AN ACT to make various changes to the principal fellows program and to codify administrative internship stipends.

The General Assembly of North Carolina enacts:

part i. modify allowable uses of funds for the principal fellows program

SECTION 1.  Article 5C of Chapter 116 of the General Statutes reads as rewritten:

Article 5C.

North Carolina Principal Fellows Program.

§ 116‑74.41.  North Carolina Principal Fellows Commission established; membership.

(a)        There is established the North Carolina Principal Fellows Commission. The Commission shall exercise its powers and duties independently in its administration of the North Carolina Principal Fellows Program in accordance with this Article. The Director of the Program shall staff the Commission in accordance with G.S. 116‑74.49. The State Education Assistance Authority as created in G.S. 116‑203 shall be is responsible for awarding grants upon selection of the recipients by the Commission in accordance with G.S. 116‑74.46 and G.S. 116‑74.46A and executing agreements for forgivable scholarship loans, cancelling through service, collecting, and otherwise enforcing the agreements under G.S. 116‑74.48.

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§ 116‑74.41A.  Definitions.

For the purposes of this Article, the following definitions apply:

(1)        Authority or SEAA. – The State Education Assistance Authority as created in G.S. 116‑203.

(2)        Commission. – The North Carolina Principal Fellows Commission.

(2a)      Developmental grant. – A grant awarded to an eligible entity pursuant to G.S. 116‑74.46A.

(3)        Eligible entity. – A for‑profit or nonprofit organization or an institution of higher education that has an evidence‑based plan for preparing school leaders who implement school leadership practices linked to increased student achievement.

(4)        High‑need local school administrative unit. – A local school administrative unit with the majority of its schools deemed to be high‑need schools as defined in subdivision (5) of this subsection.

(5)        High‑need school. – A public school that meets one or more of the following criteria:

a.         Is a school identified under Part A of Title I of the Elementary and Secondary Education Act of 1965, as amended.

b.         Is a persistently low‑achieving school, as identified by the Department of Public Instruction for purposes of federal accountability.

c.         A middle school containing any of grades five through eight that feeds into a high school with less than a seventy‑five percent (75%) four‑year cohort graduation rate.

d.         A high school with less than a seventy‑five percent (75%) four‑year cohort graduation rate.

(6)        Repealed by Session Laws 2019‑60, s. 1(x), effective July 1, 2021.

(7)        Principal. – The highest administrative official in a public school building with primary responsibility for the instructional leadership, talent management, and organizational development of the school.

(7a)      Principal Fellows grant. – A grant awarded to an eligible entity pursuant to G.S. 116‑74.46.

(8)        Repealed by Session Laws 2019‑60, s. 1(x), effective July 1, 2021.

(9)        Program. – The North Carolina Principal Fellows Program established pursuant to G.S. 116‑74.44.

(9a)      Program participant. – An individual enrolled at an eligible entity that has been awarded a Principal Fellows grant.

(10)      Public school. – An elementary or secondary school located in North Carolina that is operated by a local board of education, charter school board of directors, regional school board of directors, chancellor for a University of North Carolina laboratory school, an innovative school operator, or the United States government.

(11)      School leader. – An individual employed in a school leadership role, including principal or assistant principal roles.

(12)      Student achievement. – At the whole school level, after three years of leading a school, consistent and methodologically sound measures of:

a.         Student academic achievement.

b.         Aggregated individual student academic growth.

c.         Additional outcomes, such as high school graduation rates, the percentage of students taking advanced‑level coursework, or the percentage of students who obtain a career‑related credential through a national business certification exam.

(13)      Trust Fund. – The North Carolina Principal Fellows Trust Fund established pursuant to G.S. 116‑74.41B.

§ 116‑74.41B.  The North Carolina Principal Fellows Trust Fund.

(a)        Trust Fund Established. – The North Carolina Principal Fellows Trust Fund shall be an institutional trust fund established pursuant to G.S. 116‑36.1. All funds appropriated to, or otherwise received by, (i) the Program for the award of Principal Fellows grants pursuant to G.S. 116‑74.44, and developmental grants, (ii) all funds received as repayment of scholarship loans, including under the former Principal Fellows Program administered under G.S. 116‑74.42 and the Transforming Principal Preparation Program under G.S. 116‑209.77, and (iii) all interest earned on these funds shall be placed in the Trust Fund.

