A BILL TO BE ENTITLED
AN ACT to change the state and local funding method for charter schools and to appropriate additional funds necessary to implement the change.
The General Assembly of North Carolina enacts:

Part I. State Funds for charter schools
SECTION 1.1.  G.S. 115C‑218.105 reads as rewritten:
"§ 115C‑218.105.  State funds for a charter school.
(a)	The State Board of Education shall allocate funds to each charter school on the same basis as the State Board allocates funds to each city school administrative unit, except as follows:
(1)	For the central office administration allotment category, the allocation of funds to a charter school shall be as follows:
a.	For charter schools with an average daily membership of less than or equal to 1,000, the State Board shall allocate one hundred forty thousand dollars ($140,000) to the charter school each fiscal year.
b.	For charter schools with an average daily membership of greater than 1,000, the State Board shall allocate four hundred thousand dollars ($400,000) to the charter school each fiscal year.
(2)	A charter school with an average daily membership of less than 500 shall receive an amount equal to half the amount the charter school would otherwise have received under the Disadvantaged Student Supplemental Funding Allotment formula.
(3)	Charter schools shall not be eligible to receive funds from the transportation allotment category. The State Board may, subject to the availability of funds, establish a grant program to allow charter schools to apply for grant funds for transportation services provided to students.
(4)	Charter schools shall not be eligible to receive funds from the driver training allotment category.
(a1)	In accordance with subsections (e) and (f) of G.S. 115C‑218.5, the State Board shall allow for annual adjustments to the amount allocated to a charter school based on its enrollment growth in school years subsequent to the initial year of operation.

(b)	Funds allocated by the State Board of Education may be used to enter into operational and financing leases for real property or mobile classroom units for use as school facilities for charter schools and may be used for payments on loans made to charter schools for facilities, equipment, or operations. However, State funds shall not be used to obtain any other interest in real property or mobile classroom units. No indebtedness of any kind incurred or created by the charter school shall constitute an indebtedness of the State or its political subdivisions, and no indebtedness of the charter school shall involve or be secured by the faith, credit, or taxing power of the State or its political subdivisions. Every contract or lease into which a charter school enters shall include the previous sentence. The school also may own land and buildings it obtains through non‑State sources.

	

	
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SECTION 1.2.  G.S. 115C‑546.2(d) reads as rewritten:
"(d)	If funds are appropriated from the Education Lottery Fund to the Public School Building Capital Fund, such funds shall be allocated for school capital construction projects on a per average daily membership basis according to the average daily membership for the budget year as determined and certified by the State Board of Education.
(1),	(2) Repealed by Session Laws 2013‑360, s. 6.11(b), effective July 1, 2013.
(3)	No county shall have to provide matching funds required under subsection (c) of this section.
(4)	A county may use monies in this Fund to pay for school construction projects in local school administrative units and to retire indebtedness incurred for school construction projects. A county shall not use money in this Fund to pay for charter school construction projects or to retire indebtedness incurred for charter school construction projects.
(5)	A county may not use monies in this Fund to pay for school technology needs."
SECTION 1.3.  There is appropriated from the General Fund to the Department of Public Instruction the sum of forty‑seven million three hundred thirty‑three thousand two hundred fourteen dollars ($47,333,214) in recurring funds for the 2016‑2017 fiscal year to implement the requirements of Section 1.1 of this act, except to the extent transportation grant funds are provided to charter schools.

