Senate committee substitute, as amended, makes the following changes to the 2nd edition.

Amends the short and long titles.

Part I

The following changes, unless otherwise noted, are contingent on Senate Bill 402 (Appropriations Act) becoming law:

Repeals Section 6.18(f) of Senate Bill 402, concerning the transfer of funds from the Eugenics Compensation Fund for operation of the Justice for Sterilization Victims Foundation.

Changes the due date for amendments to the Medical Assistance Program and Children's Health Insurance Program found in Section 6.18(e) to September 30, 2013 (was, August 1, 2013).

Amends Section 6.4(c) to provide that the Attorney General must take all necessary actions to implement this section and to notify the court in the action entitled State of North Carolina v. Philip Morris Incorporated regarding certain redirection of payments.

Amends Section 6.1 of the act to provide that, among other things, the funds appropriated to the Contingency and Emergency Fund can be used for expenditures required by the State Treasurer to pay death benefits as authorized under GS Chapter 143, Article 12A, by the Office of Governor for specified crime rewards, by the Industrial Commission for supplemental awards of compensation, or by the Department of Justice for legal fees.

Amends GS 143C-9-3 to provide that funds credited to the Settlement Reserve Fund each fiscal year will be included in General Fund availability as nontax revenue (was, nontax revenue for the next fiscal year).

Part II

The following changes, unless otherwise noted, are contingent on Senate Bill 402 becoming law:

Amends Section 7.17(e) to provide that the Department of Revenue can use up to $11,874,319 for payment of internal costs for the fiscal biennium (previously, did not provide a limit on the amount of funds retained by the Department of Revenue which could be used for internal costs).

Amends Section 7.22, providing that the State's Chief Information Officer's plan for implementation of an electronic portal must contain a provision that requires fees to support the operation of the portal to be authorized by the State Chief Information Officer and reported to the Joint Legislative Oversight Committee on Information Technology.

Amends the title of Section 7.8 to be Information Technology Personal Service/Convenience Contract. Also amends the section to require consultation with the Office of State Budget and Management, among others, when determining that a state employee should be performing a certain function rather than a contractor.

Amends Section 7.10(d), and more specifically the included provision GS 143B-426.38A(f)(1), making a clarifying change. Effective when the section becomes law.

Part III

The following changes, unless otherwise noted, are contingent on Senate Bill 402 becoming law:

If House Bill 269 becomes law, then Section 5 of that act is amended to provide that the funding for the allocations in this section come from funds appropriated to the Reserve for Pending Legislation by Senate Bill 402.

Amends GS 115C-301, concerning the allocation of teachers and class size, setting a maximum class size for kindergarten through 3rd grade, establishing that at no time can a local school administrative unit's average class size exceed the funded allotment ratio to students in kindergarten through 3rd grade. Provides that at the end of the second school month and for the remainder of the school year, the size of an individual class in Kindergarten through third grade cannot exceed the allotment ratio by more than three students. Deletes language referring to the limit on appropriation of funds for higher unit class averages than those provided in the 1984-85 school year.  Establishes that in grades four through 12, local school administrative units have the maximum flexibility to use allotted teacher positions to maximize student achievement.  Deletes the provisions of GS 115C-301(d), maximum teaching load, and (e), alternative maximum class sizes. Directs the local boards of education to report exceptions to the class size requirements for kindergarten through third grade and to report significant increases in class size at other grade levels and request waivers and adjustments to the allotments accordingly. Provides the State Board of Education has the authority to grant the waivers for the excess class size and must do so within 45 days of receipt of the request. Deletes language which set out the parameters for which a waiver could be granted. Deletes the provision concerning the assessment of a penalty for noncompliance. Makes conforming changes. Amends GS 115C-47, concerning the powers and duties of local boards of education, making conforming changes reflecting the changes to the provisions regarding allotments and class size above. Makes some language gender neutral. Amends GS 115C-276(k), requiring local boards of education, at the end of the second month of school, to report school organization, employees' duties, and class sizes to the State Board.  Makes conforming changes. Provides that notwithstanding GS 115C-301 or any other law, for the 2013-15 fiscal biennium, class size requirements in kindergarten through third grade will remain unchanged.

