HomeMy WebLinkAboutAgenda - 03-30-1995 - II 3-31- 95
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ORANGE COUNTY
HILLSBOROUGH
:NORTH.CAROLINA
60&a"Aa 17S2
M E M O R A N D U M
TO: Orange County Board of Commissioners
FROM: John M. Link, Jr. , County Manager
DATE: March 28, 1995
RE: Attached material for Thursday Night's WorkSession
4
The attachment is additior4a material for the Work-
Session scheduled for Thursday ght, March 30; r-,
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fn:dsk95B0050328 .DOC
AREA CODE (919) 732-8181 • 968-4501 • 688.7331 • 227-2031 • FAX (919) 644-3004
Ext. 2300
Update,* School Enrollment Projecfions
by Charles D. Liner
DURING THE NEXT DECADE statewide public school en- From 1993-94 to 1998-99, 97 of the 119 school
rollment in North Carolina will continue the upward units (82 percent) will experience some increase in to-
trend begun in 1990-91, but the rate of growth in en- tal enrollment (see Table 1). However, only 25 units
rollment will decline over the decade. About 45 per- can expect increases of 10 percent or more, and only 3
cent of North Carolina's school units can expect units can expect increases of 20 percent or more. Total
enrollment growth of 10 percent or more over the next enrollment of 22 units will decline over this period,
ten years, while the remainder can expect modest in- but only 5 of those units will experience declines of 10
creases or decreases. percent or more.
After falling 10 percent between 1976-77 and
1989-90, statewide total enrollment began increasing Table 1
in 1990-91 and now is 4 percent above the level of Percentage Change in Actual and Projected
1989-90. According to projections of average daily Average Daily Membership (ADM) in
membership (ADM) made by the Department of Public I IS North Carolina School Units
Instruction, this upward trend will continue through the ACTUAL PROJECTED
next decade.' By school year 2003--04, statewide total Number of Number of School Units whose ADM is
enrollment will be 14 percent higher than in 1993-94. School Units Projected to Change,by Grade Level
However, the rate of growth in total enrollment will be whose ADM
decreasing steadily during the decade. For example, to- Amountof Changed from 1993-94 to 1998-99 1993-94 to 2003-4
tal enrollment will increase by 2 percent in 1994-95, ChangeADM(%) 191989-90) to
93-94 K-6 7-9 10-12 K-12 K-6 7-9 10-12 K-12
but by only 0.6 percent in 2003-04. Figure 1,page 17, — —
shows expected trends in enrollment by grade level. 300/a or more 0 0 1 4 0 1 17 15 4
20%to 30% 2 3 6 6 3 5 22 16 10
Statewide elementary school enrollment, which 10%to 20% 6 37 21 21 22 27 26 22 39
has been increasing substantially in recent years, will 5%to 10% 26 29 24 19 39 31 20 7 17
grow slowly during the next few years and then will 0%to 5% 36 36 21 27 33 26 15 24 25
decrease. Enrollment in grades K through 3 will peak 0%to-5% 40 10 17 25 17 20 8 12 15
in 1998-99, while enrollment in grades 4 through 6 -5%to-10% 9 4 18 10 5 4 6 9 5
will peak in 2002-03. In the meantime, enrollment in -10%to-20% 0 0 10 7 0 5 5 10 4-20%or more o 0 1 0 0 0 o a o
grades 7 through 12 will continue to grow substan-
tially. By school year 2003-04, enrollment in grades 7 Summary of Change
through 9 will be 21 percent higher than in 1993-94, Units with
and enrollment in grades 10 through 12 will be almost Change in ADM
18 percent higher than in 1993-94. Increase
(number of units) 70 . 105 73 77 97 90 100 84 95
(percentage) 59 88 61 65 82 76 84 71 80
Decrease
(number of units) 49 14 46 42 22 29 19 35 24
The author is an Institute of Government faculty member who spe- (percentage) 41 12 39 35 18 24 16 29 20
cializes in public finance.
1. The projections analyzed here were made by Evan Sun of the Source:Calculated from projections made by the V.C.Department of Pub-
N.C. Department of Public Instruction. lic Instruction.
