OFFICE OF STATE BUDGET AND
MANAGEMENT
(919) 807-4700 (phone) (919) 733-0640 (fax)
- 1 -
North Carolina
Budget Manual
OFFICE OF STATE BUDGET AND
MANAGEMENT
(919) 807-4700 (phone) (919) 733-0640 (fax)
- 2 -
http://www.osbm.state.nc.us
STATE OF NORTH CAROLINA
BUDGET MANUAL
OFFICE OF STATE BUDGET AND MANAGEMENT
Effective Date July 1, 2011 Updated January 25, 2012
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INTRODUCTION
The Office of State Budget and Management (OSBM) prepares the Budget Manual for the State of North Carolina for use by state departments, agencies and institutions in the preparation and administration of their budgets. The Manual is a guide to state departments and agencies in dis-charging their duties under applicable laws and regulations. It is the responsibility of department heads and their fiscal staffs to acquaint themselves with the Manual.
The Manual is divided into nine major sections:
1. State Budget Act
2. Budget Development
3. Budget Execution
4. Fiscal Policies and Regulations
5. Travel Policies and Regulations
6. Personnel
7. Rule Analysis
8. Reporting
9. Municipal Population Estimates
10. Glossary
There are several features that should facilitate referencing and navigating throughout the Manu-al. First, there is a table of contents at the beginning and an index at the end of each section that will assist users with quick referencing. Second, specific General Statute citations are referenced throughout the Manual and the online version includes direct links to the appropriate General Statute. A third feature, also in the online version, is the inclusion of direct links to other sites for useful information and documents.
All revisions, supplements and deletions to the Manual will be issued through the State Budget Director. Departmental officials and their staffs should maintain a current version of the Manual that will be updated online periodically by OSBM. The header at the top of each page in the Manual reflects the effective date of this version of the Manual and the date of the most recent updates to this version. The appendix at the end of the Manual lists revisions to date.
Any exceptions to the rules, regulations, or guidelines stated in the Budget Manual, except those exceptions expressly delegated, must be approved by OSBM. These policies may be superceded by OSBM directives or agency policies as long as they conform to the basic principles of the State Budget Manual.
An OSBM staff directory and a list of Budget Memorandums are available on OSBM’s website.
STATE OF NORTH CAROLINA
BUDGET MANUAL
OFFICE OF STATE BUDGET AND MANAGEMENT
Effective Date July 1, 2011 Updated January 25, 2012
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Questions, comments, or suggestions concerning the Budget Manual may be sent to Budget-Manual-OSBM@osbm.nc.gov or you can call 919-807-4700. Periodically, OSBM will revise the Budget Manual to reflect policy and procedure changes and to make the Budget Manual more user-friendly.
STATE OF NORTH CAROLINA
BUDGET MANUAL
OFFICE OF STATE BUDGET AND MANAGEMENT
Effective Date July 1, 2011 Updated January 25, 2012
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ONLINE START PAGE
Section 1: State Budget Act 5
Section 2: Budget Development 43
Section 3: Budget Execution 61
Section 4: Fiscal Policies and Regulations 109
Section 5: Travel Policies and Regulations 123
Section 6: Personnel Policies and Regulations 147
Section 7: Rule Analysis 165
Section 8: Reporting 177
Section 9: Municipal Population Estimates 185
Section 10: Glossary 193
Appendix: Budget Manual Revisions 199
STATE OF NORTH CAROLINA
BUDGET MANUAL
OFFICE OF STATE BUDGET AND MANAGEMENT
Effective Date July 1, 2011 Updated January 25, 2012
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1.0 STATE BUDGET ACT
Table of Contents
143C-1-1 Purpose and definitions ............................................................................................ 7
143C-1-2 Appropriations: constitutional requirement; reversions .......................................... 10
143C-1-3 Fund types ............................................................................................................... 10
143C-1-4 Interest earnings credited to the General Fund; interest earnings on
Highway Fund and Trust Fund credited to those funds ........................................... 12
143C-2-1 Governor is the Director of the budget .................................................................... 12
143C-2-2 Collection of State Budget Statistics ....................................................................... 13
143C-2-3 Fiscal analysis required for any State agency bill that affects the budget ............... 13
143C-2-4 Director of the Budget may direct State Treasurer to borrow money for
Certain payments ..................................................................................................... 13
143C-3-1 Budget estimate for the legislative branch .............................................................. 14
143C-3-2 Budget estimate for the judicial branch ................................................................... 14
143C-3-3 Budget requests from State agencies in the executive branch. ................................ 14
143C-3-4 Budget request from non-State entities ................................................................... 16
143C-3-5 Budget recommendations and budget message ....................................................... 16
143C-4-1 Annual balanced budget .......................................................................................... 18
143C-4-2 Savings Reserve Account and appropriation of General Fund
unreserved fund balance .......................................................................................... 19
143C-4-3 Repairs and Renovations Reserve Account ............................................................. 19
143C-4-4 Contingency and Emergency Fund ......................................................................... 20
143C-4-5 Non-State match restrictions ................................................................................... 20
143C-4-6 General Fund operating budget size limited ............................................................ 20
143C-4-7 Limit on number of permanent positions budgeted................................................. 21
143C-5-1 Rules for the introduction of the Governor’s appropriations bills .......................... 21
143C-5-2 Order of appropriations bills ................................................................................... 22
143C-5-3 Availability statement required ............................................................................... 22
143C-5-4 Enactment deadline ................................................................................................. 22
143C-5-5 Committee report used to construe intent of budget acts ........................................ 22
143C-6-1 Budget enacted by the General Assembly; certified budgets of State agencies ...... 22
143C-6-2 Methods to avoid deficit. ......................................................................................... 23
143C-6-3 Allotments. .............................................................................................................. 24
143C-6-4 Budget Adjustments Authorized ............................................................................. 24
143C-6-5 No expenditures for purposes for which the General Assembly has
considered but not enacted an appropriation; no fee increases that
the General Assembly has rejected .......................................................................... 25
143C-6-6 Positions included in the State Payroll .................................................................... 25
143C-6-7 Compliance with Chapter and appropriations acts by State agencies. .................... 26
143C-6-8 State agencies may incur financial obligations only if authorized by the STATE OF NORTH CAROLINA
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Director of the Budget and subject to the availability of appropriated funds. ......... 26
143C-6-9 Use of lapsed salary savings. ................................................................................... 26
143C-6-10 Flexible compensation plan. .................................................................................... 27
143C-6-11 Highway appropriation. ........................................................................................... 27
143C-6-21 Payments to nonprofits ............................................................................................ 29
143C-6-22 Use of State funds by non-State entities .................................................................. 29
143C-6-23 State grant funds: administration; oversight and reporting requirements. .............. 29
143C-7-1 Funds creating an obligation. .................................................................................. 32
143C-7-2 Federal Block Grants ............................................................................................... 33
143C-8-1 Legislative intent; purpose ...................................................................................... 33
143C-8-2 Capital facilities inventory ...................................................................................... 33
143C-8-3 Capital improvement needs criteria ......................................................................... 34
143C-8-4 Agency capital improvement needs estimates ......................................................... 34
143C-8-5 Six-year capital improvements plan ........................................................................ 35
143C-8-6 Recommendations for capital improvements set forth in the Recommended
State Budget. ............................................................................................................ 35
143C-8-7 When a State agency may begin a capital improvement project. ............................ 36
143C-8-8 When a State agency may increase the cost of a capital improvement project. ...... 36
143C-8-9 When a State agency may change the scope of a capital improvement project. ..... 36
143C-8-10 Project Reserve Account ......................................................................................... 37
143C-8-11 Reversion of appropriation and lapse of project authorization ............................... 37
143C-8-12 University system capital improvement projects from sources that are
not General Fund sources: approval of new project or change in scope
of existing project. ................................................................................................... 38
143C-9-1 Medicaid Special Fund; transfers to Department of Health and
Human Services. ...................................................................................................... 38
143C-9-2 Trust Fund for Mental Health, Developmental Disabilities, and Substance
Abuse Services and Bridge Funding Needs............................................................. 39
143C-9-3 Settlement Reserve Fund ......................................................................................... 40
143C-9-4 Biennial Fee Report ................................................................................................. 40
143C-9-5 Assignment to the State of rights to tobacco manufacturer escrow funds. ............. 40
143C-9-6 JDIG Reserve Fund ................................................................................................. 41
143C-10-1 Offenses for violation of Chapter ............................................................................ 41
143C-10-2 Civil liability for violation of Chapter ..................................................................... 42
143C-10-3 Suspension from office or impeachment for refusal to comply with Chapter ........ 42
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BUDGET MANUAL
OFFICE OF STATE BUDGET AND MANAGEMENT
Effective Date July 1, 2011 Updated January 25, 2012
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Chapter 143C.
Article 1.
General Provisions.
§ 143C-1-1. Purpose and definitions.
(a) Title of Chapter. – This Chapter is the "State Budget Act" and may be cited by that name.
(b) The provisions of this Chapter shall apply to every State agency, unless specifically exempted herein, and to every non-State entity that receives or expends any State funds. No State agency or non-State entity shall expend any State funds except in accordance with an act of appropriation and the requirements of this Chapter. The provisions of Chapter 120 of the General Statutes shall continue to apply to the General Assembly and to control its expendi-tures and in the event of a conflict with this Chapter, the provisions of Chapter 120 of the Gen-eral Statutes shall control. Nothing in this Chapter abrogates or diminishes the inherent power of the legislative, executive, or judicial branch.
(c) Purpose. – This Chapter establishes procedures for the following:
(1) Preparing the recommended State budget.
(2) Enacting the State budget.
(3) Administering the State budget.
(d) Definitions. – The following definitions apply in this Chapter:
(1) Appropriation. – An enactment by the General Assembly authorizing the withdrawal of money from the State treasury. An enactment by the General Assembly that authorizes, specifies, or otherwise provides that funds may be used for a particular purpose is not an appropriation.
(2) Biennium. – The two fiscal years beginning on July 1 of each odd-numbered year and ending on June 30 of the next odd-numbered year.
(3) Budget. – A plan to provide and spend money for specified programs, func-tions, activities, or objects during a fiscal year.
(4) Budget year. – The fiscal year for which a budget is proposed and enacted.
(5) Capital improvement. – A term that includes real property acquisition, new construction or rehabilitation of existing facilities, and repairs and renova-tions.
(6) Capital Improvements Appropriations Act. – An act of the General Assem-bly containing appropriations for one or more capital improvement projects.
(7) Certified budget. – The budget as enacted by the General Assembly includ-ing adjustments made for (i) distributions to State agencies from statewide reserves appropriated by the General Assembly, (ii) distributions of reserves appropriated to a specific agency by the General Assembly, and (iii) organi-zational or budget changes directed by the General Assembly but left to the Director to carry out.
(8) Controller. – The Office of the State Controller. STATE OF NORTH CAROLINA
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(9) Current Operations Appropriations Act. – An act of the General Assembly estimating revenue availability for and appropriating money for the current operations of State government during one or more budget years.
(10) Departmental receipt. – Fees, licenses, federal funds, grants, fines, penalties, tuition, and other similar collections or credits generated by State agencies in the course of performing their governmental functions that are applied to the cost of a program administered by the State agency or transferred to the Civil Penalty and Forfeiture Fund pursuant to G.S. 115C-457.1, and that are not defined as tax proceeds or nontax revenues. Departmental receipts may include moneys transferred into a fiscal year from a prior fiscal year.
(11) Director. – The Director of the Budget, who is the Governor.
(12) Encumbrance. – A financial obligation created by a purchase order, con-tract, salary commitment, unearned or prepaid collections for services pro-vided by the State, or other legally binding agreement.
(13) Fiscal period. – A fiscal biennium beginning in odd-numbered years or the first or second fiscal year within a fiscal biennium.
(14) Fiscal year. – The annual period beginning July 1 and ending on the follow-ing June 30.
(15) Fund. – A fiscal and accounting entity with a self-balancing set of accounts recording cash and other resources, together with all related liabilities and residual equities or balances, and changes therein, for the purpose of carry-ing on stated programs, activities, and objectives of State government.
