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Public Schools: How are they funded?
North Carolina has one of the most heavily state-funded – and therefore state-controlled – education systems. The state Constitution charges the state with responsibility for “instructional expenses for current operations of the public school system as defined in the standard course of study.” By contrast, county governments are responsible for “the facilities requirements for a public education system.” All told, schools receive nearly two-thirds of their funding from the state, a little more than a quarter from local sources, and about 10 percent from the federal government. By contrast, the average school system in the United States receives almost an equal share of money from state and local governments (47 percent state; 43 percent local).
Over the years, the state has given more budgetary control to local education agencies (LEAs) while putting in place standards and measures to hold LEAs accountable for student results. Currently, the LEAs have discretion over how approximately 85 percent of their budgets are spent.
The bulk of state funding for schools is based on the number of students in each district, calculated using “Average Daily Membership” (ADM): the number of students in each LEA, times the number of days each student is there, divided by the number of days in the school year. (Thus a student enrolled for the entire year is counted as one student, and a student enrolled for only one semester is counted as half a student.) When the governor and General Assembly put together the budget, they use projected ADM for the public schools. Each LEA is funded based on projected ADM or the first or second month of the previous year’s actual ADM, whichever is highest.
Nearly all funding is allocated based on ADM; overall the state spent an average of $7,328 per pupil in 2004-05. Funding per pupil varies considerably between districts, however, with small districts such as Tyrell receiving as much as $12,533 per pupil.
How does the state decide how much each district gets?
The single largest pot, teacher salaries, is distributed based on ADM and legislatively established class size ratios. The state supplies funds for one teacher per 18 students in grades K-3; one teacher per 22 students in grades 4-6; one per 21 students in grades 7 and 8; one per 24.5 students in grade 9; and one per 26.64 students in grades 10-12. Although the state pays each teacher’s actual salary (as determined by the salary schedule), LEAs hire the teachers. Thus a beginning teacher and a 10-year veteran teacher both count as one “teaching slot.” Hence, the LEA has no financial incentive to hire an inexperienced, less costly teacher.
Most other positions are allotted to schools based on set ratios to ADM, and professional positions are paid based on salary schedules or derivatives of those schedules.
Schools also receive supplemental funding to “address conditions that can create disparities among students (special ed., at-risk, LEP, low wealth, vocational ed., etc.)” These supplements amounted to $1.65 billion in 2006-07. The largest categories of supplemental funds are: Children with Disabilities ($620 million), Career & Technical Education ($363 million), At-Risk Student Services/Alternative Schools ($211 million), and Low Wealth Supplemental Funding ($182 million). The fastest growing supplement is Disadvantaged Student Supplemental Funding, which increased from $22 million in 2005-06 to $50 million in 2006-07.
Finally, schools also receive lottery funds. After several years of advocacy on the part of Governor Easley, the Legislature enacted a state lottery in 2006. Thirty-five percent of the lottery funds are allocated to education specifically: More at Four pre-kindergarten (which was moved from the Department of Health and Human Services to DPI at the same time the lottery was enacted), school construction, and higher education scholarships. See Q&A #6.
What do local governments fund?
Counties have the constitutional responsibility to pay for facilities.Therefore, state policies such as class size reduction impact county budgets when they result in the need for additional classroom space. Some counties also add more teachers to the payroll, and 100 of the 115 LEAs give local salary supplements.
Oversight of School Systems: Who has it?
The two-headed governance structure of the State Board of Education and the state superintendent of public instruction has fueled controversy over who has authority to make state education policy for several decades. In addition, the General Assembly creates education policy through legislation, including budget priorities.
Finally, the governor holds the purse strings and the power of the bully pulpit. Even the courts have a hand in education policy, the most glaring example being the series of Leandro decisions handed down by Judge Howard Manning. See Q&A #4.
Article IX of the state Constitution is the genesis for the dispute between the State Board of Education and the state superintendent. It creates the State Board of Education, whose members include the state treasurer, the lieutenant governor, and 11 members appointed by the governor. The board has the responsibility to “supervise and administer the free public school system and the educational funds provided for its support.” The same article also designates the elected position of superintendent of public schools, who serves as the secretary and the chief administrative officer of the board. The result is that the superintendent is in the rare position of administering, in some sense, the will of the board, but being accountable not to the board but to the voting public.
