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

INTRODUCTION
SECTION 1.  The appropriations made in this act are for maximum amounts necessary to provide the services and accomplish the purposes described in the budget.  Savings shall be effected where the total amounts appropriated are not required to perform these services and accomplish these purposes and, except as allowed by the State Budget Act, or this act, the savings shall revert to the appropriate fund at the end of each fiscal year.

TITLE OF ACT
SECTION 1.2.  This act shall be known as "The Current Operations and Capital Improvements Appropriations Act of 2007."

PART II. CURRENT OPERATIONS AND EXPANSION/GENERAL FUND

SECTION 2.1.  Appropriations from the General Fund of the State for the maintenance of the State's departments, institutions, and agencies, and for other purposes as enumerated, are made for the biennium ending June 30, 2009, according to the following schedule:

				FY 2007‑08	FY 2008‑09
			State Agency or Division	Recommended	Recommended				Appropriation	Appropriation

HEALTH AND HUMAN SERVICES
Central Administration	$71,872,058	$67,419,374
Aging			34,907,589	34,909,179
Child Development	305,916,143	305,939,926
Education Services	39,373,863	39,928,830
Public Health	186,706,619	179,716,681
Social Services	216,303,887	222,788,887
Medical Assistance	2,882,941,451	3,167,283,638
Child Health	59,391,155	59,391,155
Services for the Blind	12,413,913	12,536,515
Mental Health/DD/SAS	716,811,415	718,940,878
Facility Services	19,453,150	20,795,503
Vocational Rehabilitation	45,976,163	46,383,551
	Total Health & Human Services	4,592,067,406	4,876,034,117

				FY 2007‑08	FY 2008‑09
			State Agency or Division	Recommended	Recommended
				Appropriation	Appropriation

NATURAL AND ECONOMIC RESOURCES		
Agriculture & Consumer Services	67,134,939	61,314,179
Commerce	62,658,713	42,109,110
Commerce – State Aid to Non‑State Entities	52,654,087	52,654,087
Environment and Natural Resources	200,131,656	201,707,134
Clean Water Management Trust Fund	100,000,000	100,000,000
Labor			16,594,758	16,594,951
	Total Natural and Economic Resources	499,174,153 	474,379,461
				
JUSTICE AND PUBLIC SAFETY		
Correction	1,217,393,823	1,237,821,977
Crime Control & Public Safety	47,526,155 	43,054,413
Judicial		420,098,593 	423,824,541
Judicial – Indigent Defense	104,747,454 	108,569,559
Justice			96,375,618 	92,533,849
Juvenile Justice	161,610,825 	165,811,556
	Total Justice and Public Safety	2,047,752,468 	2,071,615,895
				
GENERAL GOVERNMENT		
Administration	68,508,544 	69,010,048
State Auditor	12,903,026 	12,916,479
Cultural Resources	70,463,491 	71,352,733
Cultural Resources – Roanoke Island	2,020,023 	2,020,023
General Assembly	55,729,083 	56,931,204
Governor's Office	6,462,319 	6,500,587
Insurance		32,003,945 	31,958,716
Insurance – Worker's Compensation Fund	4,500,000 	4,500,000
Lieutenant Governor	938,104 	939,091
Office of Administrative Hearings	3,738,155 	3,568,432
Revenue		87,619,246 	87,711,626
NC Housing Finance	11,250,945 	4,750,945
Secretary of State	10,704,933 	10,776,784
State Board of Elections	9,528,421 	6,798,147
State Budget and Management (OSBM)	5,930,060 	5,936,765
OSBM – Special Appropriations	6,438,446 	6,438,446
Office of State Controller	20,817,526 	20,835,033
State Treasurer	9,441,130 	9,438,190
State Treasurer – Retirement/Benefits	9,165,457 	9,165,457
Total General Government	428,162,854 	421,548,706

				FY 2007‑08	FY 2008‑09
			State Agency or Division	Recommended	Recommended
				Appropriation	Appropriation

EDUCATION

Public Schools	7,603,203,498	7,663,846,464
Community Colleges	915,790,652	912,122,495
University System	2,304,460,041	2,357,978,162
	UNC – Hospital	45,673,970	45,673,970
	UNC – GA Passthrough	284,576,699	336,283,215
Total Education	11,153,704,861	11,315,904,307

Total Budget	18,720,861,742	19,159,482,486

DEBT SERVICE
	General Debt Service	619,793,004	655,299,484
	Federal Reimbursement	1,616,380	1,616,380
Total Debt Service	621,409,384	656,915,864

RESERVES & ADJUSTMENTS		
	Contingency and Emergency Reserve	5,000,000 	5,000,000
	Compensation Increase Reserve	394,520,636 	386,490,786
	Salary Adjustment Reserve	28,188,000 	28,188,000
	Retirement System COLA	27,200,000 	27,200,000
	Retirement System – Payback	45,000,000 	0
	ITS Enterprise Fee Hold Harmless	1,500,000 	1,500,000
	Health Plan Reserve	111,247,930 	146,563,167
	Job Development Investment Grants	12,400,000 	12,400,000
	Reserve for Internal Control 
		Task Force Recommendations	1,000,000 	1,000,000
	Reserve for ITAS Replacement	10,000,000 	10,000,000
	Beacon Project Reserve 	20,000,000 	
	IT Initiative	4,140,000 	2,840,000
Total Reserves & Adjustments	660,196,566	621,181,953

CAPITAL		
	Capital Improvements	63,883,409	0
Total Capital	63,883,409	0

TOTAL GENERAL FUND BUDGET	$20,066,351,100	20,437,580,303

GENERAL FUND AVAILABILITY STATEMENT

SECTION 2.2.(a)  The General Fund availability used in developing the 2007‑2009 budget is shown below:
		FY 2007‑08	FY 2008‑09
	Description	Recommended	Recommended
		(In Millions)	(In Millions)
Beginning Availability:
	Unappropriated Balance from Prior Fiscal Year	0	118,823,900
	Credit Balance FY 2004‑05 (Reversions & 
		Over‑collections)	950,100,000	0
	Credit to Savings Reserve Account	(237,525,000)	0
	Credit to Repairs and Renovations
		Reserve Account	(100,000,000)	0
Beginning Unreserved Credit Balance	612,575,000	0

REVENUES
	Tax:
	Individual Income Tax	10,568,000,000	11,188,200,000
	Corporate Income Tax	4,877,000,000	5,093,300,000
	Sales and Use	1,194,000,000	1,251,900,000
	Other Tax	1,853,600,000	1,937,000,000
	Total Tax	18,492,600,000	19,470,400,000
	Nontax/Transfers	869,000,000	889,000,000
Total Revenue	19,361,600,000	20,359,400,000

Tax Reductions
	Income Tax Reduction	(28,000,000)	(63,000,000)
	Adoption Tax Credit	(3,000,000)	(3,000,000)
	Increased Expensing for Small Businesses	(35,800,000)	(27,900,000)
	Deductions for Higher Education Tuition	(13,900,000)	(14,400,000)
	Deductions for Qualified Expenses for K‑12 Teachers	(2,300,000)	(1,300,000)
	Health Insurance Premiums for Retired Officers	(2,000,000)	(2,200,000)
	Miscellaneous IRC Conformities	(4,700,000)	(3,000,000)
Subtotal Tax Reductions	(89,700,000)	(115,100,000)

Other Tax Changes
	Continue 4.25% State Sales Tax Rate	259,900,000	286,300,000
	Continue 8.0% Income Tax Rate	40,800,000	93,700,000
Subtotal Other Tax Changes	300,700,000	380,000,000

Total Availability	20,185,175,000	20,743,123,899

Less:  Total General Fund Appropriations	(20,066,351,101)	(20,437,580,303)

Unappropriated Balance Remaining	$118,823,900	$305,543,597

SECTION 2.2.(b)  Notwithstanding G.S. 143C‑9‑3, of the funds credited to the Tobacco Trust Fund from the Master Settlement Agreement pursuant to Section 6(2) of S.L. 1999‑2 during the 2007‑2009 fiscal biennium, the sum of twenty‑six million dollars ($26,000,000) for the 2007‑2008 fiscal year and the sum of sixteen million dollars ($16,000,000) for the 2008‑2009 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 Non‑tax Budget Code 19978 (Intra State Transfers) to support General Fund appropriations for the 2007‑2008 and 2008‑2009 fiscal years.
SECTION 2.2.(c)  Notwithstanding the allocations outlined in G.S. 143‑15.2 and G.S. 143‑15.3A, the State Controller shall transfer one hundred million dollars ($100,000,000) from the unreserved credit balance to the Repairs and Renovations Reserve Account on June 30, 2007.  This section becomes effective June 30, 2007.

PART III. CURRENT OPERATIONS/HIGHWAY FUND

CURRENT OPERATIONS/HIGHWAY FUND
SECTION 3.1.  Appropriations from the Highway Fund of the State for the maintenance and operation of the Department of Transportation, and for other purposes as enumerated, are made for the biennium ending June 30, 2009, according to the following schedule:

Current Operations – Highway Fund	2007‑08	2008‑09
				Recommended	Recommended

DOT – General Administration	$	95,787,091	$	93,204,187
		Highway Division Administration	32,651,442	32,703,136
		State Match for Federal Aid‑Planning and
		Research	4,700,000	4,700,000

Construction Program:
		State Secondary System	93,046,035	95,073,949
		Division Small Urban Construction	21,000,000	21,000,000
		Discretionary Funds	15,000,000	15,000,000
		Spot Safety Improvements	9,100,000	9,100,000
		Access and Public Services Roads	2,000,000	2,000,000
			Total Construction Program	140,146,035	140,173,949

Maintenance Program
		Primary System	155,323,184	155,323,184
		Secondary System	243,316,065	243,316,065
		System Preservation	100,289,071	88,403,935
		Contract Resurfacing	284,525,663	284,525,663
		General Maintenance Reserve	151,912,491	148,820,724
			Total Maintenance Program	935,366,474	920,389,571

Ferry Operations	29,513,921	29,513,921
State Aid to Municipalities	93,046,035	93,073,949
State Aid to Railroads	25,125,153	25,125,153
State Aid for Public Transportation	73,466,447	73,466,447
Asphalt Plant Cleanup	425,000	425,000
Governor's Highway Safety Program	334,314	335,449
Division of Motor Vehicles	101,700,725	119,510,944

Total Department of Transportation	$	1,554,122,759	$	1,555,751,739

Appropriations to Other State Agencies:
		Agriculture	4,742,033	4,709,039
		Revenue	5,778,561	5,786,604
		Public Instruction – Driver Education	33,285,956	33,255,278
		CCPS – Highway Patrol	205,685,608	203,516,779
		DENR – LUST Trust Fund	4,952,900	4,988,378
		DHHS – Chemical Test	622,183	622,183
			Total – Other State Agencies	255,067,241	252,878,261

Reserves and Transfers:
		Salary Adjustment	1,650,000	1,650,000
		Minority Contractor Development	150,000	150,000
		State Fire Protection Grant	150,000	150,000
		Stormwater Discharge Permit	500,000	500,000
		Reserve for Visitor's Centers	400,000	400,000
		Global TransPark	1,600,000	1,600,000
		Reserve for Legislative Increase	12,700,000	12,700,000
		Reserve for Health Insurance Adjustment	5,200,000	6,900,000
		Employer's Contribution‑Retiree	1,400,000	1,400,000
		Reserve for Administrative Reduction	(2,500,000)	(2,500,000)
			Total Reserves and Transfers	21,250,000	22,950,000

Total Highway Fund Appropriation	$1,830,440,000	$1,831,580,000

HIGHWAY FUND AVAILABILITY STATEMENT
SECTION 3.2.  The Highway Fund availability used in developing the 2007‑2009 biennial budget is shown below:

Highway Fund Availability Statement	2007‑08	2008‑09
				Recommended	Recommended

Beginning Credit Balance	$	30,000,000		0
Estimated Revenue	1,800,440,000	1,831,580,000
Estimated Reversions	0	0
		
Total Highway Fund Availability	$	1,830,440,000	$	1,831,580,000

PART IV. HIGHWAY TRUST FUND APPROPRIATIONS

HIGHWAY TRUST FUND APPROPRIATIONS
SECTION 4.1.  Appropriations from the Highway Trust Fund are made for the biennium ending June 30, 2009, according to the following schedule:

		Highway Trust Fund	2007‑08	2008‑09
				Recommended	Recommended

Department of Transportation:
		Maximum Allowance for Administration	$	42,722,640	$	43,386,880

		Construction Allocation:
			Intrastate System	540,326,825	550,107,613
			Urban Loop System	218,485,665	222,440,608
			Secondary Roads	94,808,677	96,786,225

		State Aid to Municipalities	56,692,887	57,719,120

		Transfer to the General Fund	172,543,306	172,619,554

TOTAL HIGHWAY TRUST FUND APPROPRIATIONS	$	1,125,580,000	$	1,143,060,000

PART V. BLOCK GRANT PROVISIONS

DHHS BLOCK GRANTS
SECTION 5.1.(a)  Appropriations from federal block grant funds are made for the fiscal year ending June 30, 2008, according to the following schedule:

TEMPORARY ASSISTANCE TO NEEDY FAMILIES BLOCK GRANT
Local Program Expenditures 
		Division of Social Services
	1.	Work First Family Assistance (Cash Assistance)		$95,807,234
	2.	Work First County Block Grants		94,653,315
	3.	Child Protective Services – Child Welfare Workers 
		for Local DSS		14,452,391
	4.	Work First – Boys and Girls Clubs		1,500,000
	5.	Work First – After‑School Services for At‑Risk Children		2,249,642
	6.	Work First – After-School Programs for At-Risk 
		Youth in Middle Schools		500,000
	7.	Work First – Work Central		550,000
	8.	Adoption Services – Special Children's Adoption Fund		3,000,000
	9.	Family Violence Prevention		2,200,000
		Division of Child Development
	10.	Subsidized Child Care Program		48,563,266
DHHS Administration
	11.	Division of Social Services		762,626
	12.	Office of the Secretary		65,836
	13.	Office of the Secretary/DIRM –  TANF
		Automation Projects		592,500
	14.	Office of the Secretary/DIRM – NCFAST Implementation		1,800,000
Transfers to other Block Grants
		Division of Child Development
	15.	Transfer to Child Care and Development Fund		81,292,880
		Division of Social Services
	16.	Transfer to SSBG for Department of Juvenile 
		Justice and Delinquency Prevention – Support our Students		2,749,642
	17.	Transfer to SSBG for Child Protective Services – 
		Child Welfare Training for Counties		2,550,000
	18.	Transfer to SSBG for Maternity Homes		838,000
	19.	Transfer to SSBG for Teen Pregnancy Prevention Initiatives		2,500,000
	20.	Transfer to SSBG for County DSS for Children's Services		4,500,000
	21.	Transfer to SSBG for Foster Care Services		1,181,907
TEMPORARY ASSISTANCE TO NEEDY FAMILIES 
BLOCK GRANT TOTAL		$362,309,239

SOCIAL SERVICES BLOCK GRANT
	Local Program Expenditures 
	Divisions of Social Services and Aging & Adult Services
1.	County departments of social services (Transfer 
	from TANF – $4,500,000)		$ 28,868,189
	2.	State In‑Home Services Fund (DAAS)		2,101,113
	3.	State Adult Day Care Fund (DAAS)		2,155,301
	4.	Child Protective Services/CPS Investigative Services – 
		Child Medical Evaluation Program (DSS)		238,321
	5.	Foster Care Services  (DSS)
		(Transfer from TANF-$1,181,907)		2,649,662
	6.	Foster Care Maintenance Payments		2,636,587
	7.	CPS – Child Welfare Training for Counties
		(Transfer from TANF)		2,550,000
	8.	Maternity Homes (Transfer from TANF)		838,000
	Division of Aging and Adult Services
	9.	Home and Community Care Block Grant (HCCBG)		1,834,077
	10.	Mental Health Services Program		422,003
	11.	Developmental Disabilities Services Program		5,000,000
	12.	Mental Health Services – Adult
		Mental Health Services – Child
		Developmental Disabilities Program
		Substance Abuse Services‑Adult		3,234,601
	Division of Child Development
	13.	Subsidized Child Care Program		3,195,000
	Division of Vocational Rehabilitation
	14.	Vocational Rehabilitation Services – Easter Seal
		Society/UCP		188,263
	Office of the Secretary – OEO
	15.	Elderly Supplemental Grant Program		41,302
	Division of Public Health
	16.	Teen Pregnancy Prevention Initiatives 
		(Transfer from TANF)		2,500,000
	Division of Aging and Adult Services
	17.	UNC‑CARES Training Contract		247,920
	Division of Blind
	18.	Independent Living Program		3,480,133
	Division of Facility Services
	19.	Adult Care Licensure Program		411,897
	20.	Mental Health Licensure and Certification Program		205,668
DHHS Administration
	21.	Division of Aging and Adult Services		658,674
	22.	Division of Social Services		869,058
	23.	Office of the Secretary/Controller's Office		126,155
	24.	Office of the Secretary/DIRM		82,009
	25.	Office of the Secretary		46,819
	26.	Division of Child Development		15,000
	27.	Division of Mental Health Developmental 
		Disabilities and Substance Abuse Services		28,860
	28.	Division of Facility Services		159,218
	29.	Office of the Secretary – NC Inter‑Agency Council for
		Coordinating Homeless Programs		250,000
	30.	Office of the Secretary – Housing Coalition		100,000
Transfers to Other State Agencies
	Department of Administration
	31.	NC Commission of Indian Affairs In‑Home Services 
		for the Elderly 		203,198
	Department of Juvenile Justice and Delinquency  Prevention
	32.	Support Our Students (Transfer from TANF)		2,749,642
Transfers to Other Block Grants
	Division of Public Health
	33.	Transfer to Preventive Health Services BG for
		HIV/STD Prevention and Community Planning		145,819
SOCIAL SERVICES BLOCK GRANT TOTAL		$68,232,489

LOW INCOME HOME ENERGY ASSISTANCE BLOCK GRANT
Local Program Expenditures 
	Division of Social Services
	1.	Low Income Energy Assistance Program (LIEAP)		$17,315,919
	2.	Crisis Intervention Program (CIP)		12,904,706
	Office of the Secretary – Office of Economic Opportunity
	3.	Weatherization Program		5,578,702
	4.	Heating Air Repair & Replacement Program (HARRP)		2,602,008
	Division of Social Services
	5.	County DSS Administration		2,215,016
	Office of the Secretary – Office of Economic Opportunity
	6.	Local Residential Energy Efficiency Service Providers – 
		Weatherization		262,837
	7.	Local Residential Energy Efficiency Service 
		Providers – HARRP		122,591
DHHS Administration
	8.	Division of Social Services		215,000
	9.	Division of Mental Health/DD/SAS		7,389
	10.	Office of the Secretary/DIRM		245,395
	11.	Office of the Secretary/Controller's Office		11,211
	12.	Office of the Secretary/Office of Economic
		Opportunity – Weatherization		262,837
	13.	Office of the Secretary/Office of Economic 
		Opportunity – HARRP		122,591
Transfers to other State Agencies
	14.	Department of Administration – N.C. Commission of 
		Indian Affairs		59,740
LOW INCOME HOME ENERGY ASSISTANCE BLOCK
GRANT TOTAL		$41,925,942

CHILD CARE AND DEVELOPMENT BLOCK GRANT
Local Program Expenditures
	Division of Child Development
	1.	Subsidized Child Care Services (CCDF)		$163,231,913
	2.	Subsidized Child Care Services (TANF to CCDF)		81,292,880
	3.	Quality and Availability Initiatives		31,463,419
Local Administration
	Division of Child Development
	4.	Administrative Expenses (Non‑Direct Subsidy Services Support)	1,849,000
DHHS Administration 
	Division of Child Development
	5.	DCD Administrative Expenses		6,028,354
CHILD CARE AND DEVELOPMENT BLOCK
GRANT TOTAL		$283,865,566

MENTAL HEALTH SERVICE BLOCK GRANT
Local Program Expenditures
	Division of MH/DD/SAS
	1.	Mental Health Services – Adult		$5,654,932
	2.	Mental Health Services – Child		3,921,992
	3.	Comprehensive Treatment Service Program		1,500,000
DHHS Administration
Division of MH/DD/SAS
	4.	Division of Mental Health		100,000
MENTAL HEALTH SERVICES BLOCK GRANT
TOTAL			$11,176,923

SUBSTANCE ABUSE PREVENTION AND TREATMENT BLOCK GRANT
	Local Program Expenditures
		Division of Mental Health, Developmental 
		Disabilities and Substance Abuse Services
	1.	Substance Abuse Services – Adult		$20,537,390
	2.	Substance Abuse Treatment Alternatives for Women		8,069,524
	3.	Substance Abuse – HIV and IV Drug		4,816,378
	4.	Substance Abuse Prevention – Child		5,835,701
	5.	Substance Abuse Services – Child		4,940,500
	6.	Substance Abuse Strengthening Families – Prevention		851,156
	Division of Public Health
	7.	Risk Reduction Projects		383,980
	8.	Aid to Counties		209,576
	9.	Maternal Health		37,779
DHHS Administration 
	10.	Division of Mental Health		500,000
SUBSTANCE ABUSE PREVENTION AND 
TREATMENT BLOCK GRANT TOTAL		$46,181,984

MATERNAL AND CHILD HEALTH BLOCK GRANT
Local Program Expenditures
	Division Name
	1.	Children's Health Services		$6,657,275
	2.	Maternal Health		3,441,129
	3.	Family Planning		4,078,338
	4.	Oral Health		34,284
	5.	Teen Pregnancy Prevention Initiatives		85,710
DHHS Program Expenditures
	Division Name
	6.	Children's Health Services		2,446,112
	7.	Maternal Health		106,927
	8.	State Center for Health Statistics		33,134
	9.	Local Technical Assistance & Training		17,318
	10.	Injury and Violence Prevention		142,850
	11.	Office of Minority Health		37,068
	12.	Immunization Program – Vaccine Distribution		310,667
DHHS Administration
	13.	Division of Public Health administration		600,586
MATERNAL AND CHILD HEALTH BLOCK GRANT
TOTAL			$17,991,398

PREVENTIVE HEALTH AND HEALTH SERVICES BLOCK GRANT
Local Program Expenditures 
	Division of Public Health
	1.	NC Statewide Health Promotion		$1,775,653
	2.	Services to Rape Victims		197,112
	3.	HIV/STD Prevention and Community Planning 
		(Transfer from SSBG)		145,819
DHHS Program Expenditures 
	Division of Public Health
	4.	NC Statewide Health Promotion		718,451
	5.	Oral Health		70,000
DHHS Administration 
	Division of Public Health
	6.	Administration		163,806
PREVENTIVE HEALTH AND HEALTH SERVICES BLOCK 
GRANT TOTAL		$3,070,841

COMMUNITY SERVICES BLOCK GRANT
Local Program Expenditures
	Office of Economic Opportunity
	1.	Community Action Agencies		$15,071,666
	2.	Limited Purpose Agencies		823,136
DHHS Administration (by division)
	3.	Office of Economic Opportunity		823,136
COMMUNITY SERVICES BLOCK GRANT TOTAL		$16,717,938

SECTION 5.1.(b)  Changes in Federal Fund Availability. – If the Congress of the United States 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 proportionally across the program and activity appropriations identified for that Block Grant 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. 
If the Congress of the United States decreases 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 reduce State administration by at least the percentage of the reduction in federal funds. After determining the State administration, the remaining reductions shall be allocated proportionately across the program and activity appropriations identified for that Block Grant in this section. 
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 Commission 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.(c)  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. This subsection does not apply to Block Grant changes caused by legislative salary increases and benefit adjustments.
CHILD CARE AND DEVELOPMENT BLOCK GRANT
SECTION 5.1.(d)  Payment for subsidized child care services provided with federal TANF funds shall comply with all regulations and policies issued by the Division of Child Development for the subsidized child care program.
SECTION 5.1.(e)  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.
SOCIAL SERVICES BLOCK GRANT
SECTION 5.1.(f)  Social Services Block Grant funds appropriated to the North Carolina Inter‑agency Council for Coordinating Homeless Program and the N. C. Housing Coalition are exempt from the provisions of 10A NCAC 71R.0201.(3).  
NER BLOCK GRANTS
SECTION 5.2.  The Department of Commerce shall submit to the Office of State Budget and Management a plan for allocating federal funds received for the Community Development Block Grant.  Upon receipt and approval of the Department's plan, the Office of State Budget and Management shall submit an allocation schedule to the North Carolina General Assembly for review and appropriation of federal block grant funds for the fiscal year ending June 30, 2008.

PART VI. GENERAL PROVISIONS

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 2007‑2009 fiscal biennium as follows:
(1)	For all budget codes listed in "North Carolina State Budget, Recommended Operating Budget 2007‑2009, 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 2007‑2008 fiscal year and the 2008‑2009 fiscal year. Funds may be expended only for the programs, purposes, 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 "North Carolina State Budget, Recommended Operating Budget 2007‑2009, Volumes 1 through 6", cash balances and receipts are appropriated for each year of the 2007‑2009 fiscal biennium up to the level of actual expenditures for the 2006‑2007 fiscal year, unless otherwise provided by law. Funds may be expended only for the programs, purposes, objects, and line items authorized for the 2006‑2007 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 2007‑2008 fiscal year and the 2008‑2009 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 2007‑2008 fiscal year and the 2008‑2009 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 State 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 overrealized receipts in the fiscal year in which the receipts were collected is authorized by the State Budget Act.
Overrealized 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 overrealized receipts approved for expenditure under this subsection by the Director of the Budget. The report shall include the source of the receipt, the amount overrealized, 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.

INSURANCE AND FIDELITY BONDS
SECTION 6.2.  All insurance and all official fidelity and surety bonds authorized for the several departments, institutions, and agencies shall be effected and placed by the Department of Insurance, and the cost of placement shall be paid by the affected department, institution, or agency with the approval of the Commissioner of Insurance.

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.

REDEPLOYMENT OF RESOURCES RESULTING FROM HR/PAYROLL IMPLEMENTATION
SECTION 6.4.  Notwithstanding any other provision of law, the Office of State Budget and Management is authorized to evaluate the impact of the BEACON Program on affected agencies and to develop a plan for addressing resources affected by the Program.  As relates to the impact on personnel, the State Redeployment Plan shall be implemented to the extent possible and, when compliance with federal or State law requires, new positions may be created if balanced by the elimination of a current or contracted position.  This provision expires December 31, 2008.

REVISE FREQUENCY OF FEE REPORT
SECTION 6.5.  G.S. 143C‑9‑4 reads as rewritten:
"§ 143C‑9‑4.  (Effective July 1, 2007) Annual Fee Report.
The Office of State Budget and Management shall prepare a report biennially on the fees charged by each State department, bureau, division, board, commission, institution, and agency during the previous fiscal year. The report shall include the statutory or regulatory authority for each fee, the amount of the fee, when the amount of the fee was last changed, the number of times the fee was collected during the prior fiscal year, and the total receipts from the fee during the prior fiscal year."

BUDGET REALIGNMENT
SECTION 6.6.  Notwithstanding G.S. 143C‑6‑4(b), the Office of State Budget and Management may adjust the enacted budget by making transfers among purposes or programs for the sole purpose of correctly aligning authorized positions and associated operating costs with the appropriate purposes or programs as defined in G.S. 143C‑1‑1(d)(23).  The Office of State Budget and Management shall change the certified budget to reflect these adjustments only after reporting the proposed adjustments to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division.  Under no circumstances shall total General Fund expenditures for a State department exceed the amount appropriated to that department from the General Fund for the fiscal year.

EDUCATION LOTTERY
SECTION 6.7.(a)  Notwithstanding G.S. 18C‑164, the revenue used to support appropriations made in this act is transferred from the State Lottery Fund in the amount of four hundred thirty‑eight million dollars ($438,000,000) for the 2007‑2008 fiscal year.
SECTION 6.7.(b)  Notwithstanding G.S 18C‑164, the appropriations made from the Education Lottery Fund pursuant to G.S. 18C‑164(d) for the 2007‑2008 fiscal year are as follows:

Class Size Reduction	$	127,867,291
Prekindergarten Program	144,572,109
Public School Building Capital Fund	132,448,480
Scholarships for Needy Students	33,112,120
	
Total Appropriation	$	438,000,000

SECTION 6.7.(c)  G.S. 18C‑162(a) reads as rewritten:
"(a)	To the extent and in order to maximize total net revenues for education purposes, 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)	The percentage of the total annual revenues, as described in this Chapter, that the Commission determines necessary to maximize total net revenues for education and satisfy the annual appropriation requirements set by the General Assembly 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. Advertising expenses shall not exceed one percent (1%) of the total annual revenues.
(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."
SECTION 6.7.(d)  Notwithstanding G.S. 18C‑164(e), any unexpended funds in budget code 13510 may be used to support the 2006‑2007 appropriation for Class Size Reduction established in Section 6.15.(b) of S.L. 2006‑66.
SECTION 6.7.(e)  This section becomes effective June 30, 2007.

PART VII. PUBLIC SCHOOLS

TEACHER SALARY SCHEDULES
SECTION 7.1.(a)  Effective for the 2007‑2008 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 (c) 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 2007‑2008 fiscal year to certified personnel of the public schools who are classified as teachers. The schedule contains 31 steps with each step corresponding to one year of teaching experience.

2007‑2008 Monthly Salary Schedule
"A" Teachers
	Years of Experience	"A" Teachers	NBPTS Certification
	0	$2,975	N/A 
	1	$3,017	N/A 
	2	$3,061	N/A 
	3	$3,217	$3,603 
	4	$3,357	$3,760 
	5	$3,491	$3,910 
	6	$3,620	$4,054 
	7	$3,724	$4,171 
	8	$3,772	$4,225 
	9	$3,821	$4,280 
	10	$3,871	$4,336 
	11	$3,920	$4,390 
	12	$3,971	$4,448 
	13	$4,022	$4,505 
	14	$4,075	$4,564 
	15	$4,129	$4,624 
	16	$4,184	$4,686 
	17	$4,239	$4,748 
	18	$4,298	$4,814 
	19	$4,356	$4,879 
	20	$4,414	$4,944 
	21	$4,476	$5,013 
	22	$4,537	$5,081 
	23	$4,603	$5,155 
	24	$4,667	$5,227 
	25	$4,732	$5,300 
	26	$4,798	$5,374 
	27	$4,866	$5,450 
	28	$4,937	$5,529 
	29	$5,008	$5,609 
	30+	$5,106	$5,719

2007‑2008 Monthly Salary Schedule
"M" Teachers
	Years of Experience	"M" Teachers	NBPTS Certification
	0 	$3,273	N/A 
	1	$3,319	N/A 
	2	$3,367	N/A 
	3	$3,539	$3,964 
	4	$3,693	$4,136 
	5	$3,840	$4,301 
	6	$3,982	$4,460 
	7	$4,096	$4,588 
	8	$4,149	$4,647 
	9	$4,203	$4,707 
	10	$4,258	$4,769 
	11	$4,312	$4,829 
	12	$4,368	$4,892 
	13	$4,424	$4,955 
	14	$4,483	$5,021 
	15	$4,542	$5,087 
	16	$4,602	$5,154 
	17	$4,663	$5,223 
	18	$4,728	$5,295 
	19	$4,792	$5,367 
	20	$4,855	$5,438 
	21	$4,924	$5,515 
	22	$4,991	$5,590 
	23	$5,063	$5,671 
	24	$5,134	$5,750 
	25	$5,205	$5,830 
	26	$5,278	$5,911 
	27	$5,353	$5,995 
	28	$5,431	$6,083 
	29	$5,509	$6,170 
	30+	$5,617	$6,291 

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 school teachers with certification based on academic preparation at the six‑year degree level shall receive a salary supplement of one hundred twenty‑six dollars ($126.00) per month in addition to the compensation provided for certified personnel of the public schools who are classified as "M" teachers. Certified public school teachers with certification based on academic preparation at the doctoral degree level shall receive a salary supplement of two hundred fifty‑three dollars ($253.00) per month in addition to the compensation provided for certified personnel of the public schools who are classified as "M" teachers.
SECTION 7.1.(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.

