Article 1, Section 15 of the North Carolina constitution states:

The people have a right to the privilege of education, and it is the duty of the State to guard and maintain that right.

Further, Article 9, Section 2 of the North Carolina constitution states:

(1) General and uniform system: term. The General Assembly shall provide by taxation and otherwise for a general and uniform system of free public schools, which shall be maintained at least nine months in every year, and wherein equal opportunities shall be provided for all students.

(2) Local responsibility. The General Assembly may assign to units of local government such responsibility for the financial support of the free public schools as it may deem appropriate. The governing boards of units of local government with financial responsibility for public education may use local revenues to add to or supplement any public school or post-secondary school program.

Historically this and other laws have been interpreted to mean that the state provides current expense funding and the counties are providing capital funding.

In fact, a majority of the funding for public K-12 education in North Carolina comes from the State budget (approximately 65% of all K-12 funding). K-12 funding represents almost 50% of the state budget and is the largest expenditure for the State. Federal funds, for Title I, EC, CTE, etc. contributes another 11% of state funding. Funding provided to each LEA by the county makes up the balance of funding in the state.

Funding from the state and Federal governments are provided equally to each county based on a funding formula consisting of the ADM in each school district. ADM stands for Average Daily Membership which is the average number of students in attendance. Calculations vary by state, but in North Carolina it is calculated as the total number of school days attended by all students in a school divided by the number of days per month. Federal funds are block grants to the state, which then allocate funds based on eligible ADM in each district. Review this report for a more detailed overview of school funding.

Challenges in School Funding

While the ADM formula assures equal state funding per student to each district, there have been long-standing concerns over whether the funding is equitable resulting in one of the landmark education court cases in the State, Leandro v. North Carolina, which has shaped much of the State’s turnaround school policy for the last 20 years, as the court found that the state had not met the right of each student to a “sound basic education”. As a result, the state released DSSF funds (Disadvantage and Small School Supplemental Funding) to help provide extra funds to districts in need.

In 2019, a new report from West-Ed, a California-based non-profit hired by the court to assess the current progress of the state towards meeting the Leandro decree, released a report finding that the state still continues to have significant funding-related equity problems in providing a sound basic education for all.

Some of this inequity is exacerbated by local funding, which is provided by the counties. All capital expense funding (also called Capital Outlay) is provided to LEAs by the county. Counties can also supplement current expense funding as they choose to in order to augment funding coming from the state. Each year, the North Carolina Public School Forum releases a report that studies the financing of public schools systems by counties. This report finds that significant inequities are created by county funding. For example, Orange County funds districts the most per student at $6,409 per ADM. The seven counties providing the lowest amount per ADM (Duplin, Caswell, Graham, Greene, Robeson, Hoke, and Swain) combined provide $6,033 per ADM. These counties do not have the tax base or economic base to produce the funding needed to provide significant funding to the LEAs. In addition to meaning schools are less resource-rich, the allocation of these funds can also create staffing challenges. The state sets the base pay scale for schools in NC. However, counties are allowed to supplement this salary using local funds in order to increase salaries (primarily due to costs of living in certain areas). This means that the average teacher in Wake County receives a supplement of $8,670 per year while a teacher in Caswell county receives $0. A teacher in Buncombe county receives an average supplement of $7,748 while in neighboring Yancey county, they receive $300.

There are two other major issues with education funding: the fact that schools are HR-heavy and simply the volume of money being imperceptible to most people. In 2023-2024, 93.03% of state funding for education was spent on personnel costs. Many other expenditures, such as building and utility costs, are fixed. This means that any change to education, when funding either increases or decreases, will impact personnel by necessity. When education funding is cut, schools will usually cut services and defer maintenance (creating a cascade of issues) but most cuts will involve cuts of personnel. Secondarily to that is the volume of money. $10 billion of state funding is more money than most people can imagine and makes math difficult. For example a 1% raise in teacher salary equates to about $500 in a teacher’s paycheck each year but $50 million in cost to the state. While this is a lot of money, it’s also only about 0.5% of the budget for education. However, unlike the US Government which can accumulate debt, states are only allowed to spend the money they bring in. So assuming all of the tax revenue is spent, a $50 million increase in one place may mean a $50 million decrease somewhere else unless revenues increase (revenues increase for three reasons: taxes are increased, incomes increase so people pay more in taxes, or the number of people paying taxes increase).

