Summary — HB 490 (Propel NC Funding and Tuition Surcharge)
Status: Passed 1st Reading (North Carolina House)
Introduced: March 24–25, 2025
Effective date: July 1, 2025 (section indicates full act effective that date)
Purpose
- Directs the State Board of Community Colleges (SBCC) to revise the community college funding formula to align with the “Propel NC” model (a base allocation plus enrollment- and workforce-weighted funding).
- Establishes an Enrollment Increase Reserve to respond to unexpected enrollment growth.
- Authorizes community colleges to impose a limited local tuition/fee surcharge to support instruction.
Key provisions
Part I — Revise funding model
- Repeals specified prior session-law provisions (S.L. 2011‑145 §8.3(b) and S.L. 2013‑360 §10.4(a)).
- Requires SBCC to implement a revised funding formula for FY 2025–26 that, at minimum:
- Maintains a base allocation for each college; and
- Provides additional funds based on FTE enrollment in: curriculum, workforce continuing education, Basic Skills, Customized Training Program courses, and Small Business Center Network programming.
- Allocations for enrollment are to be weighted by workforce sector; the SBCC must consider salary data and labor market demand when assigning weights.
- SBCC must review and, if needed, revise workforce sector designations by July 15, 2028, and every three years thereafter.
- Reporting: Community Colleges System Office to report to the Joint Legislative Education Oversight Committee by April 1, 2027 on the revised funding formula and implementation.
- Appropriation: $93,019,556 recurring from the General Fund to the SBCC for 2025–26 to implement the funding formula changes.
Part II — Enrollment Increase Reserve
- Establishes an Enrollment Increase Reserve administered by SBCC.
- Reserve funding consists of General Fund appropriations included in annual operations requests; monies do not revert at fiscal year end.
- Eligibility for allocations: a college with either (a) >5% increase in FTE in curriculum, workforce continuing education, or Basic Skills versus budgeted levels; or (b) an increase of more than 325 total FTE students.
- Appropriation: $6,000,000 recurring to the Reserve for 2025–26.
Part III — Local tuition and fee surcharge
- Allows a community college to implement a local surcharge up to 10% of the statewide tuition rate (for curriculum) or fee rate (for workforce continuing education registration).
- All enrolled students in affected courses must be charged the surcharge, except those whose tuition/registration is waived by law or regulation.
- Use restriction: surcharge revenues may be used only for instruction in curriculum, workforce continuing education, or Basic Skills (no noninstructional uses).
- Transparency: SBCC must report no later than February 15, 2026, and annually thereafter to the Joint Legislative Education Oversight Committee on all surcharge expenditures; reports must disaggregate spending by curriculum, workforce continuing education, and Basic Skills.
- SBCC required to adopt implementing rules.
Who is affected
- Public community colleges and the State Board of Community Colleges (administration, budgeting, reporting).
- Students (potential local surcharge up to 10% on tuition/registration for certain courses).
- State budget (recurring appropriations: $93.02M for formula implementation; $6.0M for enrollment reserve).
- Employers and labor-market planners (through workforce-aligned weighting and sector designation reviews).
Potential impacts and considerations
- Shifts a portion of funding to enrollment-and workforce-weighted allocations intended to better match college funding with labor-market demand.
- Provides targeted resources to colleges experiencing rapid enrollment increases.
- Grants colleges local flexibility to raise instructional revenue but could increase student costs modestly where surcharges are adopted.
- Requires SBCC rulemaking and reporting; implementation costs are addressed by the appropriations included for FY 2025–26.
Key deadlines / oversight
- Revised funding formula to be implemented beginning FY 2025–26.
- SBCC report on formula revisions due April 1, 2027.
- Workforce sector review due by July 15, 2028, and every three years thereafter.
- First annual surcharge expenditure report due Feb 15, 2026, then annually.
