Money Strings Bind Schools

July 2008

This commentary first appeared in the The News & Observer, July 14, 2008.

North Carolina legislators and educators get good marks when it comes to improving K-12 public schools. During the past 20 years, they cut class sizes. They raised teacher pay. They established a much-needed accountability system. Recently they turned their attention to reducing the dropout rate, improving early education and reforming high schools.

These are welcome and necessary changes. Unfortunately, they are not enough. What remains to be improved is fundamentally reforming how the state actually funds its public schools.

What needs serious attention and reform are North Carolina's K-12 funding mechanisms that discourage innovation and fail to address local needs. The bottom-line result is systemic unequal educational opportunities for many students.

In 49 interviews with state, district and school administrators as part of a three-year study of school finance funded by the Bill & Melinda Gates Foundation, we asked about the challenges and barriers North Carolina educators face in their efforts to improve student achievement.

Local officials frequently complained about unhelpful and unpredictable state actions that interfere with how they can best serve their students.

One district official told us that all the strings on state money "[don't] allow us to be creative in terms of looking at other solutions. We're in an environment now where we have to think way out of the box and look at things very, very differently" to meet student performance goals.

For example, a 2004 state law set the dates of the school year for students and cut five days from the working year for teachers, reducing the time available for districts to provide professional development for their staffs.

Additionally, state dollars usually arrive with restrictions on how they can be used. And the state sometimes imposes requirements on districts (for such things as teacher training or data systems) without providing money to pay for them.

Another problem is North Carolina's "position allotment" system.

Established in the 1930s, the position allotment system is the primary vehicle through which the state finances K-12 schools. The state tells each school district how many teachers and other staff it will fund based on student enrollment. The state then pays the salaries, according to a state schedule, for the teachers the district hires.

The position allotment system can be a major barrier to local district improvement efforts.

Districts sometimes find it difficult to vary school features such as the personnel mix and class sizes to respond to local needs. Districts can't trade in salaries to invest in technology or other innovations.

Moreover, position allocation typically results in the better, more experienced teachers going to wealthier districts, leaving less experienced teachers for poorer districts where student achievement may lag.

A much smaller share of state dollars is given to districts through a set of "categorical" programs aimed at addressing specific needs, such as aid for low-wealth counties, districts with high levels of disadvantaged students or limited-English learners.

One example is the Disadvantaged Student Supplemental Fund. Set up in 2004 in response to the Leandro court ruling, it was estimated to require over $200 million to be fully funded. Four years later the fund receives less than $70 million annually.

Overall our study found a state school finance system at odds with the goal of improving the education of all students. Nevertheless, the news is not all bad.

Last year, the General Assembly created a Joint Legislative Study Committee on Public School Funding Formulas. Their final report is due at the end of this year. The General Assembly also called for a pilot program in five counties, focusing on alternative teacher salary plans. Such initiatives could be important vehicles for making North Carolina's school finance system work better for all kids.

But to deliver on that, these initiatives must be powered by the political will to place the educational needs of students ahead of some political interests who may be resistant to change.

North Carolina is one of the states where this might just happen.

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