Amends the appropriations from the General Fund in the Education section, reducing, for fiscal year 2014-15, appropriations to the Related Educational Program by $10 million and increasing the appropriations to Aid to Private Institutions by $10 million.

Amends GS 115C-238.70(a), not contingent on Senate Bill 402 becoming law, to add a new subdivision (4) that requires the State Board of Education to allocate to a regional school, if it has a final total average daily membership of 100 or more students, an amount to fund 12 months of employment for the school principal position.

Amends GS 115C-83.11(b)(7), to change the way school achievement scores are calculated, providing that schools will receive one point for each percent of students that complete Algebra II or Integrated Math III (previously, were required to complete the end-of-course tests for the courses to receive points).

Amends Section 10.4A(a) of Senate Bill 402, to require the State Board of Community Colleges to consult and cooperate with the Office of State Budget and Management when implementing a fourth tier in the Tiered Funding Formula for the allocation of funds to community colleges.

Directs the reduction to the cash balance of the Teaching Fellows Trust Fund for the 2013-14 fiscal year to be taken from Budget Code 63501.

Provides that the developmental screening and kindergarten entry assessment required by GS 115C-83.5 will be administered beginning with the 2014-15 school year in at least 50% of local school administrative units, with statewide implementation to occur no later than the 2015-16 school year.

Amends GS 115C-64.10(a), to provide that the NC Education and Workforce Innovation Commission will be located administratively in the Office of the Governor (was, Department of Public Instruction). Makes conforming changes.

Amends appropriations from the General Fund for the Department of Public Instruction and the Office of the Governor in order to reflect the shift of the NC Education and Workforce Innovation Commission to the Office of the Governor.

Provides that the Department of Public Instruction will not use any funds appropriated to it in the budget act for the 2013-15 fiscal biennium to support the program for competitive grants. Directs the Office of the Governor to use the sum of $2 million in recurring funds for each fiscal year of the 2013-15 fiscal biennium to support the program for competitive grants.

Amends Section 8.4(a) of SB 402 to clarify that a county with a county-adjusted property tax base per student is below the state-adjusted property tax base per student if the total average daily membership (ADM) of all local school administrative units (LEAs) located within the county is from 3,175 to 4,000 students (was, from 3,239 to 4,804). Provides as one of the required criteria on which the State Board of Education (SBE) may base a finding that a county has used supplemental funds as provided in Section 8.4 of SB 402 (small school systems supplemental funds) to supplant local current expense funds a determination that the current expense appropriation per student of the county for the current year is less than 95% of the average of local current expense appropriations (was, expenditures) per student for the three prior fiscal years.

Provides that Section 11.10 of SB 402, which amends GS 116-198.34(5) regarding UNC's disposition and acquisition of real property, expires June 30, 2015 (was, repealed subsection (d) of Section 9.10 of SL 2012-142).

Rewrites Section 10.15(c) of SB 402 to modify the membership of the committee, located administratively in the Community Colleges System Office and tasked with studying the community college program audit function. Makes the Community Colleges System Office Chief Financial Officer and the State Chief Information Officer or designee nonvoting members. Provides that the committee is to elect a chair from its members (was, designated the Community Colleges System Office Chief Financial Officer as the chair).

Makes a technical correction to Section 10.16(a).

Requires the Joint Legislative Education Oversight Committee (Committee), in conjunction with the Board of Governors of the University of North Carolina and the State Board of Community Colleges, to study the feasibility of establishing an alternative undergraduate admission program to be known as the North Carolina Guaranteed Admission Program (NC GAP) (was, directed the Board of Governors of the University of North Carolina and the State Board of Community Colleges to jointly study the feasibility of establishing NC GAP). Directs the Committee to report its findings and recommendations regarding NC GAP and any recommended legislation to the 2014 Regular Session of the 2013 General Assembly upon its convening (was, charged the Board of Governors of the University of North Carolina and the State Board of Community Colleges with making a report of findings and recommendations to the Committee by March 1, 2014).