This distribution of power is actually less confusing than it used to be, thanks to the revisions to the Constitution that took place in 1971:
The Superintendent of Public Instruction was eliminated as a voting member of the State Board of Education but retained as the Board’s secretary. He was replaced with an additional at-large appointee. A potential conflict of authority between the Superintendent and the Board (both of which previously had Constitutional authority to administer the public schools) was eliminated by making the Superintendent the chief administrative officer of the Board, which is to supervise and administer the schools.
Still, the 1971 rewrite did not resolve the conflict. In 1991 and 1992 the superintendent and the State Board filed lawsuits against one another challenging each other’s right to make decisions that affect public education. To help ease this contentious relationship, Governor Hunt in 1993 asked the General Assembly to take steps to help resolve the conflict. It was suggested that the position of state superintendent become appointed rather than elected, but this suggestion never materialized. Rather, in 1995 the General Assembly clarified the roles of the board and the superintendent through Senate Resolution 1. The superintendent became responsible for managing the day-to-day operations of the public school system, but “under the direction, control and approval of the State Board of Education.” Lastly, the resolution specified that “the appointment of all administrative and supervisory personnel in the Department of Public Instruction is subject to the approval of the State Board of Education.”
Even with Senate Resolution 1, however, the state continues to struggle with the complex nature of who is ultimately accountable for North Carolina’s public schools.
Teacher Salaries: How do they compare?
North Carolina, like many states, uses a teacher salary scale that increases salary based on experience (years teaching) and education (bachelor’s, master’s, and National Board certification.) Teachers also receive ABC bonuses if they are in schools that make at least expected progress, and local salary supplements range from $0 to $4,712 for a beginning teacher, and up to $8,989 for a teacher with 30 years of experience. Nearly half of North Carolina’s teachers have more than 10 years of experience, so to fully understand teacher salaries we must look at both average and beginning salaries. The state’s significant number of National Board-certified teachers also skews the salary averages.
Average salaries. According to National Education Association (NEA) data, North Carolina ranked 27th in 2005-06 for the 50 states and the District of Columbia, with an average teacher salary of $43,922, compared to the national average of $49,109. The District of Columbia ranked first, followed by Connecticut and California. National averages and rankings, however, do not take into account important factors like cost of living, experience levels of teachers in different states, pension contributions, bonuses and local salary supplements. Moreover, the national average is misleading because it is not an average of each state’s average salary, but rather an average of all teachers’ salaries in the nation. Therefore teachers in populous (and high-paying) states like California weigh more heavily in the national average, pulling the number up. In 2005-06, the national average was $49,109, but the average state actually paid its teachers $46,588.
According to a study by the John Locke Foundation, once cost of living, teacher experience, and pension benefits are accounted for, North Carolina moves from 27th to 19th in the rankings of 48 states and D.C. (Massachusetts and New Hampshire were excluded due to insufficient data). The adjusted average salary was $51,687, compared to a national median of $50,694 and a national average of $48,954. Other states had even more dramatic movements. Georgia moved from 18th to 1st, and the District of Columbia dropped from 1st to 49th.
Beginning salaries. Looking at beginning teacher salaries, North Carolina ranks 42nd, with an NEA-reported salary of $27,392. Adjusting for pension contributions and cost of living using the John Locke methodology, the state moves up to 38th. It should be noted, however, that the actual beginning teacher salary in North Carolina in 2005-06 ranged from $26,626 to $38,067. (Maximum salary includes supplements for additional education degrees, local supplements, and ABC bonuses.) One reason North Carolina’s beginning salary ranks lower than its average salary is that the average is pulled up by the relatively large number of teachers with National Board certification.
National board salaries. With 8 percent certified, North Carolina has the highest number of National Board-certified teachers in the country. North Carolina pays the board assessment fee, gives teachers three days of paid leave to prepare for the review, awards 15 hours of continuing education credit, and adds 12 percent to a teacher’s salary for National Board certification. Other states vary considerably in their National Board incentives, with North Carolina considered one of the more generous in this regard.
The Leandro Decision: What is it?
In 1994, five low wealth counties filed suit against the state, claiming that the state did not provide adequate funding for them to educate their students. They were joined by six urban counties, who claimed that the state did not provide enough funds for them to educate their at-risk students and those with limited English proficiency.