SCHOOL‑BASED ADMINISTRATOR SALARY SCHEDULE
SECTION 7.2.(a)  Effective for the 2007‑2008 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 2007‑2008 fiscal year, commencing July 1, 2007, is as follows:

2007‑2008 Principal and Assistant Principal Salary Schedules
Classification
Years of Exp	Assistant	Prin I	Prin II	Prin III	Prin IV
	Principal	(0‑10)	(11‑21)	(22‑32)	(33‑43)
	0‑4	$3,730 	-	-	-	-
	5 	$3,878 	-	-	-	-
	6 	$4,022 	-	-	-	-
	7 	$4,137 	-	-	-	-
	8 	$4,190 	$4,190 	-	-	-
	9 	$4,245 	$4,245 	-	-	-
	10 	$4,301 	$4,301 	$4,355 	-	-
	11 	$4,355 	$4,355 	$4,412 	-	-
	12 	$4,412 	$4,412 	$4,468 	-	-
	13 	$4,468 	$4,468 	$4,528 	$4,528 	$4,648 
	14 	$4,528 	$4,528 	$4,587 	$4,587 	$4,710 
	15 	$4,587 	$4,587 	$4,648 	$4,648 	$4,775 
	16 	$4,648 	$4,648 	$4,710 	$4,710 	$4,840 
	17 	$4,710 	$4,710 	$4,775 	$4,775 	$4,904 
	18 	$4,775 	$4,775 	$4,840 	$4,840 	$4,973 
	19 	$4,840 	$4,840 	$4,904 	$4,904 	$5,041 
	20 	$4,904 	$4,904 	$4,973 	$4,973 	$5,114 
	21 	$4,973 	$4,973 	$5,041 	$5,041 	$5,185 
	22 	$5,041 	$5,041 	$5,114 	$5,114 	$5,257 
	23 	$5,114 	$5,114 	$5,185 	$5,185 	$5,331 
	24 	$5,185 	$5,185 	$5,257 	$5,257 	$5,407 
	25 	$5,257 	$5,257 	$5,331 	$5,331 	$5,485 
	26 	$5,331 	$5,331 	$5,407 	$5,407 	$5,564 
	27 	$5,407 	$5,407 	$5,485 	$5,485 	$5,675 
	28 	$5,485 	$5,485 	$5,564 	$5,564 	$5,789 
	29 	$5,564 	$5,564 	$5,675 	$5,675 	$5,905 
	30 	$5,675 	$5,675 	$5,789 	$5,789 	$6,023 
	31 	$5,789 	$5,789 	$5,905 	$5,905 	$6,143 
	32 	-	$5,905 	$6,023 	$6,023 	$6,266 
	33 	-	-	$6,143 	$6,143 	$6,391 
	34 	-	-	$6,266 	$6,266 	$6,519 
	35 	-	-	-	$6,391 	$6,649 
	36 	-	-		$6,519 	$6,782 
	37 	-	-	-	$6,649 	$6,918 

2007‑2008 Principal and Assistant Principal Salary Schedules
Classification
Years of Exp	Prin V	Prin VI	Prin VII	Prin VIII
	(44‑54)	(55‑65)	(66‑100)	(101+)
	0‑14	$4,775 	-	-	-
	15 	$4,840 	-	-	-
	16 	$4,904 	$4,973 	-	-
	17 	$4,973 	$5,041 	$5,185 	-
	18 	$5,041 	$5,114 	$5,257 	$5,331 
	19 	$5,114 	$5,185 	$5,331 	$5,407 
	20 	$5,185 	$5,257 	$5,407 	$5,485 
	21 	$5,257 	$5,331 	$5,485 	$5,564 
	22 	$5,331 	$5,407 	$5,564 	$5,675 
	23 	$5,407 	$5,485 	$5,675 	$5,789 
	24 	$5,485 	$5,564 	$5,789 	$5,905 
	25 	$5,564 	$5,675 	$5,905 	$6,023 
	26 	$5,675 	$5,789 	$6,023 	$6,143 
	27 	$5,789 	$5,905 	$6,143 	$6,266 
	28 	$5,905 	$6,023 	$6,266 	$6,391 
	29 	$6,023 	$6,143 	$6,391 	$6,519 
	30 	$6,143 	$6,266 	$6,519 	$6,649 
	31 	$6,266 	$6,391 	$6,649 	$6,782 
	32 	$6,391 	$6,519 	$6,782 	$6,918 
	33 	$6,519 	$6,649 	$6,918 	$7,056 
	34 	$6,649 	$6,782 	$7,056 	$7,197 
	35 	$6,782 	$6,918 	$7,197 	$7,341 
	36 	$6,918 	$7,056 	$7,341 	$7,488 
	37 	$7,056 	$7,197 	$7,488 	$7,638 
	38 	$7,197 	$7,341 	$7,638 	$7,791 
	39 		$7,488 	$7,791 	$7,947 
	40 		$7,638 	$7,947 	$8,106 
	41 			$8,106 	$8,268 

SECTION 7.2.(c)  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.(d)  A principal shall be placed on the step on the salary schedule that reflects total number of years of experience as a certificated employee of the public schools and an additional step for every three years of experience as a principal. A principal or assistant principal shall also continue to receive any additional State‑funded percentage increases earned for the 1997‑1998, 1998‑1999, and 1999‑2000 school years for improvement in student performance or maintaining a safe and orderly school.
SECTION 7.2.(e)  Principals and assistant principals with certification based on academic preparation at the six‑year degree level shall be paid a salary supplement of one hundred twenty‑six dollars ($126.00) per month and at the doctoral degree level shall be paid a salary supplement of two hundred fifty‑three dollars ($253.00) per month.
SECTION 7.2.(f)  Longevity pay for principals and assistant principals shall be as provided for State employees under the State Personnel Act.
SECTION 7.2.(g)  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.(h)  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 2007‑2008 fiscal year and subsequent fiscal years, the stipend shall not exceed the difference between the beginning salary of an assistant principal plus the cost of tuition, fees, and books 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.(i)  During the 2007‑2008 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.

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 2007‑2008 fiscal year, beginning July 1, 2007.  The local board of education shall determine the appropriate category and placement for each assistant superintendent, associate superintendent, director/coordinator, supervisor, or finance officer within the salary ranges and within funds appropriated by the General Assembly for central office administrators and superintendents. The category in which an employee is placed shall be included in the contract of any employee hired on or after July 1, 2007.

School Administrator I	$3,170	$5,954
School Administrator II	$3,365	$6,315
School Administrator III	$3,572	$6,699
School Administrator IV	$3,716	$6,966
School Administrator V	$3,865	$7,248
School Administrator VI	$4,101	$7,686
School Administrator VII	$4,266	$7,996

SECTION 7.3.(b)  The monthly salary ranges that follow apply to public school superintendents for the 2007‑2008 fiscal year, beginning July 1, 2007.  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. 

Superintendent I	$4,527	$8,482
Superintendent II	$4,806	$8,994
Superintendent III	$5,099	$9,543
Superintendent IV	$5,412	$10,122
Superintendent V	$5,744	$10,739

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 shall be two and one‑half percent (2.5%), commencing July 1, 2007. 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.

NONCERTIFIED PERSONNEL SALARIES
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 two and one‑half percent (2.5%), commencing July 1, 2007.
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 2006‑2007 and who continue their employment for fiscal year 2007‑2008 by providing an annual salary increase for employees of two and one‑half percent (2.5%).
SECTION 7.4.(c)  The State Board of Education may adopt salary ranges for noncertified personnel to support increases of two and one‑half percent (2.5%) for the 2007‑2008 fiscal year.

BONUS FOR CERTIFIED PERSONNEL AT THE TOP OF THEIR SALARY SCHEDULES
SECTION 7.5.  Effective July 1, 2007, any permanent certified personnel employed on July 1, 2007, and paid on the teacher salary schedule with 30+ years of experience shall receive a one‑time bonus equivalent to the average increase of the 27- to 30-year steps. Effective July 1, 2007, any permanent personnel employed on July 1, 2007, 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.

USE OF SUPPLEMENTAL FUNDING IN LOW‑WEALTH COUNTIES
SECTION 7.6.(a)  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.(b)  The State Board of Education shall report this information annually by October 31 to the Office of State Budget and Management,  the Joint Legislative Education Oversight Committee, and the Fiscal Research Division. 
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 2007‑2009 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, 2008, 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.

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 2007‑2008 fiscal year and a base of seven hundred forty thousand seventy‑four dollars ($740,074) for the 2008‑2009 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 2007‑2009 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 because of (i) an increase in the population of the county in which the local school administrative unit is located or (ii) 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 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, 2008, 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.

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.
The State Board of Education may require districts receiving funding under the Disadvantaged Student Supplemental Fund to purchase the Education Value Added Assessment System in order to provide in‑depth analysis of student performance and help identify strategies for improving student achievement. This data shall be used exclusively for instructional and curriculum decisions made in the best interest of children and for professional development for their teachers and administrators.
SECTION 7.8.(b)  Beginning in the 2007‑2008 fiscal year, funds appropriated to a local education agency (LEA) for disadvantaged student supplemental funding (DSSF) shall be allotted based on: (i) the LEA's eligible DSSF population and (ii) the difference between a teacher‑to‑student ratio of 1:21 and the following teacher‑to‑student ratios:
(1)	For counties with wealth greater than ninety percent (90%) of the statewide average, a ratio of 1:20;
(2)	For counties with wealth not less than eighty percent (80%) and not greater than ninety percent (90%) of the statewide average, a ratio of 1:19.5;
(3)	For counties with wealth less than eighty percent (80%) of the statewide average, a ratio of 1:19; and
(4)	For LEAs receiving DSSF funds in 2005‑2006, a ratio of 1:16.
These LEAs shall receive no less than the DSSF amount allotted in 2005‑2006. For the purpose of this subsection, wealth shall be calculated under the low‑wealth supplemental formula.

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.

AT‑RISK STUDENT SERVICES/ALTERNATIVE SCHOOLS
SECTION 7.10.  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 2007‑2008 fiscal year and for the 2008‑2009 fiscal year to implement G.S. 115C‑12(24).

CHILDREN WITH DISABILITIES
SECTION 7.11.  The State Board of Education shall allocate funds for children with disabilities on the basis of three thousand one hundred fifty‑seven dollars and fifty‑five cents ($3,157.55) per child for a maximum of 172,317 children for the 2007‑2008 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 2007‑2008 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.

FUNDS FOR ACADEMICALLY GIFTED CHILDREN
SECTION 7.12.  The State Board of Education shall allocate funds for academically or intellectually gifted children on the basis of one thousand twelve dollars and sixty cents ($1,012.60) per child. A local school administrative unit shall receive funds for a maximum of four percent (4%) of its 2007‑2008 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 58,470 children for the 2007‑2008 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.

EXPENDITURE OF FUNDS TO IMPROVE STUDENT ACCOUNTABILITY
SECTION 7.13.(a)  Funds appropriated for the 2007‑2008 and 2008‑2009 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 2007‑2008 fiscal year within 30 days of the date this act becomes law. 
SECTION 7.13.(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. 
SECTION 7.13.(c)  Funds appropriated for the At‑Risk/Alternative Schools allotment and the Improving Student Accountability allotment shall be used consistent with the policies and procedures adopted by the State Board of Education. Priority for use of the funds shall be to (i) provide instructional positions or instructional support positions and/or professional development; (ii) provide intensive in‑school and/or after‑school remediation; and (iii) purchase diagnostic software and progress monitoring tools.
SECTION 7.13.(d)  To remain eligible for funds appropriated for the At‑Risk/Alternative Schools allotment and the Improving Student Accountability allotment, local school administrative units must submit a report to the State Board of Education by October 31 of each year detailing the expenditure of the funds and the impact of these funds on student achievement. The State Board of Education shall report this information annually by October 31 to the Office of State Budget and Management, the Joint Legislative Education Oversight Committee, and the Fiscal Research Division.

LITIGATION RESERVE FUNDS
SECTION 7.14.  The State Board of Education may expend up to five hundred thousand dollars ($500,000) each year for the 2007‑2008 and 2008‑2009 fiscal years from unexpended funds for certified employees' salaries to pay expenses related to pending litigation.

REPLACEMENT SCHOOL BUSES FUNDS
SECTION 7.15.(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 7.15.(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.

DISCREPANCIES BETWEEN ANTICIPATED AND ACTUAL ADM
SECTION 7.16.(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 7.16.(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.

CHARTER SCHOOL ADVISORY COMMITTEE/CHARTER SCHOOL EVALUATION
SECTION 7.17.  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 2007‑2008 and 2008‑2009 fiscal years to continue support of a charter school advisory committee and to continue to evaluate charter schools.

MENTOR TEACHER FUNDS MAY BE USED FOR FULL‑TIME MENTORS
SECTION 7.18.(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 7.18.(b)  The State Board, after consultation with the Professional Teaching Standards Commission, shall adopt standards for mentor training.
SECTION 7.18.(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 annually by October 15 each year of the biennium.
SECTION 7.18.(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 annually to the Joint Legislative Education Oversight Committee and the Fiscal Research Division by December 15 each year of the biennium.  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.

FUNDS TO IMPLEMENT THE ABCS OF PUBLIC EDUCATION
SECTION 7.19.(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 2006‑2007 school year, in accordance with the ABCs of Public Education Program. In accordance with State Board of Education policy:
(1)	Incentive awards in schools that achieve higher than expected improvements may be up to: 
a.	One thousand five hundred dollars ($1,500) for each teacher and for certified personnel; and
b.	Five hundred dollars ($500.00) for each teacher assistant. 
(2)	Incentive awards in schools that meet the expected improvements may be up to: 
a.	Seven hundred fifty dollars ($750.00) for each teacher and for certified personnel; and 
b.	Three hundred seventy‑five dollars ($375.00) for each teacher assistant.
SECTION 7.19.(b)  The State Board of Education may use funds appropriated to the State Public School Fund to implement the Consolidated Assistance program report required by Section 7.20 of this act.

CONSOLIDATED ASSISTANCE PROGRAM
SECTION 7.20.(a)  The State Board of Education (SBE) shall ensure that all assistance to Local Education Agencies LEAs and schools that is provided on behalf of the State Board of Education (SBE) by the Department of Public Instruction and its contractors shall be merged into the Consolidated Assistance Program.
SECTION 7.20.(b)  The SBE shall report to the Office of State Budget and Management, the Fiscal Research Division, and the Joint Legislative Education Oversight Committee no later than October 30, 2007.  The report shall contain (i)  measurable goals and objectives for the assistance program, (ii) clearly defined  criteria used to determine which (LEAs) and schools are selected to receive assistance, (iii) a description of the delivery mechanism for providing assistance with the consolidated resources, (iv) annual historical data on the assistance that has been provided since 1996‑1997, (v) quantitative outcomes from the assistance program including student academic performance for each school and LEA assisted, (vi) an explanation of the assistance provided, (vii) research‑based data regarding state LEA and school assistance programs,  (viii) actual expenditures by category, (ix) recommendations for the continuance of this program, and (x) any other information the State Board deems necessary. 
SECTION 7.20.(c)  The Department will develop and maintain a revised organizational structure, clearly defined functions of consolidated Assistance Team program positions, and a budget for the provision of consolidated assistance services to LEAs to ensure the department can meet the needs of the LEAs.  The organization structure and budget must be approved by the State Board of Education.
SECTION 7.20.(d)  Funds in the amount of two million dollars ($2,000,000) in 2007‑2008 and two million dollars ($2,000,000) in 2008‑2009 are appropriated in this act to the State Board of Education to provide assistance through this consolidated program to the State's low‑performing LEAs and schools to assist schools in meeting adequate yearly progress in each subgroup identified in the No Child Left Behind Act of 2001.  These funds shall be placed in a reserve. The Director of the Office of State Budget and Management shall not release funds appropriated in this act to the SBE until the Consolidated Assistance Program report is received.
SECTION 7.20.(e)  The State Board of Education shall contract with an independent evaluator to conduct an in‑depth analysis of the effectiveness of the interventions provided to the State's low‑performing schools. The evaluation should be scientifically based and address the following:  the causal relationship between assistance team interventions, improvement in student performance in participating schools, participating schools' ability to meet adequate yearly progress in each subgroup identified in the No Child Left Behind Act of 2001, and the sustainability of any identified academic improvement.

LEARN AND EARN HIGH SCHOOLS
SECTION 7.21.(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 7.21.(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 7.21.(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. The budget flexibility authorized by G.S. 115C‑105.25 does not apply to these positions.
SECTION 7.21.(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.
SECTION 7.21.(e)  Enrollment fees and tuition for The University of North Carolina courses in which Learn and Earn students are enrolled are allowable uses of these funds. Tuition costs may include laboratory fees assessed to all students enrolled in the course or a similar course.
SECTION 7.21.(f)  Textbooks required for college courses in which Learn and Earn students are enrolled may be purchased with these funds.
SECTION 7.21.(g)  Payment of fees from these funds by local school administrative units to partnering community colleges and universities are restricted to technology or course fees. Funds appropriated in this act shall not be used to support the cost of athletic or other student activity or campus fees not required by enrollment in a specific course.
SECTION 7.21.(h)  The State Board of Education shall allot funds for university enrollment, tuition and fees, and textbooks on the basis of and after verification of the credit hour enrollment of Learn and Earn students in university courses. The State Board of Education shall allot funds for community college fees and textbooks on the basis of and after verification of the credit hour enrollment of Learn and Earn students in community college courses.

FUNDS FOR TEACHER WORKING CONDITIONS SURVEY INITIATIVE SHALL NOT REVERT
SECTION 7.22.(a)  Funds appropriated to the State Board of Education to be used in collaboration with the Professional Teaching Standards Commission for the Teachers Working Conditions Survey Initiative shall not revert at the end of the 2006‑2007 fiscal year but shall remain available until expended.   
SECTION 7.22.(b)  This section becomes effective June 30, 2007.

NORTH CAROLINA VIRTUAL PUBLIC SCHOOL
SECTION 7.23.(a)  The North Carolina Virtual Public School (NCVPS) program shall report to the State Board of Education and shall maintain an administrative office at the Department of Public Instruction.
SECTION 7.23.(b)  The Director of NCVPS will continue to ensure that course quality standards are met and that all E‑learning opportunities offered by State‑funded entities to public school students are consolidated under the NC Virtual Public School program, eliminating course duplication. The Director shall report on the consolidation status and operating plan for 2007‑2008 to the Joint Legislative Education Oversight Committee, the Office of State Budget and Management, and the Fiscal Research Division no later than January 15, 2008.   The report shall also address specific collaboration efforts with Learn and Earn Online. 
SECTION 7.23.(c)  Subsequent to course consolidation, the Director will prioritize e‑learning course offerings for students residing in rural and low‑wealth county LEAs, in order to expand available instructional opportunities. First‑available E‑learning instructional opportunities should include courses required as part of the standard course of study for high school graduation and AP offerings not otherwise available.
SECTION 7.23.(d)  The State Board of Education shall develop an allotment formula for funding E‑learning, effective in the 2007‑2008 fiscal year. In developing the formula, the Board shall consider, at a minimum, the following:
(1)	The number of students in average daily membership (ADM) projected to enroll in E‑learning,
(2)	The projected cost of fees for E‑learning courses,
(3)	The extent to which projected enrollment in E‑learning courses affects funding required for other allotments that are based on ADM. 
SECTION 7.23.(e)  Any funds appropriated in this act for the NCVPS program that are not expended in fiscal year 2006‑2007 shall be carried forward for expenditure in fiscal year 2007‑2008. Any such funds that remain unexpended on June 30, 2008, shall revert to the General Fund.
SECTION 7.23.(f)  This section becomes effective June 30, 2007.

SMALL REDESIGNED HIGH SCHOOLS
SECTION 7.24.  The State Board of Education shall report the evaluation results of the program to the Office of State Budget and Management, the Fiscal Research Division, and the Joint Legislative Education Oversight Committee no later than January 15 of each year.   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; and (ii) 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 no later than January 15 of each year.

NC WISE POSITIONS
SECTION 7.25.  Notwithstanding G.S. 143C‑6‑4, the State Board of Education may in consultation with the Office of Information Technology Services, use funds appropriated in this act for NC WISE to create a maximum of 10 positions and incur expenditures necessary to maintain and administer the NC WISE system within the Department of Public Instruction.

21st CENTURY LITERACY COACHES
SECTION 7.26.(a)  Funds are appropriated in this act to support the selection and hiring of 200 literacy coaches.  Coaches will be hired and placed in 200 middle schools or other public schools with an eighth grade class.  A site selection process including formal criteria will be developed by the State Board of Education in consultation with the North Carolina Teacher Academy.  The site must receive formal approval of the State Board of Education to receive funds for this purpose. To be selected schools must
(1)	Contain an eighth grade class, and
(2)	Ensure that literacy coaches will have no administrative responsibilities in the schools in which they are placed.
SECTION 7.26.(b)  National Board for Professional Teaching Standards (NBPTS) certified teachers serving in these positions shall be exempt from the requirements in G.S. 115C‑296.2(b)(2)d and shall remain on the NBPTS teacher salary schedule.

MORE AT FOUR PROGRAM AND OFFICE OF SCHOOL READINESS 
SECTION 7.27.(a)  The Department of Public Instruction 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 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 research‑based and/or built on sound instructional theory. 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 a 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 and the Department of Public Instruction. 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 and the Department of Public Instruction shall consider the reallocation of existing funds from State and local programs that provide prekindergarten‑related care and services.
SECTION 7.27.(b)  The Department of Public Instruction, in collaboration with the Department of Health and Human Services, shall implement a plan to expand "More at Four" program standards within existing resources to include four‑ and five‑star‑rated centers and schools serving four‑year‑olds and develop guidelines for these programs. The "NC Prekindergarten Program Standards" initiative shall recognize four‑ and five‑star‑rated centers that choose to apply and meet equivalent "More at Four" program standards as high quality prekindergarten classrooms. Classrooms meeting these standards shall have access to training and workshops for "More at Four" programs. Whenever expansion slots are available, these classrooms shall have first priority to receive them.
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 January 31 of each year, 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 7.27.(c)  The Department of Public Instruction shall submit a report by February 1, 2008, to the Joint Legislative Commission on Governmental Operations, the Joint Legislative Education Oversight Committee, the Senate Appropriations Committee on Education, the House of Representatives Appropriations Subcommittee on Education, 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)	A comprehensive cost analysis of the program, including the cost per child served by the program.
(6)	The status of the NC Prekindergarten initiatives as outlined in this section.
SECTION 7.27.(d)  For the 2007‑2008 and the 2008‑2009 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. 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 7.27.(e)  The "More at Four" program funding shall not supplant any funding for classrooms serving four‑year‑olds as of the 2005‑2006 fiscal year. Support of existing four‑year‑old classrooms with "More at Four" program funding shall be permitted when current funding is eliminated, reduced, or redirected as required to meet other specified federal or State educational mandates.

ADMINISTRATIVE FUNDING FOR TEACHING FELLOWS PROGRAM
SECTION 7.28.  The Public School Forum, as administrator for the Teaching Fellows Program, may use up to eight hundred ten thousand dollars ($810,000) for the 2007‑2008 fiscal year from the balance in the revolving fund established in G.S. 115C‑363.23A(f) for costs associated with administration of  the Teaching Fellows Program. The funding provided for administration of the Teaching Fellows Program in this subsection shall be used to meet current administrative expenses of the Program, expand minority recruitment initiatives, and expand the Program to up to four additional campuses using a merit‑based selection process developed by the North Carolina Teaching Fellows Commission. The Teaching Fellows Program shall report to the Joint Legislative Education Oversight Committee by March 15, 2008, on:
(1)	Actual expenditures for the 2006‑2007 fiscal year and budgeted expenditures for the 2007‑2008 fiscal year for administration of the Program and
(2)	Initiatives to recruit minorities to the Program.  

CONVERT 100 TEACHING FELLOWS SCHOLARSHIP LOANS FOR PROSPECTIVE MATHEMATICS AND SCIENCE TEACHERS
SECTION 7.29.  Beginning in the 2008‑2009 fiscal year, 100 of the 500 teaching fellows scholarship loans as established in G.S. 115C‑363.23A  shall be changed from four‑year scholarship loans to two‑year scholarship loans for North Carolina college juniors who intend to obtain licensure in middle school or high school mathematics or science.

No Cost Summer School or other remediation activities
SECTION 7.30.(a)  G.S. 115C‑105.41 prohibits charging tuition or fees to Students at Risk for Academic Failure.  Effective July 1, 2007, LEAs shall  formally communicate to at‑risk students and their parents or guardians that there will be no charge for participation in intervention activities/practices offered by the LEA to at‑risk students, or for transportation necessary for participation in the intervention activities.    
SECTION 7.30.(b)  Effective July 1, 2007, LEAs shall formally communicate to students and their parents or guardians that tuition and fees will not be charged for summer school courses that are required for remediation or courses that are necessary for the student to meet graduation requirements. 

Transfer Funds designated for Institute for Principals in Low‑Performing Schools to the State Board of Education
SECTION 7.31.  Two hundred fifty thousand dollars ($250,000) appropriated to The University of North Carolina in the 2006‑2007 fiscal year for the Principals' Executive Program initiative for principal leadership in high‑need schools shall be permanently transferred to the State Board of Education (SBE) effective July 1, 2007.  These funds will support the training of principals in low‑performing high schools. The professional development provider will be selected at the discretion of the SBE.  The SBE will provide oversight for the training offered to these principals.

LOTTERY RECEIPTS SHALL NOT REVERT
SECTION 7.32.(a)  Education Lottery receipts appropriated to support the Prekindergarten Program and Class Size Reduction shall not revert at the end of the 2006‑2007 fiscal year but shall remain available until expended.  
SECTION 7.32.(b)  This section becomes effective June 30, 2007.

PROHIBIT USE OF STATE FUNDS FOR LOBBYING EXPENSES
SECTION 7.33. State funds appropriated by this act for local school administrative units shall not be used for the payment of dues to organizations that conduct lobbying or legislative advocacy.

LEARN AND EARN ONLINE
SECTION 7.34.(a)  Funds are appropriated in this act for the Learn and Earn Online program.  This program will allow high school students to enroll in college courses to qualify for college credit. Online courses will be made available to students through The University of North Carolina and the North Carolina Community College System. 
SECTION 7.34.(b)  Funds shall be used for course tuition, and only those technology and course fees, and textbooks required for course participation.  Funds shall also support a liaison position to be housed at the Department of Public Instruction to coordinate with The University of North Carolina and the North Carolina Community College System, and to communicate course availability and related information to high school administrators, teachers, and counselors.
SECTION 7.34.(c)  The State Board of Education shall determine the allocation of Learn and Earn Online course offerings across the State.
SECTION 7.34.(d)  The State Board of Education shall allot funds for tuition, fees, and textbooks on the basis of and after verification of the credit hour enrollment of high school students in Learn and Earn Online courses. Community college student enrollments in Learn and Earn Online shall not be considered as a regular budget full‑time equivalents (FTE) in the curriculum enrollment formula, but shall be accounted for separately and funds shall be allotted as a special allotment.
SECTION 7.34.(e)  The University of North Carolina program shall report to The University of North Carolina Board of Governors, and the North Carolina Community College program shall report to the North Carolina Community College Board of Trustees.  The Department of Public Instruction shall report to the State Board of Education. 
SECTION 7.34.(f)  Both The University of North Carolina and the North Carolina Community College System shall provide oversight and coordination, including coordination with the Department of Public Instruction, and with the North Carolina Virtual Public School (NCVPS) to avoid course duplication. 
SECTION 7.34.(g)  Course quality and rigor standards shall be established, and each program shall conduct course evaluations to ensure that the online courses made available to students meet the established standards.
SECTION 7.34.(h)  The State Board of Education, The University of North Carolina, and the North Carolina Community College System shall report on the proposed operating plan for 2008‑2009 to the Joint Legislative Education Oversight Committee, the Office of State Budget and Management, and the Fiscal Research Division no later than March 1, 2008.

COOPERATIVE INNOVATIVE HIGH SCHOOL PROGRAMS
SECTION 7.35.(a)  G.S. 115C‑238.53(b) reads as rewritten:
"(b)	A program approved under this Part shall operate under the terms of a written agreement signed by the local superintendent, the local college/university president, the Superintendent of Public Instruction, and the president of the higher education system. 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 first agreement may be for a term of no longer than five school years. Subsequent agreements shall continue until terminated by the local board of education, the board of trustees, or the applicable governing board upon written notice. Such notice shall extend through the end of the public school's academic school year."
SECTION 7.35.(b)  G.S. 115C‑238.53(f) reads as rewritten:
"(f)	Except as provided in this Part and under the terms of the agreement, a program may be exempted by the applicable governing Board 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. The applicable governing board may also grant a standard of exemptions applicable to the operation of these programs."

CONNECTIVITY INITIATIVE
SECTION 7.36.(a)  Funds are appropriated in this act to support the enhancement of the technology infrastructure for public schools.  These funds shall be used for broadband access and equipment to create or improve access to instructional opportunities for public school students offered via technology.  
SECTION 7.36.(b)  The State Board of Education shall conduct a formal needs assessment and submit a report to the Office of State Budget and Management and the Office of Information Technology Services via the Project Portfolio Management (PPM) tool, detailing the implementation plan based on the assessment results including:
(1)	Identified statewide needs,
(2)	The number, location and schedule of sites to be served in 2007‑2008 and 2008‑2009,
(3)	The criteria used to select sites to be served each year of the biennium,
(4)	The projected implementation budget including the per site costs, and
(5)	All other information required by the PPM tool.
SECTION 7.36.(c)  Funds appropriated will be placed in a reserve.  The Director of the Office of State Budget and Management shall not release funds appropriated in this act to the SBE until the Connectivity Initiative report is received and the Project Portfolio Management tool is approved by the Office of Information Technology Services and the Office of State Budget and Management.
SECTION 7.36.(d)  The Department of Public Instruction, with the approval of the State Board of Education, Office of State Budget and Management, and the Office of Information Technology may hire up to eight individuals to implement this initiative. No more than one million dollars ($1,000,000) of this appropriation shall be used for salary and related personnel costs.
SECTION 7.36.(e)  All applicable e‑rate reimbursements will be directed to the Department of Public Instruction to offset implementation costs incurred by this initiative.
SECTION 7.36.(f)  Up to three hundred thousand dollars ($300,000) may be transferred to the Office of the Governor to establish NC Virtual Public School (NCVPS) within the Education Cabinet.  These funds may be used for services to coordinate E‑learning activities across all State educational agencies.

REORGANIZATION OF THE DEPARTMENT OF PUBLIC INSTRUCTION
SECTION 7.37.(a)  Notwithstanding G.S. 143C‑6‑4, the Department of Public Instruction may reorganize in accordance with the plan adopted by the State Board of Education. 
SECTION 7.37.(b)  This section expires June 30, 2008.

PART VIII. COMMUNITY COLLEGES

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 2006‑2007 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, 2007.

CARRYFORWARD OF EQUIPMENT FUNDS FOR COMMUNITY COLLEGES
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 ten million dollars ($10,000,000) of the operating funds that were not reverted in fiscal year 2006‑2007 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, 2007.

SALARIES OF COMMUNITY COLLEGE FACULTY AND PROFESSIONAL STAFF
SECTION 8.3.(a)  Funds appropriated in this act for salary increases shall be used to increase faculty and professional staff salaries by an average of two and one‑half percent (2.5%). 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.
SECTION 8.3.(b)  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.

REPORT ON THE NCCCS BIONETWORK
SECTION 8.4.  The Community Colleges System Office shall report annually on November 1 to the Joint Legislative Education Oversight Commission, the Office of State Budget and Management, and the Fiscal Research Division on the implementation of the NCCCS BioNetwork.  This report shall include an explanation of the BioNetwork's activities, accomplishments, and expenditures.

CARRYFORWARD OF SYSTEM OFFICE FUNDS FOR CASWELL BUILDING SPACE RECONFIGURATION
SECTION 8.5.(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 three hundred forty thousand dollars ($340,000) of the operating funds that were not reverted in fiscal year 2006‑2007 to be used to reconfigure office space in the Community Colleges System Office, located in the Caswell Building in Raleigh.  These funds may be used for the purchase of furniture and equipment necessary to implement the recommendations made by the State Property Office.
SECTION 8.5.(b)  This section becomes effective June 30, 2007.

INSTRUCTIONAL RESOURCE ALLOCATION FORMULA
SECTION 8.6.  The State Board of Community Colleges shall develop a new funding formula for library books and related instructional resources before distributing funds appropriated in the 2007‑2009 Continuation Budget.  The revised instructional resource allocation formula shall reflect the availability of online subscription resources and electronic media and should include a base amount per college.

PILOT PROGRAMS TO BE STUDIED FOR NCCCS INCREMENTAL CREDENTIALS 
SECTION 8.7.  Funds appropriated in this act to create incremental credentials shall be used first to develop incremental credentials in the following programs: Early Childhood Education, Automotive Systems Technology, Computer Information Technology, and Building Construction Technology.  The allocation of these funds shall be determined by the Community Colleges System Office and approved by the State Board of Community Colleges.

ONLINE COURSE INSTRUCTION DELIVERY REQUIRED TO BE COMPATIBLE AMONG ALL NC PUBLIC EDUCATION SYSTEMS
SECTION 8.8.(a)  Software purchased and used for online course instruction by the Department of Public Instruction, the NC Community Colleges, and The University of North Carolina shall be compatible and able to be integrated with course management and distance learning software adopted by the State Board of Education, the State Board of Community Colleges, and The University of North Carolina.
SECTION 8.8.(b)  This provision shall apply to the NC Virtual Public School, the NCCCS Virtual Learning Community, and any future online course instruction software purchased.
SECTION 8.8.(c)  The Office of Information Technology Services shall ensure compatibility pursuant to subsection (a) of this section.

JOINT NCCCS/UNC COURSE MANAGEMENT SYSTEM
SECTION 8.9.(a)  Funds appropriated in this act for the Joint NCCCS/UNC Course Management System shall be used to consider potential options for a shared course management system, to be implemented July 1, 2008.  This solution shall consider the possibility of using open‑source course management software.
SECTION 8.9.(b)  The NC Community College System and The University of North Carolina shall report their recommendations for a shared course management system to the Joint Legislative Education Oversight Committee, the Office of Information Technology Services, and the Office of State Budget and Management by March 1, 2008.

PRIORITY FOR NEW PROGRAM START‑UP FUNDS
SECTION 8.10.  The State Board of Community Colleges shall develop rules governing the distribution of new program start‑up funds appropriated in this act.  These funds shall be allocated first to programs fulfilling a high‑priority need or programs that are classified as new to the system.

REPORT ON NCCCS DISTANCE LEARNING AND ONLINE CAPABILITIES
SECTION 8.11.  The Community Colleges System Office shall report by March 1, 2008, to the Joint Legislative Education Oversight Committee, the Fiscal Research Division, and the Office of State Budget and Management, on its efforts regarding distance learning opportunities.  This report shall complement the report authorized by the General Assembly in S.L. 2004‑179, Section 6, and shall address the following:
(1)	The implementation of the Learning Objects Repository, as appropriated in this act;
(2)	The expenditure of funds appropriated in this act, for bandwidth at community colleges, including a description of each community college's current bandwidth capacity;
(3)	The Virtual Learning Community and its course development centers;
(4)	Joint efforts between the NC Community College System and The University of North Carolina, regarding distance learning;
(5)	Joint efforts between individual community colleges and special responsibility constituent institutions of The University of North Carolina or NC private colleges;
(6)	Analysis of necessary changes or enhancements to improve the sharing of distance learning and online opportunities with The University of North Carolina and the Department of Public Instruction;
(7)	The adequacy of current funding, and the need for additional funds, to support the initiatives listed in this section, as well as additional anticipated online and distance education collaborations between the NC Community College System, The University of North Carolina, and the Department of Public Instruction.

FACULTY UPGRADE AND STAFF DEVELOPMENT FUNDS
SECTION 8.12.(a)  Funds appropriated in the act for faculty upgrade and staff development shall be allocated by the State Board of Community Colleges.  Community colleges may use these funds to provide their employees with training opportunities that relate to teaching subject matter content and upgrading instructional and technical skills.  These opportunities may include funds for faculty to earn baccalaureate and masters degrees, and for faculty to participate in industry‑specific training.
SECTION 8.12.(b)  These funds may be used only to support educational activities which serve to develop the employee's competencies, knowledge, skills, and abilities directly related to their employment.

ACHIEVING THE DREAM FUNDS
SECTION 8.13.  The Community Colleges System Office shall report by November 1, 2008, to the Joint Legislative Education Oversight Committee, the Fiscal Research Division, and the Office of State Budget and Management on its expenditures of funds appropriated in this act for the Achieving the Dream initiative.

CURRICULUM ENROLLMENT FORMULA
SECTION 8.14.  Student enrollment in Learn and Earn Online courses shall not count as regular budget FTE in the curriculum enrollment formula but shall be reported as self‑supporting, and Learn and Earn Online funds shall be allotted as a categorical State allotment.

PART IX. UNIVERSITIES

NORTH CAROLINA SCHOOL OF SCIENCE AND MATHematics ENROLLMENT GROWTH FORMULA
SECTION 9.1.(a)  The Office of State Budget and Management shall conduct a study to create a formula for enrollment growth at the North Carolina School of Science and Mathematics. This formula will be used to calculate the amount of funds needed for enrollment growth for the North Carolina School of Science and Mathematics. The formula will be used for calculating the enrollment growth funding request to be submitted to the 2008 Session of the North Carolina General Assembly.  
SECTION 9.1.(b)  The Office of State Budget and Management shall submit the study to the Joint Legislative Education Oversight Committee and the Fiscal Research Division no later than March 1, 2008.

