$2,800	N/A
	1	$2,846	N/A
	2	$2,894	N/A
	3	$3,063	$3,431
	4	$3,219	$3,605
	5	$3,366	$3,769
	6	$3,507	$3,927
	7	$3,621	$4,055
	8	$3,673	$4,114
	9	$3,727	$4,175
	10	$3,782	$4,236
	11	$3,837	$4,298
	12	$3,892	$4,360
	13	$3,947	$4,421
	14	$4,006	$4,487
	15	$4,065	$4,553
	16	$4,126	$4,621
	17	$4,188	$4,690
	18	$4,250	$4,759
	19	$4,315	$4,832
	20	$4,379	$4,904
	21	$4,447	$4,980
	22	$4,514	$5,056
	23	$4,585	$5,136
	24	$4,656	$5,215
	25	$4,726	$5,288
	26	$4,795	$5,376
	27	$4,875	$5,460
	28	$4,952	$5,547
	29	$5,031	$5,634

2006‑2007 Monthly Salary Schedule
"A" Teachers

Years of Experience	"A" Teachers	NBPTS Certification

	0	$2,574	N/A
	1	$2,617	N/A
	2	$2,661	N/A
	3	$2,818	$3,156
	4	$2,960	$3,315
	5	$3,095	$3,466
	6	$3,225	$3,612
	7	$3,329	$3,729
	8	$3,378	$3,783
	9	$3,428	$3,839
	10	$3,478	$3,896
	11	$3,528	$3,951
	12	$3,580	$4,009
	13	$3,630	$4,066
	14	$3,684	$4,126
	15	$3,739	$4,187
	16	$3,794	$4,250
	17	$3,850	$4,312
	18	$3,909	$4,378
	19	$3,967	$4,443
	20	$4,026	$4,509
	21	$4,089	$4,580
	22	$4,151	$4,649
	23	$4,217	$4,723
	24	$4,281	$4,795
	25	$4,347	$4,869
	26	$4,414	$4,944
	27	$4,483	$5,021
	28	$4,554	$5,101
	29	$4,626	$5,181

2006‑2007 Monthly Salary Schedule
"M" Teachers

Years of Experience	"M" Teachers	NBPTS Certification

	0	$2,832	N/A
	1	$2,879	N/A
	2	$2,927	N/A
	3	$3,099	$3,470
	4	$3,256	$3,646
	5	$3,404	$3,812
	6	$3,547	$3,972
	7	$3,663	$4,102
	8	$3,715	$4,161
	9	$3,770	$4,223
	10	$3,826	$4,284
	11	$3,881	$4,347
	12	$3,937	$4,410
	13	$3,993	$4,472
	14	$4,052	$4,539
	15	$4,112	$4,605
	16	$4,173	$4,674
	17	$4,236	$4,744
	18	$4,299	$4,814
	19	$4,364	$4,888
	20	$4,429	$4,961
	21	$4,498	$5,038
	22	$4,566	$5,114
	23	$4,638	$5,195
	24	$4,710	$5,275
	25	$4,781	$5,355
	26	$4,855	$5,438
	27	$4,931	$5,523
	28	$5,009	$5,611
	29	$5,088	$5,699

SECTION 7.1.(c)  Annual longevity payments for teachers shall be at the rate of 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.  The longevity payment shall be paid in a lump sum once a year.
SECTION 7.1.(d)  Certified public schoolteachers 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 schoolteachers 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.(e)  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.(f)  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.(g)  Certified school nurses who are employed in the public schools as nurses shall be paid on the "M" salary schedule.
SECTION 7.1.(h)  As used in this section, the term "teacher" shall also include instructional support personnel.

Requested by:	Senator Lucas, Swindell, Garrou, Dalton, Hagan
SCHOOL‑BASED ADMINISTRATOR SALARY SCHEDULE
SECTION 7.2.(a)  Effective for the 2005‑2006 school year and for the 2006‑2007 school year, the Director of the Budget shall transfer from the Reserve for Compensation Increases funds necessary to implement the salary schedules 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 2005‑2006 fiscal year, commencing July 1, 2005, is as follows:

2005‑2006
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	$3,256		‑ 	‑ 	‑ 
5	$3,404	‑ 	‑ 	‑ 	‑ 
6	$3,547	‑ 	‑ 	‑ 	‑ 
7	$3,662	‑ 	‑ 	‑ 	‑ 
8	$3,715	$3,715 	‑ 	‑ 	‑ 
9	$3,769	$3,769 	‑ 	‑ 	‑ 
10	$3,825	$3,825 	$3,880 	‑ 	‑ 
11	$3,880	$3,880 	$3,936 	‑ 	‑ 
12	$3,936	$3,936 	$3,993 	$4,052 	‑ 
13	$3,993	$3,993 	$4,052 	$4,111 	$4,173 
14	$4,052	$4,052 	$4,111 	$4,173 	$4,235 
15	$4,111	$4,111 	$4,173 	$4,235 	$4,298 
16	$4,173	$4,173 	$4,235 	$4,298 	$4,363 
17	$4,235	$4,235 	$4,298 	$4,363 	$4,428 
18	$4,298	$4,298 	$4,363 	$4,428 	$4,497 
19	$4,363	$4,363 	$4,428 	$4,497 	$4,565 
20	$4,428	$4,428 	$4,497 	$4,565 	$4,638 
21	$4,497	$4,497 	$4,565 	$4,638 	$4,708 
22	$4,565	$4,565 	$4,638 	$4,708 	$4,780 
23	$4,638	$4,638 	$4,708 	$4,780 	$4,855 
24	$4,708	$4,708 	$4,780 	$4,855 	$4,931 
25	$4,780	$4,780 	$4,855 	$4,931 	$5,008 
26	$4,855	$4,855 	$4,931 	$5,008 	$5,088 
27	$4,931	$4,931 	$5,008 	$5,088 	$5,189 
28	$5,008	$5,008 	$5,088 	$5,189 	$5,294 
29	$5,088	$5,088 	$5,189 	$5,294 	$5,400 
30	$5,189	$5,189 	$5,294 	$5,400 	$5,508 
31	$5,294	$5,294 	$5,400 	$5,508 	$5,617 
32	‑ 	$5,400 	$5,508 	$5,617 	$5,730 
33	‑ 	‑ 	$5,617 	$5,730 	$5,845 
34	‑ 	‑ 	$5,730 	$5,845 	$5,962 
35	‑ 	‑ 	‑ 	$5,962 	$6,081 
36	‑ 	‑ 	‑ 	$6,081 	$6,203 
37	‑ 	‑ 	‑ 	‑ 	$6,327 

2005‑2006
Principal and Assistant Principal Salary Schedules
Classification

Yrs. of	PrinV	PrinVI	PrinVII	PrinVIII
Exp	(44‑54)	(55‑65)	(66‑100)	(101+)

14	$4,298 	‑	‑ 	 ‑
15	$4,363 	 ‑	‑ 	 ‑
16	$4,428 	$4,497 	‑ 	 ‑
17	$4,497 	$4,565 	$4,708 	 ‑
18	$4,565 	$4,638 	$4,780 	$4,855 
19	$4,638 	$4,708 	$4,855 	$4,931 
20	$4,708 	$4,780 	$4,931 	$5,008 
21	$4,780 	$4,855 	$5,008 	$5,088 
22	$4,855 	$4,931 	$5,088 	$5,189 
23	$4,931 	$5,008 	$5,189 	$5,294 
24	$5,008 	$5,088 	$5,294 	$5,400 
25	$5,088 	$5,189 	$5,400 	$5,508 
26	$5,189 	$5,294 	$5,508 	$5,617 
27	$5,294 	$5,400 	$5,617 	$5,730 
28	$5,400 	$5,508 	$5,730 	$5,845 
29	$5,508 	$5,617 	$5,845 	$5,962 
30	$5,617 	$5,730 	$5,962 	$6,081 
31	$5,730 	$5,845 	$6,081 	$6,203 
32	$5,845 	$5,962 	$6,203 	$6,327 
33	$5,962 	$6,081 	$6,327 	$6,453 
34	$6,081 	$6,203 	$6,453 	$6,583 
35	$6,203 	$6,327 	$6,583 	$6,714 
36	$6,327 	$6,453 	$6,714 	$6,847 
37	$6,453 	$6,583 	$6,847 	$6,985 
38	$6,583 	$6,714 	$6,985 	$7,124 
39	‑ 	$6,847 	$7,124 	$7,266 
40	‑ 	$6,985 	$7,266 	$7,412 
41	‑ 	‑ 	$7,412 	$7,560

SECTION 7.2.(c)  The base salary schedule for school‑based administrators shall apply only to principals and assistant principals.  The base salary schedule for the 2006‑2007 fiscal year, commencing July 1, 2006, is as follows:

2006‑2007
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	$3,297	‑	‑ 	‑ 	‑ 	 
5	$3,448	 ‑	‑ 	‑ 	‑ 
6	$3,593	 ‑	‑ 	‑ 	‑ 
7	$3,709	 ‑	‑ 	‑ 	‑ 
8	$3,762	$3,762 	‑ 	‑ 	‑ 
9	$3,817	$3,817 	‑ 	‑ 	‑ 
10	$3,874	$3,874 	$3,930 	‑ 	‑ 
11	$3,930	$3,930 	$3,987 	‑ 	‑ 
12	$3,987	$3,987 	$4,044 	$4,104 	‑ 
13	$4,044	$4,044 	$4,104 	$4,163 	$4,226 
14	$4,104	$4,104 	$4,163 	$4,226 	$4,289 
15	$4,163	$4,163 	$4,226 	$4,289 	$4,353 
16	$4,226	$4,226 	$4,289 	$4,353 	$4,419 
17	$4,289	$4,289 	$4,353 	$4,419 	$4,484 
18	$4,353	$4,353 	$4,419 	$4,484 	$4,554 
19	$4,419	$4,419 	$4,484 	$4,554 	$4,623 
20	$4,484	$4,484 	$4,554 	$4,623 	$4,697 
21	$4,554	$4,554 	$4,623 	$4,697 	$4,769 
22	$4,623	$4,623 	$4,697 	$4,769 	$4,842 
23	$4,697	$4,697 	$4,769 	$4,842 	$4,917 
24	$4,769	$4,769 	$4,842 	$4,917 	$4,994 
25	$4,842	$4,842 	$4,917 	$4,994 	$5,072 
26	$4,917	$4,917 	$4,994 	$5,072 	$5,153 
27	$4,994	$4,994 	$5,072 	$5,153 	$5,256 
28	$5,072	$5,072 	$5,153 	$5,256 	$5,361 
29	$5,153	$5,153 	$5,256 	$5,361 	$5,469 
30	$5,256	$5,256 	$5,361 	$5,469 	$5,579 
31	$5,361	$5,361 	$5,469 	$5,579 	$5,689 
32	‑ 	$5,469 	$5,579 	$5,689 	$5,803 
33	‑ 	‑ 	$5,689 	$5,803 	$5,920 
34	‑ 	‑ 	$5,803 	$5,920 	$6,039 
35	‑ 	‑ 	 ‑	$6,039 	$6,158 
36	‑ 	‑ 	 ‑	$6,158 	$6,282 
37	‑ 	‑ 	 ‑	 ‑	$6,408 

2006‑2007
Principal and Assistant Principal Salary Schedules
Classification

Yrs. of	PrinV	PrinVI	PrinVII	PrinVIII
Exp	(44‑54)	(55‑65)	(66‑100)	(101+)

14	$4,353 	‑ 	‑ 	‑ 
15	$4,419 	‑ 	‑ 	‑ 
16	$4,484 	$4,554 	‑ 	‑ 
17	$4,554 	$4,623 	$4,769 	‑ 
18	$4,623 	$4,697 	$4,842 	$4,917 
19	$4,697 	$4,769 	$4,917 	$4,994 
20	$4,769 	$4,842 	$4,994 	$5,072 
21	$4,842 	$4,917 	$5,072 	$5,153 
22	$4,917 	$4,994 	$5,153 	$5,256 
23	$4,994 	$5,072 	$5,256 	$5,361 
24	$5,072 	$5,153 	$5,361 	$5,469 
25	$5,153 	$5,256 	$5,469 	$5,579 
26	$5,256 	$5,361 	$5,579 	$5,689 
27	$5,361 	$5,469 	$5,689 	$5,803 
28	$5,469 	$5,579 	$5,803 	$5,920 
29	$5,579 	$5,689 	$5,920 	$6,039 
30	$5,689 	$5,803 	$6,039 	$6,158 
31	$5,803 	$5,920 	$6,158 	$6,282 
32	$5,920 	$6,039 	$6,282 	$6,408 
33	$6,039 	$6,158 	$6,408 	$6,536 
34	$6,158 	$6,282 	$6,536 	$6,667 
35	$6,282 	$6,408 	$6,667 	$6,800 
36	$6,408 	$6,536 	$6,800 	$6,935 
37	$6,536 	$6,667 	$6,935 	$7,074 
38	$6,667 	$6,800 	$7,074 	$7,215 
39	 	$6,935 	$7,215 	$7,359 
40	 	$7,074 	$7,359 	$7,507 

SECTION 7.2.(d)  The appropriate classification for placement of principals and assistant principals on the salary schedule, except for principals in alternative schools and in cooperative innovative high 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 and in cooperative innovative high school programs 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.(e)  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 1999‑2000 school years for improvement in student performance or maintaining a safe and orderly school.
SECTION 7.2.(f)  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.(g)  Longevity pay for principals and assistant principals shall be as provided for State employees under the State Personnel Act.
SECTION 7.2.(h)  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.
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 2005‑2006 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 2005‑2006 fiscal year and the 2006‑2007 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:	Senator Lucas, Swindell, 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 2005‑2006 fiscal year, beginning July 1, 2005.
School Administrator I	$2,932	$5,506
School Administrator II	$3,112	$5,840
School Administrator III	$3,303	$6,195
School Administrator IV	$3,436	$6,442
School Administrator V	$3,574	$6,702
School Administrator VI	$3,792	$7,108
School Administrator VII	$3,945	$7,394
The monthly salary ranges that follow apply to assistant superintendents, associate superintendents, directors/coordinators, supervisors, and finance officers for the 2006‑2007 fiscal year, beginning July 1, 2006.
School Administrator I	$2,932	$5,671
School Administrator II	$3,112	$6,015
School Administrator III	$3,303	$6,380
School Administrator IV	$3,436	$6,636
School Administrator V	$3,574	$6,903
School Administrator VI	$3,792	$7,322
School Administrator VII	$3,945	$7,616
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.
SECTION 7.3.(b)  The monthly salary ranges that follow apply to public school superintendents for the 2005‑2006 fiscal year, beginning July 1, 2005. 
Superintendent I	$4,187	$7,844
Superintendent II	$4,445	$8,318
Superintendent III	$4,716	$8,825
Superintendent IV	$5,005	$9,360
Superintendent V	$5,312	$9,931
The monthly salary ranges that follow apply to public school superintendents for the 2006‑2007 fiscal year, beginning July 1, 2006. 
Superintendent I	$4,187	$8,080
Superintendent II	$4,445	$8,568
Superintendent III	$4,716	$9,090
Superintendent IV	$5,005	$9,641
Superintendent V	$5,312	$10,229
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.
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 annual salary increase for all permanent full‑time personnel paid from the Central Office Allotment who work a nine‑, 10‑, 11‑, or 12‑month work year schedule shall be the greater of five hundred dollars ($500.00) or two percent (2%), commencing July 1, 2005. The annual salary increase for all permanent full‑time personnel paid from the Central Office Allotment who work a nine‑, 10‑, 11‑, or 12‑month work year schedule shall be the three percent (3%), commencing July 1, 2006. The State Board of Education shall allocate these funds to local school administrative units.  The local boards of education shall establish guidelines for providing salary increases to these personnel.

Requested by:	Senator Lucas, Swindell, Garrou, Dalton, Hagan
NONCERTIFIED PERSONNEL SALARY
SECTION 7.4.(a)  The annual salary increase for permanent, full‑time noncertified public school employees whose salaries are supported from the State's General Fund shall be the greater of five hundred dollars ($500.00) or two percent (2%), commencing July 1, 2005. 
The annual salary increase for permanent, full‑time noncertified public school employees whose salaries are supported from the State's General Fund shall be three percent (3%), commencing July 1, 2006. 
SECTION 7.4.(b)  Local boards of education shall increase the rates of pay for such employees who were employed for all or part of fiscal year 2004‑2005 and who continue their employment for fiscal year 2005‑2006 by providing an annual salary increase for employees of the greater of five hundred dollars ($500.00) or two percent (2%).
Local boards of education shall increase the rates of pay for such employees who were employed for all or part of fiscal year 2005‑2006 and who continue their employment for fiscal year 2006‑2007 by providing an annual salary increase for employees of three percent (3%).
For part‑time employees, the pay increase shall be pro rata based on the number of hours worked.
SECTION 7.4.(c)  The State Board of Education may adopt salary ranges for noncertified personnel to support increases of the greater of five hundred dollars ($500.00) or two percent (2%) for the 2005‑2006 fiscal year.
The State Board of Education may adopt salary ranges for noncertified personnel to support increases of three percent (3%) for the 2006‑2007 fiscal year.
SECTION 7.4.(d)  For the 2005‑2006 fiscal year, permanent full‑time employees who work a nine‑, 10‑, or 11‑month work year schedule shall receive the five hundred dollars ($500.00) or the two percent (2%) annual increase provided by this act, whichever is greater.
For the 2006‑2007 fiscal year, permanent full‑time employees who work a nine‑, 10‑, or 11‑month work year schedule shall receive the three percent (3%) annual increase provided by this act.

Requested by:	Senator Lucas, Swindell, Garrou, Dalton, Hagan
bonus for certified personnel at the top of their salary schedules
SECTION 7.5.  Effective July 1, 2005, 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, 2005, any permanent personnel employed on July 1, 2004, and paid at the top of the principal and assistant principal salary schedule shall receive a one‑time bonus equivalent to two percent (2%).
Effective July 1, 2006, 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, 2006, any permanent personnel employed on July 1, 2005, 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, Swindell, 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 2005‑2006 fiscal year and the 2006‑2007 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 2005‑2007 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, 2006, 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, Swindell, 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 seven hundred forty thousand seventy‑four dollars ($740,074), excluding textbooks for the 2005‑2006 fiscal year and a base of seven hundred forty thousand seventy‑four dollars ($740,074) for the 2006‑2007 fiscal year.
(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 2005‑2007 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, 2006, 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, Swindell, Garrou, Dalton, Hagan
disadvantaged student supplemental funding
SECTION 7.8.(a)  Funds are appropriated in this act to address the capacity needs of local school administrative units to meet the needs of disadvantaged students.  Each local school administrative unit shall use funds allocated to it for disadvantaged student supplemental funding to implement a plan jointly developed by the unit and the LEA Assistance Program team.  The plan shall be based upon the needs of students in the unit not achieving grade‑level proficiency. The plan shall detail how these funds shall be used in conjunction with all other supplemental funding allotments such as Low‑Wealth, Small County, At‑Risk Student Services/Alternative Schools, and Improving Student Accountability, to provide instructional and other services that meet the educational needs of these students. Prior to the allotment of disadvantaged student supplemental funds, the plan shall be approved by the State Board of Education.
Funds received for disadvantaged student supplemental funding shall be used, consistent with the policies and procedures adopted by the State Board of Education, only to:
(1)	Provide instructional positions or instructional support positions and/or professional development;
(2)	Provide intensive in‑school and/or after‑school remediation;
(3)	Purchase diagnostic software and progress‑monitoring tools; and
(4)	Provide funds for teacher bonuses and supplements. The State Board of Education shall set a maximum percentage of the funds that may be used for this purpose.
SECTION 7.8.(b)  Funds are appropriated in this act to evaluate the Disadvantaged Students Supplemental Funding Initiatives and Low‑Wealth Initiatives. The State Board of Education shall use these funds to:
(1)	Evaluate the strategies implemented by local school administrative units with Disadvantaged Student Supplemental Funds and Low‑Wealth Funds and assess their impact on student performance; and
(2)	Evaluate the efficiency and effectiveness of the technical assistance and support provided to local school administrative units by the Department of Public Instruction.
The State Board of Education shall report the results of the evaluation to the Office of State Budget and Management, the Joint Legislative Education Oversight Committee, and the Fiscal Research Division by February 15, 2006, and by January 15 of each subsequent year.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
students with limited english proficiency
SECTION 7.9.(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 ten 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 7.9.(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.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
flexibility for the highest priority elementary schools
SECTION 7.10.  The State Board of Education may allow high priority schools that have made high growth for three consecutive years to be removed from the list of high priority schools.  If a local board of education chooses to have a school removed from the list of high priority schools, the additional high priority funding for that school shall be discontinued.

Requested by:	Senators Lucas, Swindell, 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 2005‑2006 fiscal year and for the 2006‑2007 fiscal year to implement G.S. 115C‑12(24).

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
funds for CHILDREN WITH DISABILITIES
SECTION 7.12.  The State Board of Education shall allocate funds for children with disabilities on the basis of two thousand eight hundred thirty‑eight dollars and thirty‑nine cents ($2,838.39) per child for a maximum of 169,164 children for the 2005‑2006 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 2005‑2006 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, Swindell, Garrou, Dalton, Hagan
funds for academically gifted children
SECTION 7.13.  The State Board of Education shall allocate funds for academically or intellectually gifted children on the basis of nine hundred twenty‑six dollars and fifty‑five cents ($926.55) per child. A local school administrative unit shall receive funds for a maximum of four percent (4%) of its 2005‑2006 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 55,895 children for the 2005‑2006 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, Swindell, Garrou, Dalton, Hagan
EXPENDITURE OF FUNDS TO IMPROVE STUDENT ACCOUNTABILITY
SECTION 7.14.(a)  Funds appropriated for the 2005‑2006 and 2006‑2007 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 State Board of Education 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 2005‑2006 fiscal year within 30 days of the date this act becomes law.
SECTION 7.14.(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, Swindell, Garrou, Dalton, Hagan
LITIGATION RESERVE FUNDS
SECTION 7.15.  The State Board of Education may expend up to five hundred thousand dollars ($500,000) each year for the 2005‑2006 and 2006‑2007 fiscal years from unexpended funds for certified employees' salaries to pay expenses related to pending litigation.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
BASE BUDGET REDUCTION TO DEPARTMENT OF PUBLIC INSTRUCTION
SECTION 7.16.  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 2005‑2006 fiscal year.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
REPLACEMENT SCHOOL BUSES FUNDS
SECTION 7.17.(a)  The State Board of Education may impose any of the following conditions on allotments to local boards of education for replacement school buses:
(1)	The local board of education shall use the funds only to make the first, second, or third 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 shall 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 Department of Administration, Division of Purchase and Contract, in cooperation with the State Board of Education, shall solicit bids for the direct purchase of school buses and activity buses and shall establish a statewide term contract for use by the State Board of Education. Local boards of education and other agencies shall be eligible to purchase from the statewide term contract. The State Board of Education shall also solicit bids for the financing of school buses.
(5)	A bus financed pursuant to this section shall meet all federal motor vehicle safety regulations for school buses.
(6)	Any other condition the State Board of Education considers appropriate.
SECTION 7.17.(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, Swindell, Garrou, Dalton, Hagan
expenditures for driving eligibility certificates
SECTION 7.18.  G.S. 115C‑12(28) reads as rewritten:
"§ 115C‑12.  Powers and duties of the Board generally.
The general supervision and administration of the free public school system shall be vested in the State Board of Education. The State Board of Education shall establish policy for the system of free public schools, subject to laws enacted by the General Assembly. The powers and duties of the State Board of Education are defined as follows:
…
(28)	Duty to Develop Rules for Issuance of Driving Eligibility Certificates. – The State Board of Education shall adopt the following rules to assist schools in their administration of procedures necessary to implement G.S. 20‑11 and G.S. 20‑13.2:
a.	To define what is equivalent to a high school diploma for the purposes of G.S. 20‑11 and G.S. 20‑13.2. These rules shall apply to all educational programs offered in the State by public schools, charter schools, nonpublic schools, or community colleges.
b.	To establish the procedures a person who is or was enrolled in a public school or in a charter school must follow and the requirements that person shall meet to obtain a driving eligibility certificate.
c.	To require the person who is required under G.S. 20‑11(n) to sign the driving eligibility certificate to provide the certificate if he or she determines that one of the following requirements is met:
1.	The person seeking the certificate is eligible for the certificate under G.S. 20‑11(n)(1) and is not subject to G.S. 20‑11(n1).
2.	The person seeking the certificate is eligible for the certificate under G.S. 20‑11(n)(1) and G.S. 20‑11(n1).
These rules shall apply to public schools and charter schools.
d.	To provide for an appeal to an appropriate education authority by a person who is denied a driving eligibility certificate. These rules shall apply to public schools and charter schools.
e.	To define exemplary student behavior and to define what constitutes the successful completion of a drug or alcohol treatment counseling program. These rules shall apply to public schools and charter schools.
The State Board also shall develop policies as to when it is appropriate to notify the Division of Motor Vehicles that a person who is or was enrolled in a public school or in a charter school no longer meets the requirements for a driving eligibility certificate.
The State Board shall develop a form for parents, guardians, or emancipated juveniles, as appropriate, to provide their written, irrevocable consent for a school to disclose to the Division of Motor Vehicles that the student no longer meets the conditions for a driving eligibility certificate under G.S. 20‑11(n)(1) or G.S. 20‑11(n1), if applicable, in the event that this disclosure is necessary to comply with G.S. 20‑11 or G.S. 20‑13.2. Other than identifying under which statutory subsection the student is no longer eligible, no other details or information concerning the student's school record shall be released pursuant to this consent. This form shall be used for students enrolled in public schools or charter schools.
The State Board of Education may use funds appropriated for drivers education to cover the costs of driving eligibility certificates."

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
discrepancies between anticipated and actual adm
SECTION 7.19.(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 7.19.(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, Swindell, Garrou, Dalton, Hagan
CHARTER SCHOOL ADVISORY COMMITTEE/CHARTER SCHOOL EVALUATION
SECTION 7.20.  The State Board of Education may spend up to fifty thousand dollars ($50,000) a year from State Aid to Local School Administrative Units for the 2005‑2006 and 2006‑2007 fiscal years to continue support of a charter school advisory committee and to continue to evaluate charter schools.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
mentor teacher funds may be used for full‑time mentors
SECTION 7.21.(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 7.21.(b)  The State Board, after consultation with the Professional Teaching Standards Commission, shall adopt standards for mentor training.
SECTION 7.21.(c)  Each local board of education with a plan approved pursuant to subsection (a) of this section shall report to the State Board on the impact of its mentor program on teacher retention.  The State Board shall analyze these reports to determine the characteristics of mentor programs that are most effective in retaining teachers and shall report its findings to the Joint Legislative Education Oversight Committee by October 15, 2006.
SECTION 7.21.(d)  In addition to the report required in subsection (c) of this section, the State shall also evaluate the effectiveness of a representative sample of local mentor programs and report on its findings to the Joint Legislative Education Oversight Committee and the Fiscal Research Division by December 15, 2006.   The evaluation shall focus on quantitative evidence, quality of service delivery, and satisfaction of those involved.  The report shall include the results of the evaluation and recommendations both for improving mentor programs generally and for an appropriate level of State support for mentor programs.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
visiting international exchange teachers
SECTION 7.22.(a)  G.S. 115C‑105.25(b) is amended by adding a new subdivision to read:
"(5a)	Positions allocated for classroom teachers may be converted to dollar equivalents to contract for visiting international exchange teachers. These positions shall be converted at the statewide average salary for classroom teachers, including benefits. The converted funds shall be used only to cover the costs associated with bringing visiting international exchange teachers to the local school administrative unit through a State‑approved visiting international exchange teacher program and supporting the visiting exchange teachers."
SECTION 7.22.(b)  The Visiting International Faculty Program is a State‑approved visiting international exchange teacher program.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
FUNDS TO IMPLEMENT THE ABCS OF PUBLIC EDUCATION
SECTION 7.23.(a)  The State Board of Education shall use funds appropriated in this act for State Aid to Local School Administrative Units to provide incentive funding for schools that met or exceeded the projected levels of improvement in student performance during the 2004‑2005 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:
a.	Up to one thousand five hundred dollars ($1,500) for each teacher and for certified personnel; and
b.	Up to five hundred dollars ($500.00) for each teacher assistant.
(2)	Incentive awards in schools that meet the expected improvements may be:
a.	Up to seven hundred fifty dollars ($750.00) for each teacher and for certified personnel; and
b.	Up to three hundred seventy‑five dollars ($375.00) for each teacher assistant.
SECTION 7.23.(b)  The State Board of Education may use funds appropriated to the State Public School Fund for assistance teams to low‑performing schools.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
LEA ASSISTANCE PROGRAM
SECTION 7.24.  Of the funds appropriated to the State Public School Fund, the State Board of Education shall use five hundred thousand dollars ($500,000) for the 2005‑2006 fiscal year and five hundred thousand dollars ($500,000) for the 2006‑2007 fiscal year 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, 2006, and by December 15, 2007. The report shall contain: (i) the criteria for selecting LEAs and schools to receive assistance, (ii) measurable goals and objectives for the assistance program, (iii) an explanation of the assistance provided, (iv) findings from the assistance program, (v) actual expenditures by category, (vi) recommendations for the continuance of this program, and (vii) any other information the State Board deems necessary. These funds shall not revert at the end of each fiscal year but shall remain available until expended for this purpose.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
FUNDS FOR THE TESTING AND IMPLEMENTATION OF THE NEW STUDENT INFORMATION SYSTEM
SECTION 7.25.(a)  Funds appropriated for the Uniform Education Reporting System shall not revert at the end of the 2005‑2006 and 2006‑2007 fiscal years but shall remain available until expended.
SECTION 7.25.(b)  This section becomes effective June 30, 2005.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
PUBLIC SCHOOL BUILDING CAPITAL and technology FUND
SECTION 7.26.(a)  The title of Article 38A of Chapter 115C of the General Statutes reads as rewritten:
"Article 38A.
Public School Building Capital and Technology Fund."
SECTION 7.26.(b)  G.S. 115C‑546.1 is amended by deleting the language "Public School Building Capital Fund" wherever it appears and substituting "Public School Building Capital and Technology Fund". 
SECTION 7.26.(c)  Notwithstanding the provisions of G.S. 115C‑546.1(b), as rewritten by subsection (b) of this section, for the third and fourth quarters of the 2005‑2006 fiscal year only, the Secretary of Revenue shall remit to the State Treasurer an amount equal to five sixty‑ninths of the net collections received during the previous quarter by the Department of Revenue under G.S. 105‑130.3. Of these funds, twenty‑five million dollars ($25,000,000) each quarter shall be for credit to the State Public School Fund, and the remainder shall be for credit to the Public School Building Capital and Technology Fund. 
SECTION 7.26.(d)  Notwithstanding the provisions of G.S. 115C‑546.1(b), as rewritten by subsection (b) of this section, for the first and second quarters of the 2006‑2007 fiscal year only, the Secretary of Revenue shall remit to the State Treasurer an amount equal to five sixty‑ninths of the net collections received during the previous quarter by the Department of Revenue under G.S. 105‑130.3. Of these funds, twenty million five hundred thousand dollars ($20,500,000) each quarter shall be for credit to the State Public School Fund, and the remainder shall be for credit to the Public School Building Capital and Technology Fund.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
LEA Sales Tax Refund Reporting
SECTION 7.27.(a)  G.S. 105‑164.14(c) reads as rewritten:
"(c)	Certain Governmental Entities. – A governmental entity listed in this subsection is allowed an annual refund of sales and use taxes paid by it under this Article on direct purchases of tangible personal property and services, other than electricity and telecommunications service. Sales and use tax liability indirectly incurred by a governmental entity on building materials, supplies, fixtures, and equipment that become a part of or annexed to any building or structure that is owned or leased by the governmental entity and is being erected, altered, or repaired for use by the governmental entity is considered a sales or use tax liability incurred on direct purchases by the governmental entity for the purpose of this subsection. A request for a refund must be in writing and must include any information and documentation required by the Secretary. A request for a refund is due within six months after the end of the governmental entity's fiscal year. The Secretary shall make an annual report to the Department of Public Instruction and the Fiscal Research Division of the General Assembly by January 1 of the amount of refunds, identified by taxpayer, claimed under subdivisions (2b) and (2c) of this subsection over the preceding year.
This subsection applies only to the following governmental entities:
(1)	A county.
(2)	A city as defined in G.S. 160A‑1.
(2a)	A consolidated city‑county as defined in G.S. 160B‑2.
(2b)	A local school administrative unit.
(2c)	A joint agency created by interlocal agreement among local school administrative units pursuant to G.S. 160A‑462 to jointly purchase food service‑related materials, supplies, and equipment on their behalf.
(3)	A metropolitan sewerage district or a metropolitan water district in this State.
(4)	A water and sewer authority created under Chapter 162A of the General Statutes.
(5)	A lake authority created by a board of county commissioners pursuant to an act of the General Assembly.
(6)	A sanitary district.
(7)	A regional solid waste management authority created pursuant to G.S. 153A‑421.
(8)	An area mental health, developmental disabilities, and substance abuse authority, other than a single‑county area authority, established pursuant to Article 4 of Chapter 122C of the General Statutes.
(9)	A district health department, or a public health authority created pursuant to Part 1A of Article 2 of Chapter 130A of the General Statutes.
(10)	A regional council of governments created pursuant to G.S. 160A‑470.
(11)	A regional planning and economic development commission or a regional economic development commission created pursuant to Chapter 158 of the General Statutes.
(12)	A regional planning commission created pursuant to G.S. 153A‑391.
(13)	A regional sports authority created pursuant to G.S. 160A‑479.
(14)	A public transportation authority created pursuant to Article 25 of Chapter 160A of the General Statutes.
(14a)	A facility authority created pursuant to Part 4 of Article 20 of Chapter 160A of the General Statutes.
(15)	A regional public transportation authority created pursuant to Article 26 of Chapter 160A of the General Statutes, or a regional transportation authority created pursuant to Article 27 of Chapter 160A of the General Statutes.
(16)	A local airport authority that was created pursuant to a local act of the General Assembly.
(17)	A joint agency created by interlocal agreement pursuant to G.S. 160A‑462 to operate a public broadcasting television station.
(18)	Repealed by Session Laws 2001‑474, s. 7, effective November 29, 2001.
(19)	Repealed by Session Laws 2001‑474, s. 7, effective November 29, 2001.
(20)	A constituent institution of The University of North Carolina, but only with respect to sales and use tax paid by it for tangible personal property or services that are eligible for refund under this subsection acquired by it through the expenditure of contract and grant funds.
(21)	The University of North Carolina Health Care System.
(22)	A regional natural gas district created pursuant to Article 28 of Chapter 160A of the General Statutes."
SECTION 7.27.(b)  G.S. 105‑259(b) is amended by adding a new subdivision to read:
"(b)	Disclosure Prohibited. – An officer, an employee, or an agent of the State who has access to tax information in the course of service to or employment by the State may not disclose the information to any other person unless the disclosure is made for one of the following purposes:
…
(32)	To provide the report required under G.S. 105‑164.14(c) to the Department of Public Instruction and the Fiscal Research Division of the General Assembly."
SECTION 7.27.(c)  In addition to the report required under G.S. 105‑164.14(c), as amended by this section, the Secretary of Revenue shall make a report to the Department of Public Instruction and the Fiscal Research Division of the General Assembly within 30 days after this act becomes law of the amount of refunds, identified by taxpayer, claimed under subdivisions (2b) and (2c) of G.S. 105‑164.14(c) during the 2002‑2003, 2003‑2004, and 2004‑2005 fiscal years.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
REVIEW OF standards for Masters in school administration PROGRAMS
SECTION 7.28.  The State Board of Education, in consultation with the Board of Governors of The University of North Carolina, shall review standards for Masters in School Administration programs to ensure that appropriate competencies related to teacher retention, teacher evaluations, teacher support programs, and teacher effectiveness are included and emphasized.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
EVALUATION OF SCHOOL PRINCIPALS
SECTION 7.29.  Chapter 115C of the General Statutes is amended by adding a new section to read:
"§ 115C‑286.1.  Evaluations of principals. 
Local school administrative units shall evaluate all principals and assistant principals at least once each year. Either the superintendent or the superintendent's designee shall conduct the evaluations.
The State Board of Education shall ensure that the standards and criteria for the evaluations include the accountability measures of teacher retention, teacher support, and school climate. The State Board shall revise its evaluation instruments to include these measures. A local board shall use the performance standards and criteria adopted by the State Board unless the board develops an alternative evaluation that is properly validated and that includes standards and criteria similar to those adopted by the State Board."

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
PLANNING TIME FOR TEACHERS
SECTION 7.30.  The State Board of Education shall report on best practices from North Carolina schools for providing a minimum of five hours per week within the instructional day for planning, collaborating with colleagues and parents, and professional development, especially within elementary school schedules. The State Board shall submit its report to the Education Cabinet and to the Joint Legislative Education Oversight Committee by December 31, 2005.
The State Board shall disseminate this information about best practices to schools and school systems across the State.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
ONLINE PROFESSIONAL DEVELOPMENT RESOURCE CENTER FOR TEACHERS AND PRINCIPALS
SECTION 7.31.  The State Board of Education and the Department of Public Instruction shall develop a Web portal that catalogues high‑quality professional development opportunities for teachers and principals.
The State Chief Information Officer must approve the system's information technology project plan before funds are spent for the implementation of this system.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
LEARN AND EARN HIGH SCHOOLS
SECTION 7.32.(a)  Funds are appropriated in this act for the Learn and Earn high school workforce development program.  The purpose of the program is to create rigorous and relevant high school options that provide students with the opportunity and assistance to earn an associate degree or two years of college credit by the conclusion of the year after their senior year in high school. The State Board of Education shall work closely with the Education Cabinet and the New Schools Project in administering the program.
SECTION 7.32.(b)  These funds shall be used to establish new high schools in which a local school administrative unit, two‑ and four‑year colleges and universities, and local employers work together to ensure that high school and postsecondary college curricula operate seamlessly and meet the needs of participating employers.
Funds shall not be allotted until Learn and Earn high schools are certified as operational.
SECTION 7.32.(c)  During the first year of its operation, a high school established under G.S. 115C‑238.50 shall be allotted a principal regardless of the number of State‑paid teachers assigned to the school or the number of students enrolled in the school.
SECTION 7.32.(d)  The State Board of Education, in consultation with the State Board of Community Colleges and The University of North Carolina Board of Governors, shall conduct an annual evaluation of this program.  The evaluation shall include measures as identified in G.S. 115C‑238.55. It shall also include: (i) an accounting of how funds and personnel resources were utilized and their impact on student achievement, retention, and employability; (ii) recommended statutory and policy changes; and (iii) recommendations for improvement of the program.  The State Board of Education shall report the results of this evaluation to the Office of State Budget and Management, the Joint Legislative Education Oversight Committee, and the Fiscal Research Division by January 15 of each fiscal year.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
FLEXIBILITY FOR HIGH SCHOOL INNOVATION
SECTION 7.33.(a)  Part 9 of Article 16 of Chapter 115C of the General Statutes reads as rewritten:
"Part 9. Cooperative Innovative High School Programs.
"§ 115C‑238.50.  Purpose.
(a)	The purpose of this Part is to authorize local boards of education to jointly establish with one or more boards of trustees cooperative innovative programs in high schools and colleges or universities that will expand students' opportunities for educational success through high quality instructional programming. These cooperative innovative high school programs shall target:
(1)	High school students who are at risk of dropping out of school before attaining a high school diploma; or
(2)	High school students who would benefit from accelerated academic instruction.
(b)	All the cooperative innovative high school programs established under this Part shall:
(1)	Prepare students adequately for future learning in the workforce or in an institution of higher education.
(2)	Expand students' educational opportunities within the public school system.
(3)	Be centered on the core academic standards represented by the college preparatory or tech prep program of study as defined by the State Board of Education.
(4)	Encourage the cooperative or shared use of resources, personnel, and facilities between public schools and  colleges or universities, or both.(5)	Integrate and emphasize both academic and technical skills necessary for students to be successful in a more demanding and changing workplace.
(6)	Emphasize parental involvement and provide consistent counseling, advising, and parent conferencing so that parents and students can make responsible decisions regarding course taking and can track the students' academic progress and success.
(7)	Be held accountable for meeting measurable student achievement results.
(8)	Encourage the use of different and innovative teaching methods.
(9)	Establish joint institutional responsibility and accountability for support of students and their success.
(10)	Effectively utilize existing funding sources for high school, college, university, and vocational programs and actively pursue new funding from other sources.
(11)	Develop methods for early identification of potential participating students in the middle grades and through high school.
(12)	Reduce the percentage of students needing remedial courses upon their initial entry from high school into a college or university.
(c)	Programs developed under this Part that target students who are at risk of dropping out of high school before attaining a high school diploma shall:
(1)	Provide these students with the opportunity to graduate from high school possessing the core academic skills needed for postsecondary education and high‑skilled employment.
(2)	Enable students to complete a technical or academic program in a field that is in high demand and has high wages.
(3)	Set and achieve goals that significantly reduce dropout rates and raise high school and college retention, certification, and degree completion rates.
(4)	Enable students who complete these programs to pass employer exams, if applicable.
(d)	Cooperative innovative high school programs that offer accelerated learning programs shall:
(1)	Provide a flexible, customized program of instruction for students who would benefit from accelerated, higher level coursework or early graduation from high school.
(2)	Enable students to obtain a high school diploma in less than four years, to begin or complete an associate degree program, to master a certificate or vocational program, or to earn up to two years of college credit.
(3)	Offer a college preparatory academic core and in‑depth studies in a career or technical field that will lead to advanced programs or employment opportunities in engineering, health sciences, or teaching.
(e)	Cooperative innovative high school programs may include the creation of a school within a school, a technical high school, or a high school or technical center located on the campus of a college or university.
(f)	Students are eligible to attend these programs as early as ninth grade.
"§ 115C‑238.50A.  Definitions.
The following definitions apply in this Part:
(1)	Constituent institution. – A constituent institution as defined in G.S. 116‑2(4).
(2)	Education partner. – An education partner as provided in G.S. 115C‑238.52.(3)	Governing board. – The State Board of Community Colleges, the Board of Governors of The University of North Carolina, or the Board of the North Carolina Independent Colleges and Universities.
(4)	Local board of trustees. – The board of trustees of a community college, constituent institution of The University of North Carolina, or private college located in North Carolina.
"§ 115C‑238.51.  Application process.
(a)	A local board of education and at least one local board of trustees shall jointly apply to establish a cooperative innovative high school program under this Part.
(b)	The application shall contain at least the following information:
(1)	A description of a program that implements the purposes in G.S. 115C‑238.50.
(2)	A statement of how the program relates to the Economic Vision Plan adopted for the economic development region in which the program is to be located.
(3)	The facilities to be used by the program and the manner in which administrative services of the program are to be provided.
(4)	A description of student academic and vocational achievement goals and the method of demonstrating that students have attained the skills and knowledge specified for those goals.
(5)	A description of how the program will be operated, including budgeting, curriculum, transportation, and operating procedures.
(6)	The process to be followed by the program to ensure parental involvement.
(7)	The process by which students will be selected for and admitted to the program.
(8)	A description of the funds that will be used and a proposed budget for the program. This description shall identify how the average daily membership (ADM) and full‑time equivalent (FTE) students are counted.
(9)	The qualifications required for individuals employed in the program.
(10)	The number of students to be served.
(11)	A description of how the program's effectiveness in meeting the purposes in G.S. 115C‑238.50 will be measured.
(c)	The application shall be submitted to the State Board of Education and the applicable governing Boards by November 1 of each year. The Boards shall appoint a joint advisory committee to review the applications and to recommend to the Boards those programs that meet the requirements of this Part and that achieve the purposes set out in G.S. 115C‑238.50.
(d)	The Boards may approve programs recommended by the joint advisory committee or may approve other programs that were not recommended. The Boards shall approve all applications by March 15 of each year. No application shall be approved unless the State Board of Education and the applicable governing Board find that the application meets the requirements set out in this Part and that granting the application would achieve the purposes set out in G.S. 115C‑238.50. Priority shall be given to applications that are most likely to further State education policies, to address the economic development needs of the economic development regions in which they are located, and to strengthen the educational programs offered in the local school administrative units in which they are located.
"§ 115C‑238.52.  Participation by other education partners.
(a)	Any or all of the following education partners may participate in the development of a cooperative innovative program under this Part that is targeted to high school students who would benefit from accelerated academic instruction:
		(3)	A private business or organization.
(4)	The county board of commissioners in the county in which the program is located.
(b)	Any or all of the education partners listed in subsection (a) of this section that participate shall:
(1)	Jointly apply with the local board of education and the local board of trustees to establish a cooperative innovative program under this Part.
(2)	Be identified in the application.
(3)	Sign the written agreement under G.S. 115C‑238.53(b).
"§ 115C‑238.53.  Program operation.
(a)	A program approved by the State is accountable to the local board of education.
(b)	A program approved under this Part shall operate under the terms of a written agreement signed by the local board of education, local board of trustees, State Board of Education, and applicable governing Board. The agreement shall incorporate the information provided in the application, as modified during the approval process, and any terms and conditions imposed on the program by the State Board of Education and the applicable governing Board. The agreement may be for a term of no longer than five school years.
(c)	A program may be operated in a facility owned or leased by the local board of education, the local board of trustees, or the education partner, if any.
(d)	A program approved under this Part shall provide instruction each school year for at least 180 days during nine calendar months, shall comply with laws and policies relating to the education of students with disabilities, and shall comply with Article 27 of this Chapter.
(e)	A program approved under this Part may use State, federal, and local funds allocated to the local school administrative unit, to the applicable governing Board, and to the college or university to implement the program. If there is an education partner and if it is a public body, the program may use State, federal, and local funds allocated to that body.
(f)	Except as provided in this Part and under the terms of the agreement, a program is exempt from laws and rules applicable to a local board of education, a local school administrative unit, a community college, a constituent institution, or a local board of trustees.
"§ 115C‑238.54.  Funds for programs.
(a)	The Department of Public Instruction shall assign a school code for each program that is approved under this Part. All positions and other State and federal allotments that are generated for this program shall be assigned to that school code. Notwithstanding G.S. 115C‑105.25, once funds are assigned to that school code, the local board of education may use these funds for the program and may transfer these funds between funding allotment categories.
(b)	The local board of trustees may allocate State and federal funds for a program that is approved under this Part.
(c)	An education partner under G.S. 115C‑238.52 that is a public body may allocate State, federal, and local funds for a program that is approved under this Part.
(d)	If not an education partner under G.S. 115C‑238.52, a county board of commissioners in a county where a program is located may nevertheless appropriate funds to a program approved under this Part.
(e)	The local board of education and the local board of trustees are strongly encouraged to seek funds from sources other than State, federal, and local appropriations. They are strongly encouraged to seek funds the Education Cabinet identifies or obtains under G.S. 116C‑4.
"§ 115C‑238.55.  Evaluation of programs.
The State Board of Education and the governing Boards shall evaluate the success of students in programs approved under this Part. Success shall be measured by high school retention rates, high school completion rates, high school dropout rates, certification and associate degree completion, admission to four‑year institutions, postgraduation employment in career or study‑related fields, and employer satisfaction of employees who participated in and graduated from the programs. Beginning October 15, 2005, and annually thereafter, the Boards shall jointly report to the Joint Legislative Education Oversight Committee on the evaluation of these programs. If, by October 15, 2006, the Boards determine any or all of these programs have been successful, they shall jointly develop a prototype plan for similar programs that could be expanded across the State. This plan shall be included in their report to the Joint Legislative Education Oversight Committee that is due by October 15, 2007."
SECTION 7.33.(b)  It is the intent of the General Assembly that three cooperative innovative high school programs are established that emphasize the educational development of high school students in the areas of science and mathematics in a nonresidential setting.  One of these programs shall be located in the eastern region of the State, one shall be located in the central region of the State, and one shall be located in the western region of the State.  The State Board of Education shall begin planning for the design and implementation of these programs and shall report their plan to the Joint Legislative Education Oversight Committee and the Fiscal Research Division of the General Assembly by March 15, 2006.
The plan shall include, but not be limited to, the following aspects of the proposed programs:
(1)	Programmatic design including location, curriculum, student access, and calendar,
(2)	Projected costs of operation, including instructional, administrative, transportation, capital, and other costs,
(3)	Any plans for coordination with institutes of higher education,
(4)	Proposed implementation schedule.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
funds for education of STUDENTS at eckerd youth ALTERNATIVES therapeutic camp
SECTION 7.35.  If a student is placed in an Eckerd Youth Alternatives therapeutic camp on  the recommendation of a local school administrative unit, the unit shall transfer to the camp the State funds allocated to the unit for the education of the child.  For each day that the child receives educational services at the camp, that unit shall pay 1/180 of the annual amount a charter school located in that unit would receive in State funds for that child, for a maximum of 180 days in a fiscal year.  If the child is a child with special needs, the unit shall also be responsible for the State per pupil allocation for children with special needs.

Requested by:	Senators Lucas, Garrou, Dalton, Hagan
fund one local school administrative unit per county
SECTION 7.36.(a)  Notwithstanding any other provision of law, the State Board of Education shall allot State funds on the basis of only one local school administrative unit per county.  To implement this change, the State Board shall change formulas that allot funds on a per local school administrative unit basis to formulas that allot funds on a per county basis.  If the amount previously allotted per local school administrative unit was graduated on the basis of average daily membership, the amount allotted per county shall be graduated on the basis of the total average daily membership of all units located in the county.
If a city school administrative unit is located in more than one county, the State Board of Education shall include in each county's average daily membership the average daily membership of the county's students in the city school administrative unit.
If a county contains more than one local school administrative unit, the State Board shall divide the amount allotted on a per county basis between the units on the basis of average daily membership.
SECTION 7.36.(b)  This section does not apply to allotments to the Nash‑Rocky Mount School Administrative Unit, the Edgecombe County School Administrative Unit, the Cleveland County School Administrative Unit, or the Gaston County School Administrative Unit.
SECTION 7.36.(c)  This section becomes effective July 1, 2006.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
minimize time devoted to standardized tests
SECTION 7.37.  G.S. 115C‑174.12(a) reads as rewritten:
"(a)	The State Board of Education shall establish policies and guidelines necessary for minimizing the time students spend taking tests administered through State and local testing programs, for minimizing the frequency of field testing at any one school, and for otherwise carrying out the provisions of this Article. These policies and guidelines shall include the following:
(1)	Schools shall devote no more than two days of instructional time per year to the taking of practice tests that do not have the primary purpose of assessing current student learning;
(2)	Students in a school shall not be subject to field tests or national tests during the two‑week period preceding the administration of end‑of‑grade tests, end‑of‑course tests, or the school's regularly scheduled final exams; and
(3)	No school shall participate in more than two field tests at any one grade level during a school year unless that school volunteers, through a vote of its school improvement team, to participate in an expanded number of field tests.
These policies shall reflect standard testing practices to insure reliability and validity of the sample testing. The results of the field tests shall be used in the final design of each test. The State Board of Education's policies regarding the testing of children with disabilities shall (i) provide broad accommodations and alternate methods of assessment that are consistent with a child's individualized education program and section 504 (29 U.S.C. § 794) plans, (ii) prohibit the use of statewide tests as the sole determinant of decisions about a child's graduation or promotion, and (iii) provide parents with information about the Statewide Testing Program and options for students with disabilities. The State Board shall report its proposed policies and proposed changes in policies to the Joint Legislative Education Oversight Committee prior to adoption.
The State Board of Education may appoint an Advisory Council on Testing to assist in carrying out its responsibilities under this Article."

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
education cabinet
SECTION 7.38.(a)  G.S. 116C‑1(b) reads as rewritten:
"(b)	The Education Cabinet shall consist of the Governor, who shall serve as chair, the President of The University of North Carolina, the State Superintendent of Public Instruction, the Chairman of the State Board of Education, the President of the North Carolina Community Colleges System, the Secretary of Health and Human Services, and the President of the North Carolina Independent Colleges and Universities. The Education Cabinet may invite other representatives of education to participate in its deliberations as adjunct members."
SECTION 7.38.(b)  The Education Cabinet shall study:
(1)	The extent to which school nurses, school social workers, and other instructional support personnel collaborate with each other and with local health, mental health, and social services providers to meet the needs of at‑risk children and their families and to support the educational achievement of at‑risk children; and
(2)	The need for additional training for school nurses, school social workers, and other instructional support personnel on multidisciplinary assessments and on referral and care coordination for at‑risk students and their families.
The Education Cabinet shall report the results of its study and its recommendations to the Joint Legislative Education Oversight Committee prior to April 15, 2006.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
the center for 21st century skills
SECTION 7.39.(a)  The State Board of Education shall transfer funds appropriated for the Center for 21st Century Skills to the Office of the Governor.  These funds shall be used for the establishment of the Center for 21st Century Skills within the North Carolina Business Committee for Education, Inc. The purpose of the Center shall be to design curriculum, teacher training, and student assessment to support students acquiring the knowledge and skills needed for the emerging workforce of the 21st century.
SECTION 7.39.(b)  The North Carolina Business Committee for Education, Inc., and the Center for 21st Century Skills shall coordinate their efforts on high school reform with the North Carolina New Schools Project.
SECTION 7.39.(c)  The North Carolina Business Committee for Education, Inc., and the Center for 21st Century Skills shall work with the North Carolina Science, Mathematics and Technology Education Center, the North Carolina School of Science and Mathematics, the North Carolina Board of Science and Technology, and the governing boards of education to research and propose options to create new or expand existing mathematics and science summer enrichment programs across the State and to establish nonresidential high schools focused on mathematics, science, and technology. The Center shall also support efforts of the Futures for Kids Program to connect students with the workforce needs of their home communities.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
TEACHER WORKING CONDITIONS INITIATIVE
SECTION 7.40.(a)  Funds are appropriated in this act to continue the Governor's Teacher Working Conditions Survey. The State Board of Education shall use these funds: (i) for the administration of the survey by the Professional Teaching Standards Commission on a biennial basis, and (ii) to establish an advisory board to oversee implementation of recommendations from the survey.
SECTION 7.40.(b)  The State Board of Education may supplement these funds with gifts or other private funds donated for this purpose. 

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
plan and funding for a virtual high school
SECTION 7.41.(a)  The State Board of Education, the Board of Governors of The University of North Carolina, the Independent Colleges and Universities, and the State Board of Community Colleges shall develop E‑learning standards and plans for infrastructures that provide virtual learning opportunities accessible to students and other citizens through all North Carolina schools, universities, and community colleges. In developing the plan for the public schools, the State Board of Education shall focus initially on high schools while also researching and developing, where appropriate, E‑learning for middle schools, junior high schools, and elementary schools. E‑learning programs shall support both teachers and students.
SECTION 7.41.(b)  As used in this section, "E‑learning" is electronic learning that includes a wide set of applications and processes, such as Web‑based learning, computer‑based learning, virtual classrooms, and digital collaboration. It includes the delivery of content via Internet, intranet/extranet (LAN/WAN), audiotape, videotape, satellite broadcast, interactive television, and CD‑ROM.
SECTION 7.41.(c)  It is the intent of the General Assembly to give public schools the highest priority in funding for and development of E‑learning. Funding for E‑learning should be a new appropriation and not come exclusively from existing funds.
SECTION 7.41.(d)  The State Board of Education shall use funds appropriated for a virtual high school to establish and implement a pilot virtual high school during the 2005‑2006 school year and the 2006‑2007 school year.
The State Board of Education shall include in the pilot program instruction on personal financial literacy. This instruction shall be designed to equip students with the knowledge and skills they need, before they become self‑supporting, to make critical decisions regarding their personal finances. The components of instruction shall include, at a minimum, consumer financial education, personal finance, and personal credit.
SECTION 7.41.(e)  If the pilot program is successful, it is the intent of the General Assembly to provide funding to implement a virtual high school on a statewide basis for the 2006‑2007 fiscal year.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
feasibility study for developing regional EDUCATION networks
SECTION 7.42.  The North Carolina Rural Economic Development Center and the e‑NC Authority, in collaboration with representatives from local school administrative units, The University of North Carolina, the State Board of Education, the State Chief Information Officer, and the Community College System shall perform a feasibility study on developing regional education networks that are centrally managed to provide and sustain broadband connectivity to individual students and teachers in schools, community colleges, and universities.
The study shall include an evaluation of existing technology infrastructures, such as the statewide infrastructure, the North Carolina Research and Education Network, or the regional infrastructure, Winston‑Net. These state‑of‑the‑art infrastructures may be capable of supporting growth in traffic and thus serve as a backbone infrastructure for delivering high‑speed access to underserved regions.
The North Carolina Rural Economic Development Center and the e‑NC Authority shall report the results of the study to the 2006 Regular Session of the 2005 General Assembly.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
plan for projecting school technology funding needs
SECTION 7.43.(a)  G.S. 115C‑102.6A(c) reads as rewritten:
"(c)	Components of the State school technology plan shall include at least the following:
…
(17)	A baseline template for:
a.	Technology infrastructure, including broadband connectivity, personnel recommendations, and other resources needed to operate effectively from the classroom desktop to local, regional, and State networks, and
b.	An evaluation component that provides for local school administrative unit accountability for maintaining quality upgradeable systems."
SECTION 7.43.(b)  Before November 2005, the Department of Public Instruction shall hold regional workshops for local school administrative units to provide guidance in developing local school system technology plans that meet the criteria established in the State school technology plan, including the components added under subsection (a) of this section. The State Chief Information Officer will assist with the regional meetings as needed to provide technical assistance.
SECTION 7.43.(c)  G.S. 115C‑102.7 is amended by adding the following new subsection to read:
"(c)	The Department of Public Instruction shall randomly check local school system technology plans to ensure that local school administrative units are implementing their plans as approved. The Department shall report to the State Board of Education and the State Chief Information Officer on which local school administrative units are not complying with their plans. The report shall include the reasons these local school administrative units are out of compliance and a recommended plan of action to support each of these local school administrative units in carrying out their plans."
SECTION 7.43.(d)  The State Board of Education shall determine the total amount of funds needed for the recurring total cost of ownership to implement, maintain, and upgrade technology infrastructures and instructional technology as specified in the revised local school system technology plans. This shall include personnel costs for both technical and instructional needs so that a three‑ to five‑year budget plan can be developed for the General Assembly.
SECTION 7.43.(e)  The State Board of Education shall also study and identify the types of resources needed to operate schools designed to meet the needs of twenty‑first century learners.
The State Board shall report the results of this study to the 2006 Regular Session of the 2005 General Assembly.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
annual report that highlights the IMPACT of education preparation on economic growth
SECTION 7.44.  The North Carolina Board of Science and Technology shall prepare an annual report by county on the status of trends that reflect the impact of education on economic growth for the twenty‑first century. This report shall contain information about the status of each county with regard to education and economic growth.
The Board shall  provide the report to the Regular 2006 Session of the 2005 General Assembly and shall make the report available for citizens.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
process for more assistance for e‑rate
SECTION 7.45.  2IIn order to provide assistance to local school administrative units with E‑rate applications, the Department of Public Instruction shall, within existing funds, ensure that a minimum of one full‑time coordinator who has technical knowledge and skills is assigned this responsibility. The Department shall notify local school administrative units about the person or office assigned the responsibility of providing assistance with E‑rate applications.
The Department shall provide the State Board of Education with an annual report on E‑rate, including funding, commitments, and enrollment by local school administrative units.
As used in this section, "E‑rate" is the mechanism to provide discount rates to support universal telecommunications services for use by schools and libraries as provided in section 254 of the federal Telecommunications Act of 1996.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
planning for a state central INFRASTRUCTURE office
SECTION 7.46.(a)  The Office of State Budget and Management shall conduct a study to determine the feasibility of establishing a State Central Infrastructure Office that would collect and manage information for technology, water, sewer, and other utility infrastructures needed to assist communities in becoming and remaining economically viable. 
SECTION 7.46.(b)  The Office of State Budget and Management shall report the results of this study to the 2006 Regular Session of the 2005 General Assembly.  The report shall include legislative proposals, including a proposal to define the term "infrastructure" in the General Statutes to include technology.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
school employee SALARY STUDY
SECTION 7.47.  The Joint Legislative Education Oversight Committee shall study the current salary structure for teachers and other school employees.  In the course of the study, the Committee shall:
(1)	Develop a plan to get the State moving toward the national average in teacher salaries by 2008 and toward the top 10 states in the nation by 2010.
(2)	Consider strategies for maintaining the lead in teacher salaries in the Southeastern United States.
(3)	Consider the need to reduce the number of steps on the teacher salary schedule, increase the beginning teacher salary, and enable an individual to reach the maximum salary sooner.
(4)	Perform a market‑sensitive analysis of the skills and knowledge needed to be a successful teacher to determine what it takes to make the schedule attractive and competitive.
(4)	Consider the placement of appropriate extraordinary increases on schedule for achievement of career status, teacher retention, and other purposes.
(5)	Determine the need to modify the masters schedule differential.
(6)	Determine the need to modify the alternative salary schedules to reward different levels of academic preparation and career accomplishments such as attainment of national certification.
(7)	Consider the appropriate relationship of the school counselor's schedule to the schedules for other members of the school‑based staff.
(8)	Determine the need to modify the administrator salary schedule.
(9)	Consider other matters the Committee deems appropriate.
The Committee shall report the results of its study to the 2006 Regular Session of the 2005 General Assembly.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
commission for a sound basic education
SECTION 7.48.(a)  The North Carolina Commission for a Sound Basic Education is hereby established.  The Commission shall (i) investigate strategies and resources which contribute to the opportunity for North Carolina students to obtain a sound basic education, (ii) analyze all current plans for implementing the strategies developed to enhance every child's ability to fulfill his or her potential, and (iii) if necessary, provide a cost analysis for implementing those plans. 
SECTION 7.48.(b)  The Commission shall consist of six members appointed by the President Pro Tempore of the Senate and six members appointed by the Speaker of the House of Representatives.  The President Pro Tempore of the Senate and the Speaker of the House of Representatives shall each designate a cochair of the Commission from their appointees.
SECTION 7.48.(c)  The Commission shall appoint advisory members to assist it in its work.  The advisory members shall include at least two parents of children in the public schools and representatives of State agencies, the Community College System, The University of North Carolina, education organizations, child health organizations, and child advocacy organizations.
SECTION 7.48.(d)  The full commission shall meet on a monthly basis. The commission shall develop the necessary and appropriate committees and subcommittees to facilitate completion of its work.  The committees and subcommittees shall meet as necessary to effectively conduct the work with which they are charged.
SECTION 7.48.(e)  Only members of the Commission may vote on any matter before the Commission. 
SECTION 7.48.(f)  Members of the Commission and advisory members of the Commission shall receive per diem, subsistence, and travel allowances in accordance with G.S. 120‑3.1, 138‑5, or 138‑6, as appropriate.
SECTION 7.48.(g)  The Commission, while in the discharge of its official duties, may exercise all powers provided for under G.S. 120‑19 and G.S. 120‑19.1 through G.S. 120‑19.4. The Commission may meet at any time upon the joint call of the cochairs. The Commission may meet in the Legislative Building or the Legislative Office Building.
The Legislative Services Commission, through the Legislative Services Officer, shall assign professional staff to assist the Commission in its work. The House of Representatives' and the Senate's Supervisors of Clerks shall assign clerical staff to the Commission, and the expenses relating to the clerical employees shall be borne by the Commission. The Commission may contract for professional, clerical, or consultant services as provided by G.S. 120‑32.02. If the Commission hires a consultant, the consultant shall not be a State employee or a person currently under contract with the State to provide services.
All State departments and agencies and local governments and their subdivisions shall furnish the Commission with any information in their possession or available to them.
The Legislative Services Commission, through the Legislative Services Officer, shall assign professional staff to assist the Commission in its work. The House of Representatives' and the Senate's Supervisors of Clerks shall assign clerical staff to the Commission, and the expenses relating to the clerical employees shall be borne by the Commission.
SECTION 7.48.(h)  The Commission shall provide opportunities for substantive and meaningful input into and development and review of the comprehensive plan by all stakeholders in the public education system.  These stakeholders include, but are not limited to, students, parents, guardians, educators, school board members, education advocates, and child health professionals. Opportunities for input and review shall include (i) regional public forums, (ii) regular distribution to local newspapers statewide of details of its work and posting of the information on the Internet, (iii) providing stakeholders with the opportunity to identify representative members of stakeholder groups to be included as full participants in the Commission's deliberations, and (iv) open meetings of the Commission and any committees it may create.
SECTION 7.48.(i)  The Commission shall make a final report to the General Assembly by January 15, 2006. The report shall include the details of the plans, the results of the cost analysis and a proposed budget, and any statutory changes necessary to implement the plans on a statewide basis.
SECTION 7.48.(j)  The Commission shall terminate upon filing its final report or upon the convening of the 2006 Regular Session of the 2005 General Assembly, whichever is earlier.
SECTION 7.48.(k)  Funds in the amount of two hundred thousand dollars ($200,000) are appropriated in this act to the General Assembly to carry out its work of the North Carolina Commission for a Sound Basic Education.

