New report documents North Carolina’s ongoing school finance shortcomings

A new report confirms what policymakers have long known: North Carolina’s school funding system is among the country’s worst.

Last week, some of the nation’s top school finance experts from the Albert Shanker Institute and Rutgers University published the latest edition of their annual report “The Adequacy and Fairness of State School Finance Systems.” Similar to October’s report from the Education Law Center, this new report examines each state along three measures of school funding: fiscal effort, adequacy, and progressivity.

In addition to the full report, the researchers have published state profiles (click here for North Carolina), and a wealth of data visualization tools.

According to the analysis, North Carolina’s school finance system receives poor marks for fiscal effort and adequacy. The state gets average marks for progressivity.

In terms of effort, North Carolina dedicated just 2.77 percent of it’s economic capacity (GSP) to public schools in FY 2019, compared to 3.45 percent in the average state. With a 2019 GSP of $591 billion, this implies that North Carolina would have needed to increase its school spending by over $4 billion to make the average effort of other states.

In terms of funding adequacy, the report found spending inadequate across the board, with 84.4 percent of students attend districts with inadequate spending levels. The problem is particularly dire in North Carolina’s highest-poverty districts. Spending in highest-poverty districts is estimated to be 40 percent ($7,017 per pupil) below the levels estimated necessary to meet the low bar of U.S. average test scores.

North Carolina receives moderately positive marks for progressivity. Higher-poverty districts receive 7.2 percent more revenue than zero-poverty districts. As explained above, however, this mild degree of progressivity is far below what’s estimated necessary to achieve national average levels of student achievement.

The authors assign North Carolina’s school finance system an overall score that ranks a lowly 46th out of the 48 states with possible ratings. Read more

New education budget fails to address students’ basic needs

When the General Assembly convened back in January, their assignment was to enact an education budget that put the state on the path towards providing students with “sound basic” schools by 2028. The state’s long-running Leandro court case even provided legislators with a step-by-step guide to the investments and policy changes necessary to complete the assignment.

With this week’s unveiling of the conference budget proposal – four and half months past its due date – we know the assignment was not only late, but woefully incomplete.

The key takeaway from this budget is that it fails to fund the Leandro Comprehensive Remedial Plan. In June, Superior Court judge W. David Lee ordered the state to implement the plan in full. After several months of foot-dragging and secret negotiations, the General Assembly’s budget falls far short. The budget funds just 53 percent of the Plan in FY 21-22, falling to 43 percent in FY 22-23 (full detail can be found here).

To the extent that this budget proposal funds items from the Leandro Plan, they are almost entirely concentrated in educator pay raises that barely keep pace with inflation. At a time when the core consumer price index has risen 4.6 percent over the prior year, the budget will provide teachers with an average raise of just 2.5 percent in each year of the biennium. Read more

Without legislative action NC schools could soon lose $132 million

The pandemic has created untold new challenges for our public schools. From managing multiple modes of delivery, being forced into making public health decisions, absorbing abuse from unhinged parents, addressing widespread student trauma, and coping with widespread staff vacancies…the last thing our schools need is for lawmakers to add to their plate. But if the General Assembly fails to act soon, North Carolina schools may see destabilizing mid-year budget reductions totaling $132 million.

Under state law and State Board policy, district budgets are reduced mid-year if enrollment falls short of anticipated levels. According to initial enrollment data released late last week, actual enrollment in the first month of school fell substantially below anticipated levels in 95 of the state’s 115 school districts. Unless there’s an odd uptick in enrollment in the next month’s data, these districts will see their state funding – already amongst the lowest in the nation – reduced by a further $132 million.

A final decision on budget reductions will not be made until data is collected for the second month of school. But if there is no change in the enrollment data – and past years show very little change – then the following would occur:

  • 95 of 115 LEAs would see their allotments reduced.
  • In total, LEAs would lose about $132.3 million.
  • Charlotte Mecklenburg Schools would experience the largest dollar reduction: $15.2 million, or the equivalent of about 220 teachers
  • Asheville City would experience the biggest percent reduction at 3.6 percent. Tyrell and Bertie Counties follow behind Asheville City with reductions of 3.5 percent and 3.2 percent, respectively.
  • The average Black student’s district would see a budget reduction of 1.58 percent while the average white student’s district would experience a reduction of just 1.37 percent.

See how your district would be impacted here.

In a normal year, there is some logic to making mid-year budget adjustments based on enrollment: the budget reductions in districts with lower-than-expected enrollment help provide additional funds to the districts with higher-than-expected enrollment.

However, this year, only six districts have initial enrollment levels that meet the criteria to be considered for possibly receiving additional funding. Unlike the laws governing budget reductions for lower-than-expected enrollment, additional funding for districts with higher-than-expected enrollment is not automatic. Budget increases are at the discretion of the Department of Public Instruction.

A detailed description of the state’s policy on calculating enrollment-based budget adjustments can be found here.

Legislators can still act before these destabilizing budget reductions are implemented. They can simply extend the prohibition against mid-year enrollment-based school budget adjustments from last year or adopt the language included in this year’s Senate budget proposal (see Section 7.23). If the language is not included in the soon-to-be-released conference budget proposal, legislators can include the language in a stand-alone bill.

Kris Nordstrom is a Senior Policy Analyst in the North Carolina Justice Center’s Education & Law project.

National experts continue to give NC failing grades on school funding

For the past decade, North Carolina’s legislative leaders have prioritized tax cuts over providing students with public schools that meet constitutional standards. The obvious results of these misguided policy priorities have been documented by researchers at the Education Law Center, who show that North Carolina’s school finance system is among the worst in the nation.

Education Law Center’s Making the Grade 2021 report rates all 50 states and the District of Columbia along three important measures of school funding:

  1. Funding level: Per-pupil revenue from state and local sources, adjusted for regional differences in labor costs
  2. Funding distribution: The extent to which additional funds are distributed to school districts with high levels of student poverty
  3. Funding effort: Funding allocated to support PK-12 public education as a percentage of the state’s GDP

North Carolina earns a grade of F for funding level, with just four states having a lower funding level. North Carolina’s cost-adjusted per-student funding level ($10,595) falls a whopping 43 percent short of the national average ($15,114).

The state receives middling marks for funding distribution, with highest-poverty districts receiving just slightly more funding (about 7 percent) than the lowest-poverty districts. Read more