REPORTING ON UNC FACULTY WORKLOAD
SECTION 9.2.(a)  The Board of Governors shall conduct a study on faculty workload. The study shall be done using the Delaware Study Method of collecting data. Information in the report should include, but is not to be limited to:
(1)	Faculty workload data for each UNC constituent institution compared to the UNC enrollment model.
(2)	UNC faculty workload average as compared to the UNC enrollment model student credit hours per instructional position.
(3)	Faculty workload of regional and peer institutions as compared to each UNC constituent institution faculty average and to the UNC faculty workload average.
SECTION 9.2.(b)  The UNC Board of Governors shall submit the study to the Joint Legislative Education Oversight Committee, the Office of State Budget and Management, and the Fiscal Research Division no later than March 1, 2008.  

MILLENNIUM TEACHER SCHOLARSHIP PROGRAM
SECTION 9.3.(a)  The Millennium Teacher Scholarship Program was initially created by S.L. 2004‑124, Section 9.2.(c) to provide scholarship loans in the amount of six thousand five hundred dollars ($6,500) to North Carolina residents enrolled in a teacher education program at one of the State's three Historically Black Colleges and Universities without the Teaching Fellows program.  One of the three eligible universities, Elizabeth City State University, is now a participant in the Teaching Fellows program effective with the fall 2007 semester.
SECTION 9.3.(b)  Elizabeth City State University, due to participation in the Teaching Fellows program, no longer meets the criteria established for the Millennium Teacher Scholarship Program.  All current Millennium Scholars at Elizabeth City State University shall retain the scholarship loan, and Elizabeth City State University shall forfeit to the Escheat Fund all unused funding that it has received for Millennium scholarship loans.  No new Millennium scholarship loans shall be awarded to students at Elizabeth City State University after July 1, 2007.

USE OF ESCHEAT FUND FOR NEED‑BASED FINANCIAL AID PROGRAMS
SECTION 9.4.(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 six hundred thirty‑eight thousand and sixteen dollars ($67,638,016) for 2007‑2008 and 2008‑2009, 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 2007‑2008 and 2008‑2009, to the Department of Administration, Division of Veteran Affairs the sum of six million two hundred twenty‑eight thousand six hundred thirty‑three dollars ($6,228,633) for 2007‑2008 and the sum of six million five hundred twenty thousand nine hundred sixty‑four dollars ($6,520,964) for 2008‑2009. These funds shall be allocated by the State Educational Assistance Authority for need‑based student financial aid in accordance with G.S. 116B‑7.
If the interest income generated from the Escheat Fund is less than the amounts referenced in 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 9.4.(b)  The North Carolina State Education Assistance Authority (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.  SEAA may make recommendations for redistribution of funds to The University of North Carolina, Department of Administration, and/or 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 9.4.(c)  There is appropriated from the Escheat Fund to the Board of Governors of The University of North Carolina the sum of one million one hundred fifty‑seven thousand dollars ($1,157,000) for the 2007‑2008 and 2008‑2009 fiscal years 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 two 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 9.4.(d)  All obligations to students for uses of the funds set out in sections that were made prior to the effective date of Section 9.4(a) shall be fulfilled as to students who remain eligible under the provisions of the respective programs.

BOARD OF GOVERNORS' MEDICAL SCHOLARSHIPS
SECTION 9.5.  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, 2007, 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 stipend 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 scholastic aptitude test 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.

BOARD OF GOVERNORS' DENTAL SCHOLARSHIPS
SECTION 9.6.  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, 2007, 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 stipend 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 scholastic aptitude test 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.

UNC‑NCCCS 2+2 E‑LEARNING INITIATIVE
SECTION 9.7.  The University of North Carolina and Community Colleges System Office shall report by September 1, 2007, and annually thereafter, to the Joint Legislative Education Oversight Committee, the Office of State Budget and Management, and the Fiscal Research Division of the General Assembly on the implementation of the UNC‑NCCCS 2+2 E‑Learning Initiative.  This report shall include:
(1)	The courses and programs within the 2+2 E‑Learning Initiative;
(2)	The total number of prospective teachers that have taken or are taking part in this initiative to date broken down by the current academic period and each of the previous academic periods since the program's inception;
(3)	The total number of teachers currently in the State's classroom, by local school administrative unit, who have taken part in this initiative;
(4)	The change in the number of teachers available to schools since the program's inception;
(5)	The qualitative data from students, teachers, local school administrative unit personnel, university personnel, and community college personnel as to the impact of this initiative on our State's teaching pool; and
(6)	An explanation of the expenditures and collaborative programs between the North Carolina Community College System and The University of North Carolina, including recommendations for improvement.

MANAGEMENT FLEXIBILITY TO REORGANIZE BUDGET CODE 16012 UNC BOARD OF GOVERNORS RELATED EDUCATIONAL PROGRAMS
SECTION 9.8.(a)  Notwithstanding G.S. 143C‑6‑4, for the 2007‑2008 fiscal year, the General Administration of The University of North Carolina and the State Educational Assistance Authority shall, with the approval of the Office of State Budget and Management, reorganize budget code 16012, UNC Board of Governors Related Educational Programs, so that the budget reflects and segregates each specific program individually.  The Office of State Budget and Management shall work with the University of North Carolina General Administration and the State Educational Assistance Authority to ensure that each program represented in code 16012 is identified and budgeted separately.
SECTION 9.8.(b)  The University of North Carolina General Administration shall report the new budget structure for budget code 16012, as approved by the Office of State Budget and Management, to the Fiscal Research Division of the General Assembly no later than March 31, 2008.

MANAGEMENT FLEXIBILITY CARRYFORWARD OF 2.5% OF A SPECIAL RESPONSIBILITY CONSTITUENT INSTITUTION OF THE UNIVERSITY OF NORTH CAROLINA'S AUTHORIZED BUDGET MAY BE USED FOR ONETIME CAPITAL PROJECTS
SECTION 9.9.  G.S. 116‑30.3 reads as rewritten:
"§ 116‑30.3.  Reversions.
(a)	Of the General Fund current operations appropriations credit balance remaining at the end of each fiscal year in each budget code of a special responsibility constituent institution, except for the budget code of the Area Health Education Centers of the University of North Carolina at Chapel Hill, any amount of the General Fund appropriation for that fiscal year may be carried forward by the institution to the next fiscal year and is appropriated for one‑time expenditures, to include nonrecurring funds to capital projects, that will not impose additional financial obligations on the State. Of the General Fund current operations appropriations credit balance remaining in the budget code of the Area Health Education Centers of the University of North Carolina at Chapel Hill, any amount of the General Fund appropriation for that fiscal year may be carried forward in that budget code to the next fiscal year and is appropriated for one‑time expenditures, to include nonrecurring funds to capital projects, that will not impose additional financial obligations on the State. However, the amount carried forward under this section shall not exceed two and one‑half percent (2 1/2%) of the General Fund appropriation. The Director of the Budget, under the authority set forth in G.S. 143C‑6‑2 shall establish the General Fund current operations credit balance remaining in each budget code of each institution. All capital projects, within the scope of this section that are new projects, less than three hundred thousand dollars ($300,000) may be established with the permission of the Director of the Budget. If these capital projects are new projects greater than three hundred thousand dollars ($300,000), they may only be established after consultation with the Joint Legislative Commission on Governmental Operations and permission from the Director of the Budget. The Director of the Budget may authorize the use of management flexibility carryforward funds to increase the cost of an existing capital project on a one time basis only.
(b)	Repealed by Session Laws 1998‑212, s. 11(b).
(c)	Repealed by Session Laws 1998‑212, s. 11(a).
(d)	Repealed by Session Laws 1998‑212, s. 11(b).
(e)	Notwithstanding G.S. 143C‑1‑2 of the General Fund current operations appropriations credit balance remaining in Budget Code 16010 of the Office of General Administration of The University of North Carolina, any amount of the General Fund appropriation for that fiscal year may be carried forward in that budget code to the next fiscal year and is appropriated for one‑time expenditures, to include nonrecurring funds to capital projects, that will not impose additional financial obligations on the State. However, the amount carried forward under this subsection shall not exceed two and one‑half percent (2 1/2%) of the General Fund appropriation. The Director of the Budget, under the authority set forth in G.S. 143C‑6‑2, shall establish the General Fund current operations credit balance remaining in Budget Code 16010 of the Office of General Administration of The University of North Carolina. The funds shall not be used to support positions. All capital projects, within the scope of this section that are new projects, less than three hundred thousand dollars ($300,000) may be established with the permission of the Director of the Budget. If these capital projects are new projects greater than three hundred thousand dollars ($300,000), they may only be established after consultation with the Joint Legislative Commission on Governmental Operations and permission from the Director of the Budget. The Director of the Budget may authorize the use of management flexibility carryforward funds to increase the cost of an existing capital project on a one time basis only."

GRADUATE NURSE SCHOLARSHIP LOANS FOR FULL‑TIME NURSING FACULTY IN THE NC COMMUNITY COLLEGE SYSTEM
SECTION 9.10.(a)  G.S. 90‑171.95(b) is amended to add the following subdivision:
"(3)	A scholarship loan for up to two years in the amount of fifteen thousand dollars ($15,000) per year, per recipient, to current nursing faculty in the North Carolina Community College System enrolled in a masters degree program in nursing education."
SECTION 9.10.(b)  Of the funds appropriated in this act for Graduate Nurse Scholarship Loans for full‑time nursing faculty, current community college nursing faculty should receive preference for 25 scholarships in 2007‑2008 and 50 scholarships in 2008‑2009.
SECTION 9.10.(c)  From funds appropriated in this act for Graduate Nurse Scholarship Loans, the North Carolina Nursing Scholars Commission shall grant stipends of up to fifteen thousand dollars ($15,000) per year, per recipient, to current nursing faculty in the North Carolina Community College System who have received a Graduate Nurse Scholarship Loan.  This stipend shall be prorated based on a student's enrollment.  If a recipient continues to teach at a North Carolina community college while enrolled, the total salary and stipend shall not exceed forty‑four thousand six hundred seventy‑two dollars ($44,672).

ESTABLISH THE EDUCATION ACCESS REWARDS NORTH CAROLINA SCHOLARS FUND (EARN)
SECTION 9.11.(a)  Article 23 of Chapter 116 of the General Statutes is amended by adding the following new section:
"§ 116‑209.26.  Education Access Rewards North Carolina Scholars Fund.
(a)	There is established the Education Access Rewards North Carolina Scholars Fund. The purpose of the Fund is to provide grants to certain eligible students to enable them to obtain an education beyond the high school level at certain postsecondary institutions in North Carolina without incurring student loans to meet their financial need during the first two years of their postsecondary education. It is the intent of the General Assembly that the postsecondary institutions enrolling eligible students who receive the grants will, to the extent practicable, assist the students in securing part‑time employment to help them gain experience in the workforce and earn money to defray some of the cost of their education. The State Education Assistance Authority (SEAA) shall administer the Fund.
(b)	Criteria for awarding the grants shall be developed by the SEAA and include all of the following:
(1)	The student must qualify as a legal resident of North Carolina and as a resident for tuition purposes in accordance with G.S. 116‑143.1.
(2)	Within seven months of the fiscal year in which the grant is to be disbursed, the student must have:
a.	Graduated from a North Carolina high school;
b.	Received a General Education Development (GED) Certificate from a North Carolina institution; or
c.	Completed a high school education in a home school setting meeting the qualifications and requirements under G.S. 115C‑564.
(3)	The student must meet enrollment standards by being admitted, enrolled, and classified as an undergraduate student in a matriculated status on a full‑time basis at an eligible postsecondary institution in North Carolina.
(4)	The student must be an eligible dependent student. For purposes of this subsection, an "eligible dependent student" is a student who:
a.	Either is classified as dependent for the Title IV programs or is a ward or dependent of the court; and
b.	Demonstrates total family income not exceeding two hundred percent (200%) of the applicable federal  poverty guideline, according to standards set by the SEAA and measured using data elements available to the SEAA from the Free Application for Federal Student Aid (FAFSA) or such other source as the SEAA may deem appropriate.
(5)	The student must meet all other eligibility requirements for the federal Pell Grant.
(6)	In order to retain eligibility for a grant for the student's second academic year, the student must meet achievement standards by maintaining satisfactory academic progress in a course of study in accordance with the standards and practices used for Title IV programs by the eligible postsecondary institution in which the student is enrolled.
(7)	The student may not receive a grant in an amount that, when combined with the federal Pell Grant, exceeds the student's cost of attendance as defined under Title IV. 
(8)	The student may not receive a grant under this section for more than the equivalent of two academic years.
(c)	The maximum grant for which a student is eligible under this section shall be four thousand dollars ($4,000) per academic year. In the event there are not sufficient funds to provide each eligible student with the maximum grant, it is the intent of the General Assembly that eligible students who have matriculated into an eligible postsecondary institution in North Carolina with at least one academic year of college credit receive the maximum grant amount and all other eligible students shall receive a reduced grant amount.
(d)	The following definitions apply to this section:
(1)	Academic year. – A period of time in which a student in matriculated status is expected to complete the equivalent of at least two semesters' or three quarters' academic work.
(2)	Eligible postsecondary institution. – A school that is:
a.	A constituent institution of The University of North Carolina as defined in G.S. 116‑2(4); or
b.	A community college as defined in G.S. 115D‑2(2).
(3)	Matriculated status. – Being recognized as a first‑time candidate for a degree or certificate, exclusive of any course credits earned while in high school, in a defined program of study at an eligible postsecondary institution.
(4)	Title IV. – Title IV of the Higher Education Act of 1965, as amended.
(e)	The grants provided for in this section shall be administered by the State Education Assistance Authority pursuant to rules adopted by the SEAA not inconsistent with this section.
(f)	The State Education Assistance Authority shall report to the Joint Legislative Education Oversight Committee by December 1, 2009, and by each December 1 thereafter, regarding the Fund and grants awarded from the Fund.
(g)	Grant funds unexpended shall remain available to the SEAA for future grants to be awarded under this section."
SECTION 9.11.(b)  Of the funds appropriated to the SEAA for the 2007‑2009 biennium, the sum of fifty million dollars ($50,000,000) for the 2007‑2008 fiscal year and the sum of one hundred million dollars ($100,000,000) shall be used to implement this act.  Notwithstanding the foregoing, no grant shall be disbursed to an eligible student before July 1, 2008. 

PART X. DEPARTMENT OF HEALTH AND HUMAN SERVICES

DHHS PAYROLL DEDUCTION FOR CHILD CARE SERVICES
SECTION 10.1.  Subject to rules adopted by the State Controller, an employee of the Department of Health and Human Services may authorize, in writing, the periodic deduction 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.

PHYSICIAN SERVICES
SECTION 10.2.  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.

LIABILITY INSURANCE
SECTION 10.3.(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 10.3.(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 10.3.(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.

NON‑MEDICAID REIMBURSEMENT CHANGES
SECTION 10.4.  Providers of medical services under the various State programs, other than Medicaid, offering medical care to citizens of the State shall be reimbursed at rates no more than those under the North Carolina Medical Assistance Program.  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.
The income eligibility level for the following Department of Health and Human Service programs shall be up to two hundred percent (200%) of the federal poverty guidelines, as reviewed annually by the United States Department of Health and Human Services and in effect on July 1 of each fiscal year:  The Medical Eye Care Program administered by the Division of Services for the Blind, the Vocational Rehabilitation programs administered by the Division of Vocational Rehabilitation  Services and Division of Services for the Blind, the Independent Living Rehabilitation Programs administered by the Divisions of Vocational Rehabilitation Services and Division of Services for the Blind, and the Assistive Technology Program administered by the Division of Rehabilitation Services.
Maximum net family annual income eligibility standards for services in other programs shall be as follows:
	Family Size	Other
	1	$4,200
	2	5,300
	3	6,400
	4	7,500
	5	7,900
	6	8,300
	7	8,800
	8	9,300
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.

SCHOOL‑BASED CHILD AND FAMILY TEAM INITIATIVE
SECTION 10.5.(a)  School‑Based Child and Family Team Initiative established. –
(1)	Purpose and duties. – There is established the School‑Based Child and Family Team Initiative. The purpose of the Initiative is to identify and coordinate appropriate community services and supports for children at risk of school failure or out‑of‑home placement in order to address the physical, social, legal, emotional, and developmental factors that affect academic performance. The Department of Health and Human Services, the Department of Public Instruction, the State Board of Education, the Department of Juvenile Justice and Delinquency Prevention, the Administrative Office of the Courts, and other State agencies that provide services for children shall share responsibility and accountability to improve outcomes for these children and their families. The Initiative shall be based on the following principles:
a.	The development of a strong infrastructure of interagency collaboration;
b.	One child, one team, one plan;
c.	Individualized strengths‑based care;
d.	Accountability;
e.	Cultural competence;
f.	Children at risk of school failure or out‑of‑home placement may enter the system through any participating agency;
g.	Services shall be specified, delivered, and monitored through a unified Child and Family Plan that is outcome‑oriented and evaluation‑based;
h.	Services shall be the most efficient in terms of cost and effectiveness and shall be delivered in the most natural settings possible;
i.	Out‑of‑home placements for children shall be a last resort and shall include concrete plans to bring the children back to a stable, permanent home, their schools, and their community; and
j.	Families and consumers shall be involved in decision making throughout service planning, delivery, and monitoring.
(2)	Program goals and services. – In order to ensure that children receiving services are appropriately served, the affected State and local agencies shall:
a.	Increase capacity in the school setting to address the academic, health, mental health, social, and legal needs of children.
b.	Ensure that children receiving services are screened initially to identify needs and assessed periodically to determine progress and sustained improvement in educational, health, safety, behavioral, and social outcomes.
c.	Develop uniform screening mechanisms and a set of outcomes that are shared across affected agencies to measure children's progress in home, school, and community settings.
d.	Promote practices that are known to be effective based upon research or national best practice standards.
e.	Review services provided across affected State agencies to ensure that children's needs are met.
f.	Eliminate cost shifting and facilitate cost‑sharing among governmental agencies with respect to service development, service delivery, and monitoring for participating children and their families.
g.	Participate in a local memorandum of agreement signed annually by the participating superintendent of the local LEA, directors of the county departments of social services and health, director of the local management entity, the chief district court judge, and the chief district court counselor.
(3)	Local level responsibilities. – In coordination with the North Carolina Child and Family Leadership Council (Council), the local board of education shall establish the School‑Based Child and Family Team Initiative (Initiative) at designated schools and shall appoint the Child and Family Team Leaders who shall be a school nurse and a school social worker. Each local management entity that has any selected schools in its catchment area shall appoint a Care Coordinator, and any department of social services that has a selected school in its catchment area shall appoint a Child and Family Team Facilitator. The Care Coordinators and Child and Family Team Facilitators shall have as their sole responsibility working with the selected schools in their catchment areas and shall provide training to school‑based personnel, as required. The Child and Family Team Leaders shall identify and screen children who are potentially at risk of academic failure or out‑of‑home placement due to physical, social, legal, emotional, or developmental factors. Based on the screening results, responsibility for developing, convening, and implementing the Child and Family Team Initiative is as follows:
a.	School personnel shall take the lead role for those children and their families whose primary unmet needs are related to academic achievement.
b.	The local management entity shall take the lead role for those children and their families whose primary unmet needs are related to mental health, substance abuse, or developmental disabilities and who meet the criteria for the target population established by the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services.
c.	The local department of public health shall take the lead role for those children and their families whose primary unmet needs are health‑related.
d.	Local departments of social services shall take the lead for those children and their families whose primary unmet needs are related to child welfare, abuse, or neglect.
e.	The chief district court counselor shall take the lead for those children and their families whose primary unmet needs are related to juvenile justice issues.
A representative from each named or otherwise identified publicly supported children's agency shall participate as a member of the Team as needed. Team members shall coordinate, monitor, and assure the successful implementation of a unified Child and Family Plan. 
(4)	Reporting requirements. – School‑Based Child and Family Team Leaders shall provide data to the Council for inclusion in their report to the North Carolina General Assembly. The report shall include the following:
a.	The number of and other demographic information on children screened and assigned to a team and a description of the services needed by and provided to these children;
b.	The number of and information about children assigned to a team who are placed in programs or facilities outside the child's home or outside the child's county and the average length of stay in residential treatment;
c.	The amount and source of funds expended to implement the Initiative;
d.	Information on how families and consumers are involved in decision making throughout service planning, delivery, and monitoring;
e.	Other information as required by the Council to evaluate success in local programs and ensure appropriate outcomes; and
f.	Recommendations on needed improvements.
(5)	Local advisory committee. – In each county with a participating school, the superintendent of the local LEA shall either identify an existing cross agency collaborative or council, or shall form a new group, to serve as a local advisory committee to work with the Initiative. Newly formed committees shall be chaired by the superintendent and one other member of the committee to be elected by the committee. The local advisory committee shall include the directors of the county departments of social services and health, the directors of the local management entity, the chief district court judge, the chief district court counselor, and representatives of other agencies providing services to children, as designated by the Committee. The members of the Committee shall meet as needed to monitor and support the successful implementation of the School‑Based Child and Family Team Initiative. 
The Local Child and Family Team Advisory Committee may designate existing cross agency collaboratives or councils as working groups or to provide assistance in accomplishing established goals.
SECTION 10.5.(b)  North Carolina Child and Family Leadership Council. – 
(1)	Leadership Council established; location. – There is established the North Carolina Child and Family Leadership Council (Council). The Council shall be located within the Department of Administration for organizational and budgetary purposes.
(2)	Purpose. – The purpose of the Council is to review and advise the Governor in the development of the School‑Based Child and Family Team Initiative and to ensure the active participation and collaboration in the Initiative by all State agencies and their local counterparts providing services to children in participating counties in order to increase the academic success and reduce out‑of‑home and out‑of‑county placements of children at risk of academic failure.
(3)	Membership. – The Superintendent of Public Instruction and the Secretary of Health and Human Services shall serve as cochairs of the Council. Council membership shall include the Secretary of the Department of Juvenile Justice and Delinquency Prevention, the Chairman of the State Board of Education, the Director of the Administrative Office of the Courts, and other members as appointed by the Governor.
(4)	The Council shall:
a.	Sign an annual memorandum of agreement (MOA) among the named State agencies to define the purposes of the program and to ensure that program goals are accomplished.
b.	Resolve State policy issues, as identified at the local level, which interfere with effective implementation of the School‑Based Child and Family Team Initiative.
c.	Direct the integration of resources, as needed, to meet goals and ensure that the Initiative promotes the most effective and efficient use of resources and eliminates duplication of effort.
d.	Establish criteria for defining success in local programs and ensure appropriate outcomes.
e.	Develop an evaluation process, based on expected outcomes, to ensure the goals and objectives of this Initiative are achieved.
f.	Review progress made on integrating policies and resources across State agencies, reaching expected outcomes, and accomplishing other goals.
g.	Report semiannually, on January 1 and July 1, on progress made and goals achieved to the Office of the Governor, the Joint Appropriations Committees and Subcommittees on Education, Justice and Public Safety, and Health and Human Services, and the Fiscal Research Division of the Legislative Services Office.
The Council may designate existing cross agency collaboratives or councils as working groups or to provide assistance in accomplishing established goals.
SECTION 10.5.(c)  Department of Health and Human Services. – The Secretary of the Department of Health and Human Services shall ensure that all agencies within the Department collaborate in the development and implementation of the School‑Based Child and Family Team Initiative and provide all required support to ensure that the Initiative is successful.
SECTION 10.5.(d)  Department of Juvenile Justice and Delinquency Prevention. – The Secretary of the Department of Juvenile Justice and Delinquency Prevention shall ensure that all agencies within the Department collaborate in the development and implementation of the School‑Based Child and Family Team Initiative and provide all required support to ensure that the Initiative is successful.
SECTION 10.5.(e)  Administrative Office of the Courts. – The Director of the Administrative Office of the Courts shall ensure that the Office collaborates in the development and implementation of the School‑Based Child and Family Team Initiative and shall provide all required support to ensure that the Initiative is successful.
SECTION 10.5.(f)  Department of Public Instruction. – The Superintendent of Public Instruction shall ensure that the Department collaborates in the development and implementation of the School‑Based Child and Family Team Initiative and shall provide all required support to ensure that the Initiative is successful.

FUNDS FOR SCHOOL NURSES
SECTION 10.6.(a)  Of the funds appropriated to the Department of Health and Human Services for school nurses, there shall be no supplanting of local, State, or federal 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.
SECTION 10.6.(b)  All school nurses funded with State funds shall participate, as needed, in child and family teams.

COMPREHENSIVE TREATMENT SERVICES PROGRAM
SECTION 10.7.(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 youth 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 10.7.(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 10.7.(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 10.7.(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 the 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 10.7.(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 10.7.(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.

AREA AUTHORITY AND COUNTY PROGRAM CRISIS REGIONS
SECTION 10.8.  LMEs shall report monthly to the Department regarding the use of the funds appropriated for crisis services, whether there has been a reduction in the use of State psychiatric hospitals for acute admissions, and any remaining gaps in local and regional crisis services.

LME ADMINISTRATIVE COSTS
SECTION 10.9.  To maximize the use of community services funds for the delivery of mental health, developmental disabilities, and substance abuse services, and to pursue a more efficient administration of community services envisioned in the system reform initiative, the Secretary, after consultation with the N.C. Council on Community Programs, shall develop a plan to meet the administrative needs of Local Management Entities (LME) within the existing resources of the LME administrative budget authorized by this act.
Prior to implementation, the Secretary shall report the plan to the chairs of the House Appropriations Subcommittee on Health and Human Services, Senate Appropriations Subcommittee on Health and Human Services, and the Joint Legislative Oversight Committee on Mental Health, Developmental Disabilities, and Substance Abuse Services.

DEVELOPMENTAL CENTER DOWNSIZING
SECTION 10.10.(a)  In accordance with the Department of Health and Human Services' plan for mental health, developmental disabilities, and substance abuse services system reform, the Department shall ensure that the downsizing of the State's regional Developmental Centers is based upon individual needs and the availability of community‑based services with a targeted goal of four percent (4%) each year. The Department shall implement cost‑containment and reduction strategies to ensure the corresponding financial and staff downsizing of each Developmental Center. The Department shall manage the client population of the Developmental Centers in order to ensure that placements for ICF‑MR level of care shall be made into appropriate community based settings. Admission to a State‑operated ICF‑MR facility is permitted only as a last resort and only upon approval of the Department. The corresponding budgets for each of the Developmental Centers shall be reduced, and positions shall be eliminated as the census of each facility decreases. 
SECTION 10.10.(b)  The Department of Health and Human Services shall apply any savings in State appropriations 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. 143C‑9‑2;
(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 Developmental Centers, including the savings in direct State appropriations in the budgets of the Developmental 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 Developmental Centers from the ICF‑MR line in Medicaid to the CAP‑MR/DD line.

DHHS POLICIES AND PROCEDURES IN DELIVERING COMMUNITY MENTAL HEALTH, DEVELOPMENTAL DISABILITIES, AND SUBSTANCE ABUSE SERVICES
SECTION 10.11.  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)	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.
(3)	The provision of services in the community to adults remaining in and being placed in State institutions addressed in Olmstead v. L.C. & E.W.
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. The funds may be used to facilitate the development and implementation of regional crisis facilities and local crisis services and other needed community services.

NC Kids' care
SECTION 10.12.(a)  The Division of Medical Assistance, Department of Health and Human Services shall develop and implement a limited benefit medical assistance program, NC Kids' Care, to expand coverage to children in families with incomes between two hundred percent (200%) and three hundred percent (300%) of the federal poverty guidelines, as revised April 1 of each year.  Except as otherwise provided by this section, the Division of Medical Assistance may use the recommendations of the North Carolina Institute of Medicine's Task Force on Covering the Uninsured, April 2006, as the basis for developing the program, specifying covered services, setting coverage limitations, and establishing cost‑sharing requirements.  The Division shall apply for any federal waivers and submit any State plan amendments required to implement this section.
SECTION 10.12.(b)  The limited benefit package offered shall emphasize ambulatory care, enroll beneficiaries in Community Care of North Carolina, and provide incentives to participate in disease and case management services when appropriate.  Coverage for inpatient hospital services shall not exceed ten thousand dollars ($10,000) annually.  The limited benefit package shall require enrollees to contribute to the cost of their care through the use of deductibles, co‑payments, coinsurance, and premiums to ensure cost‑effective use of health care services.  The Division shall establish sliding‑scale premiums based on income for enrollees, provided that such premiums do not exceed two percent (2%) of the individual's or four percent (4%) of the family's income.
SECTION 10.12.(c)  The Division shall take steps to minimize "crowd out," whereby eligible applicants terminate private or employer‑sponsored health insurance coverage to enroll in NC Kids' Care, and may require applicants to demonstrate that they were uninsured for a specified period of time set by the Division, not to exceed six months, immediately prior to enrolling.
SECTION 10.12.(d)  The limited benefit package shall not provide coverage for nursing home care, home health services, personal care services, or dental services.
SECTION 10.12.(e)  Enrollment shall not exceed 12,100 children for each year of the 2007‑2009 fiscal biennium. 
SECTION 10.12.(f)  The nonfederal costs of NC Kids' Care shall be paid with State funds and enrollee premiums.  Counties shall not be required to share in the nonfederal costs of this program.
SECTION 10.12.(g)  The Department of Health and Human Services may contract with a third party to administer this program.  
SECTION 10.12.(h)  Notwithstanding G.S. 143C‑1‑2(b), any unspent or unencumbered program or administrative funds appropriated for the 2007‑2008 fiscal year to implement the requirements of this section may be carried forward by the Department of Health and Human Services for use during the 2008‑2009 fiscal year as provided by this subsection.  The Department may use funds carried forward under this subsection to cover administrative or other costs of NC Kids' Care.  Prior to implementing this subsection, the Department shall demonstrate to the Office of State Budget and Management that there is a reasonable expectation that any funds carried forward can be spent or encumbered during the 2008‑2009 fiscal year.  Any funds carried forward under this subsection that remain unspent or unencumbered at the end of the 2008‑2009 fiscal year shall revert.
SECTION 10.12.(i)  This section becomes effective January 1, 2008, or upon approval of all required federal waivers and State plan amendments, whichever is later.

CODIFY LONG‑STANDING MEDICAID PROVISIONS/Funds and allocations
SECTION 10.13.(a)  Part 6 of Article 2 of Chapter 108A of the General Statutes is amended by adding a new section to read:
"§ 108A‑54.1A.  Use of funds and allocation of costs.
(a)	Use of Funds. – Funds appropriated to the Department of Health and Human Services for services provided in accordance with Title XIX of the Social Security Act, hereafter referred to as Medicaid,  are for both the categorically needy and the medically needy.
(b)	Allocation of Nonfederal Cost of Medicaid. – Except as otherwise provided, 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 10.13.(b)  G.S. 108A‑54.2 reads as rewritten:
"§ 108A‑54.2.  Medical policy.
(a)	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.
(b)	Notwithstanding subsection (a) of this section, 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.
(c)	Notwithstanding subsection (a) of this section, 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."

CODIFY LONG‑STANDING MEDICAID PROVISIONS/ELIGIBILITY
SECTION 10.13A.  Article 2 of Chapter 108A of the General Statutes is amended by adding a new section to read:
"§ 108A‑54.3.  Eligibility.
Eligibility for Medicaid shall be determined in accordance with the following:
(1)	Medicaid and Work First Family Assistance
a.	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‑WFFA*	Medically Needy
Standard of Need		Families and Children
and Families	WFFA*	and
Family	and Children	Payment	AA,AB,AD*
Size	Income Level	Level	Income Level

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).

b.	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. 
c.	The Department of Health and Human Services shall provide Medicaid coverage to 19‑ and 20‑year‑olds in accordance with federal rules and regulations.
d.	Medicaid enrollment of categorically needy families with children shall be continuous for one year without regard to changes in income or assets.
(2)	For the following Medicaid eligibility classifications for which the federal poverty guidelines are used as income limits for eligibility determinations, the income limits will be updated each April 1 immediately following publication of federal poverty guidelines. The Department of Health and Human Services, Division of Medical Assistance, shall provide Medicaid coverage to the following:  
a.	All elderly, blind, and disabled people who have incomes equal to or less than one hundred percent (100%) of the federal poverty guidelines.
b.	Pregnant women with incomes equal to or less than one hundred eighty‑five percent (185%) of the federal poverty guidelines and without regard to resources. 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.
c.	Infants and children under the age of six with family incomes equal to or less than two hundred percent (200%) of the federal poverty guidelines and without regard to resources. 
d.	Children aged six through 18 with family incomes equal to or less than the federal poverty guidelines and without regard to resources.
e.	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 guidelines.
(3)	The Department of Health and Human Services, Division of Medical Assistance, shall provide Medicaid coverage to adoptive children with special or rehabilitative needs regardless of the adoptive family's income.
(4)	The Department of Health and Human Services, Division of Medical Assistance, shall provide Medicaid coverage to "independent foster care adolescents", ages 18, 19, and 20, as defined in 42 U.S.C. § 1396d(w)(1), without regard to the adolescent's assets, resources, or income levels.
(5)	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 services, 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"

CODIFY LONG‑STANDING MEDICAID PROVISIONS/SERVICES
SECTION 10.13B.  Article 2 of Chapter 108A of the General Statutes is amended by adding a new section to read:
"§ 108A‑54.4.  Services and payment bases.
Funds appropriated for Medicaid services shall be expended in accordance with the following schedule of services and payment bases. Unless otherwise provided, services and payment bases will be as prescribed in the State Plan as established by the Department of Health and Human Services and may be changed with the approval of the Director of the Budget.
(1)	Hospital inpatient.
(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. – 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. 
(4)	Physicians, certified nurse midwife services, nurse practitioners. – Fee schedules as developed by the Department of Health and Human Services.
(5)	Community Alternative Program, EPSDT Screens. – Payments in accordance with rate schedule developed by the Department of Health and Human Services.
(6)	Home health and related services, durable medical equipment. – Payments according to reimbursement plans developed by the Department of Health and Human Services.
(7)	Hearing aids. – Wholesale cost plus dispensing fee to provider.
(8)	Rural health clinical services. – Provider‑based, reasonable cost; non‑provider‑based, single‑cost reimbursement rate per clinic visit.
(9)	Family planning. – Negotiated rate for local health departments. For other providers see specific services, e.g. hospitals, physicians.
(10)	Independent laboratory and X‑ray services. – Uniform fee schedules as developed by the Department of Health and Human Services.
(11)	Ambulatory surgical centers.
(12)	Private duty nursing, clinic services, prepaid health plans.
(13)	Intermediate care facilities for the mentally retarded.
(14)	Chiropractors, podiatrists, optometrists, dentists.
(15)	Limitations on dental coverage. – Dental services shall be provided on a restricted basis in accordance with criteria adopted by the Department to implement this subdivision. 
(16)	Medicare Buy‑In. – Social Security Administration premium.
(17)	Ambulance services. – Uniform fee schedules as developed by the Department of Health and Human Services. Public ambulance providers will be reimbursed at cost.
(18)	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.
(19)	Medicare crossover claims. – 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.
(20)	Physical therapy, occupational 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, occupational therapy, and speech therapy services are subject to prior approval and utilization review.
(21)	Personal care services.
(22)	Case management services. – Reimbursement in accordance with the availability of funds to be transferred within the Department of Health and Human Services.
(23)	Hospice.
(24)	Medically necessary prosthetics or orthotics. – In order to be eligible for reimbursement, providers must be licensed or certified by the occupational licensing board or the certification authority having authority over the provider's license or certification. Medically necessary prosthetics and orthotics are subject to prior approval and utilization review.
(25)	Health insurance premiums.
(26)	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.
(27)	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.
(28)	Drugs. – Reimbursements. Reimbursements shall be available for prescription drugs 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. Payments for drugs are subject to the provisions of this subdivision 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.
Limitations on quantity. – The Department of Health and Human Services may establish authorizations, limitations, and reviews for specific drugs, drug classes, brands, or quantities in order to manage effectively the Medicaid pharmacy program, except that the Department shall not impose limitations on brand‑name medications for which there is a generic equivalent in cases where 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". 
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).
Prior authorization. – 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.
(29)	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, licensed clinical addictions specialists, and licensed 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.	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."

