School funds should follow children.
Published August 7, 2019
By John Hood
North Carolina Democrats and Republicans have sparred for years about the level of state funding for public schools. Democrats argue the GOP-led legislature has the wrong priorities, that it ought to have cut taxes less and boosted school funding more. Republicans argue that the big drop in funding occurred during the recessionary years of 2009 to 2011 when Democrats were charge, that recent years have brought substantial increases, and that fostering economic growth will produce higher and more stable funding for education and other services in the long run.
The parties will restate their cases in 2020. Voters will have to weigh the evidence for themselves. Quite apart from the level of education funding, however, North Carolina needs to change how those dollars are distributed. The system is clunky, murky, inflexible, and unfair.
That’s what a consultant to the General Assembly concluded in 2009. It was also the conclusion of the legislature’s Program Evaluation Division in 2016. Now, a new study jointly issued by the California-based Reason Foundation and the John Locke Foundation, where I serve as board chairman, has updated and extended the analysis.
Because North Carolina funds positions rather than students and uses problematic calculations for low-wealth, small-county, limited English proficiency, and disability funding, some schools and districts get less money than they should. Other jurisdictions get more money than policymakers intended.
Furthermore, by lacing school dollars into dozens of regulatory straight-jackets, our current formula keeps superintendents, principals, and teachers from deploying funds in the most cost-effective way. While general state oversight is appropriate in an education system that is, unlike those elsewhere, mostly funded by state rather than local tax dollars, North Carolina doesn’t give educators the flexibility they need to serve students well.
The Reason/JLF report proposed student-centered funding as an alternative. It rests on four foundational principles: fairness (per-pupil funding should be based on student needs), transparency (funding systems should be simple and easy to understand), portability (funding should follow children to their schools of choice), and autonomy (funding should arrive at districts and schools as real dollars that can be spent flexibly, in exchange for accountability for outcomes).
Essentially, the state would attach a minimum amount of school funding to the backpack of each student. The state would then increase the amount for some students based on the challenges they face and the higher costs they may present to their schools.
In Hawaii, for example, the per-pupil allotment is higher for students who are poor, transient, learning English as a second language, in the earliest three grades, or have special educational needs. Texas follows a similar model, while also adjusting the allotment for pregnancy-related services and advanced career and technical education.
In other ways, Hawaii and Texas are vastly different — in the structure and funding of public education, in geography and settlement patterns, in political culture. Still, both have adopted systems that more closely align education funding to varying needs and enrollment patterns. Both make it easy for practitioners and the general public to know what gets funded and why.
Once North Carolina reforms its state funding formula, the Reason/JLF report recommends that school districts then devolve more budgetary authority to individual schools. The precise division of labor should be up to local communities and may depend on the qualities and preparation of school principals. But the core concept is unassailable: one-size-fits-all thinking is ill-suited to the complex and critical enterprise of educating young people.
Now is the time to make this change. Districts that stand to lose under a new formula are less likely to block reform if overall education funding goes up. North Carolina has had solid revenue growth for the past few years, finishing the 2018-19 fiscal year with a nearly $1 billion surplus.
Public schools are likely again to be a funding priority during the 2020 and 2021 legislative sessions. Lawmakers should couple the new dollars with fundamental reform of the funding system. North Carolinians across the political spectrum should welcome it.