House committee substitute deletes the provisions of the 3rd edition and instead provides the following.

Makes the following changes to Article 7A, NC Innovative School District and Innovation Zones, of GS Chapter 115C.

Amends GS 115C-75.5, modifying the term innovative school operator (IS operator) to remove the general prohibition provided against the Department of Public Instruction (DPI) being selected as an IS operator. Deletes the existing definition for qualifying school and now defines the term to mean a school that is a Title I school in the lowest performing 5% of school grades of all Title I schools, as defined.

Deletes the existing provisions regarding selection of innovative schools set forth in GS 115C-75.7 and instead mandates annual selection by the State Board of no more than five qualifying schools to transfer to the Innovative School District (ISD) as innovative schools (previously, the State Board was authorized to select, upon recommendation of the ISD Superintendent, up to five qualifying elementary schools, as previously defined, to transfer to the ISD, with diversity requirements and limitations to one qualifying school per local unit unless the local board consented). Requires selection of innovative schools to be based on an analysis and evaluation of performance of qualifying schools over a three-year period of the school being designated and placed on the qualifying list, watch list, and warning list, as described, with public notice given and hearings held concerning the designation in accordance with the statutory requirements set forth. Requires the State Board to ensure that the qualifying schools identified for any ISD list are engaged in strategies in compliance with state or federal law for comprehensive support and improvement. Allows the State Board of Education to establish criteria for the selection of independent turnaround school consultants in a pay-for-performance model to provide direct support for qualifying schools. Directs the ISD Superintendent to monitor the schools and assist local boards in identifying funding, strategies, and partners for those efforts. Requires local boards to identify and engage in strategies in compliance with federal and State law for comprehensive support and improvement of qualifying schools, and mandates that local board members with an immediate family member employed by the local board and assigned to a qualifying school recuse themselves from any actions directly related to that qualifying school. Permits a local board to request that the State Board select a qualifying school under its control as an innovative school at any time upon recommendation of the ISD Superintendent. Eliminates the requirement for a local board to adopt a resolution which either consents to transfer the selected qualifying school to the ISD or closes the school at the conclusion of the school year. Establishes a new selection process whereby a school that remains a qualifying school in the school year following the year the school was placed on the ISD warning list and is one of the lowest five qualifying schools on the ISD warning list, as measured by school performance scores, is selected as an innovative school beginning with the next school year. Maintains the statute's existing provisions regarding public notification and waiver for innovative schools. Requires the ISD lists and selected innovative schools to be publicly available on a website maintained by the ISD.

Amends GS 115C-75.8 to permit the State Board to select an IS operator for a selected innovative school by December 15 and require selection of an IS operator for a selected innovative school by January 15 (previously applicable to prospective innovative schools, with selection permitted by January and required by February 15). Makes conforming changes. Modifies the requirements for entities contracted as IS operators to remove reference to persistently low-performing schools or students concerning the entity's record of improvement. Eliminates the provisions that provide for the ISD to act as an IS operator in instances in which no entity meets the specified qualifications. Maintains the contract requirements for contracts between the State Board and IS operator.

Amends GS 115C-75.9 to eliminate the provision authorizing the ISD to act as an IS operator in the event that temporary management is necessary due to contract termination. Now permits an IS operator, in collaboration rather than in consultation with the ISD Superintendent, to elect to enter into a memorandum of understanding for alternate arrangements with the local board to address facility and capital expenditures, transportation services, or services for children with disabilities. Adds a requirement for the IS operator to collaborate with the ISD Superintendent in selecting and hiring the school principal for the innovative school. Concerning retained employees, allows a retained employee to become an employee of the local board if the IS operator is a local board, rather than an employee of the ISD, subject to approval of the ISD Superintendent. Provides for teachers at qualifying schools selected to become an innovative school who have career status prior to employment to teach at the innovative school to return to a public school in the local unit with career status at the end of employment at the innovative school if the appropriate position is available, and if not available, be put on a list of available teachers pursuant to GS 115C-325. 

Amends GS 115C-75.10, concerning innovative schools funds. Concerning the ability of the IS operator to enter into a funding memorandum of understanding with the local board of the local unit for all student support and operational services and all instruction services, requires collaboration rather than consultation with the ISD Superintendent. 

Amends GS 115C-75.11, concerning accountability and governance for innovative schools, to require an IS operator to collaborate with the ISD Superintendent in selecting, approving, or removing the school principal of an innovative school managing under the Article.

Amends GS 115C-75.12, regarding the term of supervision, to eliminate the provision authorizing the ISD to act as temporary IS operator during a transition period following contract termination.

Amends GS 115C-75.13 concerning the creation of an innovation zone by a local board, to allow for an innovation zone for up to three low-performing schools within the local board's local unit (was, for up to three continually low-performing schools within its local unit) if the local unit has more than 35% of the schools identified in the unit as low-performing for some or all (was, for all) of the low-performing schools located in the unit. Requires the leader of the innovation zone office to be selected by the local board in consultation with the ISD Superintendent (was, recommended by the ISD Superintendent) and approved by the State Board. Modifies the provisions regarding termination of an innovation zone to refer to low-performing schools rather than continually low-performing schools. Eliminates the provision which requires a low-performing school in an innovation zone to become an innovative school if the school does not exceed expected growth in the last two of five consecutive years in the innovation zone. 

Amends GS 115C-429 to require the local board to submit to the county commissioners with the budget the academic performance of the schools in the local unit, including school performance grades of each school, any schools identified as low-performing or continually low-performing or included on the ISD lists, and improvement efforts by the local board. Requires the local board to present the academic performance information at a public meeting upon request of the board of commissioners. 

Mandates that the State Board select the lowest scoring qualifying school, as defined by GS 115C-75.5, as amended, in the state identified based on the school performance score in the school years 2018-19, 2019-20, and 2020-21 to become an innovative school in the following school year, respectively.

Requires the State Board to select innovative schools pursuant to GS 115C-75.7(a), as amended, no earlier than the 2022-23 school year for inclusion in the ISD beginning with the 2023-24 school year, unless a local board requests selection prior to that year. 

Directs the Superintendent of Education and the ISD Superintendent to jointly study the options for innovative schools and reform of low-performing schools, as described, and report to the specified NCGA committee by March 15, 2020.

Applies to schools identified beginning with data from the 2018-19 school year as qualifying schools for the 2019-20 school year, except as otherwise provided. 

Makes conforming changes to the act's titles.