GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2001
S	1
SENATE BILL 923
     

 
Short Title:	State Pays Full Medicaid Cost/Phase-In.	()	
Sponsors:	Senators Hartsell; and Clodfelter.	
Referred to:	Appropriations/Base Budget.	
April 5, 2001

A BILL TO BE ENTITLED
AN ACT TO PHASE OUT THE COUNTY SHARE OF MEDICAID COST OVER FOUR YEARS AND TO COVER THE COST OF THE COUNTY SHARE BY PHASING OUT REIMBURSEMENTS TO COUNTIES OVER FOUR YEARS.

The General Assembly of North Carolina enacts:
SECTION 1.(a) Notwithstanding any other provision of law to the contrary, effective July 1, 2002, the county portion of the nonfederal share of State Medicaid costs shall be as follows:
(1)	11.25% for the 2002‑2003 fiscal year.
(2)	7.50% for the 2003‑2004 fiscal year.
(3)	3.75% for the 2004‑2005 fiscal year; and
(4)	0% for the 2005‑2006 fiscal year.
SECTION 1.(b) There is appropriated from the General Fund to the Department of Health and Human Services, Division of Medical Assistance, the sum of ninety‑one million seven hundred thirty‑nine thousand eight hundred dollars ($91,739,800) for the 2002‑2003 fiscal year for State Medicaid costs.
SECTION 2.  Effective July 1, 2002, G.S. 105‑275.2 reads as rewritten:
"§ 105‑275.2.  Reimbursement to municipalities for repeal of State tax on intangible personal property.
(a)	Allocation for Repeal of Tax on Money on Deposit, Money on Hand, and Funds on Deposit with Insurance Companies. – On or before August 30 of each year, the Secretary of Revenue shall allocate to each county the amount allocated to the county under this subsection in 1990.
(a1)	Allocation for Partial Repeal of Tax on Accounts Receivable. – On or before August 30 of each year, the Secretary of Revenue shall allocate to counties an amount equal to forty percent (40%) of the tax collected on accounts receivable under former Article 7 of this Chapter (repealed) during the 1989‑90 fiscal year. The Secretary shall allocate this amount among the counties in proportion to the amount allocated to each county under former G.S. 105‑213 (repealed) in August 1994.
(a2)	Allocation for Repeal of Tax on Accounts Receivable, Bonds, Stocks, and Foreign Trust Interests. – On or before August 30 of each year, the Secretary of Revenue shall allocate to counties the sum of ninety‑five million three hundred thirty‑one thousand nine hundred twenty‑seven dollars ($95,331,927). The Secretary shall allocate this amount among the counties in proportion to the amount allocated to each county under former G.S. 105‑213 (repealed) in August 1994.
(a3)	Distribution  to Municipalities. – The amounts allocated to each county under this section shall be further allocated between the county and the municipalities in the county in proportion to the total amount of ad valorem taxes levied by each during the fiscal year preceding the distribution. In  allocating these amounts between each county and its municipalities, the Secretary of Revenue shall treat taxes levied by a merged school administrative unit described in G.S. 115C‑513 in a part of the unit located in a county as taxes levied by the county in which that part is located.
After making these allocations, the Secretary shall certify to the State Controller and to the State Treasurer the amount  allocated to each municipality in the State. The State Controller shall then issue a warrant on the State Treasurer to each  municipality in the amount certified. The amounts allocated to counties shall remain in the General Fund and shall not be distributed.
For the purpose of computing the distribution to any  municipalities  for any year with respect to which the property valuation of a public service company is the subject of an appeal and the Department of Revenue is restrained by law from certifying the valuation to the  municipalities, the Department shall use the last property valuation of the public service company that has been certified.
The  mayor of each municipality shall report to the Secretary of Revenue information requested by the Secretary to enable the Secretary to  make the allocations provided in this section. If a  municipality fails to make a requested report within the time allowed, the Secretary may disregard the municipality in making the allocations provided in this section.
(b)	Restrictions on Use. – The amount distributed to each  municipality shall be used by the  municipality in proportion to property tax levies made by it for the various funds and activities of the municipality, unless the  municipality has pledged the amount to be distributed to it under this section in payment of a loan agreement with the North Carolina Solid Waste Management Capital Projects Financing Agency. A  municipality that has pledged amounts distributed under this section in payment of a loan agreement with the Agency may apply the amount the loan agreement requires.
