DRAFT

PHASE II

A FUNDING STUDY OF THE THREE LOCAL SCHOOL SYSTEMS IN DAVIDSON COUNTY , NORTH CAROLINA

This study is a continuation of “An Analysis of Data Relating to the School Merger Process” which was conducted in 2006 and 2007 by Davidson Vision and published March 27, 2007.  This continuation study was commissioned by the Executive Committee of the Board of Directors of Davidson Vision and explores in greater detail the issues surrounding school funding in Davidson County under different scenarios.

Presented in draft to the Executive Committee of Davidson Vision

February 5, 2009

E. Lewis Phillips, Jr.

Ben Ross

CONTENTS

Executive Summary                                                                                                                1

Introduction                                                                                                                           14

Background Information Pertaining to Funding Public Education in the United States               15

            Federal Funding                                                                                                         16

            State Funding                                                                                                             19

            Local Funding                                                                                                            24

            Funding Disparities                                                                                                     26

Funding of the Three School Systems in Davidson County , North Carolina                            28

            Federal Funding of School Systems in Davidson County , North Carolina                   31

            State Funding of School Systems in Davidson County , North Carolina                       33

            Local Funding of School Systems in Davidson County , North Carolina                      35

            Child Nutrition Funding in Davidson County , North Carolina                                     40

What if … A Proactive Look at Potential Changes in Funding Streams for LEAs in

Davidson County , North Carolina                                                                                         44

            State Funding for Only One Local Administrative Unit per County                              46

            Merging Lexington City and Davidson County Schools                                              52

                        Effect on Federal Funding Stream                                                                  54

                        Effect on State Funding Stream                                                                      55

                        Effect on Local Funding Stream                                                                     57

                        Effect on Child Nutrition                                                                                59

                        Effect on “Off the Books” Funding Stream                                                     60

            Consolidating All School Systems in Davidson County , North Carolina                     68

                        Effect on Federal Funding Stream                                                                  69

                        Effect on State Funding Stream                                                                      70

                        Effect on Local Funding Stream                                                                     70

                        Effect on Child Nutrition                                                                                71

                        Effect on “Off the Books” Funding Stream                                                     71

Conclusions                                                                                                                           74

Recommendations                                                                                                                 78

Appendices                                                                                                                           83

Executive Summary

Myths and Misconceptions

This community has debated the question of school merger for over thirty years.  During that time, many opinions held by leaders and citizens in the community have evolved almost as folklore and have been assumed to be true even though many of these opinions are not supported in law.  Before introducing the body of this study, we are advised to present in bullet form some elements of statutes and some of the consequences of merging the school systems that may not be commonly known. 

Although there are other debates that should occur regarding the education of the children of Davidson County , those debates will be overshadowed by the singular focus of the question of school merger.  Until that question is resolved, other discussions and recommendations seem fruitless.

Outlined below are citations from NC General Statutes § 115C-67, 68, 68.1 and 68.2. These four statutes prescribe how a community may merge their school systems from multiple systems to one system.  One of the four statutes (N.C.G.S. § 115C-68) does not apply to Davidson County because we do not have any school systems that cross county lines.  The language of these statutes is presented in the Appendices for those who wish to read the source document.

The three statutory methods of consolidating multiple school systems into one system within a single county are outlined below along with the particular differences, requirements and impacts to the community peculiar to each method.

Method 1: Merger by Voluntary Agreement of the Affected School Boards

(Authorized by N.C.G.S. § 115C-67) This statute outlines the requirements and allowances of the merger plan and is included in the other following statutes by reference.

• The county and city boards of education voluntarily enter into a written plan which shall set forth the conditions of merger.
• The method of selecting the school board of the merged system can be nominated, elected, or appointed (and whether elected, nominated, or appointed whether at-large or from districts, and in partisan or non-partisan elections). Such plan would prevail over methods of confecting county school boards prescribed under NCGS 115C-35 and 115C-37.
• Whether or not there shall be continued in force any supplemental school tax which may be in effect in either or all local school administrative units involved
• Merger under this statute may allow any two or all three systems to merge.
• The plan can stipulate whether or not the question of merger will be contingent upon approval of the voters.
• There must be a public hearing on the plan.
• The plan must be agreed to by the city and county boards of education involved and certified that it was agreed to by such boards on a specific date and time and entered into the minutes of those boards.
• After such certification of agreement, the plan must be submitted for approval to the county board of commissioners for its concurrence and approval.
• After such concurrence and approval by the county commission, the plan shall be submitted to the state board of education for approval, and shall not be effective until such approval is granted.
• The approved plan is returned then to the local school board operating and administering the public schools and a copy is filed with the NC Secretary of State.
• Under such merger, the funding available to a Lexington/Davidson County merged system would be between $6,119,492 and $7,632,424 less than is currently available from all sources.
• Under such merger, the funding available to a Lexington/Thomasville/Davidson County merged system would be between $12,872,785 and $15,651,064 less than is currently available.
• Unless the plan of merger includes redistricting the same students will enter the same schools as before the merger.

Method 2: Merger of Units by the Board of Commissioners

(Authorized by N.C.G.S. § 115C-68.1)

• The Board of County Commissioners may adopt a plan for the consolidation and merger of the units into a single countywide system.
• If the Board of Commissioners effect merger under this statute, ALL systems in Davidson County would have to merge.  There is no provision for only two of the three systems to merge under this statute. (Opinion of David Inabinett, Lexington and Davidson County Schools counsel and Kathy Boyd, Staff Attorney for the NC School Board Association)
• There is language in this statute that requires the merged school district to be funded at the highest level of funding of any local school administrative unit during the preceding five years. 
• The statute requires that the State Board of Education establish guidelines for the computation of this amount. (There are other relevant statutes that make the effect of this language difficult to evaluate.  There are also two court cases underway that may redefine the effect of this and/or other statutes that may apply with regard to funding requirements.  This study cannot quantify the funding effect on either the merged school district or the taxpayers of Davidson County until these court cases are fully adjudicated). 
• Based upon what is known and unknown, there are credible arguments that can be made that would yield no change in local funding provided by local taxpayers.  There are also credible arguments that can be made that would significantly increase the amount of local funding required from local taxpayers.
• The foregoing notwithstanding, under this or any other merger scenario, the loss of school funding from federal, state, and private sources to a school system that resulted from the merger of Lexington City, Thomasville City, and Davidson County Schools would be between $12,872,785 and $15,651,064.
• A merger plan developed under this statute would be devised solely by the Board of County Commissioners and the County and City School Boards shall not participate by preparing, entering into, submitting, or agreeing to a plan, and the plan shall not be contingent upon approval by the voters.
• A merger plan devised under this statute must be approved by the State Board of Education.  If the State Board of Education fails to approve a plan devised under this statute, such failure to approve does not preclude the approval of the plan by the General Assembly by local act.

