Home renovations can improve our lives. But most of us would see a problem if we woke up one morning and noticed that our homes had 12 bedrooms and one bathroom, with a kitchen in the back yard and a toilet in the living room.
A national school finance expert uses that analogy to explain the way some states have approached piecemeal tweaks to their public education funding systems. “Each one of those may have made sense, but now you have a structure that does not make sense overall,” said Michael Griffith of the Education Commission of the States, during a Nov. 15 presentation for state lawmakers.
Griffith didn’t aim his comment directly at North Carolina, but he could have.
Lawmakers heard his remarks two weeks after learning that this state uses 37 different allotment formulas to split tax funds among local school districts. The funding formula is so complex that many local school finance officers don’t understand it, according to a recent report from the General Assembly’s Program Evaluation Division.
Fewer than 1 percent of local school finance staffers learned how to navigate the state funding formula within a year of starting their jobs. Twenty-three percent needed four or more years to understand the system. That’s a problem for a state in which 23 percent of local school systems have a top business officer with less than four years of experience.
North Carolina’s predicament is not uncommon, Griffith told the Joint Legislative Task Force on Education Finance Reform. “You’re not the only ones who have come to this,” he said. “All of the states that have had a position allocation system have kind of gone through the same process.”
In a position allocation system, school districts get funding based on the number of teaching jobs the state expects each district to need to educate its students. There are benefits to this approach, Griffith said. Districts get a predictable level of funding. Policymakers see what their education dollars are buying. The state controls decisions about education spending.
That last point also leads to negative consequences. State control means local school districts have a hard time moving dollars around to meet district or student needs, Griffith explained. Plus the state needs to make constant adjustments for nonteaching-related education costs.
Position allocation systems made sense when most students spent all day in traditional brick-and-mortar district schools, Griffith said. Today these systems don’t account well for charter schools, competency-based education, dual or concurrent enrollment programs with community colleges or universities, nontraditional career and technical programs, open enrollment, or student movements during the school year.
Most states have jettisoned this type of system, Griffith said. He lists North Carolina among just seven states — including neighboring Tennessee — that still rely on some type of resource allocation system. Thirty-five states, including the rest of our neighbors, now use an alternative called a foundation formula.
That system relies on a foundation, or base, amount of funding for each student. The formula sets “weights” to add funding for particular students’ needs. Then the student count is multiplied by the foundation amount. Additional funding for items such as capital projects or transportation can be added at the end.
“Why did so many states move to this? It’s relatively easy to establish,” Griffith said. “It’s very flexible, and it’s easy to adjust to the state’s and districts’ needs.”
“So if, suddenly, you come up with an idea … There’s dual and concurrent enrollment, where kids can get college credit, you can simply say, ‘OK, now you can spend your foundation allowance on that,’” he added. “Instead of teaching a math course in your school, you can contract with the community college, and you can use your funds for that student for that course instead of a course inside the K-12 school.”
The John Locke Foundation’s top education expert, Terry Stoops, has focused much of his attention on North Carolina’s complicated education funding system. Stoops supports moving toward a more flexible, adaptable system based on individual students’ needs.
Greater flexibility and adaptability make sense, Griffith said. But he warned lawmakers that the process of developing both the “foundation” spending total and the weights for different education needs could be tough.
School districts and others affected by the current formula are likely to fear that any new system will lead to funding cuts, Griffith added. Lawmakers would be wise to consider a “hold-harmless” provision that would protect districts from a major loss of dollars.
Griffith also cautioned against spending a lot of time developing a new system that would make little difference in school districts’ bottom line. “If you end up simply coming up with a new way to slice the pie and everybody gets the exact same slice, I don’t know what the gain is there,” he said. “You spent a lot of political capital and energy on something that won’t make actual changes in the way things are done.”
“You would want to look at this and make this transition if you think you could do it to make your system … provide it with greater freedom and greater adaptability to a lot of things that are going on nowadays,” he said. “If that can’t be done, then maybe you step back and wait a couple of more years before you do it.”
The creation of a special education funding task force this year suggests that lawmakers consider the time ripe to make a change. We’ll see in the months ahead whether they pursue a plan that meets Griffith’s goals of increased flexibility and adaptability.
Mitch Kokai is senior political analyst for the John Locke Foundation.