(16) General Fund Operating Budget. – The sum of all appropriations from the General Fund for a fiscal year, except appropriations for (i) capital im-provements, including repairs and renovations, and (ii) one-time expendi-tures due to natural disasters or other emergencies shall not be included.
(17) Information technology. – As defined in G.S. 147-33.81(2).
(18) Non-State entity. – Any of the following that is not a State agency: an indi-vidual, a firm, a partnership, an association, a county, a corporation, or any other organization or group acting as a unit. The term includes a unit of lo-cal government and public authority.
(19) Nontax revenue. – Revenue that is not a tax proceed and that is required by statute to be credited to the General Fund.
(20) Object or line item. – An expenditure or receipt in a recommended or enact-ed budget that is designated in the Budget Code Structure of the North Carolina Accounting System Uniform Chart of Accounts prescribed by the Office of the State Controller.
(21) Performance information. – The organizational structure, agency activity statements, performance indicators, and analyses of program efficiency and effectiveness.
(22) Public authority. – A municipal corporation that is not a unit of local gov-ernment or a local governmental authority, board, commission, council, or STATE OF NORTH CAROLINA
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agency that (i) is not a municipal corporation and (ii) operates on an area, regional, or multiunit basis, and the budgeting and accounting systems of which are not fully a part of the budgeting and accounting systems of a unit of local government.
(23) Purpose or program. – A group of objects or line items for support of a spe-cific activity outlined in a recommended or enacted budget that is designat-ed by a nine-digit fund code in accordance with the Budget Code Structure of the North Carolina Accounting System Uniform Chart of Accounts pre-scribed by the Office of the State Controller.
(24) State agency. – A unit of the executive, legislative, or judicial branch of State government, such as a department, an institution, a division, a com-mission, a board, a council, or The University of North Carolina. The term does not include a unit of local government or a public authority.
(25) State funds. – Any moneys including federal funds deposited in the State treasury except moneys deposited in a trust fund or agency fund as de-scribed in G.S. 143C-1-3.
(26) State resources. – All financial and nonfinancial assets of the State.
(27) State revenue. – An increase, other than interfund transfers and debt issue proceeds, in the financial assets of any State governmental or proprietary fund.
(28) Statutory appropriation. – An appropriation that authorizes the withdrawal of funds from the State treasury during fiscal years extending beyond the current fiscal biennium, without further act of the General Assembly.
(29) Unit of local government. – A municipal corporation that has the power to levy taxes, including a consolidated city-county, as defined by G.S. 160B-2(1), and all boards, agencies, commissions, authorities, and institu-tions thereof that are not municipal corporations.
(30) Unreserved fund balance. – The available General Fund cash balance effec-tive June 30 after excluding documented encumbrances, unearned revenue, federal grants, statutory requirements, and other legal obligations to General Fund cash as determined by the State Controller. Beginning unreserved fund balance equals ending unreserved fund balance from the prior fiscal year. (2006-66, s. 6.19(h); 2006-203, s. 3; 2006-221, s. 3A; 2006-259, s. 40(h); 2007-393, s. 2..)
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§ 143C-1-2. Appropriations: constitutional requirement; reversions.
(a) Appropriation Required to Withdraw State Funds From the State Treasury. – In ac-cordance with Section 7 of Article V of the North Carolina Constitution, no money shall be drawn from the State treasury but in consequence of appropriations made by law. A law enact-ed by the General Assembly that authorizes the expenditure of money from the State treasury is an appropriation; however, an enactment by the General Assembly that authorizes, specifies, or otherwise provides that funds may be used for a particular purpose is not an appropriation.
(b) Reversions. – Unless otherwise provided by law, at the end of the fiscal year the unexpended, unencumbered balance of an appropriation reverts to the fund from which the ap-propriation was made; except that (i) an appropriation to the General Assembly shall not revert unless otherwise provided by the Legislative Services Commission, (ii) an appropriation for a capital improvement project shall revert as provided by G.S. 143C-8-11, and (iii) an appropria-tion for the implementation of information technology (IT) projects shall not revert until the project is implemented or abandoned. (2006-203, s. 3.)
§ 143C-1-3. Fund types.
(a) Types. – The Controller shall account for State resources through use of the fund types listed in this subsection. The Controller may not establish a fund type that differs from the listed fund types unless the Governmental Accounting Standards Board has approved the use of the different fund type.
The fund types are described as follows, except that where a conflict exists between a de-scription used in this section and the definition of the corresponding fund type issued by the Governmental Accounting Standards Board, it is presumed that the definition issued by the Governmental Accounting Standards Board shall prevail.
Governmental Funds.
(1) Capital Projects Funds. – Accounts for financial resources to be used for the acquisition or construction of major capital facilities other than those fi-nanced by proprietary funds or in trust funds for individuals, private organi-zations, or other governments. Capital outlays financed from general obliga-tion bond proceeds should be accounted for through a capital projects fund.
(2) Debt Service Funds. – Accounts for the accumulation of resources for, and the payment of, general long-term debt principal and interest.
(3) General Fund. – Accounts for all financial resources except those required to be reported in another fund.
(4) Special Revenue Funds. – Accounts for the proceeds of specific revenue sources, other than trusts for individuals, private organizations, or other governments or for major capital projects, that are legally restricted to ex-penditure for specified purposes.
(5) Permanent Funds. – Accounts for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs. STATE OF NORTH CAROLINA
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Proprietary Funds.
(6) Enterprise Funds. – Accounts for any activity for which a fee is charged to external users for goods or services. Activities are required to be reported as enterprise funds if any one of the following criteria is met. Each of these cri-teria should be applied in the context of the activity's principal revenue sources.
a. The activity is financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity.
b. Laws or regulations require that the activity's costs of providing ser-vices, including capital costs, be recovered with fees and charges ra-ther than with taxes or similar revenues.
c. The pricing policies of the activity establish fees and charges de-signed to recover its costs, including capital costs.
(7) Internal Service Funds. – Accounts for any activity that provides goods or services to other funds, departments, or agencies of the primary government and its component units, or to other governments, on a cost-reimbursement basis. Internal service funds should be used only if the reporting government is the predominant participant in the activity. Otherwise, the activity should be reported as an enterprise fund.
Agency and Trust Funds.
(8) Agency Funds. – Accounts for resources held by the reporting government in a purely custodial capacity. Agency funds typically involve only the re-ceipt, temporary investment, and remittance of fiduciary resources to indi-viduals, private organizations, or other governments.
(9) Investment Trust Funds. – Accounts for the external portion of investment pools reported by the sponsoring government.
(10) Pension and Other Employee Benefit Trust Funds. – Accounts for resources that are required to be held in trust for the members and beneficiaries of de-fined benefit pension plans, defined contribution plans, other postemploy-ment benefit plans, or other employee benefit plans.
(11) Private-Purpose Trust Funds. – Accounts for all other trust arrangements under which principal and income benefit individuals, private organizations, or other governments.
(b) Designation. – If State resources are designated by law as a fund or an account within a fund and there is a conflict between the legal designation and the appropriate account-ing designation of the State resources, then the Controller shall determine the appropriate des-ignation of the State resources based on the intended use and financial treatment of the State resources as set out in the law establishing the fund or account. The Controller shall determine STATE OF NORTH CAROLINA
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the fund type of all separate funds and account for them accordingly. The Controller shall keep the total number of funds to the minimum number practical.
(c) Notwithstanding subsections (a) and (b) of this section, funds established for The University of North Carolina and its constituent institutions pursuant to the following statutes are exempt from Chapter 143C of the General Statutes and shall be accounted for as provided by those statutes, except that the provisions of Article 8 of Chapter 143C of the General Stat-utes shall apply to the funds: G.S. 116-35, 116-36, 116-36.1, 116-36.2, 116-36.4, 116-36.5, 116-36.6, 116-44.4, 116-68, 116-220, 116-235, 116-238. (2006-203, s. 3.)
§ 143C-1-4. Interest earnings credited to the General Fund; interest earnings on Highway Fund and Highway Trust Fund credited to those funds.
(a) Interest Earnings Credited to the General Fund. – Unless otherwise provided by law, interest earned on all funds shall be credited to the General Fund.
(b) Exception for Interest Earnings on Highway Fund and Highway Trust Fund. – In-terest earned by the Highway Fund and the Highway Trust Fund shall be credited to the High-way Fund and the Highway Trust Fund respectively. (2006-203, s. 3.)
Article 2.
Director of the Budget.
§ 143C-2-1. Governor is Director of the Budget.
(a) Governor is Director of the Budget. – The Governor is the Director of the Budget. In that capacity, the Governor is required by Article III, Section 5(3) of the North Carolina Constitution to prepare and recommend a budget and to administer the budget as enacted by the General Assembly. The Governor's powers under this Chapter extend to all agencies, insti-tutions, departments, bureaus, boards, and commissions of the State of North Carolina under whatever name now or hereafter known. The Governor may delegate the authority to perform a power or duty of the Director under this Chapter to the Office of State Budget and Manage-ment or to one or more persons.
(b) State Agencies and Non-State Entities to Provide Information Requested by the Di-rector; Examination of Persons and Agencies by Director. – Upon request, all State agencies and non-State entities subject to this act shall furnish the Director, in the form and at the time requested by the Director, any information desired by the Director in relation to their respec-tive activities or fiscal affairs so long as the information is not confidential pursuant to federal or State law. The Director may subpoena and examine under oath any person directly or indi-rectly responsible for the operations of any executive State agency or any non-State entity sub-ject to the provisions of this Chapter.
(c) Governor May Request State Auditor to Audit State Agency or Non-State Entity Receiving State Funds. – As authorized by G.S. 147-64.6(c)(3), the Governor may request the State Auditor to make an audit of or cause an audit to be made of the books and accounts of any State agency and may require that the cost of the audit be borne by the State agency. The STATE OF NORTH CAROLINA
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Governor may also request the State Auditor to make an audit of or cause an audit to be made of the books and records of any non-State entity receiving State funds pursuant to the State Auditor's authority granted in G.S. 147-64.7. (2006-203, s. 3.)
§ 143C-2-2. Collection of State Budget Statistics.
The Director shall coordinate the efforts of governmental agencies to collect, disseminate, and analyze economic, demographic, and social statistics pertinent to State budgeting. The Di-rector shall do all of the following:
(1) Prepare and release the official demographic and economic estimates and projections for the State.
(2) Conduct special economic and demographic analyses and studies to support statewide budgeting.
(3) Develop and coordinate cooperative arrangements with federal, State, and local governmental agencies to facilitate the exchange of data to support State budgeting.
(4) Report major trends that influence revenues and expenditures in the State budget in the current fiscal year and that may influence revenues and ex-penditures over the next five fiscal years. (2006-203, s. 3.)
§ 143C-2-3. Fiscal analysis required for any State agency bill that affects the budget.
A State agency proposing a bill that affects the State budget shall prepare a fiscal analysis for the bill and submit the analysis to the Fiscal Research Division upon introduction of the bill. The fiscal analysis shall estimate the impact of the legislation on the State budget for the first five fiscal years the legislation would be in effect. (2006-203, s. 3.)
§ 143C-2-4. Director of the Budget may direct State Treasurer to borrow money for cer-tain payments.
The Director of the Budget, by and with the consent of the Governor and Council of State, may authorize and direct the State Treasurer to borrow in the name of the State, in anticipation of the collection of taxes, such sum as may be necessary to make the payments on the appro-priations as even as possible and to preserve the best interest of the State in the conduct of the various State agencies during each fiscal year. (2006-203, s. 3.) STATE OF NORTH CAROLINA
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Article 3.
Development of the Governor's Recommended Budget.
§ 143C-3-1. Budget estimate for the legislative branch.
The Legislative Services Officer shall give the Director an estimate of the financial needs of the legislative branch for the upcoming fiscal period in accordance with the schedule pre-scribed by the Director. The estimates for the legislative branch shall be approved and certified by the President Pro Tempore of the Senate and the Speaker of the House of Representatives. The estimates shall be itemized in accordance with the accounting classifications adopted by the Controller. The Director shall include the estimates in the budget the Director submits to the General Assembly. The Director may recommend changes to these estimates in the budget submitted to the General Assembly. (2006-66, s. 6.19(g); 2006-203, s. 3; 2006-221, s. 3A; 2006-259, s. 40(g).)
