As might be expected, education remained a top priority for lawmakers during the 2007 long session. What is perhaps more surprising is that even as education spending increased by 15 percent over the previous year’s budget, the General Assembly neglected to pass legislation aimed at fundamental reform. While the rise in spending is disturbing, progress was made in some areas. The legislature did allow school districts to pilot alternative pay plans for teachers and also called for the development of lateral entry teacher education programs. But all in all, there was little real innovation. Unlike more recent legislative sessions, lawmakers failed to pass any signature pieces of education legislation. The bills that did pass proved limited in scope and financial impact. Many programs funded via the budget also represented a continuation of the same old themes.
What is, perhaps, most noteworthy is the legislation that was left out. The General Assembly failed to pass legislation lifting the cap on charter schools and legislation making charter schools eligible for revenue from the North Carolina Education Lottery. Other bills that failed to pass included: legislation to use nationally-normed achievement tests (SB 1322/HB 494); a bill to create model vocational education legislation (HB 1539); and legislation to return sales tax exemption to schools (HB 67).
FY2007-08 STATE BUDGET AND EDUCATION
With a budget surplus of nearly $1.4 billion, state funding for many education programs hit record levels. In particular, funding for the More at Four program was increased by $56 million. The new EARN Scholars program received $27.6 million in FY2007-08 and another $60 million the following year. Teachers were awarded a 5 percent salary increase. In addition, significant budget increases were provided for at-risk, class size reduction, teacher bonuses, student assistance and work-to-school programs.
Education budget (HB 1473/S.L. 2007-323) highlights included:
- $11.2 billion for K-12 and higher education. This figure represented a nearly 15 percent increase over FY2006-07, when the state spent $9.8 billion on education programs.
- K-12 public education remained the single largest component of all education appropriations, accounting for 68 percent of all education appropriations.
- Since 2006, K-12 appropriations have increased from $6.7 billion to $7.7 billion. Meanwhile, K-12 student enrollment increased only 2 percent.
- Budgets for higher education mirrored spending levels for K-12 education, where spending increased 15 percent. Community colleges and the UNC System received significant budget increases of 13 percent and 17 percent, respectively.
SELECTED K-12 EDUCATION PROVISIONS IN THE BUDGET
Fiscal Impact: Overall K-12 Spending Increased by 15 percent
North Carolina Education Lottery: Amended language gives lottery commissioners more freedom to increase lottery prize money to attract more revenue. Statutory provisions regarding prize payout, percentage of revenue devoted to educa- tion, and advertising limitations are now only “guidelines.” The new changes instruct the Lottery Commission to follow the guidelines to the “extent practicable.”
More at Four: Provided $56 million to expand More at Four, Governor Mike Easley’s (D) prekindergarten daycare program for at-risk four-year-olds. More than half the money ($37.5 million) allocated to More at Four is to backfill shortfalls in lottery revenue. The remaining funds ($18.5 million) will be used to expand the program by 10,000 students. Over the past year, More at Four per student expenditures have increased by $400 per pupil to reach $4,350.
ABC Bonuses: Allocated $70 million in ABC bonuses to teachers and school personnel who met or exceeded expected student achievement growth targets in 2006-07 under the ABC program. While popular with teachers, this program has become increasingly controversial because of costs and how bonuses are distributed. Bonuses are awarded, not at the classroom level, but to all teachers and principals in the school. And in 2005, more than six Guilford County high schools qualified for more than $500,000 in teacher pay bonuses despite being on the governor’s watch list of low-performing schools. Since 1997, ABC bonuses have cost the state nearly $1 billion.
Class Size Reduction: Furnished $37.5 million in FY2007-08 for K-3 teachers to maintain student/teacher ratios at 18:1. The Education Lottery Fund also allocated $90.3 million in FY2007-08 for smaller classes. While millions continue to be spent on class size reduction, research results are inconclusive as to whether smaller class sizes contribute to academic success.