CODIFY LONG‑STANDING MEDICAID PROVISIONS/PROVIDERS
SECTION 10.13C  Article 2 of Chapter 108A of the General Statutes is amended by adding a new section to read:
"§ 108A‑54.5.  Provider payments and visits.
(a)	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.
(b)	Reimbursement is available for up to 30 visits per recipient per year to the following services: hospital outpatient providers, physicians, nurse practitioners, nurse midwives, clinics, health departments, optometrists, chiropractors, and podiatrists. The Department of Health and Human Services shall adopt medical policies, in accordance with Section 108A‑54.2 of this Part, to distribute the allowable number of visits for each service or each group of services consistent with federal law. In addition, a threshold of some number of visits shall be established by the department for these services. Primary care providers and/or the appropriate CCNC network shall be notified when a patient is nearing the established threshold to facilitate care coordination and intervention as needed. 
Prenatal services, all EPSDT children, emergency room services, 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."

CODIFY LONG‑STANDING MEDICAID PROVISIONS/EXCEPTIONS
SECTION 10.13D.  Article 2 of Chapter 108A of the General Statutes is amended by adding a new section to read:
"§ 108A‑54.6.  Exceptions, limitations, authorization and co‑payments.
(a)	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. 
(b)	The Department of Health and Human Services may establish co‑payments up to the maximum permitted by federal law and regulation."

CODIFY LONG‑STANDING MEDICAID PROVISIONS/RULES/REPORTS
SECTION 10.13E.  Article 2 of Chapter 108A of the General Statutes is amended by adding a new section to read:
"§ 108A‑54.7.  Rules, reports, and other matters.
(a)	Rules. – 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.
(b)	Changes to Medicaid Program; Reports. – The Department shall report 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. The reports shall be submitted to the House of Representatives Appropriations Subcommittee for Health and Human Services, the Senate Appropriations Committee on Health and Human Services, the Joint Legislative Health Care Oversight Committee, and the Fiscal Research Division of the Legislative Services Office."

RECODIFY MEDICAID BUY‑IN/CHANGE EFFECTIVE DATE
SECTION 10.13F.(a)  The Revisor of Statutes shall recodify G.S. 108A‑54.1 as G.S. 108A‑54.8.
SECTION 10.13F.(b)  Section 10.18(c) of S.L. 2005‑276 reads as rewritten:
"SECTION 10.18.(c)  Subsection (b) of this section becomes effective July 1, 2006. Subsection (a) of this section becomes effective 12 months after the Medicaid Management Information System or its replacement becomes operational and stabilized. The remainder of this section is effective when it becomes law."

PROPOSED CHANGES TO MEDICAL POLICY
SECTION 10.14.  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).

CONTINUE EFFORTS TO EXPAND COMMUNITY CARE AND IMPROVE QUALITY OF CARE FOR AGED, BLIND, AND DISABLED MEDICAID RECIPIENTS
SECTION 10.15.  The Department of Health and Human Services shall continue its efforts to expand the scope of the 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. The initiatives may include one or more pilot projects to control costs and improve quality of care for the aged, blind, and disabled recipients of Medicaid.  Pilot projects or the expansion of pilot projects shall be approved by the Office of State Budget and Management prior to implementation.  

IMPLEMENT ELECTRONIC QUALITY PRESCRIPTION MANAGEMENT PROGRAM
SECTION 10.16.  The Department of Health and Human Services, Division of Medical Assistance, shall implement an Electronic Quality Prescription Management program for prescription drugs through the use of personal data assistance (PDA) technology.  The division may designate CCNC through the Office of Rural Health and Community Care as the lead program to implement this section.  Notwithstanding G.S. 143C‑6‑4(b), the division may transfer cost‑containment funds, in accordance with Section 10.17 of this act to the Office of Rural Health and Community Care to purchase PDAs, connectivity, software, and other related costs.

MEDICAID COST‑CONTAINMENT ACTIVITIES
SECTION 10.17.  The Department of Health and Human Services may use not more than five million dollars ($5,000,000) in the 2007‑2008 fiscal year and not more than five million dollars ($5,000,000) in the 2008‑2009 fiscal year in Medicaid funds budgeted for program services to support the cost of administrative activities when cost‑effectiveness and savings are demonstrated.  Cost savings must be realized in the same fiscal year that the proposed expenditures will occur.  The funds shall be used to support activities that will contain the cost of the Medicaid program.
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, contracting for services, hiring additional staff, providing grants through the Office of Rural Health and Community Care to plan, develop, and implement cost‑containment programs, 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.

EXTEND IMPLEMENTATION OF COMMUNITY ALTERNATIVE PROGRAMS REIMBURSEMENT SYSTEM
SECTION 10.18.  Full implementation for the Community Alternatives Programs reimbursement system shall be not later than 12 months after the date of which the replacement Medicaid Management Information System becomes operational and stabilized.

COUNTY MEDICAID COST SHARE FOR CERTAIN SERVICES
SECTION 10.19.(a)  Effective July 1, 2000, the county share of the cost of Medicaid services currently and previously provided by Local Management Entities 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 10.19.(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.

DISPOSITION OF DISPROPORTIONATE SHARE RECEIPTS
SECTION 10.20.  For each year of the 2007‑2009 fiscal biennium, the Department of Health and Human Services, Division of Medical Assistance, shall receive funds associated with Disproportionate Share Payments from State hospitals and 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.

DISPROPORTIONATE SHARE GAIN
SECTION 10.21.(a)  G.S. 143C‑9‑1 reads as rewritten:
"§ 143C‑9‑1.  Medicaid Special Fund; transfers to Department of Health and Human Services.
(a)	The Medicaid Special Fund is established as a nonreverting special fund in the Department of Health and Human Services. The Medicaid Special Fund shall consist of the federal Medicaid disproportionate share monies remaining after payments are made to hospitals. Annually, the Department shall transfer the disproportionate share gain, after payments are made to hospitals, to the Medicaid Special Fund. Funds deposited to the Medicaid Special Fund shall only be available for expenditure upon an act of appropriation of the General Assembly.
(b)	Political subdivisions may appropriate funds directly to the Department of Health and Human Services for Medicaid programs. Other public agencies and private sources may transfer funds to the Department for Medicaid programs. The Department may accept unconditional and unrestricted donations of such funds. Notwithstanding the provisions of this Article which might forbid such transfer or donation, the University of North Carolina Hospitals at Chapel Hill may transfer funds as provided by the previous sentence of this section.
(c)	Contributed funds shall be subject to the Department of Health and Human Services administrative control and shall be allocated only as specifically provided in the Current Operations Appropriations Act, except such contributions shall not reduce State general revenue funding. At the end of any fiscal year, the unobligated balance of any such funds shall not revert to the General Fund, but shall be reappropriated for these purposes in the next fiscal year."
SECTION 10.21.(b) This section becomes effective July 1, 2007.

MEDICAID SPECIAL FUND TRANSFER
SECTION 10.22.  Of the funds transferred to the Department of Health and Human Services for Medicaid programs pursuant to G.S. 143C‑9‑1, there is appropriated from the fund the sum of fifty‑three million dollars ($53,000,000) for the 2007‑2008 fiscal year and the sum of fifty‑three million dollars ($53,000,000) for the 2008‑2009 fiscal year.  These funds shall be allocated as prescribed by G.S. 143C‑9‑1(b) for Medicaid programs. Notwithstanding the prescription in G.S. 143C‑9‑1(b) that these funds not reduce State general revenue funding, these funds shall replace the reduction in general revenue funding effected in this act. The Department may also use funds in the Medicaid Special Fund to fund the settlement of the Disproportionate Share Hospital payment audit issues between the Department of Health and Human Services and the federal government related to fiscal years 1997‑2002, and funds are hereby appropriated from the fund for the 2007‑2009 fiscal biennium for this purpose.

MEDICAID ESTATE RECOVERY TO INCLUDE LIENS ON REAL PROPERTY
SECTION 10.23.(a)  G.S. 108A‑70.5 reads as rewritten:
"§ 108A‑70.5.  Medicaid Estate Recovery Plan.
(a)	There is established in the Department of Health and Human Services, the Medicaid Estate Recovery Plan, as required by the Omnibus Budget Reconciliation Act of 1993, to recover from the estates of recipients of medical assistance an equitable amount of the State and federal shares of the cost paid the recipient. The Department shall administer the program in accordance with applicable federal law and regulations, including those under Title XIX of the Social Security Act, 42 U.S.C. § 1396(p). 
(b)	As used in this section:
(1)	"Medical assistance" means medical care services paid for by the North Carolina Medicaid Program on behalf of the recipient:
a.	If the recipient is receiving these medical care services as an inpatient in a nursing facility, intermediate care facility for the mentally retarded, or other medical institution, and cannot reasonably be expected to be discharged to return home; or
b.	If the recipient is 55 years of age or older and is receiving  these medical care services, including related hospital care and prescription drugs, for nursing facility services, personal care services, or home‑ and community‑based services.
1.	Nursing facility services.
2.	Home and community‑based services.
3.	Hospital care and prescription drugs related to nursing facility services or home and community‑based services.
4.	Personal care services.
5.	Medicare premiums.
6.	Private duty nursing.
7.	Home health aide services.
8.	Home health therapy.
9.	Speech pathology services.
(2)	"Estate" means all the real and personal property considered assets of the estate available for the discharge of debt pursuant to G.S. 28A‑15‑1.
	
(c)	The amount the Department recovers from the estate of any recipient shall not exceed the amount of medical assistance made on behalf of the recipient and shall be recoverable only for medical care services prescribed in subsection (b) of this section. The Department is a fifth‑class creditor, as prescribed in G.S. 28A‑19‑6, for purposes of determining the order of claims against an estate; provided, however, that judgments in favor of other fifth‑class creditors docketed and in force before the Department seeks recovery for medical assistance shall be paid prior to recovery by the Department.
(d)	The Department of Health and Human Services shall adopt rules pursuant to Chapter 150B of the General Statutes to implement the Plan, including rules to waive whole or partial recovery when this recovery would be inequitable because it would work an undue hardship or because it would not be administratively cost‑effective and rules to ensure that all recipients are notified that their estates are subject to recovery at the time they become eligible to receive medical assistance.
(e)	Regarding trusts that contain the assets of an individual who is disabled as defined in Title 19 of Section 1014(a)(3) of the Social Security Act, as amended, if the trust is established and managed by a nonprofit association, to the extent that amounts remaining in the beneficiary's account upon the death of the beneficiary are not retained by the nonprofit association, the trust pays to the Department from these remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the North Carolina Medicaid Program."
SECTION 10.23.(b)  G.S. 108A‑70.6 through G.S. 108A‑70.9 are repealed.
SECTION 10.23.(c)  This section becomes effective July 1, 2007.

REQUIRED DATA SHARING BY PRIVATE HEALTH INSURERS
SECTION 10.23A.  G.S. 108A‑55.4 reads as rewritten:
"§ 108A‑55.4.  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 and any contracted parties working on behalf of the Department of Health and Human Services.
(2)	"Division" means the Division of Medical Assistance of the Department of Health and Human  Services and any contracted parties working on behalf of the Department of Health and Human Services.
(3)	"Health insurer" includes self‑insured plans, group health plans (as defined in section 607(1) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1167(1), service benefit plans, managed care organizations, or other parties that are, by statute, contract, or agreement, legally responsible for payment of a claim for a health care item or service as a condition of doing business in the State.
(4)	"Medical assistance" means medical assistance benefits provided under the State Medical Assistance Plan.
(5)	Subscriber is defined as the policyholder of the insurance.
(6)	Applicant or recipient is defined as any applicant or present or former applicant or recipient of medical assistance benefits.
(7)	Request is defined as any inquiry by the Department, the Division, or both for the purpose of determining the existence of insurance where the Department or Division or both may have expended public assistance benefits or to enforce or establish child or medical support enforcement orders.
(b)	Health insurers, and pharmacy benefit managers regulated as third‑party administrators under Article 56 of Chapter 58 of the General Statutes, shall provide, with respect to any applicant or recipient, upon request of the Division, information to determine during what period the individual or the individual's spouse or dependents may be (or may have been) covered by a health insurer and the nature of the coverage that is or was provided by the health insurer (including the subscriber's name, subscriber's address, and subscriber's identification number, identifying number of the plan, the applicant's or recipient's social security number, the applicant's or recipient's name, and the applicant's or recipient's date of birth) in a manner prescribed by the Division. Notwithstanding any other provision of law, and in addition to the requirements set forth in subdivision(b)(5) of this subsection, every health insurer shall also provide, not more frequently than twelve times in a year and at no cost, to the Department of Health and Human Services, Division of Medical Assistance, upon its request, information, as necessary so that the Division may (i) identify individuals who may also be applicants or recipients of medical assistance covered under the benefit plans of the health insurer; (ii) determine the period during which the individual, the individual's spouse, or the individual's dependents may be or may have been covered by the health benefit plan; and (iii) determine the nature of the coverage. To facilitate the Division in obtaining this and other related information, every health insurer shall:
	(2)	Respond to the request for information within 90 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.
(3)	Accept the Division's right of recovery and the assignment to the Division of any right of an individual or other entity to payment from the party for an item or service for which payment has been made under the State Medical Assistance Plan.
(4)	Respond to any inquiry by the Division regarding a claim for payment for any health care item or service that is submitted not later than three years after the date of the provision of the health care item or service.
(5)	Agree not to deny a claim submitted by the Division solely on the basis of the date of submission of the claim, the type of format of the claim form, or a failure to present proper documentation at the point‑of‑sale that is the basis of the claim, if:
a.	The claim is submitted by the Division within the three‑year period beginning on the date on which the item or service was furnished; and
b.	Any action by the Division to enforce its rights with respect to such claim is commenced within six years of the Division's submission of the claim.
(6)	Cooperate with the Division's requests to determine a named individual's eligibility or payment information under the benefit plan of the health insurer.
(c)	A health insurer which complies with G.S. 108A‑55.4 shall not be liable for its compliance in any civil or criminal actions or proceedings."

SUBROGATION RIGHTS FOR MEDICAID AND NC HEALTH CHOICE
SECTION 10.24.(a)  G.S. 108A‑57(a) reads as rewritten:
"(a)	Notwithstanding any other provisions of the law, to the extent of payments under this Part, the State, or the county providing medical assistance benefits, shall be subrogated to all rights of recovery, contractual or otherwise, of the beneficiary of this assistance, or of the beneficiary's personal representative, heirs, or the administrator or executor of the estate, against any person liable for payment for medical care. The county attorney, or an attorney retained by the county or the State or both, or an attorney retained by the beneficiary of the assistance if this attorney has actual notice of payments made under this Part shall enforce this section. 
Any action or claim brought by the beneficiary, including a beneficiary who is a minor, whether or not the beneficiary is represented by an attorney, for damages arising out of any accident or injury for which medical assistance benefits have been paid shall include a claim for all medical payments made under this Part.
Any proceeds obtained by a beneficiary not represented by an attorney, including a beneficiary who is a minor, by settlement, release, or otherwise from a third party by reason of injury or death, shall be designated as medical damages payable to the Department up to the full amount of assistance paid on behalf of the beneficiary by the Department, or shall be designated as medical damages payable to the Department up to two‑thirds of the gross amount of the recovery, whichever is less.
Any proceeds obtained by a beneficiary who is represented by an attorney, including a beneficiary who is a minor, by settlement, release, or otherwise from a third party by reason of injury or death, shall be designated as medical damages payable to the Department up to the full amount of assistance paid on behalf of the beneficiary by the Department or up to one‑third of the gross amount of the recovery, whichever is less. Any attorney representing a beneficiary, including a beneficiary who is a minor, shall distribute to the Department the amount owed the Department under this Part as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered.
It shall be the duty of the beneficiary, including a beneficiary who is a minor, any attorney who represents the beneficiary, and any person who is responsible or liable for payment of the medical damages to ensure that this recovery for medical damages is distributed to the Department in a timely fashion.
The United States and the State of North Carolina shall be entitled to shares in each net recovery under this section. Their shares shall be promptly paid under this section and their proportionate parts of such sum shall be determined in accordance with the matching formulas in use during the period for which assistance was paid to the recipient."
SECTION 10.24.(b)  G.S. 135‑40.13A reads as rewritten:
"§ 135‑40.13A.  Liability of third person; right of subrogation; right of first recovery.
(a)	The Plan or the Health Insurance Program for Children, otherwise known as NC Health Choice shall have the right of subrogation upon all of the Plan member's or NC Health Choice recipient's right to recover from a liable third party for payment made under the Plan or NC Health Choice, for all medical expenses, including provider, hospital, surgical, or prescription drug expenses, to the extent those payments are related to an injury caused by a liable third party. Those benefits subrogated on behalf of NC Health Choice shall be returned to the Division of Medical Assistance. The Plan member or NC Health Choice recipient shall do nothing to prejudice these rights. The Plan or NC Health Choice has the right to first recovery on any amounts so recovered, whether by the Plan or the Plan member, or by NC Health Choice or the NC Health Choice recipient, and whether recovered by litigation, arbitration, mediation, settlement, or otherwise. Notwithstanding any other provision of law to the contrary, the recovery limitation set forth in G.S. 28A‑18‑2 shall not apply to the Plan's or NC Health Choice's right of subrogation of Plan members or recipients of NC Health Choice.(b)	If the Plan is precluded from exercising its right of subrogation, it may exercise its rights of recovery pursuant to G.S. 135‑40.13(g). If the Plan or NC Health Choice recovers damages from a liable third party in excess of the claims paid, any excess will be paid to the member or NC Health Choice recipient, less a proportionate share of the costs of collection.
(c)	In the event a Plan member or a Health Choice recipient recovers any amounts from a liable third party to which the Plan or NC Health Choice is entitled under this section, the Plan or NC Health Choice may recover the amounts directly from the Plan Member or NC Health Choice recipient. The Plan or NC Health Choice has a lien, for not more than the value of claims paid related to the liability of the third party, on any damages subsequently recovered against the liable third party. If the Plan member or NC Health Choice recipient fails to pursue the remedy against a liable third party, the Plan or NC Health Choice is subrogated to the rights of the Plan member or NC Health Choice recipient and is entitled to enforce liability in the Plan's or NC Health Choice's own name or in the name of the Plan member or NC Health Choice recipient for the amount paid by the Plan or NC Health Choice.
(d)	In no event shall the Plan's lien exceed fifty percent (50%) of the total damages recovered by the Plan member, exclusive of the Plan member's reasonable costs of collection as determined by the Plan in the Plan's sole discretion. The decision by the Plan as to the reasonable cost of collection is conclusive and is not a "final agency decision" for purposes of a contested case under Chapter 150B of the General Statutes. Notice of the Plan's lien or right to recovery shall be presumed when a Plan member is represented by an attorney, and the attorney shall disburse proceeds pursuant to this section.
(e)	Any proceeds obtained by an NC Health Choice recipient not represented by an attorney by settlement, release, or otherwise from a third party by reason of injury or death, shall be designated as medical damages payable to the Division of Medical Assistance, Department of Health and Human Services ("Division") up to the full amount of assistance paid on behalf of the NC Health Choice recipient by the Division, or shall be designated as medical damages payable to the Division up to two‑thirds of the gross amount of the recovery, whichever is less. 
Any proceeds obtained by an NC Health Choice recipient who is represented by an attorney by settlement, release, or otherwise from a third party by reason of injury or death, shall be designated as medical damages payable to the Division up to the full amount of assistance paid on behalf of the NC Health Choice recipient by the Department or up to one‑third of the gross amount of the recovery, whichever is less. Any attorney representing an NC Health Choice recipient shall distribute to the Department the amount owed the Department under this section as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered."
SECTION 10.24.(c)  This section becomes effective July 1, 2007.

SENIOR CENTER OUTREACH
SECTION 10.25.(a)  Funds appropriated to the Department of Health and Human Services, Division of Aging and Adult Services, for the 2007‑2009 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 10.25.(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 10.25.(c)  State funding shall not exceed seventy‑five percent (75%) of reimbursable costs.

STATE‑COUNTY SPECIAL ASSISTANCE
SECTION 10.26.(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 10.26.(b)  Effective January 1, 2007, the maximum monthly rate for residents in adult care home facilities shall be one thousand one hundred forty‑eight dollars ($1,148) per month per resident unless adjusted by the Department in accordance with subsection (d) of this section.
SECTION 10.26.(c) The maximum monthly rate for residents in Alzheimer/Dementia special care units shall be one thousand five hundred fifteen dollars ($1,515) per month per resident unless adjusted by the Department in accordance with subsection (d) of this section.
SECTION 10.26.(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 subsections (b) and (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). Subject to approval by the Centers for Medicare and Medicaid Service (CMS) and prior to implementing this section, the Department may disregard a limited amount of income for individuals whose countable income exceeds the adjusted State‑County Special Assistance rate. The amount of the disregard shall not exceed the difference between the Special Assistance rate prior to the adjustment and the Special Assistance rate after the adjustment and shall be used to pay a portion of the cost of the ACH‑PCS and reduce the Medicaid payment for the individual's personal care services provided in an adult care home. In no event shall the reimbursement for services through the ACH‑PCS exceed the average cost of the 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.
SECTION 10.26.(e)  Effective July 1, 2007, the Department of Health and Human Services shall recommend rates for State-County Special Assistance and for Adult Care Home Personal Care Services. The Department may recommend separate rates for residents of special care units.  The Department shall recommend rates using appropriate cost modeling methodology and cost reports submitted by adult care homes that receive State-County Special Assistance funds and shall ensure that cost reporting is done for State-County Special Assistance and Adult Care Home Personal Care Services to the same standards as apply to other residential service providers.

SPECIAL ASSISTANCE IN‑HOME
SECTION 10.27(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 1,500 individuals during the 2007‑2008 fiscal year and the 2008‑2009 fiscal year. The standard monthly payment to individuals enrolled in the Special Assistance in‑home program shall be seventy‑five percent (75%) 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 2007‑2008, qualified individuals shall not receive payments at rates less than they would have been eligible to receive in State fiscal year 2006‑2007. 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.

QUALITY IMPROVEMENT CONSULTATION PROGRAM FOR ADULT CARE HOMES
SECTION 10.28.(a)  The Department's Division of Aging and Adult Services shall develop a Quality Improvement Consultation Program for Adult Care Homes.  The purpose of the Program is to promote better care and improve quality of life in a safe environment for residents in adult care homes through consultation and assistance with adult care home providers.  The county departments of social services shall be responsible for implementation of the Program with all adult care homes located in the respective county, based on a timetable for statewide implementation.
The Division of Aging and Adult Services shall consult with adult care home providers, county departments of social services, consumer advocates, and other interested stakeholders and parties in the development of the Quality Improvement Consultation Program for Adult Care Homes. 
The Program will address the following topics:
(1)	Principles and philosophies that are resident‑centered and promote independence, dignity, and choice for residents;
(2)	Approaches to develop continuous quality improvement with a focus on resident satisfaction and optimal outcomes;
(3)	Dissemination of best practice models that have been used successfully elsewhere;
(4)	A determination of the availability of standardized instruments, and their use to the extent possible, to assess and measure adult care home performance according to quality of life indicators;
(5)	Utilization of quality improvement plans for adult care homes that identify and resolve issues that adversely affect quality of care and services to residents. The plans include agreed upon time frames for completion of improvements and identification of needed resources;
(6)	Training required to equip county departments of social services' staff to implement the Program;
(7)	A distinction of roles between the regulatory role of the Department's Division of Facility Services and the quality improvement consultation and monitoring responsibilities of the county departments of social services; and
(8)	Identification of staffing and other resources needed to implement the Program.
The Division of Aging and Adult Services shall conduct a pilot of the Quality Improvement Consultation Program for Adult Care Homes. No more than four county departments of social services shall participate in the pilot. The Division of Aging and Adult Services shall consider geographic balance and size in carrying out the pilot. At the conclusion of the pilot, the Division of Aging and Adult Services shall make recommendations regarding the effectiveness of the Quality Improvement Consultation Program for Adult Care Homes. If the Division recommends expansion of the pilot to other counties or statewide implementation of the Program, its report shall include the cost and a proposed timetable for implementing these recommendations, including the identification of any necessary statutory and administrative rule changes.  The recommendations shall be made to the Secretary of the Department of Health and Human Services, the North Carolina Study Commission on Aging, the Senate Appropriations Committee on Health and Human Services, and the House of Representatives Subcommittee on Health and Human Services.

CERTIFICATE OF NEED FEE INCREASES TO MEET STATUTORY OBLIGATIONS
SECTION 10.29.  G.S. 131E‑177(9) reads as rewritten:
"(9)	Establish and collect fees for submitting applications for certificates of need. The fee schedule established is intended to generate sufficient revenue to offset the entire cost of the certificate of need program. Fees collected under this subdivision shall be credited to the General Fund as nontax revenue. The fee shall be five thousand dollars ($5,000) plus .003 of the amount of the proposed capital expenditure that exceeds one million dollars ($1,000,000) but may not exceed a total of fifty thousand dollars ($50,000)."

HEALTH CARE FACILITY CONSTRUCTION PROJECT FEE INCREASES TO MEET STATUTORY OBLIGATIONS
SECTION 10.30.  G.S. 131E‑267 reads as rewritten:
"§ 131E‑267.  Fees for departmental review of licensed health care facility or Medical Care Commission bond financed construction projects.
The Department of Health and Human Services shall charge a fee for the review of each health care facility construction project to ensure that project plans and construction are in compliance with State law. The project fee shall be determined by the Division of Facility Services. The fee shall be charged on a one‑time, per‑project basis, as follows, and shall not exceed two hundred thousand dollars ($200,000) for any single project. Fees collected under this provision in excess of seven hundred twelve thousand six hundred twenty‑six dollars ($712,626) shall be credited to the General Fund as nontax revenue and are intended to offset rather than replace appropriation.

Institutional Project	Project Fee

Hospitals
0‑5,000 square foot project	$1,500.00 plus $0.25/square foot of project space
5001‑10,000 square foot project	$3,000.00 plus $0.25/square foot of project space
10,001‑20,000 square foot project	$4,500.00 plus $0.45/square foot of project space
20,001 and greater square	$6,000.00 plus $0.45/square foot of project space
	foot project

Nursing Homes
New Facility/Major Renovation
	2,001 square foot and	$500.00 plus $0.25/square foot of project space
	greater project
Small Project/Minor Renovation
	0‑2,000 square foot project	$250.00 plus $0.15/square foot of project space

Ambulatory Surgical Facility
New Facility/Major Renovation
	2,001 square foot and	$400.00 plus $0.25/square foot of project space
	greater project
Small Project/Minor Renovation	
	0‑2,000 square foot project	$200.00 plus $0.15/square foot of project space

Hospital
0-5,000 square foot project	$750.00 plus $0.25/square foot of project space
5,001-10,000 square foot project	$1,500.00 plus $0.25/square foot of project space
10,001-20,000 square foot project	$2,250.00 plus $0.45/square foot of project space
20,001 and greater square	$3,000.00 plus $0.45/square foot of project space
	foot project

Adult Care Home
	7 or more beds
New Facility/Major Renovation
	2,001 square foot and	$350.00 plus $0.20/square foot of project space
	greater project
Small Project/Minor Renovation
	0‑2,000 square foot project	$175.00 plus $0.10/square foot of project space

Residential Project	Project Fee
Family Care Homes	$225.00 flat fee
ICF/MR Group Homes	$350.00 flat fee
Group Homes: 1‑3 beds	$125.00 flat fee
Group Homes: 4‑6 beds	$225.00 flat fee
Group Homes: 7‑9 beds	$275.00 flat fee
Other residential:
	More than 9 beds	$275.00 plus $0.15/square foot of project space."

COMMUNITY HEALTH CENTER CHANGES
SECTION 10.31.  Of the funds appropriated in this act for Community Health Grants, the sum of five hundred thousand dollars ($500,000) in 2007‑2008 and 2008‑2009 fiscal years shall be allocated to federally qualified health centers and those health centers that meet the criteria for federally qualified health centers, State‑designated rural health centers, free clinics, public health departments, and other nonprofit organizations that provide primary and preventive medical services to uninsured or medically indigent patients 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. In distributing funds, the Department of Health and Human Services shall consider the availability of other funds for the agency, the incidence of poverty or indigent clients served, arrangements for after‑hours care, and collaboration with the applicant's community hospital and other safety net organizations.

DIVISION OF INFORMATION RESOURCE MANAGEMENT PROJECT MANAGEMENT
SECTION 10.32.  All project management positions within the Division of Information Resource Management are exempt positions as that term is defined in G.S. 126‑5.

HEALTH INFORMATION SYSTEMS (HIS) FUNDS
SECTION 10.33.  The sum of nine million five hundred eighty‑two thousand one hundred sixteen dollars ($9,582,116) is appropriated from Budget Code 24430, Fund Code 2117, to the Department of Health and Human Services, Division of Public Health, for the 2007‑2008 fiscal year.  These funds shall be used for the development and implementation of the Health Information Systems (HIS), an initiative that will provide an automated means of capturing, monitoring, reporting, and billing services provided in local health departments, CDSAs, and the State Public Health Laboratory.  The HIS will allow for interfaces to local health departments' own vendor systems and is intended to replace the outdated Health Services Information System.

CHILD SUPPORT PROGRAM/ENHANCED STANDARDS
SECTION 10.34.  The Department of Health and Human Services shall implement and maintain performance standards developed for each of the State and county child support enforcement offices across the State. 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.

FOSTER CARE AND ADOPTION ASSISTANCE PAYMENTS
SECTION 10.35.(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 10.35.(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 10.35.(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 10.35.(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.

CHILD CARING INSTITUTIONS
SECTION 10.36.  Reimbursements to child caring institutions shall not exceed the reimbursement 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.

SPECIAL CHILDREN ADOPTION FUND
SECTION 10.37.(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 2007‑2008 and 2008‑2009 fiscal years. 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 10.37.(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 each fiscal year, the Division of Social Services may reallocate those funds, in accordance with this section, to other participating adoption agencies.
SECTION 10.37.(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.

TANF BENEFIT IMPLEMENTATION
SECTION 10.38.(a)  The General Assembly approves the plan titled "North Carolina Temporary Assistance for Needy Families State Plan FY 2007‑2009," prepared by the Department of Health and Human Services and presented to the General Assembly. The North Carolina Temporary Assistance for Needy Families State Plan covers the period October 1, 2007, through September 30, 2009. 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 2007 General Assembly.
SECTION 10.38(b)  The counties approved as Electing Counties in North Carolina's Temporary Assistance for Needy Families State Plan FY 2007‑2009 as approved by this section are:  Beaufort, Caldwell, Catawba, Iredell, Lenoir, Lincoln, Macon, McDowell, Sampson, Stokes, and Wilson.
SECTION 10.38(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 2007 through 2009, pursuant to G.S. 108A‑27(e), shall operate under the Electing County budget requirements effective July 1, 2007. For programmatic purposes, all counties referred to in this subsection shall remain under their current county designation through September 30, 2007.

INTENSIVE FAMILY PRESERVATION SERVICES FUNDING AND PERFORMANCE ENHANCEMENTS
SECTION 10.39.(a)  Notwithstanding the provisions of G.S. 143B‑150.6, the Intensive Family Preservation Services (IFPS) Program shall provide intensive services to children and families in cases of abuse, neglect, and dependency where a child is at imminent risk of removal from the home and to children and families in cases of abuse where a child is not at imminent risk of removal. The Program shall be developed and implemented statewide on a regional basis. The IFPS shall ensure the application of standardized assessment criteria for determining imminent risk and clear criteria for determining out‑of‑home placement.
SECTION 10.39.(b)  The Department of Health and Human Services shall require that any program or entity that receives State, federal, or other funding for the purpose of Intensive Family Preservation Services shall provide information and data that allows for:
(1)	An established follow‑up system with a minimum of six months of follow‑up services.
(2)	Detailed information on the specific interventions applied including utilization indicators and performance measurement.
(3)	Cost‑benefit data.
(4)	Data on long‑term benefits associated with Intensive Family Preservation Services. This data shall be obtained by tracking families through the intervention process.
(5)	The number of families remaining intact and the associated interventions while in IFPS and 12 months thereafter.
(6)	The number and percentage by race of children who received Intensive Family Preservation Services compared to the ratio of their distribution in the general population involved with Child Protective Services.
SECTION 10.39.(c)  The Department shall establish performance‑based funding protocol and shall only provide funding to those programs and entities providing the required information specified in subsection (b) of this section. The amount of funding shall be based on the individual performance of each program.

CHILD CARE ALLOCATION FORMULA
SECTION 10.40.(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 10.40.(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.
SECTION 10.40.(c)  Notwithstanding subsection (a) of this section, the Department of Health and Human Services shall allocate up to twelve million dollars ($12,000,000) in federal block grant funds and State funds appropriated for fiscal years 2007‑2008 and 2008‑2009 for child care services.  These funds shall be allocated to prevent termination of child care services or for other specific needs as determined by the department.

CHILD CARE FUNDS MATCHING REQUIREMENT
SECTION 10.41.  No local matching funds may be required by the Department of Health and Human Services as a condition of any locality's receiving its initial allocation of child care funds appropriated by this act unless federal law requires a match. Additional funds above twenty-five thousand dollars ($25,000) that  are reallocated by the department to local purchasing agencies beyond their initial allocation shall require a fifteen percent (15%) local match in order to receive these reallocated funds. Matching requirements shall not apply when funds are allocated because of a disaster as defined in G.S. 166A‑4(1).

CHILD CARE REVOLVING LOAN
SECTION 10.42.  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.