(c)	Repealed by Session Laws 1995, c. 41, s. 3.
(d)	Source. – Funds distributed under this section shall be drawn from collections received under Part 2 of Article 4 of this Chapter.
(e)	(Expires September 1, 2002) Reduction. – Each year, on or before July 15, the governing body of each  municipality shall notify the Secretary of the amount of taxes it collected in the preceding fiscal year from taxes on intangible personal property discovered on or after January 1, 1997, for taxable years beginning on or after July 1, 1991. The Secretary shall reduce the amount allocated to each  municipality for distribution the following August by the amount the  municipality reports pursuant to this subsection. If the Secretary discovers that a  municipality failed to report any taxes as required by this subsection, the Secretary shall reduce the  municipality's next distribution under this section by ten percent (10%).
(f)	(Expires September 1, 2003) Additional Reduction. – Each year, on or before July 15, the governing body of each  municipality shall notify the Secretary of the amount of taxes it collected in the preceding fiscal year from taxes on qualified retirement facility property, as defined in G.S. 105‑278.6A, discovered on or after January 1, 1998, for taxable years beginning on or after July 1, 1992. The Secretary shall reduce the amount allocated to each  municipality for distribution the following August by one hundred ten percent (110%) of the amount the  municipality reports pursuant to this subsection."
SECTION 3.  Effective July 1, 2003, G.S. 105‑164.44C reads as rewritten:
"§ 105‑164.44C.  Reimbursement for sales taxes on food stamp foods and supplemental foods.
As soon as practicable after July 1 of each year, the Secretary shall make a preliminary allocation to each county of the amount of local sales taxes that would have been collected in the county during the 1989‑90 fiscal year on foods purchased with food stamp coupons or supplemental food instruments in the county, had these foods not been exempt from tax under G.S. 105‑164.13(38). The Secretary shall then  allocate the amounts allocated to each county between the county and the cities located in the county in accordance with the method by which local sales and use taxes are distributed in that county. The Secretary shall then distribute to each city the amount allocated to it. Amounts allocated to counties shall remain in the General Fund and shall not be distributed. In order to pay for the reimbursement under this section and the cost to the Department of Revenue for administering the reimbursement, the Secretary shall draw from collections received under Part 1 of Article 4 of this Chapter an amount equal to the amount of the reimbursement and the cost of administration."
SECTION 4.  Effective July 1, 2003, G.S. 105‑275.1 reads as rewritten:
"§ 105‑275.1.  Reimbursement for exclusion of manufacturers' inventories and poultry and livestock.
(a)	Initial Distribution. – On or before January 15, 1989, the governing body of each county and each city shall furnish to the Secretary a list of (i) all the inventories owned by manufacturers that were required to be listed and assessed as of January 1, 1987, and were listed on or before September 1, 1987, in the county or city under this Subchapter; (ii) all livestock and poultry and feed used in the production of livestock and poultry that was required to be listed and assessed as of January 1, 1987, and was listed on or before September 1, 1987, in the county or city under this Subchapter; (iii) all the crops and other agricultural or horticultural products held for sale, whether in process or ready for sale, owned by taxpayers regularly engaged in the growth, breeding, raising, or other production of new products for sale, that were not included under subdivision (ii) above and that were required to be listed and assessed as of January 1, 1987, and were listed on or before September 1, 1987, in the county or city under this Subchapter; (iv) in the case of a city, all the inventories owned by manufacturers that were located as of January 1, 1987, in an area for which the city began annexation proceedings before September 1, 1987, and which became a part of the city after January 1, 1987, and before January 1, 1988; and (v) in the case of a city, all the inventories owned by manufacturers that were located as of January 1, 1987, in an area for which the city began annexation proceedings before September 1, 1987, and which became a part of the city after January 1, 1988, and before July 1, 1990. The list shall contain the value of the inventories and other items as well as the property tax rates in effect in the county or city for the eight years from 1980 through 1987. The list shall also contain the property tax rates in effect for those years in each special district for which the county or city collected taxes in 1987 but whose tax rates were not included in the rates listed for the county or city, and the value of the inventories owned by manufacturers and other items described in subdivisions (ii) and (iii) above that were required to be listed and assessed as of January 1, 1987, and were listed on or before September 1, 1987, in that district. The list shall be accompanied by an affidavit attesting to the accuracy of the list and shall be on a form prescribed by the Secretary.
