Fiscal Research Division Report: Public School Funding Overview and Update

February 18, 2009

A report on public school funding was presented by Brian Matteson and Kris Nordstrom.  The complete power point presentation can be access at:

The report was directed at answering five major questions: how are public schools funded, how are funds spent, what are the biggest budget issues, how are public schools doing and what are the issues for the next biennium. Public schools receive 64.8 percent of their funds from the State and these funds are distributed to Local Education Agencies by way of allotments. Allotments are distributed by formulas, mostly by the Average Daily Membership (ADM) formula, and the allotments consist of three types: position allotments (63 percent of state funds), dollar allotments (15 percent), and categorical allotments (22 percent). State funding has increased 42.6 percent from $5.59 billion in 2000-2001 to $8.19 billion in 2008-2009, and the State funding per ADM has also increased by 24.6 percent to $5,549/per pupil during this same timeframe.  Salary and benefits in 2007-2008 were 90.1 percent of the state funding, on average. Other major expenditures were transportation, supplies and materials, school technology and staff development. The revenue from the education lottery and the cap to the ABC bonuses was discussed. The lottery funded $154.2 million for school construction, $108.1 million for class size reduction, $84.6 million for More At Four, and $38.5 million for college scholarships. The ABC bonuses were capped at $94.2 million though they needed $134.1 million to fully fund them last year. They reviewed the academic performance of students for 2007-2008. In conclusion, the staff discussed the education budget shortfall and the possible 3, 5, or 7 percent reduction to public education in the continuation budget.  One way to manage the shortfall would be to increase class size. For every student added to a class the state could save $170 million on funding. It was noted that because of the change in Kindergarten eligibility for students in 2009-2010 the state will save $50 million in funding (avoided cost) this year. There was a brief mention of the federal stimulus package. Preliminary figures show the distribution to Education in NC would be approximately $1,142.8 billion in the first part of the Fiscal Stabilization funds. These funds are restricted in that they can be used for education funding to increase the allotment from a minimum allocation distributed in 2005-2006 budget to reach to the funding allocated in the 2007-2008 budget. Other funding includes: High Priority Fiscal Stabilization $254.3 million, Title I $169.2 million 2009 and the same amount in 2010, Special Education $162.5 million in 2009 and 2010, Education Technology $8.2 million and Homeless Assistance $0.6 million. Members were cautioned regarding these figures as they were only estimated amounts.


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