Policy Position

Public School Finance

in Education
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Discussions of funding levels are necessary, but not sufficient, for truly understanding the health of our public school districts. Researchers generally agree that how the money is spent is far more important than how much money is available to be spent. But no matter how many times researchers find weak empirical relationships between spending and performance, the public will insist that schools are one teacher pay raise away from educational glory.
Unfortunately, the American public too often equates the quality of public schooling with the condition of various inputs – per-student spending, educational technology, teacher pay, class size, school buildings, and the like. Presumably, schools will succeed so long as federal, state, and local governments use taxpayer money to furnish high-tech gadgets, pay all teachers much more, reduce class sizes, and construct magnificent school buildings.
But there is a better way for us to think about education finance – a focus on productivity.
Researchers use the term “educational productivity” to describe analyses that compare funding to student performance. To do so, they use quantitative methods to measure the relative return on investment for schools and school districts, while taking differences in cost of living, household income, English language proficiency, and special education services into account.
All things being equal, there are tremendous variations in productivity within North Carolina’s public school system. According to a 2014 Center for American Progress study, Union County, Davie County, Mooresville City, and Surry County schools had the highest return on investment in the state. In general, these districts had below-average per-pupil expenditures but above-average test scores. Hertford, Anson, Washington, and Halifax county schools had the lowest return on investment. Per-pupil expenditures in these counties were relatively high, but their test scores were disappointingly low.
Whether you call it “return on investment,” “educational productivity,” or “bang for the buck,” an assessment of the relationship between educational inputs and outputs is an essential starting point for good K-12 education policy.

Key Facts

  • North Carolina spent $8,784 per K-12 student in federal, state, and local operating funds in 2015. When average spending for buildings and other capital costs are included, the total cost of public education in our state exceeds $9,235 per student.
  • State funding is not distributed to all public school children equally. State and federal agencies allocate funds based on the needs, circumstances, and grade level of each student. During the 2015-2016 school year, for example, small, low-wealth school systems received $11,662 in state funds for each special-needs elementary school student with limited English proficiency from a low-income family. Federal funding may add up to an additional $5,880 per elementary student, depending on program eligibility.
  • Over the last five years, state public school funding has increased by approximately 18 percent, from nearly $7.15 billion in 2011 to $8.44 billion in 2016.
  • Federal No Child Left Behind/Every Student Succeeds Act funding to North Carolina public schools has remained relatively flat since 2013. Child nutrition programs received an additional $200 million in federal funds since 2012, largely to implement the Healthy, Hunger-Free Kids Act.
  • Counties are responsible for financing their own capital programs and have spent almost $12 billion on school construction and maintenance since 1998. The state has contributed over $2.1 billion for capital expenditures during the same period. Taking all sources of revenue, school districts have spent over $14.2 billion for school capital expenditures since 1998.


  1. Acknowledge that empirical studies find a weak relationship between education spending and student performance. Embrace “educational productivity.” It’s not how much you spend, but how you spend it. Research suggests that expenditures on classroom instruction provide the most “bang for the buck.”
  2. Discontinue the confusing practice of allocating funds to each school district using various funding formulas, and utilize a block-grant funding system. Give school districts the freedom to allocate education funding according to unique needs and circumstances.
  3. Alternatively, change the way that North Carolina funds public education by attaching funding to the student. Coupled with open enrollment for schools statewide, student centered funding will ensure that schools chosen by parents will receive funds necessary to educate each child — nothing more, nothing less.
  4. Require school districts to post budgets, check registers, contracts, and other public documents online. In addition, districts should be required to report per-pupil expenditures by school and grade level.



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