§ 143C-3-2. Budget estimate for the judicial branch.
The Administrative Officer of the Courts shall give the Director an estimate of the financial needs of the judicial branch for the upcoming fiscal period in accordance with the schedule prescribed by the Director. The estimates for the judiciary shall be approved and certified by the Chief Justice. The estimates shall be itemized in accordance with the accounting classifica-tions adopted by the Controller. The Director shall include these estimates in the budget the Director submits to the General Assembly. The Director may recommend changes to these es-timates in the budget the Director submitts to the General Assembly. (2006-203, s. 3; 2007-393, s. 3.)
§ 143C-3-3. Budget requests from State agencies in the executive branch.
(a) General Provisions. – A State agency that is not in the legislative or judicial branch of government shall submit its budget requests for the upcoming fiscal period to the Director in accordance with the schedule prescribed by the Director. The Director shall give each State agency instructions to be used in estimating the funds required to provide necessary State gov-ernment programs and capital improvements. The estimates shall be itemized in accordance with the accounting classifications adopted by the Controller and shall be approved and certi-fied by the respective head or responsible officer of the agency submitting them.
(b) University of North Carolina System Request. – Notwithstanding subsections (c), (d), and (e) of this section, pursuant to G.S. 116-11 the Board of Governors shall prepare a uni-fied budget request for all of the constituent institutions of The University of North Carolina, including repairs and renovations, capital fund requests, and information technology.
(c) Repairs and Renovations Funds Request. – In addition to any other information re-quested by the Director, any State agency proposing to repair or renovate an existing facility shall accompany that request with all of the following:
(1) A description of current deficiencies and proposed corrections with a review and evaluation of that proposal prepared by the Department of Administra-tion. STATE OF NORTH CAROLINA
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(2) An estimate of project costs approved by the Department of Administration.
(3) A certification of project feasibility as described in G.S. 143-341.
(4) An explanation of the method by which the repair or renovation is to be fi-nanced.
(d) Capital Funds Request. – In addition to any other information requested by the Di-rector, any State agency proposing to (i) acquire real property, (ii) construct a new facility, (iii) expand the building area (sq. ft.) of an existing facility, or (iv) rehabilitate an existing facility to accommodate new or expanded uses shall accompany that request with all of the following:
(1) An estimate of its space needs and other physical requirements, together with a review and evaluation of that estimate prepared by the Department of Administration.
(2) An estimate of project costs and cash flow requirements approved by the Department of Administration.
(3) A certification of project feasibility as described in G.S. 143-341.
(4) An explanation of the method by which the acquisition, construction, or re-habilitation is to be financed.
(5) An estimate of maintenance and operating costs, including personnel, for the project, covering the first five years of operation.
(6) An estimate of revenues, if any, to be derived from the project, covering the first five years of operation.
This subsection does not apply to requests for State resources for railroad, highway, or bridge construction or renovation.
(e) Information Technology Request. – In addition to any other information requested by the Director, any State agency requesting significant State resources, as defined by the Di-rector, for the purpose of acquiring or maintaining information technology shall accompany that request with all of the following:
(1) A statement of its needs for information technology and related resources, including expected improvements to programmatic or business operations, together with a review and evaluation of that statement prepared by the State Chief Information Officer.
(2) A statement setting forth the requirements for State resources, together with an evaluation of those requirements by the State Chief Information Officer that takes into consideration the State's current technology, the opportunities for technology sharing, the requirements of Article 3D of Chapter 147 of the General Statutes, and any other factors relevant to the analysis.
(3) A statement by the State Chief Information Officer that sets forth viable al-ternatives, if any, for meeting the agency needs in an economical and effi-cient manner.
(4) In the case of an acquisition, an explanation of the method by which the ac-quisition is to be financed. STATE OF NORTH CAROLINA
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This subsection shall not apply to requests submitted by the General Assembly, the Admin-istrative Office of the Courts, or The University of North Carolina. (2006-203, s. 3; 2007-117, s. 5(a).)
§ 143C-3-4. Budget requests from non-State entities.
Unless otherwise provided by law, budget requests from non-State entities shall be submit-ted to the Director or to a State agency designated by the Director. A State agency designated to receive a budget request from a non-State entity shall evaluate the request and forward its evaluation to the Director in accordance with procedures established by the Director. This sec-tion does not apply to the General Assembly or to actions of the General Assembly to appro-priate funds to non-State entities. (2006-203, s. 3.)
§ 143C-3-5. Budget recommendations and budget message.
(a) Budget Proposals. – The Governor shall present budget recommenda-tions,consistent with G.S. 143C-3-1, 143C-3-2, and 143C-3-3 to each regular session of the General Assembly at a mutually agreeable time to be fixed by joint resolution.
(b) Odd-Numbered Fiscal Years. – In odd-numbered years the budget recommenda-tions shall include the following components:
(1) A Recommended State Budget setting forth goals for improving the State with recommended expenditure requirements, funding sources, and perfor-mance information for each State government program and for each pro-posed capital improvement. The Recommended State Budget may be pre-sented in a format chosen by the Director, except that the Recommended State Budget shall clearly distinguish program continuation requirements, program reductions, program eliminations, program expansions, and new programs, and shall explain all proposed capital improvements in the con-text of the Six-Year Capital Improvements Plan and as required by G.S. 143C-8-6. The Director shall include as continuation requirements the amounts the Director proposes to fund for the enrollment increases in public schools, community colleges, and the university system.
(2) A Budget Support Document showing, for each budget code and purpose or program in State government, accounting detail corresponding to the Rec-ommended State Budget.
a. The Budget Support Document shall employ the North Carolina Ac-counting System Uniform Chart of Accounts adopted by the State Controller to show both uses and sources of funds and shall display in separate parallel columns all of the following: (i) actual expendi-tures and receipts for the most recent fiscal year for which actual in-formation is available, (ii) the certified budget for the preceding fis-cal year, (iii) the currently authorized budget for the preceding fiscal year, (iv) program continuation requirements for each fiscal year of STATE OF NORTH CAROLINA
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the biennium, (v) proposed expenditures and receipts for each fiscal year of the biennium, and (vi) proposed increases and decreases.
b. The Budget Support Document shall include detailed information on recommended expenditures for capital improvements as required by G.S. 143C-8-6.
c. The Budget Support Document shall include accurate projections of receipts, expenditures, and fund balances. Estimated receipts, includ-ing tuition collected by university or community college institutions, shall be adjusted to reflect actual collections from the previous fiscal year, unless the Director recommends a change that will result in collections in the budget year that differ from prior year actuals, or the Director otherwise determines there is a more reasonable basis upon which to accurately project receipts. Revenue and expenditure detail provided in the Budget Support Document shall be no less de-tailed than the two-digit level in the North Carolina Accounting Sys-tem Uniform Chart of Accounts as prescribed by the State Control-ler.
d. The Budget Support Document shall clearly identify all proposed expenditures supported by existing or proposed appropriations, in-cluding statutory appropriations.
(3) A Current Operations Appropriation Act that makes appropriations for each fiscal year of the upcoming biennium for the operating expenses of all State agencies as contained in the Recommended State Budget, together with a Capital Improvements Appropriations Act that authorizes any capital im-provements projects.
(4) The biennial State Information Technology Plan as outlined in G.S. 147-33-72B to be consistent in facilitating the goals outlined in the Recom-mended State Budget.
(c) Even-Numbered Fiscal Years. – In even-numbered years, the Governor may rec-ommend changes in the enacted budget for the second year of the biennium. These recommen-dations shall be presented as amendments to the enacted budget and shall be incorporated in a recommended Current Operations Appropriation Act and a recommended Capital Improve-ments Appropriations Act as necessary. Any recommended changes shall clearly distinguish program reductions, program eliminations, program expansions, and new programs, and shall explain all proposed capital improvements in the context of the Six-Year Capital Improve-ments Plan and as required by G.S. 143C-8-6. The Governor shall provide sufficient support-ing documentation and accounting detail, consistent with that required by G.S. 143C-3-5(b), corresponding to the recommended amendments to the enacted budget.
(d) Funds Included in Budget. – Consistent with requirements of the North Carolina Constitution, Article 5, Section 7(a), the Governor's Recommended State Budget, together with the Budget Support Document, shall include recommended expenditures of State funds from all Governmental and Proprietary Funds, as those funds are described in G.S. 143C-1-3. Ex-STATE OF NORTH CAROLINA
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cept where provided otherwise by federal law, funds received from the federal government be-come State funds when deposited in the State treasury and shall be classified and accounted for in the Governor's budget recommendations no differently than funds from other sources.
(e) Revenue Estimates. – The recommended Current Operations Appropriations Act shall contain a statement showing the estimates of General Fund availability, Highway Fund availability, and Highway Trust Fund availability upon which the Recommended State Budget is based.
(f) Budget Message. – The Governor's budget recommendations shall be accompanied by a written budget message that does all of the following:
(1) Explains the goals embodied in the recommended budget.
(2) Explains important features of the activities anticipated in the budget.
(3) Explains the assumptions underlying the statement of revenue availability.
(4) Sets forth the reasons for changes from the previous biennium or fiscal year, as appropriate, in terms of programs, program goals, appropriation levels, and revenue yields.
(5) Identifies anticipated sources of funding for major spending initiatives.
(6) Prepares a fiscal analysis that addresses the State's budget outlook for the upcoming five-year period. This fiscal analysis shall include detailed esti-mates for five years for any proposals to create new or significantly expand programs and for proposals to create new or change existing law.
(g) Different Gubernatorial Administrations. – For years in which there will be a change in gubernatorial administrations, the incumbent Governor shall complete the budget recommendations and budget message by December 15 and deliver them to the Gover-nor-elect. (2006-203, s. 3.; 2007-393, s. 4.)
Article 4.
Budget Requirements.
§ 143C-4-1. Annual balanced budget.
The budget recommended by the Governor and the budget enacted by the General Assem-bly shall be balanced and shall include two fiscal years beginning on July 1 of each odd-numbered year. Each fiscal year and each fund shall be balanced separately. The budget for a fund is balanced when the beginning unreserved fund balance for the fiscal year, together with the projected receipts to the fund during the fiscal year, is equal to or greater than the sum of appropriations from the fund for that fiscal year. (2006-203, s. 3.)
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§ 143C-4-2. Savings Reserve Account and appropriation of General Fund unreserved fund balance.
(a) Creation and Source of Funds. – The Savings Reserve Account is established as a reserve in the General Fund. The Controller shall reserve to the Savings Reserve Account one-fourth of any unreserved fund balance, as determined on a cash basis, remaining in the General Fund at the end of each fiscal year.
(b) Use of Funds. – The Savings Reserve Account is a component of the unappropriat-ed General Fund balance. Funds reserved to the Savings Reserve Account shall be available for expenditure only upon an act of appropriation by the General Assembly.
(c) Goal for Savings Reserve Account Balance. – The General Assembly recognizes the need to establish and maintain sufficient reserves to address unanticipated events and cir-cumstances such as natural disasters, economic downturns, threats to public safety, health, and welfare, and other emergencies. It is a goal of the General Assembly and the State to accumu-late and maintain a balance in the Savings Reserve Account equal to or greater than eight per-cent (8%) of the prior year's General Fund operating budget. (2006-203, s. 3.)
§ 143C-4-3. Repairs and Renovations Reserve Account.
(a) Creation and Source of Funds. – The Repairs and Renovations Reserve Account is established as a reserve in the General Fund. The State Controller shall reserve to the Repairs and Renovations Reserve Account one-fourth of any unreserved fund balance, as determined on a cash basis, remaining in the General Fund at the end of each fiscal year.