CHILD CARE SUBSIDY RATES
SECTION 10.43.(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 10.43.(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 10.43.(c)  Payments for the purchase of child care services for low‑income children shall be in accordance with the following requirements:
(1)	Religious‑sponsored child care facilities operating pursuant to G.S. 110‑106 and licensed child care centers and homes that meet the minimum licensing standards that are participating in the subsidized child care program shall be paid the one‑star county market rate or the rate they charge privately paying parents, whichever is lower.
(2)	Licensed child care centers and homes with two or more stars shall receive the market rate for that rated license level for that age group or the rate they charge privately paying parents, whichever is lower.
(3)	Nonlicensed homes shall receive fifty percent (50%) of the county market rate or the rate they charge privately paying parents, whichever is lower.
(4)	Maximum payment rates shall also be calculated periodically by the Division of Child Development for transportation to and from child care provided by the child care provider, individual transporter, or transportation agency, and for fees charged by providers to parents. These payment rates shall be based upon information collected by market rate surveys.
SECTION 10.43.(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 10.43.(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 parents for each age group of enrollees within the county. The Division of Child Development shall also calculate a statewide rate and regional market rates for each rated license level for each age category.
SECTION 10.43.(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 10.43.(g)  Payment for subsidized child care services provided with Work First Block Grant funds shall comply with all regulations and policies issued by the Division of Child Development for the subsidized child care program.
SECTION 10.43.(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.

EARLY CHILDHOOD EDUCATION AND DEVELOPMENT INITIATIVES ENHANCEMENTS
SECTION 10.44.(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 10.44.(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 10.44.(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 10.44.(d)  The Department of Health and Human Services shall continue to implement the performance‑based evaluation system.
SECTION 10.44.(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 2007‑2008 and 2008‑2009 shall be administered and distributed in the following manner:
(1)	Capital expenditures are prohibited for fiscal years 2007‑2008 and 2008‑2009. 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 2007‑2008 and 2008‑2009.
SECTION 10.44.(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.
SECTION 10.44.(g)  For fiscal years 2007‑2008 and 2008‑2009, the local partnerships shall spend an amount for child care subsidies that provides at least fifty‑two million dollars ($52,000,000) for the TANF maintenance of effort requirement and the Child Care Development Fund and Block Grant match requirement.

NORTH CAROLINA PARTNERSHIP FOR CHILDREN PERSONNeL RECORD PROTECTION
SECTION 10.45.(a)  G.S. 143B‑168.12(a)(2) reads as rewritten:
"(2)	The North Carolina Partnership and the local partnerships shall agree to adopt procedures for its operations that are comparable to those of Article 33C of Chapter 143 of the General Statutes, the Open Meetings Law, and Chapter 132 of the General Statutes, the Public Records Law, and provide for enforcement by the Department. Such procedures may provide for the confidentiality of personnel files that are comparable to Article 7 of Chapter 126 of the General Statutes."
SECTION 10.45.(b)  G.S. 143B‑168.14(a)(2) reads as rewritten:
"(2)	Each local partnership shall agree to adopt procedures for its operations that are comparable to those of Article 33C of Chapter 143 of the General Statutes, the Open Meetings Law, and Chapter 132 of the General Statutes, the Public Records Law, and provide for enforcement by the Department. Such procedures may provide for the confidentiality of personnel files that are comparable to Article 7 of Chapter 126 of the General Statutes."

PART XI. DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES

PLANT INDUSTRY DIVISION‑PLANT CONSERVATION PROGRAM
SECTION 11.1.  From funds 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 thirty thousand dollars ($30,000) for the 2007‑2008 fiscal  year shall be transferred to the Department of Agriculture and Consumer Services to be used, notwithstanding G.S. 146‑30, 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, environmental studies, and for the management of plant conservation program preserves owned by the Department.

SALE OF TIMBER 
SECTION 11.2.  G.S. 143‑64.05(a) reads as rewritten:
"(a)	The State agency for surplus property may assess and collect a service charge for the acquisition, receipt, warehousing, distribution, or transfer of any State surplus property and for the transfer or sale of recyclable material. The service charge authorized by this subsection does not apply to the transfer or sale of timber on land owned by the Wildlife Resources  or the Department of Agriculture and Consumer Services."

PART XII. DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES

MINING PERMIT APPLICATION REVIEW FEE
SECTION 12.1.  G.S. 74‑54.1 read as rewritten:
"§ 74‑54.1.  Permit fees.
(a)	The fee schedule for the processing of permit applications and permit renewals and modifications is as follows:

		0‑25 acres	26+ acres

	New Permit Applications	$3,750.00	$5,000.00
	Permit Modifications	$750.00	$1,000.00
	Permit Renewals	$750.00	$1,000.00
	Transfers	$100.00	$100.00

On January 1 of each year, the fees shall be adjusted for inflation. The inflation adjustment shall be the increase each year by the percentage, if any, by which the Consumer Price Index for the most recent calendar year ending before the beginning of such year exceeds the Consumer Price Index for the previous year. The Consumer Price Index for all‑urban consumers published by the US Department of Labor, as of the close of the 12‑month period ending on August 31 of each calendar year. The resulting fees shall be rounded to the nearest ten‑dollar ($10.00) increment. 
(b)	The Mining Account is established as a nonreverting account within the Department. Fees collected under this section shall be credited to the Mining Account and shall be applied to the costs of administering this Article.
(c)	The Department shall annually report on or before 1 September to the Environmental Review Commission on the cost of implementing this Article. The report shall include the fees established, collected, and disbursed under this section and any other information requested by the General Assembly or the Commission."

MODIFY THE COMMERCIAL AND NONCOMMERCIAL LEAKING PETROLEUM UNDERGROUND STORAGE TANK FEES AND PROGRAM 
SECTION 12.2.(a)  G.S. 143‑215.94C (a) reads as rewritten:
"(a)	For purposes of this subsection, each compartment of a commercial underground storage tank that is designed to independently contain a petroleum product is a separate petroleum commercial underground storage tank. The owner or operator of a commercial petroleum underground storage tank shall pay to the Secretary for deposit into the Commercial Fund an annual operating fee of four hundred fifty dollars ($450.00).
(1)	For each petroleum commercial underground storage tank of 3,500 gallons or less capacity – two hundred dollars ($200.00).
(2)	For each petroleum commercial underground storage tank of more than 3,500 gallon capacity – three hundred dollars ($300.00)."
SECTION 12.2.(b)  G.S. 143‑215.94B is amended by adding a new subsection to read:
"(g)	The Commercial Fund may be used to support the administrative functions of the UST program up to the amounts allowed by law, which amounts may be changed from time to time. In the case of a legislated increase or decrease in salaries and benefits, the administrative allowance existing at the time of the increase or decrease shall be correspondingly increased or decreased an amount equal to the legislated increase or decrease in salaries and benefits."
SECTION 12.2.(c)  G.S. 143‑215.94D is amended by adding a new subsection to read:
"(g)	The Noncommercial Fund may be used to support the administrative functions of the UST program up to the amounts allowed by law, which amounts may be changed from time to time. In the case of a legislated increase or decrease in salaries and benefits, the administrative allowance existing at the time of the increase or decrease shall be correspondingly increased or decreased an amount equal to the legislated increase or decrease in salaries and benefits."

SOLID WASTE MANAGEMENT FACILITY PERMIT FEES AND ANNUAL FEES
SECTION 12.3.(a)  Article 9 of Chapter 130A of the General Statutes is amended by adding a new section to read:
"§ 130A‑293.1.  Fees applicable to permits for solid waste management facilities.
(a)	It is the intent of the General Assembly that the fees collected pursuant to this section shall be used to support the Department's solid waste management program.
(b)	The Solid Waste Management Account is established as a non‑reverting account within the Department. All fees collected under this section shall be credited to the Account and shall be used for personnel and other resources necessary to do any one or more of the following:
(1)	Provide a high level of professional review of permit applications for solid waste landfills and other solid waste management facilities;
(2)	Provide timely review of permit applications;
(3)	Improve monitoring of solid waste management facilities;
(4)	Increase compliance activities related to solid waste management facilities; and
(5)	Review and update  rules governing the construction and operation of solid waste landfills to recognizing advances in technology and research to better protect public health and the environment.
(c)	Applicants for permits shall pay an application fee according to the following schedule:
(1)	Municipal Solid Waste Landfill accepting less than 100,000 tons/year of solid waste – New Permit – $25,000
(2)	Municipal Solid Waste Landfill accepting less than 100,000 tons/year of solid waste – Amendment – $15,000
(3)	Municipal Solid Waste Landfill accepting less than 100,000 tons/year of solid waste – Modification – $1,500
(4)	Municipal Solid Waste Landfill accepting 100,000 tons/year or more of solid waste – New Permit – $50,000
(5)	Municipal Solid Waste Landfill accepting 100,000 tons/year or more of solid waste – Amendment – $30,000
(6)	Municipal Solid Waste Landfill accepting 100,000 tons/year or more of solid waste – Modification – $3,000
(7)	Construction and Demolition Landfill accepting less than 100,000 tons/year of solid waste – New Permit – $15,000
(8)	Construction and Demolition Landfill accepting less than 100,000 tons/year of solid waste – Amendment – $9,000
(9)	Construction and Demolition Landfill accepting less than 100,000 tons/year of solid waste – Modification – $1,500
(10)	Construction and Demolition Landfill accepting 100,000 tons/year or more of solid waste – New Permit – $30,000
(11)	Construction and Demolition Landfill accepting 100,000 tons/year or more of solid waste – Amendment – $18,500
(12)	Construction and Demolition  Landfill accepting 100,000 tons/year or more of solid waste – Modification – $2,500
(13)	Industrial Landfill accepting less than 100,000 tons/year of solid waste – New Permit – $15,000
(14)	Industrial Landfill accepting less than 100,000 tons/year of solid waste – Amendment – $9,000
(15)	Industrial Landfill accepting less than 100,000 tons/year of solid waste – Modification – $1,500
(16)	Industrial Landfill accepting 100,000 tons/year or more of solid waste – New Permit – $30,000
(17)	Industrial Landfill accepting 100,000 tons/year or more of solid waste – Amendment – $18,500
(18)	Industrial  Landfill accepting 100,000 tons/year or more of solid waste – Modification – $2,500
(19)	Tire Monofill – New Permit – $1,750
(20)	Tire Monofill – Amendment – $1,250
(21)	Tire Monofill – Modification – $500
(22)	Treatment and Processing New Permit – $1,750
(23)	Treatment and Processing Amendment – $1,250
(24)	Treatment and Processing Modification – $500
(25)	Transfer Stations New Permit – $5,000
(26)	Transfer Stations Amendment – $3,000
(27)	Transfer Station Modification – $500
(28)	Incinerator New Permit – $1,750
(29)	Incinerator Amendment – $1,250
(30)	Incinerator Modification – $500
(31)	Large Compost Facility  New Permit – $1,750
(32)	Large Compost Facility Amendment – $1,250
(33)	Large Compost Facility Modification – $500
(34)	Land Clearing and Inert New Permit – $1,000
(35)	Land Clearing and Inert Amendment – $500
(36)	Land Clearing and Inert Modification – $250
(d)	The application permit fee under this section shall be paid upon submission of the permit application. 
(e)	A permitted solid waste management facility shall pay an annual permit fee on or before August 1 of each year according to the following schedule:
1. Municipal Solid Waste Landfill – $3,500
2. Post Closure Municipal Solid Waste Landfill – $1,000
3. Construction and Demolition Landfill – $2,750
4. Post Closure Construction and Demolition Landfill – $500
5. Industrial Landfill – $2750
6. Post Closure Industrial Landfill – $500
7. Transfer Station – $750
8. Treatment and Processing Facility – $500
9. Tire Monofill – $500
10. Incinerators – $500
11. Large Compost Facility – $500
12. Land Clearing and Inert Debris Landfill – $500
(f)	As used in this section, the following definitions apply:
(1)	'New permit' means all of the following:
a.	An application for a new solid waste management facility not previously permitted by the Department. It includes one site suitability review, the initial permit to construct, and one permit to operate the constructed portion of a phase included in the permit to construct. 
b.	An application that proposes to expand the boundary of a permitted waste management facility for the purpose of expanding the permitted activity.
c.	Any application that includes a proposed expansion to the boundary of a waste disposal unit within an existing permitted solid waste management facility.
d.	An application for a substantial amendment to a solid waste permit, as defined in G.S. 130A- 294(b1).
(2)	'Permit amendment' means all of the following:
a.	An application for a permit to construct and one permit to operate for the second and subsequent phases of landfill development depicted in the approved facility plan for an existing solid waste management permit.
b.	An application for a renewal or a permit review every five years after issuance of the existing solid waste management facility permit, as required by rule.
c.	Any application that proposes a change in ownership or corporate structure of a permitted solid waste management facility.
(3)	'Permit modification' means all of the following:
a.	An application for any change to the plans approved in the existing permit for a solid waste management facility that does not constitute a 'permit amendment' or a 'new permit'.
b.	A second or subsequent permit to operate for a constructed portion of a phase included in the permit to construct."

WATER QUALITY PERMIT FEES
SECTION 12.4.(a)  G.S. 143‑215.3D reads as rewritten:
"§ 143‑215.3D.  Fee schedule for water quality permits.
(a)	Annual fees for discharge and nondischarge permits under G.S. 143‑215.1. –
(1)	Major Individual NPDES Permits. – The annual fee for an individual permit for a point source discharge of 1,000,000 or more gallons per day, a publicly owned treatment works (POTW) that administers a POTW pretreatment program, as defined in 40 Code of Federal Regulations § 403.3 (1 July 1996 Edition), or an industrial waste treatment works that has a high toxic pollutant potential shall be three thousand four hundred forty dollars ($3,440).(2)	Minor Individual NPDES Permits. – The annual fee for an individual permit for a point source discharge other than a point source discharge to which subdivision (1) of this subsection applies shall be eight hundred sixty dollars ($860.00).
(3)	Single‑Family Residence. – The annual fee for a certificate of coverage under a general permit for a point source discharge or an individual nondischarge permit from a single‑family residence shall be sixty dollars ($60.00).
(4)	Stormwater and Wastewater Discharge General Permits. – The annual fee for a certificate of coverage under a general permit for a point source discharge of stormwater or wastewater shall be one hundred dollars ($100.00).
(5)	Recycle Systems. – The annual fee for an individual permit for a recycle system nondischarge permit shall be three hundred sixty dollars ($360.00).(6)	Major Nondischarge Permits. – The annual fee for an individual permit for a nondischarge of 10,000 or more gallons per day or requiring 300 or more acres of land shall be one thousand three hundred ten dollars ($1,310).
(7)	Minor Nondischarge Permits. – The annual fee for an individual permit for a nondischarge of less than 10,000 gallons per day or requiring less than 300 acres of land shall be eight hundred ten dollars ($810.00).
(8)	Animal Waste Management Systems. – The annual fee for animal waste management systems shall be as set out in G.S. 143‑215.10G.
(b)	Application fee for new discharge and nondischarge permits. – An application for a new permit of the type set out in subsection (a) of this section shall be accompanied by an initial application fee equal to the annual fee for that permit. If a permit is issued, the application fee will be applied as the annual fee for the first year that the permit is in effect. If the application is denied, the application fee shall not be refunded.
(c)	Application and annual fees for consent special orders. –
(1)	Major Consent Special Orders. – If the Commission enters into a consent special order, assurance of voluntary compliance, or similar document pursuant to G.S. 143‑215.2 for an activity subject to an annual fee under subdivision (1) or (6) of subsection (a) of this section, the initial project fee shall be four hundred dollars ($400.00) and the annual fee shall be five hundred dollars ($500.00). These fees shall be in addition to the annual fee due under subsection (a) of this section.
(2)	Minor Consent Special Orders. – If the Commission enters into a consent special order, assurance of voluntary compliance, or similar document pursuant to G.S. 143‑215.2 for an activity subject to an annual fee under subdivision (2) or (7) of subsection (a) of this section, the initial project fee shall be four hundred dollars ($400.00) and the annual fee shall be two hundred fifty dollars ($250.00). These fees shall be in addition to the annual fee due under subsection (a) of this section.
(d)	Fee for major permit modifications. – An application for a major modification of a permit of the type set out in subsection (a) of this section shall be accompanied by an application fee equal to thirty percent (30%) of the annual fee applicable to that permit. A major modification of a permit is any modification that would allow an increase in the volume or pollutant load of the discharge or nondischarge or that would result in a significant relocation of the point of discharge, as determined by the Commission. This fee shall be in addition to the fees due under subsections (a) and (c) of this section. If the application is denied, the application fee shall not be refunded.
(e)	Other fees under this Article. –
(1)	Sewer System Extension Permits. – The application fee for a permit for the construction of a new sewer system or for the extension of an existing sewer system shall be four hundred eighty dollars ($480.00).
(2)	State Stormwater Permits. – The application fee for a permit regulating stormwater runoff under G.S. 143‑214.7 and G.S. 143‑215.1 shall be five hundred five dollars ($505.00).
(3)	Major Water Quality Certifications. – The fee for a water quality certification involving one acre or more of wetland fill or 150 feet or more of stream impact shall be five hundred seventy dollars ($570.00).
(4)	Minor Water Quality Certifications. – The fee for a water quality certification involving less than one acre of wetland fill or less than 150 feet of stream impact shall be two hundred forty dollars ($240.00).
(5)	Permit for Land Application of Petroleum Contaminated Soils. – The fee for a permit to apply petroleum contaminated soil to land shall be four hundred eighty dollars ($480.00).
(6)	Fee Nonrefundable. – If an application for a permit or a certification described in this subsection is denied, the application or certification fee shall not be refunded.
(7)	Limit Water Quality Certification Fee Required for CAMA Permit. – An applicant for a permit under Article 7 of Chapter 113A of the General Statutes for which a water quality certification is required shall pay a fee established by the Secretary. The Secretary shall not establish a fee that exceeds the greater of the fee for a permit under Article 7 of Chapter 113A of the General Statutes or the fee for a water quality certification under subdivision (3) or (4) of this subsection.
(f)	Local Government Fee Authority Not Impaired. – This section shall not be construed to limit any authority that a unit of local government may have pursuant to any other provision of law to assess or collect a fee for the review of an application for a permit, the review of a mitigation plan, or the inspection of a site or a facility under any local program that is approved by the Commission under this Article.
(g)	Other, pertaining to fees under this Article. – The water quality permit fees shall be increased each calendar year by the percentage, if any, by which the General Assembly has granted an employee compensation increase for that fiscal year."
SECTION 12.4.(b)  G.S. 143‑215.10G reads as rewritten:
"§ 143‑215.10G.  Fees for animal waste management systems.
(a)	The Department shall charge an annual permit fee to an animal operation that is subject to a permit under G.S. 143‑215.10C for an animal waste management system according to the following schedule:
(1)	For a system with a design capacity of 38,500 or more and less than 100,000 pounds steady state live weight, sixty dollars ($60.00).
(2)	For a system with a design capacity of 100,000 or more and less than 800,000 pounds steady state live weight, one hundred eighty dollars ($180.00).
(3)	For a system with a design capacity of 800,000 pounds or more steady state live weight, three hundred sixty dollars ($360.00).
(a1)	The Department shall charge an annual permit fee to a dry litter poultry facility that is subject to a permit under G.S. 143‑215.10C for an animal waste management system according to the following schedule:
(1)	For a system with a permitted capacity of less than 25,000 laying chickens, less than 37,500 nonlaying chickens, or less than 16,500 turkeys, sixty dollars ($60.00).
(2)	For a system with a permitted capacity of 25,000 or more but less than 200,000 laying chickens, 37,500 or more but less than 290,000 nonlaying chickens, 16,500 or more but less than 133,000 turkeys, one hundred eighty dollars ($180.00).
(3)	For a system with a permitted capacity of more than 200,000 laying chickens, more than 290,000 nonlaying chickens, or more than 133,000 turkeys, three hundred sixty dollars ($360.00).
(b)	An application for a new permit under this section shall be accompanied by an initial application fee equal to the annual fee for that permit. If a permit is issued, the application fee will be applied as the annual fee for the first year that the permit is in effect. If the application is denied, the application fee shall not be refunded.
(c)	Fees collected under this section shall be credited to the Water and Air Quality Account. The Department shall use fees collected pursuant to this section to cover the costs of administering this Part."
SECTION 12.4.(c)  G.S. 90A‑42 reads as rewritten:
"§ 90A‑42.  Fees.
(a)	The Commission, in establishing procedures for implementing the requirements of this Article, shall impose the following schedule of fees:
(1)	Examination including Certificate, $85.00;
(2)	Temporary Certificate, $200.00;
(3)	Temporary Certification Renewal, $300.00;
(4)	Conditional Certificate, $75.00;
(5)	Repealed by Session Laws 1987, c. 582, s. 3.
(6)	Reciprocity Certificate, $100.00;
(6a)	Voluntary Conversion Certificate, $50.00;
(7)	Annual Renewal, $50.00;
(8)	Replacement of Certificate, $20.00;
(9)	Late Payment of Annual Renewal, $50.00 penalty in addition to all current and past due annual renewal fees plus one hundred dollars ($100.00) penalty per year for each year for which annual renewal fees were not paid prior to the current year; and
(10)	Mailing List Charges – The Commission may provide mailing lists of certified water pollution control system operators and of water pollution control system operators to persons who request such lists. The charge for such lists shall be twenty‑five dollars ($25.00) for each such list provided.
(b)	The Water Pollution Control System Account is established as a nonreverting account within the Department. Fees collected under this section shall be credited to the Account and applied to the costs of administering this Article."

STATEWIDE WASTE TIPPING FEE
SECTION 12.5.  Part 2A of Article 9 of Chapter 130A of the General Statutes is amended by adding a new section to read:
"§ 130A‑309.08A.  Solid waste disposal fee; use of proceeds.
(a)	Fee Imposed. – A fee of two dollars ($2.00) per ton of waste is imposed on the disposal of municipal solid waste or construction or demolition debris in any landfill permitted pursuant to this Part. A fee of two dollars ($2.00) per ton of waste is imposed on the transfer of solid waste to a transfer station permitted pursuant to this Part for disposal outside the State.
(b)	Determination and Payment of Fee. – The owner or operator of each landfill and transfer station permitted pursuant to this Part shall maintain scales, designed to determine waste tonnage, that are approved by the Department of Agriculture and Consumer Services. Each owner or operator shall record waste tonnage at the time the waste is received and calculate and record the fees due under this section for each quarter of the calendar year on forms approved by the Department. Each owner or operator shall provide the completed forms, report the total number of tons of waste received, and pay the fees due for each quarter of the calendar year to the Department no later than the 15th day of the following calendar month. The Department shall credit all fees received pursuant to this section to the Inactive Hazardous Sites Cleanup Fund established by G.S. 130A‑310.11.
(c)	Use of Proceeds. – The Department shall use the proceeds of the fees imposed by this section for the following purposes:
(1)	Assessment and remediation of orphan landfills.
(2)	Assessment and remediation of inactive hazardous substance or waste disposal sites for which a private party is or may be responsible if the private party cannot be identified or located or if the private party is unable or refuses to assume responsibility for the assessment or remediation.
(3)	Up to fifteen percent (15%) of the proceeds may be used to fund staff to administer contracts for the assessment and remediation of orphan landfills and of inactive hazardous substance or waste disposal sites pursuant to subdivisions (1) and (2) of this subsection.
(4)	Up to ten percent (10%) of the proceeds may be used for grants to units of local government to support redevelopment of brownfields.
(5)	Up to ten percent (10%) of the proceeds may be used by the Department to provide the State's share of the cost of assessment and remediation of sites in the State that are listed on the federal National Priorities List sites."

SEDIMENTATION AND EROSION CONTROL PLAN REVIEW FEE
SECTION 12.6.  G.S. 113A‑54.2(a) reads as rewritten:
"(a)	An application fee of sixty‑five dollars ($65.00) per acre of disturbed land shown on an erosion and sedimentation control plan or of land actually disturbed during the life of the project shall be charged for the review of an erosion and sedimentation control plans under this Article."

MODIFY EXISTING FEE STRUCTURE FOR RADIOACTIVE MATERIAL LICENSEES
SECTION 12.7.  Pursuant to G.S. 104E‑19, the Division of Environmental Health, Radiation Protection Section, shall increase the fee structure for radioactive material licensees established in 15A NCAC 11 .1105 to provide sufficient funds to support one additional receipt‑supported Health Physicist position and associated operating costs in order to fulfill statutory requirements.

PROCEEDS FROM TIME WARNER CABLE LEASE 
SECTION 12.8. The net proceeds received from Time Warner Cable by the Department of Environment and Natural Resources, Division of Forest Resources, for lease of property at 2600 Howard Road shall be transferred to the Department for deposit into a Capital Improvement account. Funds may be used to construct an equipment storage building and related improvements.

PART XIII. DEPARTMENT OF COMMERCE

REGULATORY FEE FOR UTILITIES COMMISSION
SECTION 13.1.(a)  The percentage rate to be used in calculating the public utility regulatory fee under G.S. 62‑302(b)(2) is twelve‑hundredths of one percent (0.12%) for each public utility's North Carolina jurisdictional revenues earned during each quarter that begins on or after July 1, 2007.
SECTION 13.1.(b)  The electric membership corporation regulatory fee imposed under G.S. 62‑302(b1) for the 2007‑2008 fiscal year is two hundred thousand dollars ($200,000).
SECTION 13.1.(c)  This section becomes effective July 1, 2007.

WANCHESE SEAFOOD INDUSTRIAL PARK/OREGON INLET FUNDS
SECTION 13.2.(a)  Funds appropriated to the Department of Commerce for the 2006‑2007 fiscal year for the Wanchese Seafood Industrial Park that are unexpended and unencumbered as of June 30, 2007, shall not revert to the General Fund on June 30, 2007, 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, in addition to funds available to the Authority for these purposes.  This section becomes effective June 30, 2007.
SECTION 13.2.(b)  Funds appropriated to the Department of Commerce for the 2006‑2007 fiscal year for the Oregon Inlet Project that are unexpended and unencumbered as of June 30, 2007, shall not revert to the General Fund on June 30, 2007, but shall remain available to the Department to be expended by the Wanchese Seafood Industrial Park for securing adequate channel maintenance of Oregon Inlet, operations, maintenance, repair, and capital improvements in accordance with Article 23C of Chapter 113 of the General Statutes, in addition to funds available to the Authority for these purposes.  This section becomes effective June 30, 2007.

ONE NORTH CAROLINA FUND
SECTION 13.3.  Of the funds appropriated in this act 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 2007‑2008 fiscal year.

BIOTECHNOLOGY CENTER
SECTION 13.4.(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 13.4.(b)  The North Carolina Biotechnology Center shall provide funding for biotechnology, biomedical, and related bioscience applications under its Business and Science Technology Programs.
SECTION 13.4.(c)  The North Carolina Biotechnology Center shall:
(1)	By January 15, 2008, 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 2006‑2007 program activities, objectives, and accomplishments;
b.	State fiscal year 2006‑2007 itemized expenditures and fund sources;
c.	State fiscal year 2006‑2007 planned activities, objectives, and accomplishments, including actual results through December 31, 2007; and
d.	State fiscal year 2006‑2007 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2007.
(2)	By January 15, 2009, 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 2007‑2008 program activities, objectives, and accomplishments;
b.	State fiscal year 2007‑2008 itemized expenditures and fund sources;
c.	State fiscal year 2007‑2008 planned activities, objectives, and accomplishments, including actual results through December 31, 2008; and
d.	State fiscal year 2007‑2008 estimated itemized expenditures and fund sources, including actual expenditures and fund sources through December 31, 2008.
(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 13.4.(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.

ADVANCED VEHICLE RESEARCH CENTER /FUNDS SHALL NOT REVERT 
SECTION 13.5.(a)  Funds appropriated to the Advanced Vehicle Research Center, Inc., from the 2005‑2006 through 2006‑2007 fiscal years that are unexpended and unencumbered as of  June 30, 2007, shall not revert to the General Fund on June 30, 2007, but shall remain available at the Department of Commerce.
SECTION 13.5.(b)  Of the funds appropriated to the Advanced Vehicle Research Center from the last biennium, the Department of Commerce, with approval from the Office of State Budget and Management, may subject to subsection (b1) of this section, transfer remaining appropriated funds to the Advanced Vehicle Research Center of North Carolina, Inc., (Center) when the Office of State Budget and Management, in consultation with the Department of Commerce, determines the Center has completed goals and projects consistent with the Center's business plan. The goals and projects shall include the following:
(1)	The Center has obtained legal title to the property on which the Advanced Vehicle Research Center will be built.
(2)	The Center has determined and provided for the critical infrastructure needed to support the Advanced Vehicle Research Center.
(3)	The Center has entered into a contract for the use and operation of a testing facility that will create new private sector jobs in Tier 1 or Tier 2 counties.
SECTION 13.5.(c)  No funds shall be released by the Office of State Budget and Management under subsection (b) of this section until a board of directors of the Center consisting of no fewer than five members representing five different organizations is appointed and operating.
The Center shall file with the Department of Commerce a copy of the Center's policy addressing conflicts of interest that may arise involving the Center's management employees and the members of its board of directors or other governing body before funds may be allocated to the Center. The policy shall address situations in which any of these individuals may directly or indirectly benefit, except as the Center's employees or members of the board or other governing body, from the Center'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.
By December 31, 2007, and April 30, 2008, the Center shall report to the Governor, the Joint Legislative Commission on Governmental Operations, and the Fiscal Research Division the following information: (i) fiscal year 2006‑2007 projects, objectives, and accomplishments; and (ii) fiscal year 2006‑2007 itemized expenditures and fund sources. The April 30, 2008, report shall also contain the following: (i) fiscal year 2008‑2009 planned projects, objectives, and accomplishments; and (ii) fiscal year 2008‑2009 estimated expenditures and fund sources.
The Center shall provide to the Governor, the Joint Legislative Commission on Governmental Operations, and the Fiscal Research Division: (i) a copy of the Center's annual audited financial statement within 30 days of issuance of the statement; and (ii) a copy of the Center's IRS Form 990.
The Center shall provide a report containing detailed budget information to the Office of State Budget and Management in the same manner as State departments and agencies in preparation for biennium budget requests. Specific salary information will be provided upon written request by the Chairmen of the Joint Legislative Commission on Governmental Operations or the Chairmen of the House Appropriations Committee on Environment, Health, and Natural Resources and the Chairman of the Senate Appropriations Committee on Natural and Economic Resources.

ABC COMMISSION
SECTION 13.6.  G.S. 18B‑208(b) reads as rewritten:
"(b)	Special Fund. – A special fund in the office of the State Treasurer, the ABC Commission Fund, is created. On and after November 1, 1982, all moneys derived from the collection of bailment charges and bailment surcharges shall be deposited in the ABC Commission Fund for the purpose of carrying out the provisions of this Chapter. The Commission shall fix the level of the bailment surcharges at an amount calculated to cover operating expenses of the Commission, capital improvements to the Commission warehouse and offices, and the retirement of any bonds issued for capital improvements. The ABC Commission Fund shall be subject to the provisions of the Executive Budget Act except that no unexpended surplus of this fund shall revert to the General Fund, but shall remain available to the ABC Commission to be expended for capital improvements to the Commission warehouse and offices and the retirement of any bonds issued for capital improvements. Upon payment of the bonds issued pursuant to this section, the Commission shall reduce the bailment surcharge to an amount no greater than necessary to pay operating expenses of the Commission as authorized by the General Assembly.
All moneys credited to the ABC Commission Fund shall be used to carry out the intent and purposes of the ABC law in accordance with plans approved by the North Carolina ABC Commission and the Director of the Budget, and all these funds are appropriated, reserved, set aside, and made available until expended for the administration of the ABC law."

PART XIV. ADMINISTRATIVE OFFICE OF THE COURTS

TRANSFER OF EQUIPMENT AND SUPPLY FUNDS
SECTION 14.1.  Funds appropriated to the Administrative Office of the Courts in the 2007‑2009 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.

FEDERAL GRANT FUNDS
SECTION 14.2.  The Administrative Office of the Courts may use up to the sum of one million five hundred thousand dollars ($1,500,000) 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.

PART XV. DEPARTMENT OF CORRECTION

FEDERAL GRANT MATCHING FUNDS
SECTION 15.1.  Notwithstanding the provisions of G.S. 148‑2, the Department of Correction may use up to the sum of one million two hundred thousand dollars ($1,200,000) in the 2007‑2008 fiscal year and up to the sum of one million two hundred thousand dollars ($1,200,000) in the 2008‑2009 fiscal year 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.

MEDIUM CUSTODY ROAD CREW COMPENSATION
SECTION 15.2.(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 to the Department of Correction during the 2007‑2008 and 2008‑2009 fiscal years 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 15.2.(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 2007‑2008 and 2008‑2009 fiscal years 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.

LIMIT USE OF OPERATIONAL FUNDS
SECTION 15.3.  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 180 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.

USE OF CLOSED PRISON FACILITIES
SECTION 15.4.  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.

ENERGY COMMITTED TO OFFENDERS/CONTRACT AND REPORT
SECTION 15.5.  The Department of Correction may continue to contract with Energy Committed To Offenders, Inc., for the purchase of prison beds for minimum security female inmates during the 2007‑2008 and 2008‑2009 fiscal years. Energy Committed To Offenders, Inc., shall report by February 1 of each year to the Joint Legislative Commission on Governmental Operations on the annual cost per inmate and the average daily inmate population compared to bed capacity using the same methodology as that used by the Department of Correction.

CRIMINAL JUSTICE PARTNERSHIP PROGRAM
SECTION 15.6.  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.

REPORTS ON NONPROFIT PROGRAMS
SECTION 15.7.(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, Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee, and the Chairs of the House of Representatives and Senate Appropriations Subcommittees on Justice and Public Safety 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 15.7.(b)  Summit House shall report by February 1 of each year to the Joint Legislative Commission on Governmental Operations, Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee, and the Chairs of the House of Representatives and Senate Appropriations Subcommittees on Justice and Public Safety 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 15.7.(c)  Women at Risk shall report by February 1 of each year to the Joint Legislative Commission on Governmental Operations, Joint Legislative Corrections,  Crime Control, and Juvenile Justice Oversight Committee, and the Chairs of the House of Representatives and Senate Appropriations Subcommittees on Justice and Public Safety 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.
SECTION 15.7.(d)  Our Children's Place shall report by February 1, 2008, to the Joint Legislative Corrections, Crime Control, and Juvenile Justice Oversight Committee, and the Chairs of the House of Representatives and Senate Appropriations Subcommittees on Justice and Public Safety on the status of the planning, design, and construction of Our Children's Place, the proposed program components and evaluation measures, and on the projected number of inmates and their children to be served. The report shall also provide financial data, including the expenditure of State funds and all funding sources and amounts.

PART XVI. DEPARTMENT OF ADMINISTRATION

REDESIGNATION OF THE GOVERNOR'S ADVOCACY COUNCIL FOR PERSONS WITH DISABILITIES
SECTION 16.1.  Part 14A of Article 9 of Chapter 143B of the General Statutes is repealed.
SECTION 16.2.  Pursuant to the Developmental Disabilities Assistance and Bill of Rights Act, the Governor shall redesignate the operation and function of the Governor's Advocacy Council for Persons with Disabilities from the Department of Administration to a nongovernmental entity.   The Governor shall follow the federal statutory procedure for redesignation found at 45 C.F.R. § 1386.20, with a target transfer date of July 1, 2007.

