House committee substitute makes the following changes to the 1st edition.

Changes the long title of the act.

Amends GS 115C-75.5(5) by changing the first criteria which a low-performing school may meet to be a qualifying school under Article 7A of GS Chapter 115C. Now, subdivision (a) sets out that the school must have received a school performance score in the lowest 5% of all schools in the prior school year and (1) the school includes all or part of grade kindergarten through fifth, (2) the school did not exceed growth in at least one of the prior three school years and did not meet growth in at least one of the prior three school years, and (3) one of the models established in GS 115C-105.37B for continually low-performing schools had not been adopted for that school for the immediately prior school year.

Amends GS 115C-75.9(h), concerning achievement school employees, to authorize the ASD Superintendent or the Superintendent's designee (previously, did not provide the option for the Superintendent to have a designee) to interview all existing staff members at the qualifying school and review student growth and performance data for those staff members for whom it is available before finalizing staffing recommendations.

Makes technical changes to GS 115C-75.11(a) and (c).

Amends GS 115C-75.12(a)(2) to change the subdivision's descriptor to Nonrenewal of contract based on performance (previously, Closure of achievement school based on performance). Provides that the State Board of Education will not renew the contract of the AS operator (previously, will close the achievement school) and develop a transition plan to return the school to the local school administrative unit if the circumstances, as specified in subdivision (2), are present. Amends GS 115C-75.12(c), requiring the State Board of Education to make all decisions related to contracts for AS operators no later than May 1, by adding an exception for provisions provided in subdivision (5) of subsection (a) of the statute.

Makes clarification to GS 115C-75.6(c) and (d), GS 115C-75.10(b), and GS 115C-75.12(a).

Amends GS 115C-105.37B(a), which sets out the models a local board of education may adopt, in accordance with State Board requirements, if the State Board approves the local board of education's request to reform a school, by changing the third requirement of the principal turnout model provided in subdivision (5) to require consideration by the local board of education of all recommendations of the turnout principal, made in collaboration with the superintendent, with regard to personnel assigned to the school and, to the extent possible, implementation of those recommendations (previously, did not provide for collaboration with the superintendent). Eliminates the requirement of the principal turnout model that required there to be authority for the turnaround principal to select staff assigned to the school. Makes conforming, technical changes to subdivision (5).

Amends GS 115C-105.37B(a1) by reducing the number of of schools statewide that the State Board of Education can authorize to adopt the principal turnaround model from no more than 10 to no more than 5 schools.

Deletes the previous language of Section 5 of the act, concerning evaluation of the Achievement School District, and replaces it with the following. Directs the State Board of Education to contract during the 2016-17 school year with an independent research organization to evaluate the implementation and effectiveness of the Achievement School District in turning around low-achieving schools, innovation zones in turning around low-achieving schools, and principal turnaround models in turning around low-achieving schools, as specified by the act. Requires the independent research organization to report its interim findings to the State Board of Education annually no later than February 15, beginning in 2017, and submit a final report no later than February 15, 2023. Directs the State Board of Education to provide the report  of the independent research commission and any recommended legislative changes to the Joint Legislative Education Oversight Committee annually no later than March 1, beginning in 2017 until submission of the final report in 2023.

Directs the State Board of Education to authorize the Charlotte-Mecklenburg (CMS) Board of Education to create an innovation zone among Project LIFT schools and Beacon Initiative schools as provided in GS 115C-75.13. Authorizes the CMS innovation zone to include up to five low-performing schools. Defines Project LIFT schools and Beacon Initiative schools as they apply to this directive and authorization.

Directs the State Board of Education to solicit applications for a three-year pilot to authorize two local boards of education to each create an innovation zone, as provided in GS 115C-75.13. Establishes that, notwithstanding GS 115C-75.13, the local board of education cannot be required to transfer a qualifying school to the ASD to be selected for the pilot. Authorizes the two pilot innovation zones to include up to three low-performing schools. Provides that the Board's solicitation of applications is to be no later than November 15, 2016, for a small district innovation zone, to be awarded to a school district with less than 6,000 students, and a medium district innovation zone, to be awarded to a school district with more than 6,001 and less than 20,000 students. Requires the Board to select the two pilot innovation zones no later than January 15, 2017. Requires the two pilot innovation zones to begin operation with the 2017-18 school year and report annually to the Board on the required innovation zone accountability metrics. Requires the Board to report to the Joint Legislative Oversight Committee on the outcomes of the pilot innovation zones by March 15, 2020, and to include recommendations on continuation or expansion of the pilot.

Makes the appropriation of $400,000 to the Department of Public Instruction (DPI) for 2016-17 fiscal year in recurring funds (previously, did not provide for recurring funds).

Makes new appropriation of $500,000 from the General Fund to DPI for the 2016-17 fiscal year to contract with an independent research organization to conduct the evaluation required in Section 5 of the act.