PART VIII. COMMUNITY COLLEGES

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
Use of Funds for the College Information System Project
SECTION 8.1.(a)  Funds appropriated to the Community Colleges System Office for the College Information System Project shall not revert at the end of the 2004‑2005 fiscal year but shall remain available until expended.
SECTION 8.1.(b)  The Community Colleges System Office shall report on a quarterly basis to the Joint Legislative Education Oversight Committee on the implementation of the College Information System Project.
SECTION 8.1.(c)  Subsection (a) of this section becomes effective June 30, 2005.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
Carryforward for Equipment
SECTION 8.2.(a)  Subject to the approval of the Office of State Budget and Management and cash availability, the North Carolina Community Colleges System Office may carry‑forward an amount not to exceed fifteen million dollars ($15,000,000) of the operating funds that were not reverted in fiscal year 2004‑2005 to be reallocated to the State Board of Community Colleges' Equipment Reserve Fund.  These funds shall be distributed to colleges consistent with G.S. 115D‑31.
SECTION 8.2.(b)  This section becomes effective June 30, 2005.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
SALARIES OF COMMUNITY COLLEGE FACULTY AND PROFESSIONAL STAFF
SECTION 8.3.(a)  The minimum salaries for community college faculty shall be based on the following education levels:
(1)	Vocational Diploma/Certificate or Less. – This education level includes faculty members who are high school graduates, have vocational diplomas, or have completed one year of college.
(2)	Associate Degree or Equivalent. – This education level includes faculty members who have an associate degree or have completed two or more years of college but have no degree.
(3)	Bachelors Degree.
(4)	Masters Degree or Education Specialist.
(5)	Doctoral Degree.
SECTION 8.3.(b)  For the 2005‑2006 school year, the minimum salaries for nine‑month, full‑time, curriculum community college faculty shall be as follows:
	Education Level	Minimum Salary
		2005‑2006	2006‑2007
Vocational Diploma/Certificate or Less	$29,652	$30,542
Associate Degree or Equivalent	$30,102	31,005
Bachelors Degree	$32,050	33,011
Masters Degree or Education Specialist	$33,777	34,790
Doctoral Degree	$36,269	37,357
No full‑time faculty member shall earn less than the minimum salary for his or her education level.
The pro rata hourly rate of the minimum salary for each education level shall be used to determine the minimum salary for part‑time faculty members.
SECTION 8.3.(c)
(1)	It is the intent of the General Assembly to encourage community colleges to make faculty salaries a priority and to reward colleges that have taken steps to achieve the national average, therefore:
a.	If the average faculty salary at a community college is one hundred percent (100%) or more of the national average community college faculty salary, the college may transfer up to eight percent (8%) of the State funds allocated to it for faculty salaries.
b.	If the average faculty salary at a community college is at least ninety‑five percent (95%) but less than one hundred percent (100%) of the national average community college faculty salary, the college may transfer up to six percent (6%) of the State funds allocated to it for faculty salaries.
c.	If the average faculty salary at a community college is at least ninety percent (90%) but less than ninety‑five percent (95%) of the national average community college faculty salary, the college may transfer up to five percent (5%) of the State funds allocated to it for faculty salaries.
d.	If the average faculty salary at a community college is at least eighty‑five percent (85%) but less than ninety percent (90%) of the national average community college faculty salary, the college may transfer up to three percent (3%) of the State funds allocated to it for faculty salaries.
e.	If the average faculty salary at a community college is eighty‑five percent (85%) or less of the national average community college faculty salary, the college may transfer up to two percent (2%) of the State funds allocated to it for faculty salaries.
Except as provided by subdivision (2) of this subsection, a community college shall not transfer a greater percentage of the State funds allocated to it for faculty salaries than is authorized by this subsection.
(2)	With the approval of the State Board of Community Colleges, a community college at which the average faculty salary is eighty‑five percent (85%) or less of the national average may transfer a greater percentage of the State funds allocated to it for faculty salaries than is authorized by sub‑subdivision e. of subdivision (1) of this subsection. The State Board shall approve the transfer only for purposes that directly affect student services.
(3)	A local community college may use all State funds allocated to it except for Literacy Funds and Funds for New and Expanding Industry Training to increase faculty salaries.
SECTION 8.3.(d)  As used in this section:
(1)	"Average faculty salary at a community college" means the total nine‑month salary from all sources of all nine‑month, full‑time, curriculum faculty at the college, as determined by the North Carolina Community College System on October 1 of each year.
(2)	"National average community college faculty salary" means the nine‑month, full‑time, curriculum salary average, as published by the Integrated Postsecondary Education Data System (IPEDS), for the most recent year for which data are available.
SECTION 8.3.(e)  The State Board of Community Colleges shall adopt rules to implement the provisions of this section.
SECTION 8.3.(f)  The State Board of Community Colleges shall report to the appropriations subcommittees on education, the Speaker of the House of Representatives, the President Pro Tempore of the Senate, the Fiscal Research Division, and the Office of State Budget and Management by December 1, 2005, and every year thereafter through December 1, 2009, on the implementation of this section.
SECTION 8.3.(g)  Funds appropriated in this act for salary increases shall be used to increase faculty and professional staff salaries by an average of two percent (2%). These increases are in addition to other salary increases provided for in this act and shall be calculated on the average salaries prior to the issuance of the compensation increase. 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. These funds shall not be transferred by the State Board or used for any other budget purpose by the community colleges.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
workforce development PROGRAMs
SECTION 8.4.(a)  Article 1 of Chapter 115D of the General Statutes is amended by adding a new G.S. 115D‑5.1 to be entitled "Workforce Development Programs"; G.S. 115D‑5(d) is recodified as G.S. 115D‑5.1(a); G.S. 115D‑5(k) is recodified as G.S. 115D‑5.1(b); and G.S. 115D‑5(i) is recodified as G.S. 115D‑5.1(c).
SECTION 8.4.(b)  G.S. 115D‑5.1, as enacted by subsection (a) of this section, reads as rewritten:
"§ 115D‑5.1.  Workforce Development Programs.
(a)	Community colleges shall assist in the preemployment and in‑service training of employees in industry, business, agriculture, health occupation and governmental agencies. Such training shall include instruction on worker safety and health standards and practices applicable to the field of employment. The State Board of Community Colleges shall make appropriate regulations including the establishment of maximum hours of instruction which may be offered at State expense in each in‑plant training program. No instructor or other employee of a community college shall engage in the normal management, supervisory and operational functions of the establishment in which the instruction is offered during the hours in which the instructor or other employee is employed for instructional or educational purposes.
(b)	The North Carolina Community College System's New and Expanding Industry Training (NEIT) Program Guidelines, which were adopted by the State Board of Community Colleges on April 18, 1997, apply to all funds appropriated for the Program after June 30, 1997. A project approved as an exception under these Guidelines, or these Guidelines as modified by the State Board of Community Colleges, shall be approved for one year only.
(c)	The State Board of Community Colleges shall report to the Joint Legislative Education Oversight Committee on September 1 of each year on expenditures for the New and Expanding Industry Training Program each fiscal year. The report shall include, for each company or individual that receives funds for the New and Expanding Industry Training Program:
(1)	The total amount of funds received by the company or individual;
(2)	The amount of funds per trainee received by the company or individual;
(3)	The amount of funds received per trainee by the community college training the trainee;
(4)	The number of trainees trained by company and by community college; and
(5)	The number of years the companies or individuals have been funded.
(d)	Funds available to the New and Expanding Industry Training Program shall not revert at the end of a fiscal year but shall remain available until expended.
(e)	There is created within the North Carolina Community College System the Customized Industry Training (CIT) Program. The CIT Program shall offer programs and training services as new options for assisting existing business and industry to remain productive, profitable, and within the State. Before a business or industry qualifies to receive assistance under the CIT Program, the President of the North Carolina Community College System shall determine that:
(1)	The business is making an appreciable capital investment;
(2)	The business is deploying new technology; and
(3)	The skills of the workers will be enhanced by the assistance.
The State Board shall report on an annual basis to the Joint Legislative Education Oversight Committee on:
(1)	The total amount of funds received by a company under the CIT Program;
(2)	The amount of funds per trainee received by that company;
(3)	The amount of funds received per trainee by the community college delivering the training;
(4)	The number of trainees trained by the company and community college; and
(5)	The number of years that company has been funded.
The State Board shall adopt rules and policies to implement this section."
SECTION 8.4.(c)  Notwithstanding any other provision of law, the State Board of Community Colleges may use funds appropriated to it for the New and Expanding Industry Training Program to operate programs under the Customized Industry Training Program.
SECTION 8.4.(d)  G.S. 115D‑5.1(d), as enacted by this section, becomes effective June 30, 2005.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
REPORT ON THE ADEQUACY OF MULTICAMPUS FUNDS
SECTION 8.5.  The General Assembly finds that additional data are needed to determine the adequacy of multicampus and off‑campus center funds; therefore, multicampus colleges and colleges with off‑campus centers shall report annually, beginning September 1, 2005, to the Community Colleges System Office on all expenditures by line item of funds used to support their multicampuses and off‑campus centers.  The Community Colleges System Office shall report on these expenditures to the Education Appropriation Subcommittees of the House of Representatives and the Senate, the Office of State Budget and Management, and the Fiscal Research Division by October 1 of each year.
Notwithstanding any other provision of law, funds appropriated to the Community Colleges System Office for multicampus colleges or off‑campus centers shall be used only for the administration of the multicampus college or off‑campus center for which the funds were allotted. These funds shall not be transferred to any other campus or center, or used for any other purpose.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
EDUCATION PROGRAM AUDITING FUNCTION
SECTION 8.6.  G.S. 115D‑5(m) reads as rewritten:
"(m)	The State Board of Community Colleges shall maintain an education program auditing function that conducts an annual audit of each community college operating under the provisions of this Chapter. The purpose of the annual audit shall be to ensure that college programs and related fiscal operations comply with State law, State regulations, State Board policies, and System Office guidance. The State Board of Community Colleges shall require auditors of community college programs to use a statistically valid sample size in performing program audits of community colleges. All education program audit findings shall be forwarded to the college president, local college board of trustees, the State Board of Community Colleges, and the State Auditor. The State Board shall assess a twenty‑five percent (25%) fiscal penalty in addition to the audit exception on all audits of both dollars and student membership hours excepted when the audit exceptions result from nonprocessing errors."

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
FERRY BOAT OPERATOR TRAINING FEASIBILITY STUDY
SECTION 8.7.(a)  The State Board of Community Colleges, in consultation with the Ferry Division of the Department of Transportation, shall study the need for training for ferry boat operators. In conducting the study, the State Board shall consider the following:
(1)	Types of training needed and whether it is feasible for the community colleges to provide this training.
(2)	Estimated number of students.
(3)	Estimated employment opportunities for the students.
(4)	Start‑up costs for the program and resources for those costs.
(5)	Location of the training.
SECTION 8.7.(b)  The State Board shall report to the Joint Legislative Education Oversight Committee and the Joint Legislative Transportation Oversight Committee on its findings and recommendations no later than December 1, 2005.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
EXTEND THE SUNSET ON TRAINING AND REEMPLOYMENT CONTRIBUTIONS MADE BY EMPLOYERS
SECTION 8.8.(a)  Section 8 of S.L. 1999‑321, as amended by Section 30.5(f) of S.L. 2001‑424, reads as rewritten:
"Section 8. Section 1 of this act is effective with respect to calendar quarters beginning on or after April 1, 1999. Section 7 of this act becomes effective July 1, 1999. The remainder of this act is effective with respect to calendar quarters beginning on or after January 1, 2000. "
SECTION 8.8.(b)  G.S. 96‑6.1 is amended by adding a new subsection to read:
"(c)	Sunset. – This section is repealed effective with respect to calendar quarters beginning on or after January 1, 2011."

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
Community College Innovative Learning Fund
SECTION 8.9.  There is created within the North Carolina Community College System (NCCCS) The Innovative Learning Fund. The purpose of the Fund is to assist colleges with infrastructure needs as they evolve to meet the needs of the changing economy. The President of the NCCCS, in consultation with the State Board of Community Colleges, may make grants to qualified colleges of up to one million dollars ($1,000,000), for planning, equipment, or technology for innovative or lifelong learning centers. The NCCCS shall consult with the seven Economic Development Partnerships, the local boards of trustees, the constituent institutions of The University System when appropriate, and any other entity it deems necessary to prioritize and determine which projects should receive grants from the Fund. In awarding the grants, the President and the State Board shall consider the following:
(1)	The Vision Plan of the Economic Development Partnership where the project will be located;
(2)	The ability of the county to provide funding for the project;
(3)	The maintenance of effort by the county to support the existing mission of the college;
(4)	The impact the innovative learning center will have on economic development in the county and region; and
(5)	The existence of any other innovative learning centers in the region.
Priority shall be given to projects that directly impact teacher education, allied health, economic development, or public safety. 
Funds appropriated in this act for the Innovative Learning Fund shall not revert at the end of the 2005‑2006 fiscal year but shall remain available until expended.

Requested by:	Senators Rand, Lucas, Swindell, Garrou, Dalton, Hagan
Carryforward for Colleges in Economically Disadvantaged Counties
SECTION 8.10.(a)  Notwithstanding G.S. 143‑18 or any other provision of law, a community college may retain and carry‑forward its General Fund current operations credit balance remaining at the end of the fiscal year, if the county in which the main campus of the community college is located:
(1)	Is designated as a Tier 1 or Tier 2 county in accordance with G.S. 105‑129.3;
(2)	Had an unemployment rate greater than or equal to seven percent (7%) in calendar year 2004; and
(3)	Is designated as a Low‑Wealth County under Section 7.6 of this act, whose wealth as calculated by the Low‑Wealth Formula is eighty percent (80%) or less of the State Average.
SECTION 8.10.(b)  Colleges who serve counties that meet the criteria outlined in subsection (a) of this section, but whose main campuses are not located in such counties, may carry‑forward the percentage of the funds remaining at the end of the fiscal year equal to the percentage of total full‑time equivalent students served in those counties that meet the criteria, as determined by the North Carolina Community Colleges System Office.
SECTION 8.10.(c)  Allowable carryforwards under this section shall be calculated prior to the calculation of Performance Funding as described in G.S. 115D‑31.3.
SECTION 8.10.(d)  This section becomes effective June 30, 2005.

Requested by:	Senators Rand, Lucas, Swindell, Garrou, Dalton, Hagan
DEFENSE TECHNOLOGY INNOVATION CENTER
SECTION 8.11.  Funds appropriated in this act for North Carolina Electronics and Information Technologies Association's Defense Technology Innovation Center shall be used for the following:
(1)	Site selection and acquisition, including the purchase or lease of real property to house the Center; the construction of buildings or other site structures; the improvement or refurbishment of existing structures to provide appropriate laboratory and administrative space; and the improvement of existing infrastructure at the facility, including improvements to utility, telecommunications, and Internet infrastructure.
(2)	Equipment acquisition, including acquisition of laboratory equipment and supplies and office furniture, equipment, and supplies.
(3)	Employment of staff to support the mission of the Center and to oversee day‑to‑day operations of the Center.
(4)	Implementation of a comprehensive business and marketing plan for the Center.
(5)	Development of a tenant screening process and the recruitment of appropriate tenants for the Center.
(6)	Administration and operation of the Center and the development of a sustainable business plan for the Center.

Requested by:	Senators Swindell and Lucas
community college capital funds
SECTION 8.12.  Notwithstanding G.S. 115D‑31 or any other provision of law, funds appropriated in this act for community college capital projects do not have to be matched by local funds.

PART iX. UNIVERSITIES

Requested by:	Senators Lucas, Swindell, 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 management flexibility adjustments made to the General Fund budget codes in order to meet the 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, 2005, on all reductions made by these entities and constituent institutions in order to reduce the budgets by the targeted amounts.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
ENROLLMENT GROWTH FUND/Encourage Partnerships for new 2 + 2 Programs
SECTION 9.2.(a)  The University of North Carolina Board of Governors' Task Force on Meeting Teacher Supply and Demand called for the President to develop a plan for enrollment growth in the University System's teacher education programs to respond to the State's shortage of teachers.  In a presentation to the Joint Legislative Education Oversight Committee and to the Board of Governors, a commitment was made to increase the number of teacher education graduates in 2005‑2006 and in 2006‑2007.  The Office of the President of The University of North Carolina shall obtain plans from each campus as to how they will maintain their current enrollment in the teacher education programs and achieve their growth targets to ensure such increases in those programs occur.  Plans may include using enrollment growth funds for targeted admissions, enhanced student support, and advising, recruiting, increases in faculty in necessary instructional areas that lead to certification, and other methods the Office of the President believes will achieve those results.  The Office of the President shall report back to the Office of State Budget and Management and the Joint Legislative Education Oversight Committee no later than December 30, 2005, on each campus's plan.  No later than March 31, 2006, the Office of the President shall submit a report on progress towards meeting this priority for the 2006‑2007 academic year, based on each campus's current students in the education programs, and the students who have been accepted for the 2006‑2007 fiscal year who are enrolling in the education programs.  The report shall also explain the distribution of enrollment growth funds by specific initiative.
SECTION 9.2.(b)  The Board of Governors of The University of North Carolina and the State Board of Community Colleges shall strongly encourage the constituent institutions and the community colleges that do not currently have 2 + 2 programs that emphasize teacher education to design and enter into formal partnerships to offer those 2 + 2 programs.  The Board of Governors and the Board of Community Colleges shall report to the Joint Legislative Education Oversight Committee by February 1, 2006, regarding the status of existing 2 + 2 programs and any new partnerships established.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
UNC‑NCCCS JOINT INITIATIVE FOR TEACHER EDUCATION AND RECRUITMENT
SECTION 9.3.(a)  Funds appropriated in this act to The University of North Carolina for the UNC‑NCCCS Joint Initiative for Teacher Education and Recruitment shall be used to establish eight  positions.  These individuals shall have an office in and work with staff in the Regional Alternative Licensure Centers of the Department of Public Instruction.  Their responsibilities are to assist in increasing the number of certified teachers in the public schools of North Carolina. To accomplish this, their specific tasks are as follows:
(1)	Resolve curriculum issues between The University of North Carolina campuses and the community colleges within each region to ensure seamless articulation;
(2)	Serve as licensure advisors to prospective teachers and assist with individual reviews for lateral entry candidates;
(3)	Offer admissions advice to community college students seeking to transfer to a four‑year institution; and
(4)	Recruit prospective teachers on community college campuses.
Funds have been included in the appropriation to ensure these staff members can travel routinely among all the University System campuses and community college sites within a region.
SECTION 9.3.(b)  The results of this initiative shall be reported annually, and shall include at a minimum, the following performance outcomes by region in which the advisors are working:
(1)	Number of community college students articulated and working toward teacher licensure, their "base" community college, and The University of North Carolina institution to which they have moved;
(2)	Number of lateral entry teachers worked with by these advisors who are actively pursuing certification, and the number licensed;
(3)	Head count of the number of students in the process of receiving courses towards certification, their home county, where/at what institution(s) they are taking the course(s), and whether they are taking the course by regular attendance or via distance education (or the respective percentages if both methods are being employed);
(4)	Total full‑time equivalencies (FTE's) and student credit hours that the head count in subdivision (3) of this subsection represents;
(5)	Articulation issues and curriculum changes effectively made as a result of these advisors; and
(6)	Articulation issues that are under discussion but have not been satisfactorily resolved.
SECTION 9.3.(c)  These results shall be reported by September 1, 2006, and annually thereafter to the State Board of Education, the Board of Governors of The University of North Carolina, the State Board of Community Colleges, the Education Cabinet, the Joint Legislative Education Oversight Commission, and the Office of State Budget and Management.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
ENROLLMENT GROWTH FUNDING MODEL
SECTION 9.4.  The Office of State Budget and Management, jointly with The University of North Carolina and the Fiscal Research Division of the General Assembly, shall conduct a comprehensive review of the enrollment funding model to review the assumptions contained within each element of the formula, to obtain current benchmark information related to specific elements within the formula, and to examine the impact of alternative elements and assumptions.  An alternative to the current model shall be the result of this analysis.  This alternative shall be used to prepare a request for enrollment growth funding for the budget to be submitted for the 2006 Session of the General Assembly and shall be shown in comparison to the use of the current formula.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
UNC‑NCCCS 2+2 E‑LEARNING INITIATIVE
SECTION 9.5.  Funds appropriated in this act to The University of North Carolina and the North Carolina Community College System for the UNC‑NCCCS 2+2 E‑Learning Initiative shall be used to fund further development of online courses for 2+2 programs.  Based on a mutually agreed upon decision by the State Board of Education Chairman, the President of the North Carolina Community College System, and the President of The University of North Carolina as to the areas of greatest need, funds are available to support joint technology development, systems to track student progress and articulation between a North Carolina community college and a University of North Carolina campus, and to develop technology to support online courses and 2+2 programs.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
USE OF ESCHEAT FUND FOR NEED‑BASED FINANCIAL AID PROGRAMS
SECTION 9.6.(a)  There is appropriated from the Escheat Fund income to the Board of Governors of The University of North Carolina the sum of sixty‑seven million two hundred forty‑eight thousand sixteen dollars ($67,248,016) for fiscal year 2005‑2006 and the sum of sixty‑seven million six hundred thirty‑eight thousand sixteen dollars ($67,638,016) for fiscal year 2006‑2007; and to the State Board of Community Colleges the sum of thirteen million nine hundred eighty‑one thousand two hundred two dollars ($13,981,202) for fiscal year 2005‑2006 and the sum of thirteen million nine hundred eighty‑one thousand two hundred two dollars ($13,981,202) for fiscal year 2006‑2007. These funds shall be allocated by the North Carolina State Educational Assistance Authority (SEAA) for need‑based student financial aid in accordance with G.S. 116B‑7.
The SEAA shall perform all of the administrative functions necessary to implement this 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 9.6.(b)  There is appropriated from the Escheat Fund to the Board of Governors of The University of North Carolina the sum of seven hundred eighty thousand dollars ($780,000) for the 2005‑2006 fiscal year and the sum of one million one hundred seventy thousand dollars ($1,170,000) for the 2006‑2007 fiscal year to be allocated to the SEAA for need‑based student financial aid to be used in accordance with G.S. 116B‑7 and this act. The SEAA shall use these funds only to provide scholarship loans (known as the Millennium Teaching Scholarship Loan Program) to North Carolina high school seniors interested in preparing to teach in the State's public schools who also enroll at any of the Historically Black Colleges and Universities that do not have Teaching Fellows.  An allocation of 20 grants of six thousand five hundred dollars ($6,500) each shall be given to the three universities without any Teaching Fellows for the purposes specified in this subsection.
The SEAA shall administer these funds and shall establish any additional criteria needed to award these scholarship loans, the conditions for forgiving the loans, and the collection of the loan repayments when necessary.
SECTION 9.6.(c)  If the interest income generated from the Escheat Fund is insufficient to pay the appropriations made in subsections (a) and (b) of this section, the difference may be taken from the Escheat Fund principal to reach the appropriations referenced in this section; however, under no circumstances shall the Escheat Fund principal be reduced below the sum of four hundred million dollars ($400,000,000).
SECTION 9.6.(d)  All obligations to students for uses of the funds set out in sections that were made before the date this act becomes law shall be fulfilled as to students who remain eligible under the provisions of the respective programs.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
STUDY OF DISTANCE EDUCATION
SECTION 9.7.  The Office of State Budget and Management shall conduct a study to identify and analyze the distance education programs at the institutions in the University System. The study shall identify any duplication in course and program offerings, leader courses and programs at campuses in a particular area of study, the cost of developing online courses, and determine which campuses are best suited to offer a particular course or program of study. The findings of the study shall be reported to the Joint Legislative Education Oversight Committee no later than April 30, 2006.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
INFORMATION TECHNOLOGY PROCUREMENT
SECTION 9.8.  For purposes of purchasing hardware, software licenses, and multiyear maintenance agreements, The University of North Carolina and its constituent institutions may participate in the aggregation of purchasing administered by the Office of State Technology Services, as defined in G.S. 147‑33.72F.  The Office of State Budget and Management shall conduct a cost comparison study of hardware, software license, and multiyear maintenance agreement purchases made by The University of North Carolina and its constituent institutions and by the Office of State Technology Services, to determine if further aggregation is cost‑justified.  The Study shall also include an analysis of aggregated purchases by the University System and the effect of educational discounts available to the University System.  The report of comparative unit costs shall be completed by December 31, 2005.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
BOARD OF GOVERNORS' DENTAL SCHOLARSHIPS
SECTION 9.9.(a)  The current Board of Governors' Dental Scholarship Program, under the purview of the Board of Governors of The University of North Carolina, shall make any awards to students admitted after July 1, 2005, as scholarship loan awards.  The Board of Governors' Dental Scholarship Program is administered by the Board of Governors of The University of North Carolina.  The Board of Governors' Dental Scholarship Program shall be used to provide a four‑year scholarship loan of relevant tuition and fees, mandatory medical insurance, required laptop computers for first‑year students, required dental equipment, and an annual payment of five thousand dollars ($5,000) per year to students who have been accepted for admission to the School of Dentistry at the University of North Carolina at Chapel Hill.  The Board may adopt standards, including minimum grade point average and SAT scores, for awarding these scholarship loans to ensure that only the most qualified students receive them.  The Board shall make an effort to identify and encourage minority and economically disadvantaged youth to enter the program.  All scholarship loans shall be evidenced by notes made payable to the Board that shall bear interest at the rate of ten percent (10%) per year beginning September 1 after completion of the program, or immediately after termination of the scholarship loan, whichever is earlier.  The scholarship loan may be terminated by the recipient withdrawing from school or by the recipient not meeting the standards set by the Board.  The Board shall forgive the loan if, within seven years after graduation, the recipient practices dentistry in North Carolina for four years.  The Board shall also forgive the loan if it finds that it is impossible for the recipient to practice medicine in North Carolina for four years, within seven years after graduation, because of the death or permanent disability of the recipient.  All unused funds appropriated to or otherwise received by the Board for scholarships, all funds received as repayment of scholarship loans, and all interest earned on these funds shall revert to the General Fund at the end of each fiscal year.
SECTION 9.9.(b)  Any dental scholarship awarded prior to July 1, 2005, shall remain a scholarship and shall not be converted to a scholarship loan unless the recipient agrees to the conversion.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
BOARD OF GOVERNORS' MEDICAL SCHOLARSHIPS
SECTION 9.10.(a)  The current Board of Governors' Medical Scholarship Program, under the purview of the Board of Governors of The University of North Carolina, shall make any awards to students admitted after July 1, 2005, as scholarship loan awards. The Board of Governors' Medical Scholarship Program is administered by the Board of Governors of The University of North Carolina.  The Board of Governors' Medical Scholarship Program shall be used to provide a four‑year scholarship loan of relevant tuition and fees, mandatory medical insurance, required laptop computers, and an annual payment of five thousand dollars ($5,000) per year to students who have been accepted for admission to either Duke University School of Medicine, Brody School of Medicine at East Carolina University, the University of North Carolina at Chapel Hill School of Medicine, or the Wake Forest University School of Medicine. The Board may adopt standards, including minimum grade point average and SAT scores, for awarding these scholarship loans to ensure that only the most qualified students receive them. The Board shall make an effort to identify and encourage minority and economically disadvantaged youth to enter the program. All scholarship loans shall be evidenced by notes made payable to the Board that shall bear interest at the rate of ten percent (10%) per year beginning September 1 after completion of the program, or immediately after termination of the scholarship loan, whichever is earlier. The scholarship loan may be terminated by the recipient withdrawing from school or by the recipient not meeting the standards set by the Board. The Board shall forgive the loan if, within seven years after graduation, the recipient practices medicine in North Carolina for four years. The Board shall also forgive the loan if it finds that it is impossible for the recipient to practice medicine in North Carolina for four years, within seven years after graduation, because of the death or permanent disability of the recipient. All unused funds appropriated to or otherwise received by the Board for scholarships, all funds received as repayment of scholarship loans, and all interest earned on these funds, shall revert to the General Fund at the end of each fiscal year.
SECTION 9.10.(b)  Any medical scholarship awarded prior to July 1, 2005, shall remain a scholarship and shall not be converted to a scholarship loan unless the recipient agrees to the conversion.

Requested by:	Senators Swindell, Lucas, Garrou, Dalton, Hagan
Teacher Scholarships Funds
SECTION 9.11.(a)  Article 23 of Chapter 116 of the General Statutes is amended by adding the following new section:
"§ 116‑209.38.  Future Teachers of North Carolina Scholarship Loan Fund.
(a)	There is established the Future Teachers of North Carolina Scholarship Loan Fund. The purpose of the Fund is to provide a two‑year scholarship loan of six thousand five hundred dollars ($6,500) per year for any North Carolina student pursuing a college degree to teach in the public schools of the State. The scholarship loan shall be paid only for the student's junior and senior years. The scholarship loan is available if the student is enrolled in a State institution of higher education or a private institution of higher education located in this State that has an accredited teacher preparation program for students planning to become certified teachers in North Carolina. The State Education Assistance Authority shall administer the Fund and shall award 100 scholarship loans annually.
(b)	The Board of Governors of The University of North Carolina, in consultation with the State Board of Education and the State Board of Community Colleges, shall develop the criteria for awarding the scholarship loans under this section and shall adopt very stringent standards for awarding these scholarship loans to ensure that only the best students receive them. Additional criteria for awarding a scholarship loan under this section shall include all of the following:
(1)	The student is one who either: (i) maintained a "B" or better average in college and is enrolled as a junior or senior in a teacher preparation program at any of the institutions described by subsection (a) of this section; or (ii) completed a college transfer curriculum at a community college in the State's community college system, maintained a "B" or better average in the community college courses, and is accepted and enrolled in a teacher preparation program at one of the institutions described by subsection (a) of this section.
(2)	The student agrees to become certified in math, science, special education, or English as a Second Language and teach full‑time in that subject area in a North Carolina public school for three years within four years after graduation.
(3)	Any additional criteria that the Board of Governors of The University of North Carolina, in consultation with the State Board of Education and the State Board of Community Colleges, considers necessary to administer the Fund effectively.
(c)	If a student who is awarded a scholarship loan under this section fails to comply with the provisions of this section or the terms of the agreement awarding the scholarship loan, then the student shall repay the full amount of the scholarship loan provided to the student and the appropriate amount of interest as determined by the State Education Assistance Authority.(d)	The Board of Governors of The University of North Carolina, the State Board of Education, and the State Board of Community Colleges shall: (i) prepare a clear written explanation of the Future Teachers of North Carolina Scholarship Fund and the information regarding the availability and criteria for awarding the scholarship loans, and (ii) shall provide that information to the appropriate counselors in each local school system and the appropriate institutions of higher education and shall charge those counselors to inform students about the scholarship loans and to encourage them to apply for the scholarship loans.
(e)	The Board of Governors of The University of North Carolina shall adopt rules to implement this section.
(f)	The Board of Governors of The University of North Carolina shall report to the Joint Legislative Education Oversight Committee by March 1 each year regarding the Fund and scholarship loans awarded from the Fund."
SECTION 9.11.(b)  Of the funds appropriated in this act to the State Education Assistance Authority the sum of six hundred fifty thousand dollars ($650,000) for the 2005‑2006 fiscal year and the sum of one million three hundred thousand dollars ($1,300,000) for the 2006‑2007 fiscal year shall be used to implement this act.

Requested by:	Senators Lucas, Swindell, Nesbitt, Garrou, Dalton, Hagan
UNC‑Asheville Retain Sale Proceeds
SECTION 9.12.  Notwithstanding any other provision of law, the University of North Carolina at Asheville may retain the proceeds from the sale of its existing chancellor's residence and appurtenant land. The University of North Carolina at Asheville may use the proceeds from the sale of its existing chancellor's residence and the appurtenant land to construct or otherwise acquire a new chancellor's residence. Proceeds from the sale not used for that purpose within two fiscal years of the sale shall revert to the General Fund.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
UNC BOND PROJECT MODIFICATIONS
SECTION 9.13.(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 changing the scope of "Mitchell‑Lewis Residence Hall‑Comprehensive Renovation" to be a replacement project instead of a renovation. Section 2(a) of S.L. 2000‑3 is therefore amended in the portion under Elizabeth City State University by replacing "Mitchell Lewis Residence Hall‑Comprehensive Renovation" with "Mitchell Lewis Residence Hall‑Replacement."
SECTION 9.13.(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 by the cancellation of "Latham Residence Hall‑Comprehensive Renovation". The unused monies from "Latham Residence Hall‑Comprehensive Renovation," should be transferred to "Eagleson Residence Hall‑Comprehensive Renovation". Section 2(a) of S.L. 2000‑3 is therefore amended in the portion under North Carolina Central University by reducing the money allocated to "Latham Residence Hall‑Comprehensive Renovation" by reducing that amount by two million three hundred seventy‑three thousand four hundred fifty‑seven dollars ($2,373,457) to a total of one million thirty‑eight thousand one hundred forty‑three dollars ($1,038,143) and by increasing the allocation to "Eagleson Residence Hall‑Comprehensive Renovation" by two million three hundred seventy‑three thousand four hundred fifty‑seven dollars ($2,373,457) to create a total allocation of nine million two hundred forty‑two thousand nine hundred fifty‑seven dollars ($9,242,957).
SECTION 9.13.(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 Wilmington by the cancellation of "King Hall Classroom Building‑Comprehensive Renovation", and by transferring the unused funds to the following projects listed under the portion entitled University of North Carolina at Wilmington:  "Academic & Classroom Facilities," "General Classroom Bldg,", "Hinton James Hall Classroom Bldg. – Comprehensive Renovation," "Friday Hall Laboratory Bldg. – Comprehensive Renovation," "Kenan Auditorium – Comprehensive Renovation." Section 2(a) of S.L. 2000‑3 is therefore amended in the portion under the University of North Carolina at Wilmington by:
(1)	Reducing the allocation to "King Hall Classroom Building – Comprehensive Renovation" by three million one hundred sixty‑eight thousand six hundred eighty‑nine dollars ($3,168,689) to create a total allocation of three hundred fifty‑eight thousand seven hundred eleven dollars ($358,711).
(2)	Increasing the allocation to "General Classroom Building" by six hundred seventy‑nine thousand seven hundred seventy‑eight dollars ($679,778) to create a total allocation of thirteen million three hundred twenty‑six thousand seven hundred seventy‑eight dollars ($13,326,778).
(3)	Increasing the allocation to "Academic & Classroom Facilities" by nine hundred ninety‑one thousand one hundred twenty‑three dollars ($991,123) to create a total allocation of thirty‑four million twenty‑three thousand two hundred twenty‑three dollars ($34,023,223).
(4)	Increasing the allocation to "Hinton James Hall Classroom Building – Comprehensive Renovation" by one hundred seventy‑six thousand six hundred nine dollars ($176,609) to create a total allocation of two million eight hundred six thousand five hundred sixty‑one dollars ($2,806,561).
(5)	Increasing the allocation to "Kenan Auditorium – Comprehensive Renovation" by one hundred fifty‑one thousand seven hundred forty‑nine dollars ($151,749) to create a total allocation of two million seventy‑three thousand seven hundred twenty‑four dollars ($2,073,724).
(6)	Increasing the allocation to "Friday Hall Laboratory Building – Comprehensive Renovation" by one million one hundred sixty‑nine thousand four hundred thirty dollars ($1,169,430) to create a total allocation of eight million eight hundred sixty‑two thousand eight hundred thirty dollars ($8,862,830).
SECTION 9.13.(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 by the cancellation of "West Residence Hall – Comprehensive Renovation" and by transferring the unused funds to a new project, "North and Belk Residence Halls–Fire Safety Improvements and Renovations" and by the cancellation of "Campuswide Infrastructure Improvements" and by transferring those unused funds to a new project, "Biotechnology Teaching Labs and Classroom Building". Section 2(a) of S.L. 2000‑3 is therefore amended in the portion under University of North Carolina at Pembroke by:
(1)	Reducing the allocation to "West Residence Hall – Comprehensive Renovation" by eight hundred seventy‑nine thousand three hundred dollars ($879,300) to a total allocation of ninety‑eight thousand dollars ($98,000).
(2)	Reducing the allocation to "Campuswide Infrastructure Improvements" by one million seven hundred thirty thousand three hundred eighty‑two dollars ($1,730,382) to a total allocation of two hundred sixty‑six thousand two hundred eighteen dollars ($266,218).
(3)	Adding a new project entitled "North and Belk Residence Halls – Fire Safety Improvements and Renovations $879,300".
(4)	Adding a new project entitled "Biotechnology Teaching Labs and Classroom Building $1,730,382".
SECTION 9.13.(e)  Nothing in this section is intended to supersede any other requirement of law or policy for approval of the substituted capital improvement projects.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
AMEND NC SCHOOL OF SCIENCE AND MATH TUITION GRANT
SECTION 9.14.(a)  G.S. 116‑238.1(f) reads as rewritten:
"(f)	Notwithstanding any other provision of this section, no tuition grant awarded to a student under this section shall exceed the cost of attendance at the constituent institution at which the student is enrolled. If a student, who is eligible for a tuition grant under this subsection, also receives a scholarship or other grant covering the cost of attendance at the constituent institution for which the tuition grant is awarded, then the amount of the tuition grant shall be reduced by an appropriate amount determined by the State Education Assistance Authority. The State Education Assistance Authority shall reduce the amount of the tuition grant so that the sum of all grants and scholarship aid covering the cost of attendance received by the student, including the tuition grant under this section, shall not exceed the cost of attendance for the constituent institution at which the student is enrolled. The cost of attendance, as used in this subsection, shall be determined by the State Education Assistance Authority for each constituent institution."
SECTION 9.14.(b)  This section applies to any eligible student who is enrolled full‑time in The University of North Carolina after July 1, 2005.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
UNC‑CHAPEL HILL CONTINUE TO OPERATE HORACE WILLIAMS AIRPORT
SECTION 9.15.  The University of North Carolina at Chapel Hill shall operate the Horace Williams Airport and continue air transportation support for the Area Health Education Centers (AHEC) and the public from that location until AHEC's Medical Air Operations have access to, or utilize, the Raleigh‑Durham International Airport (RDU) on a basis sufficient to serve adequately the needs of patients, physicians, and passengers associated with AHEC's statewide programs and activities. At that time, the University of North Carolina at Chapel Hill may close the Horace Williams Airport.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
North Carolina Agricultural and Technical State University Funds
SECTION 9.16.  Of the funds appropriated by this act to the Board of Governors of The University of North Carolina for the 2005‑2006 fiscal year the sum of one million eighty‑eight thousand nine hundred forty‑one dollars ($1,088,941) shall be allocated to North Carolina Agricultural and Technical State University for agricultural and research extension programs.  It is the intent of the General Assembly to fully fund these programs for the 2006‑2007 fiscal year.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
TRANSFER PROSPECTIVE TEACHER SCHOLARSHIP LOAN AND TEACHER ASSISTANT SCHOLARSHIP LOAN TO THE NC STATE EDUCATION ASSISTANCE AUTHORITY
SECTION 9.17.(a)  The Scholarship Loan Fund for Prospective Teachers is transferred from the Department of Public Instruction to the State Education Assistance Authority.  This transfer shall have all of the elements of a Type I transfer, as defined in G.S. 143A‑6.
SECTION 9.17.(b)  G.S. 115C‑468 is recodified as G.S. 116‑209.33. G.S. 115C‑469, 115C‑470, and 115C‑472.1 are repealed. G.S. 115C‑471 is recodified as G.S. 116‑209.34.
SECTION 9.17.(c)  G.S. 115C‑468 recodified by subsection (b) of this section as G.S. 116‑209.33 reads as rewritten:
"§ 116‑209.33.  Scholarship Loan Fund for Prospective Teachers.
(a)	There is established a revolving fund known as the "Scholarship Loan Fund for Prospective Teachers". The purpose of the Fund is to provide scholarship loans to qualified individuals who are pursuing college degrees to become teachers. The State Education Assistance Authority shall administer the Fund.
(b)	The State Education Assistance Authority, in consultation with the State Board of Education, shall develop criteria for awarding scholarship loans from the Fund. These criteria shall include:
(1)	Measures of academic performance including grade point averages, scores on standardized tests, class rank, and recommendations of guidance counselors and principals.
(2)	North Carolina residency. – For purposes of this section, residency shall be determined by the same standard as residency for tuition purposes pursuant to G.S. 116‑143.1.
(3)	The geographic areas or subjects of instruction in which the demand for teachers is greatest.
(4)	To the extent practical, an equal number of scholarships shall be awarded in each of the State's Congressional Districts.
(5)	Any additional criteria that the State Education Assistance Authority considers necessary to administer the Fund effectively, including the following:
a.	Consideration of the appropriate numbers of minority applicants and applicants from diverse socioeconomic backgrounds to receive scholarships pursuant to this section.
b.	Consideration of the commitment an individual applying to receive funds demonstrates to the profession of teaching.
(c)	The State Education Assistance Authority may earmark each year up to twenty percent (20%) of the funds available for scholarship loans under this section for awards to applicants for the Teacher Assistant Scholarship Fund established in G.S. 116‑209.35."
SECTION 9.17.(d)  G.S. 115C‑471 recodified by subsection (b) of this section as G.S. 116‑209.34 reads as rewritten:
"§ 116‑209.34.  Fund administered by State Education Assistance Authority; rule‑making authority.
(a)	The State Education Assistance Authority shall establish the terms and conditions for the scholarship loans consistent with the following:(1)	The loan amount shall be not more than four thousand dollars ($4,000) per academic school year for a maximum of four years for applicants who are pursuing a college degree to become a teacher.
(2)	All scholarship loans shall be evidenced by notes made payable to the Authority that bear interest at the rate of ten percent (10%) per year, beginning September 1 after graduation, or immediately after termination of the scholarship loan, whichever is earlier.
(3)	A scholarship loan shall be terminated upon the recipient's withdrawing from school or a finding by the Authority that the recipient fails to meet the standards set by the Authority. All terminated scholarships shall be regarded as vacant and subject to being awarded to other eligible persons.
	
(4)	The Authority shall forgive a four‑year loan if, within seven years after graduation, the recipient teaches for four years at a North Carolina public school or at a school operated by the United States government in North Carolina. The Authority shall also forgive a four‑year loan if, within seven years after graduation, the recipient teaches for three consecutive years, or for three years interrupted only by an approved leave of absence, at a North Carolina public school that is in a low‑performing school system or a school system on warning status at the time the recipient accepts employment with the local school administrative unit. For loans of less than four years, the Authority shall forgive one year for each year the recipient teaches, within four years of graduation, at a North Carolina public school or a school operated by the United States government in North Carolina.(5)	 The Authority may forgive or reduce any loan payment if the Authority considers that extenuating circumstances exist that would make teaching or repayment impossible.(6)	The Authority shall ensure that all repayments, including the accrued interest, are placed in the Fund. 
(b)	The State Education Assistance Authority, in consultation with the State Board of Education, shall adopt rules to implement G.S. 116‑209.33, 116‑209.34, and 116‑209.35."
SECTION 9.17.(e)  This section becomes effective January 1, 2006, and applies to scholarship loans awarded on or after that date.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
University System and Community College System Joint Study of Higher Education Strategy/Amend Reporting Requirement
SECTION 9.18.  Section 6.2 of S.L. 2004‑179 reads as rewritten:
"SECTION 6.2. These studies shall be designed to provide information and recommendations that will assist the General Assembly in setting priorities for funding to address the strategic higher education needs of the State. The Board of Governors, the State Board, and their consultant shall periodically report their findings to a higher education programming subcommittee of the Joint Legislative Education Oversight Committee. The two boards and their consultant shall report the preliminary results of the study to the General Assembly and to the Joint Legislative Education Oversight Committee by June 15, 2005, and shall file a final report and recommendations with the General Assembly and the Joint Legislative Education Oversight Committee no later than December 31, 2006."

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
UNC Research Institutions May Increase Tuition
SECTION 9.19.(a)  G.S. 116‑143 reads as rewritten:
"§ 116‑143.  State‑supported institutions of higher education required to charge tuition and fees.
Except as provided in G.S. 116‑143.6, the Board of Governors of the University of North Carolina shall fix the tuition and fees, not inconsistent with actions of the General Assembly, at the institutions enumerated in G.S. 116‑4 in such amount or amounts as it may deem best, taking into consideration the nature of each institution and program of study and the cost of equipment and maintenance; and each institution shall charge and collect from each student, at the beginning of each semester or quarter, tuition, fees, and an amount sufficient to pay other expenses for the term.
In the event that said students are unable to pay the cost of tuition and required academic fees as the same may become due, in cash, the said several boards of trustees are hereby authorized and empowered, in their discretion, to accept the obligation of the student or students together with such collateral or security as they  may deem necessary and proper, it being the purpose of this Article that all students in State institutions of higher learning shall be required to pay tuition, and that free tuition is hereby abolished.
Inasmuch as the giving of tuition and fee waivers, or especially reduced rates, represent in effect a variety of scholarship awards, the said practice is hereby prohibited except when expressly authorized by statute or by the Board of Governors of the University of North Carolina; and, furthermore, it is hereby directed and required that all budgeted funds expended for scholarships of any type must be clearly identified in budget reports.
Notwithstanding the above provision relating to the abolition of free tuition, the Board of Governors of the University of North Carolina may, in its discretion, provide regulations under which a full‑time faculty member of the rank of full‑time instructor or above, and any full‑time staff member of the University of North Carolina may during the period of normal employment enroll for not more than one course per semester in the University of North Carolina free of charge for tuition, provided such enrollment does not interfere with normal employment obligations and further provided that such enrollments are not counted for the purpose of receiving general fund appropriations."
SECTION 9.19.(b)  Article 14 of Chapter 116 of the General Statutes is amended by adding a new section to read:
"§ 116‑143.6.  Board of Trustees of a Doctoral/Research University-Extensive campus may increase tuition without approval of the Board of Governors.
(a)	Notwithstanding G.S. 116‑11(7) and G.S. 116‑143, the Board of Trustees of a constituent institution designated as a Doctoral/Research University-Extensive campus of The University of North Carolina may set undergraduate tuition for an academic year. In considering tuition, the Boards of Trustees shall take into account that undergraduate tuition for North Carolina residents shall remain affordable to ensure accessibility, as required by Section 9 of Article IX of the North Carolina Constitution, and shall take the appropriate steps to increase financial aid accordingly and to ensure that the annual undergraduate in‑State tuition rate remains in the lowest quartile of that constituent institution's national public peers.
Any additional revenues derived from a tuition increase set under this section shall remain available for use on that campus and are in addition to the operating budgets approved by the General Assembly.
(b)	If a Board of Trustees decides to increase tuition at a constituent institution, the institution shall notify the Board of Governors, the Office of State Budget and Management, and the Fiscal Research Division of the amount of increase, additional receipts anticipated, and the allocation of the funds among various programs in a format prescribed by the Board of Governors of The University of North Carolina."
SECTION 9.19.(c)  This section applies to the 2005‑2006 academic year and each subsequent academic year.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
NC Space Grant Consortium Funds
SECTION 9.20.  Funds appropriated by this act to the North Carolina Space Grant Consortium shall be allocated only to constituent institutions of The University of North Carolina participating in the Consortium; no funds shall be allocated to any private institution as defined by G.S. 116‑15(a2) that participates in the Consortium.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
Distinguished Professors Endowment Trust Fund
SECTION 9.21.(a)  G.S. 116‑41.15 reads as rewritten:
"§ 116‑41.15.  Distinguished Professors Endowment Trust Fund; allocation; administration.
(a)	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; or
(3)	On the basis of one challenge grant of up to six hundred sixty‑seven thousand dollars ($667,000) for funds raised from private sources in twice the amount of the challenge grant.
If an institution chooses to pursue the use of the allocated challenge grant funds described in either subdivision (1), subdivision (2), or subdivision (3) of this subsection, the challenge grant funds shall be matched by funds from private sources on the basis of two dollars of private funds for every one dollar of State funds.
(b)	For 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 five hundred thousand dollar ($500,000) challenge grant for each five hundred thousand dollars ($500,000) raised from private sources; or
(2)	On the basis of one two hundred fifty thousand dollar ($250,000) challenge grant for each two hundred fifty thousand dollars ($250,000) raised from private sources; or
(3)	On the basis of one challenge grant of up to one million dollars ($1,000,000) for funds raised from private sources in the same amount as the challenge grant.
If an institution chooses to pursue the use of the allocated challenge grant funds described in either subdivision (1), subdivision (2), or subdivision (3) of this subsection, the challenge grant funds shall be matched by funds from private sources on the basis of one dollar of private funds for every dollar of State funds.
(c)	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 9.21.(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(a)(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(a)(2); or
(3)	A commitment to make a donation in excess of six hundred sixty‑six thousand dollars ($666,000), as prescribed by G.S. 143‑31.4, and an initial payment of one‑sixth of the committed amount to receive a grant described in G.S. 116‑41.15(a)(3);
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, contributions may also be eligible for matching if there is:
(1)	A commitment to make a donation of at least five hundred thousand dollars ($500,000), as prescribed by G.S. 143‑31.4, and an initial payment of eighty‑three thousand three hundred dollars ($83,300) to receive a grant described in G.S. 116‑41.5(b)(1); or
(2)	A commitment to make a donation of at least two hundred fifty thousand dollars ($250,000), as prescribed by G.S. 143‑31.4, and an initial payment of forty‑one thousand six hundred dollars ($41,600) to receive a grant described in G.S. 116‑41.15(b)(2); or
(3)	A commitment to make a donation in excess of five hundred thousand dollars ($500,000), as prescribed by G.S. 143‑31.4, and an initial payment of one‑sixth of the committed amount to receive a grant described in G.S. 116‑41.15(b)(3);
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. 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."
SECTION 9.21.(c)  G.S. 116‑41.17 reads as rewritten:
"§ 116‑41.17.  Distinguished Professors Endowment Trust Fund; establishment of chairs.
When the sum of the challenge grant and matching funds in the Distinguished Professors Endowment Trust Fund reaches:
(1)	One million dollars ($1,000,000), if the sum of funds described in  G.S. 116‑41.15(a)(1) or G.S. 116‑41.15(b)(1); or
(2)	Five hundred thousand dollars ($500,000), if the sum of funds described in G.S.  116‑41.15(a)(2) or G.S. 116‑41.15(b)(2); or
(3)	An amount up to two million dollars ($2,000,000), if the sum of funds described in G.S. 116‑41.15(a)(3) or G.S. 116‑41.15(b)(3);
the board of trustees may recommend to the Board, for its approval, the establishment of an endowed chair or chairs. The Board, in considering whether to approve the recommendation, shall include in its consideration the programs already existing in The University of North Carolina. If the Board approves the recommendation, the chair or chairs shall be established. The chair or chairs, the property of the constituent institution, may be named in honor of a donor, benefactor, or honoree of the institution, at the option of the board of trustees."

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
UnC MAY encourage the ESTABLISHment of PRIVATE, NONPROFIT CORPORATIONS TO SUPPORT THE UNIVERSITY SYSTEM AND ASSIGN unc EMPLOYEES TO ASSIST WITH THOSE CORPORATIONS
SECTION 9.22.  Article 1 of Chapter 116 of the General Statutes is amended by adding a new Part to read:
"Part 2B. Private, Nonprofit Corporations.
"§ 116‑30.20.  Establishment of private, nonprofit corporations.
The Board of Governors of The University of North Carolina shall encourage the establishment of private, nonprofit corporations to support the constituent institutions of The University of North Carolina and The University System. The President of The University of North Carolina and the chancellors of the constituent institutions may assign employees to assist with the establishment and operation of a nonprofit corporation and may make available to the corporation office space, equipment, supplies, and other related resources; provided, the sole purpose of the corporation is to support The University of North Carolina or one or more of its constituent institutions.
The board of directors of each such private, nonprofit corporation shall secure and pay for the services of The University System's internal auditors or employ a certified public accountant to conduct an audit of the financial accounts of the corporation. The board of directors shall transmit to the Board of Governors a copy of the annual financial audit report of the private, nonprofit corporation."

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
Eliminate Reporting Requirement for School Administrator Training Programs
SECTION 9.23.  G.S. 116‑74.21 reads as rewritten:
"§ 116‑74.21.  Establishment of a competitive proposal process for school administrator programs.
(a)	The Board of Governors shall develop and implement a competitive proposal process and criteria for assessing proposals to establish school administrator training programs within the constituent institutions of The University of North Carolina. To facilitate the development of the programs, program criteria, and the proposal process, the Board of Governors may convene a panel of national school administrator program experts and other professional training program experts to assist it in designing the program, the proposal process, and criteria for assessing the proposals.
(b)	No more than 12 school administrator programs shall be established under the competitive proposal program. In selecting campus sites, the Board of Governors shall be sensitive to the racial, cultural, and geographic diversity of the State. Special priority shall be given to the following factors: (i) the historical background of the institutions in training educators; (ii) the ability of the sites to serve the geographic regions of the State, such as, the far west, the west, the triad, the piedmont, and the east; and, (iii) whether the type of roads and terrain in a region make commuting difficult. A school administrator program may provide for instruction at one or more campus sites.
(c)	The Board of Governors shall study the issue of supply and demand of school administrators to determine the number of school administrators to be trained in the programs in each year of the biennium and report the results of this study to the Joint Legislative Education Oversight Committee no later than March 1 annually.
(d)	The Board of Governors shall develop a budget for the programs established under subsection (a) of this section that reflects the resources necessary to establish and operate school administrator programs that meet the vision of the report submitted to the 1993 General Assembly by the Educational Leadership Task Force.
	"

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
Continue Academic Common Market Program
SECTION 9.24.  Section 31.2 of S.L. 2001‑424 reads as rewritten:
"Academic Common Market Program
SECTION 31.2.(a)  The Southern Regional Education Board currently operates an Academic Common Market program. Under this program, qualified students from participating states may apply to attend programs at public universities in participating states that are not available in their home state's university system. North Carolina's participation for graduate programs would provide a cost‑effective means of offering educational access for North Carolina residents. North Carolinians will be able to attend graduate programs that are not available at The University of North Carolina at reduced rates, and the State would avoid the cost associated with the development of new academic programs.
SECTION 31.2.(b)  The Board of Governors of The University of North Carolina may continue participation in the Southern Regional Education Board's Academic Common Market at the graduate program level. The Board of Governors shall examine the graduate programs offered in The University of North Carolina system and select for participation only those graduate programs that are likely to be unique or are not commonly available in other Southern Regional Education Board states. Out‑of‑state tuition shall be waived for students who are residents of other Southern Regional Education Board states and who are participating in the Academic Common Market program. If accepted into The University of North Carolina graduate programs that are part of the Academic Common Market, these students shall pay in‑State tuition and shall be treated for all purposes of The University of North Carolina as residents of North Carolina.  
SECTION 31.2.(c)  Once a student is enrolled in The University of North Carolina system under the Academic Common Market program, the student shall be entitled to pay in‑State tuition as long as the student is enrolled in that graduate program. The Board of Governors shall provide a report on the Academic Common Market program to the Joint Legislative Education Oversight Committee by September 2007, and each biennium thereafter."

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
Tuition Waiver Program Expansion
SECTION 9.25.(a)  G.S. 116‑143.1 is amended by adding a new subsection to read:
"(m)	Notwithstanding subsection (b) of this section, a person who is a full‑time employee of The University of North Carolina, or is the spouse or dependent child of a full‑time employee of The University of North Carolina, and who is a legal resident of North Carolina, qualifies as a resident for tuition purposes without having maintained that legal residence for at least 12 months immediately prior to his or her classification as a resident for tuition purposes."
SECTION 9.25.(b)  The Board of Governors of The University of North Carolina and the State Board of Community Colleges shall study the feasibility of a tuition waiver exchange program under which full‑time employees of The University of North Carolina would be allowed to take a specified number of courses at a community college without paying tuition, and full‑time employees of a community college would be allowed to take a specified number of courses at a constituent institution of The University of North Carolina without paying tuition.  The Boards shall report the results of this study to the Joint Legislative Education Oversight Committee by April 1, 2006.

Requested by:	Senators Lucas, Swindell, Kerr, Jenkins, Garrou, Dalton, Hagan
Brody School of Medicine at ECU/Medicare Receipts/family medicine center
SECTION 9.26.(a)  G.S. 116‑36.6 reads as rewritten:
"§ 116‑36.6.  Brody School of Medicine at East Carolina University; Medicare receipts.
The Brody School of Medicine at East Carolina University shall request, on a regular basis consistent with the State's cash management plan, funds earned by the School from Medicare reimbursements for education costs. Upon receipt, these funds shall be allocated as follows:
(1)	The portion of the Medicare reimbursement generated through the effort and expense of the Brody School of Medicine's Medical Faculty Practice Plan shall be transferred to the appropriate Medical Faculty Practice Plan account within the School of Medicine. The Medical Faculty Practice Plan shall assume responsibility for any of these funds that subsequently must be refunded due to final audit settlements.
		
(2a)	Funds that were received pursuant to this section prior to July 1, 2005, and that were transferred to a special fund account on deposit with the State Treasurer are appropriated to the Brody School of Medicine at East Carolina University and may be expended by the Brody School of Medicine for the family medicine center and for purposes consistent with its stated mission."
SECTION 9.26.(b)  Subsections (b) and (c) of Section 87 of Chapter 321 of the 1993 Session Laws are repealed.
SECTION 9.26.(c)  Notwithstanding any other provisions of law, the Board of Governors of The University of North Carolina may authorize the design and construction of a new capital project, a family medicine center, on the Health Sciences Campus of the Brody School of Medicine at East Carolina University, that would replace the existing family medicine facility that has reached capacity. The family medicine center is also used as a clinical teaching site for medical students, and the existing facility is functionally outdated for this purpose. The cost of the facility is estimated to be thirty million dollars ($30,000,000). The Board of Governors of The University of North Carolina may authorize the financing of the project with funds available to the Brody School of Medicine at East Carolina University from Medicare reimbursements for education costs, gifts, grants, receipts, self‑liquidating indebtedness, or other funds, or any combination of these funds, but not including funds appropriated from the General Fund of the State.
SECTION 9.26.(d)  Effective July 1, 2005, the Brody School of Medicine Medical Faculty Practice Plan shall no longer be required to reimburse the General Fund for use of outpatient facilities built with General Fund monies; the Brody School of Medicine Medical Faculty Practice Plan shall assume responsibility for payment of all operating costs, including utility costs, currently paid for by the General Fund. This subsection shall remain in effect until changed or repealed by the General Assembly.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
Scholarship Student
SECTION 9.27.(a)  Article 14 of Chapter 116 of the General Statutes is amended by adding a new section to read:
"§ 116‑143.6.  Full scholarship students attending constituent institutions.
(a)	Notwithstanding any other provision of law, any person who receives a full scholarship to a constituent institution and who attends the institution as an undergraduate student shall be considered and treated for all purposes of The University of North Carolina as a resident of North Carolina.
(b)	The following definitions apply in this section:
(1)	'Full scholarship' means a grant that meets the full cost for a student to attend the constituent institution for an academic year.
(2)	'Full cost' means an amount calculated by the constituent institution that is no less than the sum of in‑State tuition, required fees, on‑campus room and board, and required course‑related books.
(c)	This section shall not be applied in any manner that violates federal law.
(d)	No State funds shall be expended to offset any fiscal impact of this section."
SECTION 9.27.(b)  This section applies to students who accept admission on or after July 1, 2005, to a constituent institution.

Requested by:	Senators Lucas, Swindell, Garrou, Dalton, Hagan
ENHANCE NUTRITION IN UNIVERSITY AND COMMUNITY COLLEGE FOOD PROGRAMS
SECTION 9.28. For nutritional purposes, the Board of Governors of The University of North Carolina and the State Board of Community Colleges shall adopt policies governing any food programs operated by the constituent institutions or local community colleges that prohibit: (i) the use of cooking oils in those food programs that contain trans‑fatty acids, or (ii) the sale of processed foods containing trans‑fatty acids that were formed during the commercial processing of the foods.

