A BILL TO BE ENTITLED
AN ACT to modify the university of north carolina enrollment change funding formula and to make enrollment change funding for each constituent institution contingent on the institution's performance in achieving targets established by the board of governors, as recommended by the joint legislative program evaluation oversight committee.
The General Assembly of North Carolina enacts:
SECTION 1.(a)  The Board of Governors of The University of North Carolina, with the assistance of General Administration, shall study and thoroughly examine the enrollment change funding formula currently used by The University System to predict its enrollment growth and estimate its funding needs.  The purpose of the study is to consider and evaluate possible modifications to the formula that would simplify and standardize the enrollment projection process and yield more accurate funding requests.
As part of its study, the Board of Governors shall do all of the following:
(1)	Consider the recommendations set out in the final report to the Joint Legislative Program Evaluation Oversight Committee (Report Number 2010‑05), dated November 17, 2010, regarding modification of The University of North Carolina enrollment change funding formula.
(2)	Consider simplifying and standardizing the enrollment projection process for the enrollment change funding formula.
(3)	Reexamine and justify funding factors for libraries and general institutional support.
(4)	Consider whether to adopt the weighted cost per student credit hour (SCH) as recommended by the Program Evaluation Division of the General Assembly or develop an approach that achieves the aim of retaining the formula granularity but reduces projection error.
(5)	Consider what modifications may be made to the formula to improve the ability of each campus to analyze the accuracy of its enrollment projections, correct errors in those projections at an earlier date, and adjust funding requests before the requests are included in the campus's base operating budget, which is used as a component by the Board of Governors in developing and preparing the budget request for The University of North Carolina that is submitted to the Governor and the General Assembly pursuant to G.S. 116‑11(9).
SECTION 1.(b)  Based on its study and evaluations conducted pursuant to this section, the Board of Governors shall develop a revised enrollment change funding model, including enrollment projection process, revised cost factors, and resulting weighted cost per student credit hour (SCH) or similar approach, and present that revised enrollment change funding model by June 30, 2011, to the General Assembly for its consideration.
 SECTION 1.(c)  The Board of Governors shall implement the new model for enrollment change funding, as approved by the General Assembly, beginning with the 2012‑2013 fiscal year.
SECTION 2.(a)  The Board of Governors of The University of North Carolina shall establish in writing policies and procedures for developing campus enrollment projections, calculating tuition offset, and calculating funding formula elements and cost factors.  The Board shall also develop written criteria for granting "hold harmless" status.  The Board of Governors shall consider the recommendations set out in the final report to the Joint Legislative Program Evaluation Oversight Committee (Report Number 2010‑05), dated November 17, 2010, regarding written policies for enrollment change funding decisions.
SECTION 2.(b)  The Board of Governors shall produce a policy and procedures manual that includes the items set out in subsection (a) of this section.  The policies and procedures manual shall be presented to the Joint Legislative Education Oversight Committee no later than January 1, 2012.
SECTION 3.(a)  The Board of Governors of The University of North Carolina shall develop a system to track and analyze enrollment and funding data from each campus within The University System.  One of the primary functions and uses of the system shall be to produce an annual report in a clear electronic format that sets out current year numbers and graphical presentations of trends and analyses performed.  The annual reports produced by the system shall include trend data by campus that includes all of the following:
(1)	Student credit hours (SCH) delivered each year.
(2)	Annual estimated change in SCH.
(3)	Number of students served.
(4)	Number of new faculty and staff positions by area of responsibility.
(5)	Previous year enrollment funding.
(6)	Analysis of projection accuracy.
(7)	Retention rates.
(8)	Graduation rates.
(9)	Explanations of projection errors greater than five percent (5%), along with the results of investigations into those errors and the measures taken to resolve those errors.
SECTION 3.(b)  The Board of Governors shall consult with the Program Evaluation and Fiscal Research Divisions of the General Assembly on the final format of the system described in subsection (a) of this section.  
SECTION 3.(c)  The Board of Governors shall present the initial report to the Joint Legislative Education Oversight Committee, the Senate Appropriations Committee on Education/Higher Education, and the House of Representatives Appropriations Subcommittee on Education by January 1, 2012, and annually thereafter.