(b)        Use of Monies in the Trust Fund. – The monies in the Trust Fund may be used only for the purposes set forth in this subsection, including the award of Principal Fellows grants pursuant to G.S. 116‑74.44, and developmental grants, administrative costs, and costs associated with Program operations in accordance with this Article. The Authority may use up to two percent (2%) of the funds appropriated for the Program or one hundred sixty thousand dollars ($160,000) from the Trust Fund, whichever is greater, each fiscal year for administrative costs, including recovery of funds advanced under the Program, and may allocate to the Commission up to eight hundred thousand dollars ($800,000) from the Trust Fund each fiscal year for the following:

(1)        The salary and benefits of the director and staff of the Program.

(2)        The expenses of the Commission to administer the Program.

(3)        Program monitoring and evaluation.

(4)        Extracurricular enhancement activities for the Program.

(5)        Repealed by Session Laws 2019‑60, s. 1(y), effective July 1, 2021.

(6)        Programming on research‑based school leadership practices to be shared with eligible entities in order to improve principal preparation throughout the State.

(c)        Remaining Funds. – If at the end of each fiscal year there are funds remaining in the Trust Fund that are not obligated or otherwise encumbered for another purpose, upon the request of the Commission, the Authority shall allocate the funds to the Commission for any of the purposes identified in subdivisions (3) through (6) of subsection (b) of this section.

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§ 116‑74.44.  North Carolina Principal Fellows Program established; administration.

(a)        Established. – There is established the North Carolina Principal Fellows Program as a competitive grant program for eligible entities for the purpose of elevating educators in North Carolina public schools by transforming the preparation of principals across the State and providing for forgivable scholarship loans to the participants of those school leader preparation programs. The Authority shall administer the North Carolina Principal Fellows Program in collaboration with the Commission as set forth in this Article to provide funds for the preparation and support of highly effective future school principals in North Carolina.

(b)        Program Administration. – The Commission shall select grant recipients recipients of Principal Fellows grants and developmental grants and notify the Authority for the award of the grants with the Authority acting as the fiscal agent for the Trust Fund with respect to grants awarded by the Commission. The Commission shall also coordinate with Principal Fellows grant recipients to provide extracurricular enhancement activities for program participants. The Authority shall monitor the implementation of forgivable scholarship loans to school leader preparation program participants, as authorized by this Article.

(c)        Administration of Forgivable Scholarship Loans. – Upon the Principal Fellows grant recipients' selection of the program participants for the school leader preparation programs, the Commission shall transfer the names of all program participants to the Authority. The Authority shall perform all of the administrative functions necessary to implement the forgivable scholarship loans to the school leader preparation program participants, which functions shall include rulemaking, disseminating information, acting as a liaison with participating eligible entities, implementing forgivable loan agreements in the form of promissory notes, monitoring loan repayment through service and cash, and performing all other functions necessary for the execution, payment, and enforcement of promissory notes required under this Article.

(d)       Prior Loan Monitoring. – The Authority, in collaboration with the Commission, shall also monitor the implementation of forgivable scholarship loans to school leader preparation program participants executed pursuant to G.S. 116‑209.77, and the Authority shall administer all outstanding forgivable scholarship loans previously awarded and subject to repayment under the former Transforming Principal Preparation Program administered pursuant to Part 4 of Article 23 of this Chapter.

§ 116‑74.45.  Grant Principal Fellows grant applications; priority.

(a)        Application Requirements. – Subject to the availability of funds for this purpose, the Commission shall issue a request for proposal with guidelines and criteria for applying for a Principal Fellows grant. An eligible entity that seeks a Principal Fellows grant shall submit to the Commission an application at such time, in such manner, and accompanied by such information as the Commission may require. Eligible entities may create partnerships to develop and establish school leader preparation programs and apply jointly to be a grant recipient. An applicant shall include at least the following information in its application for consideration by the Commission:

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(b)        Application Priority. – The Commission shall evaluate the applicants for Principal Fellows grants by giving priority to an eligible entity with a record of preparing principals demonstrating the following:

(1)        Improvement in student achievement.

(2)        Placement as school leaders in eligible schools.

(3)        A proposed focus on and, if applicable, a record of serving high‑need schools, high‑need local school administrative units, or both.

(4)        A detailed plan and commitment to share lessons learned and to improve the capacity of other entities in reaching similar outcomes.

(5)        A service area that is underserved by existing principal preparation programs or demonstrates unmet need despite current available programs.

§ 116‑74.46.  Recipient Principal Fellows grant recipient selection; use of grant funds; duration and conditions of grants; reporting requirements.

