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Joint Task Force on Education Finance Reform November 1, 2017 Allotment-Specific and System-Level Issues Adversely Affect North Carolina’s Distribution of K-12 Resources (November 16, 2016 report) A presentation to the Joint Task Force on Education Finance Reform November 1, 2017 Sean Hamel, Principal Program Evaluator Program Evaluation Division North Carolina General Assembly In Your Folder Full Report Slides Handouts Digest Program Evaluation Division North Carolina General Assembly 2 1 K-12 Funding

Joint Task Force on Education Finance Reform November 1, 2017 Our Charge • Directive: Examine the formulas the State uses to allocate resources to Local Education Agencies (LEAs) and charter schools for the operation of K-12 public schools • Stakeholders: Department of Public Instruction (DPI), Local Education Agencies (LEAs), Charter Schools Report p. 2 Program Evaluation Division North Carolina General Assembly 3 Twelve Findings Across Two Sections Section I: Allotment-specific issues • Findings 1 through 7 • Issues with individual allotments or issues that span numerous allotments Section II: System-level issues • Findings 8 through 12 • Deficiencies with the allotment system as a whole Report p. 13 Program Evaluation Division North Carolina General Assembly 4 2 K-12 Funding

Joint Task Force on Education Finance Reform November 1, 2017 Overview: Section One Findings 1. The structure of the Classroom Teacher allotment results in a distribution that favors wealthy counties 2. The allotment for children with disabilities fails to observe student population differences and directs disproportionately fewer resources to LEAs with more students to serve 3. How funds are distributed for limited English proficiency lacks rationale, which results in illogical and uneven funding 4. Small county funding is duplicative and unsubstantiated Program Evaluation Division North Carolina General Assembly 5 Overview: Section One Findings 5. Low wealth funding is overly complex and could be modified to better reflect a county’s ability to generate local revenue 6. Resources for disadvantaged students are disproportionately distributed 7. Funds for central office administration are disconnected from changes in student membership, creating an imbalance in funding Program Evaluation Division North Carolina General Assembly 6 3 K-12 Funding

Joint Task Force on Education Finance Reform November 1, 2017 Overview: Section Two Findings 8. The allotment system is overly complex and has limited transparency 9. The system is guided by a patchwork of laws and documented policies and procedures that fail to sufficiently explain the system 10. System features intended to promote LEA flexibility blur accountability 11. Translating LEA allotments to fund charter schools creates several challenges 12. Other models for distributing resources offer alternatives that merit consideration Program Evaluation Division North Carolina General Assembly 7 Overview: Recommendations The General Assembly should choose between 1. Overhauling the allotment system by transitioning to a student-based model or 2. Reforming and modifying the current system Program Evaluation Division North Carolina General Assembly 8 4 K-12 Funding

Joint Task Force on Education Finance Reform November 1, 2017 Background Program Evaluation Division North Carolina General Assembly 9 Funding for the K-12 Public School System Totaled $12 Billion in FY 2014-15 Local DPI distributes state $2.7 billion 23% and federal resources; county commissioners Total distribute local Distributed Federal FY 2014-15 funds $844 million $12 Billion 7% State funds and some State federal funds are distributed $8.4 billion 70% through allotments Report p. 4 Program Evaluation Division North Carolina General Assembly 10 5 K-12 Funding

Joint Task Force on Education Finance Reform November 1, 2017 Allotments • A specific amount of resources, determined using a formula or rules, allocated by the State to an LEA or charter school to implement components of the state education curriculum • Distributed to Local Education Agencies (LEAs) and charter schools • Allotments do not determine the amount of resources needed to ensure opportunity to a sound basic education Report pp. 5-6 Program Evaluation Division North Carolina General Assembly 11 North Carolina Allotment System is Based on a Resource Allocation Model • Resource allocation model – Identifies the components necessary for providing a local public education system and then provides resources for each component – Each allotment represents a distinct category of resources distributed to eligible LEAs and charter schools to operate public schools – “Top-down” Report p. 5 Program Evaluation Division North Carolina General Assembly 12 6 K-12 Funding

