Creates the Needs-Based Public School Capital Fund (Fund) to be administered by the Superintendent of Public Instruction to award grants to counties designated as a tier one area or a development tier two area, as defined in GS 143B-437.08, to assist with their critical public school building capital needs. Sets forth the priority in which the Superintendent is to award grants to counties. Subjects grant funds awarded to a matching requirement from the recipient county, based on whether the county is a development tier one area or development tier two area.

Caps the total amount that can be awarded to a single county in a fiscal year at $10 million. Caps the total aggregate amount awarded from the Fund in a fiscal year at $100 million. Prohibits grant funds from being used for real property acquisition or for operational lease agreements.

Requires a grant recipient to submit an annual report to the Superintendent by April 1 each year that describes the progress of the project for which the grant was received for the preceding year. Requires the grant recipient to submit a final report to the Superintendent within three months of the completion of the project. Directs the Superintendent to submit an annual report by May 1 each year to the Chairs of the Senate Appropriations Committee on Education/Higher Education, the Chairs of the House Appropriations Committee on Education, and the Fiscal Research Division. Sets out the report requirements. Appropriates $75 million in recurring funds from the Education Lottery Fund to the Needs-Based Public School Capital Fund for the 2017-18 fiscal year to be used to administer the grant program.

Current law, GS 18C-161, provides that four types of revenue must be deposited in the NC State Lottery Fund: (1) all proceeds from the sale of lottery tickets or shares, (2) the funds for initial start-up costs provided by the State, (3) all other funds credited or appropriated to the NC State Lottery Commission from any source, and (4) interest earned by the North Carolina State Lottery Fund. Amends GS 18C-162 (Allocation of revenues) to add a new subsection (a1) to prohibit lottery advertising costs from exceeding 2% of the total revenues (currently, capped at 1%), as described in GS Chapter 18C. Amends GS 18C-163(b) to provide that expenses of the lottery includes advertising costs. Makes technical and conforming changes. 

Current law, GS 18C-164(c), directs the General Assembly to appropriate the remaining net revenue of the Education Lottery Fund annually in the Current Operations Appropriations Act for education-related purposes, based upon estimates of lottery net revenue to the Education Lottery Fund provided by the Office of State Budget and Management and the Fiscal Research Division of the Legislative Services Commission. Amends GS 18C-164(e) to require the Governor (currently, permits the Governor) to transfer from the Education Lottery Reserve Fund an amount sufficient to equal the appropriation by the General Assembly required in subsection (c) if the actual net revenues of the Fund are less than the appropriation for a given year. 

Effective July 1, 2017.