- State budgets often contain policies and signals indicating which way the legislature may act on a particular issue. Four examples:
- Education Lottery makes it possible to backfill a failing system for financing and building schools – and buy time
- Joint Commission on Education Finance Reform created to help resolve school finance problems
- Full-time staff for UNC Board of Governors? Yes, there is a problem with information flow
- Personal Education Savings Accounts – The future of school choice comes to North Carolina
Let’s face it: the vast majority of North Carolinians view the recently passed state budget as a dry document, filled with endless numbers with little significance other than how state agencies will be funded and at what levels. That’s a mistake.
While it’s true the state budget is mostly about numbers; the numbers tell only part of the story. The state budget also contains important policy decisions and signals about which way the legislature may act on future issues. Let’s look at four budget provisions impacting education in this year’s budget and see what they might tell us about education in North Carolina.
NC Education Lottery
Each year the state budget provides specific guidance on how lottery revenue is to be distributed. In FY 2016-17 the legislature appropriated $591 million for salaries for non-instructional support personnel, PreK programs, building campaigns, scholarships and need-based financial aid. In 2017-18, according to the state budget, total lottery appropriations will increase to $677 million. While that’s a significant increase in revenue, the General Assembly also made several significant changes in how lottery money will be distributed.
First, it should be noted that the item receiving the largest expenditure of lottery revenue is Non-Instructional Support Personnel. Included in the category of Non-Instructional Support Personnel are such positions as Teacher Assistant, Campus Security, Transportation and Family School Advocate. The General Assembly increased the money dedicated to Non-Instructional Support personnel from $372 million in FY2015-16 to $383 million in 2017-18.
Yes, that’s right; 57 percent of all revenue schools receive from the NC Education Lottery goes to pay the salaries of Non-Instructional Support personnel. In addition, boosting funding for such personnel, the General Assembly also added $43 million to a new category called “Transportation” to help school districts address the rising costs of transporting children. In 2018-19, funding for “Transportation” is reduced to $1.3 million dollars. It should be noted; the legislature had never before allocated lottery money for transportation costs. Whether or not the category continues as a permanent category, only time will tell.
It is also important to note that the state budget contained a provision that changed how money would be distributed to local schools to help construct new schools or renovate old ones. For years the legislature had distributed a portion of lottery proceeds to schools to help defray the costs of building new schools. How much money an LEA received was based on the size of the district and a complicated formula involving the size of the county’s property tax base and its relation to the state average.
This is an issue because North Carolina has a school construction funding problem (see here and here). The state has been trying to provide money to local districts to help defray costs of construction, but the percentage of lottery revenue dedicated to school construction has declined in recent years. In 2015-16 that figure declined to 16.9 percent. The 2016-17 budget says that percentage must be raised to 40 percent of net lottery revenue collected, no later than the 2028-29 fiscal year. The other significant change regarding school construction concerns how those dollars will be distributed. Under the new legislation school districts will be either classified as Tier I or Tier II schools based on need and the county’s ability to generate sales and property tax revenue. Tier one counties can receive a match of three dollars for every local dollar invested up to a maximum $15 million. Tier two counties will receive a one-to-one match not to exceed $10 million in funding.
These changes are noteworthy for two reasons. First the priority on school capital costs is an admission that North Carolina schools have a funding problem that needs to be fixed. Earlier in the year legislation calling for a $1.9 billion bond referendum was introduced, but also defeated. And rightly so. While the referendum might have provided the vehicle to obtain needed resources, it would have done nothing to address the many shortcomings of the current system. One encouraging step is a state evaluation of the capital needs of local school districts followed by an assessment of the best ways to fund those needs. This study will buy some time and provide a framework for a system to better address how school capital needs might best be met in the future.
This is all to say, that contrary to its original intent of providing additional resources for the classroom, legislators continue to use lottery money to patch over a variety of problems from Non-Instructional Support Staffing to school construction. And you thought lottery money found its way into the classroom. How lottery money is distributed is as big a ruse as how the money is generated. It must change.
Joint Legislative Task Force on Education Finance Reform
Normally legislative commissions don’t attract much attention—except when they involve important topics and involve lots of money. The public schools comprise the single largest expenditure item in the FY 2017-18 state budget ($9 billion). The Commission is important for that reason and also because its final report — due by October 1, 2018 — will likely provide an outline for suggested changes in how public schools are funded in North Carolina.
Such a Commission is long overdue. The last time the state visited the topic of public school financing was 2007. A Commission was formed, consultant hired and recommendations were made. Then the recession hit, and the consultant’s report was essentially put on the shelf. That was a decade ago. The problems haven’t gone away. They have only gotten bigger. Schools in urban areas deal with the needs of overcrowding. Rural schools need to address declining student enrollment. And unlike ten years ago, Republicans are now in charge.