SECTION 3.(d)  G.S. 116‑11 is amended by adding a new subdivision to read:
"(9a)	The Board of Governors shall track and analyze enrollment and funding data from each campus within The University of North Carolina. The Board of Governors shall report annually to the Joint Legislative Education Oversight Committee, the Senate Appropriations Committee on Education/Higher Education and the House of Representatives Appropriations Subcommittee on Education. The annual report shall include trend data by campus that includes all of the following:
a.	Student credit hours (SCH) delivered each year.
b.	Annual estimated change in SCH.
c.	Number of students served.
d.	Number of new faculty and staff positions by area of responsibility.
e.	Previous year enrollment funding.
f.	Analysis of projection accuracy.
g.	Retention rates.
h.	Graduation rates.
i.	Explanations of projection errors greater than five percent (5%), along with the results of investigations into those errors and the measures taken to resolve those errors."
SECTION 4.(a)  G.S. 116‑11(9) reads as rewritten:
"(9)	a.	The Board of Governors shall develop, prepare and present to the Governor and the General Assembly a single, unified recommended budget for all of the constituent institutions of The University of North Carolina. The recommendations shall consist of requests in three general categories: (i) funds for the continuing operation of each constituent institution, (ii) funds for salary increases for employees exempt from the State Personnel Act and (iii) funds requested without reference to constituent institutions, itemized as to priority and covering such areas as new programs and activities, expansions of programs and activities, increases in enrollments, increases to accommodate internal shifts and categories of persons served, capital improvements, improvements in levels of operation and increases to remedy deficiencies, as well as other areas. The president may present to the General Assembly an updated estimate of tuition, fees, and other receipts by June 15 of each year to be included in the budget for the following fiscal year.
a1.	Enrollment change funding shall be based on the performance of each constituent institution and shall be contingent on the attainment of the constituent institution's target as determined by the Board of Governors. A constituent institution that fails to achieve the target shall not receive enrollment change funding.
The Board of Governors shall provide full documentation and justification of any enrollment change funding request at the time it isrecommended, including hold harmless status requests. This documentation and justification shall include the most recent academic year's actual enrollment numbers in the same format in which the growth increase request is made. The actual enrollment numbers shall be the actual student credit hours (SCH) or full‑time equivalencies (FTE). This documentation and justification shall also include an explanation of how a constituent institution's request for hold harmless status meets established criteria and a history of the hold harmless requests granted to the constituent institution.
b.	Funds for the continuing operation of each constituent institution shall be appropriated directly to the institution. Funds for salary increases for employees exempt from the State Personnel Act shall be appropriated to the Board in a lump sum for allocation to the institutions. Funds for the third category in paragraph a of this subdivision shall be appropriated to the Board in a lump sum for allocation to the institutions. The Board shall make allocations among the institutions in accordance with the Board's schedule of priorities and any specifications in the Current Operations Appropriations Act. When both the Board and the Director of the Budget deem it to be in the best interest of the State, funds in the third category may be allocated, in whole or in part, for other items within the list of priorities or for items not included in the list. Provided, nothing herein shall be construed to allow the General Assembly, except as to capital improvements, to refer to particular constituent institutions in any specifications as to priorities in the third category.
c.	The Director of the Budget may, on recommendation of the Board, authorize transfer of appropriated funds from one institution to another to provide adjustments for over or under enrollment or may make any other adjustments among institutions that would provide for the orderly and efficient operation of the institutions.
d.	Repealed by Session Laws 1987, c. 795, s. 27."
SECTION 4.(b)  By January 1, 2012, The University of North Carolina General Administration shall develop written detailed policies and procedures for the constituent institutions to guide performance‑based funding.  While developing the policies and procedures, General Administration shall also hold systemwide meetings to ensure the performance‑based approach and implementation time line are fully understood by the constituent institutions and shall work closely with each constituent institution to help the institution meet its target.  The Fiscal Research Division of the General Assembly and the Joint Legislative Education Oversight Committee shall provide oversight for the initial and ongoing implementation of performance‑based funding.  The Board of Governors shall implement the performance‑based funding approach for The University of North Carolina no later than January 1, 2013.
SECTION 5.  This act is effective when it becomes law.