On or before March 20, 1989, the Secretary shall pay to each county and city that submitted a list under this subsection an amount equal to the county or city average rate, as provided below, multiplied by the value of the inventories described in subdivisions (i) and (iv) above contained in the list submitted by the city or county, plus or minus the percentage of this product that equals the percentage by which State personal income has increased or decreased during the most recent 12‑month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce.
On or before March 20, 1989, the Secretary shall also pay to each county and city that submitted a list under this subsection an amount equal to the average rate, as provided below, for each special district for which the county or city collected taxes in 1987, but whose tax rates were not included in the county or city's rates, multiplied by the value of the inventories owned by manufacturers that were required to be listed and assessed as of January 1, 1987, and were listed on or before September 1, 1987, in the district, plus or minus the percentage of this product that equals the percentage by which State personal income has increased or decreased during the most recent 12‑month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce.
The Secretary shall calculate an average rate for each county and city, and for each special district whose tax rates were not included in the tax rates of a county or city, as the arithmetic mean of the property tax rates in effect in the county, city, or district for the eight years from 1980 through 1987. If a county, city, or district did not have tax rates in effect for the entire eight‑year period, the average rate shall be the arithmetic mean of the property rates in effect for the years during the eight‑year period that it did have rates in effect.
Of the funds received by each county and city pursuant to this subsection, the portion that was received because the county or city was collecting taxes for a special district (either because the district's tax rate was included in the city or county's rate or because the Secretary paid the county or city the product of the district's average rate and the value of the inventories in the district) shall be distributed among the districts in the county or city as soon as practicable after the city or county receives funds under this subsection. The county or city shall distribute to each special district in the county or city an amount equal to the average rate for the district multiplied by the value of the inventories owned by manufacturers that were required to be listed and assessed as of January 1, 1987, and were listed on or before September 1, 1987, in the district, plus or minus the percentage of this product that equals the percentage by which State personal income has increased or decreased during the most recent 12‑month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce. The Local Government Commission may adopt rules for the resolution of disputes and correction of errors in the distribution among special districts provided in this paragraph. The Local Government Commission shall report to the 1990 General Assembly any errors it discovers in the information furnished by local governments to the Secretary as required in this subsection.
(b)	Subsequent Distributions. – As soon as practicable after January 1, 1990, the Secretary shall pay to each county and city the amount it received under subsection (a) in 1989 plus an amount equal to the county or city average rate multiplied by the value of the items described in subdivisions (ii) and (iii) of subsection (a) that were required to be listed and assessed as of January 1, 1987, and were listed on or before September 1, 1987, in the county or city, plus or minus the percentage of this product that equals the percentage by which State personal income has increased or decreased during the most recent 12‑month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce. As soon as practicable after January 1, 1990, the Secretary shall also pay to each county and city an amount equal to the average rate for each special district for which the county or city collected taxes in 1987, but whose tax rates were not included in the county or city's rates, multiplied by the value of the items described in subdivisions (ii) and (iii) of subsection (a) that were required to be listed and assessed as of January 1, 1987, and were listed on or before September 1, 1987, in the district, plus or minus the percentage of this product that equals the percentage by which State personal income has increased or decreased during the most recent 12‑month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce. As soon as practicable after January 1, 1991, except as provided in subsection (f), the Secretary shall pay to each county and city the amount it received under this section the preceding year plus an amount equal to the county or city average rate multiplied by the value of the items described in subdivision (v) of subsection (a) contained in the list submitted by the county or city, plus or minus the percentage of this product that equals the percentage by which State personal income has increased or decreased during the most recent 12‑month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce. As soon as practical after January 1, 1992, except as provided in subsection (f), the Secretary shall distribute to each county and city the amount it received under this section the preceding year. On or before April 30, 1993, except as provided in subsection (f), the Secretary shall distribute to each county and city ninety‑nine and eighty‑one one‑hundredths percent (99.81%) of the amount it received under this section the preceding year. Thereafter, until August 1995, except as provided in subsection (f), on or before April 30 of each year, the Secretary shall distribute to each county and city the amount it received under this section the preceding year. On or before August 30, 1995, the Secretary shall determine for each county and city the amount it received in April 1995 under this section. Each year thereafter, until July 1, 2003, except as provided in subsection (f), the Secretary shall distribute to each county and city fifty percent (50%) of this amount on or before September 30 and the remaining fifty percent (50%) on or before the following April 30. Beginning August 1, 2003, and each August 1 thereafter, the Secretary shall distribute to each city the amount it was entitled to receive under this section the previous August 1. Beginning April 30, 2004, and each April 30 thereafter, the Secretary shall distribute to each city the amount it was entitled to receive under this section the previous April 30.
