Understanding School FinanceMeck Ed – February 12, 2009

www.ncforum.org

A. School Finance Overview

B. Impact of the Lottery

C. School Finance Litigation

School Finance Overview

2007-08 Sources of School Funding

64.8%

25.0%

10.2%

State Federal Local

$7.37 B

$1.16 B

$2.84 B

Source: DPI, Financial & Business Services, Highlights of the NC Public School Budget, February 2008

Who Pays For What?

2007-08 Federal Funds Provide ($2.84 B)Title I – all programs ($328.6 m)

Child Nutrition ($325.0 m)

Children w/ Special Needs ($297.0 m)

Teacher Quality ($62.4 m)

Vocational Education ($21.8 m)

Technology Grants ($5.8 m)

After School Programs ($20.9 m)

Safe & Drug Free Schools ($5.8 m)

2007-08 Local Funds Provide ($1.16 B)

Additional teachers, instructional support & teacher

assistants (11,432 positions)

Central Office Administrators (33.6% of total)

Salary Supplements (4 @ $5,000+, Average=$1,993, 5 @ $0)

School Construction, Maintenance & Debt Service

Utilities, Housekeeping, Technology, & Garage Costs

Who Pays For What?

2007-08 State Funds Provide ($7.37 B)Instructional Personnel ($4.1 B)

At-Risk Student Services ($220.3 m)

Children w/ Special Needs ($663.3 m)

Transportation ($360.6 m)

Low-Wealth supplemental funds ($195.4 m)

ABCs Bonus ($70 m)

Limited English Proficient ($61.2 m)

Largest Expense in the State Budget (37.3%)

Enormous Business ($7.91 B)

Largest Employers in the State• Charlotte Mecklenburg Schools is among top 10 employers• Half of all districts have 1,000+ employees

Transportation (13,696 buses178,297,253 miles)

Counseling (4,380 counselors & psychologists)

Food Provider (186,564,780 breakfasts & lunches)

Maintenance staff (26,748 service workers, drivers & other laborers)

Just the Facts. . .

NC History and how we got here…

Article IX: Education Sec. 2. Uniform system of schools. (1) General and uniform system: term.

The General Assembly shall provide by taxation and otherwise for a general and uniform system of free public schools, which shall be maintained at least nine months in every year, and wherein equal opportunities shall be provided for all students.

School Funding ResponsibilitySchool Budget and Fiscal Control Act (1975)

“To insure a quality education for every child in North Carolina, and to assure that the necessary resources are provided, it is the policy of the State of North Carolina to provide from State revenue sources the instructional expenses for current operations of the public school system as defined in the standard course of study. It is the policy of the State of North Carolina that the facilities requirements for a public education system will be met by county governments.”

A Decade of Enrollment Growth: 1997-98 to 2007-08

17,834

28,176

18,484

21,11719,772

23,127 23,983

40,117

37,803

27,415

20,577

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1997-1998

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-06

2006-07

2007-08

an

nu

al

gro

wth

Source: Public School Forum based upon data from DPI

Public Education Authorized Budget(% of General Operating Fund)

52.0%

37.3%

30%

31%

32%

33%

34%

35%

36%

37%

38%

39%

40%

41%

42%

43%

44%

45%

46%

47%

48%

49%

50%

51%

52%

53%

54%

55%

19

70

-71

19

71

-72

19

72

-73

19

73

-74

19

74

-75

19

75

-76

19

76

-77

19

77

-78

19

78

-79

19

79

-80

19

80

-81

19

81

-82

19

82

-83

19

83

-84

19

84

-85

19

85

-86

19

86

-87

19

87

-88

19

88

-89

19

89

-90

19

90

-91

19

91

-92

19

92

-93

19

93

-94

19

94

-95

19

95

-96

19

96

-97

19

97

-98

19

98

-99

19

99

-00

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

Average=43.6%

If schools received the same percentage of General Fund expenditures as they did in 1970, schools would have had $2.97 B MORE in 2007-08.