Method 3: Merger of Units by the Local School Board or Boards (through dissolution)

(Authorized by N.C.G.S. § 115C-68.2)

• If the Lexington City School Board notifies the State Board of Education that it is dissolving itself, which has been advocated by the Lexington City Administration, the State Board of Education shall adopt a plan of consolidation or merger of Lexington City Schools with Davidson County Schools.  (The same would be true if the Thomasville Board of Education voted to dissolve itself, but the Thomasville Board of Education and administration has indicated that they have no intention of so dissolving.)
• The NC State Board of Education will have aegis over the development of the merger plan and the local government, the local school board, and the local electorate shall have no input to the development of the merger plan.  (Opinion of David Inabinett, Lexington and Davidson County Schools counsel and Kathy Boyd, Staff Attorney for the NC School Board Association concurs that the statute forbids local input to the plan devised by the State School Board)
• The decision to dissolve a school system is essentially irrevocable. The only way the decision could be reversed would be by an act of the general assembly (opinion of the North Carolina Attorney General),
• The NC State Board of Education in its stipulation of the merger plan could mandate a continuation of the supplemental school tax for the residents inside the former Lexington City School unit (opinion of the NC State Attorney General).
• The NC State Board of Education would set forth the manner in which the new merged board would be constituted (including stipulating a district system or an at large system of election, nomination or appointment) and all current board members would not necessarily continue on a merged board.
• The new board would be most likely elected with little chance that city residents would be represented proportionately on a merged board elected by the entire county (Opinion of David Inabinett, Lexington and Davidson County Schools counsel and Kathy Boyd, Staff Attorney for the NC School Board Association)
• There has never been a merger by a city school board dissolving itself in the history of North Carolina (Statement by Allison Shaffer NC State School Board Counsel and Tom Ziko, N.C. Asst. Attorney General). 
• Generally, if  a charter is turned in, all attempts to merge through amicable collaboration as provided in NCGS 115C-67 and 68.1 have failed, and NCGS 115C-68.2 then stipulates that no local input to the merger plan is allowed (including input from local government, from local school administrative units or from the local electorate).
• There would be an irrevocable loss of between $6,119,492 and $7,632,424 in state and federal funding to the merged district compared with the total funding available to the individual districts before the merger.

Continuation of Three Separate Systems

Currently Davidson County , Lexington City , and Thomasville City Schools operate as three separate independent school districts, each having its own governing board.  Assuming no other structure emerges, either through consolidation or actually creating additional units, it is prudent to consider that no funding changes would occur except those that occur due to the vagaries of the economy, the NC General Assembly budget deliberations, and/or other changes in state or local statutes.  Should such changes occur, it is prudent to assume that they would impact all three school districts or a merged system proportionately with regard to funding.  The most likely state actions with their individual impacts are presented below.  The funding changes indicated would be in addition to any impacts outlined above under the merger scenarios, and all of the funding changes below would impact the funding changes in each of the merger scenarios directly and in like amount across the board.

·        The most likely action of the General Assembly in 2009 regarding school structure and funding is passage of Senate Bill 120, otherwise known as the Rand Bill, or something similar.  As currently drafted (which is subject to change) the bill would provide funding for one and only one school system administrative office (central office) per county in North Carolina .  The bill would further define what constitutes funded positions and activities for each central office.  The reduction in funding to the current systems would total $2,211,333.  If the systems remained independent, the changes in money available for the operation of a central office and associated positions would be as follows: Davidson County currently receives $15,403,968; under Rand they would receive

$14,666,857. Lexington City Schools currently receives $3,630,593; under Rand , they would receive $2,893,482. Thomasville City Schools currently receives $2,650,706;                                  under Rand they would receive $1,913,595.

·        The estimated loss of state funding to education in Davidson County , Lexington , and Thomasville due to passage of the Rand Bill would be $2,211,333.  Merging the school systems as a response to that loss would result in an additional loss of Federal funding of at least $6,119,492 and perhaps as much as $12,872,785 due to changes in demographics that would make the merged system ineligible for certain Federal funds currently received.  It would not be prudent, therefore, to merge the systems solely as a response to passage of the Rand Bill.

·        Currently Davidson County Schools receives $105,814,627.38; Lexington City Schools receives $19,093,075.50; and Thomasville City Schools receives $15,065,378.36 in state funding for all purposes.  The NC Department of Public Instruction has advised all school systems to be prepared for a budget cut of between 3 and 7 % in the 2009-2010 school year.  Should such cuts be implemented, Davidson County Schools would stand to lose between $3.2 million and $7.4 million; Lexington City Schools would stand to lose between $572 thousand and $1.3 million; and Thomasville City Schools would stand to lose between $452 thousand and $1.05 million.  These amounts would be in addition to any other losses.  In the event the three systems merged, the potential consolidated loss due to such budget cuts to the merged system would be between $4.2 million and $9.75 million.

·        Complicating the issues above, the economic stimulus package sent to the U.S. Congress by the President and passed by the U.S. House of Representatives on January 28, 2009 would nullify the education budget cuts looming over the NC General Assembly by making up the difference with Federal funding.  Though this legislation must still pass the U.S. Senate (as of January 30, 2009) it is probable that some form of stimulus package will pass that body, and it is unlikely that all of the money earmarked for states’ public education budgets will be eliminated.  In any event, it is unlikely that any stimulus package passed by the U.S. Congress would be predicated upon the number of school systems in a state or county, and, therefore, the impact with regard to the determination of merger would be neutral.

Other Considerations

Merger Occasioned by Lexington City School Board Dissolving Itself

Based on 2004-2005 National Statistics from the U.S. Dept. of Education, National Center for Education Statistics, there are 537 school districts in the U.S. with ADMs of 15,000 students or more.  Davidson County Schools is the lowest funded school district in North Carolina based on per pupil expenditure.  Out of the 537 school districts in the U.S. having more than 15,000 students, Davidson County Schools is the 26^th lowest funded among them based on per pupil expenditure. Davidson County is the 10^th most populous and the 28^th wealthiest county in North Carolina based on per capita income. 

We are fortunate that the Davidson County School system performs in the highest one third of school districts in North Carolina . 

This fact notwithstanding, it is reasonable to assume that the State School Board, if forced to dictate a merger plan for Davidson County and Lexington City Schools, would mandate a merger plan that calls for a system with educational delivery and services consistent with the services provided by the better performing systems in North Carolina rather than those provided by the poorest regions of the U.S. 