Requested by:	Senators Lucas, Swindell, Snow, Garrou, Dalton, Hagan
Grant‑in‑Aid/Fire Truck for Cullowhee Volunteer Fire Dept. to help ensure adequate fire protection services to western carolina university
SECTION 9.29.  Of the funds appropriated from the General Fund to the Board of Governors of The University of North Carolina, the sum of seven hundred fifteen thousand dollars ($715,000) for the 2005‑2006 fiscal year shall be allocated to Western Carolina University as a grant‑in‑aid for the Cullowhee Volunteer Fire Department, Inc., to use to purchase a 95‑foot platform truck and equipment to ensure adequate fire protection services to Western Carolina University.

Requested by:	Senators Shaw, Lucas, Swindell, Garrou, Dalton, Hagan
waive tuition for a person of a certain age who is or was a ward of the state and who attends classes at any constituent institution of the university of north carolina or any community college
SECTION 9.30.(a)  G.S. 115B‑2 is amended by adding a new subdivision to read:
"(5)	Any child, if the child (i) is at least 17 years old but not yet 23 years old, (ii) is a ward of North Carolina or was a ward of the State at the time the child reached the age of 18, and (iii) is a resident of the State;"
SECTION 9.30.(b)  G.S. 115B‑5 is amended by adding a new subsection to read:
"(c)	The officials of the institutions charged with administration of this Chapter may require proof to verify that a person applying to the institution under G.S. 115B‑2(5) is eligible for the benefits provided by this Chapter."

PART X. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Information Technology
SECTION 10.1.(a)  To support its information technology initiatives, the Department of Health and Human Services shall develop the following:
(1)	A detailed business plan.
(2)	An information technology plan directly tied to business requirements.
(3)	An IT architecture.
The Department of Health and Human Services shall ensure that the planning documents extend three to five years and include detailed shortfall analyses and associated cost assessments. The Department of Health and Human Services shall forward the documents to the Office of Information Technology Services, 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 December 1, 2005. The Office of Information Technology Services shall review the documents and report its findings and recommendations 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 31, 2006.
SECTION 10.1.(b)  The Department of Health and Human Services shall develop a project plan for each of its information technology projects.  These plans shall include the following:
(1)	A detailed description of the project.
(2)	A description of how the project improves Department operations and service to customers.
(3)	The projected cost of the project by year and phase.
(4)	Deliverables required to implement each phase of the system.
(5)	The date that each deliverable is to be implemented.
(6)	The cost of implementing each deliverable.
(7)	What capabilities each deliverable adds to the project.
SECTION 10.1.(c)  The Department of Health and Human Services shall provide the plans 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 no later than October 1, 2005, with subsequent updates provided quarterly. The Department of Health and Human Services shall notify the Division of Fiscal Research within 10 days when costs, completion dates, or system capabilities change and provide a report detailing the impact of the change.
SECTION 10.1.(d)  The Department of Health and Human Services shall not spend more than the amounts appropriated by the General Assembly for information technology projects and may not allocate funds appropriated for one information technology project to any other information technology project.
SECTION 10.1.(e)  The Department of Health and Human Services shall use funds appropriated for the 2005‑2006 and 2006‑2007 fiscal years for the North Carolina Families Accessing Services through Technology (NC FAST) program only for program‑specific development, deliverables, and maintenance costs associated with the NC FAST program.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Office of Policy and Planning
SECTION 10.2.  Article 3 of Chapter 143B is amended by adding the following new Part to read:
"Part 34. Office of Policy and Planning.
"§ 143B‑216.70.  Office of Policy and Planning.
(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.
(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, Malone, Garrou, Dalton, Hagan
Senior Prescription Drug Access Program Funding
SECTION 10.3.  The Director of the Budget shall use available funds up to seven million dollars ($7,000,000) in the 2005‑2006 fiscal year to fully fund the Senior Prescription Drug Access Program through December 31, 2005, if there is a shortfall of funds from the Health and Wellness Trust Fund, and the funds are not sufficient to provide drug acquisition services under the Program through December 31, 2005.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
SENIOR CARES PROGRAM ADMINISTRATION
SECTION 10.4.(a)  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. The Department may use funds appropriated in this act to administer the Senior Cares prescription drug access program.
SECTION 10.4.(b)  This section expires December 31, 2005.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
NONMEDICAID REIMBURSEMENT CHANGES
SECTION 10.5.  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 non‑Medicaid 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 non‑Medicaid 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, Malone, 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, Malone, 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, on behalf of 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, Malone, Garrou, Dalton, Hagan
DHHS Payroll Deduction for Child Care Services
SECTION 10.8.  Part 1 of Article 3 of Chapter 143B of the General Statutes is amended by adding the following new section to read:
"§ 143B‑139.6B.  Department of Health and Human Services; authority to deduct payroll for child care services.
Notwithstanding G.S. 143‑3.3 and pursuant to rules adopted by the State Controller, an employee of the Department of Health and Human Services may, in writing, authorize the Department to periodically deduct from the employee's salary or wages paid for employment by the State, a designated lump sum to be paid to satisfy the cost of services received for child care provided by the Department."

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
community health centers funds
SECTION 10.9.(a)  Of the funds appropriated in this act for Community Health Grants for the 2005‑2006 fiscal year, the sum of two million dollars ($2,000,000) in recurring funds shall be used for federally qualified health centers, for those health centers that meet the criteria for federally qualified health centers, and for State‑designated rural health centers and public health departments and other clinics to:
(1)	Increase access to preventative and primary care services by uninsured or medically indigent patients in existing or new health center locations;
(2)	Establish community health center services in counties where no such services exist;
(3)	Create new services or augment existing services provided to uninsured or medically indigent patients, including primary care and preventative medical services, dental services, pharmacy, and behavioral health; and
(4)	Increase capacity necessary to serve the uninsured by enhancing or replacing facilities, equipment, or technologies.
Grant funds may not be used to enhance or increase compensation or other benefits of personnel, administrators, directors, consultants, or any other parties. Grant funds may not be used to supplant federal funds traditionally received by federally qualified community health centers and may not be used to finance or satisfy any existing debt.
SECTION 10.9.(b)  The Office shall work with the North Carolina Community Health Center Association (hereafter "NCCHCA") and the North Carolina Public Health Association (hereafter "NCPHA") to establish an advisory committee to develop an objective and equitable process for awarding grant funds. The Office shall also develop auditing and accountability procedures. Not more than one percent (1%) of the funds appropriated in this section may be used to reimburse the Office for administering the grant program in collaboration with the NCCHCA and the NCPHA.
SECTION 10.9.(c)  Recipients of grant funds shall provide to the Office annually a written report detailing the number of additional uninsured and medically indigent patients that are cared for, the types of services that were provided, and any other information requested by the Office as necessary for evaluating the success of the grant program.
SECTION 10.9.(d)  The Office shall work with the NCCHCA and NCPHA to study and present recommendations for continuing funds to support the expansion of community health centers, State‑designated rural health centers, and public health departments to serve more of the State's uninsured and indigent population. The Office shall submit the report to the 2006 Regular Session of the 2005 General Assembly upon its convening.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Provider Reimbursement Rates
SECTION 10.10.  The Department of Health and Human Services shall maintain reimbursement rates paid to service providers at fiscal year 2004‑2005 levels during the 2005‑2006 fiscal year. Exceptions made by the Department shall be made on a case‑by‑case basis and must be approved by the Office of the Secretary. Changes in rate structures that result in lower payments to the providers are exempted from this requirement. As used in this section, "service providers" includes subcontractors, such as counties, area agencies on aging, departments of social services, departments of public health, child developmental services agencies, and local management entities.

Requested by:	Senators Purcell, Malone, Dalton, Garrou, Hagan
MEDICAID
SECTION 10.11.(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. The Department may override the six‑prescription limit up to two additional prescriptions for a total of not more than eight prescriptions per recipient per month, for recipients that meet the Department's override policy requirements. Payments for drugs are subject to the provisions of subsection (h) of this section and to the provisions at the end of this subsection 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. In addition to the professional services fee, the Department may pay an enhanced fee for pharmacy services.
(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. – Wholesale cost plus a dispensing fee to the provider.
(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. – Payment for materials is made to a contractor in accordance with 42 C.F.R. § 431.54(d). Fees paid to dispensing providers are negotiated fees established by the State agency based on industry charges.
(16)	Ambulatory surgical centers. – Payment as prescribed in the reimbursement plan established by the Department of Health and Human Services.
(17)	Medicare crossover claims. – By not later than October 1, 2005, the Department shall apply Medicaid medical policy to Medicare claims for dually eligible recipients. The Department shall pay 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 provided by:
1.	Licensed or certified psychologists, licensed clinical social workers, certified clinical nurse specialists in psychiatric mental health advanced practice, nurse practitioners certified as clinical nurse specialists in psychiatric mental health advanced practice, licensed psychological associates, licensed professional counselors, licensed marriage and family therapists, certified clinical addictions specialists, and certified clinical supervisors, when Medicaid‑eligible children are referred by the Community Care of North Carolina primary care physician, a Medicaid‑enrolled psychiatrist, or the area mental health program or local management entity, 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.
c.	For Medicaid‑eligible adults, services provided by 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, licensed psychological associates, licensed professional counselors, licensed marriage and family therapists, certified clinical addictions specialists, and certified clinical supervisors, Medicaid‑eligible adults may be self‑referred.
d.	Payments made for services rendered in accordance with this subdivision shall be to qualified providers in accordance with approved policies and the State Plan. Nothing in sub‑subdivision b. or c. of this subdivision shall be interpreted to modify the scope of practice of any service provider, practitioner, or licensee, nor to modify or attenuate any collaboration or supervision requirement related to the professional activities of any service provider, practitioner, or licensee. Nothing in sub‑subdivision b. or c. of this subdivision shall be interpreted to require any private health insurer or health plan to make direct third‑party reimbursements or payments to any service provider, practitioner, or licensee.
e.	The Department of Health and Human Services shall not enroll licensed psychological associates, licensed professional counselors, licensed marriage and family therapists, certified clinical addiction specialists, and certified clinical supervisors until all of the following conditions have been met:
1.	The fiscal impact of payments to these qualified providers has been projected;
2.	Funding for any projected requirements in excess of budgeted Division of Medical Assistance funding has been identified from within State funds appropriated to the Department of Health and Human Services, Division of Mental Health, Developmental Disabilities, and Substance Abuse Services to support area mental health programs or county programs, or identified from other sources; and
3.	Approval has been obtained from the Office of State Budget and Management to transfer these State or other source funds from the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services to the Division of Medical Assistance. Upon approval and implementation, the Department of Health and Human Services shall, on a quarterly basis, provide a status report to the Office of State Budget and Management and the Fiscal Research Division.
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. – Reimbursement in accordance with the State Plan approved by the Department of Health and Human Services, except that in order to be eligible for reimbursement, providers must be Board certified not later than July 1, 2005. Medically necessary prosthetics and orthotics are subject to prior approval and utilization review.
(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 subdivision 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.
SECTION 10.11.(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. In addition, the State shall pay eighty‑five percent (85%); the county shall pay fifteen percent (15%) of the federal Medicare Part D clawback payments under the Medicare Modernization Act of 2004.
SECTION 10.11.(c)  Co‑Payment for Medicaid Services. – The Department of Health and Human Services may establish co‑payments up to the maximum permitted by federal law and regulation and required by this subsection in order to achieve reductions in the budget in fiscal years 2005‑2006 and 2006‑2007.  The co‑payment for inpatient hospitalization services is fifty dollars ($50.00).
SECTION 10.11.(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 10.11.(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.  This subsection expires December 31, 2005.
SECTION 10.11.(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 10.11.(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 10.11.(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 10.11.(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 10.11.(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 10.11.(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 10.11.(l)  Cost‑Containment Programs. – The Department of Health and Human Services, Division of Medical Assistance, may undertake cost‑containment programs, including contracting for services, preadmissions to hospitals, and prior approval for certain outpatient surgeries before they may be performed in an inpatient setting.
SECTION 10.11.(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 10.11.(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 10.11.(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. 
(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.
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 10.11.(p)  Medicaid enrollment of categorically needy families with  children shall be continuous for one year without regard to changes in income or assets.
SECTION 10.11.(q)  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 10.11.(r)  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 10.11.(s)  The Department of Health and Human Services may adopt temporary or emergency rules according to the procedures established in G.S. 150B‑21.1 and G.S. 150B‑21.1A 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 or emergency rules with the Rules Review Commission and 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 or emergency rule and its effect on State appropriations and local governments.
SECTION 10.11.(t)  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 10.11.(u)  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 childbearing 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.
SECTION 10.11.(v)  The Department of Health and Human Services may apply federal transfer of assets policies, as described in Title XIX, section 1917(c) of the Social Security Act, including the attachment of liens, to real property excluded as  "income producing", tenancy‑in‑common, or as nonhomesite property made "income producing" under Title XIX, section 1902(r)(2) of the Social Security Act. The transfer of assets policy shall apply only to an institutionalized individual or the individual's spouse as defined in Title XIX, section 1917(c) of the Social Security Act. This subsection becomes effective no earlier than October 1, 2001. Federal transfer of asset policies and attachment of liens to properties excluded as tenancy‑in‑common or as nonhomesite property made "income producing" in accordance with this subsection shall become effective not earlier than November 1, 2002.
SECTION 10.11.(w)  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 10.11.(x)  Unless required for compliance with federal law, the Department shall not change medical policy affecting the amount, sufficiency, duration, and scope of health care services and who may provide services until the Division of Medical Assistance has prepared a five‑year fiscal analysis documenting the increased cost of the proposed change in medical policy and submitted it for Departmental review. If the fiscal impact indicated by the fiscal analysis for any proposed medical policy change exceeds three million dollars ($3,000,000) in total requirements for a given fiscal year, then the Department shall submit the proposed policy change with the fiscal analysis to the Office of State Budget and Management and the Fiscal Research Division. The Department shall not implement any proposed medical policy change exceeding three million dollars ($3,000,000) in total requirements for a given fiscal year unless the source of State funding is identified and approved by the Office of State Budget and Management. The Department shall provide the Office of State Budget and Management and the Fiscal Research Division a quarterly report itemizing all medical policy changes with total requirements of less than three million dollars ($3,000,000).
SECTION 10.11.(y)  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. The Secretary shall also consult with and seek the advice of officials of the professional societies or associations representing providers who are affected by the new medical coverage policy or amendments to existing medical coverage policy.
(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.
SECTION 10.11.(z)  For the purposes of investigating and reducing client fraud and abuse, the Department of Health and Human Services, Division of Medical Assistance, shall include in the Medicaid enrollment process the requirement that the applicant for Medicaid consent to or authorize in writing the release of the applicant's medical records for the three years immediately preceding the application for Medicaid benefits.  The Department shall obtain and use information from the applicant's medical records in a manner and form that complies with the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), P.L. 104‑191, as amended, and that protects the privacy of the information as required by other applicable federal or State law. In addition to fraud and abuse detection, the Department may require the applicant's consent for other purposes permitted by HIPAA and required or authorized by other applicable federal or State law.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
DISPOSITION OF DISPROPORTIONATE SHARE RECEIPTS
SECTION 10.12.(a)  Disproportionate share receipts reserved at the end of the 2005‑2006 and 2006‑2007 fiscal years shall be deposited with the Department of State Treasurer as nontax revenue for each of those fiscal years.
SECTION 10.12.(b)  For each year of the 2005‑2007 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, Malone, Garrou, Dalton, Hagan
COUNTY MEDICAID COST SHARE
SECTION 10.13.(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 10.13.(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, Malone, Garrou, Dalton, Hagan
MEDICAID COST CONTAINMENT ACTIVITIES
SECTION 10.14.  The Department of Health and Human Services may use not more than three million dollars ($3,000,000) in the 2005‑2006 fiscal year and not more than three million dollars ($3,000,000) in the 2006‑2007 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, technology that improves clinical decision making, credit balance recovery and data mining services, and other cost‑containment activities.  Funds may be expended under this section only after the Office of State Budget and Management has approved a proposal for the expenditure submitted by the Department. Proposals for expenditure of funds under this section shall include the cost of implementing the cost‑containment activity and documentation of the amount of savings expected to be realized from the cost‑containment activity.  The Department shall provide a copy of proposals for expenditures under this section to the Fiscal Research Division.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
MEDICAID RESERVE FUND TRANSFER
SECTION 10.15.  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 fifty million dollars ($50,000,000) for the 2005‑2006 fiscal year and the sum of fifty million dollars ($50,000,000) for the 2006‑2007 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, Malone, Garrou, Dalton, Hagan
NO Prior AUTHORIZATION FOR CERTAIN prescription DRUGS UNDER MEDICAID
SECTION 10.16.  The Department of Health and Human Services, Division of Medical Assistance, shall not establish prior authorization requirements or other restrictions under the State Medical Assistance Program for FDA‑approved medications indicated for the treatment of life‑threatening respiratory conditions due to chronic obstructive pulmonary disease (COPD) or stroke. In developing a disease management program, the Department of Health and Human Services shall include initiatives that positively impact COPD and stroke‑related health care costs.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
EXPAND COMMUNITY CARE OF NORTH CAROLINA MANAGEMENT TO ADDITIONAL MEDICAID RECIPIENTS
SECTION 10.17.(a)  The Department of Health and Human Services shall expand the scope of Community Care of NC care management model to recipients of Medicaid and dually eligible individuals with a chronic condition and long‑term care needs.  In expanding the scope, the Department shall focus on the Aged, Blind, and Disabled, and CAP‑DA populations for improvement in management, cost‑effectiveness, and local coordination of services through Community Care of NC and in collaboration with local providers of care.  The Department shall target personal care services, private duty nursing, home health, durable medical equipment, ancillary professional services, specialty care, residential services, including skilled nursing facilities, home infusion therapy, pharmacy, and other services determined target‑worthy by the Department.  The Department shall pilot communitywide initiatives and shall expand statewide successful models.
SECTION 10.17.(b)  The Department of Health and Human Services may work with the federal government to attain the necessary regulatory and policy relief to better align policy and economic incentives to improve care in the most cost‑effective manner and attain savings through controlled utilization of services.
SECTION 10.17.(c)  The Department of Health and Human Services may pay network and primary care providers an enhanced PMPM care management fee and shall also provide additional block grant funds for start‑up during the pilot phase.  
SECTION 10.17.(d)  The Department of Health and Human Services shall report on the implementation of this section, including resulting savings and quality improvement benchmarks 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 March 1, 2007.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
TICKET TO WORK/MEDICAID ELIGIBILITY
SECTION 10.18.(a)  Article 2 of Chapter 108A of the General Statutes is amended by adding the following new section to read:
"§ 108A‑54.1. Medicaid buy‑in for workers with disabilities.
(a)	Title. – This act may be cited as the Health Coverage for Workers With Disabilities Act. The Department shall implement a Medicaid buy‑in eligibility category as permitted under P.L. 106‑170, Ticket to Work and Work Incentives Improvement Act of 1999. The Department shall establish rules, policies, and procedures to implement this act in accordance with this section.
(b)	Definitions. – As used in this section, unless the context clearly requires otherwise:
(1)	'FPG' means the federal poverty guidelines.
(2)	'HCWD' means Health Coverage for Workers With Disabilities.
(3)	'SSI' means Supplemental Security Income.
(4)	'Ticket to Work' means the Ticket to Work and Work Incentives Improvement Act of 1999.
(c)	Eligibility. – An individual is eligible for HCWD if:
(1)	The individual is at least 16 years of age and is less than 65 years of age;
(2)	The individual meets Social Security Disability criteria, or the individual has been enrolled in HCWD and then becomes medically improved as defined in Ticket to Work and as further specified by the Department. An individual shall be determined to be eligible under this section without regard to the individual's ability to engage in, or actual engagement in, substantial gainful activity as defined in section 223 of the Social Security Act (42 U.S.C. § 423(d)(4)). In conducting annual redetermination of eligibility, the Department may not determine that an individual participating in HCWD is no longer disabled based solely on the individual's participation in employment or earned income;
(3)	The individual's unearned income does not exceed one hundred fifty percent (150%) of FPG, and countable resources for the individual do not exceed the resource limit for the minimum community spouse resource standard under 42 U.S.C. § 1396r, and as further determined by the Department. In determining an individual's countable income and resources, the Department may not consider income or resources that are disregarded under the State Medical Assistance Plan's financial methodology, including the sixty‑five‑dollar ($65.00) disregard, impairment‑related work expenses, student earned‑income exclusions, and other SSI program work incentive income disregards; and
(4)	The individual is engaged in a substantial and reasonable work effort (employed) as provided in this subdivision and as further defined by the Department and allowable under federal law. For purposes of this subsection, "engaged in substantial and reasonable work effort" means all of the following:
a.	Working in a competitive, inclusive work setting, or self‑employed.
b.	Earning at least the applicable minimum wage.
c.	Having monthly earnings above the SSI basic sixty‑five‑dollar ($65.00) earned‑income disregard.
d.	Being able to provide evidence of paying applicable Medicare, Social Security, and State and federal income taxes.
The Department may impose additional earnings requirements in defining "engaged in substantial and reasonable work effort" for individuals who are eligible for HCWD based on medical improvement.Individuals who participate in HCWD but thereafter become unemployed for involuntary reasons, including health reasons, shall have continued eligibility in HCWD for up to 12 months from the time of involuntary unemployment, so long as the individual (i) maintains a connection with the workforce, as determined by the Department, (ii) meets all other eligibility criteria for HCWD during the period, and (iii) pays applicable fees, premiums, and co‑payments.
(d)	Fees, Premiums, and Co‑Payments. – Individuals who participate in HCWD and have countable income greater than one hundred fifty percent (150%) of FPG shall pay an annual enrollment fee of fifty dollars ($50.00) to their county department of social services. Individuals who participate in HCWD and have countable income greater than or equal to two hundred percent (200%) of FPG shall pay a monthly premium in addition to the annual fee. The Department shall set a sliding scale for premiums, which is consistent with applicable federal law. An individual with countable income equal to or greater than four hundred fifty percent (450%) of FPG shall pay not less than one hundred percent (100%) of the cost of the premium, as determined by the Department. The premium shall be based on the experience of all individuals participating in the Medical Assistance Program. Individuals who participate in HCWD are subject to co‑payments equal to those required under the North Carolina Health Choice Program."
SECTION 10.18.(b)  Of the funds appropriated in this act to the Department of Health and Human Services, Division of Medical Assistance, the sum of one hundred fifty thousand dollars ($150,000) for the 2006‑2007 fiscal year shall be used to support the expansion of Medicaid eligibility authorized under subsection (a) of this section.
SECTION 10.18.(c)  Subsection (b) of this section becomes effective July 1, 2006.  Subsection (a) of this section becomes effective January 1, 2007.  The remainder of this section is effective when it becomes law.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
MEDICAID PERSONAL CARE SERVICES LIMITATIONS
SECTION 10.19.(a)  The Department of Health and Human Services, Division of Medical Assistance, shall apply the following minimum criteria for eligibility for personal care services under Medicaid:
(1)	Personal care services shall not exceed three hours per day and 40 hours per month.
(2)	Before services are authorized, the individual must be assessed by a physician who has examined the individual. The assessing physician must use an assessment tool identified by the Division.
(3)	The physician must see the individual at least every six months after service is approved to determine if the need for services continues to exist.
(4)	The provider of personal care services must ensure that a nurse reviews the individual's services every 90 days or less, as determined by the Division of Medical Assistance.
The Division may include additional criteria for eligibility for personal care services.
SECTION 10.19.(b)  The Division of Medical Assistance shall work with Community Care of North Carolina (CCNC) to determine how CCNC can help with the review of the need for personal care services.
SECTION 10.19.(c)  The Division of Medical Assistance shall study and determine appropriate utilization/prior authorization systems for personal care services and other home and community‑based services that can be provided to individuals who meet medical criteria and that can be implemented when the new MMIS goes into effect.  The Department of Health and Human Services, Division of Medical Assistance, shall report the plan for implementation of this section, including costs, not later than May 1, 2006, 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, Malone, Garrou, Dalton, Hagan
CAP‑DA CHANGES
SECTION 10.20.(a)  The Department of Health and Human Services, Division of Medical Assistance, shall develop a new system for reimbursing the CAP‑DA program.  The new system shall:
(1)	Use a case‑mix reimbursement system, similar to the one used by nursing facilities, to determine the level of care provided and the amount paid for the care provided; and
(2)	Use the Resource Utilization Groups‑III (RUG‑III) to determine level of need for CAP‑DA services.
SECTION 10.20.(b)  When determining eligibility and service level for CAP‑DA services, the Division shall include criteria that consider the ability and availability of family members to provide care.
SECTION 10.20.(c)  Not later than May 1, 2006, the Department of Health and Human Services, Division of Medical Assistance, shall report on the development of the new system, including an implementation schedule.   Full implementation of the new system shall be not later than January 1, 2007.  The Department  shall submit the 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.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
dma ACCESS TO HEALTH INSURANCE INFORMATION TO ENSURE RECOUPMENT OF medicaid funds  SPENT ON MEDICAL CARE covered by insurance
SECTION 10.21.(a)  Part 1 of Article 50 of Chapter 58 of the General Statutes is amended by adding the following new section to read:
"§ 58‑50‑46.  Insurers to provide certain information to Department of Health and Human Services.
(a)	As used in this section, the terms:
(1)	'Department' means the Department of Health and Human Services.
(2)	'Division' means the Division of Medical Assistance of the Department of Health and Human Services.
(3)	'Health benefit plan' and 'insurer' have the meaning applicable under G.S. 58‑3‑167.
(4)	'Medical assistance' means medical assistance benefits provided under the State Medical Assistance Plan.
(b)	Every insurer issuing a health benefit plan shall provide to the Department of Health and Human Services, upon its request, information, including automated data matches conducted under the direction of the Department of Health and Human Services, Division of Medical Assistance, as necessary for the purpose of identifying individuals covered under the insurer's health benefit plans who are also recipients of medical assistance. To facilitate the Division in obtaining this and other related information, every insurer shall:
(1)	Cooperate with the Division to determine whether a named individual who is a recipient of medical assistance may be covered under the insurer's health benefit plan and eligible to receive benefits under the health benefit plan for services provided under the State Medical Assistance Plan;
(2)	Accept the Division's authorization for the provision of medical services on behalf of the recipient of medical assistance as the insurer's authorization for the provision of the services; and
(3)	Respond to the request for information within 15 working days after receipt of written proof of loss or claim for payment for health care services provided to a recipient of medical assistance who is covered by the insurer's health benefit plan.
(c)	An insurer that complies with this section shall not be liable on that account in any civil or criminal action or proceedings brought by an individual covered under the insurer's health benefit plan, or the individual's beneficiaries."
SECTION 10.21.(b)  G.S. 108A‑70 reads as rewritten:
"§ 108A‑70.  Recoupment of amounts spent on medical care.
(a)	The Department may garnish the wages, salary, or other employment income of, and the Secretary of Revenue shall withhold amounts from State tax refunds to, any person who:
(1)	Is required by court or administrative order to provide health benefit plan coverage for the cost of health care services to a child eligible for medical assistance under Medicaid; and
(2)	Has received payment from a third party for the costs of such services; but
(3)	Has not used such payments to reimburse, as appropriate, either the other parent or guardian of the child or the provider of the services;
to the extent necessary to reimburse the Department for expenditures for such costs under this Part; provided, however, claims for current and past due child support shall take priority over any such claims for the costs of such services.
(b)	To the extent that payment for covered services has been made under G.S. 108A‑55 for health care items or services furnished to an individual, in any case where a third party has a legal liability to make payments, the Department of Health and Human Services is considered to have acquired the rights of the individual to payment by any other party for those health care items or services.
(c)	The Department of Health and Human Services, Division of Medical Assistance, may request, receive, and use information obtained pursuant to G.S. 58‑50‑46 in order to enforce this section."

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
NC HEALTH CHOICE APPROPRIATIONs; claims processing; medicaid rates
SECTION 10.22.(a)  The total amount of funds appropriated to the North Carolina Health Choice for Children Program for the 2005‑2007 fiscal biennium may be increased through budget transfers, subject to the approval of the Office of State Budget and Management, if needed to match available federal funds to support program expenditures.
SECTION 10.22.(b)  The Department of Health and Human Services shall issue a Request for Proposal to contract for administration and claims processing of the NC Health Choice Program. The contract shall provide for applying Medicaid rates for service providers as provided by law. The Department shall schedule the review process for proposals received such that the Department has signed a contract with the selected contractor not later than July 1, 2006. The contract shall provide for full implementation of administration and claims processing, including the application of Medicaid rates for service providers other than prescription drug and dental care providers, not later than July 1, 2007. The Department shall study the impact of paying dental care providers at Medicaid rates and shall make its recommendation 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 May 1, 2006.
SECTION 10.22.(c)  Effective July 1, 2007, G.S. 108A‑70.22, G.S. 108A‑70.24, and Part 5 of Article 3 of Chapter 135 of the General Statutes are repealed.
SECTION 10.22.(d)  Effective July 1, 2007, G.S. 108A‑70.20 reads as rewritten:
"§ 108A‑70.20.  Program established.
The Health Insurance Program for Children is established. The Program shall be administered by the Department of Health and Human Services in accordance with this Part and as required under Title XXI and related federal rules and regulations. "
SECTION 10.22.(e)  Effective July 1, 2007, G.S. 108A‑70.21(b) reads as rewritten:
"§ 108A‑70.21.  Program eligibility; benefits; enrollment fee and other cost‑sharing; coverage from private plans; purchase of extended coverage.
…
(b)	Benefits. – Except as otherwise provided for eligibility, fees, deductibles, copayments, and other cost‑sharing charges, health benefits coverage provided to children eligible under the Program shall be equivalent to coverage provided for dependents under the North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan, including optional prepaid plans. Prescription drug providers shall accept as payment in full, for outpatient prescriptions filled, ninety percent (90%) of the average wholesale price for the prescription drug or the amounts published by the Centers for Medicare and Medicaid Services plus a dispensing fee of five dollars and sixty cents ($5.60) per prescription for generic drugs and four dollars ($4.00) per prescription for brand name drugs. Except for dental care providers, health care providers providing services to Program enrollees shall accept as payment in full for services rendered the maximum allowable charges under the State Medical Assistance Program for services less any copayments assessed to enrollees under this Part. Dental 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 co‑payments 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, fluoride varnish, sealants, simple extractions, therapeutic pulpotomies, prefabricated stainless steel crowns, and routine fillings of amalgam or other tooth‑colored filling material to restore diseased teeth. No benefits are to be provided for services under this subsection that are not performed by or upon the direction of a dentist, doctor, or other professional provider approved by the Plan nor for services and materials that do not meet the standards accepted by the American Dental Association.
(2)	Vision: Scheduled routine eye examinations once every 12 months, eyeglass lenses or contact lenses once every 12 months, routine replacement of eyeglass frames once every 24 months, and optical supplies and solutions when needed. Optical services, supplies, and solutions must be obtained from licensed or certified ophthalmologists, optometrists, or optical dispensing laboratories. Eyeglass lenses are limited to single vision, bifocal, trifocal, or other complex lenses necessary for a Plan enrollee's visual welfare. Coverage for oversized lenses and frames, designer frames, photosensitive lenses, tinted contact lenses, blended lenses, progressive multifocal lenses, coated lenses, and laminated lenses is limited to the coverage for single vision, bifocal, trifocal, or other complex lenses provided by this subsection. Eyeglass frames are limited to those made of zylonite, metal, or a combination of zylonite and metal. All visual aids covered by this subsection require prior approval of the Plan. Upon prior approval by the Plan, refractions may be covered more often than once every 12 months.
(3)	Hearing: Auditory diagnostic testing services and hearing aids and accessories when provided by a licensed or certified audiologist, otolaryngologist, or other hearing aid specialist approved by the Plan. Prior approval of the Plan is required for hearing aids, accessories, earmolds, repairs, loaners, and rental aids.
The Department may provide services to children aged birth through five years enrolled in the Program through the State Medical Assistance managed care program. Services provided through the managed care program shall be paid from Program funds."

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
LONG‑TERM PLAN FOR MEETING MENTAL HEALTH, DEVELOPMENTAL DISABILITIES, AND SUBSTANCE ABUSE SERVICES NEEDS
SECTION 10.24.(a)  The Secretary of the Department of Health and Human Services shall, in consultation with interested advocacy groups and affected State and local agencies, develop a long‑range plan for addressing the mental health, developmental disabilities, and substance abuse services needs of the State. The plan shall be consistent with the plan developed pursuant to G.S. 122C‑102, and shall address the following:
(1)	The services needed at the community level within each LME in order to ensure an adequate level of services to the average number of persons needing the services based on population projections.
(2)	The full continuum of services needed for each disability group within an LME, including:
a.	Which services could be regional or multi‑LME based;
b.	What percent of the population each LME would expect to use State‑level facilities; and
c.	An inventory of existing services within each LME for each disability group, and the gaps that exist;
(3)	Projected growth in services for each disability group within each LME or region that can reasonably be managed over the ensuing five‑year period; and
(4)	Projected start‑up costs and the total funding needed in each year from the Trust Fund for Mental Health, Developmental Disabilities, and Substance Abuse Services and Bridge Funding Needs to implement the long‑range plan.
Funds shall not be transferred from the Trust Fund for Mental Health, Developmental Disabilities, and Substance Abuse Services and Bridge Funding Needs until the Secretary has consulted with the Joint Legislative Commission on Governmental Operations, the Joint Legislative Oversight Committee on Mental Health, Developmental Disabilities, and Substance Abuse Services, and the Chairs of the Senate Appropriations Committee on Health and Human Services and the House of Representatives Appropriations Subcommittee on Health and Human Services.
SECTION 10.24.(b)  Moneys in the Trust Fund established pursuant to G.S. 143‑15D shall be used to establish or expand community‑based services only if sufficient recurring funds can be identified within the Department from funds currently budgeted for mental health, developmental disabilities, and substance abuse services, area mental health programs or county programs, or local government.
SECTION 10.24.(c)  Not later than January 1, 2006, 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.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
COMPREHENSIVE TREATMENT SERVICES PROGRAM
SECTION 10.25.(a)  The Department of Health and Human Services shall continue the Comprehensive Treatment Services Program for children at risk for institutionalization or other out‑of‑home placement.  The Program shall be implemented by the Department in consultation with the Department of Juvenile Justice and Delinquency Prevention, the Department of Public Instruction, and other affected State agencies.  The purpose of the Program is to provide appropriate and medically necessary residential and nonresidential treatment alternatives for children at risk of institutionalization or other out‑of‑home placement.  Program funds shall be targeted for non‑Medicaid eligible children.  Program funds may also be used to expand a system‑of‑care approach for services to children and their families statewide.  The program shall include the following:
(1)	Behavioral health screening for all children at risk of institutionalization or other out‑of‑home placement.
(2)	Appropriate and medically necessary residential and nonresidential services for deaf children.
(3)	Appropriate and medically necessary residential and nonresidential treatment services including placements for sexually aggressive youth.
(4)	Appropriate and medically necessary residential and nonresidential treatment services including placements for youths needing substance abuse treatment services and children with serious emotional disturbances.
(5)	Multidisciplinary case management services, as needed.
(6)	A system of utilization review specific to the nature and design of the Program.
(7)	Mechanisms to ensure that children are not placed in department of social services custody for the purpose of obtaining mental health residential treatment services.
(8)	Mechanisms to maximize current State and local funds and to expand use of Medicaid funds to accomplish the intent of this Program.
(9)	Other appropriate components to accomplish the Program's purpose.
(10)	The Secretary of the Department of Health and Human Services may enter into contracts with residential service providers.
(11)	A system of identifying and tracking children placed outside of the family unit in group homes, therapeutic foster care home settings, and other out‑of‑home placements.
SECTION 10.25.(b)  In order to ensure that children at risk for institutionalization or other out‑of‑home placement 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 children:
(1)	Provide only those treatment services that are medically necessary.
(2)	Implement utilization review of services provided.
(3)	Adopt 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 child'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.
(4)	Implement all of the following cost‑reduction strategies:
a.	Preauthorization for all services except emergency services.
b.	Levels of care to assist in the development of treatment plans.
c.	Clinically appropriate services.
SECTION 10.25.(c)  The Department shall collaborate with other affected State agencies such as the Department of Juvenile Justice and Delinquency Prevention, the Department of Public Instruction, the Administrative Office of the Courts, and with local departments of social services, area mental health programs, and local education agencies to eliminate cost shifting and facilitate cost‑sharing among these governmental agencies with respect to the treatment and placement services.
SECTION 10.25.(d)  The Department shall not allocate funds appropriated for Program services until a Memorandum of Agreement has been executed between the Department of Health and Human Services, the Department of Public Instruction, and other affected State agencies.  The Memorandum of Agreement shall address specifically the roles and responsibilities of the various departmental divisions and affected State agencies involved in the administration, financing, care, and placement of children at risk of institutionalization or other out‑of‑home placement.  The Department shall not allocate funds appropriated in this act for the Program until Memoranda of Agreement between local departments of social services, area mental health programs, local education agencies, and the Administrative Office of the Courts and the Department of Juvenile Justice and Delinquency Prevention, as appropriate, are executed to effectuate the purpose of the Program.  The Memoranda of Agreement shall address issues pertinent to local implementation of the Program, including provision for the immediate availability of student records to a local school administrative unit receiving a child placed in a residential setting outside the child's home county.
SECTION 10.25.(e)  Notwithstanding any other provision of law to the contrary, services under the Comprehensive Treatment Services Program are not an entitlement for non‑Medicaid eligible children served by the Program.
SECTION 10.25.(f)  Of the funds appropriated in this act for the Comprehensive Treatment Services Program, the Department of Health and Human Services shall establish a reserve of three percent (3%) to ensure availability of these funds to address specialized needs for children with unique or highly complex problems.
SECTION 10.25.(g)  The Department of Health and Human Services, in conjunction with the Department of Juvenile Justice and Delinquency Prevention, the Department of Public Instruction, and other affected agencies, shall report on the following Program information:
(1)	The number and other demographic information of children served.
(2)	The amount and source of funds expended to implement the Program.
(3)	Information regarding the number of children screened, specific placement of children including the placement of children in programs or facilities outside of the child's home county, and treatment needs of children served.
(4)	The average length of stay in residential treatment, transition, and return to home.
(5)	The number of children diverted from institutions or other out‑of‑home placements such as training schools and State psychiatric hospitals and a description of the services provided.
(6)	Recommendations on other areas of the Program that need to be improved.
(7)	Other information relevant to successful implementation of the Program.
SECTION 10.25.(h)  The Department shall submit a report on December 1, 2005, on the implementation of this section and a final report not later than April 1, 2006, to the House of Representatives Appropriations Subcommittee on Health and Human Services, the Senate Appropriations Committee on Health and Human Services, the Joint Legislative Oversight Committee on Mental Health, Developmental Disabilities, and Substance Abuse Services, and the Fiscal Research Division.
SECTION 10.25.(i)  This section expires July 1, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
SERVICES TO MULTIPLY DIAGNOSED ADULTS
SECTION 10.26.(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.
(2)	Provide those treatment services that are medically necessary.
(3)	Implement utilization review of services provided.
SECTION 10.26.(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.
SECTION 10.26.(c)  No State funds shall be used for the purchase of single‑family or other residential dwellings to house multiply diagnosed adults.
SECTION 10.26.(d)  The Department shall submit a progress report on implementation of this section not later than February 1, 2006, and a final report not later than May 1, 2006, to the Senate Appropriations Committee on Health and Human Services, the House of Representatives Appropriations Subcommittee on Health and Human Services, the Joint Legislative Oversight Committee on Mental Health, Developmental Disabilities, and Substance Abuse Services, and the Fiscal Research Division.
SECTION 10.26.(e)  This section expires July 1, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
EXTEND MENTAL HEALTH CONSUMER ADVOCACY PROGRAM CONTINGENT UPON FUNDS APPROPRIATED BY THE 2007 GENERAL ASSEMBLY
SECTION 10.27.  Section 4 of S.L. 2001‑437, as amended by Section 10.30 of S.L. 2002‑126, and as further amended by Section 10.10 of S.L. 2003‑284, 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 July 1 of the fiscal year for which funds are appropriated by the General Assembly for that purpose. The remainder of this act is effective when it becomes law."

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
TRANSITION PLANNING FOR STATE PSYCHIATRIC HOSPITALS
SECTION 10.28.(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 continue to implement a plan for the transition of patients from State psychiatric hospitals 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 10.28.(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 10.28.(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 10.28.(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, the Joint Legislative Oversight Committee on Mental Health, Developmental Disabilities, and Substance Abuse Services, and the Fiscal Research Division.  These reports shall be submitted on December 1, 2005, and May 1, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
MENTAL RETARDATION CENTER DOWNSIZING
SECTION 10.29.(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 10.29.(b)  The Department of Health and Human Services shall apply any savings in State appropriations in each year of the 2005‑2007 fiscal biennium that result from reductions in beds or services as follows:
(1)	The Department shall place nonrecurring savings in the Trust Fund for Mental Health, Developmental Disabilities, and Substance Abuse Services and Bridge Funding Needs and use the savings to facilitate the transition of clients into appropriate community‑based services and support in accordance with G.S. 143‑15.3D; 
(2)	The Department of Health and Human Services, Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, shall retain recurring savings realized through implementation of this section 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 the savings in direct State appropriations in the budgets of the State mental retardation centers; and
(3)	The Department of Health and Human Services, Division of Medical Assistance, shall transfer any recurring Medicaid savings resulting from the downsizing of State‑operated MR centers from the ICF‑MR line in Medicaid to the CAP‑MR/DD line.
SECTION 10.29.(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 Department shall submit the progress report no later than January 15, 2006, and submit a final report no later than May 1, 2006.
SECTION 10.29.(d)  The Department of Health and Human Services shall maintain downsizing of mental retardation centers occurring in the 2005‑2006 fiscal year for the 2006‑2007 fiscal year. The Department shall accomplish downsizing in accordance with this section and the State Plan for Mental Health, Developmental Disabilities, and Substance Abuse Services. The Department shall use all savings resulting from downsizing occurring on and after July 1, 2005, as set forth in subsection (b) of this section.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
PRIVATE AGENCY UNIFORM COST FINDING REQUIREMENT
SECTION 10.30.(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 10.30.(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.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
DHHS POLICIES AND PROCEDURES IN DELIVERING COMMUNITY MENTAL HEALTH, DEVELOPMENTAL DISABILITIES, AND SUBSTANCE ABUSE SERVICES
SECTION 10.31.  The Department of Health and Human Services, Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, shall in cooperation with area mental health authorities and county programs, identify and eliminate administrative and fiscal barriers created by existing State and local policies and procedures in the delivery of community‑based mental health, developmental disabilities, and substance abuse services provided through the area programs and county programs, including services provided through the Comprehensive Treatment Services Program for Children and services delivered to multiply diagnosed adults.  The Department shall implement changes in policies and procedures in order to facilitate all of the following:
(1)	The provision of services to adults and children as defined in the Mental Health System Reform State Plan as priority or targeted populations.
(2)	A revised system of allocating State and federal funds to area mental health authorities and county programs that reflects projected needs, including the impact of system reform efforts rather than historical allocation practices and spending patterns.
(3)	The provision of services to children not deemed eligible for the Comprehensive Treatment Services Program for Children, but who would otherwise be in need of medically necessary treatment services to prevent out‑of‑home placement.
(4)	The provision of services in the community to adults remaining in and being placed in State institutions addressed in Olmstead v. L.C.
Area mental health, developmental disabilities, and substance abuse services authorities and county programs shall use all funds appropriated for and necessary to provide mental health, developmental disabilities, and substance abuse services to meet the need for these services. If excess funds are available after expending appropriated funds to fully meet service needs, one‑half of these excess funds shall not revert to the General Fund but shall be transferred to the Trust Fund for Mental Health, Developmental Disabilities, and Substance Abuse Services and Bridge Funding Needs, except that one‑half of the funds appropriated for the Comprehensive Treatment Services Program for Children that are unexpended and unencumbered shall not revert to the General Fund but shall be carried forward and used only for services for children and adolescents.
The Department, in consultation with the area mental health authorities and county programs, shall report to the House of Representatives Appropriations Subcommittee on Health and Human Services, the Senate Appropriations Committee on Health and Human Services, and the Joint Legislative Oversight Committee on Mental Health, Developmental Disabilities, and Substance Abuse Services on the progress in implementing these changes. The report shall be submitted on October 1, 2005, and February 1, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
IMMUNITY FOR REPORTING ABUSE AND NEGLECT
SECTION 10.32.  G.S. 122C‑66 reads as rewritten:
"§ 122C‑66.  Protection from abuse and exploitation; reporting.
(a)	An employee of or a volunteer at a facility who, other than as a part of generally accepted medical or therapeutic procedure, knowingly causes pain or injury to a client or borrows or takes personal property from a client is guilty of a Class 1 misdemeanor. Any employee or volunteer who uses reasonable force to carry out the provisions of G.S. 122C‑60 or to protect himself or others from a violent client does not violate this subsection.
(a1)	An individual who witnesses or has knowledge of abuse, neglect, or exploitation of a client of a residential facility may report the incident of abuse, neglect, or exploitation to an authorized employee of the facility. 
(b)	An employee of a facility who witnesses or has knowledge of a violation of subsection (a) or of an accidental injury to a client shall report the violation or accidental injury to authorized personnel designated by the facility. No employee making a report may be threatened or harassed by any other employee or volunteer on account of the report. Violation of this subsection is a Class 3 misdemeanor punishable only by a fine, not to exceed five hundred dollars ($500.00).
(c)	The identity of an individual who makes a report under this section or who cooperates in an ensuing investigation may not be disclosed without his consent, except to persons authorized by the facility or by State or federal law to investigate or prosecute these incidents, or in a grievance or personnel hearing or civil or criminal action in which a reporting individual is testifying, or when disclosure is legally compelled or authorized by judicial discovery. This subsection shall not be interpreted to require the disclosure of the identity of an individual where it is otherwise prohibited by law.
(d)	An employee or citizen who makes a report in good faith under this section is immune from any civil liability that might otherwise occur for the report. In any case involving liability, making of a report under this section is prima facie evidence that the maker acted in good faith.
(e)	The duty imposed by this section is in addition to any duty imposed by G.S. 7B‑301 or G.S. 108A‑102.
(f)	The facility shall investigate or provide for the investigation of all reports made under the provisions of this section."

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
RULES PERTAINING TO CONFLICT OF INTEREST IN REFERRALS TO PROVIDER AGENCIES
SECTION 10.33.  G.S. 122C‑26 reads as rewritten:
"§ 122C‑26.  Powers of the Commission.
In addition to other powers and duties, the Commission shall exercise the following powers and duties:
(1)	Adopt, amend, and repeal rules consistent with the laws of this State and the laws and regulations of the federal government to implement the provisions and purposes of this Article;
(2)	Issue declaratory rulings needed to implement the provisions and purposes of this Article;
(3)	Adopt rules governing appeals of decisions to approve or deny licensure under this Article;
(4)	Adopt rules for the waiver of rules adopted under this Article; and
(5)	Adopt rules applicable to facilities licensed under this Article:
a.	Establishing personnel requirements of staff employed in facilities;
b.	Establishing qualifications of facility administrators or directors;
c.	Establishing requirements for death reporting including confidentiality provisions related to death reporting; 
d.	Establishing requirements for patient  advocates; and
e.	Requiring facility personnel who refer clients to provider agencies to disclose any pecuniary interest the referring person has in the provider agency, or other interest that may give rise to the appearance of impropriety."

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
LEGISLATIVE OVERSIGHT COMMITTEE on Mental Health, Developmental Disabilities, and Substance Abuse Services to STUDY OVERSIGHT AND MONITORING BY Department of Health and Human Services OF SERVICES TO MENTAL HEALTH CONSUMERS
SECTION 10.34.  The Legislative Oversight Committee on Mental Health, Developmental Disabilities, and Substance Abuse Services shall study the oversight and monitoring roles and activities of the Divisions of: Social Services, Facility Services, Medical Assistance, and Mental Health, Developmental Disabilities, and Substance Abuse Services, of the Department of Health and Human Services.  The study shall focus on how the oversight and monitoring activities benefit consumers of mental health, developmental disabilities, and substance abuse services in residential settings, and shall include in its report recommendations on ensuring quality of care and increasing efficiency in the provision of services.  The Oversight Committee shall report its findings and recommendations 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, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
APPEALS PROCESS FOR CLIENTS OF MENTAL HEALTH, DEVELOPMENTAL DISABILITIES, AND SUBSTANCE ABUSE SERVICES PROGRAMS
SECTION 10.35.  G.S. 122C‑151.2 reads as rewritten:
"§ 122C‑151.2.  Appeal by area authorities and county programs; rules governing appeals process for clients of area authorities or county programs.
(a)	The area authority or county program may appeal to the Commission any action regarding rules under the jurisdiction of the Commission or rules under the joint jurisdiction of the Commission and the Secretary.
(b)	The area authority or county program may appeal to the Secretary any action regarding rules under the jurisdiction of the Secretary.
(b1)	The Commission shall adopt rules governing an appeals process for clients to the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services and the Secretary. The appeals process shall ensure that area authority and county program services meet the requirements of applicable statutes and the rules of the Commission and the Secretary.
(c)	Appeals shall be conducted according to rules adopted by the Commission and Secretary and in accordance with Chapter 150B of the General Statutes."

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
CONTROLLED SUBSTANCES REPORTING
SECTION 10.36.(a)  Chapter 90 of the General Statutes is amended by adding a new Article to read:
"Article 5D.
"North Carolina Controlled Substances Reporting Act.
"§ 90‑113.60.  Short title.
This Article shall be known and may be cited as the "North Carolina Controlled Substances Reporting System Act."
"§ 90‑113.61.  Legislative findings.
The General Assembly makes the following findings:
(1)	North Carolina is experiencing an epidemic of poisoning deaths from unintentional drug overdoses.
(2)	Since 1997, the number of deaths from unintentional drug overdoses has increased threefold, from 228 deaths in 1997 to 690 deaths in 2003.
(3)	The number of unintentional deaths from illicit drugs in North Carolina has decreased since 1992 while unintentional deaths from licit drugs, primarily prescriptions, have increased.
(4)	Licit drugs are now responsible for over half of the fatal unintentional poisonings in North Carolina.
(5)	Over half of the prescription drugs associated with unintentional deaths are narcotics (opioids).
(6)	Of these licit drugs, deaths from methadone, usually prescribed as an analgesic for severe pain, have increased sevenfold since 1997.
(7)	Methadone from opioid treatment program clinics is a negligible source of the methadone that has contributed to the dramatic increase in unintentional methadone‑related deaths in North Carolina.
(8)	Review of the experience of the 19 states that have active controlled substances reporting systems clearly documents that implementation of these reporting systems do not create a "chilling" effect on prescribing.
(9)	Review of data from controlled substances reporting systems help:
a.	Support the legitimate medical use of controlled substances.
b.	Identify and prevent diversion of prescribed controlled substances.
c.	Reduce morbidity and mortality from unintentional drug overdoses.
d.	Reduce the costs associated with the misuse and abuse of controlled substances.
e.	Assist clinicians in identifying and referring for treatment patients misusing controlled substances.
f.	Reduce the cost for law enforcement of investigating cases of diversion and misuse.
g.	Inform the public, including health care professionals, of the use and abuse trends related to prescription drugs.
"§ 90‑113.62.  Definitions.
The following definitions apply in this Article:
(1)	"Controlled substance" means a controlled substance as defined in G.S. 90‑87(5).
(2)	"Department" means the Department of Health and Human Services.
(3)	"Dispenser" means a person who delivers a Schedule II through V controlled substance to an ultimate user in North Carolina, but does not include any of the following:
a.	A licensed hospital or long‑term care pharmacy that dispenses such substances for the purpose of inpatient administration.
b.	A person authorized to administer such a substance pursuant to Chapter 90 of the General Statutes.
c.	A wholesale distributor of a Schedule II through V controlled substance.
(4)	"Ultimate user" means a person who has lawfully obtained, and who possesses, a Schedule II through V controlled substance for his or her own use, for the use of a member of his or her household, or for the use of an animal owned or controlled by him or her or by a member of his or her household.
"§ 90‑113.63.  Requirements for controlled substances reporting system.
The Department shall establish and maintain a reporting system of prescriptions for all Schedule II through V controlled substances. Each dispenser shall submit the information in accordance with transmission methods and frequency established by rule by the Commission. The Department may issue a waiver to a dispenser that is unable to submit prescription information by electronic means. Such waiver may permit the dispenser to submit prescription information by paper form or other means, provided all information required of electronically submitted data is submitted.
"§ 90‑113.64.  Confidentiality.
(a)	Prescription information submitted to the Department shall be confidential and shall not be public records pursuant to G.S. 132‑1. The Department may use such information for purposes of administration and enforcement. Any contractor shall be bound to maintain the confidentiality of prescription information in accordance with this section. The information may only be disclosed in accordance with subsections (b) and (c) of this section.
(b)	The Department shall, upon request, release data in the controlled substances reporting system to the following persons:
(1)	Persons authorized to prescribe or dispense controlled substances for the purpose of providing medical or pharmaceutical care for their patients.
(2)	An individual who requests the individual's own controlled substances reporting system information.
(3)	Other agencies authorized to have access to such information pursuant to the provisions of G.S. 90‑107.
(4)	Primary monitoring authorities for other states if information concerns the dispensing of a Schedule II through V controlled substance to an ultimate user who resides in such state or the dispensing of a Schedule II through V controlled substance prescribed by a licensed health care practitioner whose principal place of business is located in such other state.
(5)	To a court pursuant to a lawful court order.
(c)	The Department may provide data to public or private entities for statistical, research, or educational purposes after removing information that could be used to identify individual patients who received prescriptions from dispensers.
"§ 90‑113.65.  Commission for Mental Health, Developmental Disabilities, and Substance Abuse Services to adopt rules.
The Commission for Mental Health, Developmental Disabilities, and Substance Abuse Services shall adopt rules necessary to implement this act."
SECTION 10.36.(b)  This section becomes effective January 1, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
SENIOR CENTER OUTREACH
SECTION 10.37.(a)  Funds appropriated to the Department of Health and Human Services, Division of Aging and Adult Services, for the 2005‑2007 fiscal biennium, shall be used by the Division of Aging and Adult Services 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 10.37.(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 10.37.(c)  State funding shall not exceed seventy‑five percent (75%) of reimbursable costs.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
STATE/COUNTY SPECIAL ASSISTANCE
SECTION 10.38.(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 10.38.(b)   Effective July 1, 2005, the maximum monthly rate for residents in adult care home facilities shall be one thousand eighty‑four dollars ($1,084) per month per resident unless adjusted by the Department in accordance with subsection (d) of this section.
SECTION 10.38.(c)  It is the intent of the General Assembly to protect individuals who meet current eligibility standards for State/County Special Assistance from becoming disenfranchised from the program as a result of any changes proposed in this section.  Therefore, subject to any necessary approvals by the Center for Medicare & Medicaid Services (CMS):
(1)	The eligibility of Special Assistance recipients who resided 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; and
(2)	The standard of need level for coverage eligibility under State/County Special Assistance, for individuals not enrolled or recipients of the program on September 30, 2003, shall be not less than one thousand ninety‑one dollars ($1,091) per month per individual, but the monthly reimbursement rate for such individuals shall be the amount established under subsections (c) and (d) of this section. However, the Department of Health and Human Services, in its determination of reimbursement rates, may establish a minimum monthly reimbursement rate of not more than five dollars ($5.00) per month for any resident of an adult care home facility meeting the established standard of need level for coverage.
SECTION 10.38.(d)  Notwithstanding any other provision of this section, the Department of Health and Human Services shall review activities and costs related to the provision of care in adult care homes and shall determine what costs may be considered to properly maximize allowable reimbursement available through Medicaid personal care services for adult care homes (ACH‑PCS) under federal law.  As determined, and with any necessary approval from the Centers for Medicare and Medicaid Services (CMS), and the approval of the Office of State Budget and Management, the Department may transfer necessary funds from the State/County Special Assistance program within the Division of Social Services to the Division of Medical Assistance and may use those funds as State match to draw down federal matching funds to pay for such activities and costs under Medicaid's personal care services for adult care homes (ACH‑PCS), thus maximizing available federal funds.  The established rate for State/County Special Assistance set forth in subsection (c) of this section shall be adjusted by the Department to reflect any transfer of funds from the Division of Social Services to the Division of Medical Assistance, and related transfer costs and responsibilities from State/County Special Assistance to the Medicaid personal care services for adult care homes (ACH‑PCS).  Such rate adjustments to the Special Assistance rate shall be effective with the effective date of increased reimbursement under ACH‑PCS.  In no event shall the reimbursement for services through the ACH‑PCS exceed the average cost of such services as determined by the Department from review of cost reports as required and submitted by adult care homes.  The Department shall report any transfers of funds and modifications of rates to the House of Representatives Appropriations Subcommittee on Health and Human Services, the Senate Appropriations Committee on Health and Human Services, and the Fiscal Research Division.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
SPECIAL ASSISTANCE IN‑HOME
SECTION 10.39.(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 2005‑2006 fiscal year and the 2006‑2007 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 2005‑2006, qualified individuals shall not receive payments at rates less than they would have been eligible to receive in State fiscal year 2004‑2005. 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 10.39.(b)  The Department shall report on or before January 1, 2006, and on or before January 1, 2007, 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. 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 10.39.(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, Malone, Garrou, Dalton, Hagan
LICENSure of residential treatment facilities
SECTION 10.40.(a) Article 2 of Chapter 122C of the General Statutes is amended by adding the following new section to read:
"§ 122C‑23.1.  Licensure of residential treatment facilities.
The General Assembly finds:  
(1)	That much of the care for residential treatment facility residents is paid by the State and the counties;
(2)	That the cost to the State for care for residents of residential treatment facilities is substantial, and high vacancy rates in residential treatment facilities further increase the cost of care;
(3)	That the proliferation of residential treatment facilities results in costly duplication and underuse of facilities and may result in lower quality service;
(4)	There is currently no ongoing relationship between some applicants for licensure and local management entities (LMEs) that are responsible for the placement of children and adults in residential treatment facilities; and
(5)	That it is necessary to protect the general welfare and lives, health, and property of the people of the State for the local management entity (LME) to verify that additional beds are needed in the LME's catchment area before new residential treatment facilities are licensed. This process is established to ensure that unnecessary costs to the State do not result, residential treatment facility beds are available where needed, and that individuals who need care in residential treatment facilities may have access to quality care.
Based on these findings, the Department of Health and Human Services may license new residential treatment facilities if the applicant for licensure submits with the application a letter of support obtained from the local management entity in whose catchment area the facility will be located. The letter of support shall be submitted to the Department of Health and Human Services, Division of Facility Services and Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, and shall specify the number of existing beds in the same type of facility in the catchment area and the projected need for additional beds of the same type of facility. As used in this subsection, "residential treatment facility" means a "residential facility" as defined in and licensed under this Chapter, but not subject to Certificate of Need requirements under Article 9 of Chapter 131E of the General Statutes.
SECTION 10.40.(b)  This section applies to  license applications pending and license applications submitted on and after the effective date of this act. 

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
PLAN FOR STAR‑RATING SYSTEM FOR ADULT CARE HOMES
SECTION 10.41.  The Department of Health and Human Services shall develop a plan for implementing a star‑rating system for adult care homes to improve quality of care.  The Department shall report on the status and details of the plan, including a recommended timeline for implementation, 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 March 1, 2006. 

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
SOCIAL SERVICES COMMISSION TECHNICAL CORRECTION
SECTION 10.42.  G.S. 108A‑14(a)(8) reads as rewritten:
"§ 108A‑14.  Duties and responsibilities.
(a)	The director of social services shall have the following duties and responsibilities:
…
(8)	To supervise adult care homes under the rules and regulations of the Medical Care Commission;
…."

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Child Support Program/Enhanced Standards
SECTION 10.43.(a)  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 10.43.(b)  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, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Child Welfare System Study
SECTION 10.44.  The Department of Health and Human Services shall conduct a study to document variations in the implementation of the Child Welfare System within North Carolina counties. The study shall include recommendations for correcting identified disparities. The study shall identify systemic issues associated with North Carolina's Child Welfare System and provide recommendations for resolving these issues. The Department shall report the results of its study 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 no later than January 1, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Multiple Response System
SECTION 10.45.(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. Local departments of social services shall continue systems already in place. The alternative response system shall provide a family‑centered approach to child protective services in which local departments of social services use family assessment tools and family support principles when responding to selected reports of suspected child abuse, neglect, and dependency, including establishing a system of care with child and family teams.
SECTION 10.45.(b)  The Department of Health and Human Services shall expand this project using both State appropriations and any non‑State funding sources that can be identified for this purpose. Counties may also implement the system using existing resources.

