A BILL TO BE ENTITLED
AN ACT consolidating the University of North Carolina Need‑Based Financial Aid Program, THE Education Lottery Scholarship Program, and the North Carolina Community College Grant Program into the North Carolina Need‑Based Scholarship for Public Colleges and Universities.
The General Assembly of North Carolina enacts:

part i. establishing the North Carolina Need‑Based Scholarship for Public Colleges and Universities
SECTION 1.1.  Article 23 of Chapter 116 of the General Statutes is amended by adding a new Part to read:
"Part 5. The North Carolina Need‑Based Scholarship for Public Colleges and Universities.
"§ 116‑209.80.  Definitions.
The following definitions apply to this Part:
(1)	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).
b.	A community college as defined in G.S. 115D‑2(2).
(2)	Matriculated status. – Being recognized as a student in a defined program of study leading to a degree, diploma, or certificate at an eligible postsecondary institution.
(3)	Program. – The North Carolina Need‑Based Scholarship Program for Public Colleges and Universities.
(4)	Reserve Fund. – Scholarship Reserve Fund for Public Colleges and Universities.
(5)	Scholarship. – A scholarship for education awarded under this Part.
(6)	Title IV. – Title IV of the Higher Education Act of 1965, as amended, 20 U.S.C. § 1070, et seq.
"§ 116‑209.81.  Eligibility requirements for a scholarship.
(a)	In order to be eligible to receive a scholarship under this Part, a student seeking a degree, diploma, or certificate at an eligible postsecondary institution must meet all of the following requirements:
(1)	Qualify as a resident for tuition purposes under the criteria set forth in G.S. 116‑143.1 and in accordance with the coordinated and centralized residency determination process administered by the Authority.
(2)	Meet enrollment standards by being admitted, enrolled, and classified as an undergraduate student in a matriculated status at an eligible postsecondary institution. The President of The University of North Carolina and the President of the North Carolina Community College System may jointly agree to additional enrollment standards for the Program.
(3)	Submit a Free Application for Federal Student Aid (FAFSA) and demonstrate need according to federal methodology in Title V of the Higher Education Act of 1965, as amended, 20 U.S.C. § 1070, et seq.
(b)	In addition to the criteria set forth in subsection (a) of this section, in order for a student to continue to be eligible for a scholarship for the student's second and subsequent academic years, 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 federal Title IV programs by the eligible postsecondary institution in which the student is enrolled.
"§ 116‑209.82.  Semester limitation on eligibility for scholarship.
(a)	Except as otherwise provided by subsection (c) of this section, a student matriculating at a constituent institution of The University of North Carolina shall not receive a scholarship for more than 10 full‑time academic semesters, or its equivalent if enrolled part‑time, unless the student is enrolled in a program officially designated by the Board of Governors of The University of North Carolina as a five‑year degree program. If a student is enrolled in such a five‑year degree program, then the student shall not receive a scholarship for more than 12 full‑time academic semesters or the equivalent if enrolled part‑time.
(b)	Except as otherwise provided by subsection (c) of this section, a student shall not receive a scholarship for more than six full‑time academic semesters, or the equivalent if enrolled part‑time, while matriculating at a community college.
(c)	Upon application by a student, the applicable eligible postsecondary institution may grant a waiver to the student who may then receive a scholarship for the equivalent of one additional full‑time academic semester if the student demonstrates that any of the following have substantially disrupted or interrupted the student's pursuit of a degree, diploma, or certificate: (i) a military service obligation, (ii) serious medical debilitation, (iii) a short‑term or long‑term disability, or (iv) other extraordinary hardship. The Board of Governors or the State Board of Community Colleges, as appropriate, shall establish policies and procedures to implement the waiver provided by this subsection.
"§ 116‑209.83.  Scholarship amounts; adjustment of scholarship amounts.
(a)	Scholarship Amounts. – Subject to the availability of funds in the Scholarship Reserve Fund for Public Colleges and Universities, as provided in G.S. 116‑209.85, a scholarship awarded under this Part to a student at an eligible postsecondary institution shall be based upon a consolidated payment schedule established jointly by the President of The University of North Carolina and the President of the North Carolina Community College System, in consultation with the Authority. The payment schedule shall clearly define award amounts by type of eligible postsecondary institution and student financial need as defined by federal methodology. The Authority shall publish the payment schedule for the Program in an easily accessible and understandable format. Once published, a payment schedule shall remain in effect unless otherwise agreed by the President of The University of North Carolina and the President of the North Carolina Community College System.