Effect on State DSSF Allotment to Lexington and Thomasville Schools Under Any Merger Implemented

The Disadvantaged Student Supplement Fund (DSSF), other wise known as Leandro funds, which was the subject of Judge Howard Manning’s Court ruling in 2005, held Lexington and Thomasville City School Systems “harmless” with regard to funding changes in DSSF funding formulas that apply to all but the 16 original “hold harmless” school districts in North Carolina.  Since DSSF funding is linked to Local Education Agencies (LEA), if the Lexington and/or Thomasville School Districts merge with Davidson County Schools, the former Lexington and Thomasville LEAs would cease to exist, and DSSF recipients in the Davidson County Schools would receive the revised amount of $196 per student rather than the original amount authorized for Lexington and Thomasville as stand alone “hold harmless’ districts, which now receive $795 per student. Under any merger scenario, Lexington DSSF students would lose $591,187.00 and Thomasville DSSF students would lose $495,340.00 in state funding that is currently provided.

School System Governance

Under any merged system, whether affecting just Lexington City and Davidson County schools or all three systems, one fact cannot be escaped. Currently, there are three school systems, which current boards comprise from five to nine members each.  The demographics and the districting of Lexington and Thomasville City Schools provide for some amount of parity of minority representation of the citizens of those two cities on their respective School Boards.  Davidson County currently has very little diversity in its population and this is also reflected in the membership of its school board as well, purely from mathematic reality.

Should consolidation occur, of all three school systems or of just Davidson County and Lexington school systems, the citizens to be represented on the ensuing governing board will number from approximately 130,000 to 159,000 depending on which systems merge.  With five board members, under a two system merger, each board member would represent approximately 26,000 citizens.  With a nine member board, each member would represent approximately 14,400 citizens or about 11% of the population each.  Given that minorities account for about 10% of the total county population, the governance of any merged system most likely would yield a school board representation with a significantly lower ratio of diversity than exists on the current school boards and less representative parity for the various minority populations on any merged school system board.

The table on the next page summarizes all of the merger plans with regard to what is and what is not allowed, required or forbidden by the various statutes to provide a side by side comparison of the applicable statutes.

                                                                          Merger by   Merger by Co.       Merger by

                                                                          Sch. Brd.     Commission         Sch. Brd.

                                                                          Consensus                               Dissolution

Method of selecting school board allows:

Election At Large                                        X                     X                      X

Election by District                                      X                     X                      X

Nomination                                                  X                     X                      X

Appointment                                                X                     X                      X          

Allows Continuation of Supplement Tax                X                     X                      X

Any 2 Systems May Merge                                      X               Forbids                  X

All 3 Systems Must Merge                                                              X

Plan Requires Commission Approval                      X                    X                  Forbids

Plan Requires State School Board Approval           X                    X                      X

Plan Allows Input From:________________

Commission                                                                         X                  Forbids

School Boards                                               X                Forbids            Forbids

Municipal Government                                                                            Forbids

General Public                                                                                          Forbids_ _

Plan Allows For:____________________ __

Public Hearing                                        Requires                                    Forbids

Voter Approval                                            X                 Forbids             Forbids_ _

Merger Would Reduce DSSF Funding                    X                   X                       X

Merger Would Reduce Federal Funding                 X                    X                      X

Merger Would Change School Assignment            

Local School Board Develops Plan                          X

Commission Develops Plan                                                             X

State School Board Develops Plan                                                                            X_____                    

­­­

X indicates allows for but does not require; a blank indicates that it is not specifically allowed, required, or forbidden in the statute.
Recommendation

This study stops short of recommending the best structure to deliver the best education delivery system to provide the best education to the students of Davidson County given available resources.  Rather it defines very specifically the resources that would be available to fund such education system given the scenarios suggested and the three methods the state provides to accomplish each of those scenarios.

The recommendation suggested here outlines, within the confines of the statutes, a three phase process that the community could use to determine the best education delivery system to deliver the best public education for the students and families of Davidson County .

Clearly any significant change in the structure of educational delivery in Davidson County and its municipalities should not be undertaken without the input of a broad cross-section of all affected parties in the community.  But the statutes hinder such open participation by proscribing certain participation if the conclusion of such discussions results in a merger plan.

A discussion accomplished in phases could address the central question of how to deliver the best public education to our citizens, and still comply with the letter of the law in the event that such discussions lead to the recommendation to merge any or all of the current systems.

Phase I

Phase one should start with members of the school boards and administration of the school systems in Davidson County , Lexington , and Thomasville .  They should convene in a series of joint sessions to explore how they believe the educational interests of the children under their oversight can best be accomplished irrespective of costs.  Such series of discussions does not presuppose that any one or all of the attending parties would support or be affected by merger, or that any of them support a particular structure going in.  The focus should be on determining the best method to deliver the best educational experience to children.  Once there is consensus on that question, then the question of structure can be addressed.

This phase should also encourage out of the box ideas about how best to squeeze every last ounce of value out of public resources, irrespective of their source.  As an example, can more efficacies be derived from every school having food service or would it be less costly to have one school in a cluster devote their kitchen and cafeteria to food preparation and then deliver from that location to schools in the cluster?  Does a student need to eat in a cafeteria, or could the food be delivered on carts to the classroom and the trash retrieved afterwards?  Under such a scenario, could the current school food service space be reallocated to instructional purposes?  Could food service be more cost effective if contracted to private caterers?  This may be an absurd idea, but the idea of questioning the way in which resources are utilized with an eye toward looking outside of the accepted conventions is not.  The point is that in this phase every aspect of delivering services associated with the education of students would be evaluated and judged in these discussions and either found superior or altered to better accomplish the goal.  A plan or plans would then be devised that described the best delivery system for education in Davidson County , Lexington , and Thomasville .

Phase II

Phase two of such discussions would invite elected government officials from county commissions and municipal councils to the table to hear the plan or plans.  Using the data presented, the group should explore in depth the best funding scenarios available to support the education delivery system developed in Phase I.  The deliberations should take into consideration the changes in funding streams that will be jeopardized by continued economic crisis.  Currently there are as many factors that could lead to continued erosion in real estate prices and continued increases in joblessness as there are factors that suggest that the economy will improve in 2009 or 2010.  In the short and medium term, the outlook for tax revenue collection at the Federal, State, and Local levels does not look promising. Discussions between the educators and the leaders who control the public coffers and the power of taxation can help determine how to achieve the best education system with the resources that are or could reasonably be expected to be brought to bear on the issue.  The County Commission in the end would have to approve the plan or plans if such plans included consolidation of any of the systems.