%inter 199 School La%� Bulletin (-
Figure 1
North Carolina Public School Enrollment by Average Daily Membership (ADM)
1989-90 to 1993-94 (Actual) and 1994-95 to 2003-4 (Projected)
ACTUAL PROJECTED
1.300,000
1.200,000 Total
Enrollment
1,100,000
a
y 1,000,000
900.000
2 800,000
T
c 700,000
K-6
c 600,000
d
a 500,000
400,000
300,000
7-9
200,000 \
10-12
0
1989- 1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003-
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
School Year
Table 2
Actual and Projected Percentage Change in
Average Daily Membership (ADM) in 119 North Carolina School Units
Actual Projected Change in ADM by Grade Level(%) Actual Projected Change in ADM by Grade Level(�a)
Changein Change in
Total ADM 1993-94 to 1998-99 1993-94 to 2003-4 Total ADM 1993-94 to 1998-99 1993-94 to 2003-4
1989-90to 1989-90 to
Unit 1993-94(%) K-6 7-9 10-12 K-12 K-6 7-9 10-12 K-12 Unit 1993-94(%) K-6 7-9 10-12 K-12 K-6 7-9 10-12 K-12
Alamance 6.2 9.9 13.0 10.4 10.9 6.9 27.6 27.0 15.6 Catawba 4.1 14.2 9.4 10.3 12.3 13.3 30.4 21.6 18.8
Burlington 0.5 9.2 17.2 -3.3 8.6 6.1 30.6 9.0 12.0 Hickory 1.5 9.9 6.4 9.1 8.9 9.2 20.7 21.4 14.1
Alexander -0.7 3.8 5.1 13.0 5.8 6.8 7.8 14.9 8.5 Newton-
Aileghany -7.9 1.7 -101 1.6 -1.4 0.7 -5.7 -16.6 -4.8 Conover -4.3 4.0 -13.2 -1.8 -1.3 2.1 -3.0 -10.0 -1.4
Anson -7.9 7.7 -13.7 -10.9 -1.5 10.1 -2.3 -14.1 1.9 Chatham 7.1 10.7 10.0 10.1 10.4 5.8 26.8 27.5 14.6
Ashe -4.8 1.7 -11.1 -0.4 -2.0 -2.2 -5.8 -13.2 -5.3 Cherokee -3.7 5.1 2.7 -1.8 3.0 9.0 3.9 1.3 6.1
Avery -3.5 -3.9 -5.6 3.0 -2.9 -3.8 -9.1 -6.8 -5.6 Chowan 3.0 2.2 8.7 0.6 3.4 -0.1 8.6 1.7 2.3
Beaufort 0.6 4.5 -7.9 -11.5 -2.0 2.7 -3.7 -13.0 -2.2 Clay -1.5 -8.4 -3.3 5.8 -4.0 -13.1 -12.6 -10.9 -12.5
Bertie -5.5 -3.2 3.7 7.0 0.5 -10.6 5.3 4.1 -3.7 Cleveland 1.8 13.6 0.1 2.4 8.2 11.6 24.7 7.7 14.0
Bladen -7.4 3.4 -9.4 -3.0 -1.0 4.5 -0.5 -10.3 0.4 Kings
Brunswick 4.0 5.9 11.2 6.2 7.4 9.2 18.3 12.7 12.1 Mountain 2.0 15.7 -1.1 3.2 9.3 14.7 25.1 9.7 16.3
Buncombe 6.8 10.0 9.5 13.6 10.6 7.7 25.4 30.0 16.1 Shelby -4.3 14.6 -6.7 -4.0 6.1 12.9 18.1 4.0 12.2
Asheville -2.1 7.3 -8.4 .1.3 2.6 5.7 1.8 4.1 4.9 Columbus -3.7 -1.5 -6.9 16.8 0.3 -4.2 -7.1 10.2 -2.4
Burke 4.7 13.1 2.6 4.1 9.0 12.0 22.2 15.9 15.2 Whiteville 0.4 1.3 5.9 -5.5 1.3 -0.8 8.6 -1.8 1.3
Cabarrus 16.9 14.0 26.2 26.4 18.9 14.0 46.5 52.1 28.2 Craven 1.1 0.4 1.4 11.8 3.0 0.8 1.8 14.2 3.7
Kannapolis -5.2 1.4 -7.7 -2.1 -1.2 1.8 -2.1 -4.0 0.1 Cumberland 10.3 4.8 19.6 12.2 9.5 6.7 20.1 29.0 13.7
Caldwell 1.2 7.7 -4.5 -4.2 2.9 7.4 7.4 0.0 6.3 Currituck 15.8 10.9 7.3 15.9 10.9 0.5 27.8 31.7 12.9
^amden 4.9 8.2 16.6 19.9 12.5 -2.3 30.4 37.5 13.9 Dare 18.2 9.6 23.7 33.4 16.9 5.4 39.7 54.5 21.6
,rteret 3.0 -1.1 2.2 4.3 1.0 -2.8 1.3 1.5 -0.7 Davidson 4.7 8.2 5.6 8.3 7.6 6.6 15.7 14.5 10.3
Caswell -5.6 5.1 3.2 0.0 3.7 -1.5 15.0 3.1 3.4 Lexington -1.8 -2.7 12.5 2.7 2.2 -4.4 6.6 4.2 0.2
Continues(on nexr puce
18 School Li%k Bulletin winter 1995
Table 2-continued
Actual Projected Change in ADM by Grade Level('/a) Actual Projected Change in ADM by Grade Level(°'o)
Change in Change in