PART XVII. OFFICE OF STATE BUDGET AND MANAGEMENT

MODIFY STATE FIRE PROTECTION GRANT FUND
SECTION 17.1.  G. S. 58‑85A‑1(c) reads as rewritten:
"(c)	It is the intent of the General Assembly to appropriate annually to the State Fire Protection Grant Fund up to four million eight hundred thousand dollars ($4,800,000) from the General Fund, one hundred fifty‑eight thousand dollars ($158,000) from the Highway Fund, and one million three hundred forty‑five thousand dollars ($1,345,000) from University of North Carolina receipts. Funds received from the General Fund shall be allocated only for providing local fire protection for State‑owned property supported by the General Fund; funds received from the Highway Fund shall be allocated only for providing local fire protection for State‑owned property supported by the Highway Fund; and funds received from University of North Carolina receipts shall be allocated only for providing local fire protection for State‑owned property supported by University of North Carolina receipts."

GEOGRAPHICAL INFORMATION SYSTEMS (GIS) STUDY
SECTION 17.2.(a)  The Office of State Budget and Management (OSBM), in consultation with the Center for Geographic Information and Analysis (CGIA), the State Chief Information Officer, and the chair of the Geographic Information Coordinating Council (GICC), shall conduct a study to identify the development and use of Geographical Information Systems (GIS) in North Carolina by State agencies.  The study shall identify the purpose of each system; any duplication of effort across agencies, including local governments and federal agencies; the completeness, timeliness, and accessibility of the data developed and used by the systems; the cost and actual staffing for each system; the organizational location of each system; the hardware and software inventories associated with each system.  The study shall also assess the current and potential benefits that GIS investments provide to the State and identify opportunities for the State to leverage federal and local support for North Carolina GIS systems.
SECTION 17.2.(b)  OSBM shall make recommendations on the governance, organization, and staffing of GIS in and across State agencies and on a coherent and cost‑effective State investment strategy for GIS that appropriately leverages local and federal support.  The findings of this study shall be reported to the North Carolina General Assembly by January 15, 2008.
SECTION 17.2.(b)  This section does not apply to The North Carolina University System or to the Judicial Branch.

MILITARY MORALE, RECREATION, AND WELFARE FUNDS
SECTION 17.3.(a)  There is appropriated from the General Fund to a Reserve for the Military Morale, Recreation, and Welfare Fund in the Office of State Budget and Management the sum of one million dollars ($1,000,000) in each year of the 2007‑2009 biennium.
SECTION 17.3.(b)  The Office of State Budget and Management shall distribute for the purposes described in this section the amount appropriated by subsection (a) of this section. That amount shall be distributed to each military installation on a per capita basis.
SECTION 17.3.(c)  Funds distributed to a military installation exchange under this section must be deposited in the Military Morale, Recreation, and Welfare Fund for that installation and used only for community services and other expenditures to improve quality of life programs for military members and their families in North Carolina.

LICENSING BOARD REPORTING REQUIREMENT
SECTION 17.4.  G.S. 93B‑2(b) reads as rewritten:
"(b)	Each occupational licensing board shall file with the Secretary of State, the Attorney General, the Office of State Budget and Management, and the Joint Legislative Administrative Procedure Oversight Committee a financial report that includes the source and amount of all funds credited to the occupational licensing board and the purpose and amount of all funds disbursed by the occupational licensing board during the previous 12‑month period."

STAFFING ANALYSIS OF STATE AGENCY BUSINESS FUNCTIONS
SECTION 17.5.(a)  The Office of State Budget and Management, in consultation with the Office of State Controller and the Office of State Personnel, shall conduct annual follow‑up analyses to the Human Resources/Payroll Function Mapping Analysis that was completed in January 2007 by the BEACON staff and OSBM.  This initial analysis was conducted to provide not only a preimplementation assessment of State agency Human Resources/Payroll staffing prior to BEACON HR/Payroll implementation but also to provide a basis on which new HR/Payroll roles required by BEACON implementation could be mapped.  These follow‑up analyses of State agency HR/Payroll staffing should be completed by January 1 of each year to assure the staffing levels remain appropriate.  The annual staffing analyses shall be conducted throughout the implementation of the BEACON HR/Payroll System and shall continue for a reasonable time after the implementation to assure that the staffing levels are adjusted based on the increased efficiency provided by the implementation.
SECTION 17.5.(b)  The Office of State Budget and Management, in consultation with the Office of State Controller, shall conduct a staffing analysis of the business functions of State government to include, but not necessarily be limited to, agency fiscal offices, budget offices, and procurement offices to be completed by April 30, 2008.  This initial analysis will serve as a preimplementation assessment of State agency business functions staffing prior to the proposed implementation of the remaining components of the BEACON ERP System.  Follow‑up analyses should be conducted annually and completed by January 1 of each year to assure the staffing levels remain appropriate.  The annual staffing analyses shall be conducted throughout the implementation of future BEACON components and shall continue for a reasonable time after the implementation to assure that the staffing levels are adjusted based on the increased efficiency provided by the implementation.
SECTION 17.5.(c)  Staffing metrics developed in association with the staffing analyses of HR/Payroll and the other business functions should be incorporated into Results Based Budgeting documents and allow for comparison between State agencies in these areas.

STUDY OF THE WORKERS' COMPENSATION PROGRAM IN STATE AGENCIES
SECTION 17.6.  The Office of State Budget and Management, in consultation with the Office of State Personnel and the Office of State Controller, shall conduct a study of the Workers' Compensation Program in State agencies and institutions to determine if the third‑party administration of the program continues to be the most effective mode of administration; to determine if the current method of funding is still the most effective method; to determine whether excess coverage policies are needed; and to identify any other operational inefficiencies in program operations that might exist.  The Office of State Budget and Management shall submit a final report outlining the related findings and recommendations for improvements to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division by April 30, 2008.

STAFFING ANALYSIS OF THE ETHICS COMMISSION AND THE LOBBYIST REGISTRATION SECTION OF THE SECRETARY OF STATE'S OFFICE
SECTION 17.7.  The Office of State Budget and Management shall conduct a staffing analysis of the Ethics Commission and the Lobbyist Registration Section of the Secretary of State's Office to determine if the staffing is appropriate for the workload volume that has been generated by the enactment of Session Law 2006‑221.  The Office of State Budget and Management shall submit a final report outlining its findings and staffing recommendations to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division by April 30, 2008.

PART XVIII. DEPARTMENT OF REVENUE

twenty percent (20%) COLLECTION ASSISTANCE FEE
SECTION 18.1.  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 fifty thousand dollars ($150,000) a year.
(4)	To pay for postage or other delivery charges for correspondence directly and primarily relating to collecting overdue tax debts, not to exceed three hundred fifty‑three thousand dollars ($353,000) a year.
(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.
(7)	To pay for the replacement of the Integrated Tax Administration System (ITAS) and related e‑Business initiatives, not to exceed forty million dollars ($40,000,000)."

WHITE GOODS DISPOSAL TAX PROGRAM
SECTION 18.2.  G.S. 105‑187.24 reads as rewritten:
"§ 105‑187.19  Use of tax proceeds.
The Secretary shall distribute the taxes collected under this Article, less the Department of Revenue's allowance for administrative expenses, in accordance with this section. The Secretary may retain the Department's cost of collection, not to exceed  four hundred twenty-five thousand dollars ($425,000) a year, as reimbursement to the Department.
Each quarter, the Secretary shall credit eight percent (8%) of the net tax proceeds to the Solid Waste Management Trust Fund and shall credit twenty percent (20%) of the net tax proceeds to the White Goods Management Account. The Secretary shall distribute the remaining seventy‑two percent (72%) of the net tax proceeds among the counties on a per capita basis according to the most recent annual population estimates certified to the Secretary by the State Budget Officer. The Department shall not distribute the tax proceeds to a county when notified not to do so by the Department of Environment and Natural Resources under G.S. 130A‑309.87. If a county is not entitled to a distribution, the proceeds allocated for that county will be credited to the White Goods Management Account.
A county may use funds distributed to it under this section only as provided in G.S. 130A‑309.82. A county that receives funds under this section and that has an interlocal agreement with another unit of local government under which the other unit provides for the disposal of solid waste for the county must transfer the amount received under this section to that other unit. A unit to which funds are transferred is subject to the same restrictions on use of the funds as the county."

SCRAP TIRE DISPOSAL TAX PROGRAM
SECTION 18.3.  G.S. 105‑187.19(a) reads as rewritten:
"(a)	The Secretary shall distribute the taxes collected under this Article, less the allowance to the Department of Revenue for administrative expenses, in accordance with this section. The Secretary may retain the cost of collection by the Department, not to exceed  four hundred twenty-five thousand dollars ($425,000) a year, as reimbursement to the Department."

PART XIX.  SALARIES AND BENEFITS

GOVERNOR AND COUNCIL OF STATE
SECTION 19.1.(a)  Effective July 1, 2007, G.S. 147‑11(a) reads as rewritten:
"(a)	The salary of the Governor shall be one hundred thirty three thousand eight hundred ninety-five dollars ($133,895) annually, payable monthly."
SECTION 19.1.(b)  Effective July 1, 2007, the annual salaries for the members of the Council of State, payable monthly, for the 2007‑2008 and 2008‑2009 fiscal years are:

	Council of State	Annual Salary
	Lieutenant Governor	$	118,171
	Attorney General	118,171
	Secretary of State	118,171
	State Treasurer	118,171
	State Auditor	118,171
	Superintendent of Public Instruction	118,171
	Agriculture Commissioner	118,171
	Insurance Commissioner	118,171
	Labor Commissioner	118,171

NONELECTED DEPARTMENT HEAD/SALARY INCREASES
SECTION 19.2.  In accordance with G.S. 143B‑9, the maximum annual salaries, payable monthly, for the nonelected heads of the principal State departments for the 2007‑2008 and 2008‑2009 fiscal years are:

	Nonelected Department Heads	Annual Salary
	Secretary of Administration	$	115,453
	Secretary of Correction	115,453
	Secretary of Crime Control and Public Safety	115,453
	Secretary of Cultural Resources	115,453
	Secretary of Commerce	115,453
	Secretary of Environment, Health, and Natural Resources	115,453
	Secretary of Human Resources	115,453
	Secretary of Revenue	115,453
	Secretary of Transportation	115,453

CERTAIN EXECUTIVE BRANCH OFFICIALS/SALARY INCREASES
SECTION 19.3. The annual salaries, payable monthly, for the 2007‑2008 and 2008‑2009 fiscal years for the following executive branch officials are:

	Executive Branch Officials	Annual Salary
	Chairman, Alcoholic Beverage Control Commission	$	105,083
	State Controller	147,064
	Commissioner of Motor Vehicles	105,083
	Commissioner of Banks	118,171
	Chairman, Employment Security Commission	136,490
	State Personnel Director	115,453
	Chairman, Parole Commission	95,953
	Members of the Parole Commission	44,293
	Chairman, Utilities Commission	131,605
	Members of the Utilities Commission	118,171
	Executive Director, Agency for Public Telecommunications	88,588
	Director, Museum of Art	107,676
	Executive Director, North Carolina Agricultural Finance Authority	102,284
	State Chief Information Officer	146,975

JUDICIAL BRANCH OFFICIALS/SALARY INCREASEs
SECTION 19.4.(a) The annual salaries, payable monthly, for specified judicial branch officials for the 2007‑2008 and 2008‑2009 fiscal years are:

	Judicial Branch Officials	Annual Salary
	Chief Justice, Supreme Court	$	133,895
	Associate Justice, Supreme Court	130,395
	Chief Judge, Court of Appeals	127,135
	Judge, Court of Appeals	124,963
	Judge, Senior Regular Resident Superior Court	121,567
	Judge, Superior Court	118,171
	Chief Judge, District Court	107,306
	Judge, District Court	103,910
	Administrative Officer of the Courts	121,567
	Assistant Administrative Officer of the Courts	111,040

SECTION 19.4.(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‑eight thousand fifty‑one dollars ($68,051), and the minimum salary of any assistant district attorney or assistant public defender is at least thirty‑five thousand five hundred sixty‑one dollars ($35,561) effective July 1, 2007.

CLERK OF SUPERIOR COURT SALARY INCREASES
SECTION 19.5.  Effective July 1, 2007 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	$79,040
100,000 to 149,999	88,695
150,000 to 249,999	98,353
250,000 and above	108,612.

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 the incumbent clerk shall not be decreased by any change in population group during his continuance in office."

ASSISTANT AND DEPUTY CLERKS OF COURT/SALARY INCREASES/ELIMINATE DEPUTY CLERK HIRING RATE
SECTION 19.6.  Effective July 1, 2007, 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		Annual Salary
Head bookkeeper
Minimum	$	30,673
Maximum		52,532

Deputy Clerks			Annual Salary
Minimum		$26,402
Maximum	40,859."

MAGISTRATES' SALARY INCREASES
SECTION 19.7.(a)  Effective July 1, 2007, G.S. 7A‑171.1(a) reads as rewritten:
"(a)	The Administrative Officer of the Courts, after consultation with the chief district judge and pursuant to the following provisions, shall set an annual salary for each magistrate.
(1)	A full‑time magistrate shall be paid the annual salary indicated in the table set out in this subdivision. A full‑time magistrate is a magistrate who is assigned to work an average of not less than 40 hours a week during the term of office. The Administrative Officer of the Courts shall designate whether a magistrate is full‑time. Initial appointment shall be at the entry rate. A magistrate's salary shall increase to the next step every two years on the anniversary of the date the magistrate was originally appointed for increases to Steps 1 through 3, and every four years on the anniversary of the date the magistrate was originally appointed for increases to Steps 4 through 6.
Table of Salaries of Full‑Time Magistrates
Step Level	Annual Salary
Entry Rate	$31,078
Step 1	33,929
Step 2	37,029
Step 3	40,415
Step 4	44,122
Step 5	48,300
Step 6	52,984.

(2)	A part‑time magistrate is a magistrate who is assigned to work an average of less than 40 hours of work a week during the term, except that no magistrate shall be assigned an average of less than 10 hours of work a week during the term. A part‑time magistrate is included, in accordance with G.S. 7A‑170, under the provisions of G.S. 135‑1 (10) and G.S. 135‑40.2 (a). The Administrative Officer of the Courts designates whether a magistrate is a part‑time magistrate. A part‑time magistrate shall receive an annual salary based on the following formula:  The average number of hours a week that a part‑time magistrate is assigned work during the term shall be multiplied by the annual salary payable to a full‑time magistrate who has the same number of years of service prior to the beginning of that term as does the part‑time magistrate and the product of that multiplication shall be divided by the number 40. The quotient shall be the annual salary payable to that part‑time magistrate.
(3)	Notwithstanding any other provision of this subsection, an individual who, when initially appointed as a full‑time magistrate, is licensed to practice law in North Carolina, shall receive the annual salary provided in the Table in subdivision (1) of this subsection for Step 4. This magistrate's salary shall increase to the next step every four years on the anniversary of the date the magistrate was originally appointed. An individual who, when initially appointed as a part‑time magistrate, is licensed to practice law in North Carolina, shall be paid an annual salary based on that for Step 4 and determined according to the formula in subdivision (2) of this subsection. This magistrate's salary shall increase to the next step every four years on the anniversary of the date the magistrate was originally appointed. The salary of a full‑time magistrate who acquires a license to practice law in North Carolina while holding the office of magistrate and who at the time of acquiring the license is receiving a salary at a level lower than Step 4 shall be adjusted to Step 4 and, thereafter, shall advance in accordance with the Table's schedule. The salary of a part‑time magistrate who acquires a license to practice law in North Carolina while holding the office of magistrate and who at the time acquiring the license is receiving an annual salary as determined by subdivision (2) of this subsection based on a salary level lower than Step 4 shall be adjusted to a salary based on Step 4 in the Table, and, thereafter, shall advance in accordance with the provision in subdivision (2) of this subsection."
SECTION 19.7.(b)  Effective July 1, 2007, 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	$	25,061
1 or more but less than 3 years of service		26,211
3 or more but less than 5 years of service		28,527."

GENERAL ASSEMBLY PRINCIPAL CLERKS
SECTION 19.8.  Effective July 1, 2007, 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-nine thousand eight hundred thirty-seven dollars ($99,837) payable monthly. Each principal clerk shall also receive such additional compensation as approved by the Speaker of the House of Representatives or the President Pro Tempore of the Senate, respectively, for additional employment duties beyond those provided by the rules of their House. 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 shall make appropriate recommendations for changes in those salaries. Any changes enacted by the General Assembly shall be by amendment to this paragraph."

SERGEANT‑AT‑ARMS AND READING CLERKS
SECTION 19.9.  Effective July 1, 2007, 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 fifty-four dollars ($354.00) 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."

LEGISLATIVE EMPLOYEES
SECTION 19.10.  The Legislative Services Officer shall increase the salaries of nonelected employees of the General Assembly in effect for fiscal year 2006‑2007 by two and one‑half percent (2.5%).  Nothing in this act limits any of the provisions of G.S. 120‑32.

COMMUNITY COLLEGES PERSONNEL/SALARY INCREASES
SECTION 19.11.(a)  The Director of the Budget shall transfer from the Reserve for Compensation Increases, created in this act for fiscal years 2007‑2008 and 2008‑2009, funds to the North Carolina Community Colleges System Office necessary to provide an annual salary increase of two and one‑half percent (2.5%) including funds for the employer's retirement and social security contributions, commencing July 1, 2007, for all permanent full‑time community college institutional personnel supported by State funds.
SECTION 19.11.(b)  The Director of the Budget shall transfer from the Reserve for Compensation Increases, created in this act for fiscal years 2007‑2008 and 2008‑2009, funds to the North Carolina Community Colleges System Office necessary to provide an additional annual salary increase of two and one‑half percent (2.5%), for Community College faculty and professional staff, including funds for the employer's retirement and social security contributions, supported by State funds. The additional two and one‑half percent (2.5%) salary increase authorized by this section shall be made in accordance with rules adopted by the State Board of Community Colleges.

UNIVERSITY OF NORTH CAROLINA SYSTEM/EPA SALARY INCREASES
SECTION 19.12.(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 2007‑2008 and 2008‑2009, to provide an annual salary increase of two and one‑half percent (2.5%), including funds for the employer's retirement and social security contributions, commencing July 1, 2007, for all employees of The University of North Carolina, as well as employees other than teachers of the North Carolina School of Science and Mathematics, supported by State funds and whose salaries are exempt from the State Personnel Act (EPA).
SECTION 19.12.(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 2007‑2008 and 2008‑2009, to provide an average annual salary increase of five percent (5%) or at least an annual increase of one thousand two hundred forty dollars ($1,240), including funds for the employer's retirement and social security contributions, commencing July 1, 2007, 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.

MOST STATE EMPLOYEES
SECTION 19.13.(a)  The salaries in effect June 30, 2007, of all permanent full‑time State employees whose salaries are set in accordance with the State Personnel Act, and who are paid from the General Fund or the Highway Fund, shall be increased, on or after July 1, 2007, unless otherwise provided by this act, by two and one‑half percent (2.5%).
SECTION 19.13.(b)  Except as otherwise provided in this act, the fiscal year 2007‑2008 salaries for permanent full‑time State officials and persons in exempt positions that are recommended by the Governor or the Governor and the Advisory Budget Commission and set by the General Assembly shall be increased by two and one‑half percent (2.5%), commencing July 1, 2007.
SECTION 19.13.(c)  The salaries in effect for fiscal year 2007‑2008 for all permanent part‑time State employees shall be increased on and after July 1, 2007, by pro rata amounts of the two and one‑half percent (2.5%) salary increase provided for permanent full‑time employees covered under this part.
SECTION 19.13.(d)  The Director of the Budget may allocate out of special operating funds or from other sources of the employing agency, except tax revenues, sufficient funds to allow a salary increase, on and after July 1, 2007, 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 19.13.(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 two and one‑half percent (2.5%) salary increase provided for permanent full‑time employees covered by the provisions of subsection (a), commencing July 1, 2007.

ALL STATE‑SUPPORTED PERSONNEL
SECTION 19.14.(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 19.14.(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 19.14.(c)  The salary increases provided in this act are to be effective July 1, 2007, 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, 2007.
Payroll checks issued to employees after July 1, 2007, which represent payment of services provided prior to July 1, 2007, 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 19.14.(d)  The Director of the Budget shall transfer from the Reserve for Compensation Increases in this act for fiscal year 2007‑2008 all funds necessary for the salary increases provided by this act, including funds for the employer's retirement and social security contributions.
SECTION 19.14.(e)  Nothing in this act authorizes the transfer of funds between the General Fund and the Highway Fund for salary increases.

TEMPORARY SALES TAX TRANSFER FOR WILDLIFE RESOURCES COMMISSION SALARIES
SECTION 19.15.(a)  For the 2007‑2008 and 2008‑2009 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.

SALARY‑RELATED CONTRIBUTIONS/EMPLOYER
SECTION 19.16.(a)  Required employer salary‑related contributions for employees whose salaries are paid from department, office, institution, or agency receipts shall be paid from the same source as the source of the employees' salary.  If an employee's salary is paid in part from the General Fund or Highway Fund and in part from department, office, institution, or agency receipts, required employer salary‑related contributions may be paid from the General Fund or Highway Fund only to the extent of the proportionate part paid from the General Fund or Highway Fund in support of the salary of the employee, and the remainder of the employer's requirements shall be paid from the source that supplies the remainder of the employee's salary.  The requirements of this section as to source of payment are also applicable to payments on behalf of the employee for hospital‑medical benefits, longevity pay, unemployment compensation, accumulated leave, workers' compensation, severance pay, separation allowances, and applicable disability income benefits.
SECTION 19.16.(b)  Effective July 1, 2007, the State's employer contribution rates budgeted for retirement and related benefits as percentage of covered salaries for the 2007‑2008 fiscal year are (i) seven and fourteen hundredths percent (7.14%) – Teachers and State Employees; (ii) twelve and fourteen hundredths percent (12.14%) – 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 19.16.(c)  The maximum annual employer contributions, payable monthly, by the State for each covered employee or retiree for the 2007‑2008 fiscal year to the Indemnity Plan of the Teachers' and State Employees' Comprehensive Major Medical Plan are as follows:  (i) Medicare‑eligible employees and retirees – July 2007 to September 2007: seven hundred thirty‑three dollars ($733.00); (ii) Medicare‑eligible employees and retirees – October 2007 to June 2008: two thousand four hundred seventy‑one dollars ($2,471); (iii) non‑Medicare‑eligible employees and retirees –  July 2007 to September 2007: nine hundred sixty‑three dollars ($963.00); and (iv) non‑Medicare‑eligible employees and retirees – October 2007 to June 2008: three thousand two hundred forty‑six dollars ($3,246).
SECTION 19.16.(d)  The maximum annual employer contributions, payable monthly, by the State for each covered employee or retiree for the 2007‑2008 fiscal year to the Preferred Provider Organization (PPO) Teachers' and State Employees' Comprehensive Major Medical Plan are as follows:  (i) Medicare‑eligible employees and retirees – July 2007 to September 2007: seven hundred eleven dollars ($711.00); (ii) Medicare‑eligible employees and retirees – October 2007 to June 2008: two thousand three hundred ninety‑seven dollars ($2,397); (iii) non‑Medicare‑eligible employees and retirees –  July 2007 to September 2007: nine hundred thirty‑five dollars ($935.00); and (iv) non‑Medicare‑eligible employees and retirees – October 2007 to June 2008: three thousand one hundred forty‑nine dollars ($3,149).
SECTION 19.16.(e)  The maximum annual employer contributions, payable monthly, by the State for each covered employee or retiree for the 2008‑2009 fiscal year to the Indemnity Plan of the Teachers' and State Employees' Comprehensive Major Medical Plan are:  (i) Medicare‑eligible employees and retirees – July 2008 to June 2009: three thousand two hundred ninety‑five dollars ($3,295) and (ii) non‑Medicare‑eligible employees and retirees – July 2008 to June 2009: four thousand three hundred twenty‑eight dollars ($4,328).
SECTION 19.16.(f)  The maximum annual employer contributions, payable monthly, by the State for each covered employee or retiree for the 2008‑2009 fiscal year to the Preferred Provider Organization (PPO) of the Teachers' and State Employees' Comprehensive Major Medical Plan are:  (i) Medicare‑eligible employees and retirees – July 2008 to June 2009: three thousand one hundred ninety‑six dollars ($3,196) and (ii) non‑Medicare‑eligible employees and retirees – July 2008 to June 2009: four thousand one hundred ninety‑eight dollars ($4,198).

STATE HEALTH PLAN BENEFIT CHANGES
SECTION 19.17.(a)  G.S. 135-40.5 reads as rewritten:
"(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.  For both Indemnity Plan and Preferred Provider Option (PPO) members, 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 fifteen dollars ($15.00) for each generic prescription,  thirty dollars ($30.00) for each preferred branded prescription, and forty dollars ($40.00) for each preferred branded prescription with a generic equivalent drug, and fifty dollars ($50.00) for each nonpreferred 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 19.17.(b)  The first paragraph of G.S. 135-40.6 reads as rewritten:
" For Indemnity Plan members, the  benefits provided in this section are subject to a deductible of  four hundred fifty dollars ($450.00) 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 19.17.(c)  G.S. 135-40.6(7)a. reads as rewritten:
"(7)	Medical Benefits. –
a.	Services of Doctors. – The Plan pays the usual, reasonable and customary charges for covered inpatient medical (nonsurgical) services. Services are covered if the individual is hospital‑confined and is eligible for hospitalization benefits as described in this section. Benefits are provided for exactly the same number of days as the individual is entitled to under this section, except that medical benefits are provided on both the day of admission and the day of discharge.
In the event a covered individual is treated by two or more co‑attending doctors during the same hospital confinement for a medical (nonsurgical) condition, benefits are limited to payment for services provided by the primary attending doctor, except where need is established for supplementary skills for treatment of separate and distinct diagnoses or conditions.
Home, office, and skilled nursing facility visits including (i) charges for injected medications, (ii) inpatient care by attending medical doctors, radiologists, pathologists, and consultants during such time as hospital benefits are paid under any section of this Plan, (iii) care in the outpatient department of a hospital, and (iv) administration of shock therapy (drug or electric) including the services of anesthesiologists provided on an office or hospital outpatient basis for treatment of acute psychotic reaction or severe depression. For Indemnity Plan members, the Plan does not cover the first twenty-five dollars ($25.00) of allowable charges for each home, office, or skilled nursing facility visit."

PROVIDE COST‑OF‑LIVING INCREASES FOR RETIREES OF THE TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM, THE JUDICIAL RETIREMENT SYSTEM, AND THE LEGISLATIVE RETIREMENT SYSTEM
SECTION 19.18.(a)  G.S. 135‑5 is amended by adding a new subsection to read:
"(qqq)	From and after July 1, 2007, the retirement allowance to or on account of beneficiaries whose retirement commenced on or before July 1, 2006, shall be increased by two percent (2%) of the allowance payable on June 1, 2007, in accordance with G.S. 135‑5(o). Furthermore, from and after July 1, 2007, the retirement allowance to or on account of beneficiaries whose retirement commenced after July 1, 2006, but before June 30, 2007, 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, 2006, and June 30, 2007."
SECTION 19.18.(b)  G.S. 135‑65 is amended by adding a new subsection to read:
"(bb)	From and after July 1, 2007, the retirement allowance to or on account of beneficiaries whose retirement commenced on or before July 1, 2006, shall be increased by two percent (2%) of the allowance payable on June 1, 2007. Furthermore, from and after July 1, 2007, the retirement allowance to or on account of beneficiaries whose retirement commenced after July 1, 2006, but before June 30, 2007, 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, 2006, and June 30, 2007."
SECTION 19.18.(c)  G.S. 120‑4.22A is amended by adding a new subsection to read:
"(v)	In accordance with subsection (a) of this section, from and after July 1, 2007, the retirement allowance to or on account of beneficiaries whose retirement commenced on or before January 1, 2007, shall be increased by two percent (2%) of the allowance payable on June 1, 2007. Furthermore, from and after July 1, 2007, the retirement allowance to or on account of beneficiaries whose retirement commenced after January 1, 2007, but before June 30, 2007, 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, 2007, and June 30, 2007."
SECTION 19.18.(d)  G.S. 128‑27 is amended by adding a new section to read:
"(hhh)	From and after July 1, 2007, the retirement allowance to or on account of beneficiaries whose retirement commenced on or before July 1, 2006, shall be increased by two percent (2%) of the allowance payable on June 1, 2007, in accordance with subsection (k) of this section. Furthermore, from and after July 1, 2007, the retirement allowance to or on account of beneficiaries whose retirement commenced after July 1, 2006, but before June 30, 2007, 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, 2006, and June 30, 2007."

SALARY ADJUSTMENT FUND
SECTION 19.19.(a)  Any remaining appropriations in the General Fund Reserve for Compensation Increases authorized for employee salary increases not required for that purpose may be used to supplement the General Fund Salary Adjustment Fund to support salary adjustments for positions supported by the General Fund. Any remaining appropriations in the Highway Fund Reserves and Transfers authorized for employee salary increases not required for that purpose may be used to supplement the Highway Fund Salary Adjustment Fund to support salary adjustments for positions supported by the Highway Fund.
SECTION 19.19.(b)  Funds appropriated or otherwise transferred to the General Fund Salary Adjustment Fund or to the Highway Fund 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, special minimum rates, grade to band transfers and geographic site differential adjustments to provide competitive salary rates for affected job groups.
(2)	Reallocation of positions to higher‑level job groups to compensate employees for more difficult duties.
(3)	Career progression and in‑range adjustments in order to recognize job change and to respond to market conditions.
Funds shall only be used for salary adjustments that are in compliance with State Personnel Commission policies. Funding shall first be provided to categories outlined in subdivision (b)(1) and subdivision (b)(2) beginning with the earliest actions approved by the State Personnel Commission or the Office of State Personnel. Any remaining funds may be used for adjustments outlined in subdivision (b)(3) in compliance with State Personnel Commission policies.
SECTION 19.19.(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 19.19.(d)  The Director of the Budget may:
(1)	Transfer to General Fund budget codes from the General Fund Salary Adjustment Fund amounts required to support salary adjustments authorized by this section with the oldest of the pending adjustments to be funded first.
(2)	Transfer to Highway Fund budget codes from the Highway Fund Salary Adjustment Fund amounts required to support salary adjustments authorized by this section.
SECTION 19.19.(e)  The Judicial Department is eligible for the funding authorized in subsection (a) of this section.
SECTION 19.19.(f)  Employees subject to the State Personnel Act in The University of North Carolina System are eligible for funding authorized in subsection (a) of this section and for the purposes outlined in subsection (b) of this section.

PART XX. REVENUE LAW CHANGES

INTERNAL REVENUE CODE UPDATE 
SECTION 20.1.(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, 2007, including any provisions enacted as of that date which become effective either before or after that date."
SECTION 20.1.(b)  Notwithstanding subsection (a) of this section, any amendments to the Internal Revenue Code enacted after January 1, 2006, that increase North Carolina taxable income for the 2006 taxable year become effective for taxable years beginning on or after January 1, 2007.
SECTION 20.1.(c) Subsections (a) and (b) of this section are effective when they become law.

NO‑TAX FLOOR 
SECTION 20.2.(a)  Article 4 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑151.30.  No‑Tax Floor.
(a)	The tax of an individual whose adjusted gross income (AGI) as calculated under the Code is less than the amount listed below shall be equal to their net tax as reduced by credits multiplied by the factor in subsection (b):
Filing Status	AGI
Married, filing jointly	$10,000
Head of Household	$7,500
Single	$5,000
Married, filing separately	$5,000

(b)	The factor for a resident is 0.0.  The factor for a nonresident or part‑year resident is one minus the fraction calculated under G.S. 105‑134.5(b) or (c), as appropriate.
(c)	The tax of an individual whose adjusted gross income (AGI) as calculated under the Code is greater than the amount indicated in subsection (a) for the relevant filing status and whose AGI is less than the amount listed below shall be equal to their net tax as reduced by credits multiplied by the factor in subsection (d):

Filing Status	AGI
Married, filing jointly	$25,000
Head of Household	$20,000
Single	$12,500
Married, filing separately	$12,500
(d)	The factor for a resident is 0.5. The factor for a nonresident or part‑year resident is one minus the product of 0.5 multiplied by the fraction calculated under G.S. 105‑134.5(b) or (c), as appropriate."
SECTION 20.2.(b)  This section becomes effective January 1, 2008.

SALES TAX CHANGE
SECTION 20.3.  Section 34.1(c) of S.L. 2001‑424, as amended by Section 38.1 of S.L 2003‑284, Section 9.1 of S.L. 2005‑144, and Section 33.1 of S.L. 2005‑276, 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 data of its amendment or repeal."

INCOME TAX CHANGE
SECTION 20.4.(a)  Section 39.1 of S.L. 2003‑284, as amended by Section 36.1(a) of S.L. 2005‑276, is repealed.
SECTION 20.4.(b)  This section is effective January 1, 2008.