Requested by:	Senators Purcell, Malone, 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)	$390.00 per child per month for children aged birth through 5;
(2)	$440.00 per child per month for children aged 6 through 12; and
(3)	$490.00 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)	$390.00 per child per month for children aged birth through 5;
(2)	$440.00 per child per month for children aged 6 through 12; and
(3)	$490.00 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 child per month with indeterminate HIV status;
(2)	$1,000 per child per month confirmed HIV‑infected, asymptomatic;
(3)	$1,200 per child per month confirmed HIV‑infected, symptomatic; and
(4)	$1,600 per child per month terminally ill with complex care needs.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Child Caring Institutions
SECTION 10.47.(a)  The Office of the State Auditor shall conduct an audit to evaluate overhead rates and reimbursements for child caring institutions receiving State funding. Of the funds appropriated to the Department of Health and Human Services, Office of the Controller, the sum of one hundred fifty thousand dollars ($150,000) shall be transferred to the State Auditor to conduct the audit. The audit shall include the following:
(1)	A detailed evaluation of each child caring institution's cost allocation processes.
(2)	A determination of whether the allocated costs are consistent in different agencies.
(3)	A determination of the basis used for cost allocation by each agency.
(4)	The methodology used to assign direct and indirect costs to specific child caring institution programs.
(5)	A determination of whether the overhead charged is reasonable for that specific type of nonprofit, based on national surveys.
(6)	A determination of how agency utilization rates impact the child caring institutions' cost allocation and subsequent State reimbursements.
(7)	An examination of rate‑setting methodologies used by other states and how North Carolina's payment to child caring institutions compare to other states.
(8)	Recommendations on how to develop equitable, reasonable rates.
(9)	An examination of the feasibility of providing child caring institutions with the opportunity to compete based on providing the best service at least cost.
The Office of the State Auditor 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 no later than March 1, 2006. The written report shall include copies of working papers developed during the course of the audit.
SECTION 10.47.(b)  The Department of Health and Human Services shall establish standardized rates for child caring institutions in this State. These rates shall be effective January 1, 2006, and shall be updated annually on July 1. Rate‑setting recommendations provided by the Office of the State Auditor shall be incorporated into the Department of Social Services rate‑setting methodology.
SECTION 10.47.(c)  Until standardized rates are set, child caring institutions' maximum reimbursement shall not exceed the rate established for the specific child caring institution by the Department of Health and Human Services Office of the Controller. In determining the maximum reimbursement, counties shall include county and IV‑E reimbursements.
SECTION 10.47.(d)  Minimum reimbursement for foster parents providing services through child caring institutions shall not be lower than the rates established by the General Assembly.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Special Children Adoption Fund
SECTION 10.48.(a)  Of the funds appropriated to the Department of Health and Human Services in this act, the sum of one hundred thousand dollars ($100,000) shall be used to support the Special Children Adoption Fund for the 2005‑2006 fiscal year. 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 exceeds two hundred percent (200%) of the federal poverty level.
SECTION 10.48.(b)  Of the total funds appropriated for the Special Children Adoption Fund each year, twenty percent (20%) of the total funds available shall be reserved for payment to participating private adoption agencies. If the funds reserved in this subsection for payments to private agencies have not been spent on or before March 31, 2006, the Division of Social Services may reallocate those funds, in accordance with this section, to other participating adoption agencies.
SECTION 10.48.(c)  The Division of Social Services shall monitor the total expenditures in the Special Children Adoption Fund and redistribute unspent funds to ensure that the funds are used according to the guidelines established in subsection (a) of this section. The Division shall implement strategies to ensure that funds that have historically reverted for this program are used for the intended purpose. The Division shall report 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 on the expenditures and activities of the program no later than December 1, 2005, and June 30, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Study to identify Adoption Incentives for children who are difficult to place
SECTION 10.49.  The Department of Health and Human Services shall conduct a study to identify potential incentives for adoption of children who are difficult to place and the associated costs for each incentive. The study shall identify incentives currently in place in individual counties and the associated costs. The study shall identify funding sources available to support each incentive. The Department shall report the results of its study 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 no later than October 1, 2005.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Limitation on State Abortion Fund
SECTION 10.50.  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 2005‑2006 and 2006‑2007 fiscal years.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
TANF Benefit Implementation
SECTION 10.51.(a)  The General Assembly approves the plan titled "North Carolina Temporary Assistance for Needy Families State Plan FY 2005‑2007", prepared by the Department of Health and Human Services and presented to the General Assembly as revised in accordance with subsection (b) of this section, except that the provision contained in the approved North Carolina Temporary Assistance for Needy Families State Plan FY 2005‑2007 eliminating pay‑after‑performance as a benefit delivery method for two‑parent families will only be implemented if the federal two‑parent work participation rate is eliminated. The North Carolina Temporary Assistance for Needy Families State Plan covers the period October 1, 2005, through September 30, 2007. 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 2005 General Assembly.
SECTION 10.51.(b)  The counties approved as Electing Counties in North Carolina's Temporary Assistance for Needy Families State Plan FY 2005‑2007 as approved by this section are:  Beaufort, Caldwell, Catawba, Iredell, Lenoir, Lincoln, Macon, McDowell, Sampson, and Stokes.
SECTION 10.51.(c)  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 2005 through 2007, pursuant to G.S. 108A‑27(e), shall operate under the Electing County budget requirements effective July 1, 2005. For programmatic purposes, all counties referred to in this subsection shall remain under their current county designation through September 30, 2005.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Residential Schools Reporting
SECTION 10.52.  The Office of Education Services shall report not later than December 1, 2005, 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.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
FUNDS for school nurses
SECTION 10.53.  Of the funds appropriated in this act to the Department of Health and Human Services, the sum of two million five hundred thousand dollars ($2,500,000) for the 2005‑2006 fiscal year, and the sum of two million five hundred thousand dollars ($2,500,000) for the 2006‑2007 fiscal year shall be used for the school nurse funding initiative.  The Department of Health and Human Services, Division of Public Health, in conjunction with the Department of Public Instruction, shall provide funds to communities to hire school nurses.  The program will fund 50 permanent local nurses. The criteria shall include determining the areas in greatest need for school nurses with the greatest inability to pay for these nurses. Other criteria to be considered shall include:  (i) the current nurse‑to‑student ratio; (ii) the economic status of the community; and (iii) the health needs of area children.
There shall be no supplanting of local, State, or federal funds with these funds. Communities shall maintain their current level of effort and funding for school nurses. These funds shall not be used for funding nurses for State agencies. All funding shall be used for direct services.
The Department of Health and Human Services shall report on the use of funds allocated under this section by December 1, 2005, 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, Malone, Garrou, Dalton, Hagan
EARLY INTERVENTION REPORTING AND EVALUATION
SECTION 10.54.(a)  The Department of Health and Human Services, Division of Public Health, shall report on Early Intervention services. The report shall include the number of children served, the number and types of services and evaluations provided, and the budget for each Children's Developmental Services Agency. In addition, the Division of Public Health shall evaluate its Early Intervention Program provider network, including provider certification and continuing education requirements.
SECTION 10.54.(b)  The Department of Health and Human Services shall analyze the reimbursement rates for Early Intervention services, and may adjust rates according to the findings of the analysis.
SECTION 10.54.(c)  The Division of Public Health shall analyze the program funding for the Children with Special Needs Program and shall develop a plan to utilize these funds within the Early Intervention Program. The Division shall report its findings and recommendations 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 December 1, 2005.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
CONTRACTING FOR more effective COMBINATION VACCINES
SECTION 10.55.  The Department of Health and Human Services may contract for the purchase of new combination vaccines that are more expensive than currently used combination or single component vaccines only if the new, more expensive combination vaccine is more effective than the currently used combination or single component vaccine it replaces.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
CHRONIC DISEASE PREVENTION ACTIVITIES INVENTORY
SECTION 10.56.  In order to reduce costs and eliminate duplication of effort, the Department of Health and Human Services shall create an inventory of all chronic disease prevention activities, funding, staffing, and other resources for these activities, including funding and resources for related task forces and committees. The inventory shall include at a minimum, heart disease, stroke, diabetes, osteoporosis, and cancer. The Department shall create a plan to combine task forces and activities for chronic disease prevention and shall explore collapsing these task forces and committees into the Healthy Carolinians structure. The Department shall report on the inventory and the Department's recommendations not later than February 1, 2006, 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, Malone, Garrou, Dalton, Hagan
PILOT PROGRAM FOR AUTOMATIC EXTERNAL DEFIBRILLATORS IN PUBLIC BUILDINGS
SECTION 10.57.(a)  The Department of Health and Human Services, Division of Public Health, shall develop a pilot program to place Automated External Defibrillators (AED) in public buildings, including public gymnasiums, that do not have an operational AED in place. In selecting pilot sites, the Department shall ensure geographic representation of the State.
SECTION 10.57.(b)  Of the funds appropriated in this act to the Department of Health and Human Services, the sum of seventeen thousand dollars ($17,000) for the 2005‑2006 fiscal year, and the sum of six thousand dollars ($6,000) for the 2006‑2007 fiscal year shall be used to purchase AED units, conduct on‑site training at the pilot sites, and conduct ongoing education and awareness campaigns to the general public in the piloted sites. The Department shall ensure that training in the use of an AED shall be conducted in accordance with G.S. 90‑21.15(b)(3). The Heart Disease and Stroke Prevention Branch of the Division of Public Health shall be responsible for the purchase of AEDs, the training of pilot program participants, and evaluation of the pilot program. 
SECTION 10.57.(c)  The Department of Health and Human Services shall report on the location, establishment, and implementation of the pilot sites 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, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
IMMUNIZATION PROGRAM FUNDING
SECTION 10.58.(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 2005‑2006 fiscal year and the sum of one million dollars ($1,000,000) for the 2006‑2007 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 10.58.(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 contracts with local health departments for outreach.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
AIDS DRUG ASSISTANCE PROGRAM
SECTION 10.59.(a)  For the 2005‑2006 fiscal year and for the 2006‑2007 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 2005‑2007 fiscal biennium shall not be extended to individuals with incomes above one hundred twenty‑five percent (125%) of the federal poverty level.
SECTION 10.59.(b)  The Department of Health and Human Services shall make an interim report on ADAP program utilization by January 1, 2006, and a final report on ADAP program utilization by May 1, 2006, 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 ADAP program utilization as follows:
(1)	Monthly data on total cumulative AIDS/HIV cases reported in North Carolina.
(2)	Monthly data on the number of individuals who have applied to participate in ADAP that have been determined to be ineligible.
(3)	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.
(4)	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.
(5)	An update on the status of the information management system.
(6)	Monthly data on ADAP usage patterns and demographics of participants in ADAP.
(7)	Fiscal year‑to‑date budget information.
(8)	The status of the new system of management for ADAP, the costs savings realized from the new system, and recommendations for improving the system.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Child Care Funds Matching Requirement
SECTION 10.60.  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, Malone, Garrou, Dalton, Hagan
Child Care Allocation Formula
SECTION 10.61.(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 10.61.(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, Malone, Garrou, Dalton, Hagan
Child Care Subsidy Rates
SECTION 10.62.(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 10.62.(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 10.62.(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 and School Readiness 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 10.62.(d)  Provisions 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 10.62.(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 and School Readiness shall also calculate a statewide rate and regional market rates for each rated license level for each age category.
SECTION 10.62.(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 10.62.(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 and School Readiness for the subsidized child care program.
SECTION 10.62.(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, Malone, Garrou, Dalton, Hagan
Child Care Revolving Loan
SECTION 10.63.  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, Malone, Garrou, Dalton, Hagan
EARLY CHILDHOOD EDUCATION AND DEVELOPMENT INITIATIVES ENHANCEMENTS
SECTION 10.64.(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 10.64.(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, a request for proposal process and advertising in a major newspaper.
SECTION 10.64.(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 10.64.(d)  The Department of Health and Human Services shall continue to implement the performance‑based evaluation system.
SECTION 10.64.(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 2005‑2006 and 2006‑2007 shall be administered and distributed in the following manner:
(1)	Capital expenditures are prohibited for fiscal years 2005‑2006 and 2006‑2007. For the purposes of this section, "capital expenditures" means expenditures for capital improvements as defined in G.S. 143‑34.40.
(2)	Expenditures of State funds for advertising and promotional activities are prohibited for fiscal years 2005‑2006 and 2006‑2007.
SECTION 10.64.(f)  A county may use the county's allocation of State and federal child care funds to subsidize child care according to the county's Early Childhood Education and Development Initiatives Plan as approved by the North Carolina Partnership for Children, Inc. The use of federal funds shall be consistent with the appropriate federal regulations. Child care providers shall, at a minimum, comply with the applicable requirements for State licensure pursuant to Article 7 of Chapter 110 of the General Statutes.

Requested by:	Senators Purcell, Malone, Hagan, Garrou, Dalton
Smart Start Funding Study
SECTION 10.65.(a)  The North Carolina Partnership for Children, Inc., shall study its allocation of funds to local partnerships. The North Carolina Partnership for Children, Inc., shall study funding equity among all counties and local partnerships based on population, the number of children from birth to five years of age residing in the county region, economic indicators, and the quality of existing child care. The North Carolina Partnership for Children, Inc., shall develop strategies to alleviate the inequity of funds to local partnerships.
SECTION 10.65.(b)  The North Carolina Partnership for Children, Inc., shall report its findings and recommendations 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, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
Analyze Child Care Subsidy Reimbursement System
SECTION 10.66.(a)  The Department of Health and Human Services, Division of Child Development and School Readiness, shall conduct an analysis of the child care subsidy reimbursement system. The Division of Child Development and School Readiness shall conduct the analysis as follows:
(1)	Compare surveyed rates from the 2005 child care market survey to existing reimbursement rates and identify counties and levels of disparity of current market rates to subsidy reimbursements.
(2)	Compare overall compensation for child care workers by county and determine if there is a correlation with child care quality and subsidy reimbursements.
(3)	Examine the impact of North Carolina Partnership for Children, Inc., funding on child care market rates and quality of child care by comparing the length of time local partnerships have been present in counties, the amount local partnerships spend on child care quality initiatives, the number of higher quality child care centers and homes, and the allocation to the county by percentage of need.
(4)	Examine, by county, the prevalence of child care providers who charge parents a differential fee to make up the difference between private and subsidy reimbursement rates.
(5)	Examine the impact that child care reimbursement rates have on providing families access to all levels of child care.
SECTION 10.66.(b)  The Division of Child Development and School Readiness shall develop strategies to implement market rate equity among counties and submit a report of its findings and recommendations 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 30, 2006.

Requested by:	Senators Purcell, Malone, Garrou, Dalton, Hagan
MORE AT FOUR
SECTION 10.67.(a)  Of the funds appropriated in this act to the Department of Health and Human Services, the sum of sixty‑six million five hundred forty‑six thousand six hundred fifty‑three dollars ($66,546,653) for the 2005‑2006 fiscal year and the sum of seventy‑nine million one hundred nine thousand seven hundred seventy‑nine dollars ($79,109,779) for the 2006‑2007 fiscal year shall be used to implement "More At Four", a voluntary prekindergarten program for at‑risk four‑year‑olds.
SECTION 10.67.(b)  The Department of Health and Human Services, Division of Child Development and School Readiness, 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 and the Department of Public Instruction. 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 North Carolina Child Development and School Readiness Task Force (hereinafter "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 postassessment 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)	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.
SECTION 10.67.(c)  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‑rated 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 "More At Four" program shall review the number of slots filled by counties on a monthly basis and shift the unfilled slots to counties with waiting lists. The shifting of slots shall occur through December 30, 2005, at which time any remaining funds for slots unfilled shall be used to meet the needs of the waiting list for subsidized child care.
SECTION 10.67.(d)  The Department of Health and Human Services, Division of Child Development and School Readiness, and the Task Force shall submit a report by February 1, 2006, 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.
SECTION 10.67.(e)  For the 2005‑2006 and the 2006‑2007 fiscal years, the "More At Four" program shall establish income eligibility requirements for the program not to exceed seventy‑five percent (75%) of the State median income to make the program consistent with the child care subsidy requirements. Up to twenty percent (20%) of children enrolled may have family incomes in excess of seventy‑five percent (75%) of median income if they have other designated risk factors.
SECTION 10.67.(f)  The "More At Four" program funding shall not supplant any funding for classrooms serving four‑year‑olds as of the 2003‑2004 fiscal year.
SECTION 10.67.(g)  The Department of Health and Human Services, Division of Child Development and School Readiness, shall review and evaluate the early literacy project in Davie County and consider incorporation of this curriculum into the "More At Four" program.
SECTION 10.67.(h)  The "More At Four" program shall contract with Prevent Blindness of North Carolina for one hundred fifty thousand dollars ($150,000) for vision screenings for children in the "More At Four" program and other child care classrooms.
SECTION 10.67.(i)  The "More At Four" program shall provide a grant of one hundred seventy‑seven thousand dollars ($177,000) to the Carolina Children's Communicative Disorders Program at the University of North Carolina at Chapel Hill.
 
Requested by:	Senators Garrou, Dalton, Hagan  
Establish the division of child development and School Readiness in the department of health AND human services
SECTION 10.68.(a)  The Division of Child Development of the Department of Health and Human Services is renamed the Division of Child Development and School Readiness (hereinafter "the Division").  The purpose of the Division is to regulate and license child care facilities, administer the five‑star rating system of child care facilities, and ensure school readiness for North Carolina's children through increased coordination and effectiveness of the State's early care and education programs and through improved transitions for at‑risk children into kindergarten.  In addition, the Division shall have oversight of all prekindergarten programs serving three‑ and four‑year‑olds, which includes the More at Four prekindergarten programs, and shall expand the focus of the programs, thereby developing increased collaboration between local Head Start programs and the State's prekindergarten programs as well as private child care programs. The Division shall collaborate with the Department of Public Instruction to develop a common statewide assessment and to promote improved transition practices for children entering kindergarten.
SECTION 10.68.(b)  The More at Four Prekindergarten Program is transferred from the Office of the Governor to the Department of Health and Human Services, Division of Child Development and School Readiness.  This transfer shall have all the elements of a Type I transfer, as defined in G.S. 143A‑6. 
SECTION 10.68.(c)  The Head Start Collaboration Office shall remain in the Department of Health and Human Services under the Division of Child Development and School Readiness. 
SECTION 10.68.(d)  The North Carolina Partnership for Children, Inc., shall continue to be funded through, and work cooperatively with, the Department of Health and Human Services, the Division of Child Development and School Readiness. 
SECTION 10.68.(e)  The More at Four Task Force shall be reconstituted and renamed the North Carolina Child Development and School Readiness Task Force. The Secretary of the Department of Health and Human Services shall appoint the members of the North Carolina Child Development and School Readiness Task Force from representatives of publicly funded programs and services for children age birth to five years, including the More at Four Prekindergarten Program, the North Carolina Partnership for the Children, Inc., Early Intervention, preschool programs in the public schools and other stakeholders, including Head Start.
The Task Force shall study the integration of public funds and programs to ensure that all North Carolina's children age birth to five years are prepared to come to school ready to achieve. In conducting the study, the Task Force shall consider and develop recommendations for the following:
(1)	Creating principles, rationale, strategies, structure, and outcomes for the integration of all funding and programs that serve children age birth to five years to achieve improved school readiness;
(2)	Eliminating the duplication of programs;
(3)	Enhancing the quality and performance of current programs;
(4)	Creating performance measures that will document outcomes for programs and children and will provide accessible service for families;
(5)	Creating effective transition plans as children move from one program or service to another; 
(6)	Documenting all current funding and programs for children ages birth to kindergarten entry and coordination of existing data systems; and
(7)	Equalizing the funding of the various programs that provide services to children from birth to the age of five years to ensure equity in accessibility to these programs.
The Task Force shall submit a report by April 1, 2006, to the President Pro Tempore of the Senate, the Speaker of the House of Representatives, the Chairs of the Senate Appropriations Committee on Health and Human Services, the Chairs of the House of Representatives Appropriations Subcommittee on Health and Human Services, and the Fiscal Research Division.
SECTION 10.68.(f)  The Revisor of Statutes shall substitute the term "Division of Child Development and School Readiness" for the term "Division of Child Development" everywhere those terms appear in the following sections of the General Statutes:
G.S. 110‑90.2.	Mandatory child care providers' criminal history checks.
G.S. 110‑102.	Information for parents.
G.S. 114‑19.5.	Criminal record checks of child care providers.
G.S. 143B‑138.1. Department of Health and Human Service functions and organization.
SECTION 10.68.(g)   This section becomes effective July 1, 2005, for organizational changes.  The budgetary adjustments required by this section become effective October 1, 2005. 

PART XI. DEPARTMENT OF Agriculture and consumer Services

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
Pesticide Disposal Program
SECTION 11.1.  G.S. 143‑468(b) reads as rewritten:
"(b)	The Pesticide Environmental Trust Fund is established as a nonreverting account within the Department of Agriculture and Consumer Services. The Department of Agriculture and Consumer Services shall administer the Fund. The additional assessment imposed by G.S. 143‑442(b) on the registration of a brand or grade of pesticide shall be credited to the Fund. The Department shall distribute money in the Fund as follows:
(1)	Two and one‑half percent (2.5%) to North Carolina State University Cooperative Extension Service to enhance its agromedicine efforts in cooperation with East Carolina University School of Medicine.
(2)	Two and one‑half percent (2.5%) to East Carolina University School of Medicine to enhance its agromedicine efforts in cooperation with North Carolina State University Cooperative Extension Service.
(3)	Twenty percent (20%) to North Carolina State University, Department of Toxicology, to establish and maintain an extension agromedicine specialist position.
(4)	Seventy‑five percent (75%) to the Department of Agriculture and Consumer Services for the costs of administering its pesticide disposal program, including the salaries and support of staff for the pesticide disposal program, and for its environmental programs, as directed by the Board, including establishing a pesticide container management program to enhance its pesticide disposal program and its water quality initiatives."

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
tiMBER SALES RECEIPTS FOR CAPITAL IMPROVEMENTS AT AGRICULTURAL RESEARCH STATIONS AND FARMS 
SECTION 11.2.  The sum of one million thirty‑three thousand one hundred dollars ($1,033,100) shall be transferred from the Department of Agriculture and Consumer Services' timber sales capital improvement account in the Department of Agriculture and Consumer Services as such funds become available during the 2005‑2006 fiscal year, and used by the Department for the following capital improvements projects at agricultural research stations and research farms:
(1)	$378,000 for improvements at the swine facility at the Cherry Research Farm.
(2)	$285,500 for renovation of dairy facilities at the Cherry Research Farm. 
(3)	$369,600 for land acquisition and development at the Tidewater Research Station.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
Plant Conservation Program Funds
SECTION 11.3.  From funds received from the sale of timber that are deposited with the State Treasurer pursuant to G.S. 146‑30 to the credit of the Department of Agriculture and Consumer Services in a capital improvement account, the sum of twenty thousand dollars ($20,000) shall be transferred to the Department of Agriculture and Consumer Services to be used by the Department for its plant conservation program under Article 19B of Chapter 106 of the General Statutes for costs incidental to the acquisition of land, such as land appraisals, land surveys, title searches, and environmental studies.

Requested by:	Senators Kerr, Garrou, Dalton, Hagan
Increase Funds for North Carolina Grape Growers Council
SECTION 11.4.  G.S. 105‑113.81A reads as rewritten:
"§ 105‑113.81A.  Distribution of part of wine taxes attributable to North Carolina wine.
The Secretary shall on a quarterly basis credit to the Department of Agriculture and Consumer Services the net proceeds of the excise tax collected on unfortified wine bottled in North Carolina during the previous quarter and the net proceeds of the excise tax collected on fortified wine bottled in North Carolina during the previous quarter, except that the amount credited to the Department of Agriculture and Consumer Services under this section shall not exceed five hundred thousand dollars ($500,000) per fiscal year. The Department of Agriculture and Consumer Services shall allocate the funds received under this section to the North Carolina Grape Growers Council to be used to promote the North Carolina grape and wine industry and to contract for research and development services to improve viticultural and enological practices in North Carolina. Any funds credited to the Department of Agriculture and Consumer Services under this section that are not expended by June 30 of any fiscal year may not revert to the General Fund, but shall remain available to the Department for the uses set forth in this section."

PART XII. DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
State Match for Federal Safe Drinking Water Act Funds
SECTION 12.1.  Notwithstanding the provisions of Chapter 159G of the General Statutes, the Department of Environment and Natural Resources may transfer from the General Water Supply Revolving Loan Account up to one million five hundred thousand dollars ($1,500,000) to the Department of Environment and Natural Resources to be used to match the federal grant moneys authorized by section 1452 of the federal Safe Drinking Water Act amendments of 1996 for the 2005‑2006 fiscal year. The General Water Supply Revolving Loan Account is an account under the Clean Water Revolving Loan and Grant Fund and is established under G.S. 159G‑4. The Clean Water Revolving Loan and Grant Fund is established by G.S. 159G‑5.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
Expand Express Review Program Statewide
SECTION 12.2.(a)  Part 1 of Article 7 of Chapter 143B of the General Statutes is amended by adding two new sections to read:
"§ 143B‑279.13.  Express permit and certification reviews.
(a)	The Department of Environment and Natural Resources shall develop an express review program to provide express permit and certification reviews in all of its regional offices. Participation in the express review 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 program from those who request to participate in the program. The express review 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 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.
(b)	The Department of Environment and Natural Resources may determine the fees for express application review under the express review 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 program under this section.
(c)	No later than March 1 of each year, the Department of Environment and Natural Resources shall report to the Fiscal Research Division and the Environmental Review Commission its findings on the success of the program under this section and any other findings or recommendations, including any legislative proposals that it deems pertinent.
"§ 143B‑279.14.  Express Review Fund.
The Express Review Fund is created as a special nonreverting fund. All fees collected under G.S. 143B‑279.13 shall be credited to the Express Review Fund. The Express Review Fund shall be used for the costs of implementing the express review program under G.S. 143B‑279.13 and the costs of administering the program, including the salaries and support of the program's staff. If the express review program is abolished, the funds in the Express Review Fund shall be credited to the General Fund."
SECTION 12.2.(b)  The Department of Environment and Natural Resources shall expand to a statewide program that operates in each regional office of the Department the Express Review Pilot Program established by Section 11.4A of S.L. 2003‑284 and expanded by Section 12.9 of S.L. 2004‑124, and the provisions of G.S. 143B‑279.13, as enacted by subsection (a) of this section, shall apply to this statewide program.
SECTION 12.2.(c)  The Department of Environment and Natural Resources shall establish and support 12 additional positions to administer the statewide express review program under G.S. 143B‑279.13, as enacted by subsection (a) of this section.  Up to seven hundred thirty‑six thousand six hundred twenty‑nine dollars ($736,629) for the 2005‑2006 fiscal year and up to six hundred seventy‑one thousand four hundred nine dollars ($671,409) for the 2006‑2007 fiscal year shall be allocated from the Express Review Fund created in G.S. 143B‑279.14, as enacted by subsection (a) of this section, to establish and support these 12 positions. 
SECTION 12.2.(d)  The Department of Environment and Natural Resources shall continue and support the four positions established under Section 12.9(c) of S.L. 2004‑124 to administer the statewide express review program under G.S. 143B‑279.13, as enacted by subsection (a) of this section. Up to two hundred twenty‑three thousand eight hundred three dollars ($223,803) for the 2005‑2006 fiscal year and up to two hundred twenty‑three thousand eight hundred three dollars ($223,803) for the 2006‑2007 fiscal year shall be allocated from the Express Review Fund created in G.S. 143B‑279.14, as enacted by subsection (a) of this section, to continue and support these four positions. 

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
Sedimentation Education Funds
SECTION 12.3.  The Department of Environment and Natural Resources shall use the funds appropriated in this act to the Department of Environment and Natural Resources for the 2005‑2006 fiscal year and for the 2006‑2007 fiscal year for sedimentation education for only the following:
(1)	Sedimentation education activities that provide technical assistance to local erosion and sedimentation control programs under G.S. 113A‑60; or
(2)	Sedimentation education to professionals involved in developing erosion and sedimentation control plans for which prior approval is required under Article 4 of Chapter 113A of the General Statutes. 

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
Funds to Implement Fishing License Requirements Legislation/Contingent Repeal of Saltwater Fishing License Requirement
SECTION 12.4.(a)  The Wildlife Resources Commission may disburse up to one million dollars ($1,000,000) from the Wildlife Resources Fund to implement Senate Bill 1126 (Amend Fishing License Requirements‑2) or House Bill 1092 (Amend Fishing License Requirements) if either bill becomes law no later than 30 days after adjournment of the 2005 Regular Session.
SECTION 12.4.(b)  The State Treasurer shall transfer a sum equal to the sum of funds disbursed pursuant to subsection (a) of this section from the Marine Resources Fund to the Wildlife Resources Fund on July 1, 2010.
SECTION 12.4.(c)  Sections 1 through 4 and Sections 6 through 12 of S.L. 2004‑187 and Section 12.16 of S.L. 2004‑124 are repealed unless Senate Bill 1126 (Amend Fishing License Requirements‑2) or House Bill 1092 (Amend Fishing License Requirements) becomes law no later than 30 days after the adjournment in 2005 of the 2005 Regular Session under a joint resolution.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
Grassroots Science Program
SECTION 12.5.(a)  Of the funds appropriated in this act to the Department of Environment and Natural Resources for the Grassroots Science Program, the sum of three million one hundred ninety‑seven thousand seven hundred sixty‑two dollars ($3,197,762) for the 2005‑2006 fiscal year is allocated as grants‑in‑aid for each fiscal year as follows:
		2005‑2006

Aurora Fossil Museum		$59,057
Cape Fear Museum		$161,007
Carolina Raptor Center		$112,174
Catawba Science Center		$133,429
Colburn Gem and Mineral Museum, Inc.		$74,545
Discovery Place		$662,865
Eastern NC Regional Science Center		$50,000
Elizabeth City Science Center		$50,000
Fascinate‑U		$80,742
Granville County Museum Commission,
Inc.–Harris Gallery		$56,422
Greensboro Children's Museum		$135,076
The Health Adventure Museum of Pack
Place Education, Arts and
Science Center, Inc.		$134,499
Highlands Nature Center		$79,268
Imagination Station		$86,034
Kidsenses		$50,000
Museum of Coastal Carolina		$74,192
Natural Science Center of Greensboro		$186,354
North Carolina Museum of Life
and Science		$379,826
Rocky Mount Children's Museum		$72,254
Schiele Museum of Natural History		$229,547
Sci Works Science Center and
Environmental Park of Forsyth County		$146,499
Western North Carolina Nature Center		$112,879
Wilmington Children's Museum		$71,093

Total		$3,197,762
SECTION 12.5.(b)  No later than March 1, 2006, the Department of Environment and Natural Resources shall report to the Fiscal Research Division all of the following information for each museum that receives funds under this section:
(1)	The operating budget for the 2004‑2005 fiscal year.
(2)	The operating budget for the 2005‑2006 fiscal year.
(3)	The total attendance at the museum during the 2005 calendar year.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
Moratorium on new lease Purchase Contracts for forestry Equipment for Division of Forest resources
SECTION 12.6.  The Division of Forest Resources of the Department of Environment and Natural Resources shall not enter into any new lease purchase contracts for the purchase of forestry equipment. The Department of Administration shall not enter into any new lease purchase contracts for the purchase of forestry equipment on behalf of the Division of Forest Resources. This section does not apply to existing lease purchase contracts entered into by, or on behalf of, the Division.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
Extend and Expand Pilot Program for Inspection of Animal Waste Management Systems
SECTION 12.7.(a)  Section 15.4(a) of S.L. 1997‑443, as amended by Section 3.1 of S.L. 1999‑329, Section 5 of S.L. 2001‑254, Section 1.1 of S.L. 2002‑176, and Section 6.1 of S.L. 2003‑340, reads as rewritten:
"(a)	The Department of Environment and Natural Resources shall develop and implement a pilot program to begin no later than 1 November 1997, and to terminate 1 September 2007, regarding the annual inspections of animal operations that are subject to a permit under Article 21 of Chapter 143 of the General Statutes. The Department shall select two counties located in a part of the State that has a high concentration of swine farms to participate in this pilot program. In addition, Brunswick County and Pender County shall be added to the program. Notwithstanding G.S. 143‑215.10F, the Division of Soil and Water Conservation of the Department of Environment and Natural Resources shall conduct inspections of all animal operations that are subject to a permit under Article 21 of Chapter 143 of the General Statutes in these four counties at least once a year to determine whether any animal waste management system is causing a violation of water quality standards and whether the system is in compliance with its animal waste management plan or any other condition of the permit. The personnel of the Division of Soil and Water Conservation who are to conduct these inspections in each of these four counties shall be located in an office in the county in which that person will be conducting inspections. As part of this pilot program, the Department of Environment and Natural Resources shall establish procedures whereby resources within the local Soil and Water Conservation Districts serving the four counties are used for the quick response to complaints and reported problems previously referred only to the Division of Water Quality of the Department of Environment and Natural Resources."
SECTION 12.7.(b)  Section 3.3 of S.L. 1999‑329, as amended by Section 6 of S.L. 2001‑254, Section 1.2 of S.L. 2002‑176, and Section 6.2 of S.L. 2003‑340, reads as rewritten:
"Section 3.3. The Department of Environment and Natural Resources, in consultation with both the Division of Water Quality and the Division of Soil and Water Conservation, shall submit semiannual interim reports no later than 15 April and 15 October of each year beginning 15 October 1999  to the Environmental Review Commission, the Fiscal Research Division, and the Appropriations Subcommittees on Natural and Economic Resources in both the Senate and the House of Representatives. These reports shall indicate whether the pilot program has increased the effectiveness of the annual inspections program or the response to complaints and reported problems, specifically whether the pilot program had resulted in identifying violations earlier, taking corrective actions earlier, increasing compliance with the animal waste management plans and permit conditions, improving the time to respond to discharges, complaints, and reported problems, improving communications between farmers and Department employees, and any other consequences deemed pertinent by the Department. These reports shall also compare the costs of conducting operations reviews and inspections under the pilot program with the costs of conducting operations reviews and inspections pursuant to G.S. 143‑215.10D and G.S. 143‑215.10F and the resources that would be required to expand the pilot program to all counties. "
SECTION 12.7.(c)  No later than October 15, 2005, the Department of Environment and Natural Resources shall recommend to the Environmental Review Commission and the General Assembly whether to continue or expand the pilot program under this section. The Environmental Review Commission shall recommend to the 2006 Session of the General Assembly whether to continue or expand the pilot program under this section and may make any related legislative proposals.

PART XIII. DEPARTMENT OF COMMERCE

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
WANCHESE SEAFOOD INDUSTRIAL PARK/OREGON INLET FUNDS
SECTION 13.1.(a)  Funds appropriated to the Department of Commerce for the 2004‑2005 fiscal year for the Wanchese Seafood Industrial Park that are unexpended and unencumbered as of June 30, 2005, shall not revert to the General Fund on June 30, 2005, but shall remain available to the Department to be expended by the Wanchese Seafood Industrial Park for operations, maintenance, repair, and capital improvements in accordance with Article 23C of Chapter 113 of the General Statutes. 
SECTION 13.1.(b)  Funds appropriated to the Department of Commerce for the 2004‑2005 fiscal year for the Oregon Inlet Project that are unexpended and unencumbered as of June 30, 2005, shall not revert to the General Fund on June 30, 2005.
SECTION 13.1.(c)  This section becomes effective June 30, 2005.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
COUNCIL OF GOVERNMENT FUNDS
SECTION 13.2.(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 2005‑2006 fiscal year and eight hundred thirty‑two thousand one hundred fifty dollars ($832,150) for the 2006‑2007 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 2005‑2006 and the 2006‑2007 fiscal years.
SECTION 13.2.(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 13.2.(c)  Funds appropriated by this section shall be paid by electronic transfer in two equal installments, the first no later than September 1, 2005, 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, 2006, as specified in subdivision (e)(2) of this section.
SECTION 13.2.(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 13.2.(e)  Each council of government or lead regional organization shall do the following:
(1)	By January 15, 2006, 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 2004‑2005 program activities, objectives, and accomplishments;
b.	State fiscal year 2004‑2005 itemized expenditures and fund sources;
c.	State fiscal year 2005‑2006 planned activities, objectives, and accomplishments, including actual results through December 31, 2005; and
d.	State fiscal year 2005‑2006 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2005.
(2)	By January 15, 2007, 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 2005‑2006 program activities, objectives, and accomplishments;
b.	State fiscal year 2005‑2006 itemized expenditures and fund sources;
c.	State fiscal year 2006‑2007 planned activities, objectives, and accomplishments, including actual results through December 31, 2006; and
d.	State fiscal year 2006‑2007 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2006.
(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 13.3.  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 ($1.00) for every four State dollars ($4.00).
(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 ($1.00) for every three State dollars ($3.00).
(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 ($4.00) for every one State dollar ($1.00).

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
EMPLOYMENT SECURITY FUNDS
SECTION 13.4.(a)  There is appropriated from the Special Employment Security Administration Fund to the Employment Security Commission of North Carolina the sum of six million three hundred thousand dollars ($6,300,000) for the 2005‑2006 fiscal year to be used for the following purposes:
(1)	Six million dollars ($6,000,000) for the operation and support of local offices.
(2)	Two hundred thousand dollars ($200,000) for the State Occupational Information Coordinating Committee to develop and operate an interagency system to track former participants in State education and training programs.
(3)	One hundred thousand dollars ($100,000) 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.
SECTION 13.4.(b)  This section becomes effective July 1, 2005.

Requested by:	Senator Hartsell
Trade jobs for success reporting
SECTION 13.4A.(a)  In addition to the statutory reporting requirements pursuant to G.S. 143B‑438.17, the Employment Security Commission, Department of Commerce, and the Community Colleges System Office shall make a joint written progress report on their compliance with Section 13.7A of S.L. 2004‑124, as to the following:
(1)	The actions taken to obtain from the U.S. Department of Labor as quickly as possible a waiver under the Trade Adjustment Act to allow the Trade Jobs for Success initiative to (i) serve persons regardless of their age, (ii) use unemployment funds to provide direct monetary incentives to participating employers and direct income to eligible workers in the retraining program, and (iii) use funds for in‑State relocation assistance.
(2)	Whether waivers have been sought for other program components.
(3)	The progress made in implementing the Trade Jobs for Success initiative in the counties hardest hit by trade‑impacted job losses, particularly the counties having an unemployment rate of eight percent (8%) and the extent to which these counties have received priority consideration.
(4)	The efforts of the Department of Commerce seeking and receiving private grants and federal funds for the Trade Jobs for Success initiative.
(5)	Any reasons why legislative mandates have not been followed or the statutory goals have not been achieved.
The progress report shall be submitted to the Joint Legislative Commission on Governmental Operations and to the Chairs of the Appropriations Committees of the Senate and the House of Representatives by August 1, 2005.
SECTION 13.4A.(b)  G.S. 143B‑438.17 reads as rewritten:
"§ 143B‑438.17.  Reporting.
(a)	Beginning July 1, 2005, the Department of Commerce, in conjunction with the Employment Security Commission and the Community Colleges System Office, shall publish a monthly written report on the Trade Jobs for Success (TJS) initiative. The monthly report shall provide information on the commitment, disbursement, and use of funds and the status of any grant proposals or waivers requested on behalf of the Trade Jobs for Success initiative. The monthly report shall be submitted to the Governor and to the Fiscal Research Division of the General Assembly.
(b)	Beginning October 1, 2005, the Department of Commerce, in conjunction with the Employment Security Commission and the Community Colleges System Office, shall publish a quarterly written report on the Trade Jobs for Success initiative. The quarterly report shall include legislative proposals and recommendations regarding statutory changes needed to maximize the effectiveness and flexibility of the TJS initiative. Copies of the quarterly report shall be provided to the Joint Legislative Commission on Governmental Operations, to the chairs of the Senate and House of Representatives Appropriations Committees, and to the Fiscal Research Division of the General Assembly.
(c)	Beginning January 1, 2006, the Department of Commerce, in conjunction with the Employment Security Commission and the Community Colleges System Office, shall publish a comprehensive annual written report on the Trade Jobs for Success initiative. The annual report shall include a detailed explanation of outcomes and future planning for the TJS initiative. Copies of the annual report shall be provided to the Governor, to the Joint Legislative Commission on Governmental Operations, to the chairs of the Senate and House of Representatives Appropriations Committees, and to the Fiscal Research Division of the General Assembly."

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
INDUSTRIAL DEVELOPMENT FUND
SECTION 13.5.  G.S. 143B‑437.01 reads as rewritten:
"§ 143B‑437.01.  Industrial Development Fund.
(a)	Creation and Purpose of Fund. – There is created in the Department of Commerce the Industrial Development Fund to provide funds to assist the local government units of the most economically distressed counties in the State in creating jobs in certain industries. The Department of Commerce shall adopt rules providing for the administration of the program. Those rules shall include the following provisions, which shall apply to each grant from the fund:
…
(1)	The funds shall be used for (i) installation of or purchases of equipment for eligible industries, (ii) structural repairs, improvements, or renovations of existing buildings to be used for expansion of eligible industries, or (iii) construction of or improvements to new or existing water, sewer, gas, telecommunications, high‑speed broadband,  electrical utility distribution lines or equipment, or transportation infrastructure for existing or new or proposed industrial buildings to be used for eligible industries. To be eligible for funding, the water, sewer, gas, telecommunications, high‑speed broadband, electrical utility lines or facilities, or transportation infrastructure shall be located on the site of the building or, if not located on the site, shall be directly related to the operation of the specific eligible industrial activity.
…
(b1)	Utility Account. – There is created within the Industrial Development Fund a special account to be known as the Utility Account to provide funds to assist the local government units of enterprise tier one, two, and three areas, as defined in G.S. 105‑129.3, in creating jobs in eligible industries. The Department of Commerce shall adopt rules providing for the administration of the program. Except as otherwise provided in this subsection, those rules shall be consistent with the rules adopted with respect to the Industrial Development Fund. The rules shall provide that the funds in the Utility Account may be used only for construction of or improvements to new or existing water, sewer, gas, telecommunications, high‑speed broadband,  electrical utility distribution lines or equipment, or transportation infrastructure for existing or new or proposed industrial buildings to be used for eligible industrial operations. To be eligible for funding, the water, sewer, gas, telecommunications, high‑speed broadband,  electrical utility lines or facilities, or transportation infrastructure shall be located on the site of the building or, if not located on the site, shall be directly related to the operation of the specific industrial activity. There shall be no maximum funding amount per new job to be created or per project.
…."

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
ONE NORTH CAROLINA FUND
SECTION 13.6.  Of the funds appropriated in Section 1(a) of S.L. 2004‑88 to the One North Carolina Fund, the Department of Commerce may use up to three hundred thousand dollars ($300,000) to cover its expenses in administering the One North Carolina Fund and other economic development incentive grant programs in the 2005‑2006 fiscal year.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
REGIONAL ECONOMIC DEVELOPMENT COMMISSION ALLOCATIONS
SECTION 13.7.(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 13.7.(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; and
(2)	Next, the Department shall subtract from funds allocated to the Global TransPark Development Commission the sum of one hundred eighteen thousand one hundred twenty‑nine dollars ($118,129) in the 2005‑2006 fiscal year and one hundred eighteen thousand four hundred seventy‑seven dollars ($118,477) in the 2006‑2007 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 eighteen thousand one hundred twenty‑nine dollars ($118,129) in the 2005‑2006 fiscal year and one hundred eighteen thousand four hundred seventy‑seven dollars ($118,477) in the 2006‑2007 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 ECONOMIC DEVELOPMENT COMMISSION REPORTS
SECTION 13.8.(a)  By February 15 of each fiscal year, the seven regional economic development commissions shall report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division the following information:
(1)	The preceding fiscal year's program activities, objectives, and accomplishments.
(2)	The preceding fiscal year's itemized expenditures and fund sources.
(3)	Demonstration of how the commission's regional economic development and marketing strategy aligns with the State's overall economic development and marketing strategies.
(4)	To the extent they are involved in promotion activities such as trade shows, visits to prospects and consultants, advertising and media placement, the commissions shall demonstrate how they have generated qualified leads.
SECTION 13.8.(b)  Each of the commissions shall provide to the Fiscal Research Division a copy of their annual audited financial statement within 30 days of issuance of the statement.
SECTION 13.8.(c)  The reporting requirements for regional economic development commissions, as provided in subsection (a) of this section, shall be reviewed annually by the North Carolina Partnership for Economic Development, and recommendations for changes to the reporting requirements shall be made to the Fiscal Research Division, the President Pro Tempore of the Senate, and the Speaker of the House of Representatives.
SECTION 13.8.(d)  Regional economic development commissions shall receive quarterly allocations of the funds appropriated in this act to the Department of Commerce for regional economic development commissions.
SECTION 13.8.(e)  Regional economic development commissions shall remain in the Department of Commerce's Budget Code 14601 with other State‑aided nonprofit entities.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
NONPROFIT REPORTING REQUIREMENTS
SECTION 13.9.(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, 2006, 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 2004‑2005 program activities, objectives, and accomplishments;
b.	State fiscal year 2004‑2005 itemized expenditures and fund sources;
c.	State fiscal year 2005‑2006 planned activities, objectives, and accomplishments including actual results through December 31, 2005; and
d.	State fiscal year 2005‑2006 estimated itemized expenditures and fund sources including actual expenditures and fund sources through December 31, 2005.
(2)	By January 15, 2007, 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 2005‑2006 program activities, objectives, and accomplishments;
b.	State fiscal year 2005‑2006 itemized expenditures and fund sources;
c.	State fiscal year 2006‑2007 planned activities, objectives, and accomplishments including actual results through December 31, 2006; and
d.	State fiscal year 2006‑2007 estimated itemized expenditures and fund sources including actual expenditures and fund sources through December 31, 2006.
(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 13.9.(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, 2005.  Fourth quarter allotments shall not be released to any nonprofit organization that does not satisfy the reporting requirements by January 15, 2006, or January 15, 2007.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
BIOTECHNOLOGY CENTER
SECTION 13.10.(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 13.10.(b)  The North Carolina Biotechnology Center shall provide funding for biotechnology, biomedical, and related bioscience applications under its Business and Science Technology Programs.
SECTION 13.10.(c)  The North Carolina Biotechnology Center shall:
(1)	By January 15, 2006, 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 2004‑2005 program activities, objectives, and accomplishments;
b.	State fiscal year 2004‑2005 itemized expenditures and fund sources;
c.	State fiscal year 2005‑2006 planned activities, objectives, and accomplishments, including actual results through December 31, 2005; and
d.	State fiscal year 2005‑2006 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2005.
(2)	By January 15, 2007, 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 2005‑2006 program activities, objectives, and accomplishments;
b.	State fiscal year 2005‑2006 itemized expenditures and fund sources;
c.	State fiscal year 2006‑2007 planned activities, objectives, and accomplishments, including actual results through December 31, 2006; and
d.	State fiscal year 2006‑2007 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2006.
(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 13.10.(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 Weinstein, Garrou, Dalton, Hagan
Rural Economic Development Center
SECTION 13.11.(a)  Of the funds appropriated in this act to the Rural Economic Development Center, Inc., the sum of two million twenty‑five thousand six hundred ninety‑seven dollars ($2,025,697) for the 2005‑2006 fiscal year and the sum of two million twenty‑five thousand six hundred ninety‑seven dollars ($2,025,697) for the 2006‑2007 fiscal year shall be allocated as follows:
	2005‑2006	2006‑2007 
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	604,298	604,298
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
Institute for Rural Entrepreneurship	144,000	144,000.
SECTION 13.11.(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 13.11.(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 13.11.(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 2005‑2006 fiscal year and the sum of two million four hundred fifteen thousand nine hundred ten dollars ($2,415,910) for the 2006‑2007 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.	$997,410 for direct grants to local community development corporations to support operations and project activities.
b.	$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.	$675,000 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.
c.	$100,000 in each fiscal year to support the update of the statewide water and sewer database and to support the development of a statewide water management plan.
(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 13.11.(e)  The Rural Economic Development Center, Inc., shall:
(1)	By January 15, 2006, 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 2004‑2005 program activities, objectives, and accomplishments;
b.	State fiscal year 2004‑2005 itemized expenditures and fund sources;
c.	State fiscal year 2005‑2006 planned activities, objectives, and accomplishments, including actual results through December 31, 2005; and
d.	State fiscal year 2005‑2006 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2005.
(2)	By January 15, 2007, 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 2005‑2006 program activities, objectives, and accomplishments;
b.	State fiscal year 2005‑2006 itemized expenditures and fund sources;
c.	State fiscal year 2006‑2007 planned activities, objectives, and accomplishments, including actual results through December 31, 2006; and
d.	State fiscal year 2006‑2007 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2006.
(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 13.11.(f)  No funds appropriated under this act shall be released to a community development corporation, as defined in this section, 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, Albertson, Garrou, Dalton, Hagan
RURAL ECONOMIC DEVELOPMENT CENTER
SECTION 13.12.(a)  Of the funds appropriated in this act to the Rural Economic Development Center, Inc., the sum of twenty million dollars ($20,000,000) for the 2005‑2006 fiscal year and the sum of twenty million dollars ($20,000,000) for the 2006‑2007 fiscal year shall be allocated as follows: 
(1)	To continue the North Carolina Infrastructure Program. The purpose of the Program is to provide grants to local governments to construct critical water and wastewater facilities and to provide other infrastructure needs, including technology needs, to sites where these facilities will generate private job‑creating investment. At least fifteen million dollars ($15,000,000) of the funds appropriated in this act for each year of the biennium must be used to provide grants under this Program.
(2)	To provide matching grants to local governments in distressed areas and equity investments in public‑private ventures that will productively reuse vacant buildings and properties, with priority given to towns or communities with populations of less than 5,000.
(3)	To provide economic development research and demonstration grants.
SECTION 13.12.(b)  The funds appropriated in this act to the Rural Economic Development Center, Inc., shall be recurring funds.
SECTION 13.12.(c)  The Rural Economic Development Center, Inc., may contract with other State agencies, constituent institutions of The University of North Carolina, and colleges within the North Carolina Community College System for certain aspects of the North Carolina Infrastructure Program, including design of Program guidelines and evaluation of Program results.
SECTION 13.12.(d)  During each year of the 2005‑2007 biennium, the Rural Economic Development Center, Inc., may use up to two percent (2%) of the funds appropriated in this act to cover its expenses in administering the North Carolina Economic Infrastructure Program.
SECTION 13.12.(e)  No later than January 15 each year, the Rural Economic Development Center, Inc., shall submit an annual report to the Joint Legislative Commission on Governmental Operations concerning the progress of the North Carolina Economic Infrastructure Program.
SECTION 13.12.(f)  Of the funds appropriated in this act to the Rural Economic Development Center, Inc., the sum of five hundred thousand dollars ($500,000) for the 2005‑2006 fiscal year and the sum of five hundred thousand dollars ($500,000) for the 2006‑2007 fiscal year shall be allocated to the e‑NC Authority.
The e‑NC Authority may:
(1)	Contract with other State agencies, The University of North Carolina, the North Carolina Community College System, and nonprofit organizations to assist with program development and the evaluation of program activities.
(2)	Use up to five percent (5%) of the funds allocated in this section to cover its expenses in program development and implementation of activity areas.
The e‑NC Authority shall report to the 2006 General Assembly on the following:
(1)	The activities necessary to be undertaken in distressed urban areas of the State to enhance the capability of citizens and businesses residing in these areas to access the high‑speed Internet.
(2)	An implementation plan for the training of citizens and businesses in distressed urban areas.
(3)	The technology and digital literacy training necessary to assist citizens and existing businesses to create new technology‑based enterprises in these communities and to use the Internet to enhance the productivity of their businesses.
The e‑NC Authority shall, by January 31, 2006, and quarterly thereafter, report to the Joint Legislative Commission on Governmental Operations on program development and the evaluation of program activities.

Requested by:	Senators Weinstein, Garrou, Dalton, Hagan
OPPORTUNITIES INDUSTRIALIZATION CENTER FUNDS
SECTION 13.13.(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 2005‑2006 fiscal year and the sum of three hundred sixty‑one thousand dollars ($361,000) for the 2006‑2007 fiscal year shall be equally distributed among the certified Opportunities Industrialization Centers for ongoing job training programs.
SECTION 13.13.(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, 2006, 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 2004‑2005 program activities, objectives, and accomplishments;
b.	State fiscal year 2004‑2005 itemized expenditures and fund sources;
c.	State fiscal year 2005‑2006 planned activities, objectives, and accomplishments, including actual results through December 31, 2005; and
d.	State fiscal year 2005‑2006 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2005.
(2)	By January 15, 2007, 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 2005‑2006 program activities, objectives, and accomplishments;
b.	State fiscal year 2005‑2006 itemized expenditures and fund sources;
c.	State fiscal year 2006‑2007 planned activities, objectives, and accomplishments, including actual results through December 31, 2006; and
d.	State fiscal year 2006‑2007 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2006.
(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 13.13.(c)  No funds appropriated under this act shall be released to an Opportunities Industrialization Center (hereinafter Center) listed in subsection (a) of this section if the Center has any overdue tax debts, as that term is defined in G.S. 105‑243.1, at the federal or State level.

PART XIV. JUDICIAL DEPARTMENT

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
establish CONFERENCE OF CLERKS of superior court
SECTION 14.1.(a)  Chapter 7A of the General Statutes is amended by adding a new Subchapter to read:
"subchapter xv. conference of clerks of superior court.
"Article 63.
"Conference of Clerks of Superior Court.
"§ 7A‑805.  Establishment and purpose.
There is created the Conference of Clerks of Superior Court of North Carolina, of which each clerk of superior court is a member. The purpose of the Conference is to assist in improving the administration of justice in North Carolina by coordinating the efforts of the various clerks of superior court, by assisting them in the administration of their offices, and by exercising the powers and performing the duties provided for in this Article.
"§ 7A‑806.  Annual meetings; organization; election of officers.
(a)	Annual Meetings. – The Conference shall meet each summer and winter at a time and place selected by the President of the Conference.
(b)	Election of Officers. – Officers of the Conference are a President, two Vice Presidents, a Secretary, a Treasurer, and other officers from among its membership that the Conference may designate in its bylaws. Officers are elected for one‑year terms at the annual summer conference and take office on July 1 immediately following their election.
(c)	Executive Committee. – The Executive Committee of the Conference consists of the President, the two Vice Presidents, the Secretary, the Treasurer, and seven other members of the Conference. One of these seven members shall be the immediate past president if there is one and that past president continues to be a member.
(d)	Organization and Functioning; Bylaws. – The bylaws may provide for the organization and functioning of the Conference, including the powers and duties of its officers and committees. The bylaws shall state the number of members required to constitute a quorum at any meeting of the Conference or the Executive Committee. The bylaws shall set out the procedure for amending the bylaws.
(e)	Calling Meetings; Duty to Attend. – The President or the Executive Committee may call a meeting of the Conference upon 10 days' notice to the members, except upon written waiver of notice signed by at least three‑fourths of the members. A member should attend each meeting of the Conference and the Executive Committee of which he is given notice. Members are entitled to reimbursement for travel and subsistence expenses at the rate applicable to State employees.
"§ 7A‑807.  Powers of Conference.
(a)	The Conference may:
(1)	Cooperate with citizens and other public and private agencies to promote the effective administration of justice.
(2)	Develop advisory manuals to assist in the organization and administration of their offices, case management, calendaring, case tracking, filing, and office procedures.
(3)	Work with the cooperation of the Administrative Office of the Courts and the Institute of Government of the School of Government at UNC‑Chapel Hill to provide education and training programs for clerks and staff.
(b)	The Conference may not adopt rules pursuant to Chapter 150B of the General Statutes.
"§ 7A‑808.  Executive secretary; clerical support.
The Conference may employ an executive secretary and any necessary supporting staff to assist it in carrying out its duties."
SECTION 14.1.(b)  The organizational meeting of the Conference of Clerks of Superior Court shall be convened by the Director of the Administrative Office of the Courts as soon as feasible. Officers elected at that organizational meeting shall serve until their successors take office July 1, 2006.