(b) Use of Funds. – The funds in the Repairs and Renovations Reserve Account shall be used only for the repair and renovation of State facilities and related infrastructure that are supported from the General Fund. Funds from the Repairs and Renovations Reserve Account shall be used only for the following types of projects:
(1) Roof repairs and replacements;
(2) Structural repairs;
(3) Repairs and renovations to meet federal and State standards;
(4) Repairs to electrical, plumbing, and heating, ventilating, and air-conditioning systems;
(5) Improvements to meet the requirements of the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq., as amended;
(6) Improvements to meet fire safety needs;
(7) Improvements to existing facilities for energy efficiency;
(8) Improvements to remove asbestos, lead paint, and other contaminants, in-cluding the removal and replacement of underground storage tanks;
(9) Improvements and renovations to improve use of existing space;
(10) Historical restoration;
(11) Improvements to roads, walks, drives, utilities infrastructure; and
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Funds from the Repairs and Renovations Reserve Account shall not be used for new con-struction or the expansion of the building area (sq. ft.) of an existing facility unless required in order to comply with federal or State codes or standards.
(c) Use of Funds. – Funds Available Only Upon Appropriation. – Funds reserved to the Repairs and Renovations Reserve Account shall be available for expenditure only upon an act of appropriation by the General Assembly. (2006-203, s. 3.)
§ 143C-4-4. Contingency and Emergency Fund.
(a) Creation. – The Contingency and Emergency Fund is established within the Gen-eral Fund. The General Assembly shall appropriate a specific amount to this fund for contin-gencies and emergencies in the Current Operations Appropriations Act or other appropriations bill.
(b) Authorized Uses. – Notwithstanding any other provision of law, funds appropriated to the Contingency and Emergency Fund may be used only for expenditures required: (i) by a court or Industrial Commission order, (ii) to respond to events as authorized under G.S. 166A-5(1)a.9. of the Emergency Management Act, or (iii) for other statutorily authorized pur-poses or other contingencies and emergencies.
(c) Request for Allocation. – A State agency may request an allocation from the Con-tingency and Emergency Fund by submitting a request in writing to the Director along with any information required by the Director. If the Director approves the request, the Director shall present the request, together with a recommendation, to the Council of State for its ap-proval. If the Council of State approves the request, the Director shall order the Controller to allocate the funds requested. The Director shall report on the request at the next scheduled meeting of the Joint Legislative Commission on Governmental Operations. (2006-203, s. 3.)
§ 143C-4-5. Non-State match restrictions.
Whenever money is required to match an appropriation made for a specific purpose by the State of North Carolina, the recipient of the appropriation shall actually receive as a gift, grant, earnings in actual money, or a pledge that can be used as collateral in any prudent loan transac-tion, the matching amount required. The recipient shall retain the matching amount received in its possession until spent for that purpose and shall spend an equal percentage of the appropria-tion and of the matching amount each time an expenditure is made, unless the individual ap-propriation requires otherwise. (2006-203, s. 3.)
§ 143C-4-6. General Fund operating budget size limited.
(a) Size Limitation. – Except as otherwise provided in this section, the General Fund operating budget each fiscal year shall not be greater than seven percent (7%) of the projected total State personal income for that fiscal year.
(b) Increase in Size Limitation. – To the extent that any percent increase in appropria-tions for a fiscal year for (i) Medicaid, (ii) operation of prisons, or (iii) the costs of providing health insurance for teachers and State employees, exceeds the percent increase in State per-sonal income growth for the same period, the limitation on the size of the General Fund operat-STATE OF NORTH CAROLINA
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ing budget provided in subsection (a) of this section for that fiscal year shall be increased by the dollar amount represented by the excess percentage. For all subsequent fiscal years, the percent limitation contained in subsection (a) shall then be increased to reflect that dollar ad-justment.
(c) Fiscal Reports. – The Office of State Budget and Management and the Fiscal Re-search Division of the General Assembly shall each submit a tentative estimate of total State personal income for the upcoming fiscal year to the General Assembly no later than February 1 of each year. The Office and the Fiscal Research Division shall each submit a final projection of total State personal income for the upcoming fiscal year to the General Assembly no later than May 1 of each year. The General Assembly shall use the lower of the two final projec-tions to calculate the limitation on the size of the General Fund operating budget provided in this section. (2006-203, s. 3; 2007-393, s. 5.)
§ 143C-4-7. Limit on number of permanent positions budgeted.
The total number of permanent budgeted positions established in State agencies shall not be increased by the end of any State fiscal year by a greater percentage rate of change than the percentage rate of change of the residential population growth for the State of North Carolina. The Office of State Budget and Management shall be responsible for computing the annual percentage rates of change for each measure. The population growth rate shall be computed by averaging the annual residential population growth rate in each of the preceding 10 fiscal years as stated in the annual estimates of residential population in North Carolina made by the Unit-ed States Census Bureau. The growth rate of the number of budgeted positions shall be com-puted by averaging the annual rate of growth of State budgeted positions in each of the preced-ing 10 fiscal years. The total number of permanent budgeted positions established in State agencies shall be computed by adding the total number of budgeted Full-Time Equivalents from all fund types. This section does not apply to State-funded positions supported by the State in a local public school system or local community college institution. (2006-203, s. 3.)
Article 5.
Enactment of the Budget.
§ 143C-5-1. Rules for the introduction of the Governor's appropriations bills.
The Current Operations Appropriations Act recommended by the Governor and the Capital Improvements Appropriations Act recommended by the Governor shall be introduced by the chairs of the committee on appropriations in each house of the General Assembly. This section shall be considered and treated as a rule of procedure in the Senate and House of Representa-tives unless provided otherwise by a rule of either branch of the General Assembly. (2006-203, s. 3.)
§ 143C-5-2. Order of appropriations bills. STATE OF NORTH CAROLINA
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Each house of the General Assembly shall first pass its version of the Current Operations Appropriations Act on third reading and order it sent to the other chamber before placing any other appropriations bill on the calendar for second reading. This section does not apply to the following bills:
(1) An appropriations bill to respond to a disaster as defined by G.S. 166A-4(1).
(2) An appropriations bill making adjustments to the current year budget.
(3) An appropriations bill authorizing continued operations at current funding levels. (2006-203, s. 3.)
§ 143C-5-3. Availability statement required.
The Current Operations Appropriations Act enacted by the General Assembly shall state the General Fund, Highway Fund, and Highway Trust Fund availability used as basis for ap-propriations from those funds. (2006-203, s. 3.)
§ 143C-5-4. Enactment deadline.
The General Assembly shall enact the Current Operations Appropriations Act by June 15 of odd-numbered years and by June 30 of even-numbered years in which a Current Operations Appropriations Act is enacted. (2006-203, s. 3.)
§ 143C-5-5. Committee report used to construe intent of budget acts.
A committee report incorporated by reference in the Current Operations Appropriations Act or the Capital Improvements Appropriations Act and distributed on the floor of the House of Representatives and of the Senate as part of the explanation of the act is to be construed with the appropriate act in interpreting its intent. If a report conflicts with the act, the act pre-vails. The Director of the Fiscal Research Division of the Legislative Services Commission shall send a copy of the reports to the Director. (2006-203, s. 3.)
Article 6.
Administration of the Budget.
Part 1. Certification and Administration of the Budget.
§ 143C-6-1. Budget enacted by the General Assembly; certified budgets of State agen-cies.
(a) Governor to Administer the Budget as Enacted by the General Assembly. – In ac-cordance with Section 5(3) of Article III of the North Carolina Constitution, the Governor shall administer the budget as enacted by the General Assembly. All appropriations of State funds now or hereafter made to the State agencies and non-State entities authorize expenditures only for the (i) purposes or programs and (ii) objects or line items enumerated in the Recommended State Budget and the Budget Support Document recommended to the General Assembly by the Governor, as amended and enacted by the General Assembly in the Current Operations Appro-STATE OF NORTH CAROLINA
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priations Act, the Capital Improvements Appropriations Act, or any other act affecting the State budget. The Governor shall ensure that appropriations are expended in strict accordance with the budget enacted by the General Assembly.
(b) Departmental Receipts. – Departmental receipts collected to support a program or purpose shall be credited to the fund from which appropriations have been made to support that program or purpose.
(c) Certification of the Budget. – The Director of the Budget shall certify to each State agency the amount appropriated to it for each program and each object from all governmental and proprietary funds. The certified budget for each State agency shall reflect the total of all appropriations enacted for each State agency by the General Assembly in the Current Opera-tions Appropriations Act, the Capital Improvements Appropriations Act, and any other act af-fecting the State budget. The certified budget for each State agency shall follow the format of the Budget Support Document as modified to reflect changes enacted by the General Assem-bly. (2006-203, s. 3.)
§ 143C-6-2. Methods to avoid deficit.
(a) Appropriations. – Each appropriation is maximum and conditional. The expendi-tures authorized by an appropriation from a fund shall be made only if necessary and only if the aggregate revenues to the fund during each fiscal year of the biennium, when added to any unreserved fund balance from the previous fiscal year, are sufficient to support the expendi-tures.
(b) Revenue Collections. – The Director, with the assistance of the Secretary of Reve-nue and other officials collecting or receiving appropriated State revenue, shall continuously survey the revenue collections. If the Director finds that revenues to any fund, when added to the beginning unreserved fund balance in that fund, will be insufficient to support appropria-tions from that fund, the Director shall immediately notify the General Assembly that a deficit is anticipated. The Director shall report in a timely manner to the General Assembly a plan containing the expenditure reductions and other lawful measures as the Director is implement-ing in order to avert the deficit.
(c) Local Governments Funds. – In exercising the powers contained in Section 5(3) of Article III of the North Carolina Constitution, the Governor shall not withhold from distribu-tion funds that have been collected by the State on behalf of local governments or funds that the General Assembly has appropriated to local governments unless the Governor has exhaust-ed all other sources of revenue of the State including any appropriated surplus remaining in the treasury at the beginning of the fiscal period.
In accordance with Section 19 of Article I of the North Carolina Constitution and the Due Process Clause of the United States Constitution, the State is prohibited from taking local tax revenue. This subsection does not authorize the Governor to withhold revenues from taxes lev-ied by units of local governments and collected by the State. (2006-203, s. 3; 2007-393, s. 6.)
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§ 143C-6-3. Allotments.
To receive the operating funds appropriated to it, a State agency shall submit to the Direc-tor, at intervals and in a format prescribed by the Director, a request for an allotment of the amount estimated to be required for the agency's operating costs during the ensuing fiscal peri-od. The Director shall approve or modify the allotment requests, and the State Controller shall implement the allotments as approved or modified by the Director. (2006-203, s. 3.)
§ 143C-6-4. Budget Adjustments Authorized.
(a) Findings. – The General Assembly recognizes that even the most thorough budget deliberations may be affected by unforeseeable events. Under limited circumstances set forth in this section, the Director may adjust the enacted budget by making transfers among lines of expenditure, purposes, or programs or by increasing expenditures funded by departmental re-ceipts. Under no circumstances, however, shall total General Fund expenditures for a State de-partment exceed the amount appropriated to that department from the General Fund for the fis-cal year.
(b) Adjustments to the Certified Budget. – Notwithstanding the provisions of G.S. 143C-6-1, a State agency may, with approval of the Director of the Budget, spend more than was authorized in the certified budget for all of the following:
(1) An object or line item within a purpose or program so long as the total amount expended for the purpose or program is no more than was author-ized in the certified budget for the purpose or program.
(2) A purpose or program if the overexpenditure of the purpose or program is:
a. Required by a court or Industrial Commission order;
b. Authorized under G.S. 166A-5(1)a.9. of the Emergency Manage-ment Act; or
c. Required to call out the national guard.
(3) A purpose or program not subject to the provisions of subdivision (b)(2) of this subsection, but only in accord with the following restrictions: (i) the overexpenditure is required to continue the purpose or programs due to complications or changes in circumstances that could not have been fore-seen when the budget for the fiscal period was enacted, (ii) the scope of the purpose or program is not increased, (iii) the overexpenditure is authorized on a nonrecurring basis, and (iv) under no circumstances shall the total re-quirements for a State department exceed the department's certified budget for the fiscal year by more than three percent (3%) without prior consulta-tion with the Joint Legislative Commission on Governmental Operations.