(b)	Availability of Scholarships. – Subject to the payment schedule described in subsection (a) of this section, the Authority shall have the power to determine the actual scholarship amounts disbursed to students in any given year based on the amount of funds available in the Scholarship Reserve Fund for Public Colleges and Universities created pursuant to G.S. 116‑209.85. If the funds available are not sufficient to fully fund the scholarships as set forth in the payment schedule established pursuant to subsection (a) of this section, the Authority, in consultation with the President of The University of North Carolina and the President of the North Carolina Community College System, shall adjust the distribution of the funds as necessary.
"§ 116‑209.84.  Scholarship administration; reporting requirements.
(a)	The scholarships provided for in this Article shall be administered by the Authority under rules adopted by the Authority in accordance with the provisions of this Article.
(b)	Notwithstanding any other provision of law to the contrary, the Authority shall conduct periodic evaluations of expenditures under the Program administered by the Authority to determine if allocations are utilized to ensure access to eligible postsecondary institutions and to meet the goals of respective programs. The authority may make recommendations of the redistribution of funds to the President of The University of North Carolina and the President of the North Carolina Community College System, who then may jointly authorize redistribution of funds for a particular fiscal year.
(c)	The Authority shall report no later than December 1, 2024, and annually thereafter to the Joint Legislative Education Oversight Committee. The report shall contain, for the previous academic year, the dollar amount of awards disbursed, the number of eligible students receiving funds, and a breakdown of the eligible postsecondary institutions that received the funds.
(d)	Scholarship funds unexpended shall remain available for future scholarships to be awarded under this Article.
"§ 116‑209.85.  Scholarship Reserve Fund for Public Colleges and Universities.
(a)	There is established the Scholarship Reserve Fund for Public Colleges and Universities as a reserve consisting of the following monies:
(1)	Funds appropriated by the General Assembly for the Program from the Education Lottery Fund in the Current Operations Appropriations Act for a fiscal year for education‑related purposes in accordance with G.S. 18C‑164.
(2)	Funds appropriated by the General Assembly for the Program from the Escheat Fund in the Current Operations Appropriations Act for a fiscal year that is distributed annually on or before August 15 to the Authority pursuant to G.S. 116B‑7(a).
(3)	Funds appropriated by the General Assembly for the Program from the General Fund in the Current Operations Appropriations Act for a fiscal year.
(4)	All returned scholarship funds from the Program.
(5)	All interest earned on these funds.
(b)	The Authority shall create two reserves within the Reserve Fund as follows: The University of North Carolina (UNC Reserve) and the North Carolina Community College System (CC Reserve) from monies in the Reserve Fund. The funds in the reserves shall be used for scholarships for the academic year that begins in the fiscal year following the fiscal year in which the allocations are made to the reserves. The amount of funds in each reserve shall be determined according to the payment schedules for eligible postsecondary institutions pursuant to G.S. 116‑209.83.
Beginning with the 2023‑2024 fiscal year and for each subsequent fiscal year, within the funds available, the Authority shall allocate an amount equal to the amount from the prior fiscal year for the UNC Reserve and the CC Reserve to each reserve, respectively, unless otherwise agreed to by the President of The University of North Carolina and the President of the North Carolina Community College System. Additional funds may be directed to the reserves from a Current Operations Appropriations Act in a fiscal year. The reserves established for the 2022‑2023 fiscal year shall consist of the following funds:
(1)	For the UNC Reserve, the monies shall consist of the following:
a.	An amount equal to the amount appropriated to the Board of Governors of The University of North Carolina for The University of North Carolina Need‑Based Financial Aid Program for the 2021‑2022 fiscal year.
b.	An amount equal to the proportionate share of the appropriation for the Education Lottery Scholarship Program based on awards of financial assistance to students enrolled in The University of North Carolina from the Education Lottery Scholarship Program for the 2017‑2018, 2018‑2019, and 2019‑2020 fiscal years.
(2)	For the CC Reserve, the monies shall consist of the following:
a.	An amount equal to the amount appropriated to the Community Colleges System Office for the North Carolina Community College Grant Program, except for funds set aside for the targeted assistance program pursuant to G.S. 115D‑40.1, for the 2021‑2022 fiscal year.
b.	An amount equal to the proportionate share of the appropriation for the Education Lottery Scholarship based on awards of financial assistance to students enrolled in North Carolina community colleges from the Education Lottery Scholarship Program for the 2017‑2018, 2018‑2019, and 2019‑2020 fiscal years.
(c)	Monies in the Reserve Fund shall not revert at the end of each fiscal year but shall remain available until expended for the purposes of this Article.