Part II. Local funds for Charter schools
SECTION 2.1.  G.S. 105‑487(a) reads as rewritten:
"(a)	Except as provided in subsection (c), forty percent (40%) of the revenue received by a county from additional one‑half percent (1/2%) sales and use taxes levied under this Article during the first five fiscal years in which the additional taxes are in effect in the county and thirty percent (30%) of the revenue received by a county from these taxes  after the first five fiscal years in which the taxes are in effect in the county may be used by the county only for public school capital outlay purposes as defined in G.S. 115C‑426(f) or to retire any indebtedness incurred by the county for these purposes. Nothing in this section shall be construed to allow revenue to be used for charter school capital needs."
SECTION 2.2.  G.S. 105‑502(a) reads as rewritten:
"(a)	Restriction. – The county must use sixty percent (60%) of the amount of revenue specified in this subsection for public school capital outlay purposes as defined in G.S. 115C‑426(f) or to retire any indebtedness incurred by the county for these purposes during the period beginning five years prior to the date the taxes took effect:
(1)	The amount of revenue the county receives under this Article.
(2)	If the amount allocated to the county under G.S. 105‑486 is greater than the amount allocated to the county under G.S. 105‑501(a), the difference between the two amounts.
Nothing in this section shall be construed to allow revenue to be used for charter school capital needs."
SECTION 2.3.  G.S. 115C‑218.45(f) reads as rewritten:
"(f)	The charter school may give enrollment priority to any of the following:
(1)	Siblings of currently enrolled students who were admitted to the charter school in a previous year. For the purposes of this section, the term "siblings" includes any of the following who reside in the same household: half siblings, stepsiblings, and children residing in a family foster home.
(2)	Siblings of students who have completed the highest grade level offered by that school and who were enrolled in at least four grade levels offered by the charter school or, if less than four grades are offered, in the maximum number of grades offered by the charter school.
(3)	Limited to no more than fifteen percent (15%) of the school's total enrollment, unless granted a waiver by the State Board of Education, the following:
a.	Children of the school's full‑time employees.
b.	Children of the charter school's board of directors.
(4)	A student who was enrolled in the charter school within the two previous school years but left the school (i) to participate in an academic study abroad program or a competitive admission residential program or (ii) because of the vocational opportunities of the student's parent.
(5)	Notwithstanding any other provision of this section, students who are residents of a local school administrative unit located in a county that has provided capital outlay funds under G.S. 115C‑218.106(b) or that has issued bonds and notes to finance the capital costs of a charter school facility in accordance with Article 4 of Chapter 159 of the General Statutes to the extent necessary to meet a student enrollment requirement."
SECTION 2.4.  G.S. 115C‑218.100(b) reads as rewritten:
"(b)	Distribution of Assets. – Upon dissolution of a charter school, all net assets of the charter school purchased with public funds shall be deemed the property of the local school administrative unit in which the charter school is located, except that capital funds provided to a charter school by one or more counties pursuant to G.S. 115C‑218.106(b) and all net assets purchased or improved with the capital funds, up to the total amount of the funds provided, shall be deemed the property of the county or counties providing the funding and, if applicable, divided between the counties in proportion to the funds provided."
SECTION 2.5.  Article 14A of Chapter 115C of the General Statutes is amended by adding the following new sections to read:
"§ 115C‑218.106.  Local funds for a charter school.
(a)	For each student enrolled in a charter school, the board of county commissioners of the county in which the local school administrative unit is located where the student resides shall appropriate to that charter school an amount equal to the per pupil appropriation from the county to the local school administrative unit. By October 1 of each school year, the total membership of the charter school of students residing in the county for the budget year shall be determined and certified to the charter school and the board of county commissioners by the State Board of Education. The amount of the per pupil appropriation that consists of revenue derived from supplemental taxes shall only be provided to a charter school located in the tax district for which these taxes are levied and in which the student resides.