(c) Overexpenditures Reported. – The Director shall report quarterly, beginning Octo-ber 31, to the Joint Legislative Commission on Governmental Operations on overexpenditures approved by the Director under subdivisions (2) and (3) of subsection (b) of this section.
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(e) Overexpenditures in House of Representatives Budget. – The Speaker of the House of Representatives may approve expenditures for more than was authorized in the enacted budget objects or line items in the budget of the House of Representatives.
(f) Transfers Between Line Items or Programs in General Assembly Budget Other Than Senate and House of Representatives. – Expenditures exceeding amounts authorized for programs, objects, or line items in the budget of the General Assembly other than those of the Senate and House of Representatives shall be approved jointly by the President Pro Tempore of the Senate and the Speaker of the House of Representatives.
(g) Transfers in The University of North Carolina Budget. – Transfers or changes with-in the budget of The University of North Carolina may be made as provided in Article 1 of Chapter 116 of the General Statutes.
(h) Transfers Within the Office of the Governor. – Transfers or changes as between ob-jects or line items in the budget of the Office of the Governor may be made by the Governor. (2006-203, s. 3; 2007-117, s. 4.)
§ 143C-6-5. No expenditures for purposes for which the General Assembly has consid-ered but not enacted an appropriation; no fee increases that the General As-sembly has rejected.
(a) Notwithstanding any other provision of law, no funds from any source, except for gifts, grants, or funds allocated from the Repair and Renovations Account in accordance with G.S. 143C-4-3, funds allocated from the Contingency and Emergency Fund in accordance with G.S. 143C-4-4, and funds exempted from Chapter 143C in accordance with G.S. 143C-1-3(c) may be expended for any new or expanded purpose, position, or other expenditure for which the General Assembly has considered but not enacted an appropriation of funds for the current fiscal period. For the purpose of this subsection, the General Assembly has considered a pur-pose, position, or other expenditure when that purpose is included in a bill which fails a read-ing, or if the purpose is included in the version of a bill that passes one house, but the bill is enacted without the purpose.
(b) Notwithstanding any other provision of law, no fee shall be increased if the General Assembly has rejected an increase of that fee for the current fiscal period. For the purpose of this subsection, the General Assembly has rejected a fee increase when that fee increase is in-cluded in a bill which fails a reading, or if the fee increase is included in the version of a bill that passes one house, but the bill is enacted without the fee increase. (2006-66, s. 6.4; 2006-203, s. 3.)
§ 143C-6-6. Positions included in the State Payroll.
(a) Before a State agency establishes a new position or changes the funding of an exist-ing position, the agency shall submit the proposed action to the Director for approval. The Di-rector shall review the proposed action to ensure that funds for the action are included in the amount appropriated to the agency. If the Director approves the action, the Director shall noti-fy the agency and the Controller of the approval. The Controller shall not honor a voucher in STATE OF NORTH CAROLINA
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payment of a payroll that includes a new position or a change in an existing position that has not been approved by the Director.
(b) Payments on behalf of employees for hospital-medical insurance, longevity pay-ments, salary increments, and legislative salary increases, required employer salary-related contributions for retirement benefits, death benefits, the Disability Income Plan and social se-curity for employees shall be paid from the General Fund or the Highway Fund, only to the extent of the proportionate part paid from the General Fund or Highway Fund, in support of the salary of the employee, and the remainder of the employer's contribution requirements shall be paid from the same source that supplies the remainder of the employee's salary.
(c) Subsection (a) of this section does not apply to The University of North Carolina. (2006-203, s. 3; 2007-484, s. 34.)
§ 143C-6-7. Compliance with Chapter and appropriations acts by State agencies.
(a) Compliance With Chapter and Appropriations Acts. – Except as otherwise provided by law, all expenditures of State funds by a State agency shall be made in compliance with the State budget as enacted by the General Assembly and certified by the Director. If the Director finds that a State agency has spent or encumbered State funds for an unauthorized purpose, the Director shall take appropriate administrative action to ensure that no further irregularities oc-cur and shall report to the Attorney General any facts that pertain to an apparent violation of a penal statute or an apparent instance of malfeasance, misfeasance, or nonfeasance by a person.
(b) Repayment of Funds Spent for an Unauthorized Purpose. – In addition to the provi-sions of subsection (a) of this section, if the Director finds that a State agency violated this sec-tion, the Director shall withhold any future allocations for the unauthorized purpose and shall also withhold future allocations to the Department in an amount equal to the funds unlawfully spent. (2006-203, s. 3.)
§ 143C-6-8. State agencies may incur financial obligations only if authorized by the Di-rector of the Budget and subject to the availability of appropriated funds.
Unless otherwise authorized by the Director as provided by law, purchase orders, contracts, salary commitments, and any other financial obligations by State agencies shall be subject to the availability of appropriated funds or available funds that are not State funds as defined in this Chapter. (2006-203, s. 3.)
§ 143C-6-9. Use of lapsed salary savings.
Lapsed salary savings may be expended only for nonrecurring purposes or line items. (2006-203, s. 3.)
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§ 143C-6-10. Flexible compensation plan.
Notwithstanding any other provision of law, the Director may establish a program of de-pendent care assistance and a flexible compensation plan for eligible officers and employees of State agencies as provided in G.S. 126-95. With the approval of the Director, savings in the em-ployer's share of contributions under the Federal Insurance Contributions Act on account of the reduction in salary may also be used as provided by G.S. 126-95. (2007-117, s. 3(c).)
Part 2. Highway Appropriations.
§ 143C-6-11. Highway appropriation.
(a) General Provisions. – Appropriations made for transportation projects are subject to the provisions in this section. If the provisions in this section conflict with the budget acts, the budget acts prevail.
(b) Cash Flow Management of Transportation Projects. – Transportation Project funds shall be budgeted, expended, and accounted for on a "cash flow" basis. Pursuant to this end, transportation project contracts shall be planned and limited so payments due at any time will not exceed the cash available to pay them.
(c) Appropriations Are for Payments and Contract Commitments to Be Made in the Appropriation Fiscal Year. – The appropriations for transportation projects are for maximum payments estimated to be made during the appropriation fiscal year and for maximum contract-ing authority for future years. Transportation project contracts shall be scheduled so that the total contract payments and other expenditures charged to projects in the fiscal year for each transportation project appropriation item will not exceed the current appropriations provided by the General Assembly and unspent prior appropriations made by the General Assembly for the particular appropriation item.
(d) Payments Subject to Availability of Funds. – The annual appropriations for trans-portation projects shall be expended only to the extent that sufficient funds are available in the Highway Fund.
(e) Retainage Fully Funded. – The Department of Transportation shall fully fund re-tainage from transportation project contracts in the year in which the work is performed.
(f) Five Percent (5%) of the Cash Balance Required. – The Department of Transporta-tion shall maintain an available cash balance at the end of each month equal to at least five percent (5%) of the unpaid balance of the total transportation project contract obligations. In the event this cash position is not maintained, no further transportation project contract com-mitments may be entered into until the cash balance has been regained. For the purposes of awarding contracts involving federal aid, any amount due from the federal government and the Highway Bond Fund as a result of unreimbursed expenditures may be considered as cash for the purposes of this provision.
(g) Anticipation of Revenues. – In awarding State transportation project contracts re-quiring payments beyond a biennium, the Director may anticipate revenues as authorized and certified by the General Assembly to continue contract payments for up to seventy-five percent (75%) of the revenues which are estimated for the first fiscal year of the succeeding biennium and which are not required for other budget items. Up to fifty percent (50%) of the revenues STATE OF NORTH CAROLINA
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not required for other budget items may be anticipated for the second and subsequent fiscal years' contract payments. Up to forty percent (40%) of the revenues not required for other budget items may be anticipated for the first year of the second succeeding biennium and up to twenty percent (20%) of the revenues not required for other budget items may be anticipated for the second year of the second succeeding biennium.
(h) Amounts Encumbered. – Transportation project appropriations may be encumbered in the amount of allotments made to the Department of Transportation by the Director for the estimated payments for transportation project contract work to be performed in the appropria-tion fiscal year. The allotments shall be multiyear allotments and shall be based on estimated revenues and shall be subject to the maximum contract authority contained in subsection (c) above. Payment for transportation project work performed pursuant to contract in any fiscal year other than the current fiscal year is subject to appropriations by the General Assembly. Transportation project contracts shall contain a schedule of estimated completion progress, and any acceleration of this progress shall be subject to the approval of the Department of Trans-portation provided funds are available. The State reserves the right to terminate or suspend any transportation project contract, and any transportation project contract shall be so terminated or suspended if funds will not be available for payment of the work to be performed during that fiscal year pursuant to the contract. In the event of termination of any contract, the contractor shall be given a written notice of termination at least 60 days before completion of scheduled work for which funds are available. In the event of termination, the contractor shall be paid for the work already performed in accordance with the contract specifications.
(i) Provision Incorporated in Contracts. – The provisions of subsection (h) of this sec-tion shall be incorporated verbatim in all transportation project contracts.
(j) Existing Contracts Are Not Affected. – The provisions of this section shall not ap-ply to transportation project contracts awarded by the Department of Transportation prior to July 15, 1980.
(k) The Department of Transportation shall do all of the following:
(1) Utilize cash flow financing to the extent possible to fund transportation pro-jects with the goal of reducing the combined average daily cash balance of the Highway Fund and the Highway Trust Fund to an amount equal to the twelve percent (12%) of the combined estimate of the yearly receipts of the Funds. The target amount shall include an amount necessary to make all municipal-aid funding requirements of the Department.
(2) Establish necessary management controls to facilitate use of cash flow fi-nancing, such as establishment of a financial planning committee, develop-ment of a monthly financing report, establishment of appropriate fund cash level targets, review of revenue forecasting procedures, and reduction of ac-crued unbilled costs.
(3) Report annually, on October 1 of each year, to the Joint Legislative Trans-portation Oversight Committee on its cash management policies and results. (2006-203, s. 3.)
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§§ 143C-6-12 through 143C-6-20: Reserved for future codification purposes.
Part 3. Non-State Entities Receiving State Funds.
§ 143C-6-21. Payments to nonprofits.
Except as otherwise provided by law, an annual appropriation of one hundred thousand dollars ($100,000) or less to or for the use of a nonprofit corporation shall be made in a single annual payment. An annual appropriation of more than one hundred thousand dollars ($100,000) to or for the use of a nonprofit corporation shall be made in quarterly or monthly payments, in the discretion of the Director of the Budget. (2006-203, s. 3.)
§ 143C-6-22. Use of State funds by non-State entities.
(a) Disbursement and Use of State Funds. – Every non-State entity that receives, uses, or expends any State funds shall use or expend the funds only for the purposes for which they were appropriated by the General Assembly. State funds include federal funds that flow through the State Treasury.
(b) Compliance by Non-State Entities. – If the Director of the Budget finds that a non-State entity has spent or encumbered State funds for an unauthorized purpose, or fails to submit or falsifies the information required by G.S. 143C-6-23 or any other provision of law, the Director shall take appropriate administrative action to ensure that no further irregularities or violations of law occur and shall report to the Attorney General any facts that pertain to an apparent violation of a criminal law or an apparent instance of malfeasance, misfeasance, or nonfeasance in connection with the use of State funds. Appropriate administrative action may include suspending or withholding the disbursement of State funds and recovering State funds previously disbursed.
(c) Civil Actions. – Civil actions to recover State funds or to obtain other mandatory orders in the name of the State on relation of the Attorney General, or in the name of the Office of State Budget and Management, shall be filed in the General Court of Justice in Wake Coun-ty. (2006-203, s. 3.)
§ 143C-6-23. State grant funds: administration; oversight and reporting requirements.
(a) Definitions. – The following definitions apply in this section:
(1) "Grant" and "grant funds" means State funds disbursed as a grant by a State agency; however, the terms do not include any payment made by the Medi-caid program, the State Health Plan for Teachers and State Employees, or other similar medical programs.
(2) "Grantee" means a non-State entity that receives State funds as a grant from a State agency but does not include any non-State entity subject to the audit and other reporting requirements of the Local Government Commission.