Total ADM 1993-94 to 1998-99 1993-94 to 2003-4 Total ADM 1993-94 to 1998.99 1993-94 to 2003-4
1989-90 to 1989-90 to
Unit 1993-94(%) K-6 7-9 10-12 K-12 K-6 7-9 10-12 K-12 Unit 1993-94(%) K-6 7-9 10-12 K-12 K-6 7-9 10-12 K-12
Thomasville -2.3 9.7 4.3 -14.7 4.6 7.5 12.4 -1.4 7.6 Onslow 8.4 1.4 10.5 28.1 8.2 -0.6 10.4 31.2 7.5
Davie 0.8 8.7 8.5 -2.0 6.6 8.8 20.7 4.4 10.9 Orange 7.2 10.5 6.3 7.4 9.0 8.6 19.1 19.6 13.1
Duplin 0.6 7.9 6.2 1.5 6.4 5.5 15.9 10.7 9.0 Chapel Hilt-
Durham 3.6 10.2 -0.2 -0.4 6.0 12.1 13.4 2.5 10.8 Carrboro 24.1 17.5 23.9 38.8 22.6 16.5 49.1 78.2 35.1
Edgecombe -2.1 4.2 -8.6 -9.9 -1.6 1.7 -0.9 -10.4 -1.1 Pamlico 5.8 -4.4 -1.2 -3.2 -2.7 -17.5 5.6 -10.7 -9.8
Forsyth 1.7 8.1 11.2 7.9 8.8 6.3 22.1 20.0 12.5 Pasquotank 11.1 2.4 10.5 24.2 7.8 -3.3 15.8 34.5 7.2
Franklin 6.5 12.6 12.9 15.6 13.2 14.7 31.2 30.7 21.4 Pender 5.4 17.8 8.1 16.7 15.2 22.4 36.1 23.2 26.0
Gaston -4.1 5.3 -1.0 -1.8 2.8 2.6 7.4 -0.9 3.4 Perquimans 5.5 -9.0 -6.8 5.5 -5.5 -11.6 -18.2 3.7 -10.2
Gates 8.7 4.4 22.6 38.6 14.6 -3.6 31.0 46.9 13.5 Person 0.1 15.0 2.3 -5.2 7.7 14.8 20.4 7.2 14.6
Graham -4.5 -0.3 -15.0 -12.8 -6.6 -4.0 -12.0 -20.2 -9.4 Pitt 6.9 12.1 6.1 11.3 10.3 12.7 20.9 21.1 16.0
Granville 4.4 13.9 2.2 4.0 9.2 10.3 19.9 20.1 14.4 Polk 3.6 6.7 3.5 -0.3 4.7 3.3 12.8 5.6 6.0
Greene -2.9 0.6 9.8 9.0 5.1 0.3 10.2 -2.1 2.8 Randolph 6.2 14.7 12.6 7.8 13.1 13.4 32.0 26.1 20.0
Guilford 4.1 11.1 4.6 6.3 8.6 11.8 18.1 17.4 14.2 Asheboro 9.1 10.5 12.9 3.5 10.1 8.8 28.2 22.4 15.5
Halifax -4.4 4.5 -6.7 7.0 2.1 5.3 0.2 0.4 3.3 Richmond -3.4 10.6 -11.0 -1.9 2.9 15.2 6.5 -7.5 8.9
Roanoke Rapids 5.4 10.8 4.0 3.0 7.8 11.3 21.5 8.6 13.1 Robeson -2.1 8.2 -2.5 -4.1 3.4 8.4 8.6 -0.6 6.8
Weldon -1.0 4.1 -14.6 21.0 1.6 2.7 -5.1 13.0 2.2 Rockingham -1.5 6.9 3.3 -4.6 3.9 4.1 14.3 2.5 6.3
Hamett 7.6 17.1 23.9 10.8 17.2 19.3 46.4 35.9 27.7 Rowan-
Haywood -1.9 7.7 9.9 -3.1 6.1 6.3 19.2 4.4 8.9 Salisbury 7.8 10.3 10.4 18.1 11.7 8.4 25.3 33.8 17.1
Henderson 2.9 10.0 6.6 4.3 8.1 11.2 20.0 12.5 13.6 Rutherford -0.7 8.8 -5.4 -0.1 3.6 9.1 8.2 1.6 7.5
Hertford 0.9 -4.0 9.5 2.2 0.6 -9.0 6.3 2.6 -2.9 Sampson 2.0 20.8 -0.4 -2.5 10.6 24.4 28.0 6.3 21.2
Hoke 8.8 8.2 12.4 8.4 9.1 6.8 20.8 19.3 11.9 Clinton -10.0 0.8 -19.0 -11.4 -6.0 1.4 -18.7 -20.0 -7.2
Hyde -8.6 2.3 -22.7 -9.6 -6.3 -8.6 -6.1 -26.9 -11.7 Scotland -3.8 7.1 -4.3 0.2 3.2 5.8 6.9 -2.0 4.9
Iredell -0.9 15.3 -0.8 7.1 9.9 15.4 21.2 11.0 16.0 Stanly 4.2 7.7 6.9 13.4 8.6 4.6 19.0 19.4 10.8
Mooresville 29.6 18.8 47.9 21.2 25.8 19.5 74.3 62.9 39.9 Albemarle 3.5 0.6 3.9 2.8 2.1 -1.7 7.5 13.7 3.7
Jackson -4.1 3.3 -5.3 0.3 0.5 3.8 3.0 -7.9 1.3 Stokes 0.2 4.5 12.2 8.2 7.0 4.5 16.0 14.1 9.r
Johnston 6.4 22.5 18.7 3.6 18.0 27.9 49.2 24.6 31.8 Surry -0.6 15.2 -4.2 -3.1 6.4 14.2 19.4 0.0 12.5 -
Jones -1.8 1.3 -6.3 -8.8 -1.9 -2.7 6.0 -15.7 -2.8 Elkin 3.9 2.2 -6.9 30.2 5.0 -0.7 0.7 17.7 3.2
Lee 5.2 7.2 9.1 9.8 8.1 9.8 17.9 17.0 12.8 Mount Airy -2.4 12.5 -4.8 -5.6 5.0 13.2 14.9 -5.9 10.0
Lenoir -5.6 0.9 -5.8 0.5 -0.6 4.2 -4.5 -8.9 -0.3 Swain 4.0 13.9 -4.2 -5.4 5.1 5.4 16.0 4.5 7.8