Phase III

Phase three should continue with selected parent, business, and community representatives joining the collaboration with educators and governmental leaders.  There would be a public awareness/education campaign associated with this phase that would be aimed at acquainting the citizenry with the elements and costs of the plan(s) and the expected results and benefits to them.

Ultimately this constituency needs to understand the critical importance of any changes that are undertaken, why they are being undertaken, and the result that would be expected in terms of education system(s) performance.  Concomitant to that understanding, this constituency needs to understand the essential role that they as parents and future employers play in the success of any educational system(s) developed.  Without commitment from these stakeholders, the best system in the world will fail to achieve the quality education of students that is essential to our future. 

It is important that all parties to these discussions understand and believe the increasing importance of education in the world economy. If Davidson County is to advance to the next level, some sacrifices will have to be made if the economy is to be supported with economic drivers rooted in technology that require a better level of education than most of the residents have, but which pay higher wages than the residents have enjoyed in the past.  

It is likely that in any scenario the NC General Assembly will revisit Senate Bill 120 (The Rand Bill) and pass it in 2009.  There needs to be an open discussion about how best to respond based upon this prediction.  The data needed to develop a response to Senate Bill 120 is in this study, the will of the leaders and the electorate is not. 

There are several scenarios that can yield an effective educational delivery system for the people of Davidson County .  The will to rise to the challenge with additional local funding or to live with other alternatives that make do with current funding cannot be found in this study.  It can only be found in the heads and hearts of the people and the leaders they have entrusted with the care of our collective future.  Phase one of these discussions between our educators can define the best system;  phase two of this process provides input from governmental leaders to determine how best to pay for the education system, and phase three engages the rest of the community and invites them to be equal partners in the process and the resulting system.

The answers to these and other issues are within each of us, not in this study.  The actions we as a community take are up to us.

Introduction

In December, 2006 the Davidson County Board of Commissioners asked Davidson Vision to conduct background research in preparation for a possible North Carolina legislative mandate requiring State funding of one and only one school system per county.  Subsequently, when legislation known as the Rand Bill (Senate Bill 120) was written, the question of state mandated merger of school systems was not included but rather, the bill, if passed, would have provided that the state would only fund one central school district office per county and stipulated how that money would be divided should a county have more than one school district.

Currently the State supplies funds for three school systems in Davidson County ; namely, Lexington City , Thomasville City , and Davidson County .  The anticipated legislation was introduced in the N. C. Senate on February 8, 2007, entitled Fund Only One School System Per County and was subsequently referred to the Committee on Appropriations/Base Budget.  Based in part on the information uncovered in the first study by Davidson Vision, talks surrounding this legislation have stopped while more information is collected.

None the less, Davidson Vision examined recent mergers and conducted attendant research to determine best practices for conducting a smooth and successful school consolidation, should that eventually become a reality for Davidson County, and that study, An Analysis of Data Related to the School System Merger Process, was published March 27, 2007.

On September 13, 2007, the Executive Board Committee of Davidson Vision approved for Davidson Vision to proceed with a Phase II study of the school funding issue outlined in the above mentioned legislation in case an amended bill is introduced in the next legislative session.  The Phase II study seeks to determine the best structure to deliver the best education to the children of Davidson County based on available resources and funds.  As described in Davidson Vision’s first study, there are numerous issues associated with the concept of funding one school system per county.  Perhaps the biggest challenge to answering this study’s subject question is the understanding of the origin and criteria of the myriad funding streams currently fueling each of the three school systems in Davidson County and how resource availability would change under different scenarios.

Background Information Pertaining to Funding Public Education in the United States

Throughout the United States , the funding of local school systems is an amorphous process involving federal, state, and local dollars. The share of education funding that federal, state, and local governments provide has changed significantly over time. Historically, elementary and secondary education was funded largely by local governments, and states played only a supporting role. Today, states play a large and increasing role in education funding; a trend that emerged in the 1970’s when state spending first overtook education spending by local governments. Federal funding has always been minor with respect to total direct elementary and secondary education spending, though the federal government’s role in education funding has slowly increased, along with the role of the federal government in education policy (New America Foundation, 2007).  Additionally, public and private foundations fund public education through programs and pilot projects aimed at addressing specific identified needs of targeted demographic populations that align with the mission or purpose of the foundation.  Some federal and state grants are available and distributed to public schools based upon the geographic and demographic characteristics of the school or school system and its populations.  An explanation of the three funding streams for public education in this country – federal, state, and local – may shed some light on the challenges faced when dealing with the funding of public education.

Federal Funding

The federal government spends more than $70 billion on primary and secondary education programs.  Much of the federal funding is discretionary, meaning it is set annually by Congress through the appropriations process.  Funds flow mainly through the Department of Education although other federal agencies administer some funding for education related activities.  Through the U.S. Department of Education, the federal government provides more than $40 billion a year on primary and secondary education programs. The two biggest programs are No Child Left Behind Title I Grants to local school districts ($12.7 billion in fiscal year 2006) and IDEA Special Education State Grants ($11.4 billion in fiscal year 2006).

Other federal agencies that administer funding for primary and secondary education include the Department of Agriculture, which coordinates the funding for the child nutrition programs ($13.4 billion in fiscal year 2006), the Department of Health and Human Services, which supports the Head Start program ($8.0 billion in fiscal year 2006) and the Department of Labor, which supports state job training programs ($4.2 billion in fiscal year 2006) (New American Foundation, 2007).

Federal education funding is distributed to states and school districts though a variety of formula and competitive grant programs. While the federal government contributes about 10 percent of direct funding for elementary and secondary schools nationally, the amount varies considerably from state to state. In some states the federal share of total elementary and secondary education spending is only 5 percent of the total, while in other states it is higher than 17 percent.  Nearly all of it is earmarked to support specific programs or to help certain categories of students, primarily those who are poor or require Special Education.  For example, in North Carolina , the federal share of the school budget equals approximately 7.6% or $657 million.  These dollars are used in programs dealing with poor and handicapped students, and other special populations; National Education Goals Resources; vocational educational courses; safe/drug free school programs; and professional development (Public School Form of North Carolina).

As an overall share of the total federal budget, federal spending on elementary and secondary education programs through the U.S. Department of Education account for less than 3 percent of the total federal budget. In the annual appropriations process, elementary and secondary education funding accounts for about 5 percent of discretionary funding across all federal programs.