Of the funds received by each county and city pursuant to this subsection in 1990, the portion that was received because the county or city was collecting taxes for a special district (either because the district's tax rate was included in the city or county's rate or because the Secretary paid the county or city the product of the district's average rate and the value of the inventories and other items in the district) shall be distributed among the districts in the county or city as soon as practicable after the city or county receives the funds. The county or city shall distribute to each special district in the county or city the amount it distributed to the district in 1989 plus an amount equal to the average rate for the district multiplied by the value of the items, other than inventory, described in subdivisions (ii) and (iii) of subsection (a) that were required to be listed and assessed as of January 1, 1987, and were listed on or before September 1, 1987, in the district, plus or minus the percentage of this product that equals the percentage by which State personal income has increased or decreased during the most recent 12‑month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce.
Each year thereafter, until August 1995, as soon as practicable after receiving funds under this subsection, every county and city shall distribute among the special districts for which the county or city collects tax an amount equal to the amount it distributed among such districts the previous year. Each year thereafter, as soon as practical after receiving funds under this subsection in September, every  city shall distribute among the special districts for which the  city collects tax an amount equal to fifty percent (50%) of the amount it distributed among those districts in April 1995, and as soon as practicable after receiving funds under this subsection in April, every  city shall distribute among the special districts for which the  city collects tax an amount equal to fifty percent (50%) of the amount it distributed among  those districts in April 1995.
The Local Government Commission may adopt rules for the resolution of disputes and correction of errors in the distribution among special districts provided in this subsection. In addition, the Local Government Commission may adopt rules for the reallocation of funds when a special district is dissolved, merged, or consolidated, or when a special district ceases to levy tax, either temporarily or permanently.
(c)	Use. – Funds received by a  city or special district under this section may be used for any lawful purpose.
(d)	"City" Defined. – As used in this section, the term "city" has the same meaning as in G.S. 153A‑1(1).
(e)	Source of Funds. – To pay for the distribution required by this section and the cost to the Department of Revenue of making the distribution, the Secretary of Revenue shall draw from collections received under Part 1 of Article 4 of this Chapter an amount equal to the amount distributed and the cost of making the distribution.
(f)	Correction of Errors. – If the Secretary discovers that the amount or value of any inventories or other items listed by a  city pursuant to subsection (a) of this section was overstated or understated, the Secretary shall adjust the amount to be distributed under subsection (b) as follows. For the distribution to be made in the year following discovery of the overstatement or understatement, the Secretary shall distribute to the  city the amount it would have received under subsection (b) in 1993 if it had not overstated or understated the amount or value of any inventories or other items, plus the total amount it failed to receive in 1989 and subsequent years due to understatement of the amount or value of the inventories or other items, or minus the total amount it received in 1989 and subsequent years due to overstatement of the amount or value of the inventories or other items. Thereafter, each year the Secretary shall distribute to the  city the amount it would have received under subsection (b) in 1993 if it had not overstated or understated the amount or value of any inventories or other items."
SECTION 5.  Effective July 1, 2003, G.S. 105‑277.1A reads as rewritten:
"§ 105‑277.1A.  Property classified for taxation at reduced valuation; duties of tax collectors; reimbursement of  cities for portion of tax lost.
(a)	On September 1, 1990, the tax collector of each county and the tax collector of each city shall furnish to the Secretary of Revenue a list containing the name and address of each person who has qualified in that year for the exemption provided in G.S. 105‑277.1. The list shall also contain for each name the total amount of property exempted, the tax rate the property is subject to, and the product obtained by multiplying those two numbers by each other. The lists shall be accompanied by an affidavit attesting to the accuracy of the list and shall all be on a form prescribed by the Secretary of Revenue.