Lincoln 3.5 10.0 5.9 4.1 8.0 6.6 20.8 13.2 11.2 Transylvania -0.5 1.6 4.6 2.0 2.6 -1.1 10.2 4.2 2.8
Macon 6.5 1.9 5.1 17.9 5.7 6.2 6.3 15.0 7.8 Tyrrell -1.1 3.9 5.1 14.3 6.3 -3.9 5.6 25.3 4.7
Madison -1.7 7.7 -13.0 -11.4 -1.8 2.8 2.0 -16.1 -1.5 Union 8.8 19.0 12.1 7.6 15.3 26.9 38.9 25.2 29.3
Martin 0.3 3.9 -1.7 -3.1 1.3 2.5 4.2 -0.2 2.5 Vance -3.1 16.7 -8.2 -14.6 5.1 18.8 12.5 -7.4 12.5
McDowell -4.0 3.9 -5.1 2.3 1.4 3.2 6.6 -1.2 3.2 Wake 17.3 24.3 29.5 22.8 24.6 33.1 64.5 59.3 43.5
Mecklenburg 8.7 16.5 14.0 18.2 16.3 18.3 38.3 36.0 25.9 Warren 1.1 4.2 -5.3 -9.1 -0.9 -0.9 0.9 -2.8 -0.7
Mitchell 2.1 -2.2 4.8 4.8 0.8 -4.3 2.5 2.7 -1.4 Washington -3.2 -5.8 -15.5 -9.5 -9.0 -10.5 -16.7 -25.2 -15.0
Montgomery -3.2 6.0 -5.0 -4.3 1.2 4.5 2.3 -9.4 1.3 Watauga 7.1 -5.2 9.7 10.5 1.6 -9.6 1.4 17.3 -1.6
Moore 5.7 9.0 5.9 10.2 8.7 9.7 17.6 22.1 14.1 Wayne 1.6 2.9 2.2 2.0 2.7 0.4 7.3 3.6 2.8
Nash- Wilkes -4.2 1.5 -4.6 -2.0 -0.7 3.5 .3.6 .5.1 0.1
Rocky Mount 2.9 12.0 1.0 -5.6 6.2 11.6 18.1 4.0 11.6 Wilson -2.1 2.4 4.8 1.6 3.2 4.4 9.8 .0.8 5.0
New Hanover 6.9 11.9 10.7 5.1 10.3 17.3 23.9 18.6 18.9 Yadkin 5.8 16.5 10.7 5.4 13.0 20.0 31.4 23.7 23.3
Northampton -4.0 -1.6 1.7 2.0 -0.1 -6.2 4.4 -4.9 -3.2 Yancey -2.6 3.7 -0.8 -1.7 1.5 4.6 4.0 2.1 4.0
During the longer period 1993-94 to 2003-04, 9 and grades 10 through 12. In 65 units (55 percent),en-
about the same number of units(95,or 80 percent)can rollment in grades 7 through 9 will increase 10 percent
expect increased total enrollment, but more units will or more, and in 53 units (45 percent), enrollment in
see substantial growth.Fifty-three units(45 percent)can grades 10 through 12 will increase by 10 percent or
expect increases of 10 percent or more, and 14 units more. On the other hand, a few units will see substantial
can expect increases of 20 percent or more. Total en- enrollment decreases in grades 7 through 12. For ex-
rollment will decrease in 24 units (20 percent), but ample, enrollment will fall in 14 units (12 percent) in
these decreases will exceed 10 percent only in 4 units. grades 10 through 12 by 10 percent or more.
Over this longer period, enrollment increases will Table 2 shows projected changes for each of the
be especially large in many units in grades 7 through 119 school units by grade level. ■
School Construction Spending
in North Carolina
by Charles D. Liner
IN 1981 THE ESTIMATE of total school construction ings and improving school facilities. Counties, which
needs in North Carolina was $1.8 billion. Over the next are responsible for financing school construction, were
twelve years, the state and its school systems actually then suffering from a severe economic recession and
spent more than $3 billion on school construction and had to pay historically high interest rates if they bor-
other capital needs.' Despite these expenditures, the rowed money to build schools. They had received no
1993 estimate of school construction needs stood at state money for school construction since funds from
$5.6 billion. a 1973 state school construction bond were exhausted.