Requested by:	Senators Thomas, Dalton, Purcell, Apodaca, Garrou, Hagan
DIVIDE district court district 20 and prosecutorial district 20 into 20A and 20B and realign superior court districts 20A and 20B/DIVIDE Superior court, district court, and prosecutorial districts 29 into districts 29A and 29B
SECTION 14.2.(a)  G.S. 7A‑41(a) reads as rewritten:
"(a)	The counties of the State are organized into judicial divisions and superior court districts, and each superior court district has the counties, and the number of regular resident superior court judges set forth in the following table, and for districts of less than a whole county, as set out in subsection (b) of this section:
		Superior
Judicial	Court							No. of Resident
Division	District		Counties				Judges
______________________________________________________________________
First		1			Camden, Chowan,			2
Currituck, Dare, Gates,
Pasquotank, Perquimans
First		2			Beaufort, Hyde,			1
Martin, Tyrrell, Washington
First		3A			Pitt					2
Second	3B			Carteret, Craven,			3
Pamlico
Second	4A			Duplin, Jones,			1
Sampson 				1
Second	4B			Onslow 				1
Second	5A			(part of New Hanover,		1
part of Pender see subsection (b))
5B			(part of New Hanover,		1
part of Pender see subsection (b)) 
5C			(part of New Hanover,		1
see subsection (b))
First		6A			Halifax 				1
First		6B			Bertie, Hertford,			1
Northampton	
First		7A			Nash					1
First		7B			(part of Wilson,			1
part of Edgecombe, 
see subsection (b)) 
First		7C			(part of Wilson,			1
part of Edgecombe, see
subsection (b))
Second	8A			Lenoir and Greene			1
Second	8B			Wayne				1
Third		9			Franklin, Granville,			2
Vance, Warren
Third		9A			Person, Caswell			1
Third		10A			(part of Wake,			2
see subsection (b))
Third		10B			(part of Wake,			2
see subsection (b))
Third		10C			(part of Wake,			1
see subsection (b))
Third		10D			(part of Wake,			1
see subsection (b))
Fourth 	11A			Harnett, Lee				1
Fourth 	11B			Johnston				1
Fourth		12A			(part of Cumberland,		1
see subsection (b))
Fourth 	12B			(part of Cumberland,		1
see subsection (b))
Fourth 	12C			(part of Cumberland,		2
see subsection (b))
Fourth 	13			Bladen, Brunswick,			2
Columbus 
Third		14A			(part of Durham,			1
see subsection (b))
Third		14B			(part of Durham, 			3
see subsection (b))
Third		15A			Alamance				2
Third		15B			Orange, Chatham			2
Fourth 	16A			Scotland, Hoke			1
Fourth		16B			Robeson				2
Fifth		17A			Rockingham				2
Fifth		17B			Stokes, Surry 			2
Fifth		18A			(part of Guilford,			1
see subsection (b))
Fifth 		18B			(part of Guilford, 			1
see subsection (b)) 
Fifth 		18C			(part of Guilford,			1
see subsection (b)) 
Fifth		18D			(part of Guilford, 			1
see subsection (b)) 
Fifth		18E			(part of Guilford,			1
see subsection (b))
Sixth		19A			Cabarrus 				1
Fifth		19B			Montgomery, Randolph		1
Sixth		19C			Rowan 				1
Fifth		19D			Moore 				1
Sixth		20A			Anson, Richmond			 2
 StanlySixth		20B			 Union			 1
Fifth		21A			(part of Forsyth,			1
see subsection (b))
Fifth 		21B			(part of Forsyth,			1
see subsection (b))
Fifth 		21C			(part of Forsyth,			1
see subsection (b))
Fifth 		21D			(part of Forsyth,			1
see subsection (b))
Sixth 		22			Alexander, Davidson,		3
Davie, Iredell
Fifth 		23			Alleghany, Ashe,			1
Wilkes, Yadkin
Eighth 	24			Avery, Madison,			2
Mitchell, Watauga, Yancey
Seventh	25A			Burke, Caldwell			2
Seventh	25B			Catawba				2
Seventh	26A			(part of Mecklenburg,		2
see subsection (b))
Seventh	26B			(part of Mecklenburg,		3
see subsection (b))
Seventh	26C			(part of Mecklenburg,		2
see subsection (b))
Seventh	27A			Gaston				2
Seventh	27B			Cleveland, Lincoln			2
Eighth 	28			Buncombe				2
Eighth 								
		29A			McDowell, Rutherford		1
		29B			Henderson, Polk, Transylvania	1
Eighth 	30A			Cherokee, Clay,			1
Graham, Macon, Swain
Eighth 	30B			Haywood, Jackson			1."
SECTION 14.2.(b)  The superior court judgeship established for District 20A by subsection (a) of this section shall be filled by the judge currently serving District 20B who resides in Stanly County. That judge's current term expires on December 31, 2006. No election shall be held in 2006 for that judge's seat, and that judge shall serve until a successor is elected in the 2008 general election, in order to provide for unstaggered terms for multiple judgeships in the same district.
SECTION 14.2.(c)  The superior court judgeship established for District 29A by subsection (a) of this section shall be filled by the superior court judge from current District 29 who resides in Rutherford County. That judge's term expires on December 31, 2012, and a successor shall be elected in the 2012 general election.
SECTION 14.2.(d)  The superior court judgeship established for District 29B by subsection (a) of this section shall be filled by the superior court judge from current District 29 who resides in Henderson County. That judge's term expires on December 31, 2006, and a successor shall be elected in the 2006 general election.
SECTION 14.2.(e)  The trial court administrator serving current District 29 shall serve as trial court administrator for both District 29A and District 29B.
SECTION 14.2.(f)  G.S. 7A‑133(a) reads as rewritten:
"(a)	Each district court district shall have the numbers of judges as set forth in the following table:
District	Judges	County
1	5	Camden
		Chowan
		Currituck
		Dare
		Gates
		Pasquotank
		Perquimans
2	4	Martin
		Beaufort
		Tyrrell
		Hyde
		Washington
3A	5	Pitt
3B	5	Craven
		Pamlico 
		Carteret
4	8	Sampson
		Duplin
		Jones
		Onslow
5	8	New Hanover
		Pender
6A	2	Halifax
6B	3	Northampton
		Bertie
		Hertford
7	7	Nash 
		Edgecombe
		Wilson
8	6	Wayne 
		Greene
		Lenoir
9	4	Granville
		(part of Vance
		see subsection (b))
		Franklin
9A	2	Person 
		Caswell
9B	2	Warren
		(part of Vance
		see subsection (b))
10	15	Wake
11	8	Harnett
		Johnston
		Lee
12	9	Cumberland
13	6	Bladen
		Brunswick
		Columbus
14	6	Durham
15A	4	Alamance
15B	4	Orange 
		Chatham
16A	3	Scotland
		Hoke
16B	5	Robeson
17A	2	Rockingham
17B	4	Stokes 
		Surry
18	12	Guilford
19A	4	Cabarrus
19B	6	Montgomery 
		Moore
		Randolph
19C	4	Rowan
 20A	 4	Stanly 
		
		Anson
		Richmond
20B	3	Union
21	9	Forsyth
22	9	Alexander
		Davidson
		Davie
		Iredell
23	4	Alleghany
		Ashe
		Wilkes
		Yadkin
24	4	Avery
		Madison
		Mitchell
		Watauga
		Yancey
25	8	Burke 
		Caldwell
		Catawba
26	17	Mecklenburg
27A	6	Gaston
27B	4	Cleveland
		Lincoln
28	6	Buncombe

				
29A	3	McDowell
		Rutherford
29B	4	Henderson
		Polk
		Transylvania
30	5	Cherokee 
		Clay
		Graham
		Haywood
		Jackson
		Macon
		Swain."
SECTION 14.2.(g)  The four district court judgeships established for District 20A by subsection (f) of this section shall be filled by the district court judges from current District 20 who reside in Anson, Stanly, and Richmond Counties. The term of the judge living in Anson County expires the first Monday in December 2008. That judge's successor shall be elected in the 2008 election. The term of the judge living in Stanly County expires the first Monday in December 2006. That judge's successor shall be elected in the 2006 election. The term of one of the judges living in Richmond County expires the first Monday in December 2006. That judge's successor shall be elected in the 2006 election. The term of the other judge living in Richmond County expires the first Monday in December 2008. That judge's successor shall be elected in the 2008 election.
SECTION 14.2.(h)  The three district court judgeships established for District 20B by subsection (f) of this section shall be filled by the district court judges from current District 20 who reside in Union County. The terms of the three judges living in Union County expire the first Monday in December 2008. Those judges' successors shall be elected in the 2008 election.
SECTION 14.2.(i)  The three district court judgeships established for District 29A by subsection (f) of this section shall be filled by the district court judges from current District 29 who reside in McDowell and Rutherford Counties and by the judge established for District 29 to be appointed by the Governor pursuant to Section 14.6 of S.L. 2004‑124, as amended by subsection (j) of this section. The term of the judge living in Rutherford County expires the first Monday in December 2006. That judge's successor shall be elected in the 2006 general election. The term of the judge living in McDowell County expires the first Monday in December 2006. That judge's successor shall be elected in the 2006 election.
SECTION 14.2.(j)  Section 14.6(f) of S.L. 2004‑124 reads as rewritten:
"SECTION 14.6.(f)  The Governor shall appoint the additional district court judges for Districts 5, 21, and  29A authorized by subsection (e) of this section, and those judges' successors shall be elected in the 2006 general election for four‑year terms commencing on the first Monday in December 2006.
The district court judge for the additional judgeship in District 17B, as authorized by subsection (e) of this section, shall be elected in the 2004 general election in the same manner as provided for in G.S. 163‑329 to serve a four‑year term beginning the first Monday in December 2004, and no vacancy exists before that date."
SECTION 14.2.(k)  The four district court judgeships established for District 29B by subsection (f) of this section shall be filled by the district court judges from current District 29 who reside in Henderson and Transylvania Counties. The term of the three judges living in Henderson County expires the first Monday in December 2008. Those judges' successors shall be elected in the 2008 general election. The term of the judge living in Transylvania County expires the first Monday in December 2008. That judge's successor shall be elected in the 2008 general election.
SECTION 14.2.(l)  G.S. 7A‑60(a1) reads as rewritten:
"(a1)	The counties of the State are organized into prosecutorial districts, and each district has the counties and the number of full‑time assistant district attorneys set forth in the following table:
		No. of Full‑Time
		Prosecutorial		Asst. District
		District	Counties	Attorneys
	1	Camden, Chowan, Currituck,	10
		Dare, Gates, Pasquotank,
		Perquimans
	2	Beaufort, Hyde, Martin,	6
		Tyrrell, Washington
	3A	Pitt	9
	3B	Carteret, Craven, Pamlico	10
	4	Duplin, Jones, Onslow,	14
		Sampson
	5	New Hanover, Pender	14
	6A	Halifax	4
	6B	Bertie, Hertford,	4
		Northampton
	7	Edgecombe, Nash, Wilson	16
	8	Greene, Lenoir, Wayne	11
	9	Franklin, Granville,	11
		Vance, Warren
	9A	Person, Caswell	4
	10	Wake	31
	11	Harnett, Johnston, Lee	14
	12	Cumberland	18
	13	Bladen, Brunswick, Columbus	11
	14	Durham	13
	15A	Alamance	8
	15B	Orange, Chatham	7
	16A	Scotland, Hoke	5
	16B	Robeson	10
	17A	Rockingham	5
	17B	Stokes, Surry	5
	18	Guilford	27
	19A	Cabarrus	6
	19B	Montgomery, Moore, Randolph	11
	19C	Rowan	5
	 20A	Anson, Richmond,	 8
		 Stanly
	20B	Union	7
	21	Forsyth	17
	22	Alexander, Davidson, Davie,	16
		Iredell
	23	Alleghany, Ashe, Wilkes,	5
		Yadkin
	24	Avery, Madison, Mitchell,	4
		Watauga, Yancey
	25	Burke, Caldwell, Catawba	15
	26	Mecklenburg	36
	27A	Gaston	12
	27B	Cleveland,	9
		Lincoln
	28	Buncombe	11
					
	29A	McDowell, Rutherford	5
	29B	Henderson, Polk, Transylvania	6
	30	Cherokee, Clay, Graham,	9
		Haywood, Jackson, Macon,
		Swain."
SECTION 14.2.(m)  The district attorneys established for Districts 20A, 20B, 29A, and 29B by subsection (l) of this section shall be elected in the 2006 general election.
SECTION 14.2.(n)  The eight assistant district attorney positions established for District 20A by subsection (l) of this section shall be filled by eight assistant district attorneys currently serving Anson, Richmond, and Stanly Counties in District 20. The seven assistant district attorney positions established for District 20B by subsection (l) of this section shall be filled by seven assistant district attorneys currently serving Union County in District 20.
SECTION 14.2.(o)  The five assistant district attorney positions established for District 29A by subsection (l) of this section shall be filled by five assistant district attorneys currently serving McDowell and Rutherford Counties in current District 29. The six district attorney positions established for District 29B by subsection (l) of this section shall be filled by six assistant district attorneys currently serving Henderson, Polk, and Transylvania Counties in current District 29.
SECTION 14.2.(p)  G.S. 7A‑69 reads as rewritten:
"§ 7A‑69.  Investigatorial assistants.
The district attorney in prosecutorial districts 1, 3B, 4, 5, 7, 8, 11, 12, 13, 14, 15A, 15B, 16A, 18, 19B,  20A, 20B, 21, 22, 24, 25, 26, 27A, 27B, 28,  29A, 29B, and 30 is entitled to one investigatorial assistant, and the district attorney in prosecutorial district 10 is entitled to two investigatorial assistants, to be appointed by the district attorney and to serve at his pleasure.
It shall be the duty of the investigatorial assistant to investigate cases preparatory to trial and to perform such other Duties as may be assigned by the district attorney. The investigatorial assistant is entitled to reimbursement for his subsistence and travel expenses to the same extent as State employees generally."
SECTION 14.2.(q)  With respect to the realignment of Superior Court Districts 20A and 20B, subsections (a) through (e) of this section become effective December 1, 2005, or the date upon which subsection (a) of this section is approved under section 5 of the Voting Rights Act of 1965, whichever is later. With respect to the division of Superior Court District 29, subsections (a) through (e) of this section become effective December 1, 2005. With respect to the division of District Court District 20, subsections (f) through (k) of this section become effective December 1, 2005, or the date upon which subsection (f) of this section is approved under section 5 of the Voting Rights Act of 1965, whichever is later. With respect to the division of District Court District 29, subsections (f) through (k) of this section become effective December 1, 2005. With respect to the division of Prosecutorial District 20, subsections (l) through (p) of this section become effective January 1, 2007, or the date upon which subsection (l) of this section is approved under section 5 of the Voting Rights Act of 1965, whichever is later, but the district attorneys for Prosecutorial Districts 20A and 20B shall be elected in the 2006 general election. With respect to the division of Prosecutorial District 29, subsections (l) through (p) of this section become effective January 1, 2007, but the district attorneys for Prosecutorial Districts 29A and 29B shall be elected in the 2006 general election.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
COLLECTION OF WORTHLESS CHECK FUNDS
SECTION 14.3.  Notwithstanding the provisions of G.S. 7A‑308(c) and except as otherwise provided in this act, the Judicial Department may use any balance remaining in the Collection of Worthless Checks Fund on June 30, 2005, for the purchase or repair of office or information technology equipment during the 2005‑2006 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
TRANSFER OF EQUIPMENT AND SUPPLY FUNDS
SECTION 14.4.  Funds appropriated to the Judicial Department in the 2005‑2007 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
STUDY ELECTRONIC PAYMENT
SECTION 14.5.  The Judicial Department shall study the feasibility of implementing electronic and online payment options for court fees and other funds collected by the courts. The study shall address the estimated costs and time frame for implementing electronic payment as well as any necessary legislative changes. The Judicial Department shall report its findings as a result of the study to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by May 1, 2006.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
GRANT FUNDS
SECTION 14.6.  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 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
INCREASE CHARGES FOR APPELLATE division REPORTS TO ACTUAL COST
SECTION 14.7.  The Judicial Department shall charge the full cost of production for all copies of the appellate division reports that are sold.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
NORTH CAROLINA STATE BAR FUNDS
SECTION 14.8.  Of the funds appropriated in the continuation budget as a grant‑in‑aid to the North Carolina State Bar for the 2005‑2007 biennium, the North Carolina State Bar may in its discretion use up to the sum of five hundred one thousand five hundred dollars ($501,500) for the 2005‑2006 fiscal year and up to the sum of five hundred one thousand five hundred dollars ($501,500) for the 2006‑2007 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, 2006, 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 Kinnaird, Garrou, Dalton, Hagan
TRANSFER responsibility for providing legal assistance to inmates from the department of correction to the office of indigent defense services
The General Assembly of North Carolina enacts:
SECTION 14.9.(a)  G.S. 7A‑498.3 reads as rewritten:
"§ 7A‑498.3.  Responsibilities of Office of Indigent Defense Services.
(a)	The Office of Indigent Defense Services shall be responsible for establishing, supervising, and maintaining a system for providing legal representation and related services in the following cases:
(1)	Cases in which an indigent person is subject to a deprivation of liberty or other constitutionally protected interest and is entitled by law to legal representation;
(2)	Cases in which an indigent person is entitled to legal representation under G.S. 7A‑451 and G.S. 7A‑451.1; 
(2a)	Cases in which the State is legally obligated to provide legal assistance and access to the courts to inmates in the custody of the Department of Correction; and
(3)	Any other cases in which the Office of Indigent Defense Services is designated by statute as responsible for providing legal representation.
(b)	The Office of Indigent Defense Services shall develop policies and procedures for determining indigency in cases subject to this Article, and those policies shall be applied uniformly throughout the State.  Except in cases under subdivision (2a) of subsection (a) of this section, the court shall determine in each case whether a person is indigent and entitled to legal representation, and counsel shall be appointed as provided in G.S. 7A‑452.
(c)	In all cases subject to this Article, appointment of counsel, determination of compensation, appointment of experts, and use of funds for experts and other services related to legal representation shall be in accordance with rules and procedures adopted by the Office of Indigent Defense Services.
(d)	The Office of Indigent Defense Services shall allocate and disburse funds appropriated for legal representation and related services in cases subject to this Article pursuant to rules and procedures established by the Office."
SECTION 14.9.(b)  Effective October 1, 2005, the State's responsibility for providing inmates in the custody of the Department of Correction with legal assistance and access to the courts shall be administered by the Office of Indigent Defense Services. The existing contract between the Department of Correction and Prisoner Legal Services, Inc., shall not be extended or renewed beyond that date.
The Director of Indigent Defense Services, in consultation with the Commission on Indigent Defense Services and the Department of Justice, shall determine which types of legal services can best be provided directly to inmates by staff employed by the Office of Indigent Defense Services, which services should be provided by counsel designated by the Office of Indigent Defense Services, and which services should be provided by contract between the Office of Indigent Defense Services and nonprofit organizations or other contract providers.
If the Director of Indigent Defense Services determines that, in order to facilitate the transfer of responsibility provided for in this section, it is necessary for Prisoner Legal Services, Inc., to continue providing legal services and access to the courts to inmates beyond the termination of its contract with the Department of Correction on September 30, 2005, the Director may contract with Prisoner Legal Services, Inc., for a period of time to be determined by the Director.
SECTION 14.9.(c)  The sum of one million eight hundred eighty‑three thousand eight hundred sixty‑five dollars ($1,883,865) for the 2005‑2006 fiscal year and the sum of two million five hundred eleven thousand eight hundred twenty dollars ($2,511,820) for the 2006‑2007 fiscal year shall be transferred from the Department of Correction to the Office of Indigent Defense Services to implement this section.
SECTION 14.9.(d)  Subsections (a) and (b) of this section become effective October 1, 2005. The remainder of this section becomes effective July 1, 2005.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
WAKE COUNTY PUBLIC DEFENDER OFFICE funds
SECTION 14.10.  Of the funds appropriated to the Judicial Department, Office of Indigent Defense Services, in this act, the Office of Indigent Defense Services shall use up to the sum of two million three hundred thousand five hundred thirty‑four dollars ($2,300,534) for the 2005‑2006 fiscal year and the sum of two million one hundred eighty‑one thousand three hundred twenty‑three dollars ($2,181,323) for the 2006‑2007 fiscal year to establish a public defender's office in the Tenth Defender District, as authorized by Section 14.4(b) of S.L. 2004‑126. The funds shall be used to establish the public defender, 20 assistant public defenders, four investigators, one administrative assistant II, and five legal assistants.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
OFFICE OF INDIGENT DEFENSE SERVICES EXPANSION FUNDS
SECTION 14.11.  The Judicial Department, Office of Indigent Defense Services, may use up to the sum of one million sixty‑nine thousand six hundred forty‑five dollars ($1,069,645) in appropriated funds during the 2005‑2006 fiscal year and up to the sum of one million twenty‑three thousand one hundred thirty‑five dollars ($1,023,135) in appropriated funds during the 2006‑2007 fiscal year for the expansion of existing offices currently providing legal services to the indigent population under the oversight of the Office of Indigent Defense Services by creating up to 10 new attorney positions and five new support staff positions. These funds may be used for salaries, benefits, equipment, and related expenses. Prior to using funds for this purpose, the Office of Indigent Defense Services shall report to the Chairs of the House and the Senate Appropriations Subcommittees on Justice and Public Safety on the proposed expansion.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
OFFICE OF INDIGENT DEFENSE SERVICES REPORT
SECTION 14.12.  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
CLARIFY THAT fees paid to attorneys representing indigent clients shall be fixed in accordance with the rules adopted by the office of indigent defense services and may not be set at higher rates without the approval of the office of indigent defense serviceS
SECTION 14.13.  G.S. 7A‑458 reads as rewritten:
"§ 7A‑458.  Counsel fees.
The fee to which an attorney who represents an indigent person is entitled shall be fixed in accordance with rules adopted by the Office of Indigent Defense Services. Fees shall be based on the factors normally considered in fixing attorneys' fees, such as the nature of the case, and the time, effort and responsibility involved. Fees shall not be set or ordered at rates higher than those established by the rules adopted under this section without the approval of the Office of Indigent Defense Services. Even if the trial, appeal, hearing or other proceeding is never held, preparation therefor is nevertheless compensable and, in capital cases and other extraordinary cases pending in superior court, a fee for services rendered and payment for expenses incurred may be allowed pending final determination of the case."

PART XV. 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 15.1.(a)  Assets transferred to the Departments of Justice, Correction, and Crime Control and Public Safety during the 2005‑2007 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 15.1.(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 15.1.(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 15.2.  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 15.3.  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 15.4.  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 RECORD CHECKS CONDUCTED FOR CONCEALED HANDGUN PERMITS/STUDY FEE ADJUSTMENT FOR CRIMINAL RECORD CHECKS
SECTION 15.5.(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 record 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 15.5.(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 record checks conducted by the Division of Criminal Information of the Department of Justice as a result of the increase in receipts from criminal record checks. The study shall include an assessment of the Division's operational, personnel, and overhead costs related to providing criminal record 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, 2006.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
NC LEGAL EDUCATION ASSISTANCE FOUNDATION REPORT ON FUNDS DISBURSED
SECTION 15.6.  The North Carolina Legal Education Assistance Foundation shall report by March 1 of each year to the Joint Legislative Commission on Governmental Operations on the expenditure of State funds, the purpose of the expenditures, 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 Hagan, Garrou, Dalton
REDUCE BACKLOG OF RAPE KITS
SECTION 15.7.(a)  The Department of Justice shall contract with private entities to reduce the backlog of rape kits in storage in local law enforcement agencies as of July 1, 2004.  The Department shall contract with private entities to analyze bodily fluids, DNA evidence, as "DNA" is defined in G.S. 15A‑266.2, or both, from rape kits that are evidence in cases in which a suspect has not been identified.  The Department shall maximize the use of federal grant funds to expedite the elimination of the backlog.
SECTION 15.7.(b)  The Department of Justice shall report, on or before February 1, 2006, and annually thereafter to the Chairs of the House of Representatives and Senate Appropriations Subcommittees on Justice and Public Safety on the number of rape kits analyzed by private entities and how many of those analyses resulted in arrests or convictions.  The Department shall also report on the number of rape kits analyzed by the SBI Crime Lab, the amount of the remaining backlog, and the estimated time left to eliminate the backlog.
SECTION 15.7.(c)  Except as provided otherwise by this subsection, the Department of Justice shall hire only nonsworn personnel to fill vacant positions in the State Bureau of Investigation laboratory.  A position may be filled with a sworn agent in any of the following circumstances:  (i) the position is a promotion for a sworn agent who was employed at the State Bureau of Investigation laboratory prior to July 1, 2005, or (ii) the position is a forensic drug chemist position that has as a primary duty "responding to clandestine methamphetamine laboratories."

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
Study DNA Testing and analysis Costs
SECTION 15.8.  The Office of State Budget and Management, in consultation with the Department of Justice, shall study the cost of testing and analyzing DNA samples. The study shall include all of the following: a determination of the unit cost for analyzing a rape kit and a comparison of that cost with the unit cost for the same analysis when performed by other labs, both public and private; a comparison of the amount of funds and length of time required to eliminate the backlog of rape kits using private labs versus the SBI crime lab; and a survey of the funding sources used by other states for their DNA testing and analysis lab costs. 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, 2006.

PART XVI. DEPARTMENT OF JUVENILE JUSTICE AND DELINQUENCY PREVENTION

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
S.O.S. Administrative Cost Limits
SECTION 16.1.  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 2005‑2006 fiscal year and not more than four hundred fifty thousand dollars ($450,000) for the 2006‑2007 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
JCPC Grant Reporting and Certification
SECTION 16.2.(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 16.2.(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 16.3.(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:
(1)	The source of referrals for juveniles.
(2)	The types of offenses committed by juveniles participating in the program.
(3)	The amount of time those juveniles spend in the program.
(4)	The number of juveniles who successfully complete the program.
(5)	The number of juveniles who commit additional offenses after completing the program.
(6)	The program's budget and expenditures, including all funding sources.
SECTION 16.3.(b)  The Juvenile Assessment Center shall report to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on the effectiveness of the Center by April 1 each year.  The report 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. In addition, the report shall include information on the Center's budget and expenditures, including all funding sources.
SECTION 16.3.(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 effectiveness of its program.  The report shall include information on:
(1)	The number of children served.
(2)	The number of volunteers used.
(3)	The impact on children who have received services from Communities in Schools.
(4)	The program's budget and expenditures, including all funding sources. 

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
Annual Evaluation of Community Programs
SECTION 16.4.  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 on 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
State Funds May Be Used As Federal Matching Funds
SECTION 16.5.  Funds appropriated in this act to the Department of Juvenile Justice and Delinquency Prevention for the 2005‑2006 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 2005‑2006 fiscal year, the amount of funds anticipated for the 2006‑2007 fiscal year, and the allocation of funds by program and purpose.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
Implementation of Treatment Staffing Model at Youth Development Centers
SECTION 16.6.(a)  The Department of Juvenile Justice and Delinquency Prevention shall report each December 31, March 31, June 30, and September 30 of the 2005‑2007 biennium to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety and to the Joint Corrections, Crime Control, and Juvenile Justice Oversight Committee on the treatment staffing model being piloted at Samarkand and Stonewall Jackson Youth Development Centers. The report shall include a list of total positions at each facility by job class, whether the position is vacant or filled, whether positions were filled from internal employees or new employees, and the training and certification status of each position.  The report shall also describe the nature of the treatment program, the criteria for evaluating the program, and how the program is performing in comparison to these criteria. The report shall also describe the training approach to be used to train staff in using treatment methods in youth development centers and provide information on current staff training and staff training planned for the next quarter. The Department shall also develop indicators for evaluating staff performance once the model has been implemented.
SECTION 16.6.(b)  The Department of Juvenile Justice and Delinquency Prevention shall report each December 31, March 31, June 30, and September 30 of the 2005‑2007 biennium to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on the implementation of the treatment staffing model at Dobbs, Dillon, and Juvenile Evaluation Center Youth Development Centers. The Department shall identify the number of positions reallocated to the new treatment job classes and the source of funding for those positions.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
progress reports on Youth Development Center Capital Projects
SECTION 16.7.  The Department of Juvenile Justice and Delinquency Prevention shall report each December 31, March 31, June 30, and September 30 of the 2005‑2007 biennium to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety and to the Joint Corrections, Crime Control, and Juvenile Justice Oversight Committee on the Department's progress in the planning, design, and construction of new youth development centers. The report shall include:
(1)	An overall project schedule for each new youth development center showing the original estimated date for construction completion and the original estimated date for occupancy by juvenile offenders, compared to the latest projected dates.
(2)	An explanation of significant delays in the schedule or any potential cost increase.
The Office of State Construction and the Capital Improvement Section of the Office of State Budget and Management shall assist the Department of Juvenile Justice and Delinquency Prevention in the preparation of the report required by this section.

PART XVII. DEPARTMENT OF CORRECTION

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
FEDERAL GRANT REPORTING
SECTION 17.1.  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 17.2.  The Department of Correction may use funds available to the Department for the 2005‑2007 biennium to pay the sum of forty dollars ($40.00) per day as reimbursement to counties for the cost of housing convicted inmates, parolees, and post‑release supervisees awaiting transfer to the State prison system, as provided in G.S. 148‑29. The Department shall report quarterly to the Joint Legislative Commission on Governmental Operations, the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee, the Chairs of the Senate and House of Representatives Appropriations Committees, and the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on the expenditure of funds to reimburse counties for prisoners awaiting transfer and on its progress in reducing the jail backlog.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
HOLIDAY PAY FOR department of correction STAFF
SECTION 17.3.  Holiday pay for Department of Correction staff entitled to holiday pay shall be one hundred fifty percent (150%) of regular pay during the 2005‑2007 biennium, except that the Department of Correction may use funds available to pay up to one hundred seventy‑five percent (175%) of regular pay for holiday pay during the 2005‑2007 biennium.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
DEPARTMENT OF CORRECTION SECURITY STAFFING FORMULAS
SECTION 17.4.(a)  G.S. 143B‑262.5 reads as rewritten:
"§ 143B‑262.5.  Security Staffing.
(a)	The Department of Correction shall  conduct:
(1)	On‑site post‑audits of every prison at least once every three years;
(2)	Regular audits of post‑audit charts through the automated post‑audit system; and
(3)	Other staffing audits as necessary.
(b)	The Department of Correction shall update the security staffing relief formula  at least every three years. 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. The Department shall survey other states to determine which states use a vacancy factor in their staffing relief formulas."
SECTION 17.4.(b)  The Department of Correction shall implement the current post‑audit by July 1, 2005, and report by October 1, 2005, to the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety on the effect that the new post‑audit has had on staffing at each prison.
SECTION 17.4.(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 April 1, 2006. The report shall include a status report on the implementation of a centralized postaudit control system, the automation of leave records, and the survey of other states' use of a vacancy factor in staffing relief formulas.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
USE OF CLOSED PRISON FACILITIES
SECTION 17.5.  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/MEDICAL BUDGET FOR PRESCRIPTION DRUGS AND INMATE CLOTHING AND LAUNDRY SERVICES
SECTION 17.6.(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 17.6.(b)  Notwithstanding the provisions of G.S. 143‑23(a2), the Department of Correction may use funds available during the 2005‑2006 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 17.6.(c)  Notwithstanding the provisions of G.S. 143‑23(a2), the Department of Correction may use funds available during the 2005‑2006 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
CONVERSION OF CONTRACTED MEDICAL POSITIONS
SECTION 17.7.(a)  The Department of Correction may convert contract medical positions to permanent State medical positions 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 17.7.(b)  The Department of Correction shall report by April 1, 2006, 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 17.8.  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 17.9.  Notwithstanding the provisions of G.S. 148‑2, the Department of Correction may use up to the sum of seven hundred fifty thousand dollars ($750,000) 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 17.10.  Notwithstanding the provisions of G.S. 143‑23(a2), the Department of Correction may use funds available during the 2005‑2006 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 17.11.(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 2005‑2007 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 17.11.(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 2005‑2007 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
INMATE CUSTODY AND CLASSIFICATION SYSTEM
SECTION 17.12.(a)  The Department of Correction shall review the current inmate custody and classification system, with the assistance of consultants from the National Institute of Corrections. The review shall focus primarily on the custody classification instrument used to assess inmate custody and the policies and practice of overriding the assessed custody level.  The review should focus particularly on determining whether the instrument is effective in predicting custody classification, analyzing the current override rate by custody level, and assessing any need for changes in the override policy.  The Department should request assistance from the National Institute of Corrections in obtaining (i) a comparison between Department of Correction override rates and policies and those of other states; (ii) suggestions on an acceptable override rate for classification systems; and (iii) any recommendations the NIC may have on the Department's custody classification instrument and override policy.
SECTION 17.12.(b)  The Department shall report its findings and recommendations to the Chairs of the House and Senate Appropriations Subcommittees on Justice and Public Safety no later than April 15, 2006.

Requested by:	Senators Garrou, Dalton, Hagan
extend LIMITS OF CONFINEMENT/Terminally ill and permanently and totally disabled inmates
SECTION 17.13.  G.S. 148‑4 reads as rewritten:
"§ 148‑4.  Control and custody of prisoners; authorizing prisoner to leave place of confinement.
The Secretary of Correction shall have control and custody of all prisoners serving sentence in the State prison system, and such prisoners shall be subject to all the rules and regulations legally adopted for the government thereof. Any sentence to imprisonment in any unit of the State prison system, or to jail to be assigned to work under the State Department of Correction, shall be construed as a commitment, for such terms of imprisonment as the court may direct, to the custody of the Secretary of Correction or his authorized representative, who shall designate the places of confinement within the State prison system where the sentences of all such persons shall be served. The authorized agents of the Secretary shall have all the authority of peace officers for the purpose of transferring prisoners from place to place in the State as their duties might require and for apprehending, arresting, and returning to prison escaped prisoners, and may be commissioned by the Governor, either generally or specially, as special officers for returning escaped prisoners or other fugitives from justice from outside the State, when such persons have been extradited or voluntarily surrendered. Employees of departments, institutions, agencies, and political subdivisions of the State hiring prisoners to perform work outside prison confines may be designated as the authorized agents of the Secretary of Correction for the purpose of maintaining control and custody of prisoners who may be placed under the supervision and control of such employees, including guarding and transferring such prisoners from place to place in the State as their duties might require, and apprehending and arresting escaped prisoners and returning them to prison. The governing authorities of the State prison system are authorized to determine by rules and regulations the manner of designating these agents and placing prisoners under their supervision and control, which rules and regulations shall be established in the same manner as other rules and regulations for the government of the State prison system.
The Secretary of Correction may extend the limits of the place of confinement of a prisoner, as to whom there is reasonable cause to believe he will honor his trust, by authorizing him, under prescribed conditions, to leave the confines of that place unaccompanied by a custodial agent for a prescribed period of time to
(1)	Contact prospective employers; or
(2)	Secure a suitable residence for use when released on parole or upon discharge; or
(3)	Obtain medical services not otherwise available; or
(4)	Participate in a training program in the community; or
(5)	Visit or attend the funeral of a spouse, child (including stepchild, adopted child or child as to whom the prisoner, though not a natural parent, has acted in the place of a parent), parent (including a person though not a natural parent, has acted in the place of a parent), brother, or sister; or
(6)	Participate in community‑based programs of rehabilitation, including, but not limited to the existing community volunteer and home‑leave programs, pre‑release and after‑care programs as may be provided for and administered by the Secretary of Correction and other programs determined by the Secretary of Correction to be consistent with the prisoner's rehabilitation and return to society; or
(7)	Be on maternity leave, for a period of time not to exceed 60 days. The county departments of social services are expected to cooperate with officials at the North Carolina Correctional Center for Women to coordinate prenatal care, financial services, and placement of the child; or
(8)	Receive palliative care, only in the case of a terminally ill inmate or a permanently and totally disabled inmate that the Secretary finds no longer poses  a significant public safety risk, and only after consultation with any victims of the inmate or the victims' families. For purposes of this subdivision, the term "terminally ill" describes an inmate who, as determined by a licensed physician, has an incurable condition caused by illness or disease that did not exist at the time of sentencing, that will likely produce death within  six months, and that is so debilitating that it is highly unlikely that the inmate poses a significant public safety risk. For purposes of this subdivision, the term "permanently and totally disabled" describes an inmate who, as determined by a licensed physician, suffers from permanent and irreversible physical incapacitation as a result of an existing physical or medical  condition that did not exist at the time of sentencing and that is so incapacitating that it is highly unlikely that the inmate poses a significant public safety risk. The Department's medical director shall notify the Secretary immediately when an inmate has been classified as terminally ill and shall provide regular reports on inmates classified as permanently and totally disabled. The Secretary shall act expeditiously in determining whether to extend the limits of confinement under this subdivision upon receiving notice that an inmate has been classified as terminally ill or permanently and totally disabled and, in the case of a terminally ill inmate, the Secretary shall make a good faith effort to reach a determination within 30 days of receiving notice of the inmate's terminal condition.
The willful failure of a prisoner to remain within the extended limits of his confinement, or to return within the time prescribed to the place of confinement designated by the Secretary of Correction, shall be deemed an escape from the custody of the Secretary of Correction punishable as provided in G.S. 148‑45."

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
partial reimbursement/INMATE COMMUNITY WORK CREWS AND INMATE LABOR CONTRACTS
SECTION 17.14.(a)  G.S. 148‑26 is amended by adding a new subsection to read:
"(e1)	Departments, institutions, agencies, and political subdivisions of the State using inmate community work crews or inmate labor contracts as authorized by this section shall reimburse the Department of Correction for a portion of the costs of operating inmate community work crews and a portion of the administrative expenses of managing inmate labor contracts. In determining the amount of reimbursement to require under this subsection, the Department may consider requiring a smaller amount from entities that can demonstrate a limited ability to pay for inmate labor."
SECTION 17.14.(b)  In determining reimbursement amounts required by G.S. 148‑26(e1), the Department of Correction shall attempt to recoup at least the sum of six hundred thousand dollars ($600,000) for each year of the 2005‑2007 biennium in inmate work crew costs and administrative expenses of managing inmate labor contracts.
SECTION 17.14.(c)  The Department of Correction shall report by March 1, 2006, 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 the inmate labor contracts and community work programs, identifying total project man‑hours by client agency, the total operating costs of these programs, the benefits of these programs, and the potential for reimbursement that more closely reflects the actual cost of all projects.

Requested by:	Senators Rand, Thomas, Garrou, Dalton, Hagan
PROVIDER RATES FOR INMATE HEALTH SERVICES NOT TO EXCEED  PROVIDER RATES UNDER Teachers' and State Employees' Comprehensive Major Medical PLAN
SECTION 17.15.(a)  G.S. 148‑19 reads as rewritten:
"§ 148‑19.  Health services.
(a)	The general policies, rules and regulations of the Department of Correction shall prescribe standards for health services to prisoners, which shall include preventive, diagnostic, and therapeutic measures on both an outpatient and a hospital basis, for all types of patients. A prisoner may be taken, when necessary, to a medical facility outside the State prison system. The Department of Correction shall seek the cooperation of public and private agencies, institutions, officials and individuals in the development of adequate health services to prisoners.
(b)	Upon request of the Secretary of Correction, the Secretary of Health and Human Services may detail personnel employed by the Department of Health and Human Services to the Department of Correction for the purpose of supervising and furnishing medical, psychiatric, psychological, dental, and other technical and scientific services to the Department of Correction. The compensation, allowances, and expenses of the personnel detailed under this section may be paid from applicable appropriations to the Department of Health and Human Services, and reimbursed from applicable appropriations to the Department of Correction. The Secretary of Correction may make similar arrangements with any other agency of State government able and willing to aid the Department of Correction to meet the needs of prisoners for health services. Reimbursement rates to public and private agencies and health care providers for health care services rendered to prisoners shall be established as provided in G.S. 148‑22.
(c)	Each prisoner committed to the State Department of Correction shall receive a physical and mental examination by a health care professional authorized by the North Carolina Medical Board to perform such examinations as soon as practicable after admission and before being assigned to work. The prisoner's work and other assignments shall be made with due regard for the prisoner's physical and mental condition.
(d)	The Commission for Mental Health, Developmental Disabilities, and Substance Abuse Services shall adopt standards for the delivery of mental health and mental retardation services to inmates in the custody of the Department of Correction. The Commission for Mental Health, Developmental Disabilities, and Substance Abuse Services shall give the Secretary of Correction an opportunity to review and comment on proposed standards prior to promulgation of such standards; however, final authority to determine such standards remains with the Commission. The Secretary of the Department of Health and Human Services shall designate an agency or agencies within the Department of Health and Human Services to monitor the implementation by the Department of Correction of these standards and of substance abuse standards adopted by the Department of Correction upon the advice of the Substance Abuse Advisory Council established pursuant to G.S. 143B‑270. The Secretary of Health and Human Services shall send a written report on the progress which the Department of Correction has made on the implementation of such standards to the Governor, the Lieutenant Governor, and the Speaker of the House. Such reports shall be made on an annual basis beginning January 1, 1978."
SECTION 17.15.(b)  G.S. 148‑22 reads as rewritten:
"§ 148‑22.  Treatment programs.
(a)	The general policies, rules and regulations of the Department of Correction shall provide for humane treatment of prisoners and for programs to effect their correction and return to the community as promptly as practicable. Visits and correspondence between prisoners and approved friends shall be authorized under reasonable conditions, and family members shall be permitted and encouraged to maintain close contact with the prisoners unless such contacts prove to be hurtful. Casework, counseling, and psychotherapy services provided to prisoners may be extended to include members of the prisoner's family if practicable and necessary to achieve the purposes of such programs. Education, library, recreation, and vocational training programs shall be developed so as to coordinate with corresponding services and opportunities which will be available to the prisoner when he is released. Programs may be established for the treatment and training of mentally retarded prisoners and other special groups. These programs may be operated in segregated sections of facilities housing other prisoners or in separate facilities.
(b)	The Department of Correction may cooperate with and seek the cooperation of public and private agencies, institutions, officials, and individuals in the development and conduct of programs designed to give persons committed to the Department opportunities for physical, mental and moral improvement. The Department may enter into agreements with other agencies of federal, State or local government and with private agencies to promote the most effective use of available resources.
Specifically the Secretary of Correction may enter into contracts or agreements with appropriate public or private agencies or providers offering needed services including health, mental health, mental retardation, substance abuse, rehabilitative or training services for such inmates of the Department of Correction as the Secretary may deem eligible. These agencies and providers shall be reimbursed from applicable appropriations to the Department of Correction for health services rendered at a rate not to exceed  the contract rate paid for the same or similar service or diagnostic‑related grouping under the Teachers' and State Employees' Comprehensive Major Medical Plan ("Plan") for Plan members. Before paying the claim approved by the Secretary, the Secretary of Correction shall submit the claim to the Plan for verification of the rate charged under the claim in accordance with procedures established by the Executive Administrator and Board of Trustees of the Plan. The Department of Correction shall, from State appropriations and any other funds available for this purpose, transfer to the Teachers' and State Employees' Comprehensive Major Medical Plan funds in the amount determined by the Plan as necessary to cover the Plan's administrative costs for verifying claim rates. The Secretary may contract for the housing of work‑release inmates at county jails and local confinement facilities. Inmates may be placed in the care of such agencies but shall remain the responsibility of the Department and shall be subject to the complete supervision of the Department. The Department may reimburse such agencies for the support of such inmates at a rate not in excess of the average daily cost of inmate care in the corrections unit to which the inmate would otherwise be assigned."
SECTION 17.15.(c)  Article 3 of Chapter 135 of the General Statutes is amended by adding the following new Part to read:
"Part 6. Administrative Services to Other State Agencies.
"§ 135‑43. Verification of Plan rates for health services provided to prison inmates.
As used in this Part, "Plan" means the North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan. Upon receipt of a claim for health services approved by the Secretary of Correction, the Plan shall review the claim rates and shall verify to the Secretary of Correction that the rates applied in the claim do not exceed the rates applicable under the Plan for the same or similar services or diagnostic‑related grouping code for Plan members. Nothing in this section shall be construed as providing Plan benefits to prison inmates. The Plan's self‑insured indemnity program shall not incur any financial obligations for claims submitted by the Secretary of Correction for health services rendered to prison inmates."

Requested by:	Senators Kerr, Thomas, Garrou, Dalton, Hagan
REplacement OF UMSTEAD LAUNDRY
SECTION 17.16.  In preparation for the scheduled closing of Umstead Hospital in 2007, the Department of Correction shall develop a plan for the replacement of the Correction Enterprises laundry operation at Umstead Hospital and report that plan to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by May 1, 2006.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
STAFFING STUDY OF UNIT MANAGEMENT
SECTION 17.17.  The Department of Correction shall conduct an organization and staffing study of unit management in the State prison system, focusing on the 18 prison facilities that use unit management. The Department shall review workload and staffing at each of the prisons and make recommendations for staffing changes and staffing efficiencies. The study shall consider the responsibilities and workloads of custody supervisors in relation to unit managers and determine whether certain functions should be the responsibility of custody supervisors or program staff.
The Department shall report its findings and recommendations to the Chairs of the House and Senate Appropriations Subcommittees on Justice and Public Safety and the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee by March 1, 2006.

Requested by:	Senators Thomas, Dalton, Garrou, Hagan
STUDY EXPANSION AT CLEVELAND CORRECTIONAL CENTER
SECTION 17.18.  As part of its development and update of its long‑range prison housing plan, the Department of Correction shall consider the feasibility of expanding minimum custody bed capacity at the Cleveland Correctional Center. The study shall include an engineering analysis of the site and a cost analysis of either expanding the current facility or building a stand‑alone minimum custody prison. The cost analysis shall include a determination of possible savings by using inmate labor to assist with construction. The Department of Correction shall report its findings 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 April 1, 2006.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
REPORT ON ELECTRONIC MONITORING COSTS
SECTION 17.19.  The Department of Correction shall report by March 1 of each year 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 its 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
REPORT ON PROBATION AND PAROLE CASELOADS
SECTION 17.20.(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;
(3)	An assessment of the role of surveillance officers;
(4)	The number and role of paraprofessionals in supervising low‑risk caseloads;
(5)	An update on the Department's implementation of the recommendations contained in the National Institute of Correction study conducted on the Division of Community Corrections in 2004;
(6)	The selection of a risk assessment and the resulting distribution of offenders among risk levels; and
(7)	Any position reallocations in the previous 12 months, and the reasons for and fiscal impact of those reallocations.
SECTION 17.20.(b)  The Department of Correction shall conduct a study of  probation/parole officer workload at least biannually. The study 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 17.20.(c)  The Department of Correction shall report the results of the study and recommendations for any adjustments to caseload goals to the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by January 1, 2007.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
COMMUNITY SERVICE WORK PROGRAM
SECTION 17.21.  The Department of Correction shall report to the Chairs of the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by February 1 of each year 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 February 1 of each year 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, or any other agency referrals).

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
REPORTS ON NONPROFIT PROGRAMS
SECTION 17.22.(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 to serve women released from prison with children in their custody. 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, the number of clients who successfully complete the Harriet's House program, and the number of clients who have been rearrested within three years of successfully completing the program. The report shall provide financial and program data for the complete fiscal year prior to the year in which the report is submitted. The financial report shall identify all funding sources and amounts.
SECTION 17.22.(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, the number of clients who successfully complete the program while housed at Summit House,  Inc.,  and the number of clients who have been rearrested within three years of successfully completing the program. The report shall provide financial and program data for the complete fiscal year prior to the year in which the report is submitted. The financial report shall identify all funding sources and amounts.
SECTION 17.22.(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,  the number of clients who have successfully completed the  program, and the number of clients who have been rearrested within three years of successfully completing the program. The report shall provide financial and program data for the complete fiscal year prior to the year in which the report is submitted. The financial report shall identify all funding sources and amounts.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
criminal justice partnership program
SECTION 17.23.(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 17.23.(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 17.23.(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 17.23.(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;
(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; and
(7)	An evaluation of Criminal Justice Partnership programs based upon evaluation standards designed by the Division of Community Corrections in consultation with the Fiscal Research Division and the Department of Correction, Division of Research and Planning.
SECTION 17.23.(e)  G.S. 143B‑273.4 reads as rewritten:
"§ 143B‑273.4.  Eligible population.
(a)	An eligible offender is an adult offender who  was convicted of a misdemeanor or a felony offense and received a nonincarcerative sentence of an intermediate punishment or is serving a term of parole or post‑release supervision after serving an active sentence of imprisonment.
(b)	The priority populations for programs funded under this Article shall 	 be offenders sentenced to intermediate 	 punishments."
SECTION 17.23.(f)  G.S. 143B‑273.15 reads as rewritten:
"§ 143B‑273.15.  Funding formula.
To determine the grant amount for which a county or counties may apply, the granting authority shall apply the following formula:
(1)	 Twenty‑five percent (25%) based on a fixed equal dollar amount for each county;
(2)	 Fifty percent (50%) based on the county share of the State population; and
(3)	 Twenty‑five percent (25%) based on the intermediate punishment entry rate for the  county, using the total of the three most recent years of data available divided by the average county population for that same period.
The sum of the amounts in subdivisions (1), (2), and (3) is the total amount of the funding that a county may apply for under this subsection.
Grants to participating counties are for a period of one fiscal year with unobligated funds being returned to the Account at the end of the grant period. Funds are provided to participating counties on a reimbursement basis unless a county documents a need for an advance of grant funds."
SECTION 17.23.(g)  For the 2005‑2006 fiscal year, notwithstanding the formula in G.S. 143B‑273.15, each county's formula allocation shall be capped at no less than ninety‑five percent (95%) and no greater than one hundred twenty percent (120%) of the funds allocated to that county for the 2004‑2005 fiscal year. After determining the capped formula allocations, funds that were used in the 2003‑2004 fiscal year for pretrial release programs shall be reallocated among all participating counties using the formula in G.S. 143B‑273.15 and dedicated to sentenced offender programs. For the 2006‑2007 fiscal year, the same procedures shall be used, except that the capped amounts shall be no less than ninety percent (90%) and no greater than one hundred thirty percent (130%) of the funds allocated to that county for the 2004‑2005 fiscal year.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
REPORT ON INMATES ELIGIBLE FOR PAROLE
SECTION 17.24.  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 2007‑2008 fiscal year and by the end of each of the next five fiscal years, beginning with the 2008‑2009 fiscal year.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
provide that the terms of the members of the post‑release supervision and parole commission serving on June 30, 2005, expire on that date and restructure the commission to consist of one full‑time member and two half‑time members
SECTION 17.25.(a)  G.S. 143B‑267 reads as rewritten:
"§ 143B‑267.  Post‑Release Supervision and Parole Commission – members; selection; removal; chairman; compensation; quorum; services.
 Effective July 1, 2005, the Post‑Release Supervision and Parole Commission shall consist of  one full‑time  member and two half‑time members. The three  members shall be appointed by the Governor from persons whose recognized ability, training, experience, and character qualify them for service on the Commission. The terms of office of  any members serving on the Commission on June 30, 2005, shall expire on  that date.  The terms of office of persons appointed by the Governor as members of the Commission shall be for four years or until their successors are appointed and qualify. Any appointment to fill a vacancy on the Commission created by the resignation, removal, death or disability of a  member shall be for the balance of the unexpired term only.
The Governor shall have the authority to remove any member of the Commission from office for misfeasance, malfeasance or nonfeasance, pursuant to the provisions of G.S. 143B‑13. The Governor shall designate a  member of the Commission to serve as  chair of the Commission at the pleasure of the Governor.
The granting, denying, revoking, or rescinding of parole, the authorization of work‑release privileges to a prisoner, or any other matters of business coming before the Commission for consideration and action shall be decided by majority vote of the full Commission.
The  members of the Commission shall receive the salary fixed by the General Assembly in the Current Operations Appropriations Act and shall receive necessary travel and subsistence expenses in accordance with the provisions of G.S. 138‑6.
All clerical and other services required by the Commission shall be supplied by the Secretary of Correction."
SECTION 17.25.(b)  This section becomes effective June 30, 2005.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
POST‑RELEASE SUPERVISION AND PAROLE COMMISSION/REPORT ON STAFFING REORGANIZATION AND REDUCTION
SECTION 17.26.  The Post‑Release Supervision and Parole Commission shall report by October 1 of each year 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 and implementing staff reductions to reflect both declines and changes in workload.

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
MUTUAL AGREEMENT PAROLE PROGRAM
SECTION 17.27.  The Department of Correction and the Post‑Release Supervision and Parole Commission shall make a good faith effort to enroll at least ten percent (10%) of all program‑eligible, pre‑Structured Sentencing felons in the Mutual Agreement Parole Program by January 1, 2006. The Department shall report to the Senate and House of Representatives Appropriations Subcommittees on Justice and Public Safety by March 1 of each year on the number of inmates actually enrolled in the program, the number of inmates who have been paroled as a result of participation in the program, and the number of inmates who have enrolled but terminated as a result of unsuccessful participation in the program. If the ten percent (10%) participation goal established by this section has not been reached, the report shall explain why the goal was not realized.

PART XVIII. DEPARTMENT OF CRIME CONTROL AND PUBLIC SAFETY

Requested by:	Senators Thomas, Garrou, Dalton, Hagan
Annual Evaluation of Tarheel Challenge Program
SECTION 18.1.  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 of the biennium 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
Victims Assistance Network Report
SECTION 18.2.  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, Garrou, Dalton, Hagan
Transfer the Statewide Floodplain Mapping Unit
SECTION 18.3.  The Statewide Floodplain Mapping Unit is transferred from the Department of Crime Control and Public Safety to the Department of Environment and Natural Resources. This transfer has all of the elements of a Type I transfer as defined in G.S. 143A‑6.

PART XiX. DEPARTMENT OF ADMINISTRATION

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Continuation of the Study of Advocacy Programs in the Department of Administration
SECTION 19.1.  The Secretary of the Department of Administration, in collaboration with appropriate entities that concentrate on public policy and business management, shall continue the study that was completed during the 2003‑2004 fiscal year of 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 include both the advocacy and service functions of the Division of Veterans Affairs, the Council for Women and the Domestic Violence Commission, the Commission of Indian Affairs, the Governor's Advocacy Council for Persons with Disabilities, the Human Relations Commission, and the Youth Advocacy and Involvement Office. 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 April 1, 2006.

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Veterans Scholarships PARTIALLY Funded from ESCHEAT Fund
SECTION 19.2.  In accordance with G.S. 116B‑7(b), there is appropriated from the Escheat Fund to the Department of Administration the sum of four million two hundred ninety‑seven thousand five hundred forty‑four dollars ($4,297,544) for the 2005‑2006 fiscal year and four million three hundred fifty‑eight thousand forty‑six dollars ($4,358,046) for the 2006‑2007 fiscal year.

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
State Veterans Cemeteries
SECTION 19.3.  The Department of Administration may use funds credited to the Veterans Burial Fund for the 2005‑2007 biennium to cover costs incurred as a result of burials on Saturday or Sunday.

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Allocation of Petroleum Violation Escrow Funds
SECTION 19.4.  The unallocated balance of the funds and interest thereon received from the cases of United States v. Stripper Well, United States v. Exxon, United States v. Diamond Shamrock, United States v. Amoco, United States v. Chevron, and United States v. Occidental that remain in the Special Reserve for Oil Overcharge Funds is appropriated to the Department of Administration for the 2005‑2006 fiscal year to be allocated for projects approved by the State Energy Policy Council.

Requested by:	Senators Albertson, Jenkins, Dorsett, Garrou, Dalton, Hagan
Increased fuel efficiency of state motor fleet
SECTION 19.5.(a)  The Department of Administration, Motor Fleet Management, shall develop and implement a plan to improve and increase the overall fuel efficiency of the State's motor fleet by twenty percent (20%). The Department shall implement this plan and achieve the twenty percent (20%) increase in fuel efficiency by July 1, 2006. Fuel efficiency goals may be met by petroleum displacement through the use of biodiesel, ethanol, other alternative fuels, the purchase of hybrid electric vehicles and other fuel‑efficient vehicles.
SECTION 19.5.(b)  The Department shall report to the Joint Legislative Commission on Governmental Operations its plan for increasing and maintaining the fuel efficiency of the State's motor fleet no later than January 1, 2006.

PART XX. OFFICE OF THE GOVERNOR

Requested by:	Senators Dorsett, 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, 2006, or on June 30, 2007.

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Housing Finance Agency Shall continue the North Carolina Home Protection Pilot Program and Loan Fund
SECTION 20.2.(a)  The North Carolina Housing Finance Agency shall continue to administer a pilot program to assist North Carolina workers who have lost jobs in Cabarrus, Cleveland, Cumberland, Edgecombe, Forsyth, Guilford, Rowan, and Rutherford Counties as a result of changing economic conditions in North Carolina when the workers are in need of assistance to avoid losing their homes to foreclosure.
SECTION 20.2.(b)  Sections 20A.1(b), 20A.1(d), and 20A.1(e) of S.L. 2004‑124 remain effective for the 2005‑2006 fiscal year.
SECTION 20.2.(c)  The agency shall, no later than May 1, 2006, report to the General Assembly on the effectiveness of the Program in accomplishing its purposes and provide any other information the Agency determines is pertinent or that the General Assembly requests.

PART XXI. DEPARTMENT OF INSURANCE

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Insurance Regulatory Fund Transfer to General Fund
SECTION 21.1.  The Commissioner of Insurance shall transfer funds quarterly from the Insurance Regulatory 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:	Senator Swindell
strengthen requirements for issuing building permits
SECTION 21.2.  The North Carolina Code Officials Qualification Board shall take steps to ensure that building inspectors enforce the requirements of G.S. 87‑14 and shall bring disciplinary action against any building inspector who willfully or negligently issues a building permit in violation of G.S. 87‑14.

PART XXII. DEPARTMENT OF REVENUE

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Department of Revenue Debt Fee For Taxpayer Locater Services and Collection
SECTION 22.1.(a)  G.S. 105‑243.1(e) reads as rewritten:
"(e)	Use. – The fee is a receipt of the Department and must be applied to the costs of collecting overdue tax debts. The proceeds of the fee must be credited to a special account within the Department and may be expended only as provided in this subsection. The proceeds of the fee may not be used for any purpose that is not directly and primarily related to collecting overdue tax debts. The Department may apply the proceeds of the fee for the purposes listed in this subsection. The remaining proceeds of the fee may be spent only pursuant to appropriation by the General Assembly. The fee proceeds do not revert but remain in the special account until spent for the costs of collecting overdue tax debts. The Department and the Office of State Budget and Management must account for all expenditures using accounting procedures that clearly distinguish costs allocable to collecting overdue tax debts from costs allocable to other purposes and must demonstrate that none of the fee proceeds are used for any purpose other than collecting overdue tax debts.
The Department may apply the fee proceeds for the following purposes:
(1)	To pay contractors for collecting overdue tax debts under subsection (b) of this section.
(2)	To pay the fee the United States Department of the Treasury charges for setoff to recover tax owed to North Carolina.
(3)	To pay for taxpayer locater services, not to exceed one hundred thousand dollars ($100,000) a year.
(4)	To pay for postage or other delivery charges for correspondence directly and primarily relating to collecting overdue tax debts.
(5)	To pay for operating expenses for Project Collection Tax and the Taxpayer Assistance Call Center.
(6)	To pay for expenses of the Examination and Collection Division directly and primarily relating to collecting overdue tax debts."
SECTION 22.1.(b)  G.S. 105‑243.1(f) reads as rewritten:
"(f)	Reports. – The Department must report semiannually to the Joint Legislative Commission on Governmental Operations and to the Revenue Laws Study Committee on its efforts to collect tax debts. Each report must include a breakdown of the amount and age of tax debts collected by collection agencies on contract, the amount and age of tax debts collected by the Department through warning letters, and the amount and age of tax debts otherwise collected by Department personnel. The report must itemize collections by type of tax. Each report must also include a long‑term collection plan, a timeline 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.
The Department must report by April 1, 2006, and annually thereafter, to the Revenue Laws Study Committee and the Fiscal Research Division of the General Assembly on the use of the fee proceeds for collecting overdue tax debts."

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Change Property Tax Commission Compensation
SECTION 22.2.  G.S. 105‑288(d) reads as rewritten:
"(d)	Expenses. – The members of the Property Tax Commission shall receive travel and subsistence expenses in accordance with G.S. 138‑5. The members of the Property Tax Commission shall receive a salary when hearing cases, meeting to decide cases, and attending training or continuing education classes on property taxes or judicial procedure. The salary is four hundred fifty dollars ($450.00) a day for the Chair of the Property Tax Commission and four hundred dollars ($400.00) a day for other members of the Property Tax Commission. The Secretary of Revenue shall supply all the clerical and other services required by the Commission. All expenses of the Commission and the Department of Revenue in performing the duties enumerated in this Article shall be paid as provided in G.S. 105‑501."

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Positions for Revenue Tax Evasion Project
SECTION 22.3.  The 10 time‑limited positions established in the Fuel Tax Compliance Division of the Department of Revenue for the Revenue Tax Evasion Project in S.L. 2004‑124 are converted to permanent positions.

PART XXIII. SECRETARY OF STATE

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
SECRETARY OF STATE TO REASSIGN VACANT POSITION
SECTION 23.1.  The Secretary of State shall reassign position 3222‑0000‑0000‑361 from the Uniform Commercial Code Division to its General Administration Division to assist with investigations of trademark violations and training for other law enforcement personnel in the State and with investigations of violations of the Charitable Solicitation Licensing Act. The Secretary shall report to the Chairs of the Appropriations Subcommittees on General Government of the Senate and House of Representatives by December 1, 2005.

PART XXIV. OFFICE OF STATE BUDGET AND MANAGEMENT

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
NC Humanities Council
SECTION 24.1. The North Carolina Humanities Council shall:
(1)	By January 15, 2006, 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 2004‑2005 program activities, objectives, and accomplishments;
b.	State fiscal year 2004‑2005 itemized expenditures and fund sources;
c.	State fiscal year 2005‑2006 planned activities, objectives, and accomplishments, including actual results through December 31, 2005; and
d.	State fiscal year 2005‑2006 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2005.
(2)	By January 15, 2007, 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 2005‑2006 program activities, objectives, and accomplishments;
b.	State fiscal year 2005‑2006 itemized expenditures and fund sources;
c.	State fiscal year 2006‑2007 planned activities, objectives, and accomplishments, including actual results through December 31, 2006; and
d.	State fiscal year 2006‑2007 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2006.
(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.

PART XXV. OFFICE OF THE STATE CONTROLLER

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Overpayments Audit
SECTION 25.1.(a)  During the 2005‑2007 biennium, 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 25.1.(b)  For each fiscal year of the 2005‑2007 biennium, 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 25.1.(c)  All funds available in the Special Reserve Account 24172 on July 1 of each year of the 2005‑2007 biennium are transferred to the General Fund on that date.
SECTION 25.1.(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 2006 Regular Session of the 2005 General Assembly.
SECTION 25.1.(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 24172 and the disbursement of that revenue.

PART XXVI. Office of state personnel

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Study Career‑Banding/fair pay
SECTION 26.1.(a)  Of the funds appropriated to the Department of Administration, the sum of one hundred thousand dollars ($100,000) for the 2005‑2006 fiscal year shall be allocated to the Office of State Personnel to conduct a study and to determine whether to implement a career‑banding personnel system for all State employee job classifications.
SECTION 26.1.(b)  In conducting the study, the Office of State Personnel shall evaluate the following issues:
(1)	Inequities and disparities in job classifications with respect to race and gender.
(2)	Whether the minimum annual salary for State employees is a livable salary and the impact of inflationary forces on that salary.
(3)	Whether there is fair pay for equivalent jobs in State government, including the extent of wage disparities in State government employment between men and women.
(4)	Any other matters relating to pay disparities in State government employment.
SECTION 26.1.(c)  The Office of State Personnel shall report the findings and recommendations of the study as well as the findings and recommendations on inequities and disparities to the Chairs of the Appropriations Committees of the Senate and the House of Representatives and the Chairs of the Joint Appropriations Subcommittees on General Government by April 1, 2006.

PART XXVII. DEPARTMENT OF THE STATE TREASURER

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Report of the Status of the Technology Infrastructure Enhancements
SECTION 27.1.  The Department of 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 Dorsett, Garrou, Dalton, Hagan
Staffing Analysis Follow‑Up
SECTION 27.2.(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 27.2.(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.

Requested by:	Senators Dorsett, Garrou, Dalton, Hagan
Treasurer report on State Investment Officer Position Incentive bonus
SECTION 27.3.  G.S. 147‑69.3 is amended by adding a new subsection to read:
"(i1)	The State Treasurer shall report the incentive bonus paid to the Chief Investment Officer to the Joint Legislative Commission on Governmental Operations by October 1 of each year."

PART XXVIII. DEPARTMENT OF TRANSPORTATION

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Remove Gov Ops Consultation on Federal‑Aid Acts
SECTION 28.1.  G.S. 136‑44.2 reads as rewritten:
"§ 136‑44.2.  Budget and appropriations.
The Director of the Budget shall include in the "Current Operations Appropriations Bill" an enumeration of the purposes or objects of the proposed expenditures for each of the construction and maintenance programs for that budget period for the State primary, secondary, urban, and State parks road systems. The State primary system shall include all portions of the State highway system located outside municipal corporate limits which are designated by N.C., U.S. or Interstate numbers. The State secondary system shall include all of the State highway system located outside municipal corporate limits that is not a part of the State primary system. The State urban system shall include all portions of the State highway system located within municipal corporate limits. The State parks system shall include all State parks roads and parking lots which are not also part of the State highway system.
All construction and maintenance programs for which appropriations are requested shall be enumerated separately in the budget. Programs that are entirely State funded shall be listed separately from those programs involving the use of federal‑aid funds. Proposed appropriations of State matching funds for each of the federal‑aid construction programs shall be enumerated separately as well as the federal‑aid funds anticipated for each program in order that the total construction requirements for each program may be provided for in the budget. Also, proposed State matching funds for the highway planning and research program shall be included separately along with the anticipated federal‑aid funds for that purpose.
Other program categories for which appropriations are requested, such as, but not limited to, maintenance, channelization and traffic control, bridge maintenance, public service and access road construction, and ferry operations shall be enumerated in the budget.
The Department of Transportation shall have all powers necessary to comply fully with provisions of present and future federal‑aid acts. For purposes of this section, "federally eligible construction project" means any construction project except secondary road projects developed pursuant to G.S. 136‑44.7 and 136‑44.8 eligible for federal funds under any federal‑aid act, whether or not federal funds are actually available.
The "Current Operations Appropriations Bill" shall also contain the proposed appropriations of State funds for use in each county for maintenance and construction of secondary roads, to be allocated in accordance with G.S. 136‑44.5 and 136‑44.6. State funds appropriated for secondary roads shall not be transferred nor used except for the construction and maintenance of secondary roads in the county for which they are allocated pursuant to G.S. 136‑44.5 and 136‑44.6.
If the unreserved credit balance in the Highway Fund on the last day of a fiscal year is greater than the amount estimated for that date in the Current Operations Appropriations Act for the following fiscal year, the excess shall be used in accordance with this paragraph. The Director of the Budget may allocate part or all of the excess among reserves for access and public roads, for unforeseen events requiring prompt action, or for other urgent needs. The amount not allocated to any of these reserves by the Director of the Budget shall be credited to a reserve for maintenance. The Board of Transportation shall report monthly to the Joint Legislative Transportation Oversight Committee and the Fiscal Research Division on the use of funds in the maintenance reserve.
The Department of Transportation may provide for costs incurred or accrued for traffic control measures to be taken by the Department at major events which involve a high degree of traffic concentration on State highways, and which cannot be funded from regular budgeted items. This authorization applies only to events which are expected to generate 30,000 vehicles or more per day. The Department of Transportation shall provide for this funding by allocating and reserving up to one hundred thousand dollars ($100,000) before any other allocations from the appropriations for State maintenance for primary, secondary, and urban road systems are made, based upon the same proportion as is appropriated to each system."

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Transportation Services for Trade Shows
SECTION 28.2.  The Department of Transportation, from funds available for public transportation in this act, may use up to one million two hundred thousand dollars ($1,200,000) in each year of the biennium for transportation services for annual or semiannual trade shows of international significance. The Department of Transportation shall report to the Joint Legislative Transportation Oversight Committee, annually on or before March 1, on the use of these funds.

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Cash‑Flow Highway Fund and Highway Trust Fund Appropriations.
SECTION 28.3.(a)  The General Assembly authorizes and certifies anticipated revenues of the Highway Fund as follows:
For Fiscal Year 2007‑2008	$1,551.1 million
For Fiscal Year 2008‑2009	$1,593.0 million
For Fiscal Year 2009‑2010	$1,647.9 million
For Fiscal Year 2010‑2011	$1,716.1 million
SECTION 28.3.(b)  The General Assembly authorizes and certifies anticipated revenues of the Highway Trust Fund as follows:
For Fiscal Year 2007‑2008	$1,136.9 million
For Fiscal Year 2008‑2009	$1,186.4 million
For Fiscal Year 2009‑2010	$1,229.6 million
For Fiscal Year 2010‑2011	$1,283.2 million

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Small construction and Contingency Funds
SECTION 28.4.  Of the funds appropriated in this act to the Department of Transportation:
(1)	Twenty‑one million dollars ($21,000,000) shall be allocated in each fiscal year for small construction projects reviewed and approved by the Division Engineer and the member of the Board of Transportation representing the district in which the project is to be constructed. These funds shall be allocated equally in each fiscal year of the biennium among the 14 Highway Divisions for small construction projects.
(2)	Fifteen million dollars ($15,000,000) in fiscal year 2005‑2006 and fifteen million dollars ($15,000,000) in fiscal year 2006‑2007 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, including pedestrian walkways that enhance highway safety. Projects funded pursuant to this subdivision shall be reviewed and approved by the member of the Board of Transportation representing the district in which the project is to be constructed. 
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 Jenkins, Garrou, Dalton, Hagan
Use of Excess Overweight/Oversize Fees
SECTION 28.5.  Chapter 20 of the General Statutes is amended by adding a new section to read:
"§ 20‑119.1.  Use of excess overweight and oversize fees.
Funds generated by overweight and 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 Jenkins, Garrou, Dalton, Hagan
Funds for Unsafe or Obsolete field Facilities
SECTION 28.6.  Of the funds appropriated in this act to the Department of Transportation, the Department may use funds not to exceed seventy‑five hundredths of one percent (.75%) for maintenance and construction programs for major repair, renovation, or replacement of its field 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 Transportation, the House of Representatives Appropriations Subcommittee on Transportation, and the Joint Legislative Transportation Oversight Committee each year.

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
State Use of North Carolina Railroad Dividends
SECTION 28.7.(a)  G.S. 124‑5.1 is repealed.
SECTION 28.7.(b)  The Department of Transportation shall use the annual dividends received by the State from its ownership of the stock of the North Carolina Railroad Company in each year of the biennium for track and signal improvements for passenger service, in accordance with G.S. 136‑16.6(b)(1).

