- The Public School Forum’s report on Weighted Student Funding highlights an important problem, but some of its models would result in significant increases in public funding (up to nearly $9 billion) to North Carolina public schools
- The report’s proposed “No Loss” provision would undermine WSF’s ability to distribute money to where it is most needed and inoculate districts from the need to right-size staffing and operations
- Despite recommending hefty increase in spending, the report offers no provisions to enhance transparency and accountability and no strategy to improve academic outcomes
A recently released Public School Forum (PSF) report on school finance warns that migrating from North Carolina’s present resource allocation system to a system of Weighted Student Funding — without significant additional state money — would cut funding for 73 of 115 school districts and more than half of all charter schools. While upsetting to educators and policymakers, the findings raise a very important question: Is the problem a lack of funding or our inability to determine whether funds are used efficiently and effectively?
Full disclosure: My John Locke Foundation colleague Kaitlyn Shepherd and I participated in the PSF working group. We appreciated the opportunity to work constructively with other concerned colleagues. Still, like most participants, we agree on some parts of the report and disagree on others.
Diagnosis: North Carolina needs a new system of school funding
North Carolina’s current system of funding public schools is a Resource Allocation Model (RAM). It determines the cost of education based on the cost of resources such as educators or administration rather than the actual costs of educating students. RAMs use formulas, mathematical metrics, and attendance numbers to establish funding levels. They place high values on inputs over outputs and require centralized authority to administer, which limits local autonomy and innovation. Because RAMs rely heavily on local property taxes, such systems also result in resource inequities and unequal staffing.
Moreover, since RAMs don’t tie funding to students, resources are difficult to track, which raises issues of transparency and accountability. That is, we don’t really know if the funding is getting to where it is needed.
The John Locke Foundation generally supports the report’s guiding principles that a new Weighted Student Funding (WSF) model be robust, supportive, transparent, predictable, responsible, and stable. We are also in agreement with our colleagues that North Carolina needs to overhaul its system of funding our public schools and why.
We explore the shortcomings with North Carolina’s funding system in depth in our “Funding our Future” report.
Weighted Student Funding: The Solution?
Weighted Student Funding (WSF) helps to address these shortcomings. WSF provides base funding for all students along with additional funding both for student characteristics (such as students with special needs or economically disadvantaged) and community weights (such as low wealth). WSF empowers local educators with resources and flexibility to adapt innovative strategies to address the differing needs of students and communities.
WSF links funding to students, and in so doing, it helps to reduce inequities and foster transparency, fairness, and accountability. Nevertheless, those goals can only become reality if the details — formula structure, weights, funding levels, and implementation — are correctly identified and administered.
Disagreement: What is the root cause of the funding system’s ills?
While we support PSF’s diagnosis of North Carolina’s school finance system, we have several areas of significant disagreement. First, the John Locke Foundation does not accept the report’s repeated focus on funding inequities and adequacy nor its assertion that lack of resources is the major cause of the system’s current ills.
In our view, the root of current ills is not a lack of resources, but an inefficiency of resources. Parents and taxpayers don’t really know how resources are being used or if they are generating the desired outcomes. The current funding system fails to guarantee resources will get to where they are most needed. The inability to track resources effectively impedes transparency and accountability.
Real per-pupil expenditures for North Carolina public schools have nearly tripled since 1970. Academic outcomes have lagged. Do we need more resources, or do we need to learn how to use resources more efficiently?
WSF seeks to reduce inequities in resources and ensure that resources get to the students who need them most and are distributed in a transparent and accountable fashion. The main attractions of WSF are its focus on meeting the changing needs of students and its efficiency in getting resources to where they are needed. PSF’s focus on adequacy reveals a misunderstanding of the problems of school finance in North Carolina.
Disagreement: Should school districts be protected from funding decreases?
A second area of disagreement concerns the report’s support for the premise that no district should ever lose funding. According to PSF’s own figures, that premise would cost North Carolina an estimated $192.4 million. Such a position ignores the realities of declining enrollments and their impact on staffing and budgets and would place taxpayers and policymakers in untenable positions.
Enrollments have declined in 85 percent of districts since 2015. Meanwhile, districts have hired over 1,200 additional staff (consultants, librarians, school counselors etc.) just since 2020. Ensuring no district loses funding would perpetuate these problems and undermine the purpose of WSF: ensuring that money goes to the neediest students.
A “no loss” provision would only ensure that wealthier or lower-need districts — districts that should see funding cuts — maintain their funding levels. “No loss” provisions guarantee that scarce resources continue to be locked up in higher-income school districts, instead of resources being distributed to higher-need students.
