RALEIGH — Lawmakers are reportedly planning to discuss an expensive state program next year to respond to state court decisions in the Leandro case, but many appear to be operating under misperceptions about school-funding disparities in North Carolina and what the state constitution requires, according to a new report published Thursday by the John Locke Foundation.
John Hood, president of the Raleigh-based think tank, observed in the new Spotlight briefing paper “Equity in School Finance” that many state policymakers, activists, and even some parents are under the mistaken impression that per-pupil spending varies widely among North Carolina school districts based on differences in taxable property. In fact, Hood showed, local sources make up a relatively small share of the education-funding pie, with state and federal dollars accounting for three-quarters of the total, so actual dollars spent per student are remarkably consistent across the state.
“In other states where local dollars predominate, it might be easier to understand why there are lingering debates about school-finance equity,” Hood wrote. “But in North Carolina, this debate was really settled decades ago when state government became the primary source of school funding.”
Hood and JLF researchers approached the funding-comparison issue in a fresh way. Recognizing that most of the highest-spending districts were not actually wealthy but simply enrolled very few students — thus generating a statistical quirk that made their investment in the classroom look greater than it really was — the researchers grouped North Carolina’s counties into six categories: Very Small (enrollments below 2,000), Small (2,000-5,000), Urban, Suburban, Leandro (the five plaintiff counties in the lawsuit), and Heartland (the remaining counties, mostly medium-sized systems encompassing small cities, towns, and rural areas).
By doing so, the JLF team found that the small districts were really the outliers, posting significantly higher average spending per pupil because of having to spread fixed administrative costs over a small population of students. The other four groups were all within five percentage points of the statewide average in the most recent year available (2002-03): Urban ($7,049 per student), Suburban ($6,433), Leandro ($6,691), and Heartland ($6,593).
Hood pointed out that these differences were likely too small to be educationally meaningful and that they had been shrinking over time, not growing, because of large increases in state and federal funding for North Carolina public schools. In fact, he found, because of the additional funding the five Leandro districts had more resources per student in 2002-03 than the five largest urban districts did in 1993-94 — even after adjusting for inflation.
“In short, if the goal was to give poor counties the same resources that richer counties had when the lawsuit began, the debate should be over,” Hood wrote.
Part of the misperception, he said, stems from the widespread citation of statistics, from the Public School Forum of North Carolina, that are limited only to county (and some city) appropriations to local school districts. The Forum’s work, while well-intentioned, does not offer useful guidance for policymakers because it ignores most resources available to schools, exaggerates the proportional differences among systems, and makes no attempt to address the possibility that urban counties use higher local supplements to compensate for their higher labor costs.
Indeed, Hood wrote, to say that a community is “wealthy” because of its relatively high valuation of taxable property is also to say, by definition, that its housing prices are relatively higher — and this typically requires a higher nominal salary to give current or potential workers the same buying power they would have if they chose to work in another community.
“The Forum has admitted that it hasn’t considered the possibility that differences in local funding are a rational outgrowth of local differences in living costs,” Hood said. “The Forum’s omission is puzzling and significant, because the vast majority of education expenditures are for personnel.”
JLF researchers tested the hypothesis that local systems use their own resources to compensate for higher living costs by adjusting state and federal funding in each county for housing prices. It found that urban and suburban counties had significantly lower real resources per student than other counties did — and that the addition of county appropriations then brought their spending closer to the statewide average.
“Essentially, county funding acts to reduce real variations in educational investment across school systems — a role diametrically opposed to the one funding-equalization advocates usually attribute to it,” Hood wrote.
What lawmakers should remember when fashioning any possible changes to the way state government funds schools, he concluded, is that the Leandro decisions do not mandate equal funding, that county-by-county differences in expenditures are modest and declining, and that satisfying the state’s responsibility under the constitution to provide opportunities for a sound, basic education need not cost taxpayers any additional money.