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Analysis and approval of rules, policies, or Guidelines affecting department of transportation projects
SECTION 28.8.(a)  G.S. 150B‑21.4 is amended by adding a new subsection to read:
"(a1)	DOT Analyses. – In addition to the requirements of subsection (a) of this section, any agency that adopts a rule affecting environmental permitting of Department of Transportation projects shall conduct an analysis to determine if the rule will result in an increased cost to the Department of Transportation. The analysis shall be conducted and submitted to the Board of Transportation before the agency publishes the proposed text of the rule change in the North Carolina Register. The agency shall consider any recommendations offered by the Board of Transportation prior to adopting the rule. Once a rule subject to this subsection is adopted, the Board of Transportation may submit any objection to the rule it may have to the Rules Review Commission. If the Rules Review Commission receives an objection to a rule from the Board of Transportation no later than 5:00 P.M. of the day following the day the Commission approves the rule, then the rule shall only become effective as provided in G.S. 150B‑21.3(b1)."
SECTION 28.8.(b)  Chapter 136 of the General Statutes is amended by adding a new section to read:
"§ 136‑44.7C. Analysis and approval of Department of Transportation environmental policies or guidelines affecting transportation projects.
(a)	Analysis Required. – The Department of Transportation shall conduct an analysis of any proposed environmental policy or guideline adopted by the Department that affects Department of Transportation projects to determine if the policy or guideline will result in an increased cost to Department of Transportation projects.
(b)	Report of Analysis; Approval of Policy or Guideline Required. – The analysis of a proposed policy or guideline required by subsection (a) of this section shall be reported to the Board of Transportation at least 30 days prior to the proposed effective date of the policy or guideline, and shall not go into effect until approved by the Board of Transportation."

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
DEPARTMENT OF TRANSPORTATION PRODUCTIVITY PILOT PROGRAMS
SECTION 28.9.(a)  The Department of Transportation may continue the productivity pilot programs in the road oil and bridge inspection units implemented under Section 29.3 of S.L. 2003‑284. 
SECTION 28.9.(b)  The Department of Transportation may establish two additional pilot programs to test incentive pay for employees as a means of increasing efficiency and productivity.
One of the new pilot programs shall involve the Pavement Markings Unit. The other pilot program may be selected by the Department of Transportation. Up to one‑quarter of one percent (.25%) of the budget allocation for these programs may be used to provide employee incentive payments. 
Incentive payments shall be based on quantifiable measures and production schedules determined prior to the implementation of the pilot programs. Pilot programs implemented under this subsection shall last no more than two years.
The Department of Transportation shall report to the Joint Legislative Transportation Oversight Committee on the pilot programs developed under this subsection at least 30 days prior to their implementation.

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Department of transportation performance‑based contracts
SECTION 28.10.  The Department of Transportation may implement up to two performance‑based contracts for routine maintenance and operations, exclusive of resurfacing.  Selection of firms to perform this work shall be made using a best‑value procurement process.
Prior to any advertisement for a proposed project the Department shall report to the Joint Legislative Transportation Oversight Committee on the contractor selection criteria to be used.

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Department of transportation reorganization
SECTION 28.11.(a)  The Secretary of Transportation shall transfer the Program Development branch from the Deputy Secretary for Environmental, Planning and Local Government Affairs to the Chief Financial Officer of the Department of Transportation.
SECTION 28.11.(b)  The Secretary of Transportation shall transfer the Transportation Planning branch from the Deputy Secretary for Environmental, Planning and Local Government Affairs to the State Highway Administrator.
SECTION 28.11.(c)  The Secretary of Transportation shall transfer the Project Development and Environmental Analysis branch from the Deputy Secretary for Environmental, Planning and Local Government Affairs to the State Highway Administrator.
SECTION 28.11.(d)  The position of Deputy Secretary for Environmental, Planning and Local Government Affairs shall be eliminated.
SECTION 28.11.(e)  The position of Special Assistant for Environmental, Planning and Local Government Affairs shall be eliminated.
SECTION 28.11.(f)  All vacant positions in the Project Development and Environmental Analysis Branch as of April 15, 2005, shall be eliminated except for any vacant position associated with an employee on an approved leave without pay status. Once these positions are eliminated, the Department of Transportation shall not reinstate these positions without the authorization of the General Assembly.

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Continuing aviation appropriations
SECTION 28.12.  G.S. 136‑16.4 reads as rewritten:
"§ 136‑16.4.  Continuing aviation appropriations.
There is appropriated from the Highway Fund to the Department of Transportation the sum of eleven million two hundred eighty‑four thousand one hundred ninety‑eight dollars ($11,284,198) for fiscal year 2005‑2006 and the sum of twelve million nine hundred forty‑five thousand sixty‑six dollars ($12,945,066) for fiscal year 2006‑2007. Each subsequent fiscal year, there is appropriated from the Highway Fund to the Department of Transportation the amount appropriated by this section to the Department of Transportation for the preceding fiscal year, plus or minus the percentage of the amount by which the collection of State sales and use taxes increased or decreased during the preceding fiscal year. The Department of Transportation may use funds appropriated under this section only for aviation purposes."

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Transitional Training for Motor Carrier enforcement officers
SECTION 28.13.(a)  The North Carolina State Highway Patrol is authorized to complete transitional training for 149 Motor Carrier Enforcement Officers to become State Troopers.  This transition from Motor Carrier Enforcement Officer to State Trooper shall not relieve the State Highway Patrol of the responsibility of ensuring that all Motor Carrier Enforcement Officer positions and any positions that are transitioned to State Trooper are dedicated to motor carrier enforcement duties including, but not limited to, permanent weigh station operations, motor carrier inspections, and secondary road checking stations and enforcement.
SECTION 28.13.(b)  Any Motor Carrier Enforcement Officer position that is not transitioned or approved for transition by section (a) of this Special Provision shall not be transitioned to the status of a State Trooper.
SECTION 28.13.(c)  Of the 59 vacant sworn Motor Carrier Enforcement Officer positions as of April 28, 2005, all lapsed salary and benefits in the amount of two million five hundred forty‑eight thousand nine hundred eighty‑three dollars ($2,548,983) shall not be spent nor shall any position currently vacant be reclassified by any agency of the State.

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Department of transportation authority to provide WAY‑FINDING signs for the roanoke voyages corridor commission
SECTION 28.14.  Chapter 1194 of the 1981 Session Laws is amended by adding a new section that reads:
"Sec. 7.2. At the request of the Roanoke Voyages Corridor Commission, the Department of Transportation is authorized to manufacture and install, on Roanoke Island and up to 30 miles off the island, way‑finding signs that, by color, design, and lettering, do not comply with normal transportation signage standards. These signs shall be used to identify and give directions to historic, educational, and cultural attractions on the island. The Department of Transportation shall not erect any signage that would be impracticable, unfeasible, or that would result in an unsafe or hazardous condition."

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Revenue Tax Evasion Project
SECTION 28.15.  Of funds appropriated to Highway Trust Fund Administration, the sum of five hundred forty‑eight thousand six hundred thirty‑three dollars ($548,633) for the 2005‑2006 fiscal year and the sum of four hundred seventy thousand seven hundred one dollars ($470,701) for the 2006‑2007 fiscal year shall be used to establish and support nine positions in the Department of Revenue, Motor Fuels Tax Division, to fully implement the Revenue Tax Evasion Project.

Requested by:	Senators Jenkins, Snow, Garrou, Dalton, Hagan
Visitor center funds
SECTION 28.16.  G.S. 20‑79.7(c)(2) reads as rewritten: 
"(c)	Use of Funds in Special Registration Plate Account. –
…
(2)	From the funds remaining in the Special Registration Plate Account after the deductions in accordance with subdivision (1) of this subsection, there is annually appropriated from the Special Registration Plate Account the sum of one million dollars ($1,000,000) to provide operating assistance for the Visitor Centers:
a.	on U.S. Highway 17 in Camden County, ($100,000);
b.	on U.S. Highway 17 in Brunswick County, ($100,000);
c.	on U.S. Highway 441 in Macon County, ($100,000);
d.	in the Town of Boone, Watauga County, ($100,000);
e.	on U.S. Highway 29 in Caswell County, ($100,000);
f.	on U.S. Highway 70 in Carteret County, ($100,000);
g.	on U.S. Highway 64 in Tyrrell County, ($100,000);
h.	at the intersection of U.S. Highway 701 and N.C. 904 in Columbus County, ($100,000); 
i.	on U.S. Highway 221 in McDowell County, ($100,000); and
j.	on Staton Road in Transylvania County, ($100,000)."

Requested by:	Senators Jenkins, Garrou, Dalton, Hagan
Modify Global Transpark Debt
SECTION 28.17.  G.S. 147‑69.2(b)(11) reads as rewritten:
"(b)	It shall be the duty of the State Treasurer to invest the cash of the funds enumerated in subsection (a) of this section in excess of the amount required to meet the current needs and demands on such funds, selecting from among the following:
…
(11)	With respect to assets of the Escheat Fund, obligations of the North Carolina Global TransPark Authority authorized by G.S. 63A‑4(a)(22), not to exceed twenty‑five million dollars ($25,000,000), that have a final maturity not later than October 1, 2007. The obligations shall bear interest at the rate set by the State Treasurer. No commitment to purchase obligations may be made pursuant to this subdivision after September 1, 1993, and no obligations may be purchased after September 1, 1994. In the event of a loss to the Escheat Fund by reason of an investment made pursuant to this subdivision, it is the intention of the General Assembly to hold the Escheat Fund harmless from the loss by appropriating to the Escheat Fund funds equivalent to the loss.
If any part of the property owned by the North Carolina Global TransPark Authority now or in the future is divested, proceeds of the divestment shall be used to fulfill any unmet obligations on an investment made pursuant to this subdivision."

Requested by:	Senator Jenkins 
Beaver Damage Control program Funds
SECTION 28.18.  Of funds available to the Department of Transportation for maintenance, the sum of nine hundred thousand dollars ($900,000) for the 2005‑2006 fiscal year and the sum of nine hundred thousand dollars ($900,000) for the 2006‑2007 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.

PART XXIX. SALARIES AND EMPLOYEE BENEFITS

Requested by:	Senators Garrou, Dalton, Hagan
governor and council of state/salary increases 
SECTION 29.1.(a)  Effective July 1, 2005, G.S. 147‑11(a) reads as rewritten:
"(a)	The salary of the Governor shall be one hundred twenty‑three thousand eight hundred nineteen dollars ($123,819) annually, payable monthly."
SECTION 29.1.(a1)  Effective July 1, 2006, G.S. 147‑11(a), as amended by subsection (a) of this section, reads as rewritten:
"(a)	The salary of the Governor shall be one hundred twenty‑seven thousand five hundred thirty‑three dollars ($127,533) annually, payable monthly."
SECTION 29.1.(b)  Effective July 1, 2005, the annual salaries for the members of the Council of State, payable monthly, for the 2005‑2006 and 2006‑2007 fiscal years are:

	Council of State	Annual Salary
		2005‑2006	2006‑2007
	Lieutenant Governor	$109,279	$112,557
	Attorney General	109,279	112,557
	Secretary of State	109,279	112,557
	State Treasurer	109,279	112,557
	State Auditor	109,279	112,557
	Superintendent of Public Instruction	109,279	112,557
	Agriculture Commissioner	109,279	112,557
	Insurance Commissioner	109,279	112,557
	Labor Commissioner	109,279	112,557

Requested by:	Senators Garrou, Dalton, Hagan
nonelected department heads/salary increases
SECTION 29.2.  In accordance with G.S. 143B‑9, the maximum annual salaries, payable monthly, for the nonelected heads of the principal State departments for the 2005‑2006 and 2006‑2007 fiscal years are:

	Council of State	Annual Salary
		2005‑2006	2006‑2007
	Secretary of Administration	$106,765	$109,968
	Secretary of Correction	106,765	109,968
	Secretary of Crime Control and Public Safety	106,765	109,968
	Secretary of Cultural Resources	106,765	109,968
	Secretary of Commerce	106,765	109,968
	Secretary of Environment and Natural Resources	106,765	109,968
	Secretary of Health and Human Services	106,765	109,968
	Secretary of Juvenile Justice and Delinquency	106,765	109,968
	Prevention
	Secretary of Revenue	106,765	109,968
	Secretary of Transportation	106,765	109,968

Requested by:	Senators Garrou, Dalton, Hagan
certain executive branch officials/salary increases
SECTION 29.3.  The annual salaries, payable monthly, for the 2005‑2006 and 2006‑2007 fiscal years for the following Executive Branch officials are:

	Executive Branch Officials	Annual Salary
		2005‑2006	2006‑2007
	Chairman, Alcoholic Beverage 
		Control Commission	$97,175	$100,091
	State Controller	135,997	140,076
	Commissioner of Motor Vehicles	97,175	100,091
	Commissioner of Banks	109,279	112,557
	Chairman, Employment Security Commission	135,824	139,899
	State Personnel Director	106,765	109,968
	Chairman, Parole Commission	88,733	91,395
	Members of the Parole Commission	40,960	42,189
	Chairman, Utilities Commission	121,701	125,352
	Members of the Utilities Commission	109,279	112,557
	Executive Director, Agency for 
		Public Telecommunications	81,921	84,379
	Director, Museum of Art	99,573	102,561
	Executive Director, North Carolina
		Agricultural Finance Authority	94,587	97,424
	State Chief Information Officer	135,915	139,992

Requested by:	Senators Garrou, Dalton, Hagan
judicial branch officials/salary increases
SECTION 29.4.(a)  The annual salaries, payable monthly, for specified Judicial Branch officials for the 2005‑2006 and 2006‑2007 fiscal years are:

	Judicial Branch Officials	Annual Salary
		2005‑2006	2006‑2007
	Chief Justice, Supreme Court	$123,819	$127,533
	Associate Justice, Supreme Court	120,583	124,201
	Chief Judge, Court of Appeals	117,568	121,095
	Judge, Court of Appeals	115,559	119,026
	Judge, Senior Regular Resident Superior Court	112,419	115,792
	Judge, Superior Court	109,279	112,557
	Chief Judge, District Court	99,231	102,208
	Judge, District Court	96,091	98,974
	Administrative Officer of the Courts	112,419	115,792
	Assistant Administrative Officer of the Courts	102,684	105,765
SECTION 29.4.(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‑two thousand nine hundred thirty dollars ($62,930), and the minimum salary of any assistant district attorney or assistant public defender is at least thirty‑two thousand six hundred seventy‑six dollars ($32,676), effective July 1, 2005.
SECTION 29.4.(b1)  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‑four thousand eight hundred eighteen dollars ($64,818), and the minimum salary of any assistant district attorney or assistant public defender is at least thirty‑three thousand six hundred fifty‑six dollars ($33,656), effective July 1, 2006.
SECTION 29.4.(c)  Effective July 1, 2005, the annual salaries of permanent, full‑time employees of the Judicial Department whose salaries are not itemized in this act shall be increased by the greater of five hundred dollars ($500.00) or two percent (2%).
SECTION 29.4.(c1)  Effective July 1, 2006, the annual salaries of permanent, full‑time employees of the Judicial Department whose salaries are not itemized in this act shall be increased three percent (3%).
SECTION 29.4.(d)  Effective July 1, 2005, the annual salaries of permanent, part‑time employees of the Judicial Department whose salaries are not itemized in this act shall be increased by pro rata amounts of five hundred dollars ($500.00) or two percent (2%), whichever is greater.
SECTION 29.4.(d1)  Effective July 1, 2006, the annual salaries of permanent, part‑time employees of the Judicial Department whose salaries are not itemized in this act shall be increased by three percent (3%).

Requested by:	Senators Garrou, Dalton, Hagan
clerk of superior court/salary increases
SECTION 29.5.(a)  Effective July 1, 2005, 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		$73,092
100,000 to 149,999		82,021
150,000 to 249,999		90,952
250,000 and above		99,884.
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."
SECTION 29.5.(b)  Effective July 1, 2006, G.S. 7A‑101(a), as amended by subsection (a) of this section, 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		$75,285
100,000 to 149,999		84,482
150,000 to 249,999		93,681
250,000 and above		102,880.
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
assistant and deputy clerks of court/salary increases
SECTION 29.6.(a)  Effective July 1, 2005, G.S. 7A‑102(c1) reads as rewritten:
"(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		$28,065
Maximum		48,579

Deputy Clerks	Annual Salary
Minimum		$24,065
Maximum		37,673."
SECTION 29.6.(b)  Effective July 1, 2006, G.S. 7A‑102(c1), as amended by subsection (a) of this section, reads as rewritten:
"(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		$28,907
Maximum		50,036

Deputy Clerks	Annual Salary
Minimum		$24,787
Maximum		38,803."

Requested by:	Senators Garrou, Dalton, Hagan
magistrates' salary increases
SECTION 29.7.(a)  Effective July 1, 2005, G.S. 7A‑171.1(a)(1) reads as rewritten:
"(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		$28,477
Step 1			31,136
Step 2			34,061
Step 3			37,253
Step 4			40,751
Step 5			44,665
Step 6			48,997."
SECTION 29.7.(a1)  Effective July 1, 2006, G.S. 7A‑171.1(a)(1), as amended by subsection (a) of this section,  reads as rewritten:
"(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		$29,300
Step 1			32,070
Step 2			35,083
Step 3			38,371
Step 4			41,974
Step 5			46,005
Step 6			50,467."
SECTION 29.7.(b)  Effective July 1, 2005, G.S. 7A‑171.1(a1)(1) reads as rewritten:
"(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		$22,825
1 or more but less than 3 years of service		23,889
3 or more but less than 5 years of service		26,041.
Upon completion of five years of service, those magistrates shall receive the salary set as the Entry Rate in the table in subsection (a)."
SECTION 29.7.(b1)  Effective July 1, 2006, G.S. 7A‑171.1(a1)(1), as amended by subsection (b) of this section,  reads as rewritten:
"(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		$23,510
1 or more but less than 3 years of service		24,606
3 or more but less than 5 years of service		26,822.
Upon completion of five years of service, those magistrates shall receive the salary set as the Entry Rate in the table in subsection (a)."

Requested by:	Senators Garrou, Dalton, Hagan
general assembly principal clerks/salary increases
SECTION 29.8.(a)  Effective July 1, 2005, 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 ninety‑two thousand three hundred twenty‑four dollars ($92,324) 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."
SECTION 29.8.(b)  Effective July 1, 2006, G.S. 120‑37(c), as amended by subsection (a) of this section,  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 ninety‑five thousand ninety‑four dollars ($95,094) 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
sergeants‑at‑arms and reading clerks
SECTION 29.9.(a)  Effective July 1, 2005, 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 three hundred twenty‑one dollars ($321.00) 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."
SECTION 29.9.(b)  Effective July 1, 2006, G.S. 120‑37(b), as amended by subsection (a) of this section,  reads as rewritten:
"(b)	The sergeant‑at‑arms and the reading clerk in each house shall be paid a salary of three hundred thirty dollars ($330.00) 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 29.10.(a)  Effective July 1, 2005, the Legislative Services Officer shall increase the salaries of nonelected employees of the General Assembly in effect June 30, 2005, by the greater of five hundred dollars ($500.00) or two percent (2%).  Nothing in this act limits any of the provisions of G.S. 120‑32.
SECTION 29.10.(b)  Effective July 1, 2006, the Legislative Services Officer shall increase the salaries of nonelected employees of the General Assembly in effect June 30, 2006, by three percent (3%). Nothing in this act limits any of the provisions of G.S. 120‑32.

Requested by:	Senators Garrou, Dalton, Hagan
Community college personnel/salary increases
SECTION 29.11.(a)  The Director of the Budget shall transfer from the Reserve for Compensation Increases, created in this act for fiscal years 2005‑2006 and 2006‑2007, funds to the North Carolina Community Colleges System Office necessary to provide an annual salary increase of the greater of five hundred dollars ($500.00) or two percent (2%), including funds for the employer's retirement and social security contributions, commencing July 1, 2005, for all community college employees supported by State funds.
SECTION 29.11.(b)  The Director of the Budget shall transfer from the Reserve for Compensation Increases, created in this act for fiscal year 2006‑2007, funds to the North Carolina Community Colleges System Office necessary to provide an annual salary increase of three percent (3%), including funds for the employer's retirement and social security contributions, commencing July 1, 2006, for all community college employees supported by State funds.

Requested by:	Senators Garrou, Dalton, Hagan
university of north carolina system/epa compensation
SECTION 29.12.(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 2005‑2006 and 2006‑2007, to provide an average annual salary increase of the greater of five hundred dollars ($500.00) or two percent (2%), including funds for the employer's retirement and social security contributions, commencing July 1, 2005, 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). The percentage annual salary increase of two percent (2%) authorized by this section shall be made on an aggregated average basis, and these funds shall be allocated to individuals according to the rules adopted by the Board of Governors of The University of North Carolina or the Board of Trustees of the North Carolina School of Science and Mathematics, as appropriate, and may not be used for any purpose other than for salary increases and necessary employer contributions provided by this section.
SECTION 29.12.(a1)  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 year 2006‑2007, to provide an average annual salary increase of three percent (3%), including funds for the employer's retirement and social security contributions, commencing July 1, 2006, 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). These funds shall be allocated to individuals according to the rules adopted by the Board of Governors of The University of North Carolina or the Board of Trustees of the North Carolina School of Science and Mathematics, as appropriate, and may not be used for any purpose other than for salary increases and necessary employer contributions provided by this section.
SECTION 29.12.(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 2005‑2006 and 2006‑2007, to provide an average annual salary increase of two percent (2%), including funds for the employer's retirement and social security contributions, commencing July 1, 2005, 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.
SECTION 29.12.(b1)  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 year 2006‑2007, to provide an average annual salary increase of three percent (3%), including funds for the employer's retirement and social security contributions, commencing July 1, 2006, 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/salary increases
SECTION 29.13.(a)  The salaries in effect June 30, 2005, 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, effective July 1, 2005, by the greater of five hundred dollars ($500.00) or two percent (2%), unless otherwise provided by this act. The salaries in effect June 30, 2006, 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, effective July 1, 2006, by three percent (3%), unless otherwise provided by this act.
SECTION 29.13.(b)  Except as otherwise provided in this act, the salaries in effect June 30, 2005, 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 the greater of five hundred dollars ($500.00) or two percent (2%), effective July 1, 2005, unless otherwise provided by this act. Except as otherwise provided in this act, the salaries in effect June 30, 2006, 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 three percent (3%), effective July 1, 2006, unless otherwise provided by this act.
SECTION 29.13.(c)  The salaries in effect June 30, 2005, for all permanent part‑time State employees shall be increased, effective July 1, 2005, by pro rata amounts of five hundred dollars ($500.00) or two percent (2%), whichever is greater. The salaries in effect for June 30, 2006, for all permanent part‑time State employees shall be increased, effective July 1, 2006, by three percent (3%).
SECTION 29.13.(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, effective July 1, 2005, and July 1, 2006, 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 29.13.(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 greater of the five hundred dollar ($500.00) or two percent (2%) increase provided for permanent full‑time employees covered by the provisions of subsection (a) of this section, commencing July 1, 2005. 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 the three percent (3%) increase provided for permanent full‑time employees covered by the provisions of subsection (a) of this section, commencing July 1, 2006.

Requested by:	Senators Garrou, Dalton, Hagan
all state‑supported personnel/salary increases
SECTION 29.14.(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 29.14.(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 29.14.(c)  The salary increases provided in this act to be effective July 1, 2005, 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, 2005. The salary increases provided in this act to be effective July 1, 2006, 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, 2006.
Payroll checks issued to employees after July 1, 2005, which represent payment of services provided prior to July 1, 2005, 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. Payroll checks issued to employees after July 1, 2006, which represent payment of services provided prior to July 1, 2006, 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 29.14.(d)  The Director of the Budget shall transfer from the Reserve for Compensation Increases in this act for fiscal years 2005‑2006 and 2006‑2007 all funds necessary for the salary increases provided by this act, including funds for the employer's retirement and social security contributions.
SECTION 29.14.(e)  Nothing in this act authorizes the transfer of funds between the General Fund and the Highway Fund for salary increases.
SECTION 29.14.(f)  For fiscal year 2005‑2006, permanent full‑time employees who work a nine‑, ten‑, or eleven‑month work year schedule shall receive the five hundred dollars ($500.00) or two percent (2%) annual increase provided by this act, whichever is greater.
For fiscal year 2006‑2007, permanent full‑time employees who work a nine‑, ten‑, or eleven‑month work year schedule shall receive the three percent (3%) annual increase provided by this act.

Requested by:	Senators Garrou, Dalton, Hagan 
Salary Adjustment Fund
SECTION 29.15.(a)  Any remaining appropriations in the Reserve for Compensation Increases authorized for employee salary increases not required for that purpose may be used to supplement the Salary Adjustment Fund.
SECTION 29.15.(b)  Funds appropriated or otherwise transferred to the Salary Adjustment Fund by this act or any other provision of law shall be used to fund agency requests for the following purposes:
(1)	Salary range revisions to provide competitive salary rates for affected job classifications in response to changes in labor market salary rates as documented through data collection and analysis according to accepted human resource professional practices and standards.
(2)	Reallocation of positions to higher‑level job classifications to compensate employees for more difficult duties at competitive salary rates as documented through data collection and analysis according to accepted human resource professional practices and standards.
Priority funding shall be given to those salary range revisions previously approved by the State Personnel Commission and reallocations previously approved by the Office of State Personnel or designee.
SECTION 29.15.(c)  The Director of the Budget shall consult with the Joint Legislative Commission on Governmental Operations prior to transferring any salary adjustment funds for any State agency.
SECTION 29.15.(d)  The Director of the Budget may transfer to General Fund budget codes from the General Fund Salary Adjustment Fund and may transfer to Highway Fund budget codes from the Highway Fund Salary Adjustment Fund amounts required to support salary adjustments authorized by this section. 
SECTION 29.15.(e)  The Judicial Department is eligible for the funding authorized in subsection (a) of this section. 

Requested by:	Senators Garrou, Dalton, Hagan
TEMPORARY SALES TAX TRANSFER FOR WILDLIFE RESOURCES COMMISSION SALARY INCREASES
SECTION 29.16.  For the 2005‑2006 and 2006‑2007 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 any legislative salary increase for employees of the Wildlife Resources Commission.

Requested by:	Senators Garrou, Dalton, Hagan
State Agency Teachers' Compensation
SECTION 29.17.  Funds in the Reserve for Compensation Increases shall be used for experience step increases for employees of schools operated by 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 School Based Administrator Salary Schedule.

Requested by:	Senators Garrou, Dalton, Hagan, Dorsett  
State Government Employment Fair minimum Wage
SECTION 29.18.(a)  All permanent, full‑time employees subject to the State Personnel Act shall be paid a minimum salary of at least twenty thousand one hundred twelve dollars ($20,112) per year. Permanent, full‑time employees subject to the State Personnel Act working on a schedule requiring less than 12 months' service per year shall be paid the minimum salary pro rata.
SECTION 29.18.(b)  Of the funds appropriated in this act from the General Fund to the Reserve for Compensation Increases, the sum of one hundred fifty‑six thousand dollars ($156,000) for the 2005‑2006 fiscal year and the sum of one hundred fifty‑six thousand dollars ($156,000) for the 2006‑2007 fiscal year shall be used to provide a fairer minimum wage to employees subject to the State Personnel Act.
SECTION 29.18.(c)  In order to lessen salary compression and potential pay inequities, State agencies, departments, and institutions, and The University of North Carolina may, when increasing salaries pursuant to this section, make adjustments to the salaries of supervisors and other employees who have, when considering classification, significantly more experience and length of service compared to the employees receiving this pay increase. These salary compression and pay equity determinations shall be made in consultation with the Office of State Personnel.
Of the funds appropriated in this act from the General Fund to the Reserve for Compensation Increases, the Office of State Budget and Management shall use funds in an amount not to exceed seven hundred fifty thousand dollars ($750,000) for the 2005‑2006 fiscal year and not to exceed seven hundred fifty thousand dollars ($750,000) for the 2006‑2007 fiscal year to implement this subsection. The Director of the Budget shall consult with the Joint Legislative Commission on Governmental Operations prior to the transfer of any funds pursuant to this subsection.
SECTION 29.18.(d)  The fair minimum wage salary adjustment provided by this section shall be calculated and awarded after any across‑the‑board salary increases authorized by this act.

Requested by:	Senators Garrou, Dalton, Hagan 
SALARY SUPPLEMENTS FOR PERSONNEL EMPLOYED IN CERTAIN STATE AGENCIES
SECTION 29.19.(a)  G.S. 143B‑146.21 is amended by adding the following new subsection to read:
"(e)	The Secretary of Health and Human Services, in consultation with the Office of State Personnel, shall set the salary supplement paid to personnel who are employed in the programs operated by the Department of Health and Human Services and are licensed by the State Board of Education. The salary supplement shall be at least five percent (5%), but not more than the percentage supplement they would receive if they were employed in the LEA where the job site is located. Nothing in this subsection shall be construed to include "merit pay" under the term "salary supplement"."
SECTION 29.19.(b)  G.S. 143B‑516(b) is amended by adding the following new subdivision to read:
"(b)	The Secretary shall have the following powers and duties:
…
(17a)	Set, in consultation with the Office of State Personnel, the salary supplement paid to personnel who are employed at juvenile facilities and are licensed by the State Board of Education. The salary supplement shall be at least five percent (5%), but not more than the percentage supplement they would receive if they were employed in the LEA where the job site is located. Nothing in this subdivision shall be construed to include "merit pay" under the term "salary supplement".
…."
SECTION 29.19.(c)  G.S. 148‑22.1 is amended by adding the following new subsection to read:
"§ 148‑22.1.  Educational facilities and programs for selected inmates.
…
(c)	The Secretary of Correction, in consultation with the Office of State Personnel, shall set the salary supplement paid to personnel who are Division of Prison employees that serve in youth facilities and are licensed by the State Board of Education. The salary supplement shall be at least five percent (5%), but not more than the percentage supplement they would receive if they were employed in the LEA where the job site is located. Nothing in this subsection shall be construed to include "merit pay" under the term "salary supplement"."

Requested by:	Senators Garrou, Dalton, Hagan, Kerr, Hoyle, Berger of Franklin
INDUSTRIAL COMMISSION IN‑RANGE SALARY ADJUSTMENTS
SECTION 29.20.  Of the revenue generated by implementing a fee for the required review of Form 21 Agreements, the Industrial Commission may use up to one hundred seventy‑one thousand nine hundred dollars ($171,900) in fiscal years 2005‑2006 and 2006‑2007 to provide in‑range salary adjustments for Industrial Commission staff.

Requested by:	Senators Garrou, Dalton, Hagan 
COASTAL MANAGEMENT DIVISION SALARY INCREASES
SECTION 29.21.  The Department of Environment and Natural Resources is authorized to, and shall, provide to the employees of the Division of Coastal Management an increase in annual salary of five percent (5%). This increase shall be in addition to any other increase authorized by this act.

Requested by:	Senators Garrou, Dalton, Hagan, Kerr, Albertson
NCSU SALARY INCREASES FOR AGRICULTURAL PROGRAM EMPLOYEES
SECTION 29.22.  Of the funds appropriated in this act to the Board of Governors of The University of North Carolina, the sum of two million dollars ($2,000,000) for the 2005‑2006 fiscal year and the sum of two million dollars ($2,000,000) for the 2006‑2007 fiscal year shall be used to support salary increases for Agricultural Program employees of North Carolina State University who are exempt from the State Personnel Act. These funds shall be allocated to individuals according to rules adopted by the Board of Governors of The University of North Carolina and may not be used for any other purpose other than for salary increases and the necessary employer contributions provided by this section.

Requested by:	Senators Garrou, Dalton, Hagan, Clodfelter 
Longevity Service Definition
SECTION 29.23.(a)  G.S. 7A‑10(c) reads as rewritten:
"(c)	In lieu of merit and other increment raises paid to regular State employees, the Chief Justice and each of the Associate Justices shall receive as longevity pay an annual amount equal to four and eight‑tenths percent (4.8%) of the annual salary set forth in the Current Operations Appropriations Act payable monthly after five years of service, nine and six‑tenths percent (9.6%) after 10 years of service, fourteen and four‑tenths percent (14.4%) after 15 years of service, and nineteen and two‑tenths percent (19.2%) after 20 years of service. "Service" means service as a justice or judge of the General Court of Justice or as a member of the Utilities Commission. Service shall also mean service as a district attorney or as a clerk of superior court, or service as a member of the General Assembly."
SECTION 29.23.(b)  G.S. 7A‑18(b) reads as rewritten:
"(b)	In lieu of merit and other increment raises paid to regular State employees, a judge of the Court of Appeals shall receive as longevity pay an annual amount equal to four and eight‑tenths percent (4.8%) of the annual salary set forth in the Current Operations Appropriations Act payable monthly after five years of service, nine and six‑tenths percent (9.6%) after 10 years of service, fourteen and four‑tenths percent (14.4%) after 15 years of service, and nineteen and two‑tenths percent (19.2%) after 20 years of service. "Service" means service as a justice or judge of the General Court of Justice or as a member of the Utilities Commission. Service shall also mean service as a district attorney or as a clerk of superior court, or service as a member of the General Assembly."
SECTION 29.23.(c)  G.S. 7A‑44(b) reads as rewritten:
"(b)	In lieu of merit and other increment raises paid to regular State employees, a judge of the superior court, regular or special, shall receive as longevity pay an annual amount equal to four and eight‑tenths percent (4.8%) of the annual salary set forth in the Current Operations Appropriations Act payable monthly after five years of service, nine and six‑tenths percent (9.6%) after 10 years of service, fourteen and four‑tenths percent (14.4%) after 15 years of service, and nineteen and two‑tenths percent (19.2%) after 20 years of service. "Service" means service as a justice or judge of the General Court of Justice or as a member of the Utilities Commission or as director or assistant director of the Administrative Office of the Courts. Service shall also mean service as a district attorney or as a clerk of superior court, or service as a member of the General Assembly."
SECTION 29.23.(d)  G.S. 7A‑144(b) reads as rewritten:
"(b)	Notwithstanding merit, longevity and other increment raises paid to regular State employees, a judge of the district court shall receive as longevity pay an annual amount equal to four and eight‑tenths percent (4.8%) of the annual salary set forth in the Current Operations Appropriations Act payable monthly after five years of service, nine and six‑tenths percent (9.6%) after 10 years of service, fourteen and four‑tenths percent (14.4%) after 15 years of service, and nineteen and two‑tenths percent (19.2%) after 20 years of service. "Service" means service as a justice or judge of the General Court of Justice or as a member of the Utilities Commission or as director or assistant director of the Administrative Office of the Courts. Service shall also mean service as a district attorney or as a clerk of superior  court, or service as a member of the General Assembly."

Requested by:	Senators Garrou, Dalton, Hagan
SALARY‑RELATED CONTRIBUTIONS/EMPLOYER
SECTION 29.24.(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 29.24.(b)  Effective July 1, 2005, the State's employer contribution rates budgeted for retirement and related benefits as percentage of covered salaries for the 2005‑2006 fiscal year are:  (i) six and eighty‑three hundredths percent (6.83%) – Teachers and State Employees; (ii) eleven and eighty‑three hundredths percent (11.83%) – State Law Enforcement Officers; (iii) eleven and sixteen hundredths percent (11.16%) – University Employees' Optional Retirement System; (iv) eleven and sixteen hundredths percent (11.16%) – Community College Optional Retirement Program; (v) sixteen and thirty‑nine hundredths percent (16.39%) – Consolidated Judicial Retirement System; and (vi) three and eight‑tenths percent (3.8%) – Legislative Retirement System.  Each of the foregoing contribution rates includes three and eight‑tenths percent (3.8%) for hospital and medical benefits.  The rate for Teachers and State Employees, State Law Enforcement Officers, Community College Optional Retirement Program, and for 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 29.24.(c)  Effective July 1, 2006, the State's employer contribution rates budgeted for retirement and related benefits as percentage of covered salaries for the 2006‑2007 fiscal year are:  (i) six and eighty‑three hundredths percent (6.83%) – Teachers and State Employees; (ii) eleven and eighty‑three hundredths percent (11.83%) – State Law Enforcement Officers; (iii) eleven and sixteen hundredths percent (11.16%) – University Employees' Optional Retirement System; (iv) eleven and sixteen hundredths percent (11.16%) – Community College Optional Retirement Program; (v) sixteen and thirty‑nine hundredths percent (16.39%) – Consolidated Judicial Retirement System; and (vi) three and eight‑tenths percent (3.8%) – Legislative Retirement System.  Each of the foregoing contribution rates includes three and eight‑tenths percent (3.8%) for hospital and medical benefits.  The rate for Teachers and State Employees, State Law Enforcement Officers, Community College Optional Retirement Program, and for 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 29.24.(d)  The maximum annual employer contributions, payable monthly, by the State for each covered employee or retiree for the 2005‑2006 fiscal year to the Teachers' and State Employees' Comprehensive Major Medical Plan are:  (i) Medicare‑eligible employees and retirees – two thousand nine hundred ten dollars ($2,910) and (ii) non‑Medicare‑eligible employees and retirees – three thousand eight hundred twenty‑two dollars ($3,822).
SECTION 29.24.(e)  The maximum annual employer contributions, payable monthly, by the State for each covered employee or retiree for the 2006‑2007 fiscal year to the Teachers' and State Employees' Comprehensive Major Medical Plan are:  (i) Medicare‑eligible employees and retirees – three thousand ten dollars ($3,010) and (ii) non‑Medicare‑eligible employees and retirees – three thousand nine hundred fifty‑four dollars ($3,954).

Requested by:	Senators Garrou, Dalton, Hagan
provide COST‑OF‑LIVING INCREASES FOR RETIREES of the TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM, THE JUDICIAL RETIREMENT SYSTEM, the local retirement system, and THE LEGISLATIVE RETIREMENT SYSTEM
SECTION 29.25.(a)  G.S. 135‑5 is amended by adding a new subsection to read:
"(nnn)	From and after July 1, 2005, the retirement allowance to or on account of beneficiaries whose retirement commenced on or before July 1, 2004, shall be increased by two percent (2%) of the allowance payable on June 1, 2005, in accordance with G.S. 135‑5(o). Furthermore, from and after July 1, 2005, the retirement allowance to or on account of beneficiaries whose retirement commenced after July 1, 2004, but before June 30, 2005, shall be increased by a prorated amount of two percent (2%) 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, 2004, and June 30, 2005."
SECTION 29.25.(b)  G.S. 135‑65 is amended by adding a new subsection to read:
"(z)	From and after July 1, 2005, the retirement allowance to or on account of beneficiaries whose retirement commenced on or before July 1, 2004, shall be increased by two percent (2%) of the allowance payable on June 1, 2005. Furthermore, from and after July 1, 2005, the retirement allowance to or on account of beneficiaries whose retirement commenced after July 1, 2004, but before June 30, 2005, shall be increased by a prorated amount of two percent (2%) 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, 2004, and June 30, 2005."
SECTION 29.25.(c)  G.S. 120‑4.22A is amended by adding a new subsection to read:
"(t)	In accordance with subsection (a) of this section, from and after July 1, 2005, the retirement allowance to or on account of beneficiaries whose retirement commenced on or before January 1, 2005, shall be increased by two percent (2%) of the allowance payable on June 1, 2005. Furthermore, from and after July 1, 2005, the retirement allowance to or on account of beneficiaries whose retirement commenced after January 1, 2005, but before June 30, 2005, shall be increased by a prorated amount of two percent (2%) 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, 2005, and June 30, 2005."
SECTION 29.25.(d)  G.S. 128‑27 is amended by adding a new subsection to read:
"(ggg)	From and after July 1, 2005, the retirement allowance to or on account of beneficiaries whose retirement commenced on or before July 1, 2004, shall be increased by two percent (2%) of the allowance payable on June 1, 2005, in accordance with subsection (k) of this section. Furthermore, from and after July 1, 2005, the retirement allowance to or on account of beneficiaries whose retirement commenced after July 1, 2004, but before June 30, 2005, shall be increased by a prorated amount of two percent (2%) 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, 2004, and June 30, 2005."
SECTION 29.25.(e)  It is the intent of the General Assembly to provide a cost‑of‑living increase, effective July 1, 2006, to retirees of the Teachers' and State Employees' Retirement System, the Judicial Retirement System, the Local Governmental Employees' Retirement System, and the Legislative Retirement System that is comparable to the increases given to State employees in this act, subject to available actuarial gains within each system.

Requested by:	Senators Hoyle, Garrou, Dalton, Hagan, Kerr, Malone, Rand, Snow, Swindell, Thomas, Weinstein 
INCREASE the monthly pension for members of the firemen's and rescue squad workers' pension fund
SECTION 29.26.  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 sixty‑three dollars ($163.00) per month. Any retired fireman receiving a pension shall, effective  July 1, 2005, receive a pension of  one hundred sixty‑three dollars ($163.00) 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 sixty‑three dollars ($163.00) 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 Thomas, Garrou, Dalton, Hagan, Hoyle, Jenkins, Rand, Swindell, Weinstein
Increase the maximum monthly pension benefits for retired members of the north carolina national guard
SECTION 29.27.  G.S. 127A‑40(a) reads as rewritten:
"(a)	Every member and former member of the North Carolina national guard who meets the requirements hereinafter set forth shall receive, commencing at age 60, a pension of  seventy‑five dollars ($75.00) per month for 20 years' creditable military service with an additional  seven dollars and fifty cents ($7.50) per month for each additional year of such service; provided, however, that the total pension shall not exceed  one hundred fifty dollars ($150.00) per month. The requirements for such pension are that each member shall:
(1)	Have served and qualified for at least 20 years' creditable military service, including national guard, reserve and active duty, under the same requirement specified for entitlement to retired pay for nonregular service under Chapter 67, Title 10, United States Code.
(2)	Have at least 15 years of the aforementioned service as a member of the North Carolina national guard.
(3)	Have received an honorable discharge from the North Carolina national guard."

Requested by:	Senators Garrou, Dalton, Hagan
conform retiree return to teaching benefit to irs guidelines/CLARIFY DEFINITION OF RETIREMENT
SECTION 29.28.(a)  Subsection (d) of Section 28.24 of S.L. 1998‑212, as amended by Section 31.18A of S.L. 2004‑124, reads as rewritten:
"(d)	This section becomes effective January 1, 1999, and expires June 30,2006."
SECTION 29.28.(b)  The introductory language of Section 67 of S.L. 1998‑217, as amended by Section 31.18A of S.L. 2004‑124, reads as rewritten:
"SECTION 67. Effective January 1, 1999, through June 30,  2006, G.S. 135‑3(8)c., as rewritten by Section 28.24(a) of S.L. 1998‑212 reads as rewritten:".
SECTION 29.28.(c)  Subsection (b) of Section 67.1 of S.L. 1998‑217, as amended by Section 31.18A of S.L. 2004‑124, reads as rewritten:
"(b)	This section becomes effective January 1, 1999, and expires June 30,2006."
SECTION 29.28.(d)  Subsection (c) of Section 32.25 of S.L. 2001‑424, as amended by Section 31.18A of S.L. 2004‑124, reads as rewritten:
"SECTION 32.25.(c)  This section becomes effective July 1, 2001, and expires June 30, 2006."
SECTION 29.28.(e)  G.S. 135‑3(8)c. reads as rewritten:
c.	Should a beneficiary who retired on an early or service retirement allowance under this Chapter be reemployed, or otherwise engaged to perform services, by an employer participating in the Retirement System on a part‑time, temporary, interim, or on a fee‑for‑service basis, whether contractual or otherwise, and if such beneficiary earns an amount during the 12‑month period immediately following the effective date of retirement or in any calendar year which exceeds fifty percent (50%) of the reported compensation, excluding terminal payments, during the 12 months of service preceding the effective date of retirement, or twenty thousand dollars ($20,000), whichever is greater, as hereinafter indexed, then the retirement allowance shall be suspended as of the first day of the month following the month in which the reemployment earnings exceed the amount above, for the balance of the calendar year. The retirement allowance of the beneficiary shall be reinstated as of January 1 of each year following suspension. The amount that may be earned before suspension shall be increased on January 1 of each year by the ratio of the Consumer Price Index to the Index one year earlier, calculated to the nearest tenth of a percent (1/10 of 1%).
The computation of postretirement earnings of a beneficiary under this sub‑subdivision, G.S. 135‑3(8)c., who has been retired at least six months and has not been employed in any capacity with a public school for at least six months immediately preceding the effective date of reemployment, shall not include earnings while the beneficiary is employed to teach on a  permanent basis in a public school. The Department of Public Instruction shall certify to the Retirement System that a beneficiary is employed to teach by a local school administrative unit under the provisions of this sub‑subdivision and as a retired teacher as the term is defined under the provisions of G.S. 115C‑325(a)(5a).
Beneficiaries employed under this sub‑subdivision are not entitled to any benefits otherwise provided under this Chapter as a result of this period of employment."
SECTION 29.28.(f)  G.S. 115C‑325(a)(5a) reads as rewritten:
"(5a)	"Retired teacher" means a beneficiary of the Teachers' and State Employees' Retirement System of North Carolina who has been retired at least six months, has not been employed in any  capacity for at least six months, immediately preceding the effective date of reemployment, is determined by a local board of education or a charter school to have had satisfactory performance during the last year of employment by a local board of education or a charter school, and who is employed to teach as provided in G.S. 135‑3(8)c. A retired teacher at a school other than a charter school shall be treated the same as a probationary teacher except that (i) a retired teacher is not eligible for career status and (ii) the performance of a retired teacher who had attained career status prior to retirement shall be evaluated in accordance with a local board of education's policies and procedures applicable to career teachers."
SECTION 29.28.(g)  Notwithstanding any other provision of law, each local school administrative unit shall pay to the Teachers' and State Employees' Retirement System a Reemployed Teacher Contribution Rate of eleven and seventy‑hundredths percent (11.70%) as a percentage of covered salaries that the retired teachers, who are exempt from the earnings cap, are being paid. Each local school administrative unit shall report monthly to the Retirement Systems Division on payments made pursuant to this subsection.
Notwithstanding any other provision of law, any portion of the payment made by a local school administrative unit to a reemployed teacher who is exempt from the earnings cap, consisting of salary plus the Reemployed Teacher Contribution Rate, that exceeds the State‑supported salary level for that position, shall be paid from local funds.
SECTION 29.28.(h)  G.S. 135‑1(20) reads as rewritten:
"(20)	"Retirement"  means the termination of employment and the  complete separation from active service with no intent or agreement, express or implied, to return to service.  A retirement allowance under the provisions of this  Chapter may only be granted upon retirement of a member. In order for a member's retirement to become effective in any month, the member must render no  service, including part‑time, temporary, substitute, or contractor service, at any time during  the six months immediately following the effective date of retirement."
SECTION 29.28.(i)  Subsection (h) of this section becomes effective July 1, 2005, but does not apply to participants in The University of North Carolina Phased Retirement Program until June 30, 2007. The remainder of this section becomes effective June 30, 2005.

Requested by:	Senators Garrou, Dalton, Hagan
OPTIONAL RETIREMENT program VESTING
SECTION 29.29.  G.S. 135‑5.1(b) reads as rewritten:
"(b)	Participation in the Optional Retirement Program shall be governed as follows:
(1)	Those participating in the Optional Retirement Program immediately prior to July 1, 1985, under the provisions of Chapter 338, Session Laws of 1971, are deemed automatically enrolled in the Program as established by this section.
(2)	Eligible employees initially appointed on or after July 1, 1985, shall at the same time of entering upon eligible employment elect (i) to join the Retirement System in accordance with the provisions of law applicable thereto or (ii) to participate in the Optional Retirement Program. This election shall be in writing and filed with the Retirement System and with the employing institution and shall be effective as of the date of entry into eligible service.
(3)	An election to participate in the Optional Retirement Program shall be irrevocable. An eligible employee failing to elect to participate in the Optional Retirement Program at the time of entry into eligible service shall automatically be enrolled as a member of the Retirement System.
(4)	No election by an eligible employee of the Optional Retirement Program shall be effective unless it is accompanied by an appropriate application for the issuance of a contract or contracts or trust participation under the Program.
(5)	If any participant having less than  one year of coverage under the Optional Retirement Program leaves the employ of The University of North Carolina and either retires or commences employment with an employer not having a retirement program with the same company underwriting the participant's annuity contract, regardless of whether the annuity contract is held by the participant, a trust, or the Retirement System, the participant's interest in the Optional Retirement Program attributable to contributions of The University of North Carolina shall be forfeited and shall either (i) be refunded to The University of North Carolina and forthwith paid by it to the Retirement System and credited to the pension accumulation fund or (ii) be paid directly to the Retirement System and credited to the pension accumulation fund."

Requested by:	Senators Thomas, Rand, Dalton, Garrou, Hagan
Increase benefit/SHERIFFS' SUPPLEMENTAL PENSION FUND
SECTION 29.30.(a)  G.S. 143‑166.85(a) reads as rewritten:
"(a)	An eligible retired sheriff shall be entitled to and receive an annual pension benefit, payable in equal monthly installments, equal to one share for each full year of eligible service as sheriff multiplied by his total number of years of eligible service. The amount of each share shall be determined by dividing the total number of years of eligible service for all eligible retired sheriffs on December 31 of each calendar year into the amount to be disbursed as monthly pension payments in accordance with the provisions of G.S., 143 166.83(b). In no event however shall a monthly pension under this Article exceed an amount, which when added to a retired allowance at retirement from the Local Governmental Employees' Retirement System or to the amount he would have been eligible to receive if service had not been forfeited by the withdrawal of accumulated contributions, is greater than seventy ‑five percent (75%) of a sheriff's equivalent annual salary immediately preceding retirement computed on the latest monthly base rate, to a maximum amount of  one thousand five hundred dollars ($1,500)."
SECTION 29.30.(b)  G.S. 7A‑304(a)(3a) reads as rewritten:
"(3a)	For the supplemental pension benefits of sheriffs, the sum of  one dollar twenty‑five cents ($1.25) to be remitted to the Department of Justice and administered under the provisions of Article 12G of Chapter 143 of the General Statutes."

Requested by:	Senators Garrou, Dalton, Hagan, Rand 
STATE HEALTH PLAN CHANGES
SECTION 29.31.(a)  G.S. 135‑40.5 reads as rewritten:
"§ 135‑40.5.  Benefits not subject to deductible or coinsurance.
(a)	Repealed by Session Laws 1985, c. 192, s. 5.
(b)	Repealed by Session Laws 1991, c. 427, s. 20.
(c)	Preadmission Testing. – The Plan will pay one hundred percent (100%) of reasonable and customary charges for diagnostic, laboratory and x‑ray examinations performed on an outpatient basis.
(d)	Repealed by Session Laws 2001‑253, s. 1(d), effective July 1, 2001.
(e)	Routine Diagnostic Examinations. – The Plan will pay one hundred percent (100%) of allowable charges for routine diagnostic examinations and tests, including breast, colon, rectal, and prostate exams, X rays,  blood and blood pressure checks, urine tests, tuberculosis tests, and general health checkups that are medically necessary for the maintenance and improvement of individual health but no more often than once every three years for covered individuals to age 40 years, once every two years for covered individuals to age 50 years, and once a year for covered individuals age 50 years and older, unless a more frequent occurrence is warranted by a medical condition when such charges are incurred in a medically supervised facility.The Plan will pay one hundred percent (100%) of allowable charges for mammograms once per year for covered individuals age 40 years and over, and not more often than once every three years for covered individuals to age 40 years, when such charges are incurred in a medically supervised facility. Routine diagnostic examinations and tests covered under this subsection also include examinations and tests for the screening for the early detection of cervical cancer. The coverage shall be in accordance with the most recently published American Cancer Society guidelines or guidelines adopted by the North Carolina Advisory Committee on Cancer Coordination and Control for any covered female. For the purposes of this subsection, "examinations and laboratory tests for the screening for the early detection of cervical cancer" means conventional PAP smear screening, liquid‑based cytology, and human papilloma virus (HPV) detection methods for women with equivocal findings on cervical cytologic analysis that are subject to the approval of and have been approved by the United States Food and Drug Administration. Provided, however, that charges for such examinations and tests are not covered by the Plan when they are incurred to obtain or continue employment, to secure insurance coverage, to comply with legal proceedings, to attend schools or camps, to meet travel requirements, to participate in athletic and related activities, or to comply with governmental licensing requirements. The maximum amount payable under this subsection for a covered individual is one hundred fifty dollars ($150.00) per fiscal year.
(f)	Immunizations. – The Plan will pay one hundred percent (100%) of allowable charges for immunizations for the prevention of contagious diseases as generally accepted medical practices would dictate when directed by an attending physician.
(g)	Prescription Drugs. – The Plan's allowable charges for prescription legend drugs to be used outside of a hospital or skilled nursing facility are to be determined by the Plan's Executive Administrator and Board of Trustees. The Plan will pay allowable charges for each outpatient prescription drug less a copayment to be paid by each covered individual equal to the following amounts: pharmacy charges up to ten dollars ($10.00) for each generic prescription, thirty dollars ($30.00) for each branded prescription, and forty dollars ($40.00) for each branded prescription with a generic equivalent drug, and  fifty dollars ($50.00) for each branded or generic prescription not on a formulary used by the Plan. Allowable charges shall not be greater than a pharmacy's usual and customary charge to the general public for a particular prescription. Prescriptions shall be for no more than a 34‑day supply for the purposes of the copayments paid by each covered individual. By accepting the copayments and any remaining allowable charges provided by this subsection, pharmacies shall not balance bill an individual covered by the Plan. A prescription legend drug is defined as an article the label of which, under the Federal Food, Drug, and Cosmetic Act, is required to bear the legend: "Caution: Federal Law Prohibits Dispensing Without Prescription." Such articles may not be sold to or purchased by the public without a prescription order. Benefits are provided for insulin even though a prescription is not required. The Plan may use a pharmacy benefit manager to help manage the Plan's outpatient prescription drug coverage. In managing the Plan's outpatient prescription drug benefits, the Plan and its pharmacy benefit manager shall not provide coverage for erectile dysfunction, growth hormone, antiwrinkle, weight loss, and hair growth drugs unless such coverage is medically necessary to the health of the member. The Plan and its pharmacy benefit manager shall not provide coverage for growth hormone and weight loss drugs and antifungal drugs for the treatment of nail fungus and botulinium toxin without approval in advance by the pharmacy benefit manager. Any formulary used by the Plan's Executive Administrator and pharmacy benefit manager shall be an open formulary. Plan members shall not be assessed more than two thousand five hundred dollars ($2,500) per person per fiscal year in copayments required by this subsection.
SECTION 29.31.(b)  The first paragraph of G.S. 135‑40.6 reads as rewritten:
"§ 135‑40.6.  Benefits subject to deductible and coinsurance (comprehensive benefits).
The benefits provided in this section are subject to a deductible of three hundred fifty dollars ($350.00) per covered individual to an aggregate maximum of one thousand fifty dollars ($1,050) per employee and child(ren) or employee and family  coverage contract per fiscal year and are payable on the basis of eighty percent (80%) by the Plan and twenty percent (20%) by the covered individual up to a maximum of two thousand dollars ($2,000) out‑of‑pocket per fiscal year. The aggregate maximum out‑of‑pocket required of individuals covered by this section shall not be more than six thousand dollars ($6,000) per employee and child(ren) or employee and family coverage contract per fiscal year.
…."
SECTION 29.31.(c)  G.S. 135‑40.6(8)n. reads as rewritten:
"§ 135‑40.6.  Benefits subject to deductible and coinsurance (comprehensive benefits).
…
(8)	Other Covered Charges. –
…
n.	Chiropractic Services: Limited to the alignment of the spine and releasing of pressure by manipulation in accordance with the definitions in G.S. 90‑143. Covered services shall be provided only to Plan members over the age of five years. Maximum benefits for x‑rays, manipulations, and modalities shall be two thousand dollars ($2,000) per fiscal year."
SECTION 29.31.(d)  G.S. 135‑40.8 reads as rewritten:
"§ 135‑40.8.  Out‑of‑pocket expenditures.
(a)	For the balance of any fiscal year after each eligible employee, retired employee, or dependent satisfies the cash deductible, the Plan pays eighty percent (80%) of the eligible expenses outlined in G.S. 135‑40.6. The remaining twenty percent (20%) is paid by the covered individual until  two thousand dollars ($2,000) per covered individual up to an aggregate of six thousand dollars ($6,000) per employee and child(ren) or employee and family coverage contract per fiscal year in excess of the deductible has been paid out of pocket. The Plan then pays one hundred percent (100%) of the remaining covered expenses.
(b)	Repealed by Session Laws 2001‑253, s. 1(m), effective July 1, 2001.
(c)	Notwithstanding any other provision of this Article, on the first day of each confinement the Plan does not pay the first one hundred fifty dollars ($150.00) of the room accommodation charge allowable under G.S. 135‑40.6(1). Any readmission within 60 days after discharge for the same reason shall be considered the same confinement for the purpose of this subsection. The exclusion made under this subsection shall not count toward the deductible nor toward the maximum amount of coinsurance out‑of‑pocket costs.
(c1)	Notwithstanding any other provision of this Article, the Plan does not pay the first one hundred fifty dollars ($150.00) of the facility fees and ancillary charges for allowable charges exceeding five hundred dollars ($500.00) per episode of care for hospital outpatient departments and ambulatory surgical facilities under G.S. 135‑40.6(4). Readmission within 30 days after discharge for the same reason shall be considered the same episode of care for the purpose of this subsection. The exclusion made under this subsection shall not count toward the deductible nor toward the maximum amount of coinsurance out‑of‑pocket costs.
(c2)	Notwithstanding any other provision of this Article, the Plan does not pay the first one hundred fifty dollars ($150.00) of allowable emergency room charges when admission to a hospital pursuant to the emergency room use does not immediately follow. This subsection shall apply only when less costly alternative means of emergency medical care are reasonably available as determined by the Executive Administrator and Board of Trustees. The exclusion made under this subsection shall not count toward the deductible nor toward the maximum amount of coinsurance out‑of‑pocket costs.
(c3)	Notwithstanding any other provision of this Article, the Plan does not pay for the first fifteen dollars ($15.00) of allowable charges for each home, office, or skilled nursing facility visit under the provisions of G.S. 135‑40.6(7)a. and b., G.S. 135‑40.6(4), G.S. 135‑40.6(8)i., j., k., n., r., and s., and G.S. 135‑40.5(e). The co‑payment assessed by this subsection shall be assessed only once per person per provider per day and shall not apply to laboratory, pathology, and radiology services, or to charges for injected medications. The exclusion made under this subsection shall not count toward the deductible nor toward the maximum amount of coinsurance out‑of‑pocket costs.
(c4)	Notwithstanding any other provision of this Article, the Plan does not pay for the first twenty‑five dollars ($25.00) of allowable charges for services provided by medical specialists. The co‑payment assessed by this subsection shall be assessed only once per person per provider per day and shall not apply to laboratory, pathology, and radiology services, or to charges for injected medications. The exclusion made under this subsection shall not count toward the deductible nor toward the maximum amount of coinsurance out‑of‑pocket costs.
(d)	Where a network of qualified preferred providers of inpatient and outpatient hospital care is reasonably available for use by those individuals covered by the Plan, use of providers outside of the preferred network shall be subject to a twenty percent (20%) coinsurance rate up to five thousand dollars ($5,000) per fiscal year per covered individual up to an aggregate of fifteen thousand dollars ($15,000) per employee and child(ren) or employee and family coverage contract per fiscal year in addition to the general coinsurance percentage and maximum fiscal year amount specified by G.S. 135‑40.4 and G.S. 135‑40.6. The Plan then pays one hundred percent (100%) of the remaining covered expenses.
(e)	Where qualified out‑of‑state preferred providers of medical care are not reasonably available in medical emergencies, the Plan pays the amounts covered by subsection (a) of this section. Any amount of charges for services under this section that exceeds the amount allowed by the Plan for the services of qualified preferred providers under this section shall be negotiated between the Plan and the provider of medical services, and the Plan shall ensure that the Plan member is not held financially responsible for the amount of these excess charges. If a Plan member is not capable of making a decision about choosing an in‑State qualified preferred provider and emergency services personnel transport the Plan member to a provider outside of the Plan network, then the coverage under this subsection shall apply. As used in this section, a "medical emergency" is the sudden and unexpected onset of a condition manifesting itself by acute symptoms of sufficient severity that, in the absence of immediate medical care, could imminently result in injury or danger to self or others."

Requested by:	Senators Dalton, Garrou, Hagan
Forest City employees in State Health Plan
SECTION 29.32.  Section 31.26(j) of S.L. 2004‑124 reads as rewritten:
"SECTION 31.26.(j)  This section applies to:
(1)	Bladen, Cherokee, Rutherford, Washington, and Wilkes Counties only, and
(2)	The Town of Forest City only."

PART XXX. CAPITAL APPROPRIATIONS.

Requested by:	Senators Garrou, Dalton, Hagan
general fund capital appropriations/introduction
SECTION 30.1.  The appropriations made by the 2005 General Assembly for capital improvements are for constructing, repairing, or renovating State buildings, utilities, and other capital facilities, for acquiring sites for them where necessary, and acquiring buildings and land for State government purposes.

Requested by:	Senators Garrou, Dalton, Hagan 
CAPITAL APPROPRIATIONS/GENERAL FUND
SECTION 30.2.  There is appropriated from the General Fund for the 2005‑2006 fiscal year the following amount for capital improvements:
	
Capital Improvements – General Fund	2005‑2006

Department of Commerce – State Ports Authority	
	Port of Wilmington – Container Cranes		$ 5,000,000 	
Department of Environment and Natural Resources		
	Water Resources Development Projects		14,760,000 	
Department of Health and Human Services		
	Division of Public Health		100,000 
		
University of North Carolina System – Board of Governors		
	UNC‑Chapel Hill – Renaissance Computing Institute		500,000 	UNC‑Greensboro and NC A&T Joint Millennium Campus		5,000,000 	Winston‑Salem State University – Laboratory Facility Planning Funds	750,000 	
TOTAL CAPITAL IMPROVEMENTS – GENERAL FUND		$ 26,110,000

Requested by:	Senators Garrou, Dalton, Hagan 
water resources DEVELOPMENT project FUNDS
SECTION 30.3.(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	2005‑2006

(1)	Wilmington Harbor Deepening	$1,300,000
(2)	Manteo (Shallowbag) Bay Channel Maintenance	50,000
(3)	Wilmington Harbor Maintenance Dredging	500,000
(4)	B. Everett Jordan Water Supply Storage	100,000
(5)	John H. Kerr Reservoir Operations Evaluation	600,000
(6)	Bogue Banks Shore Protection Study (Carteret County)	75,000
(7)	Surf City/North Topsail Beach Protection Study	250,000
(8)	West Onslow Beach (Topsail)	100,000
(9)	Wrightsville Beach Nourishment	580,000
(10)	Hurricane Stream Restoration – Western North Carolina	2,000,000
(11)	Swan Quarter (Hyde County) Flood Control Dikes	100,000
(12)	Ocracoke NCCAT Estuarine Shoreline Protection	1,500,000
(13)	Far Creek Maintenance Dredging	120,000
(14)	Belhaven Harbor Environmental Improvements	250,000
(15)	Lower Lockwoods Folly River 	286,000
(16)	Walters Slough Maintenance Dredging	122,000
(17)	Hurricane Isabel Emergency Stream Cleanup – Northeast NC 	1,370,000
(18)	State‑Local Projects	2,000,000
(19)	Princeville Flood Control	250,000
(20)	Currituck Sound Water Management Study	300,000
(21)	Aquatic Weed Control, Lake Gaston and Statewide	375,000
(22)	Tar River and Pamlico Sound Feasibility Study	100,000
(23)	Deep Creek (Yadkin County) Water Management	2,000,000
(24)	North Carolina Oyster Habitat Restoration	50,000
(25)	Emergency Flood Control Projects	187,000
(26)	Projected Feasibility Studies	100,000
(27)	Planning Assistance to Communities	95,000

TOTALS	$14,760,000

SECTION 30.3.(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 2005‑2006 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)	U.S. Army Corps of Engineers project feasibility studies.
(2)	U.S. Army Corps of Engineers projects whose schedules have advanced and require State‑matching funds in fiscal year 2005‑2006.
(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 2006‑2007 fiscal year.
SECTION 30.3.(c)  The Department shall make semiannual 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 semiannual 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.