(a)        Selection. – After evaluation of Principal Fellows grant applications pursuant to G.S. 116‑74.45, the Commission shall notify the Authority of its selection of the recipients of Principal Fellows grants for each fiscal year. The Commission shall select up to eight Principal Fellows grant recipients to be operating a school leader preparation program with grant funds in any fiscal year.

(b)        Use of Funds. – Each eligible entity that receives Principal Fellows grant funds shall use those funds to carry out the following:

(1)        Recruiting and selecting, based on a rigorous evaluation of the competencies of the school leader candidates participating in the program and their potential and desire to become effective school leaders.

(2)        Operating a school leader preparation program that provides the opportunity for all candidates to earn a master's degree, if they do not already have one, and subsequent principal licensure by doing the following:

a.         Utilizing a research‑based content and curriculum, including embedded participant assessments to evaluate candidates before program completion that prepares candidates to do the following:

1.         Provide instructional leadership, such as developing teachers' instructional practices and analyzing classroom and school‑wide data to support teachers.

2.         Manage talent, such as developing a high‑performing team.

3.         Build a positive school culture, such as building a strong school culture focused on high academic achievement for all students, including gifted and talented students, students with disabilities, and English learners; maintaining active engagement with family and community members; and ensuring student safety.

4.         Develop organizational practices, such as aligning staff, budget, and time to the instructional priorities of the school.

b.         Providing opportunities for sustained and high‑quality job‑embedded practice in an authentic setting where candidates are responsible for moving the practice and performance of a subset of teachers or for school‑wide performance as principal‑in‑planning or interim school leaders.

(3)        Collecting data on program implementation and program completer outcomes for continuous program improvement.

(4)        Covering the cost of attendance and completion for program participants for the school leader preparation program from the funds received on behalf of program participants through forgivable scholarship loans issued in accordance with the requirements of G.S. 116‑74.48.

(c)        Duration and Conditions of Principal Fellows Grants. – The Commission shall also notify the Authority of its decisions on the duration and renewal of Principal Fellows grants to eligible entities made in accordance with the following:

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(d)       Reporting Requirements for Grant Recipients. – Recipients of Principal Fellows grants shall participate in all evaluation activities required by the Commission and submit an annual report to the Commission with any information requested by the Commission. The recipients shall comply with additional report requests made by the Commission. Whenever practicable and within a reasonable amount of time, grant recipients shall also make all materials developed as part of the program and with Principal Fellows grant funds publicly available to contribute to the broader sharing of promising practices. Materials shall not include personally identifiable information regarding individuals involved or associated with the program, including, without limitation, applicants, participants, supervisors, evaluators, faculty, and staff, without their prior written consent. The Commission shall work with recipients, local school administrative units, and public schools, as needed, to enable the collection, analysis, and evaluation of at least the following relevant data, within necessary privacy constraints:

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§ 116‑74.46A.  Developmental grants.

(a)        Selection. – Subject to the availability of funds after awarding Principal Fellows grants, the Commission may select up to two eligible entities that did not receive Principal Fellows grants to receive a one‑year developmental grant of up to two hundred fifty thousand dollars ($250,000) per recipient. The Commission shall notify the Authority of selected developmental grant recipients for each fiscal year.

(b)        Use of Funds. – An eligible entity that receives a developmental grant may use those funds for any of the permissible uses of a Principal Fellows grant in G.S. 116‑74.46(b) except for covering the cost of attendance and completion for program participants under G.S. 116‑74.46(b)(4).

(c)        Renewal. – The Commission may renew a developmental grant up to five times based on compliance with the grant terms and performance. The Commission shall notify the Authority of its decisions on the renewal of developmental grants.

(d)       Reporting Requirements for Grant Recipients. – Recipients of developmental grants shall participate in all evaluation activities required by the Commission and, for each year in which developmental grants are received, submit a report to the Commission with any information requested by the Commission. The recipients shall comply with additional report requests made by the Commission.

§ 116‑74.47.  Reports.

The Commission shall provide the State Board of Education, the Authority, and the Joint Legislative Education Oversight Committee with the data collected from grant recipients in accordance with G.S. 116‑74.46 and G.S. 116‑74.46A on an annual basis.

§ 116‑74.48.  Terms of forgivable scholarship loans for program recipients.

