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Education
Education Spending

Will Rogers said, “Lord, the money we do spend on Government and it’s not one bit better than the government we got for one-third the money twenty years ago.” This is especially true for money that we spend on public education. Despite billion-dollar increases in education spending, it has become clear that more money alone will not yield better results.

Although state education leaders and advocacy groups contend that public schools do not receive enough money, taxpayers think otherwise. Both national and regional polls suggest that more and more taxpayers believe their local school districts are inefficient and wasteful, not underfunded. This is clearly one of the benefits of state accountability efforts like the ABCs and federal programs like No Child Left Behind, but accountability alone will not tame the expensive public school bureaucracy. As long as there is no incentive for public schools to spend money more wisely, they will continue to complain about funding shortfalls while draining the public purse.

Controlling the Purse Strings

The system of funding schools in North Carolina is different from funding systems in many other states because in N.C., most public school funding comes from the state, not local governments. So control over public education in this state is highly centralized, allowing the North Carolina State Board of Education and the N.C. Department of Public Instruction (DPI) to exercise a great deal of power over public schools. According to the DPI, the state ranks fifth in the nation and first in the South for the highest percentage of funds from state revenue. In North Carolina, 64.5 percent of the funds come from the state, compared with the national average of 50 percent. Local funds make up 24.7 percent and federal funds comprise of 10.8 percent of K-12 education expenditures in North Carolina.

Salaries and Benefits

Much of the money spent on public education in North Carolina pays for employee salaries and benefits. In 2005, the state spent over 91 percent of funds appropriated for public education on salary and benefits.

The average adjusted teacher compensation in N.C. is well above the national average. Since 1992, there has been an 85.9 percent increase in base teacher compensation, compared to a 35.2 percent increase in compensation for state government employees during the same period. A 2005 study by the John Locke Foundation found that the average teacher compensation in N.C. — adjusted for cost of living, pension contribution, and years of experience — was $52,006. That ranked 11th in the nation and was nearly $1,600 greater than the national average.

More Money, Disappointing Results

Despite much of the political rhetoric about the need to increase education spending, funding increases alone will not improve education in the state. Since 2003, there has been a 9 percent increase in state per-pupil expenditure and a 17 percent increase in state education spending (see chart, "Average Per-Pupil Expenditure for North Carolina Public Schools"). During the same period, scores on the National Assessment of Education Progress (NAEP) reading test have declined, while NAEP mathematics test scores have remained the same. Likewise, the composite score for students (grades 3-8) achieving grade-level competency on North Carolina reading and mathematics tests has remained virtually unchanged over the last three years.

Recently, the state unveiled million-dollar high-school reform initiatives, like the Learn and Earn/Early College program, to raise graduation rates and increase test scores, but those programs have done neither. Graduation rates for Learn and Earn/Early College schools remain about 18 percent lower than the state average rate. As a group, these schools had lower average end-of-course test scores than state averages. Moreover, teacher turnover was significantly higher in Learn and Earn schools (43 percent) than the state average (19 percent).

Despite the programs’ low performance, the governor plans to expand them to serve students in all 100 North Carolina counties by 2008.

School Facilities and the Lottery

State and local governments have also made a substantial investment in school construction and renovation but have little to show for it. The state has contributed around $1.7 billion for capital expenditures since 1995. School districts, which are responsible for financing their own capital programs, have passed bonds worth over $5.7 billion during the same period.

Taking into account all sources of revenue, school districts have spent $8 billion for school capital expenditures since 1995. In many cases, however, school districts have not spent this money wisely. Misplaced priorities, poor planning, and inefficient school construction and renovation programs have left many school districts incapable of meeting demand and have left the state with a reported $9.7 billion in school facilities needs over the next five years.

The General Assembly estimates that $425 million will be generated by the lottery this year for school construction, class-size reduction, pre-kindergarten programs, and college scholarships. Due to a poorly designed lottery law, high growth school districts will receive only a fraction of an estimated $160 million set aside for school construction. Too much of the revenue will be used to fund unproven class-size reduction efforts and pre-kindergarten programs. The estimated $210 million in lottery funds for pre-kindergarten and class-size reduction efforts will supplant, not supplement, state funding already in place for these purposes.

It is easy to see why the education lottery is more hype than help.

Recommendations

1. Change the way that North Carolina funds public education by attaching funding to the student, rather than allocating funds to each school district on a per-pupil basis. Combined with lifting the charter school cap and open enrollment for schools statewide, this will assure that schools of the parents’ choosing receive funds necessary to educate each child and nothing more.
2. Reallocate lottery revenue to provide additional funding to high-growth school districts for school construction and renovation and for cost-saving incentives related to capital expenditures. Lottery revenue should also be distributed to charter schools, which do not receive funds for capital expenditures.
3. Implement a merit pay system for teachers that will pay a portion of their salary based on the value that they add to their students’ academic performance, rather than on years of experience and credentials.

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