In the case of many titled federal dollars, criteria for funding vary from line item to line item and often results in some school systems receiving more funds than other systems within the same county.  For instance, Title 1 federal funding began in 1965 when the Elementary and Secondary Act was passed. Since then, Title 1 has played a major role in funding education. Title 1 was created to allow all students an equal opportunity to receive the highest quality education possible. It was designed to remove factors such as low income and poverty. Through Title 1, school districts can hire teachers to lower student-teacher ratio, provide tutoring for struggling students, create school computer labs, fund parent involvement activities, purchase instructional materials, host professional development for teachers, create pre-kindergarten classes, and hire teacher assistants.

Schools receive Title 1 funding based on the percentage of their student enrollment that qualifies as being low-income. Low-income students are the children that are on free or reduced lunch. Parents can complete an application for free or reduced lunch at the beginning of each school year. To qualify, the family must meet income requirements based on the number of members in the family. The percentage of low-income students at a Title 1 school must be at least as high as the overall percentage of the district, or the percentage must be at least 35%. The lower number of the two is accepted. Each district is given a lump sum of money to divide among the schools. Districts rank the schools in order beginning with the highest low-income percentage rate. The top schools receive funding first and the rest of the money, until it is all used, is divided among the other schools. If a school has a 75% free and reduced lunch rate, it must be served under Title 1.

Students do not have to receive free or reduced lunch to benefit from Title 1. Title 1 was created to help at-risk students. Therefore, a student in a Title 1 school can receive tutoring from Title 1 funding even if the child is not considered to be low-income. Likewise, there are students that are receiving free or reduced lunch that are not receiving Title 1 services. Most schools have some percentage of students that are considered low-income. However, the school's overall percentage may not be high enough for the school to receive Title 1 funds.

 As seen with Title I classification, schools that are classified as a Title I school will receive additional funding from the Federal Government whereas non-Title I schools would not.  Title 1 classification is based on the percent of low income students and Free and Reduced Lunch recipients in their calculations i.e. the higher concentration of low income students in a system, the more funding received.  Other federal dollars are available through competitive and other grants which are based on the concentration of low income students.

While the United States Constitution does not make any federal provisions for public education, every state’s constitution guarantees some level of free public schooling for its citizens.  Each state governs its own public education system and decides how much to pay for it.  In North Carolina , the key components of the public education funding process dates back to the late 1920’s and early 30’s when the nation was struggling through the Great Depression.    

State Funding

(Note:  The following information is taken from The History of Education in North Carolina . Raleigh , NC . North Carolina Department of Public Instruction).

“The stock market crash in October 1929, followed swiftly by the Great Depression, brought a halt to almost three decades of progress and prosperity across the nation and in North Carolina . All across North Carolina , schools suffered terribly, since there was not enough money to pay salaries and keep schools open. Since financial support for schools was primarily a local matter, the conditions of education varied from county to county, but no county in the State was able to continue to operate its schools at the same level as in pre-Depression years. Conditions continued to worsen in 1930 and 1931, and prospects were dim for any substantial recovery in the foreseeable future.  It was at this point that the North Carolina General Assembly took action that was both courageous and statesmanlike. Recognizing that it was impossible for many counties to provide minimum funding for education and that the remaining counties were also in a very depressed economic condition, the 1931 General Assembly undertook the gigantic task of providing a free and uniform education to all the children of North Carolina. The legislation enacted to bring about this dramatic and unprecedented reorganization and change in North Carolina 's public schools was known as the "School Machinery Act." Enacted by the 1931 session of the General Assembly and refined and fine tuned by the 1933 session, the "School Machinery Act" included almost all of the basic elements contained in the public school laws in effect today”.  

“The concept of full State support for school operation costs was a dramatic reversal of previous funding for public schools. Counties were required to provide and maintain buildings, and were urged to supplement State funding to improve and expand programs, but there was no required matching funds in order to be eligible to receive State funds. It is difficult today to understand fully the tremendous courage and vision that this group of legislators must have had to take such bold actions to save public schools from possible extinction.  Among other things, the School Machinery Act established the county as the basic governmental unit for operating public schools. All special charter districts were abolished, but such districts were allowed to re-establish themselves if they wished to do so and if their financial situation was such that they could afford to do so. Over time, most of the districts chose to reconstitute themselves”.  

“The School Machinery Act provided the life preserver necessary for the education system to survive the Great Depression. The 1933 General Assembly expanded on the work done two years earlier and put education on the move again. In 1933, the school term was extended from six to eight months and many cuts that had been made prior to 1931 were restored. For the first time, the General Assembly began to provide support in such areas as library books and school supplies. In 1935, the state provided a text book rental plan whereby all textbooks required in grades one through 12 could be rented at approximately 20 percent of the cost of the textbook itself. Two years later, this textbook rental plan was modified by providing that all textbooks in grades one through seven should be provided free of charge to students”. With public school provisions written in the 1867 state constitution and the foresight of leaders during the Great Depression, there can be little question why the state of North Carolina is known through out the country as “the education state”. 

Control over public education in North Carolina is highly centralized, allowing the North Carolina State Board of Education and the North Carolina Department of Public Instruction (DPI) to exercise a great deal of power over public schools.   According to DPI, the state ranks sixth in the nation and first in the South for the highest percentage of education funds from State revenue.  In North Carolina , 68.7 percent of school funding comes from the state, compared with the national average of 50 percent.  Local funds make up 23.7 percent and federal funds comprise 7.6 percent of K-12 education expenditures in North Carolina .  This funding arrangement, with the largest amount of funding coming from the state rather than locally, puts North Carolina in a unique situation.

North Carolina also uses a unique mechanism to allocate two-thirds of the dollars it directs to local districts.  The state funds schools with three basic types of allotments: position allotments; dollar allotments; and categorical allotments.  Position allotments direct funding to a local school system for a specific purpose.  The local school system pays whatever is required to hire certified teachers and other educators, based on the State Salary Schedule without being limited to a specific dollar amount.  Each local school system will have a different average salary based on the certified personnel’s experience and education.  Examples of position allotments are: teachers; instructional support personnel; and school building administration.

Dollar allotments allow local school systems to hire employees or purchase goods for a specific purpose, but the local school system must operate within the allotted dollar amount.  Examples of dollar allotments include: teacher assistants; central office administration; textbooks; and classroom materials/supplies/equipment.

With categorical allotments local school systems may use this fund to purchase all services necessary to address the needs of a specific population or service.  The local school system must operate within the allotted funds.  These funds may be used to hire personnel such as teachers, teacher assistants, and instructional support personnel or to provide a service such as transportation, staff development, or to purchase supplies and materials.  Examples of categorical funding are:  at risk student services; non-instructional support personnel; children with disabilities; and transportation.

