Raising Per-Pupil Support: How is it possible?

In her first State of the State address, Gov. Beverly Perdue described some of the challenges facing North Carolina, and called on her fellow lawmakers and citizens to make the tough decisions necessary to balance the budget and improve the state’s economy. Despite a looming $2.1 billion state budget deficit, the Governor surprised lawmakers and supporters with her pledge to increase per-pupil spending.    

 RELEVANT FACTS:

• North Carolina General Fund Support for K-12 education: $8.19 billion (2008-09 budget)
• Public Education Comprises: 37 percent of General Fund Budget 
• Average Daily Membership:  1,476,566 (2008-09 school year)
• North Carolina Per-Pupil Support (State Support): $5,549

IS THERE ADDITIONAL REVENUE GOV. PERDUE MIGHT USE TO INCREASE PER-STUDENT SUPPORT FOR PUBLIC SCHOOLS?

Fiscal Stimulus Legislation provides access to a wide range of financial resources that will help fund K-12 education and provide maximum flexibility in the use of resources.   

State Fiscal Stimulus Funds:   $1.4 billion for Education
North Carolina will receive $1.4 billion in State Fiscal Stimulus Funds (SFSF). The vast majority of this money will be disbursed in 2009-10, although some will be distributed in 2010-11. According to the North Carolina Department of Education, 82 percent ($1.16 billion) of SFSF must be used “for the support of public elementary, secondary and higher education, and, as applicable, early childhood education programs and services.” The money can be used to restore or increase existing budgets. The remaining 18 percent ($258.5 million) states can use for education, public safety or other government services.  Bottom line: states exercise tremendous discretion over how and where these monies are used.   

Categorical Funds Title I ($300 million)
Monies expand existing programs for Title I students, students with disabilities, education technology and homeless students assistance.   

Competitive Funds ($5.5 billion)
North Carolina is eligible to compete for grants to enhance education reform, innovation, provide teacher incentives and improve statewide data systems. 

School Construction Funds
Provide bondholder Federal Tax credits in lieu of interest payments.  North Carolina schools in 2009-10 and 2010-11 will receive $551 million.

Demographics
Legislation mandating that children start school later will reduce ADM for fall 2009 by approximately 11,600 students.

ARE THERE CONDITIONS THAT MAY FACILITATE THE PROCESS OF INCREASING PER-PUPIL STUDENT SUPPORT?

• Federal Stimulus provides North Carolina up to an additional $1.4 billion in funds for education – approximately 17 percent of the current K-12 budget.
• Stimulus legislation will allow re-purposing of state funds to other education programs.  
• Relative to other state agencies, under the 2008-09 budget, cuts made in K-12 education ($158 million) was modest. Cuts include six percent for the Department of Public Instruction and two percent for school districts. Limited cuts will provide maximum impact for additional monies.   

IMPLICATIONS:

The availability of SFSF funds, language that provides states with great discretion in how SFSF funds are used and a slight decline in ADM membership all help to make it plausible for Gov. Perdue to contemplate an increase in per-pupil support. These developments also allow the Governor to delay some of the tough decisions she discussed in her speech. Still, such a path raises other considerations: 

• If North Carolina uses federal money to restore cuts, where will the money come from next year to fill the loss of one time federal stimulus money?
• How will North Carolina be able to provide money – this year and hereafter – for additional categorical program expansions?
• Will access to competitive grants result in additional state commitments with regard to staff and benefit costs?