Budget Allocations

State budgets in North Carolina are set every two years in odd numbered years (referred to as a biennium budget). There’s an input process to get agency feedback for what’s needed in each biennium. In odd numbered years, the General Assembly convenes for a long session (January until July, though most typically run longer). During the long session, members can propose and pass bills for any purpose and the GA is required to pass the new biennium budget. North Carolina does not use zero based budgeting, meaning each budget is an adjustment to the previous budget (versus zero-based budgeting which begins with a clean budget each time). The budget contains two parts: the special provisions and the committee report (also known as the “money report”). The special provisions contain changes to laws and statutes that are tucked into the budget bill. Some of these are related to the budget and others are not. The money report contains a summary of all of the dollar amounts being changed in the budget and defines what these dollars are intended to be used for. Once the bill is proposed (the bill is introduced by the house and then the senate in alternating biennia), it goes through the normal billmaking process before being enacted. In the event a budget cannot be enacted, the budget from the previous biennium remains in effect. In the even years, the legislature returns for the short session. This session is intended to enact a new bill that revises the biennium budget for any changes that are needed as well as to complete any bills that are outstanding from the long session.

For local funding, the local Board of Education and local County Commissioners usually meet jointly in March or April of each year to discuss requests for local funding for the upcoming year. Like the state, counties must have a balanced budget - their expenditures cannot exceed their revenues. County funding is solidified by the County Commissioners and distributed to the district.

Federal Funding is typically allocated as a block grant for states or districts to allocate based on certain criteria. The most common ones are Title I (for low-income students), the National School Lunch Program, program support for Migrant and English learning students, and funding for Career and Technical Education and Special Education.

Budgeting Structure

All public schools in North Carolina budget according to a Uniform Chart of Accounts. To a traditional LEA, funds are allocated into a PRC (which stands for Program Report Code) which defines what the money is for, where it’s from, and how it may be used. Most PRCs are a dollar allotment to the LEA, either as a set amount or a per ADM amount. Other PRCs, like the classroom teacher line item, are position allotments where the state pays the salaries for the people in that allotment, regardless of what the salary for that person is (position allotments are allocated as months of employment). For that reason, districts are encouraged to put their most expensive teachers in position allotments and their new teachers in other funding sources. Local and federal funding sources also have their own PRC.

For charter schools, the state calculates the average per ADM sent to the district and sends that amount to the charter school. For local funds, each district must calculate the per ADM amount sent by the county to the LEA and then mail a check to each charter school with students from that county in membership.

Budget Codes

The Uniform Chart of Accounts includes a singular budget code structure for each expenditure. This looks something like 1.5110.015.542.000. The first section is called the Fund Code, and indicates where the funds are coming from (in this case, a 1 indicates state funds). The second section is called the Purpose Code, which defines where the purchase will be used (5110 indicates that the purchase is for a regular instructional setting, non-EC, non-CTE. Protip: You can move assets from regular instructional settings INTO CTE and EC spaces but not vice-versa, so most districts use 5110 for all classroom purchases unless they know for a fact they’ll be used somewhere else forever). The next section is the Program Report Code (PRC), PRC 015 is the School Technology Fund. The fourth section is the object code which defines what is being purchased (542 translates to capitalized computer hardware purchases). The last set of numbers is either going to be 000 for a district-wide purchase or it may be a school’s 3-digit code. So by looking at the budget code, you can determine that the expense is for computer equipment for a classroom purchased through the School Technology Fund. The full Chart of Accounts document and Attachment A schedule defines all valid budget codes and any restrictions on funding within each PRC. Budget allocations into each PRC are downloaded automatically into each LEA’s finance system by the State and then budgeted into Purpose Codes and Object Codes by the Finance Officer. Local funding and grant funding is typically loaded in by the LEA Finance Officer in cooperation with the county or grantor to ensure that the Chart of Accounts is done correctly.

Allotments

Allotments for each PRC can be calculated using the Allotment Policy Manual and can be found on the Allotment Data website.

Funding Sources for School Technology

While many line items in the Chart of Accounts allow for the purchases of technology and computer equipment (for example, in many districts, EC and CTE will fund their own technology purchases), there are several line-items specifically for technology purchases in the State budget.

School Connectivity Initiative

As described in Unit 4, North Carolina’s School Connectivity Initiative pays MCNC directly for Internet access service for all public schools as well as provides network support services, firewall, and content filtering services. While not an allocation to schools directly, it does offset the needs of schools to pay for these services.