Imposing “no loss” provisions on districts would change school funding to “zero-sum” funding, unless new funding is added. Since shrinking districts would never lose money, districts would have no incentive to right-size and manage or modernize education programs.
Disagreement: Should there be a massive increase in state spending?
The “no loss” provision included in the report’s WSF model would strain the state budget. Ensuring nearly all districts and charters experience no financial loss would require additional state revenue. In the models profiled in the report, estimates for new state spending range from $4.1 billion (Model III) to $8.8 billion (Model IV), amounts that are unsustainable.
A school district losing revenue from a change in the funding system would not need to be debilitating. Programs can be created to limit disruptions in funding changes or to incentivize downscaling. Time-limited hold-harmless provisions may be necessary to get programs passed. Let’s not forget that allowing districts to choose the higher monthly enrollment when reporting ADM already serves as a de facto hold-harmless program. These and other programs already help schools soften the loss of revenue from declining enrollment.
The additional revenue from a “no loss” provision would greatly increase state spending, a goal of many advocates of the public schools. Nevertheless, these options likely fail the political test. An additional expenditure of such magnitude seems unlikely.
We should remember the report’s recommendations are a product of specific weights. Differing weights and spending levels would create new scenarios that may be more appealing to the public, educators, and policymakers. Those alternatives are beyond the scope of this article. The point is that the scenarios modeled in the report should not be considered the last word on the subject.
Our last objection to the report concerns things either barely mentioned in the report or left out altogether. The report focuses on WSF but offers little discussion on the need to revamp, consolidate, or eliminate current allotments. As “Funding Our Future” points out, North Carolina’s Resource Allocation Model relies on about 50 different allotments.
The report tangentially touches on teacher position allotments, by far the largest source of revenue and budget expenditures for school districts. As the report notes, district leaders assert that position allotments provide crucial staffing guarantees, allowing districts to hire the best candidates regardless of salary cost. They also restrict flexibility and limit the ability of leaders to use innovative strategies to confront staffing changes.
We need new thinking here. Converting to dollar allotments and eliminating the teacher salary schedule can give administrators more flexibility in how they pay teachers. Those opposed to moving away from position allotments say such a move would require more state spending to ensure districts can still attract and retain staff. Administrators need more flexibility to pay teachers what they are worth. While administrators love the guaranteed positions, the current teacher salary structure does not provide a long-term solution for the issue of teacher pay and only results in unequal staffing across districts. Changes can free up additional dollars and provide more flexibility to administrators
Low-wealth allotments is another area that requires serious additional review. Due to ongoing problems with assessment, changes in valuation, and the complexity of the calculations, the value of aid to districts varies widely and is not predictable.
Rethinking teacher allotments and low-wealth allotments could significantly impact the shape and level of funding for WSF. Regrettably, the final report doesn’t give the topic the attention it deserves.
Finally, the report fails to include any provisions to enhance accountability. No mention is made of steps to take so WSF could improve transparency and overall accountability. Formulas would remain largely unchanged, and no real changes would be made to ensure the success of the changes and improve accountability. The omissions are conspicuous.
Policymakers should consider adding reporting requirements that improve transparency and budgetary provisions to ensure that schools have maximum flexibility to use funding to accomplish goals.
Any WSF proposal should also include multiple reporting and auditing requirements to promote accountability. WSF proposals should include information about teachers, schools, the sources of funds, and how funds are expended. Such information is critical to tracking expenditures and identifying how money is being spent.
Finally, a WSF proposal should include strategies to improve student outcomes and ensure financial support is aligned to those changes. These changes should ensure incentives for administrators and educators that are properly aligned. WSF works best as part of a strategic framework that includes a statewide strategy to improve student achievement as well as school choice, which also provides real incentives for schools to improve. Without such components and a statewide strategy, the WSF proposal is just another plan.
Conclusion
The PSF report on Weighted Student Funding provides an accurate description of the challenges North Carolina faces in how it funds public schools and the need to link funding to students, not systems. Despite accurately diagnosing many of the current system’s ills, the report would improperly use WSF by asserting that any plan must not result in a financial loss to any district. Such a provision would necessitate new and significant increases in public funding in schools while sidestepping the real problem: Resources are being used inefficiently and not generating the desire outcomes.
Nevertheless, the report does get much right and enriches the ongoing discussion on school finance and Weighted Student Funding in North Carolina. It asks many of the right questions and provides a useful starting point in an important discussion.