Requested by:	Senators Garrou, Dalton, Hagan
PROCEDURES FOR DISBURSEMENT OF CAPITAL FUNDS
SECTION 30.4.  The appropriations made by the 2005 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 2005 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 2005 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 30.5.  When each capital improvement project appropriated by the 2005 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.

REPAIR AND RENOVATION RESERVE ALLOCATION
SECTION 30.6.  Of the funds in the Reserve for Repairs and Renovations for the 2005‑2006 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.
The Board of Governors and the Office of State Budget and Management shall consult with the Joint Legislative Commission on Governmental Operations prior to the allocation or reallocation of these funds.

Requested by:	Senators Garrou, Dalton, Hagan
PROJECT COST INCREASE
SECTION 30.7.  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 30.8.  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 30.9.  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.

Requested by:	Senators Garrou, Dalton, Hagan
APPROPRIATIONS LIMITS/REVERSION OR LAPSE
SECTION 30.10.  Except as permitted in previous sections of this act, the appropriations for capital improvements made by the 2005 General Assembly may be expended only for specific projects set out by the 2005 General Assembly and for no other purpose.  Construction of all capital improvement projects enumerated by the 2005 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 XXXi. lottery.

lottery
SECTION 31.1.(a)  If House Bill 1023, 2005 Regular Session, becomes law, then the title of House Bill 1023, 2005 Regular Session, is amended by deleting the following phrase "TO FUND COLLEGE AND UNIVERSITY SCHOLARSHIPS,".
SECTION 31.1.(b)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑103(4), as enacted by that act, reads as rewritten:
"§ 18C‑103. Definitions.
As used in this Chapter, unless the context requires otherwise:
…
(4)	'Game' or 'lottery game' means any procedure or amusement authorized by the Commission where prizes are distributed among persons who have paid, or unconditionally agreed to pay, for tickets or shares that provide the opportunity to win those prizes and does not utilize a video gaming machine as defined in G.S. 14‑306.1(c).
…."
SECTION 31.1.(c)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑110, as enacted by that act, reads as rewritten:
"§ 18C‑110.  Establishment of the North Carolina State Lottery Commission to be a self‑supporting agency of the State.
There is created the North Carolina State Lottery Commission to establish and oversee the operation of a Lottery. The Commission shall be located in the Department of Administration for budgetary purposes only; otherwise, the Commission shall be an independent, self‑supporting, and revenue‑raising agency of the State. The Commission shall reimburse other governmental entities that provide services to the Commission."
SECTION 31.1.(d)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑111, as enacted by that act, reads as rewritten:
"§ 18C‑111.  Commission membership; appointment; selection of chair; vacancies; removal; meetings; compensation.
(a)	The Commission shall consist of nine members, five of whom shall be appointed by the Governor, two of whom shall be appointed by the General Assembly upon the recommendation of the President Pro Tempore of the Senate, and two of whom shall be appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives. The Governor shall select the initial chair of the Commission from among its membership, who shall serve as chair for one year from the date of appointment. Thereafter, the Commission shall select a chair from among its membership to serve at the pleasure of the Commission.
(b)	Of the initial appointees of the Governor, three members shall serve a term of one year, one member shall serve a term of two years, and one member shall serve a term of three years. Of the initial appointees of the General Assembly upon the recommendation of the President Pro Tempore of the Senate, one member shall serve a term of two years, and one member shall serve a term of three years. Of the initial appointees of the General Assembly upon the recommendation of the Speaker of the House of Representatives, one member shall serve a term of two years, and one member shall serve a term of three years. All succeeding appointments shall be for terms of five years. Members shall not serve for more than two successive terms.
(c)	Vacancies shall be filled by the appointing authority for the unexpired portion of the term in which they occur.
(d)	The Commission shall meet at least quarterly upon the call of the chair. A majority of the total membership of the Commission shall constitute a quorum. 
(e)	Members of the Commission shall receive per diem, subsistence, and travel as provided in G.S. 138‑5 and G.S. 138‑6."
SECTION 31.1.(e)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑112, as enacted by that act, reads as rewritten:
"§ 18C‑112.  Qualifications of Commissioners.
(a)	Of the members of the Commission appointed by the Governor, at least one member shall have a minimum of five years' experience in law enforcement.
(b)	Of the members appointed by the General Assembly upon the recommendation of the President Pro Tempore of the Senate, one member shall be a certified public accountant.
(c)	Of the members of the Commission appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives, one member shall have at least five years retail sales experience as an owner or manager.
(d)	In making appointments to the Commission, the appointing authorities shall consider the composition of the State with regard to geographic representation and gender, ethnic, racial, and age composition."
SECTION 31.1.(f)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑114(a)(8) and G.S. 18C‑114(a)(11), as enacted by that act, read as rewritten:
"(a)	The Commission shall have the following powers and duties:
…
	To charge a fee of lottery vendors not to exceed the cost of the criminal record check of the lottery vendor.
…
(11)	 To specify the authority, selection, and role of the Director and other employees of the Commission. All of the following apply to all employees of the Commission:
a.	No employee of the Commission may have a financial interest in any lottery vendor or lottery contractor.
b.	No employee of the Commission with decision‑making authority shall participate in any decision involving the retailer or vendor with whom the employee has a financial interest.
c.	No employee of the Commission who leaves the employment of the Commission may represent any vendor or retailer before the Commission for a period of two years following termination of employment with the Commission.
d.	A background investigation shall be conducted on each applicant for employment with the Commission.
e.	The Commission shall bond all employees with access to lottery funds or revenue and security."
SECTION 31.1.(g)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑120(b)(3) and G.S. 18C‑120(b)(6), as enacted by that act, read as rewritten:
"(b)	The Director shall have the following powers and duties, under the supervision of the Commission:
…
(3)	To set the salaries of all Commission employees, subject to the approval of the Commission. Except for the provisions of Articles 6 and 7 of Chapter 126 of the General Statutes, all employees of the Commission shall be exempt from the State Personnel Act.
…
(6)	To coordinate and collaborate with the appropriate law enforcement authorities regarding investigations of violations of the laws relating to the operation of the Lottery and make reports to the Commission regarding those investigations.
…."
SECTION 31.1.(h)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑121, as enacted by that act, reads as rewritten:
"§ 18C‑121.  Accountability; books and records.
The Director shall have made and kept books and records that accurately and completely reflect each day's transactions, including the distribution of tickets or shares to lottery game retailers, receipt of funds, prize claims, prizes paid directly by the Commission, expenses, and all other financial transactions involving lottery funds necessary to permit preparation of financial statements that conform with generally accepted accounting principles."
SECTION 31.1.(i)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑122, as enacted by that act, reads as rewritten:
"§ 18C‑122.  Independent audits.
(a)	At the beginning of each calendar year, the Commission shall engage an independent firm experienced in security procedures, including computer security and systems security, to conduct a comprehensive study and evaluation of all aspects of security in the operation of the Commission and of the Lottery. At a minimum, such a security assessment should include a review of network vulnerability, application vulnerability, application code review, wireless security, security policy and processes, security/privacy program management, technology infrastructure and security controls, security organization and governance, and operational effectiveness.
…
(d)	Biennially at the end of the fiscal year, the Commission shall engage an independent auditing firm that has experience in evaluating the operation of lotteries to perform an audit of the Lottery. The results of this audit shall be presented to the Commission, to the Governor, and to the General Assembly."
SECTION 31.1.(j)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑130(e), as enacted by that act, reads as rewritten:
"(e)	Lottery advertising shall be designed and presented in a manner to minimize the appeal of lottery games to minors. The use of cartoon characters or of false, misleading, or deceptive information in lottery advertising is prohibited. All advertising promoting the sale of lottery tickets or shares for a particular game shall include the actual or estimated overall odds of winning the game."
SECTION 31.1.(k)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑132, as enacted by that act, is amended by adding the following new subsection to read:
"(l)	All prizes are subject to the State income tax."
SECTION 31.1.(l)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑140, as enacted by that act, reads as rewritten:
"§ 18C‑140.  Contracting with lottery game retailers.
The Commission may contract with lottery game retailers to sell tickets or shares for lottery games upon such terms and conditions as it considers appropriate. The contract entered into between the Commission and the lottery game retailer shall be considered a permit for purposes of Chapter 18B of the General Statutes. No contract to act as a lottery game retailer is assignable or transferable. All contracts with lottery game retailers shall provide that the Director may terminate the contract if the lottery game retailer knowingly violates a provision of this Chapter."
SECTION 31.1.(m)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑141(b), as enacted by that act, reads as rewritten:
"(b)	The Director may not recommend contracting with any of the following:
(1)	A natural person under 21 years of age. This minimum age shall not prohibit employees of a lottery game retailer who are under 21 years of age from selling lottery tickets or shares during their employment.
(2)	A person who would be engaged exclusively in the business of selling lottery tickets or shares or operating electronic computer terminals or other devices solely for entertainment.
(3)	A person who is not current in filing all applicable tax returns to the State and in payment of all taxes, interest, and penalties owed to the State, excluding items under formal appeal under applicable statutes. Upon request of the Director, the Department of Revenue shall provide this information about a specific person to the Commission.
(4)	A person who resides in the same household as a member of the Commission, the Director, or any other employee of the Commission."
SECTION 31.1.(n)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑142, as enacted by that act, reads as rewritten:
"§ 18C‑142.  Compensation for lottery game retailers.
The amount of compensation paid to lottery game retailers for their sales of lottery tickets or shares shall be seven percent (7%) of the retail price of the tickets or shares sold for each lottery game. The Commission shall require submission of reports and remission of lottery revenues to the Commission on a timely basis."
SECTION 31.1.(o)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑143, as enacted by that act, reads as rewritten:
"§ 18C‑143.  Responsibilities of lottery game retailers.
(a)	A lottery game retailer shall comply with all provisions of this Article and the contract with the Commission.
(b)	A lottery game retailer shall sell no lottery tickets or shares unless the retailer conspicuously displays a certificate of authority, signed by the Director, to sell lottery tickets or shares. The Commission shall issue a certificate of authority to each lottery game retailer for purposes of display for each retail outlet owned or operated by the lottery game retailer. No certificate is assignable or transferable.
(c)	A lottery game retailer shall furnish an appropriate bond or letter of credit, if so requested by the Director. The Commission may authorize the Director to purchase blanket bonds covering the activities of any or all lottery game retailers.
(d)	The Commission shall adopt rules to establish procedures governing how the lottery game retailers:
(1)	Account for all tickets or shares in their custody, including tickets and shares sold.
(2)	Account for the money collected from the sale of tickets and shares. 
(3)	Remit funds to the Commission, provided that all payments shall be in the form of electronic fund transfers or other recorded financial instruments as authorized by the Commission and approved by the Director.
(e)	No lottery retailer or applicant to be a lottery retailer shall pay, give, or make any economic opportunity, gift, loan, gratuity, special discount, favor, hospitality, or service, excluding food and beverages having an aggregate value not exceeding one hundred dollars ($100.00) in any calendar year, to the Director, to any member or employee of the Commission, or to any member of the immediate family residing in the same household as one of these individuals."
SECTION 31.1.(p)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑151, as enacted by that act, reads as rewritten:
"§ 18C‑151.  Contracts.
(a)	Except as otherwise provided in this subsection for contracts for the purchase of services, apparatus, supplies, materials, or equipment requiring an estimated expenditure of public money in an amount equal to or more than seventy‑five thousand dollars ($75,000), Article 8 of Chapter 143 of the General Statutes shall apply to contracts entered into by the Commission.In recognition of the particularly sensitive nature of the Lottery and the competence, quality of product, experience, and timeliness, fairness, and integrity in the operation and administration of the Lottery and maximization of the objective of raising revenues, a contract for the purchase of services, apparatus, supplies, materials, or equipment requiring an estimated expenditure of public money in an amount equal to or more than seventy‑five thousand dollars ($75,000) may be awarded by the Commission only after the following have occurred:
(1)	The Commission has invited proposals to be submitted by advertisement by electronic means or advertisement in a newspaper having general circulation in the State of North Carolina and containing the following information: 
a.	The time and place where a complete description of the services, apparatus, supplies, materials, or equipment may be had.
b.	The time and place for opening of the proposals.
c.	A statement reserving to the Commission the right to reject any or all proposals.
(2)	Proposals may be rejected for any reason determined by the Commission to be in the best interest of the Lottery.
(3)	All proposals shall be accompanied by a bond or letter of credit in an amount equal to not less than five percent (5%) of the proposal and the fee to cover the cost of the criminal record check conducted under G.S. 114‑19.6.
(4)	The Commission has complied with G.S. 143‑128.2 and G.S. 143‑128.3.
(5)	The Commission may not award a contract to a lottery vendor who has been convicted of a felony or any gambling offense in any state or federal court of the United States within 10 years of entering into the contract, or employs officers and directors who have been convicted of a felony or any gambling offense in any state or federal court of the United States within 10 years of entering into the contract.
(6)	The Commission shall investigate and compare the overall business practices, ethical reputation, criminal record, civil litigation, competence, integrity, background, and regulatory compliance record of lottery vendors.
(7)	The Commission may engage an independent firm experienced in evaluating government procurement proposals to aid in evaluating proposals for a major procurement.
(8)	The Commission shall award the contract to the responsible lottery vendor who submits the best proposal that maximizes the benefits to the State.
(b)	Upon the completion of the bidding process, a contract may be awarded to a lottery contractor with whom the Commission has previously contracted for the same purposes. 
(c)	Before a contract is awarded, the Director shall conduct a thorough background investigation of all of the following:
(1)	The vendor to whom the contract is to be awarded.
(2)	Any parent or subsidiary corporation of the vendor to whom the contract is to be awarded.
(3)	All shareholders with a five percent (5%) or more interest in the vendor or parent or subsidiary corporation of the vendor to whom the contract is to be awarded.
(4)	All officers and directors of the vendor or parent or subsidiary corporation of the vendor to whom the contract is to be awarded.
(d)	The Commission may terminate the contract, without penalty, of a lottery contractor that fails to comply with the Commission's instruction to implement the recommendations of the State Auditor or an independent auditor in an audit conducted of Lottery security or operations. 
(e)	After entering into a contract with a lottery contractor, the Commission shall require the lottery contractor to periodically update the information required to be disclosed under G.S. 18C‑149. Any contract with a lottery contractor who does not periodically update the required disclosures may be terminated by the Commission.
(f)	No lottery system vendor nor any applicant for a major procurement contract may pay, give, or make any economic opportunity, gift, loan, gratuity, special discount, favor, hospitality, or service, excluding food and beverages having an aggregate value not exceeding one hundred dollars ($100.00) in any calendar year, to the Director, any member or employee of the corporation, or a member of the immediate family residing in the same household as any of these individuals."
SECTION 31.1.(q)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑152, as enacted by that act, reads as rewritten:
"§ 18C‑152.  Investigation of lottery vendors.
(a)	Lottery vendors shall cooperate with the Director in completing any investigation required under G.S. 18C‑151(c), including any appropriate investigation authorizations needed to facilitate these investigations.
(b)	The Commission shall adopt rules that provide for disclosures of information required to be disclosed under subsection (c) of this section by lottery vendors to ensure that the vendors provide all the information necessary to allow for a full and complete evaluation by the Director and Commission of the competence, integrity, background, and character of the lottery vendors. Information shall be disclosed for the following:
(1)	If the vendor is a corporation, the officers, directors, and each stockholder in that corporation; however, in the case of owners of equity securities of a publicly traded corporation, only the names and addresses of those known to the corporation to own beneficially five percent (5%) or more of the securities need be disclosed.
(2)	If the vendor is a trust, the trustee and all persons entitled to receive income or benefits from the trust.
(3)	If the vendor is an association, the members, officers, and directors.
(4)	If the vendor is a partnership or joint venture, all of the general partners, limited partners, or joint venturers.
(5)	For any vendor, any person who can exercise control or authority, or both, on behalf of the vendor.
(c)	For purposes of this subsection, the term "vendor" shall include the vendor and each of the persons applicable under subsection (b) of this section. At a minimum, the vendor required to disclose information for a thorough background investigation under G.S. 18C‑151 shall disclose all of the following:
(1)	A disclosure of the vendor's name, phone number, and address. 
(2)	A disclosure of all the states and jurisdictions in which the vendor does business and the nature of the business for each state or jurisdiction.
(3)	A disclosure of all the states and jurisdictions in which the vendor has contracts to supply gaming goods or services, including lottery goods and services, and the nature of the goods or services involved for each state or jurisdiction.
(4)	A disclosure of all the states and jurisdictions in which the vendor has applied for, has sought renewal of, has received, has been denied, has pending, or has had revoked a lottery or gaming license or permit of any kind or had fines or penalties assessed on a license, permit, contract, or operation and the disposition of such in each such state or jurisdiction. If any lottery or gaming license, permit, or contract has been revoked or has not been renewed or any lottery or gaming license, permit, or application has been either denied or is pending and has remained pending for more than six months, all of the facts and circumstances underlying the failure to receive that license shall be disclosed.
(5)	A disclosure of the details of any finding or plea, conviction, or adjudication of guilt in a state or federal court of the vendor for any felony or any other criminal offense other than a minor traffic violation.
(6)	A disclosure of the details of any bankruptcy, insolvency, reorganization, or corporate or individual purchase or takeover of another corporation, including bonded indebtedness, or any pending litigation of the vendor.
(7)	If at least twenty‑five percent (25%) of the cost of a vendor's contract is subcontracted, the vendor shall disclose all of the information required by this section for the subcontractor as if the subcontractor were itself a vendor.
(8)	Any additional disclosures and information the Commission determines to be appropriate for the contract involved. 
(d)	All documents compiled by the Director in conducting the investigation of the lottery vendors shall be held as confidential information under Chapter 132."
SECTION 31.1.(r)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑162, as enacted by that act, reads as rewritten:
"§ 18C‑162.  Allocation of revenues.
(a)	To the extent practicable, the Commission shall allocate revenues to the North Carolina State Lottery Fund in the following manner:
(1)	At least fifty percent (50%) of the total annual revenues, as described in this Chapter, shall be returned to the public in the form of prizes.
(2)	At least thirty‑five percent (35%) of the total annual revenues, as described in this Chapter, shall be transferred as provided in G.S. 18C‑164.
(3)	No more than eight percent (8%) of the total annual revenues, as described in this Chapter, shall be allocated for payment of expenses of the Lottery.
(4)	No more than seven percent (7%) of the total annual revenues, as described in this Chapter, shall be allocated for compensation paid to lottery game retailers.
(b)	Unclaimed prize money held by the Commission in the North Carolina State Lottery Fund may be used by the Commission to enhance prizes in other lottery games.
(c)	To the extent that the expenses of the Commission are less than eight percent (8%) of total annual revenues, the Commission may allocate any surplus funds:
(1)	To increase prize payments; or
(2)	To the benefit of the public purposes as described in this Chapter."
SECTION 31.1.(s)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑163(3), as enacted by that act, is repealed.
SECTION 31.1.(t)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑164(b), as enacted by that act, reads as rewritten: 
"(b)	The Commission shall distribute the net revenue of the North Carolina State Lottery Fund as follows:
(1)	During the 2005‑2006 fiscal year, seventy million dollars ($70,000,000) shall be transferred to the Public School Building Capital and Technology Fund created in Article 38A of Chapter 115C of the General Statutes and is appropriated for expenditure in accordance with that Article. The amounts transferred under this subdivision shall be transferred in four equal installments, one during each fiscal quarter..
(2)	 Beginning with the 2006‑2007 fiscal year and annually thereafter, one hundred fifty million dollars ($150,000,000) shall be transferred to a special revenue fund to be established by the State Treasurer and to be known as the County Assistance Fund. The amounts transferred under this subdivision shall be transferred in four equal installments, one during each fiscal quarter. Monies in this Fund shall be used to pay for school construction projects in local school administrative units and to retire indebtedness incurred for school construction projects incurred on or after January 1, 2003. Monies in this Fund shall be distributed based on average daily membership, the county's ability to pay, the county's tax rate, growth in average daily membership, the county's debt capacity, and an appropriate requirement for matching funds from the county.
(3)	Beginning with the 2005‑2006 fiscal year, and annually thereafter, after the revenue is distributed as provided in subdivisions (1) and (2) of this subsection, the remainder shall be transferred to a special revenue fund to be established in the State treasury and to be known as the Education Enhancement Fund. This fund shall be subject to appropriation by the General Assembly and shall be used to further the goal of providing enhanced educational opportunities so that all students in the public schools can achieve their full potential. Initially, the Fund shall be used for the following primary purposes:
a.	To support reduction of class size in early grades to class size allotments not exceeding 1:18 in order to eliminate achievement gaps. 
b.	To support academic prekindergarten programs for at‑risk four‑year‑olds who would otherwise not be served in a high‑quality education program in order to help those four‑year‑olds be prepared developmentally to succeed in school.
c.	To support other educational priorities identified by the General Assembly."
SECTION 31.1.(u)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18C‑171, as enacted by that act, reads as rewritten:
"§ 18C‑171.  Lawful activity.
Other than this Chapter, any other State or local law, ordinance, or regulation providing any penalty,  restriction, regulation, or prohibition for the manufacture, transportation, storage, distribution, advertising, possession, or sale of any lottery tickets or shares or for the operation of any lottery game shall not apply to the operation of the Commission or lottery games established by this Chapter where the penalty, restriction, regulation, or prohibition applies only to the Lottery as operated by the North Carolina State Lottery Commission."SECTION 31.1.(v)  If House Bill 1023, 2005 Regular Session, becomes law, then Sections 2 and 4 of that act are repealed.
SECTION 31.1.(w)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 114‑19.6, as enacted by that act, reads as rewritten:
"§ 114‑19.16.  Criminal record checks for the North Carolina State Lottery Commission and its Director.
The Department of Justice may provide to the North Carolina State Lottery Commission and to its Director from the State and National Repositories of Criminal Histories the criminal history of any prospective employee of the Commission and any lottery vendor. The North Carolina State Lottery Commission or its Director shall provide to the Department of Justice, along with the request, the fingerprints of the prospective employee of the Commission, or of the lottery vendor, a form signed by the prospective employee of the Commission, or of the lottery vendor consenting to the criminal record check and use of fingerprints and other identifying information required by the State and National Repositories, and any additional information required by the Department of Justice. The fingerprints of the prospective employee of the Commission, or lottery vendor, shall be forwarded to the State Bureau of Investigation for a search of the State's criminal history record file, and the State Bureau of Investigation shall forward a set of fingerprints to the Federal Bureau of Investigation for a national criminal history record check. The North Carolina State Lottery Commission and its Director shall remit any fingerprint information retained by the Commission to alcohol law‑enforcement agents appointed under Article 5 of Chapter 18B of the General Statutes and shall keep all information obtained pursuant to this section confidential. The Department of Justice shall charge a reasonable fee only for conducting the checks of the national criminal history records authorized by this section."
SECTION 31.1.(x)  G.S. 18B‑101 is amended by adding a new subdivision to read:
"(8a)	'Lottery law' or 'lottery laws' means any provision of Chapter 18C of the General Statutes and the rules issued by the Lottery Commission under the authority of Chapter 18C of the General Statues."
SECTION 31.1.(y)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18B‑500(b) reads as rewritten:
"(b)	Subject Matter Jurisdiction. – After taking the oath prescribed for a peace officer, an alcohol law‑enforcement agent shall have authority to arrest and take other investigatory and enforcement actions for any criminal offense. The primary responsibility of an agent shall be enforcement of the ABC laws, lottery laws, and Article 5 of Chapter 90 (The Controlled Substances Act); however, an agent may perform any law‑enforcement duty assigned by the Secretary of Crime Control and Public Safety or the Governor."
SECTION 31.1.(z)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 18B‑500(d) reads as rewritten:
"(d)	Service of Commission Orders. – Alcohol law‑enforcement agents may serve and execute notices, orders, or demands issued by the Alcoholic Beverage Control Commission or the North Carolina State Lottery Commission for the surrender of permits or relating to any administrative proceeding. While serving and executing such notices, orders, or demands, alcohol law‑enforcement agents shall have all the power and authority possessed by law‑enforcement officers when executing an arrest warrant."
SECTION 31.1.(aa)  If House Bill 1023, 2005 Regular Session, becomes law, then, effective for taxable years beginning on or after January 1, 2005, G.S. 105‑134.5(b) reads as rewritten:
"(b)	Nonresidents. – For nonresident individuals, the term "North Carolina taxable income" means the taxpayer's taxable income as determined under the Code, adjusted as provided in G.S. 105‑134.6 and G.S. 105‑134.7, multiplied by a fraction the denominator of which is the taxpayer's gross income as determined under the Code, adjusted as provided in G.S. 105‑134.6 and G.S. 105‑134.7, and the numerator of which is the amount of that gross income, as adjusted, that is derived from North Carolina sources and is attributable to the ownership of any interest in real or tangible personal property in this State, is derived from a business, trade, profession, or occupation carried on in this State, or is derived from gambling activities in this State."
SECTION 31.1.(bb)  If House Bill 1023, 2005 Regular Session, becomes law, then, effective for taxable years beginning on or after January 1, 2005, Article 4A of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑163.2B. North Carolina State Lottery Commission must withhold taxes.
The North Carolina State Lottery Commission, established by Chapter 18C of the General Statutes, must deduct and withhold State income taxes from the payment of winnings that are reportable to the Internal Revenue Service under section 3406 of the Code. The amount of taxes to be withheld is seven percent (7%) of the winnings less the amount wagered. The Commission must file a return and pay the withheld taxes in the time and manner required under G.S. 105‑163.6 as if the winnings were wages. The taxes the Commission withholds are held in trust for the Secretary."
SECTION 31.1.(cc)  If House Bill 1023, 2005 Regular Session, becomes law, then G.S. 105‑259(b) is amended by adding a new subdivision to read:
"(b)	Disclosure Prohibited. – An officer, an employee, or an agent of the State who has access to tax information in the course of service to or employment by the State may not disclose the information to any other person unless the disclosure is made for one of the following purposes:
…
(32)	To provide to the North Carolina State Lottery Commission the information required under G.S. 18C‑141."

Requested by:	Senators Albertson, Garrou, Dalton, Hagan  
prohibit the possession or operation of VIDEO GAMING MACHINES except by a federally recognized indian tribe as AUTHORIZED by the indian gaming regulatory act and a valid tribal‑state compact
SECTION 31.2.(a)  G.S. 14‑306.1 is repealed.
SECTION 31.2.(b)  Part 1 of Article 37 of Chapter 14 of the General Statutes is amended by adding a new section to read:
"§ 14‑306.1A.  Types of machines and devices prohibited by law; penalties.
(a)	Ban on Machines. – It shall be unlawful for any person to operate, allow to be operated, place into operation, or keep in that person's possession for the purpose of operation any video gaming machine as defined in subsection (b) of this section, except for the exemption for a federally recognized Indian tribe under subsection (e) of this section for whom it shall be lawful to operate and possess machines as listed in subsection (b) of this section if conducted in accordance with an approved Class III Tribal‑State Compact applicable to that tribe, as provided in G.S. 147‑12(14) and G.S. 71A‑8.
(b)	Definitions. – As used in this section, a video gaming machine means a slot machine, as defined in G.S. 14‑306(a), and other forms of electrical, mechanical, or computer games such as, by way of illustration:
(1)	A video poker game or any other kind of video playing card game.
(2)	A video bingo game.
(3)	A video craps game.
(4)	A video keno game.
(5)	A video lotto game.
(6)	Eight liner.
(7)	Pot‑of‑gold.
(8)	A video game based on or involving the random or chance matching of different pictures, words, numbers, or symbols not dependent on the skill or dexterity of the player.
For the purpose of this section, a video gaming machine is a video machine which requires deposit of any coin or token, or use of any credit card, debit card, or any other method that requires payment to activate play of any of the games listed in this subsection. The enumeration of games in the list in this subsection does not authorize the possession or operation of such game if it is otherwise prohibited by law.
For the purpose of this section, a video gaming machine includes those that are within the scope of the exclusion provided in G.S. 14‑306(b)(2) unless conducted in accordance with an approved Class III Tribal‑State Compact applicable to that tribe as provided in G.S. 147‑12(14) and G.S. 71A‑8. For the purpose of this section, a video gaming machine does not include those that are within the scope of the exclusion provided in G.S. 14‑306(b)(1).
(c)	Exemption for Certain Machines. – This section shall not apply to assemblers, repairers, manufacturers, sellers, lessors, or transporters of video gaming machines who assemble, repair, manufacture, sell, lease, or transport them for use out‑of‑state as long as the machines, while located in this State, cannot be used to play the prohibited games and does not apply to those who assemble, repair, manufacture, sell, or lease such machines for use only by a federally recognized Indian tribe if such machines may be lawfully used on Indian land under the Indian Gaming Regulatory Act.
(d)	Ban on Warehousing. – It is unlawful to warehouse any video gaming machine except in conjunction with the activities permitted under subsection (c) of this section.
(e)	Exemption for Activities Under IGRA. – Notwithstanding any other prohibitions in State law, the form of Class III gaming otherwise prohibited by subsections (a) through (d) of this section may be legally conducted on Indian lands which are held in trust by the United States government for and on behalf of federally recognized Indian tribes if conducted in accordance with an approved Class III Tribal‑State Gaming Compact applicable to that tribe as provided in G.S. 147‑12(14) and G.S. 71A‑8."
SECTION 31.2.(c)  G.S. 14‑306.2 reads as rewritten:
"§ 14‑306.2.  Violation of G.S. 14‑306.1A a violation of the ABC laws.
A violation of G.S. 14‑306.1A is a violation of the gambling statutes for the purposes of G.S. 18B‑1005(a)(3)."
SECTION 31.2.(d)  G.S. 147‑12(14) reads as rewritten:
"(14)	Notwithstanding subsections (a) through (d) of G.S. 14‑306.1A, to negotiate and enter into Class III Tribal‑State gaming compacts, and amendments thereto, on behalf of the State, consistent with State law (G.S. 14‑306.1A(e) and G.S. 71A‑8) and the Indian Gaming Regulatory Act, Public Law 100‑497, as necessary to allow a federally recognized Indian tribe to operate gaming activities, including those games allowed pursuant to G.S. 14‑306.1A(e), in this State as permitted under federal law."
SECTION 31.2.(e)  G.S. 71A‑8 reads as rewritten:
"§ 71A‑8.  Authorization for federally recognized Indian tribes.
In recognition of the governmental relationship between the State, federally recognized Indian tribes and the United States, a federally recognized Indian tribe may conduct games consistent with the Indian Gaming Regulatory Act, Public Law 100‑497, that are in accordance with a valid Tribal‑State compact executed by the Governor pursuant to G.S. 147‑12(14) and approved by the U.S. Department of Interior under the Indian Gaming Regulatory Act, and such games, including those permitted under G.S. 14‑306.1A(e), shall be lawful and not against the public policy of the State  if conducted by a federally recognized Indian tribe on federal Indian Trust Lands within the State in accordance with a Tribal‑State Gaming Compact applicable to that tribe as provided in G.S. 147‑12(14) and G.S. 71A‑8."
SECTION 31.2.(f)  G.S. 14‑298 reads as rewritten:
"§ 14‑298.  Seizure of illegal gaming items.
Upon a determination that probable cause exists to believe that any gaming table prohibited to be used by G.S. 14‑289 through G.S. 14‑300, any illegal punchboard or illegal slot machine, or any video game machine prohibited to be used by G.S. 14‑306 or G.S. 14‑306.1A, is in the illegal possession or use of any person within the limits of their jurisdiction, all sheriffs and law enforcement officers are authorized to seize the items in accordance with applicable State law. Any law enforcement agency in possession of that item shall retain the item pending a disposition order from a district or superior court judge. Upon application by the law enforcement agency, district attorney, or owner, and after notice and opportunity to be heard by all parties, if the court determines that the item is unlawful to possess, it shall enter an order releasing the item to the law enforcement agency for destruction or for training purposes. If the court determines that the item is not unlawful to possess and will not be used in violation of the law, the item shall be ordered released to its owner upon satisfactory proof of ownership. The foregoing procedures for release shall not apply, however, with respect to an item seized for use as evidence in any criminal action or proceeding until after entry of final judgment. This section does not prohibit any activities which are legally conducted by a federally recognized Indian tribe pursuant to G.S. 14‑306.1A(e), 147‑12(14), and 71A‑8."
SECTION 31.2.(g)  Effective with respect to offenses committed on or after December 1, 2005, G.S. 14‑309(b) is repealed.
SECTION 31.2.(h)  G.S. 105‑256(d)(1) is repealed, but that repeal does not affect reports for activities prior to December 1, 2005.
SECTION 31.2.(i)  G.S. 14‑309 reads as rewritten:
"§ 14‑309.  Violation made criminal.
(a)	Any person who violates any provision of G.S. 14‑304 through 14‑309 is guilty of a Class 1 misdemeanor for the first offense, and is guilty of a Class I felony for a second offense and a Class H felony for a third or subsequent offense.
(b)	Notwithstanding the provisions of subsection (a) of this section, any person violating the provisions of G.S. 14‑306.1A involving the operation of five or more machines prohibited by that section is guilty of a Class G felony."
SECTION 31.2.(j)  This section becomes effective December 1, 2005, and applies to offenses committed on or after that date but also applies to compacts and amendments thereto executed before that date.  If a court of competent jurisdiction in this State issues a stay to prohibit possession or operation of video gaming machines by a federally recognized Indian tribe, as authorized by a valid Tribal‑State Compact, because that activity is not allowed on non‑Indian lands pursuant to this section, this section is suspended and shall not have the force of law until such time as the stay is dissolved or a final order is entered.  If a court of competent jurisdiction in this State issues a final order that prohibits the possession or operation of video gaming machines by a federally recognized Indian tribe, as authorized by a valid Tribal‑State Compact, because that activity is not allowed on non‑Indian lands, this section is void.

PART XXXII. streamlined sales tax changes

Requested by:	Senators Hoyle, Kerr
Streamlined Sales Tax Changes
SECTION 32.1.(a)  Subdivisions (4a) and (4b) of G.S. 105‑164.3 are recodified as subdivisions (4b) and (4c) respectively.  
SECTION 32.1.(b)  G.S. 105‑164.3 reads as rewritten:
"§ 105‑164.3.  Definitions.
The following definitions apply in this Article:
…
(4a)	Combined general rate. –  The State's general rate of tax set in G.S. 105‑164.4(a) plus the sum of the rates of the local sales and use taxes authorized by Subchapter VIII of this Chapter for every county in this State.
…
(4d)	Computer supply. – An item that is considered a 'school computer supply' under the Streamlined Agreement.
…
(10)	Food. – Substances that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. The substances may be in liquid, concentrated, solid, frozen, dried, or dehydrated form. The term does not include an alcoholic beverage, as defined in G.S. 105‑113.68, or a tobacco product, as defined in G.S. 105‑113.4.
…
(37b)	School supply. – An item that is commonly used by a student in the course of study and is considered a 'school supply', a 'school art supply', or 'school instructional material' under the Streamlined Agreement.
…
(45a)	Streamlined Agreement. – The Streamlined Sales and Use Tax Agreement adopted November 12, 2002, as amended on November 19, 2003,  November 16, 2004, and April 16, 2005."
SECTION 32.1.(c)  G.S. 105‑164.4(a), as amended by Section 33.1(a) of this act, reads as rewritten:
"(a)	A privilege tax is imposed on a retailer at the following percentage rates of the retailer's net taxable sales or gross receipts, as appropriate. The general rate of tax is four and one‑half percent (4 1/2%).
…
(1b)	The rate of three percent (3%) applies to the sales price of each aircraft or boat sold at retail, including all accessories attached to the item when it is delivered to the purchaser. The maximum tax is one thousand five hundred dollars ($1,500) per article.
	:

	
	.
	.

	
	
…
(4c)	The combined general rate applies to the gross receipts derived from providing telecommunications service. A person who provides telecommunications service is considered a retailer under this Article. Telecommunications service is taxed in accordance with G.S. 105‑164.4C.
…
(6)	The combined general rate applies to the gross receipts derived from providing direct to home satellite service to subscribers in this State. A person engaged in the business of providing direct‑to‑home satellite service is considered a retailer under this Article.
(7)	The combined general rate applies to the sales price of spirituous liquor other than mixed beverages. As used in this subdivision, the terms 'spirituous liquor' and 'mixed beverage' have the meanings provided in G.S. 18B‑101."
SECTION 32.1.(d)  G.S. 105‑164.4A is repealed. 
SECTION 32.1.(e)  G.S. 105‑164.13 reads as rewritten:
"§ 105‑164.13.  Retail sales and use tax.
The sale at retail and the use, storage, or consumption in this State of the following tangible personal property and services are specifically exempted from the tax imposed by this Article:
…
(1)	Any of the following items sold to a farmer for use by the farmer in the planting, cultivating, harvesting, or curing of farm crops or in the production of dairy products, eggs, or animals. A 'farmer' includes a dairy operator, a poultry farmer, an egg producer, a livestock farmer, a farmer of crops, and a farmer of an aquatic species, as defined in G.S. 106‑758.
a.	Commercial fertilizer, lime, land plaster, plastic mulch, plant bed covers, and seeds.
b.	Farm machinery, attachment and repair parts for farm machinery, and lubricants applied to farm machinery. The term 'machinery' includes implements that have moving parts or are operated or drawn by an animal. The term does not include implements operated wholly by hand or motor vehicles required to be registered under Chapter 20 of the General Statutes.
c.	A horse or mule.
d.	Fuel other than electricity.
(1a)	A container sold to a farmer, as defined in subdivision (1) of this section, used for a purpose set out in that subdivision or in packaging and transporting the farmer's product for sale.
…
(2a)	Any of the following substances when purchased for use on animals or plants, as appropriate, held or produced for commercial purposes. This exemption does not apply to any equipment or devices used to administer, release, apply, or otherwise dispense these substances:
a.	Remedies, vaccines, medications, litter materials, and feeds for animals.
b.	Rodenticides, insecticides, herbicides, fungicides, and pesticides.
c.	Defoliants for use on cotton or other crops.
d.	Plant growth inhibitors, regulators, or stimulators, including systemic and contact or other sucker control agents for tobacco and other crops.
e.	Semen.
…
(4c)	Any of the following items concerning the housing, raising, or feeding of animals:
a.	Commercially manufactured facilities to be used for commercial purposes for housing, raising, or feeding animals or for housing equipment necessary for these commercial activities.
b.	Building materials, supplies, fixtures, and equipment that become a part of and are used in the construction, repair, or improvement of an enclosure or a structure specifically designed, constructed, and used for housing, raising, or feeding animals or for housing equipment necessary for one of these commercial activities.
c.	Commercially manufactured equipment, and parts and accessories for the equipment, used in a facility that is exempt from tax under this subdivision or in an enclosure or a structure whose building materials are exempt from tax under this subdivision.
(4d)	Any of the following tobacco items:
a.	The lease or rental of tobacco sheets used in handling tobacco in the warehouse and transporting tobacco to and from the warehouse.
b.	A metal flue sold for use in curing tobacco, whether the flue is attached to a handfired furnace or used in connection with a mechanical burner.
c.	A bulk tobacco barn or rack, parts and accessories attached to the tobacco barn or rack, and any similar apparatus, part, or accessory used to cure or dry tobacco or another crop.
(4e)	A grain, feed, or soybean storage facility, and parts and accessories attached to the facility.
…
(5a)	Mill machinery, mill machinery parts and accessories, and manufacturing fuel that are subject to tax under Article 5F of this Chapter.
(5b)	Sales to a telephone company regularly engaged in providing telephone service to subscribers on a commercial basis of central office equipment, switchboard equipment, private branch exchange equipment, and parts and accessories for the equipment
(5c)	Sales to a radio or television company regulated by the Federal Communications Commission of towers, broadcasting equipment, and parts and accessories for the equipment.
…
(10)	Sales of the following to commercial laundries or to pressing and dry cleaning establishments:
a.	Articles or materials used for the identification of garments being laundered or dry cleaned, wrapping paper, bags, hangers, starch, soaps, detergents, cleaning fluids and other compounds or chemicals applied directly to the garments in the direct performance of the laundering or the pressing and cleaning service.
b.	Laundry and dry‑cleaning machinery, parts and accessories attached to the machinery, and lubricants applied to the machinery.
c.	Fuel, other than electricity, used in the direct performance of the laundering or the pressing and cleaning service.
(10a)	Sales of the following to a major recycling facility:
a.	Lubricants and other additives for motor vehicles or machinery and equipment used at the facility.
b.	Materials, supplies, parts, and accessories, other than machinery and equipment, that are not capitalized by the taxpayer and are used or consumed in the manufacturing and material handling processes at the facility.
	c.	Electricity used at the facility.
d.	Equipment that is subject to tax under Article 5F of this Chapter.
…
	…
(45)	Sales of the following items to an interstate passenger air carrier for use at its hub:
a.	Aircraft lubricants, aircraft repair parts, and aircraft accessories.
b.	Aircraft simulators for flight crew training.
…
(45b)	Sales of the following items to an interstate air courier for use at its hub:
a.	Aircraft lubricants, aircraft repair parts, and aircraft accessories.
b.	Materials handling equipment, racking systems, and related parts and accessories for the storage or handling and movement of tangible personal property at an airport or in a warehouse or distribution facility.
…"
SECTION 32.1.(f)  G.S. 105‑164.13C(a) reads as rewritten:
"(a)	The taxes imposed by this Article do not apply to the following items of tangible personal property if sold between 12:01A.M. on the first Friday of August and 11:59 P.M. the following Sunday:
(1)	Clothing with a sales price of one hundred dollars ($100.00) or less per item.
(2)	School supplies with a sales price of one hundred dollars ($100.00) or less per item.
(3)	Computers with a sales price of three thousand five hundred dollars ($3,500) or less per item.
(3a)	Computer supplies with a sales price of two hundred fifty dollars ($250.00) or less per item.
(4)	Sport or recreational equipment with a sales price of fifty dollars ($50.00) or less per item."
SECTION 32.1.(g)  G.S. 105‑164.14(a) reads as rewritten:
"(a)	Interstate Carriers. – An interstate carrier is allowed a refund, in accordance with this section, of part of the sales and use taxes paid by it on the purchase in this State of railway cars and locomotives, and fuel, lubricants, repair parts, and accessories  for a motor vehicle, railroad car, locomotive, or airplane the carrier operates. An 'interstate carrier' is a person who is engaged in transporting persons or property in interstate commerce for compensation. The Secretary shall prescribe the periods of time, whether monthly, quarterly, semiannually, or otherwise, with respect to which refunds may be claimed, and shall prescribe the time within which, following these periods, an application for refund may be made.
An applicant for refund shall furnish the following information and any proof of the information required by the Secretary:
(1)	A list identifying the railway cars, locomotives, fuel, lubricants, repair parts, and accessories purchased by the applicant inside or outside this State during the refund period.
(2)	The purchase price of the items listed in subdivision (1) of this subsection.
(3)	The sales and use taxes paid in this State on the listed items.
(4)	The number of miles the applicant's motor vehicles, railroad cars, locomotives, and airplanes were operated both inside and outside this State during the refund period.
(5)	Any other information required by the Secretary.
For each applicant, the Secretary shall compute the amount to be refunded as follows. First, the Secretary shall determine the ratio of the number of miles the applicant operated its motor vehicles, railroad cars, locomotives, and airplanes in this State during the refund period to the number of miles it operated them both inside and outside this State during the refund period. Second, the Secretary shall determine the applicant's proportional liability for the refund period by multiplying this mileage ratio by the purchase price of the items identified in subdivision (1) of this subsection and then multiplying the resulting product by the tax rate that would have applied to the items if they had all been purchased in this State. Third, the Secretary shall refund to each applicant the excess of the amount of sales and use taxes the applicant paid in this State during the refund period on these items over the applicant's proportional liability for the refund period."
SECTION 32.1.(h)  G.S. 105‑164.28 reads as rewritten:
"§ 105‑164.28.  Certificate of resale.
(a)	Seller's Responsibility. – A seller who accepts a certificate of resale from a purchaser of tangible personal property has the burden of proving that the sale was not a retail sale unless all of the following conditions are met:
(1)	For a sale made in person, the certificate is signed by the purchaser and states the purchaser's name, address, registration number, and type of business.
(2)	For a sale made in person, the tangible personal property sold is typically used in the type of business stated on the certificate.
(3)	For a sale made over the Internet or by other remote means, the sales tax registration number given by the purchaser matches the number on the Department's registry.
(b)	Purchaser's Liability. – A purchaser who does not resell property purchased under a certificate of resale is liable for any tax subsequently determined to be due on the sale. "
SECTION 32.1.(i)  Part 4 of Article 5 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑164.15A.  Effective date of rate changes for services.
The effective date of a rate change for a service taxable under this Article is administered as follows:
(1)	For a rate increase, the new rate applies to the first billing period that starts on or after the effective date.
(2)	For a rate decrease, the new rate applies to bills rendered on or after the effective date."
SECTION 32.1.(j)  Part 7A of Article 5 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑164.42K.  Registration and effect of registration.
Registration under the Agreement satisfies the registration requirements under this Article. A seller who registers under the Agreement within 12 months after the State becomes a member of the Agreement and who meets the following conditions is not subject to assessment for sales tax for any period before the effective date of the seller's registration:
(1)	The seller was not registered with the State during the 12‑month period before the effective date of this State's participation in the Agreement.
(2)	When the seller registered, the seller had not received a letter from the Department notifying the seller of an audit.
(3)	The seller continues to be registered under the Agreement and to remit tax to the State for at least 36 months."    
SECTION 32.1.(k)  Article 5F of Chapter 105 of the General Statutes is amended by adding new sections to read:
"§ 105‑187.51A.  Tax imposed on manufacturing fuel.
A privilege tax is imposed on a manufacturing industry or plant that purchases fuel to operate the industry or plant. The tax is one percent (1%) of the sales price of the fuel. The tax does not apply to electricity.
"§ 105‑187.51B.  Tax imposed on recycling equipment.
(a)	Tax. – A privilege tax is imposed on a major recycling facility that purchases any of the following tangible personal property for use in connection with the facility:
(1)	Cranes, structural steel crane support systems, and foundations related to the cranes and support systems.
(2)	Port and dock facilities.
(3)	Rail equipment.
(4)	Material handling equipment.
(b)	Rate. – The tax is one percent (1%) of the sales price of the tangible personal property. The maximum tax is eighty dollars ($80.00) per article."
SECTION 32.1.(l)  G.S. 105‑187.52 reads as rewritten:
"§ 105‑187.52.  Administration.
The privilege taxes imposed by this Article are in addition to the State use tax. Except as otherwise provided in this Article, the collection and administration of these taxes is the same as the State use tax imposed by Article 5 of this Chapter."
SECTION 32.1.(m)  Section 18 of S.L. 2000‑120, as amended by Section 44.1 of S.L. 2003‑284, 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, 2010. The remainder of this act is effective when it becomes law."
SECTION 32.1.(n)  G.S. 105‑151.21(b) reads as rewritten:
"(b)	Definitions. – The following definitions apply in this section:
(1)	Farm machinery. – Machinery exempt from State sales tax under G.S. 105‑164.13(4e).
(2)	Property taxes. – The principal amount of taxes levied and assessed by a taxing unit under Subchapter II of this Chapter. The term does not include costs, penalties, interest, or other charges that may be added to the principal amount.
(3)	Taxing unit. – Defined in G.S. 105‑273."
SECTION 32.1.(o)  G.S. 105‑164.44F(a) reads as rewritten:
"(a)	Amount. – The Secretary must distribute to the cities part of the taxes imposed by G.S. 105‑164.4(a) (4c) on telecommunications service. The Secretary must make the distribution within 75 days after the end of each calendar quarter. The amount the Secretary must distribute is eighteen and three one‑hundredths percent (18.03%) of the net proceeds of the taxes collected during the quarter, minus two million six hundred twenty thousand nine hundred forty‑eight dollars ($2,620,948). This deduction is one‑fourth of the annual amount by which the distribution to cities of the gross receipts franchise tax on telephone companies, imposed by former G.S. 105‑120, was required to be reduced beginning in fiscal year 1995‑96 as a result of the 'freeze deduction.' The Secretary must distribute the specified percentage of the proceeds, less the 'freeze deduction' among the cities in accordance with this section."
SECTION 32.1.(p)  G.S. 105‑164.6 reads as rewritten:
"§ 105‑164.6.  Complementary use tax.
(a)	Tax. – An excise tax at the applicable rate set in G.S. 105‑164.4 is imposed on the items listed below. The applicable rate is the rate and maximum tax, if any, that would apply to the sale of the item.
(1)	Tangible personal property purchased inside or outside this State for storage, use, or consumption in this State. This subdivision includes property that becomes part of a building or another structure.
(2)	Tangible personal property leased or rented inside or outside this State for storage, use, or consumption in this State.
(3)	Services sourced to this State.
(b)	Liability. – The tax imposed by this section is payable by the person who purchases, leases, or rents tangible personal property or who purchases a service. If the property purchased becomes a part of a building or other structure in the State and the purchaser is a contractor or subcontractor, the contractor, the subcontractor, and the owner of the building are jointly and severally liable for the tax. The liability of a contractor, a subcontractor, or an owner who did not purchase the property is satisfied by receipt of an affidavit from the purchaser certifying that the tax has been paid.
(c)	Credit. – A credit is allowed against the tax imposed by this section for the following: 
(1)	The amount of sales or use tax paid on the item to this State. Payment of sales or use tax to this State on an item by a retailer extinguishes the liability of a purchaser for the tax imposed under this section.
(2)	The amount of sales tax paid on the item to another State. If the amount of tax paid to the other state is less than the amount of tax imposed by this section, the difference is payable to this State. The credit allowed by this subdivision does not apply to tax paid to a state that does not grant a similar credit for sales or use taxes paid in North Carolina.

(f)	Registration. – Before a person may engage in business in this State selling or delivering tangible personal property for storage, use, or consumption in this State, the person must obtain a certificate of registration from the Department. To obtain a certificate of registration, a person must register with the Department.
The holder of the certificate of registration must pay the tax levied under this Article. A certificate of registration is valid unless it is revoked for failure to comply with the provisions of this Article or becomes void. A certificate issued to a retailer becomes void if, for a period of 18 months, the retailer files no returns or files returns showing no sales."
SECTION 32.1.(q)  G.S. 105‑164.13B(a) reads as rewritten:
"(a)	State Exemption. – Food is exempt from the taxes imposed by this Article unless the food is included in one of the subdivisions in this subsection. The following food items are subject to tax:
	
(2)	Dietary supplements.
(3)	Food sold through a vending machine.
(4)	Prepared food.
(5)	Soft drinks."
SECTION 32.1.(r)  G.S. 105‑164.42B(1) reads as rewritten:
"§ 105‑164.42B.  Definitions.
The following definitions apply in this Part:
(1)	Agreement. – Streamlined Agreement, as defined in G.S. 105‑164.3.
…."
SECTION 32.1.(s)  Subdivision (b)(5) of Section 5 of Part IV of Chapter 908 of the 1983 Session Laws, as amended by Chapter 821 of the 1989 Session Laws and S.L. 2001‑347, reads as rewritten:
"(b)	Definitions. The definitions in G.S. 105‑164.3 apply to this Part insofar as they are not inconsistent with the provisions of this Part. In addition, the following definitions apply in this Part:
…
(5)	Prepared Food and Beverages. – The term includes the following:
a.	Prepared food, as defined in G.S. 105‑164.3.
b.	An alcoholic beverage, as defined in G.S. 18B‑101, that meets at least one of the conditions of prepared food under G.S. 105‑164.3."
SECTION 32.1.(t)  Subdivision (a)(2) of Section 2 of Chapter 413 of the 1993 Session Laws, as amended by S.L. 2001‑347, reads as rewritten:
"Sec. 2. Definitions; Sales and Use Tax Statutes. – (a) The definitions in G.S. 105‑164.3 apply to this act to the extent they are not inconsistent with the provisions of this act. In addition, the following definitions apply in this act:
…
(2)	Prepared food and beverages. – The term includes the following:
a.	Prepared food, as defined in G.S. 105‑164.3.
b.	An alcoholic beverage, as defined in G.S. 18B‑101, that meets at least one of the conditions of prepared food under G.S. 105‑164.3."
SECTION 32.1.(u)  Section 2 of Chapter 449 of the 1985 Session Laws, as amended by Chapter 826 of the 1985 Session Laws, Chapter 177 of the 1991 Session Laws, and S.L. 2001‑347, reads as rewritten:
"Sec. 2. Definitions. The definitions in G.S. 105‑164.3 apply in this act. In addition, the following definitions apply in this act.
(1)	Net proceeds. – Gross proceeds less the cost to the county of administering and collecting the tax.
(2)	Prepared food and beverages. – The term includes the following:
a.	Prepared food, as defined in G.S. 105‑164.3.
b.	An alcoholic beverage, as defined in G.S. 18B‑101, that meets at least one of the conditions of prepared food under G.S. 105‑164.3."
SECTION 32.1.(v)  Subsection (b) of Section 1 of Chapter 449 of the 1993 Session Laws, as amended by S.L. 2001‑347, reads as rewritten:
"(b)	Definitions; Sales and Use Tax Statutes. – The definitions in G.S. 105‑164.3 apply to this section to the extent they are not inconsistent with the provisions of this section. The provisions of Article 5 and Article 9 of Chapter 105 of the General Statutes apply to this section to the extent they are not inconsistent with the provisions of this section.  For the purposes of this section, the term 'prepared food and beverages' includes the following:
(1)	Prepared food, as defined in G.S. 105‑164.3.
(2)	An alcoholic beverage, as defined in G.S. 18B‑101, that meets at least one of the conditions of prepared food under G.S. 105‑164.3. 
"
SECTION 32.1.(w)  Subdivision (3) of Section 2 of Chapter 594 of the 1991 Session Laws, as amended by S.L. 2001‑347, reads as rewritten:
"Sec. 2. Definitions. The definitions in G.S. 105‑164.3 apply to this act to the extent they are not inconsistent with the provisions of this act. The following definitions also apply in this act:
…
(3)	Prepared food and beverage. – The term includes the following:
a.	Prepared food, as defined in G.S. 105‑164.3.
b.	An alcoholic beverage, as defined in G.S. 18B‑101, that meets at least one of the conditions of prepared food under G.S. 105‑164.3."
SECTION 32.1.(x)  Section 3.1 of S.L. 2001‑347, as amended by Section 13 of S.L. 2003‑416, reads as rewritten:
"SECTION 3.1. Part 1 of this act is effective when it becomes law."
SECTION 32.1.(y)  Section 3.2 of S.L. 2001‑347 reads as rewritten:
"SECTION 3.2. Section 2.8, G.S. 105‑164.13(5a), as enacted by Section 2.12, and Section 2.17 of Part 2 of this act become effective October 1, 2005. The remainder of Part 2 of this act becomes effective January 1, 2002."
SECTION 32.1.(z)  This subsection and subsection (m) of this section are effective when they become law.  Subsection (a) of this section, the changes made by subsection (b) of this section to G.S. 105‑164.3(4a) and (45a), the changes made by subsection (c) of this section to G.S. 105‑164.4(a)(4c) and (6), and subsection (i) of this section become effective July 1, 2005.  The remainder of this section becomes effective October 1, 2005.  Subsection (o) of this section applies to distributions for calendar quarters that begin on or after October 1, 2005.

PART XXXIII. Sales tax changes

Requested by:	Senators Hoyle, Kerr
Sales Tax Changes
SECTION 33.1.(a)  Section 34.13(c) of S.L. 2001‑424, as amended by Section 38.1 of S.L. 2003‑284, 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 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."
SECTION 33.1.(b)  G.S. 105‑164.3 is amended by adding new subdivisions to read:
"(1a)	Cable service. – The one‑way transmission to subscribers of video programming or another programming service and any subscriber interaction required to select or use the service.
…
(37a)	Satellite digital audio radio service. – A radio communication service in which audio programming is digitally transmitted by satellite to an earth‑based receiver, whether directly or via a repeater station."
SECTION 33.1.(c)  G.S. 105‑164.4(a), as amended by subsection (a) of this section and subsection (c) of Section 32.1 of this act, reads as rewritten:
"(a)	A privilege tax is imposed on a retailer at the following percentage rates of the retailer's net taxable sales or gross receipts, as appropriate. The general rate of tax is four and one‑half percent (4 1/2%).
…
(6)	The combined general rate applies to the gross receipts derived from providing any of the following broadcast services to a subscriber in this State. A person engaged in the business of providing any of these services is considered a retailer under this Article:
a.	Direct‑to‑home satellite service.
b.	Cable service. 
c.	Satellite digital audio radio service. For service received by a mobile or portable station, the service is sourced to the subscriber's business or home address.
…
(9)	The general rate of tax applies to the sales price of a warranty agreement, a maintenance agreement, a repair contract, or a similar service agreement or contract by which the seller agrees to maintain or repair tangible personal property. A person who sells a service agreement or contract is considered a retailer under this Article."
SECTION 33.1.(d)  G.S. 105‑164.4C(b)(2) reads as rewritten:
"(2)	Charges for directory assistance, directory listing that is not yellow‑page classified listing, call forwarding, call waiting, three‑way calling, caller ID, voice mail, and other similar services."
SECTION 33.1.(e)  G.S. 105‑164.4C(c)(11) is repealed.
SECTION 33.1.(f)  G.S. 105‑164.13(1), as amended by Section 32.1(c) of this act, reads as rewritten:
"(1)	Any of the following items sold to a farmer for use by the farmer in the planting, cultivating, harvesting, or curing of farm crops or in the production of dairy products, eggs, or animals. A 'farmer' includes a dairy operator, a poultry farmer, an egg producer, a livestock farmer, a farmer of crops, and a farmer of an aquatic species, as defined in G.S. 106‑758.
a.	Commercial fertilizer, lime, land plaster, plastic mulch, plant bed covers, potting soil, and seeds.
b.	Farm machinery, attachment and repair parts for farm machinery, and lubricants applied to farm machinery. The term 'machinery' includes implements that have moving parts or are operated or drawn by an animal. The term does not include implements operated wholly by hand or motor vehicles required to be registered under Chapter 20 of the General Statutes.
c.	A horse or mule.
d.	Fuel other than electricity."
SECTION 33.1.(g)  G.S. 105‑164.13B(a) reads as rewritten:
"(a)	State Exemption. – Food is exempt from the taxes imposed by this Article unless the food is included in one of the subdivisions in this subsection. The following food items are subject to tax:
(1)	Alcoholic beverages, as defined in G.S. 105‑113.68.
(2)	Dietary supplements.
(3)	Food sold through a vending machine.
(4)	Prepared food.
(5)	Soft drinks.
(6)	Repealed.
(7)	Candy."
SECTION 33.1.(h)  Part 4 of Article 5 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑164.21B.  Credit for local cable television franchise taxes.
A cable service retailer is allowed a credit against the tax imposed by this Article on cable service. The credit is for local cable television franchise taxes the retailer pays to a city under G.S. 160A‑214 or to a county under G.S. 153A‑154 based on the amount it receives from subscribers for cable service. The amount received from subscribers for cable service does not include receipts from the lease or rental of tangible personal property.
When making a payment or filing a return under G.S. 105‑164.16, a cable service retailer may claim a credit for the applicable pro rata amount of local cable television franchise taxes for which this section allows a credit. The applicable pro rata amount is the creditable amount of local cable television franchise taxes the retailer paid for the most recent fiscal year divided by the number of sales tax payments the retailer is required to make under this Article."
SECTION 33.1.(i)  G.S. 105‑467(a) is amended by adding a new subdivision to read:
"(a)	Sales Tax. – The sales tax that may be imposed under this Article is limited to a tax at the rate of one percent (1%) of the transactions listed in this subsection. The sales tax authorized by this Article does not apply to sales that are taxable by the State under G.S. 105‑164.4 but are not specifically included in this subsection.
…
(7)	The sales price of a service agreement or contract subject to the general rate of tax under G.S. 105‑164.4(a)(9)."
SECTION 33.1.(j)  Subsections (a) and (j) of this section are effective when they become law.  The remainder of this section becomes effective October 1, 2005.

PART XXXIV. Tobacco tax rate changes

Requested by:	Senators Hoyle, Kerr
Tobacco Tax Rate Changes
SECTION 34.1.(a)  G.S. 105‑113.5 reads as rewritten:
"§ 105‑113.5.  Tax on cigarettes.
A tax is levied on the sale or possession for sale in this State, by a distributor, of all cigarettes at the rate of two  cents (2¢) per individual cigarette."
SECTION 34.1.(b)  G.S. 105‑113.35(a) reads as rewritten:
"(a)	Tax. – An excise tax is levied on tobacco products other than cigarettes at the rate of  four percent (4%) of the cost price of the products. This tax does not apply to the following:
(1)	A tobacco product sold outside the State.
(2)	A tobacco product sold to the federal government.
(3)	A sample tobacco product distributed without charge."
SECTION 34.1.(c)  G.S. 105‑113.21(a1) reads as rewritten:
"(a1)	Discount. – A distributor who files a timely report under G.S. 105‑113.18 and who sends a timely payment may deduct from the amount due with the report a discount of two percent (2%). The discount a distributor deducts on all reports filed under this Part for a 12‑month period beginning July 1 may not exceed a maximum of one hundred twenty‑five thousand dollars ($125,000). This discount covers expenses incurred in preparing the records and reports required by this Part, and the expense of furnishing a bond."
SECTION 34.1.(d)  G.S. 105-113.39 reads as rewritten:
"§ 105‑113.39.  Discount.
A wholesale dealer or a retail dealer who is primarily liable under G.S. 105‑113.35(b) for the excise taxes imposed by this Part, who files a timely report under G.S. 105‑113.37, and who sends a timely payment may deduct from the amount due with the report a discount of two percent (2%). The discount a distributor deducts on all reports filed under this Part for a 12-month period beginning July 1 may not exceed a maximum of twelve thousand five hundred dollars ($12,500).  This discount covers losses due to damage to tobacco products, expenses incurred in preparing the records and reports required by this Part, and the expense of furnishing a bond."
SECTION 34.1.(e)  This section becomes effective July 1, 2005.