Amends GS 115C-174.18, as amended by Section 8.27(c) of SB 402, to provide every student in eighth through tenth grades who has completed Algebra I or who is in the last month of Algebra I with an opportunity to take a version of either the PSAT/NMSQT or the PLAN precursor test to the ACT (was, the ACT), at the discretion of the LEA, at no expense to the student.

Provides as one of the required criteria on which the State Board of Education (SBE) may base a finding that a county has used supplemental funds as provided in Section 8.3 of SB 402 (low-wealth counties supplemental funds) to supplant local current expense funds, a determination that the current expense appropriation per student of the county for the current year is less than 95% of the average of local current expense appropriations (was, expenditures) per student for the three prior fiscal years.

Directs the Department of Public Instruction (DPI) to study the nonsupplant requirement for low-wealth counties supplemental funding and the nonsupplant requirement for small county supplemental funding allotments. Requires DPI to report on its findings to the Fiscal Research Division by March 15, 2014.

Provides that if House Bill 269, 2013 Regular Session, becomes law, then Section 7 of that act is amended to provide that despite the definition for eligible students in GS 115C-112.2, a child who meets the requirements of GS 115C-112.2(a) through (e), and who is eligible to enroll in kindergarten or the first grade in a North Carolina pubic school during the 2013-14 school year, is eligible to receive a scholarship grant for the spring semester of the 2013-14 school year.

Part IV

Provides that if Senate Bill 402 (Appropriations Act of 2013), 2013 Regular Session, becomes law, the following changes will be made.

Amends GS 90-470, deleting provision that the 18 initial members of the North Carolina Institute of Medicine (Institute) be appointed by the Governor. Provides that the North Institute is governed by a Board of Directors who are to select additional members of the Institute (was, required the Board to have approval from the Governor for its membership selections). Deletes language identifying the members appointed under this section as the initial board of directors. Makes a technical correction. Effective January 1, 2014.

Amends Article 31 of GS Chapter 90, adding a new section to provide for the appointment of individuals to the Board of Directors of the North Carolina Institute of Medicine. Provides that terms on the Board are for four years and no individual may serve more than two consecutive terms. Requires the Governor to appoint seven members and that seven members each be appointed on the recommendations of the Speaker of the House of Representatives and the President Pro Tempore of the Senate. Specifies qualifications for members. Effective January 1, 2014.

Additionally, provides that for appointees for terms to begin on January 1, 2014, the appointing authorities are to designate certain appointees to serve initial two-year terms. Provides that members of the board serving as of the effective date of this act may continue to serve until January 1, 2014.

Amends GS 143B-168.4(b), as amended by Section 12B.1(h) of SB 402, to increase the number of members appointed to the Child Care Commission upon recommendation of the President Pro Tempore of the Senate and the Speaker of the House of Representatives from two to three, respectively. Makes a technical correction.

Adds a new subsection to Section 12B.1 of SB 402, authorizing the Department of Health and Human Services (DHHS), Division of Child Development and Early Education (Division), to exempt unlicensed public classrooms currently participating in the NC Pre-K program from licensure requirements. Directs the Division to review the available capacity of other licensed facilities in the geographic area in making its decision to exempt a public classroom from the licensure requirements. Mandates that all public classrooms participating in the NC Pre-K program be licensed by the Division no later than July 1, 2014.

Amends Section 12H.13(g) to provide an exemption to the prior authorization requirements on medications prescribed to Medicaid and Health Choice recipients for the treatment of mental illness. Directs DHHS not to require prior authorization for medications on the Preferred Drug List (PDL) that are prescribed for the treatment of mental illness.

Amends GS 131E-184(f)(2), as amended by SB 402, Section 12G.3(b), to provide that this subdivision does not apply if a certificate of need was not required at the time the equipment being replaced was initially purchased by the licensed health services facility.