The case – commonly called Leandro after one of the plaintiffs – resulted in 10 years of court appearances and decisions. In 1997, the state Supreme Court found that all children in North Carolina have a constitutional right to a “sound basic education,” defined as:
[O]ne that will provide the student with at least: (1) sufficient ability to read, write, and speak the English language and a sufficient knowledge of fundamental mathematics and physical science to enable the student to function in a complex and rapidly changing society; (2) sufficient fundamental knowledge of geography, history, and basic economic and political systems to enable the student to make informed choices with regard to issues that affect the student personally or affect the student’s community, state, and nation; (3) sufficient academic and vocational skills to enable the student to successfully engage in post-secondary education or vocational training; and (4) sufficient academic and vocational skills to enable the student to compete on an equal basis with others in further formal education or gainful employment in contemporary society.
The Supreme Court remanded the case to the original superior court judge, Howard Manning, who issued a series of opinions through 2004. The crux of these opinions was that:
- The state is responsible for providing a sound basic education and giving assistance to LEAs who are failing in this task.
- The EOG/EOC tests can be used to determine whether students are receiving a sound basic education– the standard is Level III (proficient), rather than Level II (basic). (The state had argued for Level II, the LEAs for Level III.) Essentially, this means that whether the state has met its constitutional mandate to provide a sound basic education is to be judged by student results.
- The distribution of funds is not inequitable, and the state may be providing adequate funding, but it is not effectively distributed – “economically disadvantaged” students require more resources than their wealthier peers in order to receive a sound basic education.
- A sound basic education requires highly qualified teachers and excellent principals, each with strong professional development.
- The state should provide pre-kindergarten programs for at-risk children to ensure they have an equal opportunity for a sound basic education.
The state was required to report on the steps it planned to take to ensure that all students were afforded a sound basic education. As part of its response, the state funded a new pot of money – Disadvantaged Student Supplemental Funds – to provide extra resources to schools to serve at-risk students. The program began with 16 districts in 2005, but has since expanded to all districts statewide.
NAEP: What is it?
The National Assessment of Educational Progress (NAEP) is the only nationwide assessment of student proficiency. The NAEP has been used since 1969 to assess a variety of subjects, including: reading, mathematics, science, writing, U.S. history, civics, geography and the arts.
The NAEP is broken into two tests: the national NAEP and the state NAEP. The national version provides information for the nation and specific regions of the country by testing both public and non-public school students at the 4th- 8th- and 12th-grade levels. The state version of the NAEP provides assessment results from public school students for the states who participate in the test. The NAEP is voluntary for all states, but if Title 1 funds are received then the state must participate.
The NAEP test is designed to answer the often-asked question of how one state compares to another in educating its students. Sadly, several states have been found guilty of manipulating state test results to create a better picture of education achievement.
One striking issue in North Carolina has been the discrepancy between student results on North Carolina state assessments and the NAEP. The greater percentage of students deemed proficient on the state tests has led many people to question whether North Carolina is setting the bar too low. In March of 2006, the Hendersonville Times-News reported on the vast discrepancy between North Carolina state tests and the National Assessment of Educational Progress. “The performance gap was often enormous. In North Carolina, 88 percent of eighth-graders were proficient or better in reading on the state test. On the NAEP, which the President and Congress use to chart the nation’s progress, 27 percent were.”
Upon closer examination of how well North Carolina students were performing on the NAEP test, it was apparent that the discrepancy between state and federal testing applied to all curriculums that are tested. When comparing students’ mathematics performance on the most recent administrations of the state assessment and the NAEP: students were 82 percent proficient while the national test reported 32 percent were, and 72 percent were at the “basic” level.
The trend of higher state test proficiency levels compared to NAEP proficiency is not unique to North Carolina. Studies indicate that the “proficient” level on state tests can best be compared to the “basic” (one step below proficient) level on NAEP tests.
Education Lottery: How is the money divided?
The North Carolina State Lottery Act (HB1023, S.L. 2005-344), squeaked through each chamber of the General Assembly with a one vote margin. The distribution of the lottery revenue was one of many contentious issues when the lottery legislation was passed in 2005 and continued to be the subject of discussion two years later.
As it passed the House, House Bill 1023 specified the following distribution:
- 50 percent for prizes, 16 percent for administration/operating costs, and 34 percent for education.
