NCGA must answer tough questions before overhauling school finance system

By: - November 17, 2016 2:47 pm

bus-878697_960_720Yesterday, the General Assembly’s Program Evaluation Division (PED) released a new evaluation of North Carolina’s system for funding its public schools.  The report identifies a number of issues with North Carolina’s school finance system and presents potential remedies.  The report and its policy recommendations appear to have been received enthusiastically by the General Assembly, with members of the Joint Legislative Program Evaluation Oversight Committee unanimously voicing support to create legislation establishing a committee to overhaul North Carolina’s school finance system.

Despite the positive reception, overhauling North Carolina’s school finance system on the basis of this report would be a mistake.  Both the report and the presentation deftly present dry, complex information in an easily-digestible format.  The report also identifies several valid weaknesses with a number of the individual formulas (otherwise known as “allotments”) by which North Carolina distributes funding across school districts (otherwise known as “LEAs”).  Unfortunately, the report fails to address the central question it was tasked with: Does North Carolina’s school finance system direct funding to school districts commensurate with school district needs? 

An effective, equitable school finance system should provide different levels of resources based on the different needs of its students.  Ideally, such a system will provide students an equal opportunity for success, regardless of where they were born.  Unfortunately, the PED report never addresses the extent to which North Carolina’s school finance system is meeting (or failing to meet) these goals.

National studies by school finance experts tend to give North Carolina positive marks for providing additional resources to school districts with greater needs.  For example, the Education Law Center notes that North Carolina is one of just sixteen states providing additional funding to schools with higher concentrations of poverty.  Any serious examination of North Carolina’s school finance system should build upon such analysis to determine whether funding should be shifted further towards high-need districts, including indicators of need beyond poverty, in order to improve equality of opportunity for all of North Carolina’s students.  There is clearly much more work to be done along this front, as North Carolina’s school performance grades continue to be strongly correlated with school poverty.  The PED report fails to identify the extent to which North Carolina’s existing school finance system is hindering equality of opportunity, nor does it show how proposed system modifications would improve equality of opportunity.

A new legislative study committee tasked with revamping North Carolina’s school finance system will almost certainly distract from the more important questions of funding effort and adequacy.  While this PED study and a past legislative study from 2010 focused on how to best slice the funding pie between school districts, the General Assembly has avoided any study of funding adequacy.  North Carolina’s per pupil expenditures rank 44th in the country, and school districts are facing declining resource levels.  The aforementioned Education Law Center study gives North Carolina a “B” grade for funding distribution, but an “F” for funding effort.  It’s almost certainly the size of the funding pie, rather than how it’s sliced, that is the more pressing problem facing North Carolina’s schools.

The criticisms of individual allotment formulas identified in the PED report also point to the need for increased funding, rather than just a formula change.  Eliminating the funding cap for the children with disabilities allotment would require increasing funding by over $40 million.  Modifying the classroom teacher allotment to ensure that high-need districts are able to attract and retain teachers with the same experience level and credentials of high-performing districts would require an even larger investment.  Even cost-neutral formula changes inevitably require additional investment.  Historically, the General Assembly has provided “hold harmless” payments to formula losers to garner political support for any changes.

Should the General Assembly move forward with a study committee to examine school finance, their first step must be developing consensus from a wide range of stakeholders to clearly define what the problems are with the current system and which criteria will be used to measure success of any new proposals.  If significant changes are going to be made, they will need broad support and will benefit from the expertise of students, families, teachers, school finance officers, and school finance experts.  General Assembly members must also seriously examine the extent to which both the distribution of funding and the total size of available funds contribute to inequality of opportunity across school districts.  Are policymakers willing to reduce funding to high-performing districts in order to boost performance of high-need districts, or should they be examining ways to boost overall investment?

They must also recognize that a complete overhaul to a “weighted student formula” system – as proposed by Program Evaluation – will not necessarily lead to a system that is more transparent or easier to understand.  Nor will such a system necessarily improve funding equity or address funding adequacy.  Many states have weighted student formulas that are more complicated than North Carolina’s system and funnel more money to rich districts than poor districts.

What the General Assembly must not do is haphazardly rush into a series of major changes without first tackling the important, systemic questions facing North Carolina’s school finance system.

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Kris Nordstrom
Kris Nordstrom

Kris Nordstrom is a Senior Policy Analyst with the North Carolina Justice Center's Education & Law Project. He previously spent nine years with the North Carolina General Assembly’s nonpartisan Fiscal Research Division.