Amends Section 12B.7 to clarify that the Division of Child Development and Early Education (Division) is to submit the progress report on the amount allocated and the use of child care subsidy funds under Section 12B.7(b) of SB 402, and requires the Division to submit a follow-up report on the amount allocated and the use of those funds. Authorizes the Division to adjust the allocations in the Child Care and Development Fund Block Grant based on final allocations for local departments of social services and funds allocated for fraud detection and investigation initiatives. Directs the Division to submit a report on the fnal adjustments to the allocations of the 4% administrative costs to the Joint Legislative Oversight Committee on Health and Human Services and the Fiscal research Division no later than September 30, 2013.

Amends GS 108A-54 to direct the state to pay 100% of the federal Medicare Part D clawback payments under the Medicare Modernization Act of 2004, PL 108-173, as amended. Declares that the Medicaid Program is to be administered and operated in accordance with Part 6 of Article 2 of GS Chapter 108A and the NC Medicaid State Plan and Waivers, as periodically amended by DHHS in accordance with GS 108A-54.1A and approved by the federal government. Directs DHHS not to take any actions that it determines would jeopardize the state's qualification to receive federal funds through the Medicaid program. Provides that subsection (j) of Section 12A.4 of SB 402, regarding planning and implementing system modifications necessary to enable entities under contract with the Department to perform Medicaid claim adjudication in the replacement MMIS, becomes effective January 1, 2015 (was, July 1, 2014). Uncodifies, but retains, the provisions in Section 12H.8, electronic transaction requirements for providers.

Provides that if House Bill 831, 2013 Regular Session, becomes law, the State Board of Education is to identify, within the funds appropriated to DPI or to State Aid for Public Schools, the sum of $1.6 million for the 2013-14 fiscal year and $3.2 million for the 2014-15 fiscal year to ensure the provision of educational services as provided in this act.

Contingent on House Bill 399 (Amend Laws Pertaining to DHHS) becoming law, the effective date of Section 11 of the act becomes effective April 1, 2014 (was, January 1, 2014).

Contingent on House Bill 399 not becoming law, amends GS 122C-115(a), updating a statutory reference.

Contingent on House Bill 399 not becoming law, the effective date for Section 4(a) of the act is April 1, 2014 (was, January 1, 2014).

Amends Section 12H.13(f),  concerning drug reimbursements, providing different rates of reimbursement for specialty drugs (101%) and non-specialty drugs (102.7%) based on the Wholesale Acquisition Cost.  Sets the rate for dispensing brands drugs at $2. Provides new language that sets out the rates for dispensing generic drugs, based on the percentages of generic drugs dispensed by the pharmacy.

Amends Section 12H.2(c), limiting the definition of eligible medical professional providers, for the purposes of this section, to eligible medical professional providers that were receiving supplemental payments as of May 22, 2013 (previously, was limited to physicians employed by ECU School of Medicine or the UNC School of Medicine).

Adds new Section 12F.7(c), which provides that the total amount of funds appropriated to the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services for alcohol and drug abuse treatment centers is reduced by 12%. Provides that DHHS does not have to achieve the reduction by reducing the budget for each existing center as long as DHHS can achieve this reduction in any manner that (1) reduces per bed cost variability across the three alcohol and drug abuse treatment centers and (2) does not result in the closure of any of the three centers.

Amends Section 12H.13(a), providing clarifying language to provisions that state services, co-pays, reimbursement rates, and fees for the State Plan will remain as authorized as of June 30, 2013. Applicable to both the Medicaid Program, and the NC Health Choice program.

Makes the following changes if House Bill 834 (Modern State Human Resources Management/RTR) becomes law. Amends GS 90-413.3A to provide that the requirement that any hospital that has an electronic health record system msut connect to the NC HIE and submit specified information is notwithstanding the voluntary nature of the NC HIE. Adds that the NC HIE must give DHHS real time access to data and information in the NC HIE. Amends Section 14.2 of H 834 to provde that GS 90-413.3A, as amended, becomes effective upon satisfaction of both of the following: (1) DHHS and NC HIE execute an agreement concerning the information use and sharing and (2) DHHS and the NC HIE jointly report to the Joint Legislative Oversight Committees on Information Technology and Health and Human Services on the agreement.