	(b)	Repealed by 1996, Second Extra Session, c. 18, s. 15.1(c).
(c)	The Secretary of Revenue may, for cause, grant an extension for the submission of a list required by this section.
(d)	Before May 31, 1991, the Secretary of Revenue shall distribute to the county or city fifty percent (50%) of the total for the entire list provided pursuant to subsection (a) of this section of the product obtained by multiplying the tax exemption for each taxpayer times the applicable tax rate. Each year thereafter, on or before May 31, until May 2004, the Secretary of Revenue shall pay to each county and city that was entitled to receive a distribution under this subsection in 1991 the amount it was entitled to receive in 1991. Beginning May 31, 2004, and each May 31 thereafter, the Secretary shall pay to each city that was entitled to receive a distribution under this subsection in 1991 the amount it was entitled to receive in 1991.
	(e)	Any funds received by any  city pursuant to this section because the  city was collecting taxes for another unit of government or special district shall be credited to the funds of that other unit or district in accordance with regulations issued by the Local Government Commission.
(f)	In order to pay for the reimbursement under this section and the cost to the Department of Revenue of administering the reimbursement, the Secretary of Revenue shall draw from collections received under Part 1 of Article 4 of this Chapter an amount equal to the reimbursement and the cost of administration."
SECTION 6.  Effective July 1, 2004, G.S. 105‑277.001 reads as rewritten:
"§ 105‑277.001.  Reimbursement for exclusion of retailers' and wholesalers' inventories.
(a)	Submission of Claims. – On or before January 15, 1989, the governing body of each county and city shall furnish to the Secretary a list of all the inventories owned by retailers and wholesalers that were required to be listed and assessed as of January 1, 1987, and were listed on or before September 1, 1987, in the county or city under this Subchapter. The list shall contain the value of the inventories as well as the property tax rates in effect in the county or city for the eight years from 1980 through 1987. The list shall also contain the property tax rates in effect for those years in each special district for which the county or city collected taxes in 1987 but whose tax rates were not included in the rates listed for the county or city, and the value of the inventories owned by retailers and wholesalers that were required to be listed and assessed as of January 1, 1987, and were listed on or before September 1, 1987, in that district. The list shall be accompanied by an affidavit attesting to the accuracy of the list and shall be on a form prescribed by the Secretary.
The Secretary shall calculate an average rate for each county and city, and for each special district whose tax rates were not included in the tax rates of a county or city, as the arithmetic mean of the property tax rates in effect in the county, city, or district for the eight years from 1980 through 1987. If a county, city, or district did not have tax rates in effect for the entire eight‑year period, the average rate shall be the arithmetic mean of the property rates in effect for the years during the eight‑year period that it did have rates in effect.
(b)	First Per Capita Distribution. – As soon as practicable after January 1 of 1989, the Secretary shall distribute to each taxing unit the unit's per capita share of the sum of fifteen million seven hundred forty‑five thousand dollars ($15,745,000). Thereafter, as soon as practicable after January 1 of 1990 and 1991, the Secretary shall distribute to each taxing unit the unit's per capita share of an amount equal to the sum distributed to all taxing units the previous year under this subsection plus or minus the product of the sum distributed the previous year and the percentage by which State personal income has increased or decreased during the most recent 12‑month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce.
On or before April 30 of 1992, 1993, 1994, and 1995, the Secretary shall distribute to each taxing unit the unit's per capita share of the sum that this subsection provided was to be distributed to all taxing units in 1991. Beginning August 1995 and each year  thereafter until July 1, 2004, the Secretary shall determine for each taxing unit the unit's per capita share of the sum that this subsection provided was to be distributed to all taxing units in 1991. Each  year until July 1, 2004, the Secretary shall distribute to each taxing unit fifty percent (50%) of this share on or before September 30 and the remaining fifty percent (50%) of this share on or before the following April 30. Beginning September 30, 2004, and each September 30 thereafter, the Secretary shall distribute to each city the amount it was entitled to receive under this subsection the previous September 30. Beginning April 30, 2005, and each April 30 thereafter, the Secretary shall distribute to each city the amount it was entitled to receive under this subsection the previous April 30.

