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 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 than in many other states because most public school funding comes from the state, not local, government. This means that control over public education in the state is highly centralized, allowing the state legislature, governor, and North Carolina State Board of Education to exercise a great deal of power over public schools. North Carolina ranks sixth in the nation and first in the South for the highest percentage of funds from state revenue. In North Carolina, 64.8 percent of the funds come from the state, compared to a national average of 47.6 percent. Local funds make up 25 percent and federal funds 10.2 percent of K-12 education expenditures in North Carolina.

State, federal, and local education spending continues to grow much faster than student enrollment. From 2001 to 2007, student enrollment in North Carolina public schools increased nearly 10 percent. On the other hand, state public school funding has increased by 34 percent, from $5.9 billion in 2001 to $7.9 billion in 2007. During the same period, federal funding to North Carolina public schools has increased 53 percent, thanks to significant increases in No Child Left Behind funding ($212.5 million increase since 2001) and special education funding ($128.5 million increase since 2001). Finally, local public school funding posted a 28 percent increase, adding an additional $594 million to the state's public schools since 2001.

Salaries and Benefits

Much of the money spent on public education in North Carolina pays for employee salaries and benefits. For the 2000-07 school year, the state spent nearly 91 percent of funds appropriated for public education on salaries and benefits. Since 1992, there has been a 100.8 percent increase in base teacher salaries, compared to a 52.8 percent increase in inflation.

Despite legislative efforts to get North Carolina teacher pay above the "national average," teacher compensation is well above the national average when properly adjusted for cost of living, pension contribution, and years of experience. A 2008 study by the John Locke Foundation found that the average teacher compensation in North Carolina ranks 10th in the nation and was $55,731, or nearly $5,400 more 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. There has been a $3.6 billion increase in state, local, and federal public school spending since 2000, but only 70 percent of North Carolina students graduated high school in four years. In 2006-07, more than 23,500 students dropped out of school, the highest number of dropouts since 2000. Moreover, the state's 5.24 percent dropout rate for 2006-07 was the highest dropout rate in five years.

Simply throwing more money at high schools is not the answer to the dropout crisis. In 2006, Gov. Mike Easley commissioned the "North Carolina High School Resource Allocation Study" to determine if high schools in North Carolina were using existing levels of funding efficiently and effectively. After two years of exhaustive study, a team of researchers from UNC-Chapel Hill and East Carolina found that the effect of total per pupil expenditures on student performance is very small. For example, they pointed out that a $500 increase in total per pupil expenditures in a school would lead to a miniscule 0.06 increase in average test scores in the school.

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. Coupled with open enrollment for schools statewide, this will ensure 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.