Directs the Department of Public Instruction (DPI) to allot to each local school administrative unit (unit) a lump sum for the 2017­18 fiscal year to provide compensation for the principals in that unit at the discretion of the superintendent, in lieu of a salary schedule. Allotment equals the average total salary paid to a principal from State funds in the 2016­17 fiscal year, plus 7%, multiplied by the number of principal positions in that unit for the 2017­18 fiscal year. Directs DPI to further allot sufficient additional funds to each unit to ensure that principals contracted with a unit in fiscal year 2016­17, continuing in that contract in fiscal year 2017­18, shall receive at least as much as the principal earned under SL 2016­94. Directs the superintendent of each unit to compensate any such principal at least as much as the principal earned under SL 2016­94.

Appropriates $13,771,652  for 2017­18 in recurring funds from the Education Lottery Fund to DPI for the purpose described above.

Directs DPI to allot a nonrecurring bonus of $2,600 to all principals working in the 2017­18 school year. The bonuses are not compensation under GS Chapter 135, Article 1.

Enacts new GS 115C­285.5 (Principal Bonus Program). Directs the State Board of Education to establish the Principal Bonus Program (Program). Under the program, principals employed by local boards of education of a unit eligible to receive supplemental low­wealth funding from the State Board of Education may receive up to five one­time annual bonuses of $1,000 each, subject to specified criteria, including achieving, during the previous year, improvement of the learning environment and physical environment of the school, and the school exceeding expected growth. Directs local boards of education to report to DPI on the decisions made regarding payment of the bonuses, including specified information, by August 1 of each payment year. Directs DPI to report the information in the local boards' reports to the Joint Legislative Education Oversight Committee and the Fiscal Research Division no later than October 31 of each payment year. Directs DPI to allot funds beginning in 2018­19 to units based on the information it receives, and that bonuses shall be paid no later than October 31 of each year. Clarifies that the bonuses are not compensation under GS Chapter 135, Article 1.

Appropriates $6.7 million for 2017­18, in recurring funds, from the Education Lottery Fund to DPI to provide the described principal bonuses.

Directs that assistant principals will receive a monthly salary for fiscal year 2017­18 based on the salary schedule for "A" teachers plus 13%. Years of experience include years serving as a teacher, an assistant principal, or both. Includes administrators with one­year provisional assistant principal's certificates. Clarifies that assistant principals continue to receive any additional State­funded percentage increases earned for school years 1997­98 through 1999­2000. Clarifies that longevity for assistant principals is provided as under the North Carolina Human Resources Act. Directs that assistant principals with certification based on academic preparation at the six­year degree level shall receive a salary supplement of $126 per month, and at the doctoral degree level of $253 per month. Grants a 10­month stipend for participants in approved full­time master's in­school administration programs during the internship period of the master's program, as specified. Directs Principal Fellows Program or school of education to supply DPI with certification of eligible interns. Clarifies that assistant principals will recieve in 2017­18 at least as much as the assistant principal earned under SL 2016­94. Appropriates $4,135,137 for 2017­18, in recurring funds, from the Education Lottery Fund to DPI to improve and raise assistant principal pay as described.

Creates the Needs­Based Public School Capital Fund to be administered by the Superintendent of Public Instruction, to award grants to counties designated as development tier one or tier two areas under GS 143B­437.08, to assist with critical public school building capital needs. Specifies the order of priorities in granting the funds. Makes funds subject to a matching requirement from the recipient county in the amount of $2 for every $1 provided by a tier one county, and $1 for every $1 provided by a tier two county. Grant to a single county is not to exceed $10 million in a single fiscal year. Limits fund uses to new capital projects and prohibits use of the grant funds to acquire real property or pay operational lease agreements. Directs grant recipients to submit to the Superintendent of Public Instruction an annual report describing the progress of the project for which the grant was received by April 1 of each year, and a final report to the Superintendent within three months of the project's completion. Directs the Superintendent of Public Instruction to report to the chairs of the Senate Appropriation Committee on Education/Higher Education, the Chairs of the House Appropriations Committee on Education, and the Fiscal Research Division, on or before May 1 of each year, specified information regarding the grants. Appropriates $75 million for 2017­18, in recurring funds, from the Education Lottery Fund to the Needs­Based Public School Capital Fund.

Amends GS 18C­162 to restrict advertising costs for the Lottery to 2% (was, 1%) of the annual total revenues.

Amends GS 18C­163(b) to direct that the expenses of the lottery include advertising costs.

Amends GS 18C­164(e) to direct the Governor to transfer from the Education Lottery Reserve Fund an amount sufficient to equal the appropriation by the General Assembly (currently allows, but does not direct, the Governor to do so) when the net revenues are less than the appropriation for a given year.

Effective July 1, 2017.