Note: The General Fund is not the only source of public education spending, but it is the major one.Source: Public School Forum based upon data from the General Assembly & Office of State Budget & Management

Ranking Per-Pupil Expenditures by State

$10,0

42

$7,1

13

$7,8

46

$5,4

74

$7,9

35

$9,3

65

$11,8

74

$11,3

24

$7,1

55

$8,8

82

$8,9

97

$7,6

10

$6,8

63

$9,3

27

$8,9

24

$7,7

17

$8,0

05

$7,6

56

$11,6

54

$9,2

81 $10,7

23

$9,6

32

$9,2

49

$7,3

81

$6,5

65 $8,0

25

$7,3

77

$7,5

86

$9,5

55

$13,3

70

$8,1

78

$12,8

79

$9,5

57

$8,0

98

$10,2

23

$10,6

41

$7,7

66

$7,5

36

$6,8

81

$7,3

10

$5,0

32

$8,7

29

$11,6

67

$7,6

83

$9,7

55

$9,4

61

$10,3

72

$7,3

92

$6,7

09

$6,6

14

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

AK

AL

AR

AZ

CA

CO CT

DE

FL

GA

HI

IA

ID IL

IN

KS

KY LA

MA

MD

ME

MI

MN

MO

MS

MT

NC

ND

NE

NH

NJ

NM

NV

NY

OH

OK

OR

PA RI

SC

SD

TN TX

UT

VA

VT

WA

WI

WV

WY

114330492917 3 642232135451822322834 519 7132039482738403615 12546 214472610 8313744415024 4331216 9

state (rank)

per-

pupil

expendit

ure

s

NC ranks 38=$7,392

US average=$8,717

Source: Public School Forum based upon NEA, Rankings and Estimates Update (Dec. 2007)

Per-Pupil Spending for NC & I ts Neighbors

$8,882

$7,392 $7,766$6,881

$8,729

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

GA NC SC TN VA

24 38 31 44 24

state (rank)

per-

pu

pil

cu

rren

t expen

dit

ure

s US average=$8,717

Source: NEA, Rankings & Estimates Update (based upon December 2007 data)

2008 Local School Finance Study

1,237

754

315

1,435

917

446

2,044

1,282

499

2,255

1,451

546

0

500

1,000

1,500

2,000

2,500

1990-91 1995-96 2000-01 2005-06

County Spending per Student

Top 10 State Average Bottom 10

Funding from the LotteryBased Upon $1.00 of Sales

School Construction,

$0.14

Scholarships, $0.03

Class Size & More At Four, $0.18

Prizes, $0.50

Lottery Administration,

$0.15

Source: Public School Forum based upon data from DPI, Financial & Business Services

Note: Reserve fund (5% of original total) is fully funded and requires no additional contributions.

* The General Assembly gave additional flexibility to raise prize amounts over 50% of the total IF that will increase the absolute amount available for education transfers.

Lottery Revenue RealitiesOriginal estimates of $1.2 B in revenues

But even if projections had been right…

• 82 years to finance the $9.7 B construction backlog (based on 2007-08 projected funding levels)

• 49 districts would still have gotten less than $500,000

Projected Actual (2006-07)

Off by…

Scholarships $40.4 m $32.6 m -$7.8 m

Class Size/ More at Four

$201.9 m $162.7 m -$39.2 m

Construction $161.5 m $130.2 m -$31.3 m

TOTAL $403.8 m $325.5 m -$78.3 m

North Carolina Education Lottery

A Comparison of the Models shows:87 LEAS received LESS money under the Lottery Act model

1996 School Bond 2005 Lottery Act

25% high growth35% ability to pay40% ADM

35% ability to pay 65% ADM

Counties’ “Ability to Pay” Qualifies Them for Approximately $49 M in Extra Lottery Revenue (35% of Available Construction Funds)

57 shaded counties qualify for the extra revenue based upon an ability to pay componentSOURCE: NCGA, Fiscal Research Division

School Finance Litigation

Red=Low Wealth Plaintiffs

Blue=Urban Plaintiff-Intervenors

School Finance Litigation…

Changing Needs of Students & Adequate Resources

Every classroom be staffed with a competent, certified, well-trained teacher…

Every school be led by a well-trained competent Principal…

Every school be provided, in the most cost effective manner, the resources necessary…

-Leandro mandates

School Finance Case ISN’T Over

State Responsibility: “The State must step in with an iron hand and get the mess straight. If it takes removing an ineffective Superintendent, Principal, teacher, or group of teachers and putting effective, competent ones in their place, so be it…The State of North Carolina cannot shirk or delegate its ultimate responsibility.”

Judge Howard E. Manning, Jr.—4/4/02 memorandum

DSSF Resources Then…

• Started with 16 pilot districts

• Funded at $22.5 million

• New model approved by plaintiffs, defendants & judge

And now…• Covers all 115 LEAs

• Funded at $191.6 million for 2007-08 school

year

Kendall Jordankjordan@ncforum.org919-781-6833 x 102www.ncforum.org