For decades, the predominant narrative surrounding public schools has been that they don’t have enough money. While the importance of school funding is not in question, this conversation often excludes an important factor: distribution. How school funding is distributed is as important as how much schools are funded.
To look at an example, North Carolina uses an intricate resource allocation model featuring 50 different allotments or formulas to determine how much money schools receive.
Briefly, allotments come in three major types: position, dollar, or categorical allotment. Position allotments account for about two-thirds of North Carolina’s state school funding. They provide positions and salaries for teachers, administrators, and other non-instructional support staff. Dollar allotments are used to fund noncertified staff and purchase goods. Categorical allotments are funds that help remedy differences in student and district characteristics.
Sound complicated? It is — and filled with problems.
North Carolina is just one of nine states (Washington, Idaho, Wyoming, South Dakota, West Virginia, Virginia, Tennessee, and Alabama) that use an allotment system. A 2016 state report noted that it took the average business officer two years to learn how the North Carolina public schools are funded. Yes, the system pays for staff, but it also distributes funding inequitably, provides no incentives for local school districts to limit costs, and forces districts to comply with rigid reporting requirements. Simply put, the system is set up to staff a system, not to meet the needs of students.
Some of the problems are not difficult to see. The current system’s focus on inputs hinders accountability, and transparency is sorely lacking. School districts readily share data and post financial data at the district level, but just try to access comprehensive data at the school level. New federal requirements may help, but bringing real transparency may be years off.
One of the system’s worst flaws is that it treats school districts inequitably. For example, the state provides money to school districts to pay teacher salaries based on the district’s average monthly salary and benefits. But the cost of living, teacher pay, longevity, local salary supplements, and other resources vary tremendously between, for example, suburban Chapel Hill and humble Currituck. These policies create funding disparities that remain even after factoring in monies such as revenue for disadvantaged students or low-wealth counties, which were designed to help remedy such problems.
Such criticism has been echoed by a variety of state reports.
A 2010 consultant’s report by Augenblick, Palaich, and Associates found that the system North Carolina uses to fund public schools was badly in need of modernization. It said change was needed to “improve the equity and efficiency with which state aid is distributed.”
A 2016 state report was even more critical. It said the state system of individual allotments is “redundant, counterintuitive and in some cases lack a clear rationale.” Furthermore, it said, “allotment policies result in maldistribution of resources across LEAs and charter schools and allotment system features and controls obfuscate transparency and accountability.”
In 2017, the North Carolina General Assembly approved the Joint Legislative Task Force on Education Finance Reform. The task force was charged to “develop a new funding model for the elementary and secondary public schools of North Carolina based on a weighted student formula,” but it never delivered on its responsibility.
Fast forward to April 2023. Responding to previous calls to tie dollars to students, state Sens. Mike Lee, Amy Galey, and Lisa Barnes introduced legislation to create a new, weighted student funding model and repeal all current funds, grants, and allotments.
While many lawmakers liked the scope of the legislation, they didn’t like the timing. Many lawmakers thought the scope of the legislation required further study. The bill never reached the floor.
But school finance reform advocates can celebrate one small victory of late. The state budget included a provision calling on the Department of Public Instruction to develop a funding model for special-needs children based on weighted student funding.
North Carolina has 17.2 billion reasons to get school finance right. That’s how much the state spent last year on K-12 public education. It’s too much money to spend on a system so complex that it’s hard to tell if money is getting to where it is needed — and even difficult to know the budget of the local elementary school.
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School finance should not be complicated. Our states need a system that ties funding to students and honors the values of accountability, transparency, and flexibility. It needs to treat districts equitably and align funding with their goals and strengths.
A student-focused system can address many of the shortcomings as well as remedy some of the biggest problems of the school funding debate. Overhauling how we distribute school funding offers a better way to ensure public schools are properly resourced.
Robert Luebke is the director of the Center for Effective Education at the John Locke Foundation in Raleigh, North Carolina.