The primary unit of allocation is average daily membership (ADM).  Please be advised that ADM is calculated throughout the school year and thus changes from month to month. It is a constantly moving target, and calculations provided by NC Department of Public Instruction and the three local school districts use the most current ADM at the time that a calculation is made.  For that reason, ADM figures presented throughout this report vary constantly.  BUT THE VARIANCE IS NEVER MORE THAN 2%, AND THE FIGURE IS ALWAYS ACCURATE IN THE SPECIFIC PERIOD OF TIME TO WHICH THE CALCULATION APPLIES. Official ADM figures for each school district in the state are certified by the NC Department of Public Instruction during the next school year usually in November.  For that reason, ADM figures are never precise, nor can they be, but they are accurate within an acceptable range. ADM figures are established based on the higher of (a) actual ADM from the prior year, or (b) projected ADM for the current year.  ADM funding provides the basis for the majority of funding, which is allocated into the three categories described above – position, dollar, and categorical.  After the first month of school, a school district can request additional resources due to extraordinary student population growth that results in significant class size overage problems.  Special allotments may be made for assignment to small schools of less than 100 ADM when consolidation is not feasible due to geographic isolation.  Testerman and Brown (2000) reported that funds for instructional materials, supplies, instructional equipment, and testing support were distributed based on $40.29 per allotted ADM during the 1998-1999 school year.  In addition, funds for each student to take the Preliminary Scholastic Aptitude Test (PSAT) were allotted based on $2.69 per allotted ADM in grades 8 and 9.  Each school district received funds for textbooks at the rate of $46.77 per allotted ADM in grades K-12 (Testerman et al 2000).  In the 2007-2008 school year, those figures rose to the following levels:  for classroom material $56.35 per ADM; $2.96 per ADM for students in grades 8 and 9 for PSAT (no change from the 2000 school year); and $67.00 per ADM for textbooks. 

Local Funding

In their report, Mesibov and Johansen state that although the school systems (in North Carolina ) are primarily funded by the state, the average county allocates nearly a third of its funds for the operations for the public schools.  Furthermore, these locally raised revenues are used primarily to provide, equip, and maintain the physical plants for the schools and to supplement the state’s support of the operating budget (Mesibov and Johansen, 2006).

Local administrative units, i.e. county commissioners, are required by statue to finance some areas of school operations.  The General Statues specify several categories that must be provided for mainly from local revenues.

1.      Buildings, furniture, apparatus [G.S. 115C-521(b)]

2.      Garage and maintenance equipment for school buses [G.S. 115C-249(e)]

3.      Liability Insurance [G.S. 115C-47(25)]

4.      Maintenance of plant [G.S. 115C-521(c) to 115C-524]

5.      Site acquisition [G.S. 115C-517]

6.      Furnishing of superintendent’s office [G.S. 115C-277]

7.      School building supplies [G.S. 115C-522(c)]

8.      Water supply and sewage facilities [G.S. 115C-522(c)]

Counties may raise money for school construction through a general obligation bond issue or through installment financing; school administrative units have no authority to issue bonds or otherwise borrow money for construction.  Projects may also be paid for from current revenues, including county property taxes, local sales and use taxes, voter approved supplemental property taxes, proceeds from the sales of capital assets, proceeds from claims against fire and casualty insurance policies, and other sources [G.S. 115C-426(f)] (Mesibov et.al. 2006).

Property and sales taxes constitute the primary funding sources of local revenue.  Local governments collect taxes from residential and commercial properties as a direct revenue source for the local school district. All real property is assessed at 100% of market value except for agricultural, horticultural, woodland, and historic property.  Historic property is assessed at 50% of its face value.  Agriculture, horticultural, and woodland properties are assessed on the basis of present use value.  The legislature sets the discount rate of income for these properties.  The present use value of property is analyzed annually.  Local revenues are based on property tax valuation at the rate of one dollar (or percent thereof) per hundred dollar valuation.  Most counties revaluate property every four years.  State law dictates revaluation a maximum of every eight years.  However, county commissioners can, by resolution, reassess at any time (Testerman & Brown, 2000).

Wealthier, property-rich localities have the ability to collect more in property taxes. Having more resources to draw from enables the district to keep tax rates low while still providing adequate funding to their local school districts. Poorer communities with a smaller property tax base may have higher tax rates, but still raise less funding to support the local school district. This can often mean that children that live in low-income communities with the highest needs go to schools with the least resources, the least qualified teachers, and substandard school facilities (Mesibov et.al. 2006 p. 20).

Funding Disparities

There are large disparities in the amount of funding that schools receive, which create differences in educational opportunity. The funding disparities can be broken down into three main areas:

1. Interstate disparity – School finance inequities among different states

There are significant differences in education funding across different states. For example, in the 2004-05 school year, New Jersey spent $14,119 per student while Utah spent only $5,257 per student. Even when adjusted for regional variations in costs, large disparities between states exist. The disparity is caused by a number of factors, including: (1) capacity - how well off a state is based on their economy and resources, and (2) effort - the states willingness to provide funding for education. Wealthier states with a high fiscal capacity, (typically those in the Northeast), have more funding available to spend on education than states with more limited resources (typically those in the South and the West). Additionally, some states spend more of their total available funding on education. Montana , for example, is a low fiscal capacity, but high fiscal effort state (New American Foundation, 2008).

2. Intrastate disparity – School finance inequities within a particular state

There are large differences in funding among school districts within the same state. Some districts spend significantly more on education than other school districts even if they are within the same state, and sometimes only a few miles apart. For example, in Illinois , the New Trier Township High School District spent $16,783 per student while the Saratoga Community Consolidated School District spent only $5,287 per student. When school districts rely on the local property tax as their primary source of funding, schools located in wealthier districts have more resources to draw from than schools in low-income communities.  The Federal Government established a standardized measure, called the "equity factor" as part of Title I, Part A of the No Child Left Behind Act that measures school finance equity among districts in a state (New American Foundation, 2008).

3. Intradistrict disparity – School finance inequities among schools within the same district

Even within a single school district, the amount of funding that individual schools receive can differ significantly. For small school districts this is not usually an issue, but in large school districts that operate many schools, intradistrict disparities can be significant. Until recently, resource allocation at the individual school level has been largely ignored, partly due to a lack of transparency and understanding of the budget process at the local level. Recent research suggests that resources are not evenly distributed among schools in a school district and that some schools, often those that serve students with greater needs, receive less resources. A large portion of the disparity is related to the allocation of teachers. Higher paid, more experienced teachers tend to be congregated in lower needs schools, while less experienced teachers end up in high needs schools. In many school districts disparity in teacher pay does not factor in the way in which funding distributions are calculated. A handful of notable school districts, however, including New York City , are recalculating the way they allocate funding to schools. (New American Foundation, 2008).