PRC015: School Technology Fund

The School Technology Fund is funded by statewide fines and forfeitures, and provides some funding to each LEA for technology purchases and technology-related staffing. The amount of funding in this PRC is relatively small. However, in 2019, the NC School Boards Association sued the state and won a judgement of $730 million that was withheld from the school technology fund. There is no timeline for these funds to be released to PRC015.

Textbook and Digital Resources Line

Each LEA is allocated funding for textbooks. In 2015, the textbook line item was renamed “Textbook and Digital Resources” and expanded using a mix of state funds and Indian Gaming revenues. This allowed textbook funding to be used to purchase computers and digital content services.

PRC073: School Connectivity

While the state pays Internet connectivity directly to MCNC, schools are still responsible for the non-E-Rate (discussed later in this unit) portion of their WAN connectivity and the non-E-Rate portion of wifi access points. The state allocates funding to districts to pay for these costs in PRC073.

Other Programs

There are PRCs for other state funded initiatives such as an allocation to PSUs for Gaggle and Go-Guardian, Learning Management Systems, and other similar services.

Technology-Related Quirks in the Budget

There are two major technology-related quirks that CTOs need to be aware of in the budgeting process. The first is that state law allows capital outlay purchases to be made on any eligible current expense budget. Therefore, it is possible to buy computers on current expense budgets in many different PRCs. In addition, for a new school building, it’s allowed to purchase library books as part of the capital expenditure for the new building.

Additionally, the state budget runs on a fiscal year cycle beginning on July 1, and ending on June 30. It’s possible to change a budget code or PRC for a purchase all the way up until June 30. This is because funding in some PRCs will roll in a districts ledger from year-to-year, while other funding reverts back to the state’s general fund if it’s not spent by June 30 (note: in order to be considered “spent”, a purchase order has to be issued, received, invoiced, paid, and closed). PRC015 will roll from year-to-year. As a CTO, it’s good practice to review your PRC015 expenditures at the end of each fiscal year and move them out of PRC015 into other non-recurring funds such that you can keep your PRC015 funds from year-to-year. Additionally, at the end of the year, most districts have a lot of money that is still unspent. As a CTO, it’s advisable to keep a list of items that are needed in the district and that can be purchased and received quickly – and to make sure your superintendent and finance officer know about this list, so that they’ll call on you if there is money that needs to be spent. This technique has always served me well, and by scraping funding from different sources, I am typically able to double my budget at the end of each year. Superintendents would often rather see this money go to innovative technology programs than to frivolous purchases (or worse, a technology purchase that bypasses the tech department, which happens a lot in the end-of-year rush).

There’s also inconsistency in how technology staff are funded. Some schools use teacher positions to fund ITFs, others use instructional support positions and hire ITFs in lieu of media coordinators. Some use local funds or Federal funds. There is no allotment specifically for any IT staffing.

COVID Relief Funds

Nearly $390 million was made available to K-12 schools in NC as a result of the CARES Act, followed by $3.6 billion in three rounds of the Elementary and Secondary Education Emergency Relief funding (ESSER I, ESSER II, and ESSER III). An allotment manual describes these PRCs and how money may be used. There is quite a bit of money in this funding for technology, including money for digital content (PRC165), Canvas (PRC166), and computers and hotspots (though the funds can only be used to pay for hotspot devices and not service). The Emergency Assistance for Non-Public Schools (EANS) program also provided support to private schools as well. Schools able to use this funding for many uses related to COVID recovery including paying “hazard bonuses” for staff, upgrading school HVAC systems and facilities to promote social distancing, as well as for devices and tools to support digital and remote learning. We know that, among other changes, use of the Canvas LMS increased from 819,519 users in 2018 to 1,406,824 in 2021. We also know that schools purchased many devices (over 2/3 a million) by best guesses between this and ECF (discussed later). Sustainability of this level of investment remains an issue - $4 billion represents almost a third of NC’s total yearly expenditure on education.

ESSER funding has literally provided more money to schools than they can spend (nearly an extra year of funding per student), and it all disappeared on September 30, 2024. Known as the “ESSER Cliff”, this funding change has serious implications for schools that chose to hire new staff with ESSER funds or face building projects that are behind schedule and over budget. There had been hope that schools would be able to continue to spend down the funding after the deadline, but the recent budget negotiations at the Federal level will require the funding to expire and places limits on new education funding. Fortunately, schools have had time and notice to prepare for this cliff. However, because of the volume of funding, many schools are now having to cut staff, programs, and services to make up for this new shortfall.