Disadvantaged Student Supplemental Funding (DSSF): Provided an additional $17.5 million to local education agencies (LEAs) to help meet the needs of disadvantaged students not achieving grade level proficiency. DSSF was developed in the wake of the Leandro court case that found that all children in North Carolina have a constitutional right to a “sound, basic education,” and that current state funding was inadequate for the task of educating disadvantaged students. DSSF started out as a pilot in FY2003-04 with 16 schools and a budget of $23 million. Every school in the district now receives DSSF, and in 2007-08 total spending will reach $67.5 million.
Dropout Prevention: Allocated $7 million for school districts to compete for grants to develop dropout prevention programs. Grants, along with other existing funding streams such as DSSF, will provide assistance to potential dropout students. The aim here is to somehow improve North Carolina’s four-year high school graduation rate of 68 percent.
Education Reform: Allocated $4 million in 2007-08 and $7 million in 2008-09 for an education reform pilot program to be administered by the N.C. Public School Forum. The program “will incorporate targeted professional development, afterschool programming, teacher recruitment and retention bonuses, principal achievement bonuses, teacher mentoring, and science and math instructional assistance.”
Teacher and Faculty Pay Increase: The budget provided 5 percent pay raises to public school teachers, judges, community college instructors, and UNC faculty; principals received average increases of 4.4 percent. Also included in the compensation package is $1 million for additional salary increases for teacher assistants and $10 million to add another step to the top of the teacher salary schedule. Most other state employees will receive a 4 percent pay increase.
Learn & Earn: The budget provided $6.4 million to create 12 new Learn & Earn (L&E) high schools over the next two years and make available planning grants for 15 more L&E schools. The Learn & Earn program enables high school students to concurrently enroll in classes in the University of North Carolina or N.C. Community College systems while taking high school courses in an integrated program on a college campus. Students do not pay tuition for the college classes, and they can earn an associate’s degree or two years of transferable credit with just one additional year of school. L&E programs are increasingly attracting traditional students who would attend college anyway, prompting critics of the program to wonder if L&E schools have strayed from their original mission of providing career training for low income students.
Learn & Earn Online: The budget allocates $21.6 million over the next two years for Learn & Earn Online, a new initiative that allows students to take online college courses through the University of North Carolina or community college systems. L&E Online students receive free tuition for online courses at community colleges or designated online universities. Administrators for L&E Online estimate 6,000 students will enroll this fall in community college courses and approximately 4,000 students will enroll in online courses offered by four-year colleges. The estimated cost is about $150 per community college course and $300 per college course.
Fiscal Impact: University Spending Increased by 17 percent; Community College Spending by 13 percent
EARN Scholars and Tuition Subsidies: The budget appropriates $127.6 million over the next two years for Governor Easley’s new EARN (Education Access Rewards North Carolina Scholars) Fund. The EARN Scholars Program grants tuition subsidies to families of four earning up to $41,300 per year – in effect, the lower middle class. The scholarships will be funded by $27.6 million from the General Fund for FY2007-08, with another $60 million the following year. In FY2008-09, the fund will be supplemented with another $40 million from the Escheat (unclaimed property) Fund.
Community College Tuition Increase: New budget provisions allow community colleges to increase tuition 6.3 percent. The changes will bring in $7.5 million for community colleges in each of the next two years. The General Assembly took a corresponding $7.5 million reduction to the Community Colleges’ General Fund budget, effectively freeing up $7.5 million of community college money to spend elsewhere.
UNC Cancer Research: UNC-Chapel Hill will receive $5.6 million in FY2007-08 and $15.5 million in FY2008-09 to distribute to UNC hospitals for cancer research. In addition, the cancer research fund will receive monies ($11.4 million in FY2007-08 and $16.5 million in FY08-09) from an increase in the tax rate from 3 percent to 10 percent for non-cigarette tobacco products.
Capital Building Projects: The budget authorizes $481 million in certificates of participation (COPs) special indebtedness for UNC building projects. Unlike general obligation bonds, the state’s traditional method for financing capital improvement projects, COPs do not require voter approval.
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