To summarize local funding disparities, local funding differences are a result of local differences in the tax base and tax rate and would be even greater if federal funding did not flow disproportionally to poorer counties (Lily, 2007).

Funding of Three School Systems in Davidson County , NC

There are three independent school systems currently operating within Davidson County , NC ; Davidson County , Lexington City , and Thomasville City all of which are funded by federal, state, and local revenues.  The diagram on the following page depicts how the various funding streams flow into the local school systems.

A majority of federal funding is sent to the North Carolina Department of Public Instruction then delivered to the Local Education Agencies (LEAs) in the county.  LEAs can also receive monies directly from the federal government through competitive federal allotments grants.  These allotments are dependant upon eligibility requirements, applications and approvals from individual LEAs.  The state money to fund LEAs is approved and appropriated yearly by the state general assembly.   In turn, the state money is distributed to the LEAs through allotments by the North Carolina Department of Public Instruction (DPI).  Local funding is supported by property and sales tax revenue as well as any supplemental local school taxes.  Local funds are paid directly to the school systems by the local municipalities or county government.  Other funding streams can include foundation, grants and in-kind donations.   

Funding Streams for Schools Systems in

School Demographics

A look at the demographics of the three LEAs in Davidson County illustrates a very unique educational challenge.  As seen in the chart below, this uniqueness of the three LEAs in Davidson County plays a major role in funding.  While a large percentage of students in both city systems’ are classified as non-white, the county’s student population is overwhelmingly white.  As mentioned earlier, school systems that are predominately made up of at risk students receive some funding that is not available to mostly low at risk populations; if the percent of at risk students fall below a certain level, those funds are lost.  In other words, any funding that is based on the percentage of at risk students in a given system, as opposed to ADM, would be impacted if that percentage changes.

Student Population of the Davidson County ,

Lexington and Thomasville City School Systems

Based on Ethnicity

Based on 2007-2008 revenues, the following charts will illustrate the federal, state, and local funding received by each of the three school system in Davidson County .

Federal Funding of School Systems in Davidson County , North Carolina

The current enrollment for each school system in Davidson County is approximately 20,500 students in the Davidson County School system; 3,000 in Lexington City , and 2,500 in Thomasville City .  Due to the unique demographic profile and number of students attending each school system, and knowing that federal funding for certain line items are dependent upon demographics and student enrollment, all systems within Davidson County are not funded equally by federal revenues.  For example, since Lexington City and Thomasville City have a larger percentage of minority and low income students, these systems receive more funding from the federal and state on those certain line items.  Line item Federal funding for the fiscal school year 2007-2008 is seen in the chart below with Davidson County Schools receiving $5,348,307.57, Lexington City Schools an amount of $2,790,458.16, and Thomasville City Schools receiving $3,334,943.06, of Federal dollars.

Federal Revenue for Davidson County , Lexington City ,

And Thomasville City Schools FY 2007-2008

(Note: The above figures were generated and verified by the North Carolina Department of Public Instruction and the finance departments from the Davidson County Schools , Lexington City Schools , and Thomasville City Schools )

When looking at the Federal funding line items that could be affected if the current LEAs in Davidson County change, school funding appears to be fairly straightforward.   However, there is a consensus of the three local superintendents in Davidson County that the competitive Federal grants would be difficult to obtain if percentages of low wealth, free and reduced lunch, and minority populations as a percentage of the total LEAs’ ADM were to go down.  For example, Federal 21^st Century Grants have recently been awarded to both Lexington and Thomasville City Schools for their higher percentage of at risk student enrollment; however a decrease in the percentage of a schools’ at risk population would reduce the chances of getting funding from that particular grant significantly.  The same rationale can be applied to any grants that base their decision on the percentage of students receiving free or reduced meals.  With both Lexington and Thomasville City Schools having over 80% of their students eligible for free or reduced meals, any change in that percentage may impact their ability to win Federal grants.  All local superintendents were in concert with their message that many of the competitive Federal grants would not be awarded to LEAs in Davidson County if student percentages of such defined populations dropped significantly in a given LEA.

State Funding of School Systems in Davidson County , North Carolina

As mentioned earlier in this report, North Carolina uses a unique and unusual mechanism – position allotment- to allocate two-thirds of the dollars the state directs to local districts.  Under the position allotment system, the state determines how many teachers (and some administration staff) a district is entitled to have based on its average daily membership (ADM is a measure of enrollment as described earlier) and then funds those positions based on state salary schedules.  Districts are expected to use those same position allotment rules in determining school staffing levels but do have some discretion to transfer funds between spending categories.  The state pays the actual salaries of teachers in the state funded positions, giving a financial advantage to those districts that employ individuals with more experience and higher academic credentials.  The position allotment formulas make no special adjustments for low-wealth districts or children with special needs; these concerns are addressed by various non-formula categorical appropriations (Hansen et. al. 2007).

State Revenue for Davidson County , Lexington City ,

and Thomasville City Schools FY 2007-2008

(Note: The above figures were generated and verified by the North Carolina Department of Public Instruction and the finance departments from the Davidson County Schools, Lexington City Schools, and Thomasville City Schools  Textbook Revenue and Revenue – Textbooks are essentially the same.  Schools are not required to use the same code on this line item.)

With a great deal of state funding dependant upon Average Daily Membership (ADM), major changes in school funding would not be seen at the state level.  However, if the state passes legislation that only one central office is to be funded per county, then there will be significant reduction in a LEA’s personnel and administrative support allotment (for a more detailed explanation, see Titus et. al., 2007).  A major concern expressed by all local superintendents is how to effectively service the expanding student population with fewer teachers and staff and the impact less staffing will have on the quality of education delivered, unless monetary loss is recovered.

Furthermore, in addition to the reduction of teachers and staff, the Leandro Funds would also be significantly reduced if LEAs are mandated to merge by the state unless the state legislation passes a resolution that would keep the Leandro Funding at its current rate to each LEA.  The Leandro decision states that “school systems (LEAs) and the State must first put in place programs that provide all children with equal opportunity to obtain a sound basic education and that if the funding that is appropriated from whatever source is being used for any other educational purpose than to meet the constitutional mandate, then those funds must be reallocated to satisfy the constitution” (NC Department of Public Instruction, 2000).  If no such resolution is passed and changes take place within the LEAs in Davidson County , then the Leandro funding would be reduced or eliminated resulting in the reduction of programs directed towards at-risk children.

