This second annual report details North Carolina's performance and progress since 2000 in the five goal areas: high student performance; every child ready to learn; safe, orderly, and caring schools; quality teachers and administrators; and strong family, business, and community support. Over the years, North Carolina's education system has continued a steady climb that made the state number one in educational progress during the 1990s. Although the gains were modest, the advance was nearly unbroken across many different indicators of system performance, and the improvements were large enough to raise the grades on three of the five First in America Goals (high student performance; safe, orderly, and caring schools; and strong family, business, and community support). Several new indicators were added to this year's report, including National Assessment of Educational Progress grade 4 science assessment, percentage of students promoted having met state grade level standards in reading and mathematics, percentage of 25- to 44-year-old high school graduates enrolled full- or part-time in higher education, average size of classes in kindergarten through grade 3, and infant mortality rate. Two appendices present computation of the First in America grades and the First in America survey methodology. (SM)