NCSBA Funding Priorities for the 2006 Session of the General Assembly

At the NCSBA Annual Conference in November, the Delegate Assembly approved the following change to the appropriations portion of the legislative agenda. As you meet with your legislators between now and May, you are encouraged to focus on these four funding priorities.

NCSBA, as the representative of the 115 local boards of education, believes before the General Assembly approves any new funding for public schools that funding that is essential to the operation of schools be reinstated or maintained. The funding priorities, in priority order, for the 2006 Legislative Session shall be:

· Reinstate the Sales Tax Refund (state portion is $33.3 million in 2006-07)

· No Supplanting of the State’s Effort towards School Construction

· No Discretionary Cuts ($44 million in the continuation budget)

· Appropriate Funds that Were Supplanted Due to the Fines and Forfeitures Lawsuit ($102 million for 2005-06)

Sales Tax Refund: The General Assembly first approved the sales tax refund for public schools in 1998. The flexibility allowed by this funding mechanism has become a critical source of funds so that North Carolina’s school districts can address their differing needs. Beginning with the 2006-2007 fiscal year, the General Assembly has transferred this money to the State Public School Fund and then reduced that fund by an equal amount equating to a $33.3 million cut to our public schools over what they received from the state during the 2005-2006 fiscal year. This cut does not include what schools will additionally lose through the local portion of the sales tax refund. No other entity; cities, counties, universities, non-profits; lost their sales tax refund nor to our knowledge are there any plans that they will.

School Construction Dollars: The state currently allocates a portion of the corporate income tax for school construction. This money is distributed on an ADM basis. While the amount fluctuates, this year’s estimate is $73 million. During the 2005 session, the General Assembly approved a lottery with 40% of the net proceeds dedicated to school construction. The current estimates are that this will generate an additional $145 million for school construction. There are concerns that the General Assembly will attempt to supplant the money from the corporate income tax that is currently going to school construction. In the Senate version of the budget bill, $50 million of the school construction money was supplanted/cut. The last estimate was that North Carolina has over $6 billion in school construction needs. Since the study was completed class size has been reduced in K-3, growth in the student population has exceeded estimates, and steel and concrete prices have escalated.

Discretionary Cuts: Beginning with the 2002-2003 fiscal year, school districts began receiving discretionary cuts from the General Assembly. In 2002-03, the amount was $42.6 million in non-recurring funds. In 2003-2004, the amount was increased to $44.2 million and it was moved from non-recurring funds to recurring funds. This means that unless the General Assembly acts this amount will automatically be included in the continuation budget. In 2004-2005, $27.6 million in non-recurring dollars was added to the $44.2. During this budget cycle, the $44.2 million cut was continued in the continuation budget. This budget year was the first time that the public schools were not given a major expansion item to help with the discretionary cut. In 2002, the State faced a huge budget crisis. Public schools across the state asked that any cuts be discretionary because every district is different and while some may feel less pain eliminating one item another district might select something different to cut. It was never the intent or the belief that this cut would become permanent.

Supplanted Funds Because of Lawsuit: Eleven years ago, NCSBA and a handful of school districts filed suit against the State over what was considered a civil fine or forfeiture under the state constitution. The NC Supreme Court ruled this summer that the schools were entitled to a number of items under the provisions of the constitution that the State was not previously remitting to the schools. The General Assembly estimates that for this fiscal year $106 million would need to be remitted to the schools that had not previously. The General Assembly supplanted $102 million of that $106 million by diverting the money to the State’s public school fund and then reducing the appropriation to the fund by an equal amount. This means that only $4 million that was not previously going to public schools will. This money goes into the School Technology Fund.