John Locke Update / Research Brief

Class Size Controversy Puts Budget Flexibility At Risk

posted on in Education, Education (PreK-12)
Featured Image

Over the last six years, the Republican-led General Assembly has granted school districts unprecedented budget, staffing, and class size flexibility.  Much of that flexibility has come at the request of school boards and district leaders, who contend that easing regulatory restraints on schools will make them better able to meet the diverse needs of their student populations.  Legislators agree that allowing decisions to be made locally, rather than at the state level, is consistent with good governance and, in the case of Republican lawmakers, conservative principles.

But over the years, school boards and district officials appear to have used the flexibility generously granted to them by state lawmakers to execute a revenue-maximizing scheme.   Whether it is by accident or design, the formula is the same – use (or refuse to use) budget flexibility to shortchange an essential or popular line-item and then blame legislators for the shortfall.  Add a few media reports of dire predictions – mass layoffs, program cancellations, and destitute classrooms – and lawmakers are falling over themselves to make districts “whole,” avoiding the protestations of their constituents and political opponents.  The textbook funding debate was an early example of this ploy.  The class size controversy is the latest.

The resource allocation model used by our state to distribute funding to its public schools may be part of the problem.  Our current funding system is complex, lacks transparency, and, according to some lawmakers, fails to hold districts accountable for their budgetary or staffing decisions.  It is no surprise that some forward-thinking lawmakers in the House want to create a task force that will explore ways to improve the school finance system.

State funds are distributed to districts in 37 allotments.  Five are position allotments, that is, funds designed to be used for classroom teachers, school building administrators, instructional support personnel, career and technical education teachers, and child and family support teams.  The remaining 32 allotments cover teacher assistants, textbooks, central office administration, classroom materials, and other components considered necessary for the operation of public schools.  A series of formulas, published in a 150+ page policy manual, determines the amount of money that each district receives.

But funds sent to districts in one of these allotments need not stay there.  At a recent legislative committee meeting, outgoing Chief Financial Officer for the N.C. Department of Public Instruction Philip Price pointed out, “The funding that goes to the school districts is funded in total.”  School districts then use that funding to “place the teachers and hire the combination of teachers that are necessary to meet the needs of their particular school system.”

Indeed, school district officials may move taxpayer funds between categories after they are received by the state, so long as it complies with state regulations and statutes.  A handful of allotments, including non-instructional support personnel, low wealth supplemental funding, transportation, and Disadvantage Student Supplemental Funding are not restricted.  Others are subject to rules and statutes that restrict the movement of funds.  For example, funds cannot be transferred into the central office administration allotment but may be transferred out.  On the other hand, districts may transfer money into the teacher assistant allotment, but they may not transfer these dollars to another one.  The latter restriction was a legislative response to another example of budgetary duplicity – school district leaders complaining about proposed cuts to teacher assistant positions while diverting millions of dollars from their teacher assistant allotments.

A recent report published by the North Carolina General Assembly’s Program Evaluation Division detailed the transfer of funds from one allotment to another.  According to the report, during the 2014-2015 school year, districts used 968 transfer to move over $203 million across allotment categories.  Even funds set aside for our most vulnerable populations – low-income, at-risk, and Limited English Proficiency (LEP) students – were the subject of allotment transfers during that period. But these transfers are across allotments.  It does not account for how districts use money within each allotment.  This is particularly true for the massive pot of funds used to hire instructional staff across grades and disciplines, the classroom teacher allotment.

Late last year, school district leaders began to complain that, once exceptions to mandated teacher-to-student ratios expire next year, they will have insufficient funds to meet K-3 class size requirements. District officials report using their existing budgetary flexibility to reallocated tens of millions of state dollars earmarked for K-3 class size reduction to pay for art, music, physical education, and technology teachers, teacher assistants, and various positions in middle and high schools.  They contend that meeting class size requirements in the coming school year may require dismissing teachers and teacher assistants to free up funds for classroom teachers in the early grades.

House Bill 13, which addresses the problem by easing class size requirements, passed the House unanimously and now sits in the Senate Committee on Rules and Operations, but senators are reluctant to move the bill through.  Senator Jerry Tillman has been one among a handful of key senators to voice displeasure of school district budgeting practices.  Like many in his caucus, Tillman believes that maintaining the current level of budget flexibility may be a sound policy in principle, but it has, once again, become a political liability.  If current law is unchanged, they will be blamed for the dismissal of enrichment teachers and teacher assistants.  If House Bill 13 passes, they will be derided for raising class sizes.  I suspect that the bill will not move until the Senate finds a satisfactory compromise, particularly one that minimizes the potential political fallout.

Regardless of the outcome, the class size controversy further impairs the relationship between lawmakers and district administrators and school board members. It is hard to blame lawmakers for hesitating to preserve budget flexibility or grant additional freedoms to districts when they get blamed when local decisions go awry.  In the end, districts must take ownership of their decisions and refrain from using it to score political points.  Otherwise, beleaguered lawmakers will have no choice but to revoke those budgetary and operational freedoms that school officials claim are essential.

Note: This essay has been edited to reflect the fact that budget flexibility can be used and not used to shortchange a line item.  I apologize for the oversight.

As Vice President of Research and Director of Education Studies, Terry oversees the research team’s writing and analysis across the spectrum of public policy issues. He also specializes in K-13 education. Before joining the Locke Foundation, he worked as the… ...

Donate Today

About John Locke Foundation

We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

The John Locke Foundation is a 501(c)(3) research institute and is funded solely from voluntary contributions from individuals, corporations, and charitable foundations.