a After twelve years and $3 billion, how well have In 1981 school units reported that they needed a
North Carolina's counties and their school systems suc- total of$1.8 billion to meet their long-range needs for
ceeded in meeting their previously stated needs for building school facilities.2 This seemed a staggering
school construction? sum at a time when all units together were spending
This article looks at changes in reported school $100 million a year or less for school construction, and
construction needs and at North Carolina's efforts to when enrollment was declining in almost every unit.
meet those needs.It focuses on the role of state money in Unlike some earlier surveys that had asked local
helping counties meet their school construction obliga- school officials to estimate only their most critical
tions and on the state's efforts to assist the poorest coun- needs, the 1981 survey asked them to estimate their to-
ties in meeting their needs. It also examines the choices tal needs for providing "attractive, safe, and functional
that counties have made to spend,save,and borrow. facilities" for their students.3 Apparently the schools
were far from meeting that standard—more than half
The Explosion in the total amount was needed to replace temporary and
p obsolete buildings. Citing these needs, the state school
School Construction Needs board in 1981 unsuccessfully petitioned the General
During the early 1980s, North Carolina faced a Assembly to put to the voters a $600 million state
daunting problem in replacing obsolete school build- school bond issue.
and reno%aeon and(3)furnishings and equipment averaged 95.6 percent of
The author is an Institute of Government faculty member who spe- total capital ouda%. However.not all purchases of furnishings and equip-
cializes in public finance, including public school finance. This article is ment are ate sated with construction and renovation.
reprinted from Popular Government 60 (Fall 1994): 30-43: it was pub- : \,,nh Carolina Department of Public Instruction.Public School
lished under the title "Twelve Years and $3 Billion Later: School Con- Fa(i r\ ,1. m .Forth Carolina(Raleigh.N.C.: NCDPI.Jan. 1981).
struction in North Carolina." liar_ Phillips (state superintendent of public instruction).
1.The figures on construction spending cited in this article include Puhli, .,.i fit,din .Needs in North Carolina, 1984-85(Raleigh.N.C.:
not only spending for actual construction but also purchases of furnishings. NCDPI. \ I OS4). The 1981 survey did not specify the time period for
equipment, and other capital needs. which are all counted together as e+umate, ,.) Ionr_-range needs. This was true also of the 1984 and 1986
"capital outlay." ,un e\. I he 198m and 1993 surveys asked specifically for needs during
Figures from the Department of Public Instruction on statewide the nect ten%ear,.as prescribed by the 1987 School Facilities Finance.pct.
capital spending show that from 1989 to 1993 spending on(1)construction G. S. I I;C-�-1.
' School Lank Bulletin ``N inter 1944
When the survey was repeated in August 1984, Figure 1
total reported needs had increased to $2.2 biliiuu. and Reported Needs for School Construction,
1981 to 1993
the estimated cost of replacing temporary and obsolete
facilities alone had increased from $950 million to al- 6.0
most S1.1 billion. Two years later a November 1986
survey found that reported needs had increased to $3.2
billion. By 1988 estimated total needs for the next ten
years had increased to $3.7 billion, just about double 4.0
the 1981 estimate' (construction costs had increased 20
percent in the same period).' (See Figure 1.) Q
In 1992 State Superintendent of Public Instruction
Bob Etheridge proposed a $600 million state bond is- 2.0
sue for school construction, but the General Assembly m
did not act on it. The next year Etheridge released sur-
vey results that showed estimated needs for the coming
°
ten years of$5.6 billion, more than triple the 1981 esti- 1981 1984 1986 1988 1993
mate and 50 percent higher than the 1988 estimate. Year of survey
Etheridge said that the estimates included the need to
replace or upgrade some buildings that were more than
seventy-five years old, and that 827 of the 6,000 exist-
ing school buildings were constructed between 1900 range construction needs,spending totaled$2.27 billion.
and 1939. According to him, many local districts have When that figure is adjusted to account for inflation in
"used closets and other areas for classroom space, de- construction costs, the adjusted figure of$1.87 billion
layed improving programs because of a lack of space still exceeded needs reported in the 1981 survey.
and made other sacrifices because the dollars are not During the eight fiscal years 1986-93 following
available to build the schools, purchase the equipment the 1984 survey, in which reported needs totaled 52.2
and make the repairs that are so needed.116 billion, spending totaled $2.8 billion. Adjusted for in-
flation in construction costs, the total was $2.4 billion.
During the six fiscal years 1988-93 following the
The Boom m 1986 survey, which reported long-term needs of 53.2
School Construction Spending billion, spending totaled $2.5 billion, or 75 percent of
It would seem,judging from the consistent rise in reported needs. If spending continues at only the rate of
reported construction needs, that North Carolina made 1993, spending will have exceeded the needs reported
little progress in meeting school construction needs in the 1986 survey within eight years.
during the twelve years previous to 1993. But that is During the five fiscal years 1989-93 following
not the case. Despite the dramatic escalation in needs the 1988 survey, which found that needs for the next
reported in the surveys, statewide school capital outlay ten years totaled $3.7 billion, spending totaled $2.2
after each survey actually met or exceeded the total billion, or 59 percent of reported ten-year needs. After
dollar amount of needs enumerated in that survey.' adjusting for inflation, the total still exceeded half the
During the ten fiscal years 1982-91 following the needs enumerated in the 1988 survey. If statewide
1981 survey, which enumerated $1.8 billion in long- spending continues at only the 1993 level, spending
will have exceeded ten-year needs in less than nine
years.