(3) "Subgrantee" means a non-State entity that receives State funds as a grant from a grantee or from another subgrantee but does not include any STATE OF NORTH CAROLINA
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non-State entity subject to the audit and other reporting requirements of the Local Government Commission.
(b) Conflict of Interest Policy. – Every grantee shall file with the State agency disburs-ing funds to the grantee a copy of that grantee's policy addressing conflicts of interest that may arise involving the grantee's management employees and the members of its board of directors or other governing body. The policy shall address situations in which any of these individuals may directly or indirectly benefit, except as the grantee's employees or members of its board or other governing body, from the grantee's disbursing of State funds, and shall include actions to be taken by the grantee or the individual, or both, to avoid conflicts of interest and the appear-ance of impropriety. The policy shall be filed before the disbursing State agency may disburse the grant funds.
(c) No Overdue Tax Debts. – Every grantee shall file with the State agency or depart-ment disbursing funds to the grantee a written statement completed by that grantee's board of directors or other governing body stating that the grantee does not have any overdue tax debts, as defined by G.S. 105-243.1, at the federal, State, or local level. The written statement shall be made under oath and shall be filed before the disbursing State agency or department may disburse the grant funds. A person who makes a false statement in violation of this subsection is guilty of a criminal offense punishable as provided by G.S. 143C-10-1.
(d) Office of State Budget Rules Must Require Uniform Administration of State Grants. – The Office of State Budget and Management shall adopt rules to ensure the uniform administration of State grants by all grantor State agencies and grantees or subgrantees. The Office of State Budget and Management shall consult with the Office of the State Auditor and the Attorney General in establishing the rules required by this subsection. The rules shall es-tablish policies and procedures for disbursements of State grants and for State agency over-sight, monitoring, and evaluation of grantees and subgrantees. The policies and procedures shall:
(1) Ensure that the purpose and reporting requirements of each grant are speci-fied to the grantee.
(2) Ensure that grantees specify the purpose and reporting requirements for grants made to subgrantees.
(3) Ensure that State funds are spent in accordance with the purposes for which they were granted.
(4) Hold the grantees and subgrantees accountable for the legal and appropriate expenditure of grant funds.
(5) Provide for adequate oversight and monitoring to prevent the misuse of grant funds.
(6) Establish mandatory periodic reporting requirements for grantees and sub-grantees, including methods of reporting, to provide financial and program performance information. The mandatory periodic reporting requirements shall require grantees and subgrantees to file with the State Auditor copies of reports and statements that are filed with State agencies pursuant to this subsection. Compliance with the mandatory periodic reporting requirements STATE OF NORTH CAROLINA
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of this subdivision shall not require grantees and subgrantees to file with the State Auditor the information described in subsections (b) and (c) of this section.
(7) Require grantees and subgrantees to maintain reports, records, and other in-formation to properly account for the expenditure of all grant funds and to make such reports, records, and other information available to the grantor State agency for oversight, monitoring, and evaluation purposes.
(8) Require grantees and subgrantees to ensure that work papers in the posses-sion of their auditors are available to the State Auditor for the purposes set out in subsection (i) of this section.
(9) Require grantees to be responsible for managing and monitoring each pro-ject, program, or activity supported by grant funds and each subgrantee pro-ject, program, or activity supported by grant funds.
(10) Provide procedures for the suspension of further disbursements or use of grant funds for noncompliance with these rules or other inappropriate use of the funds.
(11) Provide procedures for use in appropriate circumstances for reinstatement of disbursements that have been suspended for noncompliance with these rules or other inappropriate use of grant funds.
(12) Provide procedures for the recovery and return to the grantor State agency of unexpended grant funds from a grantee or subgrantee if the grantee or subgrantee is unable to fulfill the purposes of the grant.
(e) Rules Are Subject to the Administrative Procedure Act. – Notwithstanding the pro-visions of G.S. 150B-2(8a)b. rules adopted pursuant to subsection (d) of this section are sub-ject to the provisions of Chapter 150B of the General Statutes.
(f) Suspension and Recovery of Funds to Grant Recipients for Noncompliance. – The Office of State Budget and Management, after consultation with the administering State agen-cy, shall have the power to suspend disbursement of grant funds to grantees or subgrantees, to prevent further use of grant funds already disbursed, and to recover grant funds already dis-bursed for noncompliance with rules adopted pursuant to subsection (d) of this section. If the grant funds are a pass-through of funds granted by an agency of the United States, then the Of-fice of State Budget and Management must consult with the granting agency of the United States and the State agency that is the recipient of the pass-through funds prior to taking the actions authorized by this subsection.
(g) Audit Oversight. – The State Auditor has audit oversight, with respect to grant funds received by the grantee or subgrantee, pursuant to Article 5A of Chapter 147 of the Gen-eral Statutes, of every grantee or subgrantee that receives, uses, or expends grant funds. A grantee or subgrantee must, upon request, furnish to the State Auditor for audit all books, rec-ords, and other information necessary for the State Auditor to account fully for the use and ex-penditure of grant funds received by the grantee or subgrantee. The grantee or subgrantee must furnish any additional financial or budgetary information requested by the State Auditor, in-STATE OF NORTH CAROLINA
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cluding audit work papers in the possession of any auditor of a grantee or subgrantee directly related to the use and expenditure of grant funds.
(h) Report on Grant Recipients That Failed to Comply. – Not later than May 1, 2007, and by May 1 of every succeeding year, the Office of State Budget and Management shall re-port to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division on all grantees or subgrantees that failed to comply with this section with respect to grant funds received in the prior fiscal year.
(i) State Agencies to Submit Grant List to Auditor. – No later than October 1 of each year, each State agency shall submit a list to the State Auditor, in the format prescribed by the State Auditor, of every grantee to which the agency disbursed grant funds in the prior fiscal year. The list shall include the amount disbursed to each grantee and other information as re-quired by the State Auditor to comply with the requirements of this section. (2006-203, s. 3; 2007-323, s. 28.22A(o); 2007-345, s. 12.)
Article 7.
Federal and Other Receipts.
§ 143C-7-1. Funds creating an obligation.
(a) Report to Director. – A State agency, other than the judicial branch, that submits to the federal government or to any other party an application for funds that will be subject to this Chapter shall first provide to the Director a copy of the application along with any related in-formation the Director may require. The judicial branch shall provide the Director with a copy of the application and any related information after making the application.
(b) Contract Provision. – A State agency that receives funds pursuant to an application that must be reported to the Director under subsection (a) of this section shall include in any related contract or other grant instrument a clause specifically stating that the expenditure of money de-posited in the State treasury is subject to acts of appropriation by the General Assembly. (2006-203, s. 3; 2007-393, s. 9.)
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§ 143C-7-2. Federal Block Grants.
(a) Plans Submitted and Reviewed. – The Secretary of each State agency that receives and administers federal Block Grant funds shall prepare and submit the agency's Block Grant plans to the Director of the Budget. The Director of the Budget shall submit the Block Grant plans to the Fiscal Research Division of the General Assembly not later than February 28 of each odd-numbered calendar year and not later than April 30 of each even-numbered calendar year.
(b) Information To Be Included in Plans. – Each State agency shall submit a separate Block Grant plan for each Block Grant received and administered by the agency, and each plan shall include all of the following:
(1) A delineation of the proposed dollar amount by activity and by category, in-cluding dollar amounts to be used for administrative costs.
(2) A comparison of the proposed funding with two prior years' program budg-ets. (2006-203, s. 3.)
Article 8.
Budgeting Capital Improvement Projects.
§ 143C-8-1. Legislative intent; purpose.
(a) Legislative Intent. – The General Assembly recognizes the need to establish a com-prehensive process for capital improvement planning and budgeting that is fully integrated with State financial planning and debt management.
(b) Capital Improvement Planning and Budgeting Process. – The capital improvement planning and budgeting process shall include the following elements:
(1) An inventory of facilities owned by State agencies.
(2) Criteria used to evaluate capital improvement needs.
(3) A six-year capital improvement needs estimate.
(4) A six-year capital improvements plan.
(5) Recommendations for capital improvements set forth in the Recommended State Budget as specified in G.S. 143C-3-5.
(c) Office of State Budget and Management to Manage Planning Process. – The Office of State Budget and Management has responsibility for management of the capital improve-ment planning process. The Director of the Budget may assign to any State agency or institu-tion such duties and responsibilities as may, in the Director's judgment, be necessary to the successful administration of the capital improvement planning process. (1997-443, s. 34.9; 2000-140, s. 93.1(a); 2001-424, s. 12.2(b); 2006-203, s. 3.)
§ 143C-8-2. Capital facilities inventory.
The Department of Administration shall develop and maintain an automated inventory of all facilities owned by State agencies pursuant to G.S. 143-341(4). The inventory shall include the location, occupying agency, ownership, size, description, condition assessment, mainte-STATE OF NORTH CAROLINA
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nance record, parking and employee facilities, and other information to determine maintenance needs and prepare life-cycle cost evaluations of each facility listed in the inventory. The De-partment of Administration shall update and publish the inventory at least once every three years. The Department shall also record in the inventory acquisitions of new facilities and sig-nificant changes in existing facilities as they occur. (1997-443, s. 34.9; 2006-203, s. 3.)
§ 143C-8-3. Capital improvement needs criteria.
The Office of State Budget and Management shall develop a weighted list of factors that may be used to evaluate the need for capital improvement projects. The list shall include all of the following:
(1) Preservation, adequacy and use of existing facilities.
(2) Health and safety considerations.
(3) Operational efficiencies.
(4) Projected demand for governmental services. (1997-443, s. 34.9; 2000-140, s. 93.1(a); 2001-424, s. 12.2(b); 2006-203, s. 3.)
§ 143C-8-4. Agency capital improvement needs estimates.
(a) Needs Estimate Required. – On or before September 1 of each even-numbered year, each State agency shall submit to the Office of State Budget and Management and to the Divi-sion of Fiscal Research a six-year capital improvement needs estimate. This estimate shall de-scribe the agency's anticipated capital needs for each year of the six-year planning period. Cap-ital improvement needs estimates shall be shown in two parts.
(b) Repairs and Renovations Needs Estimate. – The first part of the capital improve-ment needs estimates shall include only requirements for repairs and renovations necessary to maintain the existing use of existing facilities. Each proposed repair and renovation expendi-ture shall be justified by reference to the Facilities Condition Assessment Program operated by the Office of State Construction.
(c) Real Property and New Construction or Facility Rehabilitation Needs Estimate. – The second part of the capital improvement needs estimates shall include only proposals for real property acquisition and projects involving construction of new facilities or rehabilitation of existing facilities to accommodate uses for which the existing facilities were not originally designed. Each project included in this part shall be justified by reference to the needs evalua-tion criteria established by the Office of State Budget and Management pursuant to G.S. 143C-8-3.
For capital projects of The University of North Carolina and its constituent institutions, the Office of State Budget and Management shall utilize the needs evaluation information ap-proved by the Board of Governors of The University of North Carolina developed pursuant to G.S. 116-11(9). (1997-443, s. 34.9; 2000-140, s. 93.1(a); 2001-424, s. 12.2(b); 2006-203, s. 3.)
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§ 143C-8-5. Six-year capital improvements plan.
(a) General. – The State capital improvement plan shall address the long-term capital improvement needs of all State government agencies and shall incorporate all capital projects, however financed, proposed to meet those needs, except that transportation infrastructure pro-jects shall be excluded. On or before December 31 of each even-numbered year, the Director of the Budget shall prepare and transmit to the General Assembly a six-year capital improve-ment plan. When preparing the plan, the Director of the Budget shall consider the capital im-provement needs estimates submitted by State agencies as required in G.S. 143C-8-4. The plan shall be prepared in two parts.
(b) Repair and Renovations Requirements. – The first part of the capital improvement plan shall set forth repair and renovations requirements that, in the judgment of the Director of the Budget, should be met within each year of the six-year planning period to protect and pre-serve existing capital improvement facilities. The plan shall identify individual projects in pri-ority order by State agency and shall specify the means of financing.