PART XXXV. irc update

Requested by:	Senators Jenkins
IRC Update
SECTION 35.1.(a)  G.S. 105‑228.90(b)(1b) reads as rewritten:
"(b)	Definitions. – The following definitions apply in this Article:
…
(1b)	Code. – The Internal Revenue Code as enacted as of January 1, 2005, including any provisions enacted as of that date which become effective either before or after that date, but not including the amendments made to section 164 of the Code by section 501 of P.L. 108‑357."
SECTION 35.1.(b)  G.S. 105‑130.5(a) reads as rewritten:
"(a)	The following additions to federal taxable income shall be made in determining State net income:
…
(16)	The amount excluded from gross income under Subchapter R of Chapter 1 of the Code.
(17)	The amount excluded from gross income under section 199 of the Code."
SECTION 35.1.(c)  Notwithstanding subsection (a) of this section, any amendments to the Internal Revenue Code enacted after May 1, 2004, that increase North Carolina taxable income for the 2004 taxable year become effective for taxable years beginning on or after January 1, 2005.
SECTION 35.1.(d)  G.S. 105‑228.90(b)(1b), as amended by subsection (a) of this section, reads as rewritten:
"(b)	Definitions. – The following definitions apply in this Article:
…
(1b)	Code. – The Internal Revenue Code as enacted as of January 1, 2005, including any provisions enacted as of that date which become effective either before or after that date."
SECTION 35.1.(e)  G.S. 105‑134.6(c) reads as rewritten:
"(c)	Additions. – The following additions to taxable income shall be made in calculating North Carolina taxable income, to the extent each item is not included in taxable income:
…
(3)	Any amount deducted from gross income under section 164 of the Code as state, local, or foreign income tax or as state or local general sales tax to the extent that the taxpayer's total itemized deductions deducted under the Code for the taxable year exceed the standard deduction allowable to the taxpayer under the Code reduced by the amount the taxpayer is required to add to taxable income under subdivision (4) of this subsection.
…."
SECTION 35.1.(f)  Notwithstanding any other provision of law, a taxpayer whose federal taxable income for 2004 is reduced due to a charitable contribution of cash made in January 2005 for Indian Ocean tsunami relief efforts in accordance with P.L. 109‑1 is not required to add back the amount of the deduction related to that contribution in determining North Carolina taxable income for 2004.
SECTION 35.1.(g)  Subsections (d) and (e) of this section become effective for taxable years beginning on or after January 1, 2005.  The remainder of this section is effective when it becomes law.

PART XXXVI. individual income tax changes

Requested by:	Senators Hoyle, Kerr
Phase‑Out 8.25% Individual Income Tax Rate
SECTION 36.1.(a)  Section 39.1 of S.L. 2003‑284 is repealed. 
SECTION 36.1.(b)  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	$200,000	7.75%
	$200,000	NA	8%

(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	$160,000	7.75%
	$160,000	NA	8%

(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	$120,000	7.75%
	$120,000	NA	8%

(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	$100,000	7.75%
	$100,000	NA	8%".
SECTION 36.1.(c)  Effective for taxable years beginning on or after January 1, 2007, G.S. 105‑134.2(a), as amended by this section, 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 36.1(d).  Except as otherwise provided, this section is effective when it becomes law.

PART XXXVII. conform estate tax to federal sunset

Requested by:	Senators Hoyle, Kerr
Conform Estate Tax to Federal Sunset
SECTION 37.1.(a)  Section 30C.3(b) of S.L. 2002‑126, as amended by Section 37A.4 of S.L. 2003‑284 and Section 1 of S.L. 2004‑170, reads as rewritten:
"SECTION 30C.3.(b)  This section is effective on and after January 1, 2002, and applies to the estates of decedents dying on or after that date. "
SECTION 37.1.(b)  This section is effective when it becomes law.

PART XXXVIII. corporate income tax changes

Requested by:	Senators Hoyle, Kerr
Corporate Income Tax Reduction
SECTION 38.1.(a)  G.S. 105‑130.3 reads as rewritten:
"§ 105‑130.3.  Corporations.
A tax is imposed on the State net income of every C Corporation doing business in this State. An S Corporation is not subject to the tax levied in this section. The tax is six and four‑tenths percent (6.4%) of the taxpayer's State net 					income."
SECTION 38.1.(b)  G.S. 115C‑546.1, as amended by Section 7.26 of this act, reads as rewritten:
"§ 115C‑546.1.  Creation of Fund; administration.
(a)	There is created the Public School Building Capital and Technology Fund. The Fund shall be used to assist county governments in meeting their public school building capital needs and their equipment needs under their local school technology plans.
(b)	All funds deposited in the Public School Building Capital and Technology Fund shall be invested as provided in G.S. 147‑69.2 and G.S. 147‑69.3.
					
(c)	The Fund shall be administered by the Department of Public Instruction."
SECTION 38.1.(c)  This section is effective for taxable years beginning on or after January 1, 2007.

Requested by:	Senators Hoyle, Kerr
Corporate Throwout Rule and Outer Jurisdictional Property
SECTION 38.2.(a)  G.S. 105‑130.4(a) is amended by adding a new subdivision to read:
"(a)	As used in this section, unless the context otherwise requires:
…
(5b)	'Outer‑jurisdictional property' means tangible personal property that is not physically located in any state. The term includes orbiting satellites and undersea transmission cables."
SECTION 38.2.(b)  G.S. 105‑130.4(j)(1) reads as rewritten:
"(1)	The property factor is a fraction, the numerator of which is the average value of the corporation's real and tangible personal property owned or rented and used in this State during the income year and the denominator of which is the average value of all the corporation's real and tangible personal property owned or rented and used during the income year. Neither the numerator nor the denominator includes outer‑jurisdictional property."
SECTION 38.2.(c)  G.S. 105‑130.4(l) reads as rewritten:
"(l)	(1)	The sales factor is a fraction. The numerator of the fraction is the total sales of the corporation in this State during the income year, and the denominator of the fraction is the sum of sales to the United States government and sales other than those attributable to the United States government that are attributable to a state in which the taxpayer is taxable during the income year. Notwithstanding any other provision under this Part, the receipts from any casual sale of property shall be excluded from both the numerator and the denominator of the sales factor. Where a corporation is not taxable in another state on its apportionable income but is taxable in another state only because of nonapportionable income, all sales shall be treated as having been made in this State.
(2)	Sales of tangible personal property are in this State if the property is received in this State by the purchaser. In the case of delivery of goods by common carrier or by other means of transportation, including transportation by the purchaser, the place at which the goods are ultimately received after all transportation has been completed shall be considered as the place at which the goods are received by the purchaser. Direct delivery into this State by the taxpayer to a person or firm designated by a purchaser from within or without the State shall constitute delivery to the purchaser in this State.
(3)	Other sales are in this State if:
a.	The receipts are from real or tangible personal property located in this State; or
b.	The receipts are from intangible property and are received from sources within this State; or
c.	The receipts are from services and the income‑producing activities are in this State."
SECTION 38.2(d).  This section is effective for taxable years beginning on or after January 1, 2005.

PART XXXIX. film industry jobs incentives

Requested by:	Senators Boseman, Hoyle
Film Industry Jobs Incentives
SECTION 39.1.(a)  Part 1 of Article 4 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑130.47.  Credit for qualifying expenses of a production company.
(a)	Definitions. – The following definitions apply in this section:
(1)	Highly compensated individual. – An individual who receives compensation in excess of one million dollars ($1,000,000) with respect to a single production.
(2)	Qualifying expenses. – The sum of the total amount spent in this State for the following by a production company in connection with a production:
a.	Goods and services purchased by the production company.
b.	Compensation and wages paid by the production company, other than amounts paid to a highly compensated individual, on which the production company remitted withholding payments to the Department of Revenue under Article 4A of this Chapter.
(3)	Production company. – Defined in G.S. 105‑164.3.
(b)	Credit. – A taxpayer that is a production company and has qualifying expenses of at least one million dollars ($1,000,000) with respect to a production is allowed a credit against the taxes imposed by this Part equal to fifteen percent (15%) of the production company's qualifying expenses that have been certified as required in subsection (c) of this section. For the purposes of this section, in the case of an episodic television series, an entire season of episodes is one production. The credit is computed based on all of the taxpayer's qualifying expenses incurred with respect to the production, not just the qualifying expenses incurred during the taxable year.
(c)	Certification. – In order to be eligible for a credit under this section, a taxpayer must submit a detailed accounting of its qualifying expenses to the North Carolina Film Office of the Department of Commerce. The North Carolina Film Office, with the assistance of the regional film commission for the location of the production, must make a written certification of the amount of the qualifying expenses.
(d)	Pass‑Through Entity. – 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 does not distribute the credit among any of its owners. The pass‑through entity is considered the taxpayer for purposes of claiming the credit allowed by this section. If a return filed by a pass‑through entity indicates that the entity is paying tax on behalf of the owners of the entity, the credit allowed under this section does not affect the entity's payment of tax on behalf of its owners.
(e)	Return. – A taxpayer may claim the credit allowed by this section on a return filed for the taxable year in which the production activities are completed. The return must state the name of the production, a description of the production, and the certification from the North Carolina Film Office of the qualifying expenses for which the credit is claimed.
(f)	Credit Refundable. – If the credit allowed by this section exceeds the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowable, the Secretary must refund the excess to the taxpayer. The refundable excess is governed by the provisions governing a refund of an overpayment by the taxpayer of the tax imposed in this Part. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before refundable credits.
(g)	Limitation. – No credit is allowed under this section for any production that satisfies one of the following conditions:
(1)	It is commercial or political advertising.
(2)	It is a television production of a news program or sporting event.
(3)	It contains material that is obscene, as defined in G.S. 14‑190.1.
(h)	Substantiation. – A taxpayer allowed a credit under this section must maintain and make available for inspection any information or records required by the Secretary of Revenue or the regional film commissions. The taxpayer has the burden of proving eligibility for a credit and the amount of the credit.
(i)	Report. – The Department of Revenue must publish by May 1 of each year the following information, itemized by taxpayer for the 12‑month period ending the preceding April 1:
(1)	The location of sites used in a production for which a credit was claimed.
(2)	The qualifying expenses for which a credit was claimed, classified by whether the expenses were for goods, services, or compensation paid by the production company.
(3)	The number of people employed in the State with respect to credits claimed.
(4)	The total cost to the General Fund of the credits claimed.
(j)	Sunset. – This section is repealed for qualifying expenses occurring on or after January 1, 2010."
SECTION 39.1.(b)  Part 2 of Article 4 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑151.29.  Credit for qualifying expenses of a production company.
(a)	Definitions. – The following definitions apply in this section:
(1)	Highly compensated individual. – An individual who receives compensation in excess of one million dollars ($1,000,000) with respect to a single production.
(2)	Qualifying expenses. – The sum of the total amount spent in this State for the following by a production company in connection with a production:
a.	Goods and services purchased by the production company.
b.	Compensation and wages paid by the production company, other than amounts paid to a highly compensated individual, on which the production company remitted withholding payments to the Department of Revenue under Article 4A of this Chapter.
(3)	Production company. – Defined in G.S. 105‑164.3.
(b)	Credit. – A taxpayer that is a production company and has qualifying expenses of at least one million dollars ($1,000,000) with respect to a production is allowed a credit against the taxes imposed by this Part equal to fifteen percent (15%) of the production company's qualifying expenses that have been certified as required in subsection (c) of this section. For the purposes of this section, in the case of an episodic television series, an entire season of episodes is one production. The credit is computed based on all of the taxpayer's qualifying expenses incurred with respect to the production, not just the qualifying expenses incurred during the taxable year.
(c)	Certification. – In order to be eligible for a credit under this section, a taxpayer must submit a detailed accounting of its qualifying expenses to the North Carolina Film Office of the Department of Commerce. The North Carolina Film Office, with the assistance of the regional film commission for the location of the production, must make a written certification of the amount of the qualifying expenses.
(d)	Pass‑Through Entity. – 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 does not distribute the credit among any of its owners. The pass‑through entity is considered the taxpayer for purposes of claiming the credit allowed by this section. If a return filed by a pass‑through entity indicates that the entity is paying tax on behalf of the owners of the entity, the credit allowed under this section does not affect the entity's payment of tax on behalf of its owners.
(e)	Return. – A taxpayer may claim the credit allowed by this section on a return filed for the taxable year in which the production activities are completed. The return must state the name of the production, a description of the production, and the certification from the North Carolina Film Office of the qualifying expenses for which the credit is claimed.
(f)	Credit Refundable. – If the credit allowed by this section exceeds the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowable, the Secretary must refund the excess to the taxpayer. The refundable excess is governed by the provisions governing a refund of an overpayment by the taxpayer of the tax imposed in this Part. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before refundable credits.
(g)	Limitation. – No credit is allowed under this section for any production that satisfies one of the following conditions:
(1)	It is commercial or political advertising.
(2)	It is a television production of a news program or sporting event.
(3)	It contains material that is obscene, as defined in G.S. 14‑190.1.
(h)	Substantiation. – A taxpayer allowed a credit under this section must maintain and make available for inspection any information or records required by the Secretary of Revenue or the regional film commissions. The taxpayer has the burden of proving eligibility for a credit and the amount of the credit.
(i)	Report. – The Department of Revenue must publish by May 1 of each year the following information, itemized by taxpayer for the 12‑month period ending the preceding April 1:
(1)	The location of sites used in a production for which a credit was claimed.
(2)	The qualifying expenses for which a credit was claimed, classified by whether the expenses were for goods, services, or compensation paid by the production company.
(3)	The number of people employed in the State with respect to credits claimed.
(4)	The total cost to the General Fund of the credits claimed.
(j)	Sunset. – This section is repealed for qualifying expenses occurring on or after January 1, 2010."
SECTION 39.1.(c)  G.S. 105‑259(b), as amended by Section 30.1 of this act, is amended by adding a new subdivision to read:
"(b)	Disclosure Prohibited. – An officer, an employee, or an agent of the State who has access to tax information in the course of service to or employment by the State may not disclose the information to any other person unless the disclosure is made for one of the following purposes:
…
(33)	To exchange information concerning a tax credit claimed under G.S. 105‑130.47 or G.S. 105‑151.29 with the North Carolina Film Office of the Department of Commerce and with the regional film commissions."
SECTION 39.1.(d)  G.S. 143B‑434.4 is repealed.
SECTION 39.1.(e)  This section is effective for taxable years beginning on or after January 1, 2005.

PART XL. set rates for insurance regulatory charge and public utilities fees

Requested by:	Senators Hoyle, Kerr
Insurance regulatory charge
SECTION 40.1.(a)  The percentage rate to be used in calculating the insurance regulatory charge under G.S. 58‑6‑25 is five and one‑half percent (5.5%) for the 2005 calendar year.
SECTION 40.1.(b)  This section is effective when it becomes law.

Requested by:	Senators Hoyle, Kerr
regulatory fee for utilities commission
SECTION 40.2.(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 one percent (0.12%) for each public utility's North Carolina jurisdictional revenues earned during each quarter that begins on or after July 1, 2005.
SECTION 40.2.(b)  The electric membership corporation regulatory fee imposed under G.S. 62‑302(b1) for the 2005‑2006 fiscal year is two hundred thousand dollars ($200,000).
SECTION 40.2.(c)  This section becomes effective July 1, 2005.

PART XLI. health and human services fees

Requested by:	Senators Hoyle, Kerr
Newborn Screening Fee
SECTION 41.1.  G.S. 130A‑125(c) reads as rewritten:
"(c)	A fee of fourteen dollars ($14.00) applies to a laboratory test performed by the State Public Health Laboratory performed pursuant to this section. Fees collected shall remain in the Department to be used to offset the cost of the Newborn Screening Program."

PART XLII. natural and economic resources fees

Requested by:	Senators Weinstein, Hoyle, Kerr
Increase Various Fees
SECTION 42.1.(a)  G.S. 106‑284.34(c) reads as rewritten:
"(c)	No person shall distribute in this State a commercial feed, except a customer‑formula feed, which has not been registered pursuant to the provisions of this section. The application for registration shall be submitted in the manner prescribed by the Commissioner. Upon approval by the Commissioner or his duly designated agent the registration shall be issued to the applicant. All registrations expire on the thirty‑first day of December of each year. An annual registration fee of five dollars ($5.00) for each commercial feed other than canned pet food shall accompany each request for registration. An annual registration fee of twelve dollars ($12.00) for each canned pet food shall accompany each request for registration."
SECTION 42.1.(b)  G.S. 106‑284.40(b)(4) reads as rewritten:
"(4)	In the case of a commercial feed other than canned pet food which is distributed in the State only in packages of five pounds or less, an annual registration fee of forty dollars ($40.00) shall be paid in lieu of the inspection fee specified above."
SECTION 42.1.(c)  G.S. 106‑277.28(3) reads as rewritten:
"(3)	Each seed dealer or grower who has seed, whether originated or labeled by the dealer or grower, that is offered for sale in this State shall report the quantity of seed offered for sale and pay an inspection fee of four cents (4¢) for each container of seeds weighing 10 pounds or more. Seed shall be subject to the inspection fee and reporting requirements only once in any 12‑month period. This fee does not apply to seed grown by a farmer and offered for sale by the farmer at the farm where the seed was grown."
SECTION 42.1.(d)  The Board of Agriculture shall charge the following fees for agronomic services:
Test/Service	Fee
(1)	Routine nematode samples	$	3.00
(2)	Routine waste samples	$	5.00
(3)	Research soil and nematode samples	$12.00
(4)	Research plant, waste, and solution samples	$12.00
(5)	Nonresident nematode samples	$14.00
(6)	Nonresident plant, waste, and solution samples	$26.00
(7)	Special services for plant, waste, and solution samples:
a.	Heavy metals‑soils	$25.00
b.	Nitrates‑soils	$	5.00
c.	Waste‑heavy metals	$10.00
d.	Waste‑N breakout	$10.00
e.	Waste‑liming equivalent	$10.00
f.	Plant‑chloride	$	5.00
g.	Plant‑molybdenum	$	5.00
h.	Plant‑petiole nitrates	$	5.00
SECTION 42.1.(e)  The Board of Agriculture shall charge the following fees for animal disease diagnostic tests and services:
Test/Service	Fee
(1)	Histopath	$30.00
(2)	Professional services‑EIA	$	6.00
(3)	Professional services‑blood pour‑off fees	$	1.00
(4)	Vacuum tube handling fee	$	0.04
SECTION 42.1.(f)  G.S. 81A‑52 reads as rewritten:
"§ 81A‑52.  License.
All public weighmasters shall be licensed. Any person not less than 18 years of age who wishes to be a public weighmaster shall apply to the Department on a form provided by the Department. The Board may adopt rules for determining the qualifications of the applicant for a license. Public weighmasters shall be licensed for a period of one year beginning the first day of July and ending on the thirtieth day of June, and a fee of nineteen dollars ($19.00) shall be paid for each person licensed at the time of the filing of the application."
SECTION 42.1.(g)  G.S. 81A‑72 reads as rewritten:
"§ 81A‑72.  Registration; certificate of registration; annual renewal.
The Commissioner or his authorized agent shall register any person who has complied with the requirements of this Article by making a record of receipt of application, and the issuing of a certificate or card of registration to applicant, whereupon the applicant becomes a registered scale technician and shall be known thereafter as such. Such registration shall be in effect from date of registration until July 1 next and shall be renewed on the first day of July of each year thereafter. A fee of twenty dollars ($20.00) shall accompany each application for registration and each annual registration renewal."
SECTION 42.1.(h)  G.S. 81A‑11 is repealed.
SECTION 42.1.(i)  Chapter 81A of the General Statutes is amended by adding the following new section to read:"§ 81A‑12.  Fee schedule.
(a)	The following fees apply to all weights that are tested and certified to meet tolerances less stringent than the American Society for Testing and Materials (ASTM) Standard E617 Class 4. This includes the National Institutes of Standards and Technology (NIST) Class F tolerance. If the weight error exceeds three‑fourths of the applicable tolerance, adjustment may be required at an additional fee equal to the normal fee. No extra fee shall be charged for the normal adjustment of a weight cart. Even if weights are rejected or condemned, fees shall be assessed for the test performed.
Customary	Fee/Unit	Metric	Fee/Unit
0‑10 lb	$	5.00	0‑5 kg	$	5.00
11‑100 lb	$	10.00	6‑50 kg	$	10.00
101‑1000 lb	$	20.00	51‑500 kg	$	20.00
1001‑2500 lb	$	30.00	501‑1000 kg	$	30.00
2501‑6000 lb	$	50.00	1001‑2500 kg	$	50.00
Weight Carts	$125.00
up to 6000 1b	(includes adjustment)
(b)	The following fees apply to all weights that are tested and certified to meet ASTM Standard E617 Class 4 or the International Organization of Legal Metrology (IOLM) R111 Class F2 tolerances. If the weight error exceeds three‑fourths of the applicable tolerance, adjustment may be required at an additional fee equal to the normal fee. Even if weights are rejected or condemned, fees shall be assessed for the test performed.
Customary	Fee/Unit	Metric	Fee/Unit
0‑10 lb	$	10.00	0‑5 kg	$	10.00
11‑100 lb	$	20.00	6‑50 kg	$	20.00
101‑1000 lb	$	40.00	51‑500 kg	$	40.00
1001‑2500 lb	$	60.00	501‑1000 kg	$	60.00
2501‑6000 lb	$	100.00	1001‑2500 kg	$	100.00
(c)	The following fees apply to all weights that are calibrated. Calibration means determining actual mass and conventional mass values with an assigned uncertainty specific to the test. If necessary and considered feasible by the metrologist, adjustments to ASTM Class 1, 2, or 3 tolerances or IOLM Class E2, F1, or F2 tolerances may be made for an additional fee of two times the normal fee. Adjustments to weights of this group shall require a minimum of 10 days for weights to return to environmental equilibrium before a final calibration value can be assigned. Even if weights are rejected or condemned, fees shall be assessed for the test performed.
Customary	Fee/Unit	Metric	Fee/Unit
0‑20 lb	$	20.00	0‑10 kg	$	20.00
21‑50 lb	$	40.00	11‑30 kg	$	40.00
51‑1000 lb	$	70.00	31‑500 kg	$	70.00
1001‑2500 lb	$	130.00	501‑1000 kg	$	130.00
2501‑6000 lb	$	200.00	1001‑2500 kg	$	200.00
(d)	The following fees apply to all weights that are calibrated using NIST weighing designs. These weights are tested in groups (typically either a 1, 2, 3, 5 series or a 1, 2, 2, 5 series) and are subject to the minimum per series fee shown. The best uncertainty possible from the North Carolina Standards Laboratory shall be assigned to the mass values of the weights. If necessary and considered feasible by the metrologist, adjustments to ASTM Class 0, 1, 2, or 3 tolerances or IOLM Class E1, E2, F1, or F2 tolerances may be made for an additional fee of two times the normal fee. Adjustments to weights of this group shall require a minimum of 10 days for weights to return to environmental equilibrium before a final calibration value can be assigned.
Weight Range	Fee/Unit or Series	
0‑1 kg	$30.00 each, with a minimum charge of  $90 (3 weights) per series
2‑30 kg	$50.00 each, with a minimum charge of  $150 (3 weights) per series
0‑2 lb	$30.00 each, with a minimum charge of  $90 (3 weights) per series
3‑50 lb	$50.00 each, with a minimum charge of $150 (3 weights) per series
(e)	The following fees apply to volumetric standard calibration.
Provers or Test Measures Tested By The Volume Transfer Method
Customary	Fee/Test Point	Metric	Fee/Test Point
0‑5 gal	$30.00	0‑20 liters	$30.00
Over 5 gal	Add $0.40 per each	Over 20 liters	Add $0.10 per each
	additional gallon		additional liter
Volumetric Flasks, Graduates, Provers, Slicker Plate Standards, or Test Measures Tested By the Gravimetric Calibration Method
Customary	Fee/Test Point	Metric	Fee/Test Point
0‑100 gal set‑up fee	$50.00	0‑500 liters set‑up fee	$50.00
Calibration Fee	Add $2.00	Calibration Fee	Add $0.50 
	per gallon		per liter
Small Volume Provers (SVPs) Tested By The Gravimetric Calibration Method
Customary	Fee/Test Point	Metric	Fee/Test Point
0‑100 gal set‑up fee	$ 100.00	0‑500 liters set‑up fee	$100.00
Calibration Fee	Add $2.00	Calibration Fee	Add $0.50
	per gallon		per liter
(f)	The following fees apply to tape measures and rigid rules.
Set‑Up Fee	$	40.00 per instrument
Calibration Fee	$	10.00 calibration interval
(g)	The following fees apply to liquid‑in‑glass and electronic thermometers.
Set‑Up Fee	$	40.00/instrument
Calibration Fee	$	20.00/calibration point
Resistance Thermometry Coefficient
Calculation and Report	$	100.00/ instrument
(h)	Any special tests or weight cleaning shall be billed at the rate of seventy dollars ($70.00) per hour prorated to the nearest tenth of an hour, with a minimum charge of thirty‑five dollars ($35.00).
(i)	A minimum charge of twenty‑five dollars ($25.00) per invoice shall apply.
(j)	If travel is required in connection with the performance of any of these services, the Department shall be reimbursed at the rates provided in G.S. 138‑6.
(k)	The Department may refuse to accept for testing any weight or measure the Department deems unsuited for its intended use.
(l)	The fee for tests performed on weights or measures that will be used primarily outside of the State of North Carolina shall be twice the amounts set forth in this section."

Requested by:	Senators Hoyle, Kerr
Labor Commissioner Fee Authority for Mine Inspections
SECTION 42.2.  G.S. 74‑24.7 is amended by adding a new subsection to read:
"(h)	An annual inspection and investigation fee of one thousand two hundred thirty dollars ($1,230) is imposed on an operator of a mine subject to an inspection or investigation under this section. The fee may be collected at the time of inspection or investigation. If the fee is not collected at the time of inspection or investigation, the Director must bill the operator of the mine for the amount of the fee and the amount of the fee is payable by the operator upon receipt of the bill. Fees collected under this subsection shall be credited to the Department of Labor and applied to the cost of administering this Article."

PART XLIII. justice and public safety fees

Requested by:	Senators Thomas, Hoyle, Kerr
General Court of Justice Fee Increases
SECTION 43.1.(a)  G.S. 7A‑304(a)(4) reads as rewritten:
"(a)	In every criminal case in the superior or district court, wherein the defendant is convicted, or enters a plea of guilty or nolo contendere, or when costs are assessed against the prosecuting witness, the following costs shall be assessed and collected, except that when the judgment imposes an active prison sentence, costs shall be assessed and collected only when the judgment specifically so provides, and that no costs may be assessed when a case is dismissed.
…
(4)	For support of the General Court of Justice, the sum of eighty‑six dollars ($86.00) in the district court, including cases before a magistrate, and the sum of ninety‑three dollars ($93.00) in the superior court, to be remitted to the State Treasurer. For a person convicted of a felony in superior court who has made a first appearance in district court, both the district court and superior court fees shall be assessed. The State Treasurer shall remit the sum of one dollar and five cents ($1.05) of each fee collected under this subdivision to the North Carolina State Bar for the provision of services described in G.S. 7A‑474.4, and ninety‑five cents ($.95) of each fee collected under this subdivision to the North Carolina State Bar for the provision of services described in G.S. 7A‑474.19."
SECTION 43.1.(b)  G.S. 7A‑305(a)(2) reads as rewritten:
"(a)	In every civil action in the superior or district court, except for actions brought under Chapter 50B of the General Statutes, the following costs shall be assessed:
…
(2)	For support of the General Court of Justice, the sum of seventy‑nine dollars ($79.00) in the superior court, and the sum of sixty‑four dollars ($64.00) in the district court except that if the case is assigned to a magistrate the sum shall be fifty‑three dollars ($53.00). 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 ($1.05) of each fee collected under this subdivision to the North Carolina State Bar for the provision of services described in G.S. 7A‑474.4, and ninety‑five cents ($.95) of each fee collected under this subdivision to the North Carolina State Bar for the provision of services described in G.S. 7A‑474.19."
SECTION 43.1.(c)  G.S. 7A‑306(a)(2) reads as rewritten:
"(a)	In every special proceeding in the superior court, the following costs shall be assessed:
…
(2)	For support of the General Court of Justice the sum of forty dollars ($40.00). 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 forty‑dollar ($40.00) 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 43.1.(d)  G.S. 7A‑307(a)(2) and (2a) read as rewritten:
"(a)	In the administration of the estates of decedents, minors, incompetents, of missing persons, and of trusts under wills and under powers of attorney, in trust proceedings under G.S. 36A‑23.1, and in collections of personal property by affidavit, the following costs shall be assessed:
…
(2)	For support of the General Court of Justice, the sum of forty dollars ($40.00), plus an additional forty cents (40¢) per one hundred dollars ($100.00), or major fraction thereof, of the gross estate, not to exceed six thousand dollars ($6,000). 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 forty‑dollar ($40.00) 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.
(2a)	Notwithstanding subdivision (2) of this subsection, the fee of forty cents (40¢) per one hundred dollars ($100.00), or major fraction, of the gross estate, not to exceed six thousand dollars ($6,000), shall not be assessed on personalty received by a trust under a will when the estate of the decedent was administered under Chapters 28 or 28A of the General Statutes. Instead, a fee of twenty dollars ($20.00) shall be assessed on the filing of each annual and final account."
SECTION 43.1.(e)  G.S. 15A‑145(e) reads as rewritten:
"(e)	A person who files a petition for expunction of a criminal record under this section must pay the clerk of superior court a fee of one hundred twenty‑five dollars ($125.00) at the time the petition is filed. Fees collected under this subsection shall be deposited in the General Fund. This subsection does not apply to petitions filed by an indigent."
SECTION 43.1.(f)  G.S. 15A‑1343(b1)(3c) reads as rewritten:
"(b1)	Special Conditions. – In addition to the regular conditions of probation specified in subsection (b), the court may, as a condition of probation, require that during the probation the defendant comply with one or more of the following special conditions:
…
(3c)	Remain at his or her residence unless the court or the probation officer authorizes the offender to leave for the purpose of employment, counseling, a course of study, or vocational training. The offender shall be required to wear a device which permits the supervising agency to monitor the offender's compliance with the condition electronically and to pay a fee for the device as specified in subsection (c2) of this section."
SECTION 43.1.(g)  G.S. 20‑135.2A(e) reads as rewritten:
"(e)	Any driver or passenger who fails to wear a seat belt as required by this section shall have committed an infraction and shall pay a penalty of twenty‑five dollars ($25.00) plus court costs in the sum of seventy‑five dollars ($75.00). Court costs assessed under this section are for the support of the General Court of Justice and shall be remitted to the State Treasurer. Conviction of an infraction under this section has no other consequence."

Requested by:	Senators Thomas, Hoyle, Kerr
Device Fee for House Arrest with Electronic Monitoring
SECTION 43.2.  G.S. 15A‑1343 is amended by adding a new section to read:
"(c2)	Electronic Monitoring Device Fee. – Any person placed on house arrest with electronic monitoring under subsection (b1) of this section shall pay a fee of ninety dollars ($90.00) for the electronic monitoring device. The court may exempt a person from paying the fee only for good cause and upon motion of the person placed on house arrest with electronic monitoring. The court may require that the fee be paid in advance or in a lump sum or sums, and a probation officer may require payment by those methods if the officer is authorized by subsection (g) of this section to determine the payment schedule. The fee must be paid to the clerk of court for the county in which the judgment was entered or the deferred prosecution agreement was filed. Fees collected under this subsection shall be transmitted to the State for deposit into the State's General Fund."

Requested by:	Senators Thomas, Hoyle, Kerr
Increase Butner Taxes
SECTION 43.3.(a)  Section 1 of Chapter 830 of the 1983 Session Laws reads as rewritten:
"Section 1. (a)  The territorial jurisdiction of the Butner Police and Fire Protection District shall include:  (i) any property formerly a part of the original Camp Butner reservation, including both those areas currently owned and occupied by the State and its agencies and those which may have been leased or otherwise disposed of by the State; (ii) the Lyons Station Sanitary District; and (iii) that part of Granville County adjoining the Butner reservation and the Lyons Station Sanitary District situated north and west of the intersection of Rural Paved Roads 1103 and 1106 and bounded by those roads and the boundaries of said reservation and said sanitary district. 
(b)	The territorial jurisdiction set forth in subsection (a) of this section shall constitute the Butner Fire and Police Protection District. The tax collectors of Durham and Granville Counties shall annually collect  a tax of  twenty‑five cents (25¢) per one hundred dollars ($100.00) valuation of all real and personal property in the portions of said district in their respective counties from year to year which tax shall be collected as county taxes are collected and shall remit the same to the State Treasurer for deposit in the General Fund."
SECTION 43.3.(b)  This section is effective for taxes imposed for taxable years beginning on or after July 1, 2005.

Requested by:	Senators Thomas, Hoyle, Kerr  
fee for police information network
SECTION 43.4.(a)  G.S. 114‑10.1 reads as rewritten:
"§ 114‑10.1.  Police Information Network.
(a)	The Division of Criminal Statistics is authorized to establish, devise, maintain and operate, under the control and supervision of the Attorney General, a system for receiving and disseminating to participating agencies information collected, maintained and correlated under authority of G.S. 114‑10 of this Article. The system shall be known as the Police Information Network.
(b)	The Attorney General is authorized to cooperate with the Division of Motor Vehicles, Department of Administration, Department of Correction and other State, local and federal agencies and organizations in carrying out the purpose and intent of this section, and to utilize, in cooperation with other State agencies and to the extent as may be practical, computers and related equipment as may be operated by other State agencies.
(c)	The Attorney General, after consultation with participating agencies, shall adopt rules and regulations governing the organization and administration of the Police Information Network, including rules and regulations governing the types of information relating to the administration of criminal justice to be entered into the system, and who shall have access to such information. The rules and regulations governing access to the Police Information Network shall not prohibit an attorney who has entered a criminal proceeding in accordance with G.S. 15A‑141 from obtaining information relevant to that criminal proceeding. The rules and regulations governing access to the Police Information Network shall not prohibit an attorney who represents a person in adjudicatory or dispositional proceedings for an infraction from obtaining the person's driving record or criminal history.
(d)	The Attorney General may impose an initial set up fee of two thousand six hundred fifty dollars ($2,650) for agencies to participate in the Police Information Network. This one-time fee shall be used to offset the cost of the router and data circuit needed to access the Network.
The Attorney General may also impose monthly fees on participating agencies. The monthly fees collected under this subsection shall be used to offset the cost of operating and maintaining the Police Information Network
(1)	The Attorney General may impose a monthly circuit fee on agencies that access the Police Information Network through a circuit maintained and operated by the Department of Justice. The amount of the monthly fee is three hundred dollars ($300.00) plus an additional fee amount for each device linked to the Network. The additional fee amount varies depending upon the type of device. For every desktop device after the first seven desktop devices, the additional monthly fee is twenty-five dollars ($25.00) per device. For a mobile device, the additional monthly fee is six dollars ($6.00) per device.
(2)	The Attorney General may impose a monthly device fee on agencies that access the Police Information Network through some other approved means. The amount of the monthly device fee varies depending upon the type of device. For a desktop device, the monthly fee is twenty-five dollars ($25.00) per device. For a mobile device, the fee is six dollars ($6.00) per device."
SECTION 43.4.(b)  G.S. 114-10.1(d), as enacted by this section, reads as rewritten:
"(d)	The Attorney General may impose an initial set up fee of two thousand six hundred fifty dollars ($2,650) for agencies to participate in the Police Information Network. This one-time fee shall be used to offset the cost of the router and data circuit needed to access the Network.
The Attorney General may also impose monthly fees on participating agencies. The monthly fees collected under this subsection shall be used to offset the cost of operating and maintaining the Police Information Network
(1)	The Attorney General may impose a monthly circuit fee on agencies that access the Police Information Network through a circuit maintained and operated by the Department of Justice. The amount of the monthly fee is three hundred dollars ($300.00) plus an additional fee amount for each device linked to the Network. The additional fee amount varies depending upon the type of device. For a desktop device after the first seven desktop devices, the additional monthly fee is twenty-five dollars ($25.00) per device. For a mobile device, the additional monthly fee is twelve dollars ($12.00) per device.
(2)	The Attorney General may impose a monthly device fee on agencies that access the Police Information Network through some other approved means. The amount of the monthly device fee varies depending upon the type of device. For a desktop device, the monthly fee is twenty-five dollars ($25.00) per device. For a mobile device, the fee is twelve dollars ($12.00) per device."
SECTION 43.4.(c)  Subsection (b) of this section becomes effective January 1, 2006. The remainder of this section is effective when it becomes law.

PART XLIV. department of transportation fee changes

Requested by:	Senators Hoyle, Kerr
DOT Fee increases
SECTION 44.1.(a)  G.S. 20‑7 reads as rewritten:
"§ 20‑7.  Issuance and renewal of drivers licenses.
…
(i)	Fees. – The fee for a regular drivers license is the amount set in the following table multiplied by the number of years in the period for which the license is issued:

Class of Regular License	Fee For Each Year
Class A		$4.00
Class B		4.00
Class C		4.00

The fee for a motorcycle endorsement is one dollar and seventy‑five cents ($1.75) for each year of the period for which the endorsement is issued. The appropriate fee shall be paid before a person receives a regular drivers license or an endorsement.
(i1)	Restoration Fee. – Any person whose drivers license has been revoked pursuant to the provisions of this Chapter, other than G.S. 20‑17(2), shall pay a restoration fee of fifty dollars ($50.00). A person whose drivers license has been revoked under G.S. 20‑17(2) shall pay a restoration fee of seventy‑five dollars ($75.00) until the end of the fiscal year in which the cumulative total amount of fees deposited under this subsection in the General Fund exceeds ten million dollars ($10,000,000), and shall pay a restoration fee of fifty dollars ($50.00) thereafter. The fee shall be paid to the Division prior to the issuance to such person of a new drivers license or the restoration of the drivers license. The restoration fee shall be paid to the Division in addition to any and all fees which may be provided by law. This restoration fee shall not be required from any licensee whose license was revoked or voluntarily surrendered for medical or health reasons whether or not a medical evaluation was conducted pursuant to this Chapter. The fifty‑dollar ($50.00) fee, and the first fifty dollars ($50.00) of the seventy‑five dollar ($75.00) fee, shall be deposited in the Highway Fund. The remaining twenty‑five dollars ($25.00) of the seventy‑five dollar ($75.00) fee shall be deposited in the General Fund of the State. The Office of State Budget and Management shall certify to the Department of Transportation and the General Assembly when the cumulative total amount of fees deposited in the General Fund under this subsection exceeds ten million dollars ($10,000,000), and shall annually report to the General Assembly the amount of fees deposited in the General Fund under this subsection.
It is the intent of the General Assembly to annually appropriate the funds deposited in the General Fund under this subsection to the Board of Governors of The University of North Carolina to be used for the Center for Alcohol Studies Endowment at The University of North Carolina at Chapel Hill, but not to exceed this cumulative total of ten million dollars ($10,000,000).
…
(l)	Learner's Permit. – A person who is at least 18 years old may obtain a learner's permit. A learner's permit authorizes the permit holder to drive a specified type or class of motor vehicle while in possession of the permit. A learner's permit is valid for a period of 18 months after it is issued. The fee for a learner's permit is fifteen dollars ($15.00). A learner's permit may be renewed, or a second learner's permit may be issued, for an additional period of 18 months. The permit holder must, while operating a motor vehicle over the highways, be accompanied by a person who is licensed to operate the motor vehicle being driven and is seated beside the permit holder."
SECTION 44.1.(b)  G.S. 20‑11(j) reads as rewritten: 
"(j)	Duration and Fee. – A limited learner's permit expires on the eighteenth birthday of the permit holder. A limited provisional license expires on the eighteenth birthday of the license holder. A limited learner's permit or limited provisional license issued under this section that expires on a weekend or State holiday shall remain valid through the fifth regular State business day following the date of expiration. A full provisional license expires on the date set under G.S. 20‑7(f). The fee for a limited learner's permit or a limited provisional license is fifteen dollars ($15.00). The fee for a full provisional license is the amount set under G.S. 20‑7(i)."
SECTION 44.1.(c)  G.S. 20‑14 reads as rewritten: 
"§ 20‑14.  Duplicate licenses.
A person may obtain a duplicate of a license issued by the Division by paying a fee of ten dollars ($10.00) and giving the Division satisfactory proof that any of the following has occurred:
(1)	The person's license has been lost or destroyed.
(2)	It is necessary to change the name or address on the license.
(3)	Because of age, the person is entitled to a license with a different color photographic background or a different color border.
(4)	The Division revoked the person's license, the revocation period has expired, and the period for which the license was issued has not expired."
SECTION 44.1.(d)  G.S. 20‑16(e) reads as rewritten: 
"(e)	The Division may conduct driver improvement clinics for the benefit of those who have been convicted of one or more violations of this Chapter. Each driver attending a driver improvement clinic shall pay a fee of fifty dollars ($50.00)."
SECTION 44.1.(e)  G.S. 20‑26(c) reads as rewritten: 
"(c)	The Division shall furnish copies of license records required to be kept by subsection (a) of this section in accordance with G.S. 20‑43.1 to other persons for uses other than official upon prepayment of the following fees:
(1)	Limited extract copy of license record, for
	period up to three years	$8.00
(2)	Complete extract copy of license record	8.00
(3)	Certified true copy of complete license record	11.00.
All fees received by the Division under this subsection shall be credited to the Highway Fund."
SECTION 44.1.(f)  G.S. 20‑37.15 (a1) reads as rewritten: 
"(a1)	The application must be accompanied by a nonrefundable application fee ofthirty dollars ($30.00). This fee does not apply in any of the following circumstances:
(1)	When an individual surrenders a commercial driver learner's permit issued by the Division when submitting the application.
(2)	When the application is to renew a commercial drivers license issued by the Division.
This fee shall entitle the applicant to three attempts to pass the written knowledge test without payment of a new fee. No application fee shall be charged to an applicant eligible for a waiver under G.S. 20‑37.13(c)."
SECTION 44.1.(g)  G.S. 20‑37.16(d) reads as rewritten:
"(d)	The fee for a Class A, B, or C commercial drivers license is fifteen dollars ($15.00) for each year of the period for which the license is issued. The fee for each endorsement is three dollars ($3.00) for each year of the period for which the endorsement is issued. The fees required under this section do not apply to employees of the Driver License Section of the Division who are designated by the Commissioner."
SECTION 44.1.(h)  G.S. 20‑42(b) reads as rewritten: 
"(b)	The Commissioner and officers of the Division designated by the Commissioner may prepare under the seal of the Division and deliver upon request a certified copy of any document of the Division for a fee. The fee for a document, other than an accident report under G.S. 20‑166.1, is ten dollars ($10.00). The fee for an accident report is five dollars ($5.00). A certified copy shall be admissible in any proceeding in any court in like manner as the original thereof, without further certification. The certification fee does not apply to a document furnished for official use to a judicial official or to an official of the federal government, a state government, or a local government."
SECTION 44.1.(i)  G.S. 20‑50(b) reads as rewritten: 
"(b)	The Division may issue a temporary license plate for a vehicle. A temporary license plate is valid for the period set by the Division. The period may not be less than 10 days nor more than 60 days.
A person may obtain a temporary license plate for a vehicle by filing an application with the Division and paying the required fee. An application must be filed on a form provided by the Division.
The fee for a temporary license plate that is valid for 10 days is five dollars ($5.00). The fee for a temporary license plate that is valid for more than 10 days is the amount that would be required with an application for a license plate for the vehicle. If a person obtains for a vehicle a temporary license plate that is valid for more than 10 days and files an application for a license plate for that vehicle before the temporary license plate expires, the person is not required to pay the fee that would otherwise be required for the license plate.
A temporary license plate is subject to the following limitations and conditions:
(1)	It may be issued only upon proper proof that the applicant has met the applicable financial responsibility requirements.
(2)	It expires on midnight of the day set for expiration.
(3)	It may be used only on the vehicle for which issued and may not be transferred, loaned, or assigned to another.
(4)	If it is lost or stolen, the person who applied for it must notify the Division.
(5)	It may not be issued by a dealer.
(6)	The provisions of G.S. 20‑63, 20‑71, 20‑110 and 20‑111 that apply to license plates apply to temporary license plates insofar as possible."
SECTION 44.1.(j)  G.S. 20‑73(c) reads as rewritten: 
"(c)	Penalties. – A person to whom a vehicle is transferred who fails to apply for a certificate of title within the required time is subject to a civil penalty of fifteen dollars ($15.00) and is guilty of a Class 2 misdemeanor. A person who undertakes to apply for a certificate of title on behalf of another person and who fails to apply for a title within the required time is subject to a civil penalty of fifteen dollars ($15.00). When a person to whom a vehicle is transferred fails to obtain a title within the required time because a person who undertook to apply for the certificate of title did not do so within the required time, the Division may impose a civil penalty only on the person who undertook to apply for the title. Civil penalties collected under this subsection shall be credited to the Highway Fund."
SECTION 44.1.(k)  G.S. 20‑85(a) reads as rewritten:
"(a)	The following fees are imposed concerning a certificate of title, a registration card, or a registration plate for a motor vehicle. These fees are payable to the Division and are in addition to the tax imposed by Article 5A of Chapter 105 of the General Statutes.
(1)	Each application for certificate of title 	$39.00
(2)	Each application for duplicate or corrected certificate of title	14.00
(3)	Each application of repossessor for certificate of title	14.00
(4)	Each transfer of registration	15.00
(5)	Each set of replacement registration plates	15.00
(6)	Each application for duplicate registration card	15.00
(7)	Each application for recording supplementary lien	14.00
(8)	Each application for removing a lien from a certificate of title	14.00
(9)	Each application for certificate of title for a motor vehicle transferred to a manufacturer, as defined in G.S. 20‑286, or a motor vehicle retailer for the purpose of resale	14.00
(10)	Each application for a salvage certificate of title made by an insurer	15.00
(11)	Each set of replacement Stock Car Racing Theme plates issued under G.S. 20‑79.4 	25.00."
SECTION 44.1.(l)  G.S. 20‑85.1 reads as rewritten: 
"§ 20‑85.1.  Registration by mail; one‑day title service; fees.
(a)	The owner of a vehicle registered in North Carolina may renew that vehicle registration by mail. A postage and handling fee of one dollar ($1.00) per vehicle to be registered shall be charged for this service.
(b)	The Commissioner and the employees of the Division designated by the Commissioner may prepare and deliver upon request a certificate of title, charging a fee of seventy‑five dollars ($75.00) for one‑day title service, in lieu of the title fee required by G.S. 20‑85(a). The fee for one‑day title service must be paid by cash or by certified check.
(c)	The fee collected under subsection (a) shall be credited to the Highway Fund. The fee collected under subsection (b) shall be credited to the Highway Trust Fund."
SECTION 44.1.(m)  G.S. 20‑87 reads as rewritten: 
"§ 20‑87.  Passenger vehicle registration fees.
These shall be paid to the Division annually, as of the first day of January, for the registration and licensing of passenger vehicles, fees according to the following classifications and schedules:
(1)	For‑Hire Passenger Vehicles. – The fee for a passenger vehicle that is operated for compensation and has a capacity of 15 passengers or less is seventy‑eight dollars ($78.00). The fee for a passenger vehicle that is operated for compensation and has a capacity of more than 15 passengers is one dollar and forty cents ($1.40) per hundred pounds of empty weight of the vehicle.
(2)	U‑Drive‑It Vehicles. – U‑drive‑it vehicles shall pay the following tax:
Motorcycles: 	1‑passenger capacity 	$18.00
	2‑passenger capacity 	22.00
	3‑passenger capacity 	26.00
Automobiles: 	15 or fewer passengers 	$51.00
Buses: 	16 or more passengers 	$2.00 per
	hundred
	pounds of
	empty weight
Trucks under 
7,000 pounds 
that do not 
haul products
for hire: 	4,000 pounds	$41.50
	5,000 pounds	$51.00
	6,000 pounds	$61.00.
(3)	Repealed by Session Laws 1981, c. 976, s. 3.
(4)	Limousine Vehicles. – For‑hire passenger vehicles on call or demand which do not solicit passengers indiscriminately for hire between points along streets or highways, shall be taxed at the same rate as for‑hire passenger vehicles under G.S. 20‑87(1) but shall be issued appropriate registration plates to distinguish such vehicles from taxicabs.
(5)	Private Passenger Vehicles. – There shall be paid to the Division annually, as of the first day of January, for the registration and licensing of private passenger vehicles, fees according to the following classifications and schedules: 
Private passenger vehicles of not more than fifteen 
passengers 	$28.00
Private passenger vehicles over fifteen passengers 	31.00
Provided, that a fee of only one dollar ($1.00) shall be charged for any vehicle given by the federal government to any veteran on account of any disability suffered during war so long as such vehicle is owned by the original donee or other veteran entitled to receive such gift under Title 38, section 252, United States Code Annotated.
(6)	Private Motorcycles. – The base fee on private passenger motorcycles shall be fifteen dollars ($15.00); except that when a motorcycle is equipped with an additional form of device designed to transport persons or property, the base fee shall be twenty‑two dollars ($22.00). An additional fee of three dollars ($3.00) is imposed on each private motorcycle registered under this subdivision in addition to the base fee. The revenue from the additional fee, in addition to any other funds appropriated for this purpose, shall be used to fund the Motorcycle Safety Instruction Program created in G.S. 115D‑72.
(7)	Dealer License Plates. – The fee for a dealer license plate is the regular fee for each of the first five plates issued to the same dealer and is one‑half the regular fee for each additional dealer license plate issued to the same dealer. The "regular fee" is the fee set in subdivision (5) of this section for a private passenger motor vehicle of not more than 15 passengers.
(8)	Driveaway Companies. – Any person engaged in the business of driving new motor vehicles from the place of manufacture to the place of sale in this State for compensation shall pay a fee of one‑half of the amount that would otherwise be payable under this section for each set of plates.
(9)	House Trailers. – In lieu of other registration and license fees levied on house trailers under this section or G.S. 20‑88, the registration and license fee on house trailers shall be eleven dollars ($11.00) for the license year or any portion thereof.
(10)	Special Mobile Equipment. – The fee for special mobile equipment for the license year or any part of the license year is two times the fee in subdivision (5) for a private passenger motor vehicle of not more than 15 passengers.
(11)	Any vehicle fee determined under this section according to the weight of the vehicle shall be increased by the sum of three dollars ($3.00) to arrive at the total fee.
(12)	Low‑Speed Vehicles. – The fee for a low‑speed vehicle is the same as the fee for private passengers vehicles of not more than 15 passengers."
SECTION 44.1.(n)  G.S. 20‑88 reads as rewritten:
"§ 20‑88.  Property‑hauling vehicles.
(a)	Determination of Weight. – For the purpose of licensing, the weight of self‑propelled property‑carrying vehicles shall be the empty weight and heaviest load to be transported, as declared by the owner or operator; provided, that any determination of weight shall be made only in units of 1,000 pounds or major fraction thereof, weights of over 500 pounds counted as 1,000 and weights of 500 pounds or less disregarded. The declared gross weight of self‑propelled property‑carrying vehicles operated in conjunction with trailers or semitrailers shall include the empty weight of the vehicles to be operated in the combination and the heaviest load to be transported by such combination at any time during the registration period, except that the gross weight of a trailer or semitrailer is not required to be included when the operation is to be in conjunction with a self‑propelled property‑carrying vehicle which is licensed for 6,000 pounds or less gross weight and the gross weight of such combination does not exceed 9,000 pounds, except wreckers as defined under G.S. 20‑4.01(50). Those property‑hauling vehicles registered for 4,000 pounds shall be permitted a tolerance of 500 pounds above the weight permitted under the table of weights and rates appearing in subsection (b) of this section.
(b)	The following fees are imposed on the annual registration of self‑propelled property‑hauling vehicles; the fees are based on the type of vehicle and its weight:

SCHEDULE OF WEIGHTS AND RATES
____________________________________________________________________
Rates Per Hundred Pound Gross Weight
Farmer Rate
Not over 4,000 pounds	$0.29
4,001 to 9,000 pounds inclusive		.40
9,001 to 13,000 pounds inclusive		.50
13,001 to 17,000 pounds inclusive		.68
Over 17,000 pounds		.77
	
Rates Per Hundred Pound Gross Weight
General Rate
Not over 4,000 pounds	$0.59
4,001 to 9,000 pounds inclusive		.81
9,001 to 13,000 pounds inclusive		1.00
13,001 to 17,000 pounds inclusive		1.36
Over 17,000 pounds		1.54
	
(1)	The minimum fee for a vehicle licensed under this subsection is twenty‑four dollars ($24.00) at the farmer rate and twenty‑eight dollars ($28.00) at the general rate.
(2)	The term "farmer" as used in this subsection means any person engaged in the raising and growing of farm products on a farm in North Carolina not less than 10 acres in area, and who does not engage in the business of buying products for resale.
(3)	License plates issued at the farmer rate shall be placed upon trucks and truck‑tractors that are operated exclusively in the carrying or transportation of applicant's farm products, raised or produced on his farm, and farm supplies and not operated in hauling for hire.
(4)	"Farm products" means any food crop, livestock, poultry, dairy products, flower bulbs, or other nursery products and other agricultural products designed to be used for food purposes, including in the term "farm products" also cotton, tobacco, logs, bark, pulpwood, tannic acid wood and other forest products grown, produced, or processed by the farmer.
(5)	The Division shall issue necessary rules and regulations providing for the recall, transfer, exchange or cancellation of "farmer" plates, when vehicle bearing such plates shall be sold or transferred.
(5a)	Notwithstanding any other provision of this Chapter, license plates issued pursuant to this subsection at the farmer rate may be purchased for any three‑month period at one fourth of the annual fee.
(6)	There shall be paid to the Division annually as of the first of January, the following fees for "wreckers" as defined under G.S. 20‑4.01(50): a wrecker fully equipped weighing 7,000 pounds or less, seventy‑five dollars ($75.00); wreckers weighing in excess of 7,000 pounds shall pay one hundred forty‑eight dollars ($148.00). Fees to be prorated quarterly. Provided, further, that nothing herein shall prohibit a licensed dealer from using a dealer's license plate to tow a vehicle for a customer.
(c)	The fee for a semitrailer or trailer is nineteen dollars ($19.00) for each year or part of a year. The fee is payable on or before January 1 of each year. Upon the application of the owner of a semitrailer or trailer, the Division may issue a multiyear plate and registration card for the semitrailer or trailer for a fee of seventy‑five dollars ($75.00). A multiyear plate and registration card for a semitrailer or trailer are valid until the owner transfers the semitrailer or trailer to another person or surrenders the plate and registration card to the Division. A multiyear plate may not be transferred to another vehicle.
The Division shall issue a multiyear semitrailer or trailer plate in a different color than an annual semitrailer or trailer plate and shall include the word "multiyear" on the plate. The Division may not issue a multiyear plate for a house trailer.
(d)	Rates on trucks, trailers and semitrailers wholly or partially equipped with solid tires shall be double the above schedule.
(e)	Repealed by Session Laws 1981, c. 976, s. 6.
(f)	Repealed by Session Laws 1995, c. 163, s. 6.
(g)	Repealed by Session Laws 1969, c. 600, s. 17.
(h)	Repealed by Session Laws 1979, c. 419.
(i)	Any vehicle fee determined under this section according to the weight of the vehicle shall be increased by the sum of three dollars ($3.00) to arrive at the total fee.
(j)	No heavy vehicle subject to the use tax imposed by Section 4481 of the Internal Revenue Code of 1954 (26 U.S.C. 4481) may be registered or licensed pursuant to G.S. 20‑88 without proof of payment of the use tax imposed by that law. The proof of payment shall be on a form prescribed by the United States Secretary of Treasury pursuant to the provisions of 23 U.S.C. 141(d).
(k)	A person may not drive a vehicle on a highway if the vehicle's gross weight exceeds its declared gross weight. A vehicle driven in violation of this subsection is subject to the axle‑group weight penalties set in G.S. 20‑118(e). The penalties apply to the amount by which the vehicle's gross weight exceeds its declared weight.
(l)	The Division shall issue permanent truck and truck‑tractor plates to Class A and Class B Motor Vehicles and shall include the word "permanent" on the plate. The permanent registration plates issued pursuant to this section shall be subject to annual registration fees set in this section. The Division shall issue the necessary rules providing for the recall, transfer, exchange, or cancellation of permanent plates issued pursuant to this section."
SECTION 44.1.(o)  G.S. 20‑289 reads as rewritten: 
"§ 20‑289.  License fees.
(a)	The license fee for each fiscal year, or part thereof, shall be as follows:
(1)	For motor vehicle dealers, distributors, distributor branches, and wholesalers, seventy dollars ($70.00) for each place of business.
(2)	For manufacturers, one hundred fifty dollars ($150.00) and for each factory branch in this State, one hundred dollars ($100.00).
(3)	For motor vehicle sales representatives, fifteen dollars ($15.00).
(4)	For factory representatives, or distributor representatives, fifteen dollars ($15.00).
(5)	Repealed by Session Laws 1991, c. 662, s. 4.
(b)	The fees collected under this section shall be credited to the Highway Fund. These fees are in addition to all other taxes and fees."
SECTION 44.1.(p)  G.S. 20‑385 reads as rewritten: 
"§ 20‑385.  Fee schedule.
(a)	Amounts. –
(1)	Verification by a for‑hire motor
carrier of insurance for each for‑hire
motor vehicle operated in this State	$ 1.00
(2)	Application by an intrastate motor carrier
for a certificate of exemption	45.00
(3)	Certification by an interstate motor carrier
that it is not regulated by the United
States Department of Transportation 	45.00
(4)	Application by an interstate motor carrier
for an emergency permit	18.00.
(b)	Reciprocal Agreements. – The fee set in subdivision (a)(1) of this section does not apply to the verification of insurance by an interstate motor carrier regulated by the United States Department of Transportation if the Division had a reciprocal agreement on November 15, 1991, with another state by which no fee is imposed. The Division had reciprocal agreements as of that date with the following states: California, Delaware, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Jersey, Pennsylvania, Texas, and Vermont."
SECTION 44.1.(q)  This section becomes effective October 1, 2005, and applies to fees collected on or after that date.

PART XLV. industrial commission fees

Requested by:	Senators Hoyle, Kerr
Industrial Commission Fees
SECTION 45.1.(a)  G.S. 97‑73 reads as rewritten:
"§ 97‑73.  Fees.
(a)	The Industrial Commission may establish by rule a schedule of fees for examinations conducted, reports made, documents filed, and agreements reviewed under this Article. The fees shall be collected in accordance with rules adopted by the Industrial Commission.
(b),	(c) Repealed by Session Laws 2003‑284, s. 10.33(d), effective July 1, 2003."
SECTION 45.1.(b)  This section is effective when it becomes law.

PART XLVI. MISCELLANEOUS PROVISIONS

Requested by:	Senators Garrou, Dalton, Hagan
executive budget act applies
SECTION 46.1.  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 46.2.(a)  The Senate Appropriations/Base Budget Committee Report on the Continuation, Expansion and Capital Budgets, dated May 3, 2005, which was distributed in the Senate and House of Representatives and used to explain this act, shall indicate action by the General Assembly on this act and shall therefore be used to construe this act, as provided in G.S. 143‑15 of the Executive Budget Act, and for these purposes shall be considered a part of this act and as such shall be printed as a part of the Session Laws.
SECTION 46.2.(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 2005‑2007 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 Director of the Budget submitted the itemized budget requests to the General Assembly on February 23, 2005, in the documents, "North Carolina State Budget 2005‑2007, Summary of Recommendations" and "State of North Carolina 2005‑2007 Recommended Continuation Budget" volumes one through six. The beginning appropriation for the 2005‑2006 fiscal year and the 2006‑2007 fiscal year for the various departments, institutions, and other spending agencies of the State is referenced in Tables 12 and 13 of the Summary of Recommendations document as the recommended continuation budget.
The General Assembly adjusted the recommended continuation budget to incorporate all nonrecurring adjustments enacted by the 2003 General Assembly as required in S.L. 2004‑124 and S.L. 2003‑284. These adjustments affect the Division of Medical Assistance, the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, the Clean Water Management Trust Fund, the Department of Crime Control and Public Safety, the Judicial Department, the General Assembly, the Department of Revenue, the Office of State Budget and Management, the Community Colleges System Office, the University of North Carolina – Board of Governors, the Department of Transportation, and the Reserve for Death Benefit Trust, and the Reserve for Disability Income Plan. These adjustments to the recommended continuation budget are set out in the Senate Appropriations/Base Budget Committee Report on  the Continuation, Expansion, and Capital Budgets, dated May 3, 2005. The recommended continuation budget submitted by the Director of the Budget, as adjusted by the General Assembly, is referred to as the adjusted continuation budget and represents the starting point for further legislative revisions.
The General Assembly revised the adjusted continuation budget for the 2005‑2006 fiscal year and 2006‑2007 fiscal year 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 adjusted continuation budget was revised in accordance with reductions and additions that were set out in the Senate Appropriations/Base Budget Committee Report on the Continuation, Expansion and Capital Budgets, dated May 3, 2005, together with any accompanying correction sheets.
(2)	Transfers of funds supporting programs were made in accordance with the Senate Appropriations/Base Budget Committee Report on the Continuation, Expansion and Capital Budgets, dated May 3, 2005, together with any accompanying correction sheets.
SECTION 46.2.(c)  The budget enacted by the General Assembly shall also 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 2005‑2007 fiscal biennium
SECTION 46.3.  Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2005‑2007 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2005‑2007 fiscal biennium.

Requested by:	Senators Garrou, Dalton, Hagan
effect of headings
SECTION 46.4.  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 46.5.  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 46.6.  Except as otherwise provided, this act becomes effective July 1, 2005.