4.The 1988 survey..and the later 1993 survey, were conducted in
accordance with a provision of the 1987 School Facilities Finance Act. Altogether the COUri[IeS Spent $3.? billion On
which required reports every five years of the long-range capital plans for school capital outlay from 1982 to 1993. which was 77
the next ten years. percent more than called for by the 1981 surrey of
5. This figure is based on the implicit price deflator for fixed in- long-range needs.
vestment in nonresidential structures.
6. North Carolina Department of Public Instruction. News (Ra- As these comparisons Suggest, the escalation in
leigh.N.C.:NCDPI.March 3. 1993).The 1988 survey,and the subsequent reported needs has been matched so far with a boom in
1993 survey. were required as a provision of the 1987 School Facilities statewide School construction spending. As Figure 2
Finance Act.
7.All figures on spending and receipts presented in this article are shows, annual spending doubled between 1982 and
for fiscal Nears. 1987, and by 1991 it amounted to more than ti%e time
`k inter 1 yy� School La%k Buile.in
Figure 2
Spending for School Capital Needs in North Carolina, 1980-93
600
400
i
200 i
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
Fiscal Year Ending
i
Note: Capital needs include spending not only for school construction but also for furnishings,equipment, and other capital
needs,which are all counted as"capital outlay."Not all purchases of furnishings and equipment are associated with construc-
tion and renovation.
the 1982 level of spending. After adjusting for inflation measures that made funds available far in excess of
in construction costs, 1991 capital outlay was still three $600 million.
times the level of that in 1982.8 In 1983 the General Assembly approved a new
These comparisons show that the escalation in half-cent local retail sales tax for counties and cities
needs was not due to a failure to meet previously re- and earmarked 40 percent of county proceeds for the
ported needs but rather occurred despite success in first five years, and 30 percent for the second five years,
meeting previously reported needs. (See Figure 3, page for school construction or school bond indebtedness.'
4.) For example, between 1988 and 1993, reported (In 1993 the General Assembly required counties to
needs increased by half, from$3.74 billion to$5.58 bil- earmark 30 percent for school construction for an addi-
lion. However, during the five years from 1989 to tional five years.) The original one-cent local retail
1993, counties spent $2.226 billion meeting the needs sales tax enacted in 1971 was not restricted in any way
the schools reported in 1988. This sum plus the needs to school use.
reported in 1993 of$5.578 billion equals$7.804 billion. In 1986 the General Assembly authorized another
Therefore, needs adjusted for that spending actually local retail sales tax with the same half-cent rate."'
doubled between 1988 and 1993, increasing by more Counties were again required to earmark a portion of
than $4 billion. their receipts for school construction or to pay school
bond indebtedness on selected bond issues.That portion
State Aid for School Construction began at 60 percent in the first two years and declined to
nothing in the twelfth year.This provision was changed
The General Assembly did not approve the 1981 in 1987 to require that 60 percent of proceeds be used
request for a $600 million state school bond referen- for school construction for the first eleven years. (In
dum, but during the next six years it approved several 199; this period was extended for an additional lire
year,,.) Unspent funds earmarked for construction or
sch(wl htmd indebtedness had to be placed in a county
8. That construction spending peaked in 1991 and then fell back capital re,erve fund for schools until spent.
somewhat in 1992 and 1993 is perhaps explained by the 5120 million in
critical needs funds awarded in fiscal year 1988.Those funds would have
been spent over the next two or three fiscal years. Also. during the late
1980s many units where enrollments had been failing were beginning to M5480-487.prepare for increased enrollment during the 1990s. V (i 10.5-495-504.
4 School Law Bulletin Winter 1995
Figure 3 needs and inadequate fiscal resources.'' A
Schools' Reported Long-Range Needs Compared large sum was placed in the fund for immedi-
with Capital Spending in Succeeding Fiscal Years ate distribution, and twenty-nine school sys-
tems received grants in fiscal year 1988
totaling almost $120 million. Additional
1993 Survey awards totaling $45.9 million were made to
5-year spending(1989-93) school systems in eleven counties between
1988 Survey ! 1990 and 1993.
4. The state assumed responsibility for voca-
l—8-year spending(1986-93) tional education and secretarial expenses un-
1984 Survey der the Basic Education Program, thereby
freeing local funds for other school uses. in-
r— (0 yeaz spending(1982-91) cluding construction.
1981 Survey ❑ Spending
M Reported Needs
At the time, it was estimated that the 1987 act would
0 1 2 3 4 s 6 provide a total of $830 million in additional state aid
Current Dollars(Billions) for school construction during the following ten years,
Note: All reported needs were for long-range capital needs.The 1988 and and the state assumption of vocational education and
1993 surveys were specified as to-year capital needs. secretarial expenses would provide an additional $740
million potentially available for school construction.