(d)	The Authority may use up to one and one‑half percent (1.5%) of the funds available in the Reserve Fund each fiscal year for administrative costs related to the Program. Upon a determination by the Authority that funds in excess of one percent (1%) are necessary to administer the Program, including funds necessary for one‑time or recurring costs, the Authority shall consult with the President of The University of North Carolina and the President of the North Carolina Community College System at the same time the consolidated payment schedule is set pursuant to G.S. 116‑209.83. The Authority shall also report the amount of the increase and the purpose for which the additional funds will be used to the Joint Legislative Education Oversight Committee and the Fiscal Research Division of the General Assembly within 30 days of the increase. In no event shall the cost of administering the Program in a fiscal year exceed one and one‑half percent (1.5%) of the funds available in the Reserve Fund."
SECTION 1.2.  G.S. 116B‑7 reads as rewritten:
"§ 116B‑7.  Distribution of fund.
(a)	The income derived from the investment or deposit of the Escheat Fund shall be distributed annually on or before August 15 to the State Education Assistance Authority for grants and loans to aid worthy and needy students who are residents of this State and are enrolled in public institutions of higher education in this State. Such grants and loans shall be made upon terms, consistent with the provisions of this Chapter, pursuant to which the State Education Assistance Authority makes grants and loans to other students under G.S. 116‑201 to 116‑209.23, Article 23 of Chapter 116 of the General Statutes, policies of the Board of Governors of The University of North Carolina regarding need‑based grants for students of The University of North Carolina, and policies of the State Board of Community Colleges regarding need‑based grants for students of the community colleges. The Authority shall deposit an amount specified in the Current Operations Appropriations Act from the Escheat Fund into the Scholarship Reserve Fund for Public Colleges and Universities pursuant to G.S. 116‑209.85 each fiscal year to fund the North Carolina Need‑Based Scholarship for Public Colleges and Universities pursuant to Part 5 of Article 23 of Chapter 116 of the General Statutes.
(b)	An amount specified in the Current Operations Appropriations Act shall be transferred annually from the Escheat Fund to the Department of Military and Veterans Affairs to partially fund the program of Scholarships for Children of War Veterans established by Part 2 of Article 14 of Chapter 143B of the General Statutes. Those funds may be used only for residents of this State who (i) are worthy and needy as determined by the Department of Military and Veterans Affairs and (ii) are enrolled in public institutions of higher education of this State."
SECTION 1.3.  By May 1, 2022, the President of The University of North Carolina and the President of the North Carolina Community College System shall report the payment schedule required by G.S. 116‑209.83 and any recommended legislative changes for the North Carolina Need‑Based Scholarship Program for Public Colleges and Universities to the Fiscal Research Division, the House Appropriations Education Committee, and the Senate Appropriations on Education/Higher Education Committee.
SECTION 1.4.(a)  Notwithstanding any other provision of law, beginning with the 2022‑2023 fiscal year, of the funds appropriated from the General Fund to (i) the Board of Governors of The University of North Carolina for The University of North Carolina Need‑Based Financial Aid Program each fiscal year, the sum of seventy‑seven million eight hundred ninety‑eight thousand five hundred twenty‑three dollars ($77,898,523) in recurring funds and (ii) the Community Colleges System Office each fiscal year for the North Carolina Community College Grant Program, the sum of one hundred sixty‑five thousand dollars ($165,000) in recurring funds shall instead be appropriated to the Scholarship Reserve Fund for Public Colleges and Universities to fund scholarships beginning with the 2023‑2024 academic year, pursuant to Part 5 of Article 23 of Chapter 116 of the General Statutes, as enacted by this act.
SECTION 1.4.(b)  Notwithstanding any other provision of law, beginning with the 2022‑2023 fiscal year, of the funds appropriated from the Education Lottery for (i) The University of North Carolina Need‑Based Financial Aid Program each fiscal year, the sum of ten million seven hundred forty‑four thousand seven hundred thirty‑three dollars ($10,744,733) in recurring funds and (ii) Scholarships for Needy Students, the sum of thirty million four hundred fifty thousand dollars ($30,450,000) shall instead be appropriated to the Scholarship Reserve Fund for Public Colleges and Universities to fund scholarships beginning with the 2023‑2024 academic year, pursuant to Part 5 of Article 23 of Chapter 116 of the General Statutes, as enacted by this act.
SECTION 1.4.(c)  Notwithstanding any other provision of law, beginning with the 2022‑2023 fiscal year, of the funds allocated to the State Education Assistance Authority from the Escheat Fund for (i) The University of North Carolina Need‑Based Financial Aid Program each fiscal year, the sum of thirty‑seven million two hundred eighty‑seven thousand two hundred forty‑two dollars ($37,287,242) in recurring funds and (ii) the North Carolina Community College Grant Program each fiscal year, the sum of fifteen million seven hundred eighty‑five thousand dollars ($15,785,000) in recurring funds shall instead be appropriated to the Scholarship Reserve Fund for Public Colleges and Universities to fund scholarships beginning with the 2023‑2024 academic year, pursuant to Part 5 of Article 23 of Chapter 116 of the General Statutes, as enacted by this act.