ADOPTION TAX CREDIT
SECTION 20.5.(a)  Article 4 of Chapter 105 of the General Statutes is amended by adding a new section to read as follows:
"§ 105‑151.32.  Credit for adoption expenses.
(a)	Credit. – An individual who is allowed a federal adoption tax credit under section 23 of the Code for the taxable year is allowed a credit against the tax imposed by this Part in an amount equal to fifty percent (50%) of the amount of the federal adoption tax credit claimed effective as of January 1, 2006.
(b)	Limitations. – A nonresident or part‑year resident who claims the credit allowed by this section shall reduce the amount of the credit by multiplying it by the fraction calculated under G.S. 105‑134.5(b) or (c), as appropriate. The credit allowed under this section may not exceed the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowed, except payments of tax made by or on behalf of the taxpayer."
SECTION 20.5.(b)  This section is effective January 1, 2008.

combined income tax reportING
SECTION 20.6.(a)  G.S. 105‑130.2(5c) reads as rewritten:
"§ 105‑130.2.  Definitions.
The following definitions apply in this Part:
…
(5c)	State net income. – The taxpayer's federal taxable income as determined under the Code, adjusted as provided in G.S. 105‑130.5 and, in the case of a corporation that has income from business activity that is taxable both within and without this State, allocated and apportioned to this State as provided in G.S. 105‑130.4. A corporation's net income in this State includes all of the following: 
a.	Its share of any income apportionable to this State of each of the combined groups of which it is a member.
b.	Its share of any income apportionable to this State of a distinct business activity conducted within or without the State wholly by the taxpayer.
c.	Its income from a business conducted wholly by the taxpayer entirely within this State.
d.	Its nonapportionable income or loss allocable to this State."
SECTION 20.6.(b)  G.S. 105‑130.4(a) reads as rewritten:
"(a)	As used in this section, unless the context otherwise requires:
(01)	Affiliated group. – A group of two or more corporations in which more than fifty percent (50%) of the voting stock of each member corporation is directly or indirectly owned by a common owner or owners, either corporate or noncorporate, or by one or more of the member corporations.
(1)	Apportionable income. – All income that is apportionable under the United States Constitution.
(1a)	Business activity. – Any activity by a corporation that would establish nexus under 15 U.S.C. § 381.
(1b)	Casual sale of property. – The sale of any property which was not purchased, produced, or acquired primarily for sale in the corporation's regular trade or business.
(1c)	Combined group. – The collective members of an affiliated group that are engaged in a unitary business. 
(2)	Commercial domicile. – The principal place from which the trade or business of the taxpayer is directed or managed.
(3)	 Compensation. – Wages, salaries, commissions and any other form of remuneration paid to employees for personal services.
(4)	Excluded corporation. – A corporation engaged in business as a building or construction contractor, a securities dealer, or a loan company or a corporation that receives more than fifty percent (50%) of its ordinary gross income from intangible property.
(5)	Nonapportionable income. – All income other than apportionable income.
(6)	Public utility. – A corporation that is subject to control of one or more of the following entities: the North Carolina Utilities Commission, the Federal Communications Commission, the Interstate Commerce Commission, the Federal Energy Regulatory Commission, or the Federal Aviation Agency; and that owns or operates for public use any plant, equipment, property, franchise, or license for the transmission of communications, the transportation of goods or persons, or the production, storage, transmission, sale, delivery or furnishing of electricity, water, steam, oil, oil products, or gas. The term also includes a motor carrier of property whose principal business activity is transporting property by motor vehicle for hire over the public highways of this State.
(7)	Sales. – All gross receipts of the corporation except for the following receipts:
a.	Receipts from a casual sale of property.
b.	Receipts allocated under subsections (c) through (h) of this section.
c.	Receipts exempt from taxation.
d.	The portion of receipts realized from the sale or maturity of securities or other obligations that represents a return of principal.
(8)	(9)	State. – A state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof.
(10)	Unitary business. – One or more related business organizations engaged in business activity both within and without the State among which one or more of the following exist:
a.	A unity of ownership, operation, or use.
b.	An interdependence in their functions."
SECTION 20.6.(c)  G.S. 105‑130.4(b) reads as rewritten:
"(b)	A corporation having income from business activity which is taxable both within and without this State shall allocate and apportion its net income or net loss as provided in this section and G.S. 105‑130.4A. For purposes of allocation and apportionment, a corporation is taxable in another state if (i) the corporation's business activity in that state subjects it to a net income tax or a tax measured by net income, or (ii) that state has jurisdiction based on the corporation's business activity in that state to subject the corporation to a tax measured by net income regardless whether that state exercises its jurisdiction. For purposes of this section, "business activity" includes any activity by a corporation that would establish a taxable nexus pursuant to 15 United States Code section 381."
SECTION 20.6.(d)  G.S. 105‑130.4(i) reads as rewritten:
"(i)	All apportionable income of corporations other than public utilities and excluded corporations shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus twice the sales factor, and the denominator of which is four. Provided, that where the sales factor does not exist, the denominator of the fraction shall be the number of existing factors and where the sales factor exists but the payroll factor or the property factor does not exist, the denominator of the fraction shall be the number of existing factors plus one. The apportionable income of a corporation that is part of a combined group engaged in a unitary business shall be apportioned to this State as provided in G.S. 105‑130.4A."
SECTION 20.6.(e)  G.S. 105‑130.4(l)(2) reads as rewritten:
"(2)	Sales of tangible personal property are in this State if the property is received in this State by a purchaser other than the United States government. In addition, a sale of tangible personal property is in this State if the property is shipped from a place in this State and the purchaser is in the United States government or the taxpayer is not taxable in the state of 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."
SECTION 20.6.(f)  Part 1 of Article 4 of Chapter 105 of the General Statutes is amended by adding two new sections to read:
"§ 105.130.4A.  Apportionment of income of combined group.
(a)	Combined Group. – The apportionable income of a combined group's unitary business is determined by eliminating income, deductions, and losses from all transactions between the members of the combined group associated with the combined group's unitary business. The apportionable income of the combined group's unitary business is apportioned in accordance with G.S. 105‑130.4(i) through G.S. 105‑130.4(l), including in the numerator the property, payroll, and sales associated with the combined group's unitary business in this State of each member of the combined group that has business activity in this State associated with the combined group's unitary business and including in the denominator the property, payroll, and sales of all members of the combined group that are associated with the combined group's unitary business. Members of a combined group may elect to determine the combined group's apportionable income pursuant to water's edge election under G.S. 105‑130.4B.
(b)	Member Share. – A member's share of the apportionable income of a combined group's unitary business apportioned to this State of which it is a member is the product of the following:
(1)	The apportionable income of the combined group's unitary business apportionable to this State.
(2)	The ratio of the member's State apportionment factors associated with the combined group's unitary business to the combined group's aggregate State apportionment factors associated with the combined group's unitary business.
"§ 105‑130.4B. Water's edge election.
(a)	Election. – Members of a combined group may elect to disregard the income and apportionment factors of a member of the combined group that is a foreign corporation that conducts eighty percent (80%) or more of its business activity outside the United States and outside of a tax haven country. A water's edge election must be filed in writing with the Secretary. It is effective for the taxable year in which it is filed and for the following 10 taxable years. The election will be automatically extended at the end of the 10‑year period unless notice is given in writing to the Secretary of intent not to renew. The notice of intent not to renew must be made before the end of the last two years of the election period. 
(b)	Withdrawal of Election. – An election may be withdrawn only upon written request to the Secretary and only with the written permission of the Secretary. If the Secretary grants a withdrawal of election, the Secretary must impose reasonable conditions as necessary to prevent the evasion of tax or to clearly reflect income for the election period prior to or after the withdrawal. A water's edge election, once terminated by either a notice of withdrawal or a failure to renew, may not be renewed for a minimum of three years.
(c)	Definition. – For purposes of this section, the term 'tax haven country' has the same meaning as in G.S. 143‑59.1."
SECTION 20.6.(g)  G.S. 105‑130.14 reads as rewritten:
"§ 105‑130.14.  Combined reporting.
Any corporation electing or required to file a consolidated income tax return with the Internal Revenue Service shall not file a consolidated return with the Secretary of Revenue, unless specifically directed to do so in writing by the Secretary, and shall determine its State net income as if a separate return had been filed for federal purposes.
A corporation which is part of an affiliated group engaged in a unitary business must file a report for the combined group containing the combined net income of the combined group and any other information the Secretary may require. The use of a combined report does not disregard the separate identities of the members of the combined group. Each member of the combined group is responsible for tax based on its taxable income or loss apportioned or allocated to this State."
SECTION 20.7.(h)  This section becomes effective for taxable years beginning on or after January 1, 2009.

PART XXI. GENERAL CAPITAL APPROPRIATIONS/PROVISIONS

GENERAL FUND CAPITAL APPROPRIATIONS/INTRODUCTION
SECTION 21.1.  The appropriations made by the 2007 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.

CAPITAL APPROPRIATIONS/GENERAL FUND
SECTION 21.2.  There is appropriated from the General Fund for the 2007‑2008 fiscal year the following amount for capital improvements:

Capital Improvements – General Fund		2007‑2008

Department of Administration
		Court of Appeals Building Renovation		$	10,498,000
		Deerfield Cottage Renovation		3,556,000
		Green Square Complex – Planning and Design		2,500,000

Department of Agriculture
		Study and Design Evaluation of the Veterinary 
			Diagnostic Laboratory System		1,250,000
		Alkaline Digester		1,200,000

State Ports Authority
		Capital Improvements at the Ports of Wilmington 
			and Morehead City		7,500,000

Department of Crime Control and Public Safety
		Master Planning Statewide		280,200
		Camp Butner Training Site Buffer		117,800
		Gastonia Armory Rehab, Addition, and Alteration		527,100

Department of Cultural Resources
		Horne Creek Farm Visitors Center and Multipurpose Shelter		442,100
		Museum of History Chronology Exhibit		6,322,900

Department of Environment and Natural Resources
		Water Quality – Chemistry Lab Office		252,200
		Ashe County Forestry Headquarters		708,000
		North Carolina Zoo‑ Horticulture Equipment 
			Storage and Work Facility		450,000
		North Carolina Zoo‑ Plains Barns and Paddocks		3,006,000
		Water Resources Development Projects		19,182,000

Department of Justice
		Addition to SBI Buildings 17 and 18		1,792,006
		Western Academy Firearms Range Compound		1,974,103

Department of Juvenile Justice and Delinquency Prevention
		New Youth Development Centers – Security Equipment		1,750,000
		CA Dillon Maintenance Building		375,000
		CA Dillon Administrative Offices (Mobile)		200,000
	
TOTAL CAPITAL IMPROVEMENTS – GENERAL FUND		$63,883,409

WATER RESOURCES DEVELOPMENT PROJECT FUNDS
SECTION 21.3.(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	2007‑2008

(1)	Wilmington Harbor Deepening	$	8,333,000
(2)	Manteo (Shallowbag Bay) Channel Maintenance	50,000
(3)	Wilmington Harbor Maintenance	200,000
(4)	Bogue Banks Beach Protection	84,000
(5)	B. Everett Jordan Water Supply Storage	100,000
(6)	Princeville Flood Control	98,000
(7)	Aquatic Plant Control, Statewide and Lake Gaston	400,000
(8)	Belhaven Harbor Breakwater Restoration	250,000
(9)	John H. Kerr Reservoir Operations Evaluation	400,000
(10)	Currituck Sound Water Management Study	350,000
(11)	Neuse River Basin Study	150,000
(12)	Surf City – N. Topsail Beach Protection (Pender County)	114,000
(13)	West Onslow Beach (Topsail Beach, Pender County)	43,000
(14)	Dare County Beach Protection	500,000
(15)	North Carolina Beach and Inlet Management Plan	250,000
(16)	Dredging Contingency Fund	2,500,000
(17)	State‑Local WRD Grants	2,000,000
(18)	Planning Assistance to Communities	95,000
(19)	North Carolina Oyster Habitat Restoration	300,000
(20)	Concord Stream Restoration (Cabarrus Co)	1,130,000
(21)	Southern Shores Canal Dredging Phase II	408,000
(22)	Ararat River Restoration	852,000
(23)	Little Sugar Creek Stream Restoration Phase 7	575,000

	TOTALS	$	19,182,000

SECTION 21.3.(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 2007‑2008 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 2007‑2008.
(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 2008‑2009 fiscal year.
SECTION 21.3.(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.

REPAIR AND RENOVATION RESERVE ALLOCATION
SECTION 21.4.  Of the funds in the Reserve for Repairs and Renovations for the 2007‑2008 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. 
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.

PART XXIi. Bonds and other matters

AUTHORIZE THE ISSUANCE OF SPECIAL INDEBTEDNESS FOR LAND ACQUISITION FOR PARKS, RECREATION, AND THE PRESERVATION OF NATURAL HERITAGE, AND TO USE FUNDS CURRENTLY DEDICATED TO THESE PURPOSES TO REPAY THE INDEBTEDNESS; AUTHORIZE THE ISSUANCE OF SPECIAL INDEBTEDNESS TO FINANCE VITAL STATE FACILITIES FOR public health and safety

State Park land aCquisItion
SECTION 22.(a)  Authorization. – In accordance with G.S. 142‑83, this part authorizes the issuance or incurrence of special indebtedness in the maximum principal amount of fifty million dollars ($50,000,000) to be used to finance the cost of land acquisitions for the expansion of the State Park System and Mountains to Sea Trail. Special indebtedness authorized by this section shall be issued or incurred only in accordance with Article 9 of Chapter 142 of the General Statutes.
SECTION 22.(b)  Identification of Land Acquisitions. – The specific land acquisitions for which the special indebtedness may be used are to be identified by the North Carolina Parks and Recreation Authority for the purpose of expanding the State Park System and Mountains to Sea Trail pursuant to G.S. 113‑44.15 notwithstanding subsections (b) and (b2) of that section. Land acquisitions shall support the conservation priorities set out by the One North Carolina Naturally Program. 
SECTION 22.(c)  Debt. – The Parks and Recreation Trust Fund shall reimburse the General Fund for debt service on special indebtedness to be issued or incurred under Article 9 of Chapter 142 of the General Statutes for the purposes provided in subsection (a) of this section.

Natural Heritage Land Acquisition
SECTION 22.1.(a)  Authorization. – In accordance with G.S. 142‑83, this part authorizes the issuance or incurrence of special indebtedness in the maximum principal amount of fifty million dollars ($50,000,000) to be used to finance the cost of land acquisitions to conserve ecological diversity of the State pursuant to G.S. 113‑77.9. Special indebtedness authorized by this section shall be issued or incurred only in accordance with Article 9 of Chapter 142 of the General Statutes.
SECTION 22.1.(b)  Identification of Game Land Acquisitions. – The specific land acquisitions for which the special indebtedness may be used are to be identified by the Trustees of the Natural Heritage Trust Fund as provided in G.S. 113‑77.9. Land acquisitions shall represent the ecological diversity of the State and support the conservation priorities set out by the One North Carolina Naturally Program.
SECTION 22.1.(c)  Debt. – The Natural Heritage Trust Fund shall reimburse the General Fund for debt service on special indebtedness to be issued or incurred under Article 9 of Chapter 142 of the General Statutes for the purposes provided in this Part.

Public health and safety capital projects
SECTION 22.2.(d)  Authorization – In accordance with G.S. 142‑83, this section authorizes the issuance or incurrence of special indebtedness in the following maximum principal amounts to finance the costs of the following projects. 

Amount	Project

$13,191,300	Planning, design, and construction of a 252-bed minimum security addition to the Alexander Correctional Institution.

$19,816,500	Planning, design, and construction of a 504 bed medium security addition to the Scotland Correctional Institution.

$39,763,100	To the Department of Correction for planning, design, and construction of a women's health and mental health medical facility.

$26,580,000	To the Department of Justice for planning, design, and construction of a State Highway Patrol multipurpose building at the Garner Road campus. 

$10,000,000	To Information Technology Services for servers, routers, and equipment for the Secondary Data Center.

$109,350,900	Total

Maximum Amount 
SECTION 22.3.  Except as otherwise provided by this act, the aggregate amount of special indebtedness issued pursuant to Sections 22.1 and 22.2 of this act shall not exceed two hundred nine million three hundred fifty thousand nine hundred dollars ($209,350,900). The maximum aggregate special indebtedness issued pursuant to Parts 1, 2, and 3 shall not exceed the following amounts for each fiscal year:
	Fiscal Year	Land Acquisition	Health & Safety	Total Aggregate Amount
	2007‑2008	$40,000,000	$40,000,000	$80,000,000
	2008‑2009	$30,000,000	$40,000,000	$70,000,000
	2009‑2010	$30,000,000	$29,350,900	$59,350,900
If less than the aggregate amount of special indebtedness authorized to be issued in a fiscal year is issued in that fiscal year, the balance for that fiscal year may be issued in any subsequent fiscal year.

General provisions
SECTION 22.4.(a)  It is the intent of the General Assembly that the proceeds of special indebtedness issued pursuant to Sections 22.1 and 22.2 of this act shall be applied for the purposes provided in this Part, including the acquisition by conservation easement in Parts 1 and 2.
SECTION 22.4.(b)  None of the proceeds of special indebtedness authorized by Parts 1 and 2 of this act may be used to acquire any property by eminent domain.
SECTION 22.4.(c)  The provisions of this act are severable. If any provision of this act is held invalid by a court of competent jurisdiction, the invalidity does not affect other provisions of the act that can be given effect without the invalid provision.

authorizE the issuance of general obligation bonds of the State to provide FOR NECESSARY capital facilities
SECTION 22.5.(a)  Purpose. The General Assembly finds that State government and university facilities are inadequate to serve North Carolina's rapidly growing population. It is the intent of the General Assembly by this act to provide for necessary capital facilities by authorizing the issuance of general obligation bonds of the State.
SECTION 22.5.(b)  Definitions. As used in this act, unless the context otherwise requires:
(1)	"Bonds" means bonds issued under this act.
(2)	"Capital Facility" means any one or more of the following:
a.	One or more buildings, utilities, structures, or other facilities or property developments, including streets and landscaping, and the acquisition of equipment and furnishings in connection therewith.
b.	Additions, extensions, enlargements, renovations, and improvements to existing buildings, utilities, structures, or other facilities or property developments, including streets and landscaping.
c.	Land or an interest in land.
(3)	"Cost" means, without intending thereby to limit or restrict any proper definition of this term in financing the cost of facilities or purposes authorized by this act:
a.	The cost of constructing, reconstructing, enlarging, acquiring, and improving facilities, and acquiring equipment and land therefore,
b.	The cost of engineering, architectural, and other consulting services as may be required,
c.	Administrative expenses and charges,
d.	Finance charges and interest prior to and during construction and, if deemed advisable by the State Treasurer, for a period not exceeding two years after the estimated date of completion of construction,
e.	The cost of bond insurance, investment contracts, credit enhancement and liquidity facilities, interest‑rate swap agreements or other derivative products, financial and legal consultants, and related costs of bond and note issuance, to the extent and as determined by the State Treasurer,
f.	The cost of reimbursing the State for any payments made for any cost described above, and 
g.	Any other costs and expenses necessary or incidental to the purposes of this act. Allocations in this act of proceeds of bonds to the costs of a project or undertaking in each case may include allocations to pay the costs set forth in items c., d., e., f., and g. in connection with the issuance of bonds for the project or undertaking.
(4)	"Credit Facility" means an agreement entered into by the State Treasurer on behalf of the State with a bank, savings and loan association, or other banking institution, an insurance company, reinsurance company, surety company, or other insurance institution, a corporation, investment banking firm, or other investment institution, or any financial institution or other similar provider of a credit facility, which provider may be located within or without the United States of America, such agreement providing for prompt payment of all or any part of the principal or purchase price (whether at maturity, presentment or tender for purchase, redemption, or acceleration), redemption premium, if any, and interest on any bonds or notes payable on demand or tender by the owner, in consideration of the State agreeing to repay the provider of the credit facility in accordance with the terms and provisions of such agreement.
(5)	"Notes" means notes issued under this act.
(6)	"Par Formula" means any provision or formula adopted by the State to provide for the adjustment, from time to time, of the interest rate or rates borne by any bonds or notes, including:
a.	A provision providing for such adjustment so that the purchase price of such bonds or notes in the open market would be as close to par as possible,
b.	A provision providing for such adjustment based upon a percentage or percentages of a prime rate or base rate, which percentage or percentages may vary or be applied for different periods of time, or
c.	Such other provision as the State Treasurer may determine to be consistent with this act and will not materially and adversely affect the financial position of the State and the marketing of bonds or notes at a reasonable interest cost to the State.
(7)	"State" means State of North Carolina.
SECTION 22.5.(c)  Authorization of bonds and notes. Subject to a favorable vote of a majority of the qualified voters of the State who vote on the question of issuing general obligation bonds in the election held as provided by law, the State Treasurer may, by and with the consent of the Council of State, issue and sell, at one time or from time to time, general obligation bonds of the State to be designated "State of North Carolina Capital Facilities Bonds," with any additional designations as may be determined to indicate the issuance of bonds from time to time, or notes of the State. Except as otherwise provided by this act, the aggregate amount of bonds and notes issued pursuant to this act shall not exceed one billion one hundred sixty‑three million nine hundred sixty‑seven thousand dollars ($1,163,967,000). The bonds and notes may be issued in the following years up to the following amounts:
	Fiscal Year	Aggregate Amount
	2007‑2008	$200,000,000
	2008‑2009	$275,000,000
	2009‑2010	$275,000,000
	2010‑2011	$250,000,000
	2011‑2012	$163,967,000
If less than the aggregate amount of bonds or notes authorized to be issued in a fiscal year is issued in that fiscal year, the balance for that fiscal year may be issued in any subsequent fiscal year. Refunding bonds and notes issued pursuant to this section shall not be included in the limitation on the aggregate amount of bonds and notes that may be issued pursuant to this Part.
SECTION 22.5.(d)  Proceeds of State Capital Facilities General Obligation Bonds. The proceeds of general obligation bonds and notes, including any premium thereon, except the proceeds of general obligation bonds the issuance of which has been anticipated by bond anticipation notes or the proceeds of refunding bonds or notes, shall be allocated and expended for paying the cost of capital facilities, to the extent and as provided in this section, as enacted by this act and subject to change as provided in this act, as follows:
	Name of Project	Amount
Department of Administration	
	Capital Area Visitor Center	$28,000,000
	Green Square Complex	$100,250,000

Department of Cultural Resources	
	Tryon Palace History Education and Visitor Center	$35,000,000
	State Records Center and Library for the Blind and 
		Physically Handicapped	$32,000,000

Department of Correction	
	Bertie, Scotland, Tabor Correctional Institution 
		Minimum Security Additions	$40,264,400
	Bertie, Lanesboro, Maury Correctional Institution 
	Medium Security Additions	$50,044,900
	Alexander, Maury Correctional Institution Medical 
		and Mental Health Additions	$118,569,600
	New Adult Male Minimum Security Facility	$28,199,400

Department of Justice	
	State Bureau of Investigation Operations Building	$34,169,600

Department of Juvenile Justice and Delinquency Prevention	
	Five New Youth Development Centers	$37,000,000
	
Department of Health and Human Services	
	New Office Complex	$173,200,000

University of North Carolina Board of Governors	
	Appalachian State University – College of Education Building	$34,001,000
	East Carolina University – School of Dentistry	$87,000,000
	Fayetteville State University – Science and Technology Complex	$22,587,000
	North Carolina A&T – General Classroom Instructional Facility	$25,787,000
	North Carolina School of the Arts – Library	$24,920,000
	North Carolina State University – Companion Animal Hospital	$38,000,000
	University of North Carolina at Asheville – 
		Rhoades Hall and Rhoades Tower Renovation	$8,687,000
	University of North Carolina at Chapel Hill – 
		Genomics Sciences Building	$119,608,225
	University of North Carolina at Greensboro – 
		Academic Classroom and Office Building	$45,167,000
	University of North Carolina at Pembroke – Residence Hall	$19,000,000
	Western Carolina University – Health and 
		Gerontological Sciences Building	$43,805,000
	Winston‑Salem State University – Student Activities Center	$18,707,775
	Total 	$1,163,967,900

SECTION 22.5.(e)  Limitations on Issuance
(1)	No bonds may be issued for the following projects prior to July 1, 2008:
a.	Five New Youth Development Centers
b.	State Records Center and Library for the Blind and Physically Handicapped 
(2)	No bonds may be issued for the following projects prior to July 1, 2009.
a.	DHHS – New Office Complex
b.	SBI Operations Building
c.	Alexander and Maury Correctional Institutions Medical and Mental Health Additions
d.	New Adult Male Minimum Security Facility
SECTION 22.5.(f)  Debt Service for Certain Projects
(1)	Department of Health and Human Services – New Office Complex
Recurring savings realized from the closure of existing facilities and current rent budgets for personnel who will be relocated to the new office complex and federal funds earned annually through depreciation and interest write‑off shall not revert to the General Fund but shall be used for the payment of debt service for the construction of the new office complex.
(2)	Green Square Complex
a.	The Friends of the Museum shall reimburse the General Fund for debt service on the bonds issued to construct the Nature Resource Center in the Green Square Complex in amount sufficient to amortize twenty‑seven million five hundred thousand dollars ($27,500,000).
b.	Recurring savings realized from the closure of existing facilities and current rent budgets for personnel who will be relocated to the new Green Square Complex and federal funds earned annually through depreciation and interest write‑off shall not revert to the General Fund but shall be used for the payment of debt service for the construction of the new DENR Office Building.
SECTION 22.5.(g)  Election. – The question of the issuance of the bonds authorized by this act shall be submitted to the qualified voters of the State at an election to be held on the first Tuesday after the first Monday of November 2007. Any other primary, election, or referendum validly called or scheduled by law at the time the election on the bond question provided for in this section is held may be held as called or scheduled.  Notice of the election shall be given in the manner and at the times required by G.S. 163‑33(8). The election and the registration of voters therefor shall be held under and in accordance with the general laws of the State. Absentee ballots shall be authorized in the election.
The State Board of Elections shall reimburse the counties of the State for all necessary expenses incurred in holding the election that are in addition to those that would have otherwise been incurred, the same to be paid out of the Contingency and Emergency Fund or other funds available to the State Board of Elections.
Ballots, voting systems authorized by Article 14 of Chapter 163 of the General Statutes, or both may be used in accordance with rules prescribed by the State Board of Elections. The bond questions to be used in the ballots or voting systems shall be in substantially the following form:
"[ ] FOR	[ ] AGAINST
the issuance of one billion one hundred sixty‑three million nine hundred sixty‑seven thousand nine hundred dollars ($1,163,967,900) State of North Carolina 2007 Capital Facilities Bonds constituting general obligation bonds of the State secured by a pledge of the faith and credit and taxing power of the State for the purpose of providing funds, with any other available funds, to provide necessary capital facilities."
If a majority of those voting on the bond question in the election vote in favor of the issuance of the bonds, those bonds may be issued as provided in this act. If a majority of those voting on the bond question in the election vote against the issuance of the bonds, those bonds shall not be issued.
The results of the election shall be canvassed and declared as provided by law for elections for State officers; the results of the election shall be certified by the State Board of Elections to the Secretary of State, in the manner and at the time provided by the general election laws of the State.
SECTION 22.5.(h)  General provisions. – 
(1)	Any additional moneys which may be received by means of a grant or grants from the United States or any agency or department thereof or from any other source to aid in financing the cost of a capital facility may be disbursed, to the extent permitted by the terms of the grant or grants, without regard to any limitations imposed by this Article.
(2)	Any capital facility and the amount of the allocation for it set forth above may be changed from time to time as the General Assembly may decide.
SECTION 22.5.(i) Issuance of bonds and notes.
(1)	Terms and Conditions. – Bonds or notes may bear such date or dates, may be serial or term bonds or notes, or any combination thereof, may mature in such amounts and at such time or times, not exceeding 40 years from their date or dates, may be payable at such place or places, either within or without the United States of America, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, may bear interest at such rate or rates, which may vary from time to time, and may be made redeemable before maturity, at the option of the State or otherwise as may be provided by the State, at such price or prices, including a price less than the face amount of the bonds or notes, and under such terms and conditions, all as may be determined by the State Treasurer, by and with the consent of the Council of State.
(2)	Signatures; Form and Denomination; Registration. – Bonds or notes may be issued as certificated or uncertificated obligations.  If issued as certificated obligations, bonds or notes shall be signed on behalf of the State by the Governor or shall bear his or her facsimile signature, shall be signed by the State Treasurer or shall bear his or her facsimile signature, and shall bear the Great Seal of the State or a facsimile thereof shall be impressed or imprinted thereon.  If bonds or notes bear the facsimile signatures of the Governor and the State Treasurer, the bonds or notes shall also bear a manual signature which may be that of a bond registrar, trustee, paying agent, or designated assistant of the State Treasurer.  Should any officer whose signature or facsimile signature appears on bonds or notes cease to be such officer before the delivery of the bonds or notes, the signature or facsimile signature shall nevertheless have the same validity for all purposes as if the officer had remained in office until delivery, and bonds or notes may bear the facsimile signatures of persons who at the actual time of the execution of the bonds or notes shall be the proper officers to sign any bond or note although at the date of the bond or note such persons may not have been such officers.  The form and denomination of bonds or notes, including the provisions with respect to registration of the bonds or notes and any system for their registration, shall be as the State Treasurer may determine in conformity with this act; provided, however, that nothing in this act shall prohibit the State Treasurer from proceeding, with respect to the issuance and form of the bonds or notes, under the provisions of Chapter 159E of the General Statutes, the Registered Public Obligations Act, as well as under this act.
(3)	Manner of Sale; Expenses. – Subject to determination by the Council of State as to the manner in which bonds or notes shall be offered for sale, whether at public or private sale, whether within or without the United States of America, and whether by publishing notices in certain newspapers and financial journals, mailing notices, inviting bids by correspondence, negotiating contracts of purchase or otherwise, the State Treasurer is authorized to sell bonds or notes at one time or from time to time at such rate or rates of interest, which may vary from time to time, and at such price or prices, including a price less than the face amount of the bonds or the notes, as the State Treasurer may determine.  All expenses incurred in preparation, sale, and issuance of bonds or notes shall be paid by the State Treasurer from the proceeds of bonds or notes or other available moneys.
a.	Notes; repayment.
b.	By and with the consent of the Council of State, the State Treasurer is hereby authorized to borrow money and to execute and issue notes of the State for the same, but only in the following circumstances and under the following conditions:
1.	For anticipating the sale of bonds to the issuance of which the Council of State shall have given consent, if the State Treasurer shall deem it advisable to postpone the issuance of the bonds;
2.	For the payment of interest on or any installment of principal of any bonds then outstanding, if there shall not be sufficient funds in the State treasury with which to pay the interest or installment of principal as they respectively become due;
3.	For the renewal of any loan evidenced by notes herein authorized;
4.	For the purposes authorized in this act; and
5.	For refunding bonds or notes as herein authorized.
c.	Funds derived from the sale of bonds or notes may be used in the payment of any bond anticipation notes issued under this act. Funds provided by the General Assembly for the payment of interest on or principal of bonds shall be used in paying the interest on or principal of any notes and any renewals thereof, the proceeds of which shall have been used in paying interest on or principal of the bonds.
d.	Refunding Bonds and Notes. By and with the consent of the Council of State, the State Treasurer is authorized to issue and sell refunding bonds and notes pursuant to the provisions of the State Refunding Bond Act for the purpose of refunding bonds or notes issued pursuant to this act.  The refunding bonds and notes may be combined with any other issues of State bonds and notes similarly secured.
e.	Tax Exemption. Bonds and notes shall be exempt from all State, county, and municipal taxation or assessment, direct or indirect, general or special, whether imposed for the purpose of general revenue or otherwise, excluding inheritance and gift taxes, income taxes on the gain from the transfer of bonds and notes, and franchise taxes.  The interest on bonds and notes shall not be subject to taxation as to income.
f.	Investment Eligibility. Bonds and notes are hereby made securities in which all public officers, agencies, and public bodies of the State and its political subdivisions, all insurance companies, trust companies, investment companies, banks, savings banks, savings and loan associations, credit unions, pension or retirement funds, other financial institutions engaged in business in the State, executors, administrators, trustees, and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them.  Bonds and notes are hereby made securities which may properly and legally be deposited with and received by any officer or agency of the State or political subdivision of the State for any purpose for which the deposit of bonds, notes, or obligations of the State or any political subdivision is now or may hereafter be authorized by law.
g.	Faith and Credit. The faith and credit and taxing power of the State are hereby pledged for the payment of the principal of and the interest on bonds and notes. In addition to the State's right to amend any provision of this act to the extent it does not impair any contractual right of a bond owner, the State expressly reserves the right to amend any provision of this act with respect to the making and repayment of loans, the disposition of any repayments of loans, and any intercept provisions relating to the failure of a local government unit to repay a loan, the bonds not being secured in any respect by loans, any repayments thereof, or any intercept provisions with respect thereto.
SECTION 22.5.(j)  Minority Business Participation. – The goals set by G.S. 143‑128 for participation in projects by minority businesses apply to projects funded by the proceeds of bonds or notes issued under this act.  The Department of Administration shall monitor compliance with regard to projects funded by the proceeds of bonds and notes and shall report to the General Assembly by January 1 of each year on the participation by minority businesses in these projects.
The State Treasurer shall provide contracting opportunities for historically underutilized businesses in providing professional services in connection with the issuance of bonds and notes authorized by this act. As used in this subsection, the term "historically underutilized business" means a business described in G.S. 143‑48. The State Treasurer shall strive to increase the amount of legal, financial, and other professional services acquired by it from historically underutilized businesses. With the assistance of the Office for Historically Underutilized Businesses in the Department of Administration, the State Treasurer shall set objectives for contracting with these businesses, identify and eliminate barriers or constraints that may restrict these businesses from contracting with the State Treasurer, and develop a plan for meeting these objectives. The State Treasurer shall report quarterly to the Office for Historically Underutilized Businesses on its progress in carrying out the requirements of this subsection.
SECTION 22.5.(k)  Other Agreements. – The State Treasurer may authorize, execute, obtain, or otherwise provide for bond insurance, investment contracts, credit and liquidity facilities, interest rate swap agreements and other derivative products, and any other related instruments and matters the State Treasurer determines are desirable in connection with the issuance, incurrence, carrying, or securing of bonds or notes. Subject to the provisions of Section 9 of this act, the State Treasurer is authorized to employ and designate any financial consultants, underwriters, and bond attorneys to be associated with any bond issue under this act as the State Treasurer considers necessary.
SECTION 22.5.(l)  Variable interest rates. – In fixing the details of bonds and notes, the State Treasurer may provide that any of the bonds or notes may:
(1)	Be made payable from time to time on demand or tender for purchase by the owner thereof provided a credit facility supports the bonds or notes, unless the State Treasurer specifically determines that a credit facility is not required upon a finding and determination by the State Treasurer that the absence of a credit facility will not materially or adversely affect the financial position of the State and the marketing of the bonds or notes at a reasonable interest cost to the State;
(2)	Be additionally supported by a credit facility;
(3)	Be made subject to redemption or a mandatory tender for purchase prior to maturity;
(4)	Bear interest at a rate or rates that may vary for such period or periods of time, all as may be provided in the proceedings providing for the issuance of the bonds or notes, including, without limitation, such variations as may be permitted pursuant to a par formula; and
(5)	Be made the subject of a remarketing agreement whereby an attempt is made to remarket bonds or notes to new purchasers prior to their presentment for payment to the provider of the credit facility or to the State.
If the aggregate principal amount repayable by the State under a credit facility is in excess of the aggregate principal amount of bonds or notes secured by the credit facility, whether as a result of the inclusion in the credit facility of a provision for the payment of interest for a limited period of time or the payment of a redemption premium or for any other reason, then the amount of authorized but unissued bonds or notes during the term of such credit facility shall not be less than the amount of such excess, unless the payment of such excess is otherwise provided for by agreement of the State executed by the State Treasurer.