Local Funding of School Systems in Davidson County , North Carolina

Local funding of the current school systems in Davidson County is a function of the elected County Commissioners .  All three systems are allotted local revenue from the county based upon the number of students enrolled in a particular system.  The county funding rate per student for the 2007-2008 school year was $973.74.  It should be noted that both the City of Lexington and the City of Thomasville have supplemental local school taxes that go directly to their schools for funding.   The supplemental school tax for the 2007-2008 school year for Lexington City Schools amounted to $1,512,932.55 and $1,265,347.17 for Thomasville City Schools. 

The per pupil expenditure (PPE), which includes all funding streams and any supplemental school taxes, is different in each school system in Davidson County due in part to the supplemental school taxes that are collected in Lexington and Thomasville.  For the 2007-2008 school year, the PPE for LEA in Davidson County was:  Davidson County $6,543.00; Lexington City Schools $9,034.00; and Thomasville City Schools $9,651 (North Carolina Department of Public Instruction, 2007).        

Local Revenue for Davidson County , Lexington City

and Thomasville City Schools FTY 2007-2008

(Note: The above figures were generated and verified by the North Carolina Department of Public Instruction and the finance departments from the Davidson County Schools , Lexington City Schools , and Thomasville City Schools )

On the surface, local funding is not a complicated issue.  As seen in the chart above, funding is allocated to certain line items for each LEA in the county and also with any local supplemental school taxes collected by the cities of Lexington and Thomasville .  However, there is more to local funding than what is allocated from the county and local governments.  And it is this “off the books” revenue that makes local funding extremely complicated.

Over the past several years, parental involvement in raising additional monies to help schools has gained momentum as parents see the need for additional funds to help schools in various areas.  Two of the bigger fund raising organizations within a school are Athletic and Band Booster clubs.  Although funds are raised by these clubs, the amount of money collected is not part of the regular accounting for a given LEA but nonetheless is used for school functions.  The amount of money raised by these clubs can be astounding – easily reaching six figures in some cases.  The following illustrates what can be done by a booster club without any money coming out of the operating budget of a LEA.  In one area of the county a booster club determined that the school needed a new gymnasium.  The club had the means to secure enough money to build a state-of-the-art gymnasium for the school – doing so with minimum financial support from the school or LEA.  In another example, a new athletic field was developed and paid for by the local booster club again without any financial support from the school or LEA.  Not only are athletic boosters active within a school raising money, in many cases band booster clubs are also raising money for uniforms, equipment, and trips for band competition. 

In some cases, the fund rising efforts for band boosters can net a significant amount of money.  There is great concern among local superintendents that this funding stream would be significantly impacted if changes are made that affect a schools demographic make-up or if a merged LEA must support athletics at a schools where booster clubs are not successful in raising money, at the same level of those schools with historically active and “rich” booster clubs.

Athletic and Band booster clubs are but one example of an “off the books” revenue stream.  There are other funding streams for local LEAs that are not known by the general public.  As is the case in Davidson County, the two city LEAs school athletics’ are a line item on their current budgets – in the county it is only a limited line item for athletic and band costs.  What do you do with gate receipts and concession money from games?  Where does the money come from to pay for band equipment, supplies, and travel costs?  Who pays for athletic uniforms, equipment, and field/floor maintenance?  Do you have to pay for activity buses and pay mileage?  These are questions that are currently handled differently in the LEAs in Davidson County where in many cases, booster club funds often help with or even cover these costs.  The same is not true for Lexington and Thomasville City School systems.  Will additional local funds be available to make resource distribution equitable?

Another area of concern for local funding, and is often overlooked by stakeholders, is the in-kind services donated to the LEAs.  For example, LEAs are often allowed the use of city, government, or locally owned facilities and services for a reduced rate and/or no charge.  Would these same arrangements remain if changes happen within an LEA?  There is an agreement among local superintendents that many of these in-kind donations are done to support the “local” school.  In other words, a different school from outside of a local area may not be privileged to the same treatment because they are not viewed as a “local” school.  Services, sports fields, and utilities are often an in-kind donation to a local school for various activities by city governments.  Would this be the case if the “local” school was part of a different LEA?  Doubt is the consensus among superintendents.

More specific questions surround the current Communities in Schools (CIS) program.  Again, each LEA in Davidson County handles this program differently.  One LEA pays for CIS instructors from state allocated position monies whereas a different LEA pays another LEA to conduct the CIS program for them.  What would be the impact to this much needed program if there are LEA changes in the county?

Perhaps the biggest question that arises if the current LEA arrangement in Davidson County is changed is – how is the local rate of funding going to be determined?  There is a possibility that this question would be addressed at the state level should legislation pass for funding one central school office.  With both city LEAs in the county receiving additional revenue from a local school tax, per pupil funding is significantly higher in both than in the county LEA.   How are these differences going to be addressed? 

Child Nutrition Funding

Child Nutrition is funded by Federal revenue and by income from school operations.  The Federal United States Department of Agriculture (USDA) reimburses different dollar amounts per meal for all students.  By doing so, student prices are kept low in all schools.  The rate of reimbursement changes by the economic status of the child’s parents/guardians.  Through a stringent economic application process, parents apply for free or reduced lunch benefits.  The USDA reimburses a full meal rate for students qualifying for free lunch, a reduced rate for those qualifying for a reduced rate and a smaller rate for all other students.  The more children that qualify for free and reduced meals, the higher the reimbursement is for that LEA.  For example, since both Lexington and Thomasville City Schools have so many students that qualify for free and reduced meals (over 80% in each LEA), the reimbursement allows those LEAs to give all students free breakfast.  It also allows those LEAs to do a summer feeding program, where the USDA pays for lunch for any child in the community in full.  With such a high percentage of students qualifying, Thomasville City Schools is looking into a universal lunch program as well, where all students can receive a free lunch.  The impact on revenue from the USDA for the free and reduced meal program is illuminated by the following example.  In the 2007-2008 school year, the per pupil expenditure rate for child nutrition was $564.00 for Thomasville City Schools; $414.00 per student in the Lexington City Schools whereas students in the Davidson County Schools were funded at a rate of $151.00.

North Carolina Department of Public Instruction

Child Nutrition Services

Free and Reduced Meal Application Data by Site

All Year to Date Data

2007-2008

Having a high rate of students who qualify for free or reduced lunch also helps LEAs receive competitive grants.  Some grantors use this percentage as an indicator when disbursing their funds.  If school demographics change, a LEA would not qualify for some of these grants.  But more importantly, LEAs could no longer feed all students free because, even though the qualifying students would receive some benefits, the LEAs overall percentage would no longer allow for the benefits of Universal breakfast or lunch.

Child Nutrition Funding

Davidson County , Lexington City ,

Thomasville City Schools

2007-2008