(b)	The board of directors of a charter school may request capital outlay funds from the board of county commissioners of any county in which the charter school receives funds under subsection (a) of this section. In order for a charter school to receive capital outlay funds under this subsection, the charter school shall enter into an agreement with the county that, until such time the charter school fully repays the county in the amount of the capital funds provided under this subsection, (i) the charter school shall maintain a student enrollment of at least fifty percent (50%) of students who reside in a local school administrative unit located in the county and (ii) if the charter school facility no longer meets the student enrollment requirement or if the charter school facility is no longer used for public school purposes, then the charter school facility shall revert to the county. If the charter school facility reverts to the county and more than one county has provided capital outlay funds, the property shall be divided between the counties in proportion to the funds provided. Capital outlay funds may be used only for the following:
(1)	The acquisition of real property for school purposes, including, but not limited to, school sites, playgrounds, athletic fields, administrative headquarters, and garages.
(2)	The acquisition, construction, reconstruction, enlargement, renovation, or replacement of buildings and other structures, including, but not limited to, buildings for classrooms and laboratories, physical and vocational educational purposes, libraries, auditoriums, gymnasiums, administrative offices, storage, and vehicle maintenance.
(3)	The acquisition or replacement of furniture and furnishings, instructional apparatus, data‑processing equipment, business machines, and similar items of furnishings and equipment.
(4)	The acquisition of school buses as additions to a school's fleet.
(5)	The acquisition of activity buses and other motor vehicles.
(c)	If a charter school uses funds provided in subsection (b) of this section to acquire or improve property, the amount provided by the county must be evidenced by a promissory note and secured by a deed of trust on the property acquired or improved by the funds. The county may subordinate the deed of trust to other liens to facilitate the acquisition or improvement of the property secured by the deed of trust.
(d)	In the event that a charter school fully repays one or more of the counties in the amount of the capital funds provided under subsection (b) of this section, the county receiving the repayment shall, for the property acquired or improved by the funds, execute and file a deed of release or other documentation of satisfaction showing the charter school fully repaid the capital funds provided.
(e)	Nothing in this section shall be construed to place a duty on the board of county commissioners to fund a deficit incurred by a charter school through failure of the charter school to comply with the provisions of this Article or to provide moneys lost through misapplication of moneys by a bonded officer, employee, or agent of the charter school when the amount of the fidelity bond required by the charter school was manifestly insufficient.
(f)	Nothing in this section shall be construed to create a cause of action for a charter school against a board of county commissioners based on the amount of an appropriation to a charter school.
"§ 115C‑218.107.  County issuance of bonds for charter school capital projects.
A charter school receiving funds pursuant to G.S. 115C‑218.106 may request that the board of county commissioners providing the funds issue bonds and notes to finance the capital costs of a charter school facility in accordance with Article 4 of Chapter 159 of the General Statutes. Prior to the issuance of bonds or notes to finance the costs of a charter school facility, a county shall enter into an agreement with the charter school that includes the following requirements:
(1)	The charter school shall maintain a student enrollment of at least fifty percent (50%) of students who reside in a local school administrative unit located in the county.
(2)	The charter school shall not cease using the facility for public school purposes.
(3)	The facility shall revert to the county if any requirement of the agreement is breached by the charter school."
SECTION 2.6.  G.S. 153A‑149(b) reads as rewritten:
"(b)	Each county may levy property taxes without restriction as to rate or amount for the following purposes:
(1)	Courts. – To provide adequate facilities for and the county's share of the cost of operating the General Court of Justice in the county.
(2)	Debt Service. – To pay the principal of and interest on all general obligation bonds and notes of the county.
(3)	Deficits. – To supply an unforeseen deficiency in the revenue (other than revenues of public enterprises), when revenues actually collected or received fall below revenue estimates made in good faith and in accordance with the Local Government Budget and Fiscal Control Act.
(4)	Elections. – To provide for all federal, State, district and county elections.