These additional revenues, when added to the ear-
marked portion of local sales taxes, were estimated to
In 1987 the School Facilities Finance Act pro- produce a total of $3.2 billion in revenues potentially
vided additional funds for school construction aid." available for school construction during the following
The act, financed mainly by an increase in the corpo- decade just enough to cover the total needs of $3.2
rate income tax, provided additional funds for school billion reported in November 1986."
construction in four ways: Poorer Counties Favored
1. It required counties to continue to earmark These measures were especially noteworthy be-
for school construction or school bond in- cause the General Assembly chose to distribute some
debtedness 60 percent of the proceeds from funds in ways that reflected its concern for the needs
the local sales tax authorized in 1986, rather of counties with the least ability to pay for school
than allowing them to earmark a declining construction.
percentage of those proceeds, as the original Whereas previously funds from statewide school
law had allowed. construction bonds had been distributed on the basis of
2. It established the Public School Building enrollment, thus giving wealthy counties the same
Capital Fund, which was to distribute state amount per student as the poor counties, the General
school construction funds to all counties ac- Assembly chose to set apart some money to meet criti-
cording to their school enrollment.'' These cal needs in the poorer counties.
funds must be matched by $1.00 of local The General Assembly also deliberately changed
funds for each $3.00 of state funds, although the distribution of sales tax revenues in a way that fa-
earmarked local sales tax revenues can be vored poorer counties. The proceeds from the original
used as local matching funds. one-cent local retail sales tax, enacted in 1971. were
3. It established the Critical School Facility distributed back to the counties where the sales taxes
Needs Fund, which was to award funds for �� re collected. The wealthy, urban counties, partic-
specific school construction projects to ulark those that served as regional shopping and
school systems in counties that had critical
G S 115C.Art. 34A.
1 Laurie Mesibov• "Public Education." in Cowin-Got ernment of
11. 1987 N.C. Sess. Laws ch. 622 and 813: G.S. 115C. Art. 38A. % • „ .lrrkr. 3rd ed..ed. A. Fleming Bell. 11(Chapel Hill. N.0: lmti-
and G.S. 115C. Art. 34A. tote ,�t (w%ernment. The University of North Carolina at Chapel Hill,
12.G.S, 115C.Art. 38A. 19,9 lh-,.
%k inter 199 school Lox Bulletin
employment centers. received much more revenue per of those reported needs. During the five years from
capita than did r�tr,1 ^nunties. When the General As- 1989 to 1993, the additional state aid amounted to e989
sembly authorized the 1983 and 1986 local sales million, or 26 percent of the ten-year needs enumerated
taxes. it provided that the proceeds of these taxes be in the 1988 survey.
distributed to counties according to their population, While the additional state aid provided during this
rather than the amount of taxes collected. period was substantial, its greatest significance in many
Distributing revenues from the 1983 and 1986 lo- counties was the role it played in sparking additional
cal sales taxes according to population greatly in- local funding for school construction. During the period
creased the revenues received by the poorest counties. 1984 to 1993, additional state aid equaled $1.5 billion,
For example, several of the lowest-income counties get but total spending on school capital needs equaled
two to three times more revenue from the two half-cent $3 billion—double the amount of state aid.(See Table 1.)
sales taxes combined than from the one-cent sales tax, Given this marked increase in state and local
while Wake County, which has the highest per capita funding, how successful have the state's 100 counties
income, receives only 61 percent as much. been in meeting the needs reported by their school
In effect, the local sales taxes enacted in 1983 and units? Let us examine how the 100 counties responded
1986 were not local taxes but rather were a form of state to escalating needs for school construction by using
revenue sharing. The state was using a traditional state state aid and local funds to build and equip schools. For
revenue source—the retail sales tax—to provide funds this purpose we have reliable spending data for coun-
to local units expressly to meet the specified statewide ties for the fiscal years 1984 to 1993, so the analysis is
objective of meeting school construction needs, and it limited mainly to how well counties have met needs
chose to distribute them by formula according to popu- reported in 1984, 1986, and 1988.13
lation,not the point of collection. In addition,earmarked The shorthand term state aid includes the ear-
sales tax revenues were chosen in lieu of a state school marked portion of the 1983 and 1986 retail sales taxes
bond issue,which had been the traditional means of pro- and funds received from the Public School Building
viding state aid. Accordingly, in this article the ear- Capital Fund("capital facilities funds") and school sys-
marked portion of local sales taxes is regarded as state tems' receipts from the Critical School Needs Fund
aid to counties for school construction. ("critical needs funds").16 It does not include the
As a result of these provisions, poorer counties nonearmarked portion of sales tax revenues, funds
have received much more state aid per student for con- freed by takeover of vocational education and secre-
struction than have larger, high-income counties. From tarial costs, or other instances where the state assumed
1985 to 1993, average state aid per student in the 15 responsibility for expenses in accordance with the Ba-
counties with the lowest per capita income was twice sic Education Program.
that in the 15 highest-income counties, and in the 21 To fully analyze how well the counties have re-
counties with enrollments of less than 3,000 was twice sponded to escalating needs, we will address five
that of aid received in the 6 counties with enrollments questions:
above 20,000.
1. How does state aid compare with reported
State Aid and Local Spending needs?
?. To what extent has actual spending for con-
struction met reported needs?