Part V

Unless otherwise indicated, all changes become effective if Senate Bill 402 becomes law.

Amends Section 15.14(f) of Senate Bill 402 and Section 14.1(f) of SL 2011-145, as amended, to remove the Division of Community Assistance from entities that must report on the use of the Community Development Block Grant Funds, assigning responsibility for the report to the Department of Commerce.

Adds a section transferring the federal block grants allocated to the infrastructure category in Section 15.14(a) and Section 14.1(a) of SL 2011-145, as amended, from the Department of Commerce to the Department of Environment and Natural Resources, to be administered by the Division of Water Infrastructure. Provides for awarding funds to local governments for infrastructure projects from the funds by the State Water Infrastructure Authority.

Repeals Section 15.5 (Workforce Investment Act Funds/Transfer of Funds to Department of Labor) of Senate Bill 402.

Amends Section 15.28(a) to only repeal GS 158-8.1 through 158-8.8 and GS 158-12.1 instead of repealing the entire Article 2 (Economic Development Commissions). Also repeals Section 15.28(d), amending GS 143-215.42, and 15.28(e), amending GS 15A-398, of the act.

Amends GS 113-44.15(b) to remove retiring debt incurred for purposes of the State Parks System for capital projects, repairs and renovations, and land acquisition from the allowable uses for funds in the Parks and Recreation Trust Fund.

Amends Section 15.10A(c) of the act to require the Attorney General to take all necessary actions to implement the section, including notifying the court in State of North Carolina v. Philip Morris Incorporated, et al., and the administrators of the State Specific Account established under the Master Settlement Agreement of the intent of the General Assembly to direct one or more of the Governor's appointments to the board of directors of the Golden LEAF Foundation. Makes Section 15.10A (Golden LEAF Foundation Board of Directors/Governor's Appointments) effective upon the Attorney General taking all necessary actions to implement the section as provided in (c).

Amends Section 15.12 of Senate Bill 402 to require the Labor and Economic Analysis Division to develop a standardized performance metric to evaluate whether economic development nonprofits (was, nonprofits) allocated state funds in the 2013-15 biennium have achieved their goals or performance standards.

Amends GS 159G-70(b), as amended by Senate Bill 402, to amend the membership requirements of the State Water Infrastructure Authority to require specified members have knowledge about and experience related to rural and urban local government wastewaters systems or public water systems (was, be a representative of those issues).

Amends GS 143B-472.127(a), as amended by Senate Bill 402, to require that the Rural Infrastructure Authority, in awarding economic development grants or loans under this subsection, give priority to local government units of the county having one of the 80 highest rankings under GS 143B-437.08. Makes conforming changes to GS 143B-472.128(j)(2).

Makes a technical correction Section 14.21(m).

Amends Section 15.3 of Senate Bill 402 to change the name of the Unemployment Insurance Reserve to the Unemployment Insurance Fund and makes other technical changes. Also appropriates from the Special Employment Security Administration Fund to the Unemployment Insurance Fund $10 million for 2013-14 to be used to make payments on advances made by the federal government to pay unemployment compensation benefits. Adds a section requiring funds appropriated to the Unemployment Insurance Reserve to be used to fund the Unemployment Insurance Reserve for employees of all state agencies, departments, institutions, and UNC, as well as state-funded local public school and community college employees. Requires the Director of the Budget to use funds appropriated for 2013-14 to ensure agencies comply with SL 2013-2 (UI Fund Solvency & Program Changes).

Amends Section 15.14(a) of Senate Bill 402  and Section 14.1(a) of SL 2011-145 (Appropriations Act of 2011), as amended, to increase the amount of the appropriation from the Community Development Block Grant funds to Economic Development and decrease the appropriation for Infrastructure by specified amounts. Makes conforming changes. Amends eligible activities under the category of Infrastructure to be limited to critical public water and wastewater projects. Provides that eligible activities as defined in the subsection are limited only by applicable HUD regulations and federal law.