(5)	Jails. – To provide for the operation of a jail and other local confinement facilities.
(6)	Joint Undertakings. – To cooperate with any other county, city, or political subdivision in providing any of the functions, services, or activities listed in this subsection.
(7)	Schools. – To provide for the county's share of the cost of kindergarten, elementary, and secondary public schools, including charter schools chartered under Article 14A of Chapter 115C of the General Statutes, and post‑secondary public education.
(8)	Social Services. – To provide for public assistance required by Chapters 108A and 111 of the General Statutes."
SECTION 2.7.  G.S. 159‑48(c) reads as rewritten:
"(c)	Each county is authorized to borrow money and issue its bonds under this Article in evidence of the debt for the purpose of, in the case of subdivisions (1) through (4c) of this subsection, paying any capital costs of any one or more of the purposes and, in the case of subdivisions (5) and (6) of this subsection, to finance the cost of the purpose:
(1)	Providing community college facilities, including without limitation buildings, plants, and other facilities, physical and vocational educational buildings and facilities, including in connection therewith classrooms, laboratories, libraries, auditoriums, administrative offices, student unions, dormitories, gymnasiums, athletic fields, cafeterias, utility plants, and garages.
(2)	Providing courthouses, including without limitation offices, meeting rooms, court facilities and rooms, and detention facilities.
(3)	Providing county homes for the indigent and infirm.
(4)	Providing school facilities, including without limitation schoolhouses, buildings, plants and other facilities, physical and vocational educational buildings and facilities, including in connection therewith classrooms, laboratories, libraries, auditoriums, administrative offices, gymnasiums, athletic fields, lunchrooms, utility plants, garages, and school buses and other necessary vehicles.
(4a)	Providing improvements to subdivision and residential streets pursuant to G.S. 153A‑205.
(4b)	Providing land for present or future county corporate, open space, community college, and public school purposes.
(4c)	Providing charter school facilities for charter schools that meet the requirements of G.S. 115C‑218.107, including, without limitation, schoolhouses, buildings, plants and other facilities, physical and vocational educational buildings and facilities, including in connection therewith classrooms, laboratories, libraries, auditoriums, administrative offices, gymnasiums, athletic fields, lunchrooms, utility plants, garages, and school buses and other necessary vehicles.
(5)	Providing for the octennial revaluation of real property for taxation.
(6)	Providing housing projects for persons of low or moderate income, including construction or acquisition of projects to be owned by a county, redevelopment commission, or housing authority and the provision of loans, grants, interest supplements, and other programs of financial assistance to such persons. A housing project may provide housing for persons of other than low or moderate income if at least forty percent (40%) of the units in the project are exclusively reserved for persons of low or moderate income. No rent subsidy may be paid from bond proceeds."
SECTION 2.8.  Article 4 of Chapter 159 of the General Statutes is amended by adding a new section to read:
"§ 159‑48.5.  Reversion of charter school facilities.
Until such time a charter school fully repays a county in the amount of capital costs financed in accordance with G.S. 159‑48(c)(4c), if a charter school fails to meet the requirements of its agreement with the county under G.S. 115C‑218.107, the charter school facility shall revert back to the county or counties that borrowed money and issued bonds to pay capital costs for the facility. If applicable, the facility shall be divided between the counties in proportion to the capital funds provided."

Part Iii. Conforming Changes
SECTION 3.1.  G.S. 115C‑448(d) is repealed.
SECTION 3.2.  Section 8.35(e) of S.L. 2014‑100 reads as rewritten:
"SECTION 8.35.(e)  The State Board of Education shall provide State funding to a virtual charter school participating in the pilot program as provided in G.S. 115C‑218.105. The amount allocated pursuant to G.S. 115C‑218.105 shall not, however, include the allocation for low‑wealth counties supplemental funding and the allocation for small county supplemental funding. Virtual charter schools participating in the pilot program shall also be subject to the requirements in G.S. 115C‑218.105(b) and G.S. 115C‑218.106(a). The amount of local funds provided to participating schools pursuant to G.S. 115C‑218.106(a) shall be the lesser of seven hundred ninety dollars ($790.00) per pupil or the amount computed in accordance with G.S. 115C‑218.106(a)."

Part IV. Effective date
SECTION 4.  This act becomes effective July 1, 2016. Nothing in this act shall be construed to affect pending litigation.