New report documents North Carolina’s ongoing school finance shortcomings

A new report confirms what policymakers have long known: North Carolina’s school funding system is among the country’s worst.

Last week, some of the nation’s top school finance experts from the Albert Shanker Institute and Rutgers University published the latest edition of their annual report “The Adequacy and Fairness of State School Finance Systems.” Similar to October’s report from the Education Law Center, this new report examines each state along three measures of school funding: fiscal effort, adequacy, and progressivity.

In addition to the full report, the researchers have published state profiles (click here for North Carolina), and a wealth of data visualization tools.

According to the analysis, North Carolina’s school finance system receives poor marks for fiscal effort and adequacy. The state gets average marks for progressivity.

In terms of effort, North Carolina dedicated just 2.77 percent of it’s economic capacity (GSP) to public schools in FY 2019, compared to 3.45 percent in the average state. With a 2019 GSP of $591 billion, this implies that North Carolina would have needed to increase its school spending by over $4 billion to make the average effort of other states.

In terms of funding adequacy, the report found spending inadequate across the board, with 84.4 percent of students attend districts with inadequate spending levels. The problem is particularly dire in North Carolina’s highest-poverty districts. Spending in highest-poverty districts is estimated to be 40 percent ($7,017 per pupil) below the levels estimated necessary to meet the low bar of U.S. average test scores.

North Carolina receives moderately positive marks for progressivity. Higher-poverty districts receive 7.2 percent more revenue than zero-poverty districts. As explained above, however, this mild degree of progressivity is far below what’s estimated necessary to achieve national average levels of student achievement.

The authors assign North Carolina’s school finance system an overall score that ranks a lowly 46th out of the 48 states with possible ratings.

While the report notes shortcomings in most state school finance systems, the authors note that the challenges are readily solvable. In most states, like North Carolina, a return to past funding effort levels will largely allow lawmakers to address challenges related to adequacy and progressivity.

The challenges are especially solvable here in North Carolina. State lawmakers have been presented with a detailed, heavily-researched plan as part of the state’s long-running Leandro lawsuit that would vastly improve the effort, adequacy, and progressivity of our school funding system. Under the plan, state funding would increase by approximately 40 percent. Importantly, funding increases would be largely directed to districts with the greatest needs by focusing investments in supplemental resources for at-risk students, students with disabilities, and English learners.

Despite these long-standing, well-documented shortcomings in North Carolina’s school finance system, a clear plan for fixing these challenges, and unprecedented state revenue availability, the latest budget once again fails to make meaningful improvements. Instead, the budget includes a series of regressive tax cuts that make it increasingly unlikely that these issues will be addressed in future years.