(c) Real Property Acquisition, New Construction, or Facility Rehabilitations. – The se-cond part of the capital improvement plan shall set forth an integrated schedule for real proper-ty acquisition, new construction, or rehabilitation of existing facilities that, in the judgment of the Director of the Budget, should be initiated within each year of the six-year planning period. The plan shall contain for each project (i) estimates of real property acquisition, and construc-tion or rehabilitation costs (ii) a means of financing the project, and (iii) an estimated schedule for the completion of the project. Where the means of financing would involve direct or indi-rect debt service obligations, a schedule of those obligations shall be presented. (1997-443, s. 34.9; 2006-203, s. 3.)
§ 143C-8-6. Recommendations for capital improvements set forth in the Recommended State Budget.
(a) Budget Director's Recommendations. – The Director of the Budget shall recom-mend expenditures for repairs and renovations of existing facilities, and real property acquisi-tion, new construction, or rehabilitation of existing facilities in the Recommended State Budget in accordance with G.S. 143C-3-5.
(b) Repairs and Renovations in the Recommended State Budget. – The Recommended State Budget shall contain for repairs and renovations of existing facilities: (i) the amount rec-ommended for each State agency, (ii) a summary of the recommendations by project type, and (iii) the means of financing.
(c) Repairs and Renovations in the Budget Support Document. – The Budget Support Document shall contain for each repair and renovation project recommended in accordance with 143C-8-6(b): (i) a project description and justification, (ii) a detailed cost estimate, (iii) an estimated schedule for the completion of the project, and (iv) an explanation of the means of financing.
(d) Other Capital Projects in the Recommended State Budget. – The Recommended State Budget shall contain for each capital project involving real property acquisition, new construction, building area (sq. ft.) expansions, or the rehabilitation of existing facilities to ac-STATE OF NORTH CAROLINA
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commodate new or expanded uses: (i) a project description and statement of need, (ii) an esti-mate of acquisition and construction or rehabilitation costs, and (iii) a means of financing the project.
(e) Other Capital Projects in the Budget Support Document. – The Budget Support Document shall contain for each capital project recommended in accordance with 143C-8-6(c): (i) a detailed project description and justification, (ii) a detailed estimate of acquisition, plan-ning, design, site development, construction, contingency and other related costs, (iii) an esti-mated schedule of cash flow requirements over the life of the project, (iv) an estimated sched-ule for the completion of the project, (v) an estimate of maintenance and operating costs, in-cluding personnel, for the project, covering the first five years of operation, (vi) an estimate of revenues, if any, likely to be derived from the project, covering the first five years of operation, and (vii) an explanation of the means of financing. (2006-203, s. 3; 2007-117, s. 5(b).)
§ 143C-8-7. When a State agency may begin a capital improvement project.
No State agency may expend funds for the construction or renovation of any capital im-provement project except as needed to comply with this Article or otherwise authorized by the General Assembly. Funds that become available by gifts, excess patient receipts above those budgeted at the University of North Carolina Hospitals at Chapel Hill, federal or private grants, receipts becoming a part of special funds by act of the General Assembly, or any other funds available to a State agency or institution may be utilized for advanced planning through the working drawing phase of capital improvement projects, upon approval of the Director of the Budget. (2006-203, s. 3.)
§ 143C-8-8. When a State agency may increase the cost of a capital improvement project.
Upon the request of the administration of a State agency, the Director of the Budget may, when in the Director's opinion it is in the best interest of the State to do so, increase the cost of a capital improvement project. Provided, however, that if the Director of the Budget increases the cost of a project, the Director shall report that action to the Joint Legislative Commission on Governmental Operations at its next meeting. The increase may be funded from gifts, fed-eral or private grants, special fund receipts, excess patient receipts above those budgeted at the University of North Carolina Hospitals at Chapel Hill, or direct capital improvement appropri-ations to that department or institution. (2006-203, s. 3.)
§ 143C-8-9. When a State agency may change the scope of a capital improvement project.
A State agency may increase the scope of a capital improvement project only if the General Assembly authorizes the increase. A State agency may decrease the scope of a capital im-provement project if the Director authorizes the decrease. To obtain the Director's authoriza-tion for a decrease in the scope of a capital improvement project, a State agency shall submit its request to the Director in writing and shall state the reason for the request. (2006-203, s. 3.)
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§ 143C-8-10. Project Reserve Account.
(a) Project Reserve Account. – There is established a Project Reserve Account. When a construction contract is entered for a capital improvement project for which the General As-sembly has enacted an appropriation, the appropriation is encumbered for the project's costs of real property acquisition, planning, design, site development, construction, contingencies, and other related costs. If the amount appropriated for the project exceeds the amount encumbered, the excess shall be credited to the Project Reserve Account, unless otherwise required by law. The Director may authorize funds in the Account to be used for any of the following:
(1) An emergency repair and renovation project at a State facility.
(2) The award of a project contract when bids for the contract exceed the amount appropriated for it if the project was designed within the scope in-tended by the appropriation and if the Director finds that all means to award the contract within the appropriation were reasonably attempted.
(3) A reversion to the principal fund from which revenue was appropriated for a project when the amount encumbered for the project is less than the amount appropriated.
(b) Reporting Requirement. – Whenever the Director authorizes the use of funds from the Project Reserve Account, the Director shall report the action to the Joint Legislative Com-mission on Governmental Operations at its next meeting. (2006-203, s. 3; 2007-117, s. 6.)
§ 143C-8-11. Reversion of appropriation and lapse of project authorization.
(a) Reversion of Appropriation. – A State agency shall begin the planning of or the construction of an authorized capital improvement project during the fiscal year in which the funds are appropriated. If it does not, the Director may credit the appropriation to the Project Reserve Account, unless otherwise required by law. If the Director does not credit the appro-priation to the Project Reserve Account, the appropriation shall revert to the principal fund from which it was appropriated. The Director may, for good cause, allow a State agency to take up to an additional 12 months to take the actions required by this subsection.
(b) Lapse of Project Authorization. – Authorizations for capital improvement projects shall lapse if any of the following occur: (i) the appropriation for a capital improvement project reverts, (ii) the construction of a project does not begin during the first two fiscal years in which funds are appropriated, or (iii) the Director redirects funds appropriated for a capital im-provement project in accordance with G.S. 143C-6-2. The Director may, for good cause, allow a State agency to take up to an additional 12 months to begin construction of a project; howev-er, if the Director approves an extension of time under this subsection and construction of the project has not begun by the end of the extension, the authorization for the project shall lapse. (2006-203, s. 3.)
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§ 143C-8-12. University system capital improvement projects from sources that are not General Fund sources: approval of new project or change in scope of existing project.
Notwithstanding any other provision of this Chapter, the Director of the Budget may, upon request of the Board of Governors of The University of North Carolina and after consultation with the Joint Legislative Commission on Governmental Operations, approve: (i) expenditures to plan a capital improvement project of The University of North Carolina the planning for which is to be funded entirely with non-General Fund money, (ii) expenditures for a capital improvement project of The University of North Carolina that is to be funded entirely with non-General Fund money, or (iii) a change in the scope of any previously approved capital im-provement project of The University of North Carolina provided that both the project and change in scope are funded entirely with non-General Fund money. (2006-203, s. 3.)
Article 9.
Special Funds and Fee Reports.
§ 143C-9-1. Medicaid Special Fund; transfers to Department of Health and Human Ser-vices.
(a) The Medicaid Special Fund is established as a nonreverting special fund in the De-partment of Health and Human Services. The Medicaid Special Fund shall consist of the feder-al Medicaid disproportionate share monies remaining after payments are made to hospitals. Annually, the Department shall transfer the disproportionate share gain, after payments are made to hospitals, to the Medicaid Special Fund. Funds deposited to the Medicaid Special Fund shall only be available for expenditure upon an act of appropriation of the General As-sembly.
Political subdivisions may appropriate funds directly to the Department of Health and Hu-man Services for Medicaid programs. Other public agencies and private sources may transfer funds to the Department for Medicaid programs. The Department may accept unconditional and unrestricted donations of such funds. Notwithstanding the provisions of this Article which might forbid such transfer or donation, the University of North Carolina Hospitals at Chapel Hill may transfer funds as provided by the previous sentence of this section.
(b) Contributed funds shall be subject to the Department of Health and Human Services administrative control and shall be allocated only as specifically provided in the Current Oper-ations Appropriations Act, except such contributions shall not reduce State general revenue funding. At the end of any fiscal year, the unobligated balance of any such funds shall not re-vert to the General Fund, but shall be reappropriated for these purposes in the next fiscal year. (2006-203, s. 3; 2007-117, s. 7.) STATE OF NORTH CAROLINA
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§ 143C-9-2. Trust Fund for Mental Health, Developmental Disabilities, and Substance Abuse Services and Bridge Funding Needs.
(a) The Trust Fund for Mental Health, Developmental Disabilities, and Substance Abuse Services and Bridge Funding Needs is established as an interest-bearing, nonreverting special trust fund in the Office of State Budget and Management. Moneys in the Trust Fund shall be held in trust and used solely to increase community-based services that meet the men-tal health, developmental disabilities, and substance abuse services needs of the State. The Trust Fund shall be used to supplement and not to supplant or replace existing State and local funding available to meet the mental health, developmental disabilities, and substance abuse services needs of the State.
The State Treasurer shall hold the Trust Fund separate and apart from all other moneys, funds, and accounts. The State Treasurer shall be the custodian of the Trust Fund and shall in-vest its assets in accordance with G.S. 147-69.2 and G.S. 147-69.3. Investment earnings credit-ed to the assets of the Trust Fund shall become part of the Trust Fund. Any balance remaining in the Trust Fund at the end of any fiscal year shall be carried forward in the Trust Fund for the next succeeding fiscal year.
Moneys in the Trust Fund shall be expended only in accordance with subsection (b) of this section and in accordance with limitations and directions enacted by the General Assembly.
(b) Moneys in the Trust Fund for Mental Health, Developmental Disabilities, and Sub-stance Abuse Services and Bridge Funding Needs shall be used only to:
(1) Provide start-up funds and operating support for programs and services that provide more appropriate and cost-effective community treatment alterna-tives for individuals currently residing in the State's mental health, devel-opmental disabilities, and substance abuse services institutions.
(2) Repealed by Session Laws 2007-323, s. 10.49(w1), effective July 1, 2007.
(3) Facilitate reform of the mental health, developmental disabilities, and sub-stance abuse services system and expand and enhance treatment and preven-tion services in these program areas to remove waiting lists and provide ap-propriate and safe services for clients.
(4) Provide bridge funding to maintain appropriate client services during transi-tional periods as a result of facility closings, including departmental restruc-turing of services.
(5) Repealed by Session Laws 2007-323, s. 10.49(w1), effective July 1, 2007.
(c) Notwithstanding G.S. 143C-1-2, any nonrecurring savings in State appropriations realized from the closure of any State psychiatric hospitals that are in excess of the cost of op-erating and maintaining a new State psychiatric hospital shall not revert to the General Fund but shall be placed in the Trust Fund and shall be used for the purposes authorized in this sec-tion. Notwithstanding G.S. 143C-1-2, recurring savings realized from the closure of any State psychiatric hospitals shall not revert to the General Fund but shall be credited to the Depart-ment of Health and Human Services to be used only for the purposes of subsections (b)(2) and (b)(3) of this section. (2006-203, s. 3.) STATE OF NORTH CAROLINA
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(d) Beginning July 1, 2007, the Secretary of the Department of Health and Human Ser-vices shall report annually to the Fiscal Research Division on the expenditures made during the preceding fiscal year from the Trust Fund. The report shall identify each expenditure by recipi-ent and purpose and shall indicate the authority under subsection (b) of this section for the ex-penditure. (2006-203, s. 3; 2007-323, s. 10.49(w1).)
§ 143C-9-3. Settlement Reserve Fund.
(a) The "Settlement Reserve Fund" is established as a restricted reserve in the General Fund. Except as otherwise provided in this section, funds shall be expended from the Settle-ment Reserve Fund only by specific appropriation by the General Assembly.
(b) A Health Trust Account is established in the Settlement Reserve Fund. The portion of each Master Settlement Agreement payment identified in Section 6(3) of S.L. 1999-2 shall be credited to the Health Trust Account. The State Controller shall transfer all funds in the Health Trust Account to the Health and Wellness Trust Fund created in Article 6C of Chapter 147 of the General Statutes.