SECTION 1.4.(d)  There is appropriated from the General Fund to the Community Colleges System Office the sum of fifteen million nine hundred fifty thousand dollars ($15,950,000) in nonrecurring funds for the 2021‑2022 fiscal year for the North Carolina Community College Grant Program to provide scholarships for students for the 2022‑2023 academic year. The intent of the General Assembly is to provide forward funding for these scholarships in a reserve under the North Carolina Need‑Based Scholarship for Public Colleges and Universities pursuant to Part 5 of Article 23 of Chapter 116 of the General Statutes beginning with the 2023‑2024 academic year.
SECTION 1.5.  By October 15, 2022, the Authority shall transfer any unexpended balances remaining in the reserves for The University of North Carolina Need‑Based Financial Aid Program and the Education Lottery Scholarship to the Scholarship Reserve Fund for Public Colleges and Universities under G.S. 116‑209.85.
SECTION 1.6.  This Part becomes effective January 1, 2022, and applies to scholarships awarded beginning with the 2023‑2024 academic year.

Part Ii. Conforming Changes
SECTION 2.1.  Article 35A of Chapter 115C of the General Statutes is repealed.
SECTION 2.2.  G.S. 116‑209.19A reads as rewritten:
"§ 116‑209.19A.  Limit semesters eligible for need‑based grants and scholarships.
The Authority administers the following need‑based grant and scholarship programs: the North Carolina Need‑Based Scholarship for Public Colleges and Universities and Need‑Based Scholarships for Students Attending Private Institutions of Higher Education. G.S. 116‑209.82 and G.S. 116‑281.1 limit the number of semesters that a student may receive a grant or scholarship from these programs and also provide the circumstances in which a waiver to those limits may be granted by the appropriate postsecondary institution. The Authority shall enforce these limitations in administering these programs so that unless a waiver is granted by the appropriate postsecondary institution, no student shall receive a grant or scholarship from any of those programs or any combination of those financial aid programs while pursuing a degree, diploma, or certificate for more than any of the following time periods: (i) 10 full‑time academic semesters or its equivalent if enrolled part‑time or (ii) 12 full‑time academic semesters or its equivalent if the student is enrolled in a program officially designated as a five‑year degree program.
A postsecondary institution that grants a waiver under G.S. 116‑209.82 or G.S. 116‑281.1 shall certify the granting of the waiver in a manner acceptable to the Authority and shall also maintain documentation substantiating the reason for the waiver."
SECTION 2.3.(a)  G.S. 115D‑40.1 reads as rewritten:
"§ 115D‑40.1.  Targeted Financial Assistance for Community College Students; Participation in Federal Programs.
	
(b)	Targeted Financial Assistance. – Within the funds available, the State Board may provide financial assistance to the following students:
(1)	Students who enroll in low‑enrollment programs that prepare students for high‑demand occupations.
(2)	Students with disabilities who have been referred by the Department of Health and Human Services, Division of Vocational Rehabilitation, and are enrolled in a community college.
(3)	Students enrolled in fewer than six credit hours per semester who otherwise qualify for need‑based financial aid programs.
(c)	Administration of Targeted Financial Assistance. – The State Board shall adopt rules and policies for the disbursement of the targeted financial assistance provided in subsection (b) of this section. Degree, diploma, and certificate students must complete a Free Application for Federal Student Aid (FAFSA) to be eligible for financial assistance. The State Board may contract with the State Education Assistance Authority for administration of these targeted financial assistance funds.
(d)	Participation in Federal Loan Programs. – All community colleges shall participate in the William D. Ford Federal Direct Loan Program, unless the board of trustees of an institution adopts a resolution declining to participate in the Program. The State Board shall ensure that at least one counselor is available at each college to inform students about federal programs and funds available to assist community college students, including, but not limited to, Pell Grants, HOPE and Lifetime Learning Tax Credits, and, for participating colleges, the William D. Ford Federal Direct Loan Program, and to actively encourage students to utilize these federal programs and funds. The board of trustees of any institution that has declined to participate in the William D. Ford Federal Direct Loan Program through the adoption of a resolution may rescind the resolution and participate in the Program but shall not have the authority to again decline participation in the Program."
SECTION 2.3.(b)  G.S. 115D‑40.2 is repealed.
SECTION 2.4.  G.S. 116‑25.1 is repealed.
SECTION 2.5.  This Part becomes effective July 1, 2023.

Part III. effective date
SECTION 3.  Except as otherwise provided, this act is effective when it becomes law.