Joint Task Force on Education Finance Reform November 1, 2017 37 Different Allotments $8.4 Billion Allotted in 2014-2015 4 types • Base: 82% • Grant: 1% • Student Characteristics:14% • LEA Characteristics: 3% Two types of Resource Type resources • Positions • Dollars Report pp. 6-8 Program Evaluation Division North Carolina General Assembly Distribution of Positions and Dollars Dollar Allotments Position Allotments $3.5 billion $4.9 billion (41%) (59%) Position Other Position Allotments allotments $1.1 billion account for (23%) Total Distributed nearly 60% of FY 2014-15 resources $8.4 billion distributed in FY 2014–15 Classroom Teacher $3.8 billion (77%) Report p. 7 Program Evaluation Division North Carolina General Assembly 14 7 K-12 Funding

Joint Task Force on Education Finance Reform November 1, 2017 Allotment ≠ Expenditures 94% Although there are Salary multiple allotments, the $5.5 billion (69%) Employee overwhelming majority of Benefits $2 billion actual expenditures are (25 %) on salaries and benefits Other Purchased $1.6 million Services (<1%) $204 million Material Total LEA State Expenditures (3%) Capital and FY 2014-15 Outlay Supplies $8 billion $11.7 million $263.8 million (<1%) (3%) Report p. 11 Program Evaluation Division North Carolina General Assembly 15 Allotment Process Initial Allotments DPI first distributes funding to LEAs in 19 PRCs $7.7 billion FY 2014-15 (92% of all allotted resources) Federal Allotments Other State Allotments Allotment Revisions $844 million $672 million 8% of state resources Post Revisions Initial Allotments PRC 001 PRC 032 PRC 007 PRC 013 PRC 027 PRC 003 PRC 056 PRC 005 PRC 069 PRC 031 PRC 002 PRC 024 PRC 054 PRC 034 PRC 019 PRC 061 PRC 012 PRC 130 PRC 014 Report p. 10 Program Evaluation Division North Carolina General Assembly 16 8 K-12 Funding

Joint Task Force on Education Finance Reform November 1, 2017 Findings Program Evaluation Division North Carolina General Assembly 17 Section I: Allotment-specific issues Program Evaluation Division North Carolina General Assembly 18 9 K-12 Funding

Joint Task Force on Education Finance Reform November 1, 2017 Finding 1 The structure of the Classroom Teacher allotment results in a distribution of resources across LEAs that favors wealthy counties Report p. 14 Program Evaluation Division North Carolina General Assembly 19 Classroom Teacher Allotment • Teachers remain one of the most influential determinants of student performance • Single largest allotment  $3.8 billion distributed through 66,009 positions in FY 2014–15  45% of state funds allocated to LEAs • Position allotment  Provided as months of employment LEAs charge the State  State pays entire state salary & benefits Resources follow the teachers Report p. 14 Program Evaluation Division North Carolina General Assembly 20 10 K-12 Funding

Joint Task Force on Education Finance Reform November 1, 2017 Salary Schedule Determines the Amount Allotted to LEAs $ $ Salary increases Experience $ with years of LEAs with more Teacher pay is experience $ $ commensurate with teaching experience experienced, 0 Years Experience 35+ educated, and $60k $58k $56k $55k $55k credentialed 3 Factors $50k $50k Education Influence $45k teachers A teacher’s level of Resources $40k education affects $39k Allotted to earnings receive more $35k $38k $36k LEAs $30k $33k Bachelor Masters Doctorate Advanced funding Degree Degree Degree (Master Plus) Degree National Board Certified Teacher Credentials Licensed teachers who have National Teachers with National Board for Professional Teaching Board Certification earn Standards Certification earn a salary more than teachers Report p. 15 supplement of 12% of their monthly without certification salary on the “A” salary schedule Program Evaluation Division North Carolina General Assembly 21 High Quality Teachers are Not Evenly Distributed • Teacher sorting – Teachers express a preference in where they teach – Preferences are influenced by factors such as pay, working conditions, and student characteristics • Results of teacher sorting – More experienced and qualified teachers are more concentrated in wealthy districts – DPI affirmed this conclusion in the State Plan to Ensure Equitable Access to Excellent Educators (2014) Report p. 17 Program Evaluation Division North Carolina General Assembly 22 11 K-12 Funding