(c) A Tobacco Trust Account is established in the Settlement Reserve Fund. The por-tion of each Master Settlement Agreement payment identified in Section 6(2) of S.L. 1999-2 shall be credited to the Tobacco Trust Account. The State Controller shall transfer all funds in the Tobacco Trust Account to the Tobacco Trust Fund created in Article 75 of Chapter 143 of the General Statutes.
(d) Unless prohibited by federal law, federal funds provided to the State by block grant or otherwise as part of federal legislation implementing a settlement between United States tobacco companies and the states shall be credited to the Settlement Reserve Fund. Unless oth-erwise encumbered or distributed under a settlement agreement or final order or judgment of the court, funds paid to the State or a State agency pursuant to a tobacco litigation settlement agreement, or a final order or judgment of a court in litigation between tobacco companies and the states, shall be credited to the Settlement Reserve Fund. (2006-203, s. 3.)
§ 143C-9-4. Biennial Fee Report.
The Office of State Budget and Management shall prepare a report biennially on the fees charged by each State department, bureau, division, board, commission, institution, and agency during the previous two fiscal years. The report shall include the statutory or regulatory author-ity for each fee, the amount of the fee, when the amount of the fee was last changed, the num-ber of times the fee was collected during the prior fiscal year, and the total receipts from the fee during the prior fiscal year. (2006-203, s. 3; 2007-323, s. 6.3.)
§ 143C-9-5. Assignment to the State of rights to tobacco manufacturer escrow funds.
A tobacco product manufacturer that elects to place funds into escrow pursuant to G.S. 66-291(a)(2) may make an assignment of its interest in the funds to the benefit of the State. The assignment applies to all funds, and any earnings and appreciation, that are in the escrow account at the time of the assignment or are subsequently deposited into the escrow account STATE OF NORTH CAROLINA
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and are not released under the provisions of subdivision (1) or (2) of G.S. 66-291(b) at any time on or before the expiration of 10 years from the date of assignment. The assignment is irrevocable and shall include any reversionary interest in the escrow account and the funds therein that would otherwise belong to the tobacco manufacturer, including the right to receive the escrowed funds pursuant to G.S. 66-291(b)(3).
An assignment of rights executed pursuant to this section shall be in writing and shall be signed by a duly authorized representative of the tobacco product manufacturer making the assignment. An assignment is effective upon delivery to the Attorney General and the financial institution where the escrow account is maintained. (2006-66, s. 6.19(d); 2006-221, s. 3A; 2006-259, ss. 40(d), 40.5.)
§ 143C-9-6. JDIG Reserve Fund.
(a) The State Controller shall establish a reserve in the General Fund to be known as the JDIG Reserve. Funds from the JDIG Reserve shall not be expended or transferred except in accordance with G.S. 143B-437.63.
(b) It is the intent of the General Assembly to appropriate funds annually to the JDIG Reserve established in this section in amounts sufficient to meet the anticipated cash require-ments for each fiscal year of the Job Development Investment Grant Program established pur-suant to G.S. 143B-437.52. (2006-66, s. 6.19(f); 2006-221, s. 3A; 2006-259, ss. 40(f), 40.5.)
Article 10.
Penalties.
§ 143C-10-1. Offenses for violation of Chapter.
(a) Class 1 misdemeanor. – It is a Class 1 misdemeanor for a person to knowingly and willfully do any one or more of the following:
(1) Withdraw funds from the State treasury for any purpose not authorized by an act of appropriation.
(2) Approve any fraudulent, erroneous, or otherwise invalid claim or bill to be paid from an appropriation.
(3) Make a written statement, give a certificate, issue a report, or utter a docu-ment required by this Chapter, any portion of which is false.
(4) Fail or refuse to perform a duty imposed by this Chapter.
(b) Class A1 misdemeanor. – It is a Class A1 misdemeanor for a person to make a false statement in violation of G.S. 143C-6-23(c).
(c) Forfeiture of Office or Employment. – An appointed officer or employee of the State or an officer or employee of a political subdivision of the State, whether elected or ap-pointed, forfeits his office or employment upon conviction of an offense under this section. An elected officer of the State is subject to impeachment for committing any of the offenses speci-fied in this section. (2006-203, s. 3.)
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§ 143C-10-2. Civil liability for violation of Chapter.
A person convicted of an offense under G.S. 143C-10-1 is liable in a civil action for any damages suffered by the State in consequence of the offense. (2006-203, s. 3.)
§ 143C-10-3. Suspension from office or impeachment for refusal to comply with Chapter.
(a) State Officers or Employees of the Executive Branch. – The Governor may suspend from the performance of his or her duties any State officer or employee of the executive branch except an officer elected by the people, who persists, after notice and warning, in failing or re-fusing to comply with the provisions of this Chapter or any lawful administrative directive is-sued pursuant to this Chapter. Before acting to suspend, the Governor shall give the accused notice and an opportunity to be heard in his or her own defense. The Governor shall report the facts leading to suspension to the Attorney General who may initiate appropriate criminal or civil proceedings. The Governor may apply to the General Court of Justice for a restraining order and injunction if a suspended officer or employee persists in performing official acts.
(b) Elected Officers. – A State officer elected by the people who knowingly and will-fully fails or refuses to comply with any provision of this Chapter or any lawful administrative directive issued under this Chapter is subject to impeachment. (2006-203, s. 3; 2007-393, s. 10.)
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2.0 BUDGET DEVELOPMENT
Table of Contents
2.1 Governor’s Authority for Budget Preparations..................................................................43
2.2 Biennial Budget .................................................................................................................43
2.3 General Requirements of State Budgeting .........................................................................44
2.4 Role of the Office of State Budget and Management (OSBM) .........................................45
2.5 Process for Developing the State Budget...........................................................................46
2.6 Components of the Recommended State Budget...............................................................51
2.7 Transition from Ratified to Certified Budget.....................................................................56
2.8 Systems Supporting the Budget .........................................................................................57
2.1 Governor’s Authority for Budget Preparation
2.1.2 Constitutional Authority
The North Carolina Constitution Article III, Sec. 5(3) empowers the Governor to “prepare and recommend to the General Assembly a comprehensive budget of anticipated revenues and pro-posed expenditures of the State for the ensuing fiscal period.” The Constitution of North Caroli-na also provides that the “budget as enacted by the General Assembly shall be administered by the Governor.”
2.1.3 Statutory Reference
North Carolina General Statute 143C-2-1 provides that the Governor is Director of the Budget. As such, the Director has responsibility to prepare and recommend the State budget, and the Di-rector’s powers extend to all agencies, institutions, departments, bureaus, boards and commis-sions of the State of North Carolina. The Governor may -- and does -- delegate certain powers and authorities of the Governor as Director of the Budget to the Office of State Budget and Man-agement (OSBM) (G.S. 143C-2-1(a)).
2.2 Biennial Budget
2.2.1 Terms and Definitions
Biennium – The two fiscal years beginning on July 1 of each odd-numbered year and ending on June 30 of the next odd-numbered year (G.S. 143C-1-1(d)(2).
Budget – A plan to provide and spend money for specified programs, functions, activities, or ob-jects during a fiscal year (G.S. 143C-1-1(d)(3)).
Budget year – The fiscal year for which a budget is proposed and enacted (G.S. 143C-1-1(d)(4).
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The State of North Carolina operates under a biennial (two-year) budget, with annual updates to the second year of the enacted budget. Further, according to the Constitution, total expenditures of the State for the fiscal period covered by the budget shall not exceed the total of receipts dur-ing that fiscal period and the surplus remaining in the State Treasury at the beginning of the peri-od. Thus, the budget enacted by the General Assembly must be balanced and must include two fiscal years beginning on July 1 of each odd-numbered year (G.S. 143C-4-1).
North Carolina's Constitution (Article II, Sec. 11(1)) requires a session of the General Assembly in odd-numbered years. In 1973 the General Assembly began having annual sessions, meeting in short (reconvened) sessions in even-numbered years to adjust the biennial budget enacted during the previous long session.
2.3 General Requirements of State Budgeting
2.3.1 Information to Support State Budgeting
State agencies and non-state agencies (defined in G.S. 143C-1-1(d)(24) and (d)(18)) are required to submit to the Director any information he may request about their activities or fiscal affairs in the form and at the time requested by the Director (G.S. 143C-2-1(b)). The Director of the Budget is also charged with coordination of efforts to gather and analyze a variety of data that supports state budgeting.(G.S. 143C-2-2).
2.3.2 All Agencies Included in Budget
All state agencies are included in the Governor’s recommended state budget. The legislative and judicial branches are required to provide to the Director an estimate of financial needs for the upcoming fiscal period (G.S. 143C-3-1 and G.S. 143C-3-2), and all other state agencies are re-quired to submit budget requests for the upcoming fiscal period (G.S. 143C-3-3). All are re-quired to submit information in accordance with the schedule prescribed by the Governor and using the uniform accounting classifications (chart of accounts) adopted by the State Controller. Budget requests are submitted in accordance with detailed budget instructions that are issued bi-ennially by OSBM.
2.3.3 University of North Carolina Unified Request
The Board of Governors of the University of North Carolina is required to submit to the Gover-nor a unified budget request for all of the constituent institutions (G.S. 143C-3-3(b). This request shall include requests for repairs and renovations funds, capital funds, and information technolo-gy. The continuation portion of the unified request shall be divided by budget code and may be submitted separately from the remainder of the request, at the direction of the Board of Gover-nors.
The specific purpose/program codes created for the UNC system pursuant to G.S. 116-35, 116-36, 116-36.1, 116-36.2, 116-36.4, 116-36.5, 116-36.6, 116-44.4, 116-68, 116-220, 116-235, and 116-238 are exempt from budget development requirements, with the exception of require-ments related to Article 8 concerning Capital, of Chapter 143C of the General Statutes. These STATE OF NORTH CAROLINA
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funds shall be governed and accounted for by those statutes unless a conflict arises with Article 8, then Article 8 should be followed.
2.3.4 Non-State Entities
Non-state entities requesting state funds are required to submit budget requests to the Director or a designated agency, pursuant to G.S. 143C-3-4. If an agency is designated to receive such re-quests, the agency must evaluate the request and forward its evaluation to the Director in accord-ance with procedures established by the Director.
2.3.5 Governmental and Proprietary Funds Included in Budget
Pursuant to G.S. 143C-3-5(d), the Governor’s recommended state budget includes recommended expenditures of state funds from all Governmental and Proprietary funds. These (and other) fund types are defined in G.S. 143C-1-3. Funds of the University of North Carolina which are ex-empted in G.S. 143C-1-3(c) shall not be included.
2.3.6 Block Grant Plans
Pursuant to G.S. 143C-7-2, the Secretary of each agency that receives and administers federal block grant funds must prepare and submit to the Director of the budget the agency’s block grant plan. Plans are required annually. The Director establishes a time and procedure for submitting plans, and is required to submit them to the General Assembly not later than:
 February 28 in odd-numbered years.
 April 30 in even-numbered years.
Since block grant plans are prepared and approved annually, whereas the recommended state budget is prepared, submitted and approved on a biennial basis, the procedures and timelines for submitting block grant plans to the Director of the budget are typically handled outside of the biennial budget instructions, often through memorandum to the department heads and chief fiscal officers of state agencies.
2.4 Role of the Office of State Budget and Management (OSBM)
The role and function of OSBM in budget development is to define the budget process and to prepare and present the Governor’s budget recommendations. In creating this financial plan, which reflects the priorities of the State and balances needs with available resources, OSBM considers a number of factors that impact the budget. OSBM provides technical assistance and analysis to state agencies in developing budget requests and to the Governor and other decision-makers in prioritizing requests and final recommendations.
2.5 Process for Developing the State Budget
OSBM emphasizes a budget process that, while operating on a two-year cycle, is much broader in scope and focused on long-term outcomes. The key steps in the budget process are:
1. Distribution of budget instructions to state agencies for submitting budget requests.
2. Update of agency performance information and develop