A city  that receives funds under this subsection and that collects taxes for another taxing unit shall distribute part of the taxes received by it to the taxing unit for which it collects tax. The distribution shall be made on the basis of the proportionate amount of ad valorem taxes levied, for the most recent fiscal year beginning July 1, by the city  and by all the taxing units for which the city  collects tax. This distribution shall be made as soon as practicable after a city  receives funds from the State under this section.
(c)	Second Per Capita Distribution. – On or before March 20, 1989, the Secretary shall allocate to each county the county's per capita share of the sum of thirty‑nine million dollars ($39,000,000).
Each year thereafter through April 1995, on or before April 30, the Secretary of Revenue shall allocate to each county the amount it received the previous year under this subsection. On or before August 30, 1995, the Secretary shall determine for each county the amount it received in April 1995 under this subsection. Each year thereafter, until July 1, 2004, the Secretary shall distribute fifty percent (50%) of this amount to each county on or before September 30 and the remaining fifty percent (50%) to each county on or before the following April 30. Beginning September 30, 2004, and each September 30 thereafter, the Secretary shall allocate to each county the amount allocated to it under this subsection the previous September 30. Beginning April 30, 2005, and each April 30 thereafter, the Secretary shall allocate to each county the amount allocated to it under this subsection the previous April 30.
Amounts allocated to a county under this subsection shall in turn be allocated between the county and the cities located in the county in proportion to the total amount of ad valorem taxes levied by each during the fiscal year preceding the distribution. For the purposes of this section, the amount of the ad valorem taxes levied by a county or city shall include any ad valorem taxes collected by the county or city in behalf of a special district. For the purpose of computing the allocation for any year with respect to which the property valuation of a public service company is the subject of an appeal and the Department of Revenue is restrained by law from certifying the valuation to the appropriate counties and cities, the Department shall use the latest property valuation of that public service company that has been certified.
The Secretary shall distribute to each city the amounts allocated to it under this subsection. Amounts allocated to counties shall not be distributed but shall remain in the General Fund.
The governing body of each city shall report to the Secretary of Revenue any information the Secretary requests in order to make the distribution under this subsection. If a city fails to make a requested report within the time prescribed, the Secretary may disregard that city and the other taxing units in the city in making the distribution.
(c1)	Claims‑based Distribution. – On or before March 20, 1989, the Secretary shall distribute to each county and city an amount equal to the amount by which the county or city's inventory loss, as defined in subsection (d) of this section, exceeds the amount of the reimbursement received by the county or city under subsection (c) of this section.
Except as provided in subsection (g) of this section, each year thereafter through April 1995, on or before April 30, the Secretary shall distribute to each county and city the amount it received the previous year under this subsection. On or before August 30, 1995, the Secretary shall determine for each county and city the amount it received in April 1995 under this subsection. Each year thereafter, until July 1, 2004, the Secretary shall distribute fifty percent (50%) of this amount to each county and city on or before September 30 and the remaining fifty percent (50%) of this amount to each county and city on or before the following April 30.
Beginning September 30, 2004, and each September 30 thereafter, the Secretary shall distribute to each city the amount it was entitled to receive under this subsection the previous September 30. Beginning April 30, 2005, and each April 30 thereafter, the Secretary shall distribute to each city the amount it was entitled to receive under this subsection the previous April 30.
(c2)	Supplemental Distribution. – On or before March 20, 1989, the Secretary shall determine, with respect to each county and city, whether the sum of (i) the amount the county or city received under subsection (c), plus (ii) the amount the county or city received under subsection (c1), plus (iii) three and four‑tenths percent (3.4%) of the total distribution received by the county or city under G.S. 105‑472, 105‑486, 105‑501, and Chapter 1096 of the 1967 Session Laws between January 1, 1988, and December 31, 1988, is less than ninety percent (90%) of the amount of taxes the county or city actually levied on inventories owned by retailers and wholesalers for the 1987‑88 tax year. If that sum is less than ninety percent (90%) of the amount of taxes the county or city actually levied on those inventories for the 1987‑88 tax year, the Secretary shall distribute to that county or city a supplemental amount equal to the amount by which ninety percent (90%) of the taxes it actually levied on inventories owned by retailers and wholesalers for the 1987‑88 tax year exceeds the total of subdivisions (i), (ii), and (iii).
