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.