Requires the Department of Agriculture and Consumer Services to take all necessary actions to make the Southeastern Agriculture Center fully receipt supported.

Part VI

Unless otherwise indicated, all changes become effective if Senate Bill 402 becomes law.

Makes clarifying changes to the title of Section 18B.22.

Deletes the contents of Section 17.8 of the act, plan for transferring Assistant Attorney General positions to the State agencies they serve, and replaces it with the following. Transfers specified positions from the Department of Justice to the specified agencies. Requires any person employed in a position transferred pursuant to the authority of the section to report to the appropriate agency head to which the position is transferred and perform duties as may be assigned by the agency head. Allows the Office of State Personnel to reclassify the positions into a comparable salary classification. Effective October 1, 2013. Effective when the act becomes law, prohibits, before October 1, 2013, a vacant position set forth in the section from being filled and prohibits a person from begin transferred into any position in the section.

Makes Section 18B.21A (concerning limits on the compensation and allowances of court reporters) of Senate Bill 402 effective September 1, 2013, and applicable to payments for transcripts that are requested on after that date.

Makes a technical and clarifying change to GS 143B-707.2(b), as amended.

Provides that the conversion of Johnston Correctional Institution from a medium custody prison to a minimum custody prison results in a net savings of 62 positions.

Makes a technical change to GS 15A-1343(c2), as amended. Amends GS 15A-1368.4(e)(13) to amend the conditions of post-release supervision, violation of which may result in revocation, to amend the electronic monitoring condition to add payment of a $90 fee for the monitor device and a daily fee in an amount reflecting the actual cost of monitor. Allows for an exemption from the fee only for a good cause. Requires the fees to be deposited in the state's General Fund. Requires the daily fee to be given to the Department of Public Safety for costs of monitoring. Makes Section 16C.16 (electronic monitoring fee) effective September 1, 2103 (was, August 1, 2013).

Part VII

Unless otherwise indicated, all changes become effective if Senate Bill 402 becomes law.

Amends Section 30.2 to provide that (a), amendments concerning the distribution of the divorce filing fee, becomes effective 30 days after the act becomes law.

Part VIII

Unless otherwise indicated, all changes become effective if Senate Bill 402 becomes law.

Amends Section 34.29, concerning the highway use tax base, to make the section effective July 1, 2014 (was, January 1, 2014).

Part IX

Unless otherwise indicated, all changes become effective if Senate Bill 402 becomes law.

Amends Section 36.3(b) to provide that it is the General Assembly's intent that funds carried forward be used to supplement the $11,522,000 (was, $13,522,000) appropriated for water resources development projects.

Amends Section 36.4(a) to authorize $700,000 for the Southeastern North Carolina Agricultural Center, Horse Stall Barn.

Part XI

Effective when this act becomes law, amends GS 62-140(a) to add that if the state repeals any state funding mechanism for a reduction in the local telephone rates for low-income residential consumers, the Commission must take appropriate action to eliminate any requirement for the reduced rate funded by the repealed mechanism. Provides a state funding mechanism for a reduction in the local telephone rates includes a tax credit allowed for the public utility to recover the reduction in rates.

Effective July 1, 2014, amends GS 105-164.44K(b), as amended, to provide that the quarterly franchise tax share of a city is the total amount of electricity gross receipts franchise tax distributed to the city under repealed GS 159B-27, in addition to repealed GS 105-116.1 for the same related quarter that was the last quarter in which taxes were imposed on electric power companies under repealed GS 105-116 or GS 159B-27. Makes conforming conditions.

Amends GS 105-129.16D(b) to add that the section (concerning credit for a commercial facility for processing renewable fuel) is repealed effective for facilities placed in service on or after January 1, 2017, in the case of a taxpayer who (1) signs a letter of commitment with the Department of Commerce on or before September 1, 2013, stating the taxpayer's intent to construct and place into service a commercial facility for processing renewable fuel and (2) begins construction of the facility on or before December 31, 2013.

Amends GS 105-164.13E(8)b., to make a technical change.

Part XII

Unless otherwise indicated, the act becomes effective July 1, 2013.