Except as provided in subsection (g) of this section, each year thereafter through April 1995, on or before April 30, the Secretary shall distribute to each county and city the amount it received the previous year under this subsection. On or before August 30, 1995, the Secretary shall determine for each county and city the amount it received in April 1995 under this subsection. Each year thereafter, until July 1, 2004, the Secretary shall distribute fifty percent (50%) of this amount to each county and city on or before September 30 and the remaining fifty percent (50%) of this amount to each county and city on or before the following April 30.
Beginning September 30, 2004, and each September 30 thereafter, the Secretary shall distribute to each city the amount it was entitled to receive under this subsection the previous September 30. Beginning April 30, 2005, and each April 30 thereafter, the Secretary shall distribute to each city the amount it was entitled to receive under this subsection the previous April 30.
(c3)	Distribution to Special Districts. – Of the funds received by each  city pursuant to subsections (c), (c1), and (c2) of this section, the portion that was received because the  city was collecting taxes for a special district shall be distributed among the districts in the  city in proportion to the amount of each special district's inventory levy, as defined in subsection (d) of this section, as soon as practicable after the city  receives funds under this subsection. The Local Government Commission may adopt rules for the resolution of disputes and correction of errors in the distribution among special districts provided in this paragraph. In addition, the Local Government Commission may adopt rules for the reallocation of funds when a special district is dissolved, merged, or consolidated, or when a special district ceases to levy tax, either temporarily or permanently.
(d)	Definitions. – The following definitions apply in this section:
(1)	"City" has the same meaning as in G.S. 153A‑1(1).
(2)	"City's inventory loss" means the city's average rate multiplied by eighty percent (80%) of the value of the inventories reported to the Secretary under subsection (a) of this section by the city, plus the average rate for each special district for which the city collected taxes in 1987, but whose tax rates were not included in the city's rates, multiplied by eighty percent (80%) of the value of the inventories reported to the Secretary under subsection (a) of this section in behalf of the district, plus or minus the percentage of this amount that equals the lesser of five percent (5%) or the percentage by which State personal income has increased or decreased during the most recent 12‑month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce, minus three and four‑tenths percent (3.4%) of the total distribution received by the city under G.S. 105‑472, 105‑486, 105‑501, and Chapter 1096 of the 1967 Session Laws between January 1, 1988, and December 31, 1988.
	
(4)	"Special district's inventory levy" means the special district's average rate multiplied by eighty percent (80%) of the value of the inventories reported to the Secretary under subsection (a) of this section in behalf of the district.
(5)	"Taxing unit" means a unit that levied a property tax or for which another unit collected a property tax for the fiscal year preceding the fiscal year a distribution is made under this section.
(e)	Population Estimates. – In making the per capita calculations under this section, the Secretary shall use the most recent annual population estimates certified by the State Planning Officer.
(f)	Source of Funds. – To pay for the distribution required by this section and the cost of making the distribution, the Secretary shall draw from collections received under Part 1 of Article 4 of this Chapter an amount equal to the amount distributed and the cost of making the distribution.
(g)	Correction of Errors. – If the Secretary discovers that the amount or value of any inventories listed by a  city pursuant to subsection (a) of this section was overstated or understated, the Secretary shall adjust the amount to be distributed under subsections (c1) and (c2) as follows. For the distribution to be made in the year following discovery of the overstatement or understatement, the Secretary shall distribute to the city the amount it would have received under subsections (c1) and (c2) in 1989 if it had not overstated or understated the amount or value of any inventories, plus the total amount it failed to receive in 1989 and subsequent years due to understatement of the amount or value of the inventories, or minus the total amount it received in 1989 and subsequent years due to overstatement of the amount or value of the inventories. Thereafter, each year the Secretary shall distribute to the  city the amount it would have received under subsections (c1) and (c2) in 1989 if it had not overstated or understated the amount or value of any inventories."
SECTION 7.  Section 1 of this act becomes effective July 1, 2002. Except as otherwise provided in this act, the remainder of this act is effective when it becomes law.