Back to School Series, NC Budget and Tax Center

Nip and tuck: Leadership’s financing strategy for public education

This is part of a Back to School blog series that highlight various issues to be aware of as the 2014-15 school year kicks off. (See Part 1 and Part 2)

This week, more than 1.5 million North Carolina’s students headed back to school to underfunded classrooms. For yet another school year, teachers will do their best to prepare today’s students to grow into critical thinkers and succeed as workers in a demanding 21st century economy with too few resources available. Legislative leadership and the Governor approved a budget that fails to make up lost ground in public education, keeping spending below the last budget that was in place before the Great Recession.

In fact, when the pay raises for teachers are properly placed in the salaries and reserves section of the General Fund budget and not the public education section—a practice that has long been in place—public education spending in the new budget is below last year’s spending levels (see graphic below). This certainly is not progress, but rather sliding backwards with a budget trick used as cover.

Five years into the recovery from the worst economic downturn since the 1930s, catching up and keeping up with the needs of North Carolina’s students is stalled due to the fact that lawmakers chose to enact a tax plan last year that keeps the state from replacing the most damaging cuts to public investments. The 2013 tax plan is draining available resources—$5.4 billion over five years—that is needed to regain lost ground and reinvest in the building blocks of a strong economy. The tax plan’s impact is evident throughout the final budget for fiscal year 2015.

Back to School Blog Series_Graphic

The costly tax plan is not only keeping the state from replacing the most harmful cuts—such as professional development training for teachers, mentoring programs, and dropout prevention grants—but it is also forcing new cuts to programs that help boost student outcomes. Lawmakers chose to cut funding for at-risk student services program by more than $9 million, making it more difficult for vulnerable populations to receive targeted assistance and graduate on time. They also chose to cut the budget for Teacher Assistants compared to previously-enacted levels and force another round of cuts to transportation services that ensure students get from home to school and home again.

On the expansion side, lawmakers chose to reverse their previous decision to increase class sizes for Kindergarten and Grade 1.  They also slightly expanded textbook funding by just under $1 million—however, spending remains roughly three-quarters of what it was for fiscal year 2010 when adjusted for inflation. Lawmakers could have restored funding to even more vital parts of the education system absent the tax plan, but instead they faced a self-imposed budget crisis that thwarts progress.

Furthermore, lawmakers forced their own hand with the tax plan’s deep revenue losses and as a result, they are now relying more and more on lottery dollars to plug the funding gap. This funding source is unsustainable, meaning it can’t be relied on in future years, not to mention that lottery dollars are regressive because low- and moderate-income folks are hit the hardest. This is not the way lawmakers should fund public education—a position that the NC Budget and Tax Center has long held.

Spending matters in the classroom when it comes to providing students a high-quality education, according to a considerable body of research. That’s why my colleagues dubbed the spending in public education as “Smart Money” in their well-respected report—it is one of the best investments that the state can make to increase economic mobility and build a stronger economy for all. The report reads:

“The reality is that while spending alone cannot guarantee student success, widespread increased performance is not possible without such investment.”

“The evidence shows that funding levels matter and that a more equitable distribution of school funding can improve student performance.”

The bottom line is that the tax plan is the primary reason why North Carolina’s teachers and students are still facing cuts to certain programs and dealing with other programs that are severely underfunded. Failing to raise adequate revenues is not the way to build a stronger economy or boost student performances so that they are well-prepared to become tomorrow’s workforce. As such, lawmakers should seriously revisit the tax plan they passed last year.

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