(a)        Notes. – A program participant shall be is eligible for a forgivable scholarship loan in the amount of up to twenty thousand dollars ($20,000) per year for up to two years in the program, with a maximum loan amount of forty thousand dollars ($40,000) per participant. All forgivable scholarship loans for school leader preparation program participants shall be evidenced by notes made payable to the Authority that bear interest at a rate not to exceed ten percent (10%) per year as set by the Authority and beginning 90 days after completion of the school leader preparation program, or 90 days after termination of the loan, whichever is earlier. The funds from the forgivable scholarship loan shall be disbursed directly to the Principal Fellows grantee on behalf of the recipient for participation in the school leader preparation program. The forgivable scholarship loan may be terminated upon the recipient's withdrawal from the preparation program or by the recipient's failure to meet the standards set by the Commission or the Principal Fellows grantee.

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(c)        Repayment Period. – The Authority, in collaboration with the Commission and Principal Fellows grantees, shall monitor the acceptability of service repayment agreements and compliance of the recipient with the agreement. The Commission shall notify the Authority of any relevant information or change in the circumstances pertaining to the recipient impacting the enforcement of the promissory note. A forgivable scholarship loan shall also be forgiven if the Commission finds it is impossible for the recipient to work for four years as a school administrator, within seven years after completion of the preparation program supported by the loan, because of the death or permanent disability of the recipient. If the recipient repays the forgivable scholarship loan by cash payments to the Authority, all indebtedness shall be repaid within 10 years after completion of the school leader preparation program supported by the loan. If the recipient completes the school leader preparation program, payment of principal and interest shall begin no later than 27 months after the completion of the program. Should a recipient present extenuating circumstances, the Authority may extend the period to repay the forgivable scholarship loan in cash to no more than a total of 12 years.

§ 116‑74.49.  Staff to the Commission.

The Commission shall appoint a director of the North Carolina Principal Fellows Program. The director shall chair and staff the Commission and shall administer the extracurricular enhancement activities of the Program. The University of North Carolina System Office shall provide office space for the Program. The office space shall not be located on the campus of a constituent institution.

part ii. appropriation for principal fellows program

SECTION 2.  There is appropriated from the General Fund to the North Carolina Principal Fellows Trust Fund the sum of five million dollars ($5,000,000) in recurring funds beginning in the 2026‑2027 fiscal year to increase the number of Principal Fellows candidates supported by the North Carolina Principal Fellows Program in accordance with Article 5C of Chapter 116 of the General Statutes. These funds shall be allocated as follows:

(1)        The sum of two million six hundred thousand dollars ($2,600,000) to be used to bring the number of Principal Fellows candidates receiving funds in the 2028‑2034 award cycle into parity with the number of recipients in other award cycles.

(2)        The sum of two million four hundred thousand dollars ($2,400,000) to expand the number of Principal Fellows candidates supported by the Program with the goal of having fifty‑five percent (55%) of all principals employed in North Carolina be graduates of the North Carolina Principal Fellows Program.

part III. Administrative internship stipends

SECTION 3.  Article 19 of Chapter 115C of the General Statutes is amended by adding the following new section to read:

§ 115C‑284.2.  Administrative internship stipends.

(a)        Definitions. – The following definitions apply in this section:

(1)        Administrative intern. – A participant enrolled full time in an approved administrator preparation program who is completing a full‑time internship pursuant to G.S. 115C‑284.1(d)(1).

(2)        Administrator preparation program or APP. – As defined in G.S. 115C‑284.1(a).

(b)        Stipend. – To the extent funds are made available for this purpose, the Department of Public Instruction shall provide administrative interns with a 10‑month stipend during the internship that is the higher of the following:

(1)        The beginning salary of an assistant principal.

(2)        For a teacher who becomes an administrative intern, the salary the person would earn as a teacher on the teacher salary schedule.

(c)        If the funds made available for the stipends required by this section are insufficient to fully fund the stipends, the Department of Public Instruction may use funds appropriated to the State Public School Fund for this purpose.

(d)       The North Carolina Principal Fellows Program or the APP where the administrative intern is enrolled shall provide the Department of Public Instruction with certification of eligible administrative interns in order to receive the stipends provided pursuant to this section.

(e)        Report. – No later than February 15 of each year, the Department of Public Instruction shall report to the Joint Legislative Education Oversight Committee on the stipends provided pursuant to this section, including at least the following information:

(1)        Demographic information of administrative interns.

(2)        Total number of administrative interns.

(3)        Number of administrative interns who are participating in the North Carolina Principal Fellows Program.

(4)        Number of administrative interns by APP.

(5)        Number of administrative interns who serve as an assistant principal or principal in a public school unit within five years of completing the internship, disaggregated based on whether the intern participated in the North Carolina Principal Fellows Program.

part IV. effective date

SECTION 4.  This act becomes effective July 1, 2026.