authorizE the issuance of general obligation bonds of the State TO PROVIDE WATER AND WASTEWATER CAPITAL iMPROVEMENTS
SECTION 22.6.(a)  Purpose. – It is the intent of the General Assembly by this act to provide for the issuance of general obligation bonds of the State and to provide that the proceeds realized from the sale of the bonds shall be allocated as follows:
(1)	Water System Improvements. – One hundred twenty-five million dollars ($125,000,000) to provide grants and zero percent (0%) interest loans for qualified water systems to increase capacity and reliability through interconnections and regional linkages and upgrade systems to maintain service levels. Up to five million dollars ($5,000,000) may be used to provide technical assistance to local systems to analyze water system problems and prepare plans for improvements.
(2)	Wastewater System Improvements. – One hundred twenty-five million dollars ($125,000,000) to provide grants and zero (0%) interest loans for qualified systems which are under SOC (consent agreements to address serious problems), moratorium on new connections, or substandard collection systems with high infiltration. Up to five million dollars ($5,000,000) may be used to provide technical assistance to local systems to analyze wastewater system problems and prepare plans for improvements.
SECTION 22.6.(b)  Definitions. – As used in this section, unless the context otherwise requires:
(a)	"Bonds" means bonds issued under this act.
(b)	"Capital improvement plan" means a report that identifies water and sewer infrastructure and capital needs that address planned and strategic growth.  It shall include an assessment of current water and wastewater systems and a projection of those infrastructure needs over a 20‑year horizon.  The report shall take into consideration government mandates, usefulness of the improvements to the community and the effect on both short‑ and long‑term operation and maintenance of the scheduled improvements and identify alternatives for meeting the identified need including regionalization, consolidation and system mergers, water reuse and conservation.
(c)	"Clean Water Revolving Loan and Grant Act" means Chapter 796 of the 1987 Session Laws, as amended from time to time, codified as Chapter 159G of the General Statutes.
(d)	"Clean Water Revolving Loan and Grant Fund" means the Clean Water Revolving Loan and Grant Fund as defined in the Clean Water Revolving Loan and Grant Act.
(e)	"Cost" means, without intending thereby to limit or restrict any proper definition of this term in financing the cost of facilities or purposes authorized by this act:
(1)	The cost of constructing, reconstructing, enlarging, acquiring, and improving facilities, and acquiring equipment and land therefor,
(2)	The cost of engineering, architectural, and other consulting services as may be required,
(3)	Administrative expenses and charges,
(4)	Finance charges and interest prior to and during construction and, if deemed advisable by the State Treasurer, for a period not exceeding two years after the estimated date of completion of construction,
(5)	The cost of bond insurance, investment contracts, credit enhancement and liquidity facilities, interest‑rate swap agreements or other derivative products, financial and legal consultants, and related costs of bond and note issuance, to the extent and as determined by the State Treasurer,
(6)	The cost of reimbursing the State for any payments made for any cost described above, and
(7)	Any other costs and expenses necessary or incidental to the purposes of this act.
Allocations in this act of proceeds of bonds to the costs of a project or undertaking in each case may include allocations to pay the costs set forth in items (3) through (5) in connection with the issuance of bonds for the project or undertaking.
(f)	"Credit facility" means an agreement entered into by the State Treasurer on behalf of the State with a bank, savings and loan association, or other banking institution, an insurance company, reinsurance company, surety company, or other insurance institution, a corporation, investment banking firm, or other investment institution, or any financial institution or other similar provider of a credit facility, which provider may be located within or without the United States of America, such agreement providing for prompt payment of all or any part of the principal or purchase price (whether at maturity, presentment or tender for purchase, redemption, or acceleration), redemption premium, if any, and interest on any bonds or notes payable on demand or tender by the owner, in consideration of the State agreeing to repay the provider of the credit facility in accordance with the terms and provisions of such agreement.
(g)	"Local government units" means local government units as defined in the Clean Water Revolving Loan and Grant Act.
(h)	"Notes" means notes issued under this act.
(i)	"Par formula" means any provision or formula adopted by the State to provide for the adjustment, from time to time, of the interest rate or rates borne by any bonds or notes, including:
(1)	A provision providing for such adjustment so that the purchase price of such bonds or notes in the open market would be as close to par as possible,
(2)	A provision providing for such adjustment based upon a percentage or percentages of a prime rate or base rate, which percentage or percentages may vary or be applied for different periods of time, or
(3)	Such other provision as the State Treasurer may determine to be consistent with this act and will not materially and adversely affect the financial position of the State and the marketing of bonds or notes at a reasonable interest cost to the State.
(j)	"School water or wastewater project" means a project to provide clean water or wastewater treatment for a school by upgrading, replacing, or constructing school water or wastewater facilities.
(k)	"State" means the State of North Carolina.
(l)	"Wastewater collection systems" means wastewater collection systems as defined in the Clean Water Revolving Loan and Grant Act.
(m)	"Wastewater treatment works" means wastewater treatment works as defined in the Clean Water Revolving Loan and Grant Act.
(n)	"Water conservation projects" include, but are not limited to, any construction, repair, renovation, expansion, replacement of components, or other capital improvement, including related equipment and land acquisition, designed to:
(1)	Eliminate the wasteful or unnecessary use or loss of water in the operations of a wastewater collection system, wastewater treatment works, or water supply system; or
(2)	Enhance the operation of a wastewater collection system, wastewater treatment works, or water supply system to provide a more efficient use of water.
(o)	"Water Pollution Control Revolving Fund" means the fund described by G.S. 159G‑4(a) and G.S. 159G‑5(c).
(p)	"Water reuse" means the actual use or application of treated wastewater in or on areas which require water but do not require potable water quality.
(q)	"Water supply systems" means water supply systems as defined in the Clean Water Revolving Loan and Grant Act.
SECTION 22.6.(e)  Authorization of bonds and notes. Subject to a favorable vote of a majority of the qualified voters of the State who vote on the question of issuing Clean Water Bonds in the election called and held as provided in this act, the State Treasurer is hereby authorized, by and with the consent of the Council of State, to issue and sell, at one time or from time to time, general obligation bonds of the State to be designated "State of North Carolina Clean Water Bonds", with any additional designations as may be determined to indicate the issuance of bonds from time to time, or notes of the State as provided in this act, in an aggregate principal amount not exceeding two hundred fifty million dollars ($250,000,000) for the purpose of providing funds, with any other available funds, for the purposes authorized in this act. The bonds and notes may be issued in the following years up to the following amounts:
Fiscal Year	Aggregate Amount
2007‑2008	$100,000,000
2008‑2009	$	37,500,000
2009‑2010	$	37,500,000
2010‑2011	$	37,500,000
2011‑2012	$	37,500,000

If less than the aggregate amount of bonds or notes authorized to be issued in a fiscal year is issued in that fiscal year, the balance for that fiscal year may be issued in any subsequent fiscal year. Refunding bonds and notes issued pursuant to Section 12(e) of this act shall not be included in the limitation on the aggregate amount of bonds and notes that may be issued pursuant to this act.
SECTION 22.6.(f)  Use of Clean Water Bond and note proceeds. – 
(a)	The funds to be derived from the sale of the Clean Water Bonds authorized by this act are sufficient to meet no more than a fraction of the needs that now exist and will arise in the immediate future.  For this reason, the Department of Natural Resources shall use the criteria indicated in G.S. 159G‑23 as the primary consideration in granting and loaning funds. 
(b)	Preference will be given to projects that include consolidation, cooperation, interconnections, and regional linkages among small systems to achieve operational efficiencies, address environmental issues, promote water conservation, and improve water quality.
(c)	Only systems with water and sewer rates equal to or greater than one and one-half percent (1.5%) of median household income are eligible for grants. 
(d)	No more than three million dollars ($3,000,000) shall be provided as a grant or loan to an individual water or wastewater system. A water system and a wastewater system are considered separate units when applying this maximum.
(e)	The proceeds shall be transferred to the Clean Water Revolving Loan and Grant Fund to make grants to the appropriate local government unit qualifying for a grant from the Clean Water Revolving Loan and Grant Fund in accordance with the provisions of this act and the Clean Water Revolving Loan and Grant Act.
(f)	A county may apply for a grant on behalf of a rural school located in the county for a school water or wastewater project.
SECTION 22.6.(g)  Prohibited Use of Clean Water Bonds Proceeds. – Proceeds from the sale of the Clean Water Bonds shall not be used to construct new water or sewer lines to provide water or sewer connections in any area that has been designated as WS‑I or the critical area of any area that has been designated as WS‑II, WS‑III, or WS‑IV by the Environmental Management Commission pursuant to G.S. 143‑214.5. The Secretary of Environment and Natural Resources may grant a waiver to allow construction of new water or sewer lines and to provide water or sewer connections if the Secretary finds that granting the waiver is necessary to protect public health or water quality.  A waiver granted by the Secretary under this subsection shall include a requirement that the water or sewer line shall be designed and sized to address only the public health or water quality concerns on which the waiver is based and shall not allow for additional connections beyond those necessary to protect public health and water quality.  This subsection does not prohibit the repair or replacement of existing water or sewer lines. In addition, the proceeds shall not be used for the repair, installation, or replacement of a low‑pressure pipe wastewater system with another low‑pressure pipe wastewater system.
SECTION 22.6.(h)  Election. – The question of the issuance of the bonds authorized by this act shall be submitted to the qualified voters of the State at an election to be held on the first Tuesday after the first Monday of November 2007. Any other primary, election, or referendum validly called or scheduled by law at the time the election on the bond question provided for in this section is held may be held as called or scheduled.  Notice of the election shall be given in the manner and at the times required by G.S. 163‑33(8).  The election and the registration of voters therefor shall be held under and in accordance with the general laws of the State.  Absentee ballots shall be authorized in the election.
The State Board of Elections shall reimburse the counties of the State for all necessary expenses incurred in holding the election that are in addition to those that would have otherwise been incurred, the same to be paid out of the Contingency and Emergency Fund or other funds available to the State Board of Elections.
Ballots, voting systems authorized by Article 14 of Chapter 163 of the General Statutes, or both, may be used in accordance with rules prescribed by the State Board of Elections. The bond questions to be used in the ballots or voting systems shall be in substantially the following form:
"[ ] FOR	[ ] AGAINST
the issuance of two hundred fifty million dollars ($250,000,000) State of North Carolina 2007 Clean Water Bonds constituting general obligation bonds of the State secured by a pledge of the faith and credit and taxing power of the State for the purpose of providing funds, with any other available funds, to make loans and grants to local government units to pay all or a portion of the cost of water and wastewater capital improvement projects."
If a majority of those voting on a bond question in the election vote in favor of the issuance of the bonds described in the question, those bonds may be issued as provided in this act. If a majority of those voting on a bond question in the election vote against the issuance of the bonds described in the question, those bonds shall not be issued.
The results of the election shall be canvassed and declared as provided by law for elections for State officers; the results of the election shall be certified by the State Board of Elections to the Secretary of State, in the manner and at the time provided by the general election laws of the State.
SECTION 22.6.(i)  General Provisions. – 
(a)	The proceeds shall be used to make loans directly to local government units qualifying for a loan from the Clean Water Revolving Loan and Grant Fund or loaned in such other manner as shall effectuate the purposes of this act.  To qualify for a loan for the purpose of paying the cost of water supply systems, a local government unit must have a water supply facility plan approved by the Department of Environment and Natural Resources.  A water supply facility plan submitted by a local government unit to the Department under G.S. 143‑355(l) will be sufficient to meet this requirement.  To qualify for a loan for the purpose of paying the cost of wastewater collection systems or wastewater treatment works, a local government unit must have a wastewater facility plan approved by the Department of Environment and Natural Resources.  A wastewater facility plan must project future wastewater treatment needs, must present a long‑range plan to meet those needs, and must include plans for system operations and maintenance of the facilities being built with the bond proceeds. 
(b)	The form of the loans and the details thereof including, without limitation, the maturity and amortization schedule shall be determined, from time to time, by the State Treasurer.  In making these determinations, the State Treasurer shall consider the purpose of the loans, the ability of local government units to repay the loans, and the security for the loans.  The interest rates on these loans shall be zero percent (0%). Payments shall be sufficient to repay the principal portion of the debt service on the Clean Water Bonds.
(c)	Repayments of the loans shall be credited to the General Fund and may be used to pay, directly or indirectly, debt service on the bonds and notes issued. Repayments may be initially placed into such fund or account as may be determined by the State Treasurer for the purpose of determining compliance with applicable requirements of the federal tax law and shall be expended and disbursed therefrom under the direction and supervision of the Director of the Budget.
SECTION 22.6.(j)  Redistribution of the Allocation. – The General Assembly may at this session or at any subsequent session increase or decrease the allocations of the proceeds of the Clean Water Bonds set forth in this Part, so long as the aggregate amount of the allocations does not exceed two hundred fifty million dollars ($250,000,000).
SECTION 22.6.(k)  Contracts With Private Entities. – To the extent otherwise authorized by law, and to the extent the use otherwise accomplishes the clean water objectives of the State, this act does not prohibit a local government unit from using the proceeds of Clean Water Bonds for projects that accomplish the clean water objectives of this State through contracts or other arrangements with private entities.
SECTION 22.6.(l)  Allocation of proceeds.
(a)	The proceeds of Clean Water Bonds and notes, including premium thereon, if any, except the proceeds of bonds the issuance of which has been anticipated by bond anticipation notes or the proceeds of refunding bonds or notes, shall be placed by the State Treasurer in a special fund to be designated "Clean Water Bonds Fund", which may include such appropriate special accounts therein as may be determined by the State Treasurer and shall be disbursed as provided in this act.  Moneys in the Clean Water Bonds Fund shall be allocated and expended as provided in this act.
(b)	Any additional moneys which may be received by means of a grant or grants from the United States of America or any agency or department thereof or from any other source for deposit to the Clean Water Bonds Fund may be placed in the Clean Water Bonds Fund or in a separate account or fund and shall be disbursed, to the extent permitted by the terms of the grant or grants, without regard to any limitations imposed by this act.
(c)	Moneys in the Clean Water Bonds Fund or any separate clean water fund or account established under this act may be invested from time to time by the State Treasurer in the same manner permitted for investment of moneys belonging to the State or held in the State treasury, except with respect to grant money to the extent otherwise directed by the terms of the grant.  Investment earnings, except investment earnings with respect to grant moneys to the extent otherwise directed or restricted by the terms of the grant, may be (i) credited to the Clean Water Bonds Fund or any separate clean water fund or account established under this act, (ii) used to pay debt service on the bonds authorized by this act, (iii) used to satisfy compliance with applicable requirements of the federal tax law, or (iv) transferred to the General Fund of the State.
(d)	The proceeds of bonds and notes may be used with any other moneys made available by the General Assembly for making grants and loans authorized by this act, including the proceeds of any other State bond issues, whether heretofore made available or which may be made available at the session of the General Assembly at which this act is ratified or any subsequent sessions.  The proceeds of bonds and notes shall be expended and disbursed under the direction and supervision of the Director of the Budget.  The funds provided by this act shall be disbursed for the purposes provided in this act upon warrants drawn on the State Treasurer by the State Controller, which warrants shall not be drawn until requisition has been approved by the Director of the Budget and which requisition shall be approved only after full compliance with the State Budget Act.
SECTION 22.6.(m)  Issuance of bonds and notes. – 
(a)	Terms and Conditions. Bonds or notes may bear such date or dates, may be serial or term bonds or notes, or any combination thereof, may mature in such amounts and at such time or times, not exceeding 40 years from their date or dates, may be payable at such place or places, either within or without the United States of America, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, may bear interest at such rate or rates, which may vary from time to time, and may be made redeemable before maturity, at the option of the State or otherwise as may be provided by the State, at such price or prices, including a price less than the face amount of the bonds or notes, and under such terms and conditions, all as may be determined by the State Treasurer, by and with the consent of the Council of State.
(b)	Signatures; Form and Denomination; Registration.  Bonds or notes may be issued as certificated or uncertificated obligations.  If issued as certificated obligations, bonds or notes shall be signed on behalf of the State by the Governor or shall bear his or her facsimile signature, shall be signed by the State Treasurer or shall bear his or her facsimile signature, and shall bear the Great Seal of the State or a facsimile thereof shall be impressed or imprinted thereon.  If bonds or notes bear the facsimile signatures of the Governor and the State Treasurer, the bonds or notes shall also bear a manual signature which may be that of a bond registrar, trustee, paying agent, or designated assistant of the State Treasurer.  Should any officer whose signature or facsimile signature appears on bonds or notes cease to be such officer before the delivery of the bonds or notes, the signature or facsimile signature shall nevertheless have the same validity for all purposes as if the officer had remained in office until delivery, and bonds or notes may bear the facsimile signatures of persons who at the actual time of the execution of the bonds or notes shall be the proper officers to sign any bond or note although at the date of the bond or note such persons may not have been such officers.  The form and denomination of bonds or notes, including the provisions with respect to registration of the bonds or notes and any system for their registration, shall be as the State Treasurer may determine in conformity with this act; provided, however, that nothing in this act shall prohibit the State Treasurer from proceeding, with respect to the issuance and form of the bonds or notes, under the provisions of Chapter 159E of the General Statutes, the Registered Public Obligations Act, as well as under this act.
(c)	Manner of Sale; Expenses.  Subject to determination by the Council of State as to the manner in which bonds or notes shall be offered for sale, whether at public or private sale, whether within or without the United States of America, and whether by publishing notices in certain newspapers and financial journals, mailing notices, inviting bids by correspondence, negotiating contracts of purchase or otherwise, the State Treasurer is authorized to sell bonds or notes at one time or from time to time at such rate or rates of interest, which may vary from time to time, and at such price or prices, including a price less than the face amount of the bonds or the notes, as the State Treasurer may determine.  All expenses incurred in preparation, sale, and issuance of bonds or notes shall be paid by the State Treasurer from the proceeds of bonds or notes or other available moneys.
(d)	Notes; Repayment.
(1)	By and with the consent of the Council of State, the State Treasurer is hereby authorized to borrow money and to execute and issue notes of the State for the same, but only in the following circumstances and under the following conditions:
a.	For anticipating the sale of bonds to the issuance of which the Council of State shall have given consent, if the State Treasurer shall deem it advisable to postpone the issuance of the bonds;
b.	For the payment of interest on or any installment of principal of any bonds then outstanding, if there shall not be sufficient funds in the State treasury with which to pay the interest or installment of principal as they respectively become due;
c.	For the renewal of any loan evidenced by notes herein authorized;
d.	For the purposes authorized in this act; and
e.	For refunding bonds or notes as herein authorized.
(2)	Funds derived from the sale of bonds or notes may be used in the payment of any bond anticipation notes issued under this act. Funds provided by the General Assembly for the payment of interest on or principal of bonds shall be used in paying the interest on or principal of any notes and any renewals thereof, the proceeds of which shall have been used in paying interest on or principal of the bonds.
(e)	Refunding Bonds and Notes. By and with the consent of the Council of State, the State Treasurer is authorized to issue and sell refunding bonds and notes pursuant to the provisions of the State Refunding Bond Act for the purpose of refunding bonds or notes issued pursuant to this act.  The refunding bonds and notes may be combined with any other issues of State bonds and notes similarly secured.
(f)	Tax Exemption. Bonds and notes shall be exempt from all State, county, and municipal taxation or assessment, direct or indirect, general or special, whether imposed for the purpose of general revenue or otherwise, excluding inheritance and gift taxes, income taxes on the gain from the transfer of bonds and notes, and franchise taxes. The interest on bonds and notes shall not be subject to taxation as to income.
(g)	Investment Eligibility. Bonds and notes are hereby made securities in which all public officers, agencies, and public bodies of the State and its political subdivisions, all insurance companies, trust companies, investment companies, banks, savings banks, savings and loan associations, credit unions, pension or retirement funds, other financial institutions engaged in business in the State, executors, administrators, trustees, and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them.  Bonds and notes are hereby made securities which may properly and legally be deposited with and received by any officer or agency of the State or political subdivision of the State for any purpose for which the deposit of bonds, notes, or obligations of the State or any political subdivision is now or may hereafter be authorized by law.
(h)	Faith and Credit. The faith and credit and taxing power of the State are hereby pledged for the payment of the principal of and the interest on bonds and notes.  In addition to the State's right to amend any provision of this act to the extent it does not impair any contractual right of a bond owner, the State expressly reserves the right to amend any provision of this act with respect to the making and repayment of loans, the disposition of any repayments of loans, and any intercept provisions relating to the failure of a local government unit to repay a loan, the bonds not being secured in any respect by loans, any repayments thereof, or any intercept provisions with respect thereto.
SECTION 22.6.(n)  Other Agreements. – The State Treasurer may authorize, execute, obtain, or otherwise provide for bond insurance, investment contracts, credit and liquidity facilities, interest rate swap agreements and other derivative products, and any other related instruments and matters the State Treasurer determines are desirable in connection with the issuance, incurrence, carrying, or securing of bonds or notes. Subject to the provisions of Section 17 of this act, the State Treasurer is authorized to employ and designate any financial consultants, underwriters, and bond attorneys to be associated with any bond issue under this act as the State Treasurer considers necessary.
SECTION 22.6.(o)  Variable interest rates. – In fixing the details of bonds and notes, the State Treasurer may provide that any of the bonds or notes may:
(a)	Be made payable from time to time on demand or tender for purchase by the owner thereof provided a credit facility supports the bonds or notes, unless the State Treasurer specifically determines that a credit facility is not required upon a finding and determination by the State Treasurer that the absence of a credit facility will not materially or adversely affect the financial position of the State and the marketing of the bonds or notes at a reasonable interest cost to the State;
(b)	Be additionally supported by a credit facility;
(c)	Be made subject to redemption or a mandatory tender for purchase prior to maturity;
(d)	Bear interest at a rate or rates that may vary for such period or periods of time, all as may be provided in the proceedings providing for the issuance of the bonds or notes, including, without limitation, such variations as may be permitted pursuant to a par formula; and
(e)	Be made the subject of a remarketing agreement whereby an attempt is made to remarket bonds or notes to new purchasers prior to their presentment for payment to the provider of the credit facility or to the State.
If the aggregate principal amount repayable by the State under a credit facility is in excess of the aggregate principal amount of bonds or notes secured by the credit facility, whether as a result of the inclusion in the credit facility of a provision for the payment of interest for a limited period of time or the payment of a redemption premium or for any other reason, then the amount of authorized but unissued bonds or notes during the term of such credit facility shall not be less than the amount of such excess, unless the payment of such excess is otherwise provided for by agreement of the State executed by the State Treasurer.
SECTION 22.6.(p)  Special provisions governing clean water loans.
(a)	Scope. The provisions of this section shall apply to loans being made from the proceeds of bonds authorized by this act for clean water projects, other than from funds deposited in the Clean Water Revolving Loan and Grant Fund.
(b)	Clean Water Bonds Loan Account. There is established in the Department of State Treasurer a special account to be known as the Clean Water Bonds Loan Account, which may include any special or segregated accounts the State Treasurer considers appropriate. There shall be deposited in the Clean Water Bonds Loan Account proceeds of the Clean Water Bonds and notes to be used to make loans, other than loans to be made through the Clean Water Revolving Loan and Grant Fund, to local government units for clean water projects as provided in this act.
(c)	Except as otherwise permitted by this act with respect to the use of investment earnings, all moneys accruing to the credit of the Clean Water Bonds Loan Account other than funds set aside for administrative expenses, including expenses related to determining compliance with applicable requirements of the federal tax law and costs of issuance, shall be used to make loans for the purposes provided in this act.  The State Treasurer shall be responsible for making and administering all loans pursuant to the provisions of this section.
(d)	Application for Loans; Hearings.
(1)	Eligibility/Initial Hearing:
a.	Prior to filing an application for a loan, a local government unit shall hold a public hearing. A notice of the public hearing shall be published once at least 10 days before the date fixed for the hearing.
b.	All applications for loans shall be filed with the Department of Environment and Natural Resources. The form of the application shall be prescribed by the Department and shall require any information necessary to determine the eligibility for a loan under the provisions of this section. All applications approved by the Department of Environment and Natural Resources shall be filed with the Local Government Commission. Each applicant shall furnish to the Department of Environment and Natural Resources and the Local Government Commission information in addition or supplemental to the information contained in its application, upon request.
c.	A local government unit shall not be eligible for a loan unless it demonstrates to the satisfaction of the Department of Environment and Natural Resources and the Local Government Commission that:
1.	The applicant is a local government unit;
2.	The applicant has the financial capacity to pay the principal of and interest on its proposed loan as evidenced by the approval of the Local Government Commission;
3.	The applicant has substantially complied or will substantially comply with all applicable laws, rules, regulations, and ordinances, whether federal, State, or local; and
4.	The applicant has agreed by official resolution to adopt and place into effect a schedule of fees and charges or the application of other sources of revenue which will provide adequate funds for proper operation, maintenance, and administration of the project and repayment of all principal and interest on the loan.
(2)	Assessment.  The Department of Environment and Natural Resources may require any applicant to file with its application an assessment of the impact the project for which the funds are sought will have upon meeting the facility needs of the area within which the project is to be located.
(3)	Hearing by the Department of Environment and Natural Resources or the Local Government Commission.  A public hearing may be held by the Department of Environment and Natural Resources or the Local Government Commission at any time on any application.  Public hearings may also be held by the Department of Environment and Natural Resources in its discretion upon written request from any citizen or taxpayer who is a resident of the county or counties in which the project is to be located or a resident of the local government unit that proposes to borrow moneys under this act, if it appears that the public interest will be served by the hearing.  The written request shall set forth each objection to the proposed project or other reason for requesting a hearing on the application and shall contain the name and address of the persons submitting it.  In deciding whether to grant a request for a hearing on an application, the Department of Environment and Natural Resources may consider the application, the written objections to the proposed project, and the facility needs and shall determine if the public interest will be served by a hearing.  The determination by the Department of Environment and Natural Resources shall be conclusive, and all written requests for a hearing shall be retained as a permanent part of the records pertaining to the application.
(4)	Petition for Vote. A petition, demanding that the question of whether to enter into a loan agreement with the State under this act be submitted to voters, may be filed with the clerk of the local government unit applying for the loan within 15 days after the public hearing required by this section.  The petition's sufficiency shall be determined and a referendum, if any, shall be conducted according to the standards, procedures, and limitations set out in G.S. 159‑60 through G.S. 159‑62.
(e)	Priorities.
(1)	Determination. Determination of priorities to be assigned each eligible project shall be made semiannually by the Department of Environment and Natural Resources during each fiscal year.  Every eligible project shall be considered by the Department of Environment and Natural Resources with every other project eligible during this same priority period.
(2)	Priority Factors. All applications for loans under this act shall be assigned a priority by the Department of Environment and Natural Resources. The Department of Environment and Natural Resources shall establish other priority factors criteria by rule.
(3)	Assignment of Priority. A written statement relative to each priority assigned shall be prepared by the Department of Environment and Natural Resources and shall be attached to the application.  The priority assigned shall be conclusive.
(4)	Failure to Qualify. If an application does not qualify for a loan as of the prior period in which the application was eligible for consideration by reason of the priority assigned, the application shall be considered during the next succeeding priority period upon request of the applicant.  If the application again fails to qualify for a loan during the second priority period by reason of the priority assigned, the application shall receive no further consideration.  An applicant may file a new application at any time and may amend any pending application to include additional data or information.
(5)	Withdrawal of Commitment. Failure of an applicant within one year after the date of acceptance of the loan to arrange for necessary financing of the proposed project or award of the contract of the construction of the proposed project shall constitute sufficient cause for withdrawal of the commitment. Prior to withdrawal of a commitment, the Department of Environment and Natural Resources shall give due consideration to any extenuating circumstances presented by the applicant as reasons for failure to arrange necessary financing or to award a contract, and the commitment may be extended for an additional period of time if, in the judgment of the Department of Environment and Natural Resources, the extension is justified.
(f)	Disbursement. To be eligible to receive the loans provided for in this section, a local government unit must arrange to borrow the amounts necessary pursuant to rules adopted by the Local Government Commission.  No funds shall be disbursed until the Department of Environment and Natural Resources gives a certificate of eligibility to the effect that the applicant meets all eligibility criteria and that all procedural requirements of this act have been met. The maximum principal amount of a loan shall be one hundred percent (100%) of the cost of any eligible project.
(g)	Intercept. The governing body of a local government unit shall by resolution authorize to be included in its loan agreement a provision authorizing the State Treasurer, upon failure of the local government unit to make a scheduled repayment of the loan, to withhold from the local government unit any State funds that would otherwise be distributed to the local government unit in an amount sufficient to pay all sums then due and payable to the State as a repayment of the loan.  In such event, notwithstanding any other provision of law, the State Treasurer is authorized to withhold and apply such funds to the repayment of the loan, except that such funds shall not be withheld if (i) before the execution of the loan agreement, such funds have been legally pledged to secure special obligation bonds or other obligations of the local government unit, or (ii) after the execution of the loan agreement, such funds are legally pledged to secure special obligation bonds or other obligations of the local government unit as authorized in this subsection. After the execution of a loan agreement, all or any portion of the State funds specified in the loan agreement to be so withheld may be pledged to secure special obligation bonds or other obligations of the local government unit only with the prior written consent of the State Treasurer.
The State Treasurer shall notify the Secretary of Revenue and the State Controller of the amount to be withheld from the local government unit, and the Secretary of Revenue and the State Controller shall transfer to the State Treasurer the amount so requested to be applied by the State Treasurer to the repayment of the loan.
(h)	Inspection. Inspection of a project for which a loan has been made under this act may be performed by qualified personnel of the Department of Environment and Natural Resources or may be performed by qualified engineers registered in this State approved by the Department of Environment and Natural Resources.  No person shall be approved to perform inspections who is an officer employed by the local government unit to which the loan was made or who is an owner, officer, employer, or agent of a contractor or subcontractor engaged in the construction of the project for which the loan was made.  For the purpose of payment of inspection fees, inspection services shall be included in the term "cost" as used in this act.
(i)	Rules. The State Treasurer, the Local Government Commission, and the Department of Environment and Natural Resources may adopt, modify, and repeal rules necessary for the administration of their respective duties under this act.  Uniform rules may be jointly adopted where feasible and desirable, and no rule, jointly adopted, may be modified or revoked except upon concurrence of all agencies involved.
(j)	Federal Grants and Loans. In order to carry out the purposes of this act to secure the greatest possible benefits to the citizens of this State of the funds appropriated, the State Treasurer, the Local Government Commission, and the Department of Environment and Natural Resources shall adopt rules and criteria, not inconsistent with provisions of this act, as are necessary and appropriate to conform to regulations for federal grants and loans for any of the purposes set forth in this act.
(k)	 Report by Department of Environment and Natural Resources. The Department of Environment and Natural Resources shall prepare and file each year on or before July 31 with the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division a report for the preceding fiscal year concerning the allocation and making of loans authorized by this act. The report shall set forth for the preceding fiscal year:
(1)	Itemized and total allocations of loans authorized and unallocated funds for the loan program as of the end of the preceding fiscal year;
(2)	Identification of each loan agreement entered into by the State during the preceding fiscal year and the total amount of loans authorized by such loan agreements;
(3)	The amount disbursed to each local government unit pursuant to such loan agreements during the preceding fiscal year and the total amount of such disbursements;
(4)	The loan repayments made by each local government unit pursuant to such loan agreements and the total amount of such loan repayments during the preceding fiscal year; and
(5)	A summary for the five preceding years of the information required by subdivisions (1) through (4) of this subsection.
The report shall be signed by the Secretary of Environment and Natural Resources.
(l)	Local Government Commission.
(1)	Local government units may execute debt instruments payable to the State in order to obtain loans provided for in this act.  Local government units shall pledge or agree to apply as security for such obligations:
a.	Any available source of revenues of the local government unit, including revenues from benefited facilities or systems, provided that (i) the local government unit has not otherwise pledged the revenues as security for, or contractually agreed to apply the revenues to, the payment of any other obligations of the local government unit, (ii) the use of the revenues is not otherwise restricted by law, or (iii) the revenues are not derived from the exercise of the local government unit's taxing power; or
b.	Their faith and credit; or
c.	Any combination of a. or b. above.
The faith and credit of a local government unit shall not be pledged or be deemed to have been pledged unless the requirements of Article 4 of Chapter 159 of the General Statutes have been met.  The State Treasurer, with the assistance of the Local Government Commission, shall develop and adopt appropriate debt instruments for use under this act.
(2)	Nothing contained in this act shall prohibit any local government unit from applying any funds of the local government unit not otherwise restricted as to use by law to the payment of any debt instrument payable to the State incurred pursuant to the provisions of this act.
(3)	The Local Government Commission shall review and approve proposed loans to local government units under this act under the provisions of Articles 4 and 5 of Chapter 159 of the General Statutes. The Local Government Commission in considering the ability of a local government unit to repay a loan may regard as a source of revenue for repayment of a loan revenue sources that may not be available other than on an annual discretionary basis and that may not be subject to a pledge or agreement to apply.  Loans under this act shall be outstanding debts for the purposes of Article 10 of Chapter 159 of the General Statutes.
CLEAN WATER GRANT
SECTION 22.7. The Department of Environment and Natural Resources shall prepare and file each year on or before July 31 with the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division a report for the preceding fiscal year concerning the allocation and making of grants authorized by this act.  The report shall be signed by the Secretary of the Department of Natural Resources.  The report shall set forth for the preceding fiscal year:
(a)	Itemized and total allocations of grants authorized and unallocated funds for the grant program as of the end of the preceding fiscal year;
(b)	Identification of each grant agreement entered into by the Department of Natural Resources during the preceding fiscal year and the total amount of grants authorized by the grant agreements;
(c)	The amount disbursed to each local government unit pursuant to the grant agreements during the preceding fiscal year and the total amount of the disbursements; and
(d)	A summary for the five preceding years of the information required by subsections (a) through (c) of this section.

MINORITY BUSINESS PARTICIPATION
SECTION 22.8.  The goals set by G.S. 143‑128 for participation in projects by minority businesses apply to projects funded by the proceeds of bonds or notes issued under this act.  The Department of Environment and Natural Resources shall monitor compliance with this requirement and shall report to the General Assembly by January 1 of each year on the participation by minority businesses in these projects.
The State Treasurer shall provide contracting opportunities for historically underutilized businesses in providing professional services in connection with the issuance of bonds and notes authorized by this act. As used in this section, the term "historically underutilized business" means a business described in G.S. 143‑48. The State Treasurer shall strive to increase the amount of legal, financial, and other professional services acquired by it from historically underutilized businesses. With the assistance of the Office for Historically Underutilized Businesses in the Department of Administration, the State Treasurer shall set objectives for contracting with these businesses, identify, and eliminate barriers or constraints that may restrict these businesses from contracting with the State Treasurer, and develop a plan for meeting these objectives. The State Treasurer shall report quarterly to the Office for Historically Underutilized Businesses on its progress in carrying out the requirements of this section.

Interpretation of Part
SECTION 22.9.(a)  Additional Method. The foregoing sections of this Part shall be deemed to provide an additional and alternative method for the doing of the things authorized thereby and shall be regarded as supplemental and additional to powers conferred by other laws, and shall not be regarded as in derogation of any powers now existing.
(b)	Statutory References. References in this Part to specific sections or Chapters of the General Statutes or to specific acts are intended to be references to these sections, Chapters, or acts as they may be amended from time to time by the General Assembly.
(c)	Broad Construction. This Part, being necessary for the health and welfare of the people of the State, shall be broadly construed to effect the purposes thereof.
(d)	Inconsistent Provisions. Insofar as the provisions of this Part are inconsistent with the provisions of any general laws, or parts thereof, the provisions of this act shall be controlling.

PART XXIII. MISCELLANEOUS PROVISIONS

STATE BUDGET ACT APPLIES
SECTION 23.1.  The provisions of the State Budget Act, Chapter 143C of the General Statutes, are reenacted and shall remain in full force and effect and are incorporated in this act by reference.

MOST TEXT APPLIES ONLY TO THE 2007‑2009 FISCAL BIENNIUM
SECTION 23.2.  Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2007‑2009 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2007‑2009 fiscal biennium.

EFFECT OF HEADINGS
SECTION 23.3.  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.

SEVERABILITY CLAUSE
SECTION 23.4.  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.

EFFECTIVE DATE
SECTION 23.5.  Except as otherwise provided, this act becomes effective July 1, 2007.