According to the budget legislation, the Commission – comprised of nine members of the State House and nine members of the State Senate — will undertake a review of the current funding allotment system and also provide an in-depth review of various weighted-student funding formula models, a model more consistent with conservative ideals and the tenets of education reform than the current system. The Commission will also be charged with determining the base amount of funds that can be spent per child, identifying the student characteristics eligible for weighted student funding and determining associated weights for each characteristic such as special needs, academic disabilities, economic disadvantage and so forth. Assessing the best way to move away from funding via allotments to funding that follows the student is an ambitious and important task. While the commission will work the next year, from October to October, one thing is for sure: considering the issue and the money involved ($9 billion), no legislation to rework North Carolina’s system to finance public education will likely be considered before the 2018 elections.
Full – Time Staff for Board of Governors
The state budget includes a provision that allows the UNC Board of Governors (BOG) to hire professional staff. Normally you won’t find me arguing for more staff for various government agencies (see here). However, this request is different because of what the money could help accomplish.
Let’s remember the BOG has a big job. It is charged with controlling, managing, administering and governing all aspects of the 17 campus UNC System. It must balance the interests of citizens with the interests of a large and complicated UNC System.
Such responsibilities underscore the importance of timely, accurate and objective information. When the BOG needs research it comes from UNCGA. While that may not always be a problem, it should be noted that UNCGA personnel don’t report to the BOG. They report to the president of the university.
In an article published earlier this year, Jay Schalin, Director of Policy Analysis at the Martin Center for Academic Renewal, explores the current disparity between the Board of Governors and the UNC System and why the BOG needs its own professional staff.
The board, as the representative of the state’s people and taxpayers in the university governance system, is supposed to have oversight over the entire system. Yet because the General Administration controls the flow of information, the board does not fully assert itself. This is because, in the current structure, board members are at a severe disadvantage. They are chosen for their accomplishments in other endeavors; they are busy people who can devote only a few days a month to university system affairs. The administration, on the other hand, has roughly 100 full-time employees and has much closer contact with the rest of the university system.
As a result, board members often only know what they are told by administrators, limiting their understanding of the issues and diminishing their ability to oversee the universities to make sure they are excellent, efficient, ethical, and unbiased. The General Administration, which represents the university itself rather than the citizens of North Carolina, controls the way UNC system governance is incentivized.
This imbalance of knowledge resulting in one-sided governance is known as an “asymmetry of information” problem. To address the asymmetry, the Board of Governors needs at least one high-level staff member of its own, who will conduct independent research to identify problems and solutions that the board may otherwise overlook.
It’s important to note that the provision allows the Board of Governors to hire professional staff- if they so choose. It does not require them to do so. Unfortunately, there is no unanimity of opinion on the issue among BOG leadership. That said, the provision remains significant and could go a long way in improving UNC decision-making.
Personal Education Savings Accounts Program
A January 2017 Civitas Poll found 81 percent of respondents either agreed or strongly agreed with the following statement: Parents should have the ability to choose where their child attends school.[i] Despite these results, the overwhelming majority of children still attend a school based largely on where they live.
This year the General Assembly took yet another step to end this inequity and empower parents to choose the most appropriate education for their child. Included in this year’s state budget were provisions to authorize the creation of Personalized Education Savings Accounts (or PESAs for short) for special needs children, dependents of active military personnel and adopted children or children in foster care. ESAs have many advantages, and Civitas has been writing about them since 2012. For example, see here and here.
Parents or guardians of eligible recipients can receive up to $9,000 to help pay for such things as tuition, books, tutoring, special therapies, testing and other educational expenses. There is no income threshold for this program. The program will be administered by the State Education Assistance Authority (SEAA), the same state agency that administers the Opportunity Scholarship Program and Special Needs Scholarship.
Safeguards will be in place to ensure monies are spent on approved expenditures and audits of some accounts will be made on an annual basis. SEAA is also required to report program information to the General Assembly on an annual basis
ESAs represent the future in educational choice. ESAs empower parents with the authority and resources to make the best educational decisions for their child. They allow parents to decide how and where their child will be educated. Equally important, ESAs have proven popular in all the states where they have been tried. Earlier this year, the Arizona legislature approved a universal ESA for all state residents to be phased-in over several years. The North Carolina program will begin operation in the fall of 2018. Though the program is initially small — the General Assembly appropriated $250,000 for administration and development costs for 2017-18 and $3 million in funding for 2018-19 – ESAs open the door for even greater customization and parents have the ability to provide their child with an education that is tailored to fit their educational and developmental needs. PESAs are good for parents and children throughout our state. North Carolina’s new program is a win for everyone concerned about improving educational opportunities for all children.
Every community has its own language. The next time you are in endless discussions about the state budget remember the budget is about more than numbers. It’s a roadmap for legislative priorities and policy and also a place where lawmakers send signals on how they may respond to a variety of emerging topics. Remembering these things will make it easier to understand an institution whose actions are frequently difficult to explain.
[i] Civitas Poll Presentation at National School Choice Week Luncheon, January 26, 2017