- Education’s 34 percent would be treated as new education funds with 50 percent used for public school construction, 25 percent for need-based scholarships at state universities and colleges, and the remaining 25 percent for a fund devoted to educational enhancement purposes (to be appropriated by the General Assembly).
The Senate passed HB 1023 without a hearing in any committee other than the Rules Committee, and without changing a word of the bill. Yet the distribution above is not the distribution formula under which the lottery operates.
Why not? Prior to passing HB 1023, the Senate extensively changed the lottery bill and rolled these changes into the budget bill (SB 622). Senate budget negotiators then fought successfully to keep these changes in the final budget produced by the conference committee and signed into law.
Incorporating the Senate’s changes, the final distribution is as follows:
- 50 percent for prizes, 8 percent for administration/operating costs, 7 percent for retailers, and 35 percent for education.
- From education’s 35 percent: the first 5 percent, up to $50 million, goes into an education reserve fund, in case lottery revenues fall short. The remaining funds are allocated as follows: 50 percent for class-size reduction and More at Four; 40 percent for school construction; and 10 percent for college scholarships.
- The school construction money is divided into two pots: 65 percent is distributed to each county based on school enrollment. The remaining 35 percent is also distributed based on school enrollment, but is only accessible to counties with average effective county property tax rates above the state average.
When the lottery was passed, the General Assembly estimated that it would generate $1.2 billion in revenue. By June 2007, estimates had declined to just over $1 billion (approximately $1.05 billion).Using the General Assembly’s initial revenue expectations, $97.5 million would be divided between the existing 115 Local Education Agencies for school construction and $52.5 million would be given to counties with higher than the median property tax rate based on average daily membership.
A county like Guilford would receive $10,111,739 from the lottery each year. In Guilford County the lottery revenue would almost build one elementary school, based on Department of Public Instruction estimates. But according to district officials, Guilford’s school population is growing by 1,500 students or more annually, enough to fill three elementary schools a year. The remaining construction costs are left to the responsibility of the county.
ABCs of Education: What are they?
A – Accountability
B – Basics
C – Maximum Local Control
During the long session of the 1995 General Assembly, the State Board of Education (SBE) was directed to completely restructure public education. After months of public hearings and surveys and interviews with education professionals, the ABCs of Public Education was formulated. The plan outlined the framework for the most comprehensive restructuring North Carolina public education had seen in recent memory. The next year, more than 100 schools, in 10 school districts, piloted the new education initiative.
The plan included several novel ideas that increased accountability on the school level while eliminating a sizeable amount of state control. Accompanying this independence was greater accountability: a series of end-of-grade tests for students used to measure growth in student performance.
Between 1996 and1998 additional components were added, among them:
- Designated low-performing schools received state assistance teams.
- Charter schools were included in the ABCs reporting (charter schools began operation in North Carolina in 1997).
- The first “Report Card for the ABCs of Public Education” was published for both K-8 and high school students
- All schools making exemplary growth/gain were awarded incentives per the Excellent Schools Act; up to $1,500 for certified staff, up to $500 for teacher assistants
- Schools making expected growth/gain received up to $750 for certified staff, and up to $375 for teacher assistants.
- Additional end of grade tests were implemented to better gauge student performance.
The ABCs of education not only concentrated on holding schools accountable for student improvement, but focused on offering financial flexibility.
Ultimately, as a result of the ABCs, districts were allowed to allocate funds where they deemed necessary. This financial flexibility did not take effect until 2000, when the Department of Public Instruction allowed 83 percent of funds to be transferred with local discretion; the remaining 17 percent were funds earmarked for at-risk students and incentive pay. Administrators assert that the ABCs program allows each school to make decisions about how to spend money and what textbooksand materials to use, allowing schools to figure out how to meet their particular students’ needs.
While critics of the ABCs applaud local flexibility and less control from Raleigh, they feel that the bonuses that are attached to the incentive programs are too liberally disbursed. According to the Greensboro News and Record, six Guilford high schools qualified for more than $500,000 in ABC bonuses, even though those schools were on the governor’s “watch list” of low-performing schools. These critics argue that ABC bonuses should be allocated on a teacher-by-teacher basis rather than on the school level. The Department of Public Instruction has responded to these criticisms to some extent. Although bonuses are still distributed on a school basis, the performance results are now reported at the classroom level to hold individual teachers publicly accountable.