Since 1984 state aid has covered a substantial pro- 3. How much have counties spent in relation to
portion of reported needs, despite the sharp escalation state aid they received?
in those needs. From 1984 to 1993, the new state aid 4. Did counties leverage state aid by borrowing
measures—the earmarked portion of sales tax revenue to finance school construction, or did they
and funds from the 1987 School Facilities Finance pay off school indebtedness?
Act—provided local units a total of $1.489 billion in 5. How well have poorer counties met reported
additional funds for school construction (see Table 1, needs?
page 6), an amount equal to 82 percent of total needs --
reported in 1981. After reported needs doubled to $3.2 N C Department of State Treasurer.Report on Counn Spendin;
billion in 1986, the additional state aid received during for N """i Capital Oudu.v.February 15. 1994.and previous%ear,.
It, 1.�.Lnl,from the Critical School Needs Funds_ao directly to the
the succeeding six fiscal years amounted to 41 percent school hoard,. not the county government.
6 School Law Bulletin Win[er iyy�
Table 1
State Aid for School Construction, 1954 to 1993, by Source
(Amounts in Millions of Dollars)
Earmarked
Portion Actual
of Public Spending State
Local Sales School Critical for Aid as a
Taxes Building School Total School Percentage
Fiscal Capital Needs State Capital of
Year 1983 tax 1986 tax Fund Fund Aid Outlay Spending
1983-84 $ 8.3 - - - $ 8.3 $ 75.8 11.0%
1984-85 38.3 - - - 38.3 127.2 30.1
1985-86 44.4 - - - 44.4 151.5 29.3
1986-87 48.5 $ 27.7 - - 76.2 203.8 37.4
1987-88 52.2 78.2 $ 82.3 $119.9 332.5 230.9 144.0
1988-89 46.0 89.1 70.2 - 205.3 338.4 60.7
1989-90 47.1 93.7 48.3 10.0 199.1 417.8 47.7
1990-91 47.7 96.0 35.3 10.0 189.0 540.3 35.0
1991-92 48.4 98.1 32.6 9.9 189.0 496.0 38.1
1992-93 51.2 103.6 36.3 16.0 207.1 433.6 47.8
Totals $432.1 $586.3 $304.9 $165.7 $1,489.2 $3,015.4 49.4%
(Figures may not add up because of rounding.)
Source:North Carolina Department of State Treasurer,Report on County Spending for Public School Capital Outlay(Ra-
leigh,N.C.: Department of State Treasurer,Feb. 15, 1994,and previous years).
1.How Does State Aid Compare with Reported Between 1984 and 1988, when statewide reported
Needs? During the eight-year period 1986 to 1993, needs increased 46 percent, needs increased 50 percent
state aid for the 100 counties averaged 81 percent of or more in 54 counties, more than doubled in 32 of
needs reported in 1984, though most counties received those counties, and more than tripled in 11 of those
aid equal to 80 percent or less of reported needs. Com- counties. As a result, although state aid to counties dur-
paring state aid with reported needs, 78 counties re- ing the five-year period 1989 to 1993 was almost
ceived funds amounting to at least 50 percent of needs, double the amount of state aid received during the pre-
39 counties received funds amounting to at least 80 vious five-year period, on average state aid equaled
percent of needs, and 20 counties received an amount only 32 percent of ten-year needs reported in 1988.
exceeding reported needs. (See Figure 4.) We can extrapolate state aid to the entire ten-year
Aid was low relative to needs in some counties period 1989 to 1998 by assuming that from 199.1 to
because their reported needs were high, as indicated by 1998 each county will have received only the same
reported needs per student. In the 22 counties where amount of state aid, excluding critical needs funds. that
state aid was less than half of reported needs, average it received in 1993. Using this very conservati%e
reported needs per student were almost 50 percent method, which assumes no growth in sales tax revenue
higher than the statewide average, and in 5 counties or school facilities funds, during the ten years from
where state aid was less than 30 percent of reported 1989 to 1998 state aid on average will have equaled 54
needs the average amount of needs per student was percent of the ten-year needs reported in 1988, and 46
double the statewide average." counties will have received state aid amounting to half
or more of the ten-year needs reported in 1988. As be-
fore, the variation is due mainly to the large variation in
1988 reported needs. which ranged from 5788 to
17.The variation in reported needs per student does not appear to be $15,098 per student.
related strongly to either enrollment size or per capita income--counties
with small enrollments and low income tended to have higher needs per Thus earmarked state aid represented a substantial
student than others.but the correlation was weak. portion of 1988 reported needs, despite the escalation
�k inter 1991 School La%ti Bulletin
Figure 4 Figure 5
State Aid, 1986-93, as a Percentage of Schools' Spending for Capital Needs, 1986-93,as a Percentage
1984 Reported Needs, by County of Schools' i 984 Reported 'Needs, by County
200 or more 3
300 or more
150-199 �l y 200-249
Z �f
100-149 13 L 150-199 13
2
Lz
80-99- 19 o y 100-149 23
t:
A n 80-99 14
a" 50-79 39 "
�a
_ v•v
50-79 19
Q 30-39 117 30-49 ll
Less than 30 5 Less than 30 6
Number of Counties Number of Counties
in needs between 1984 and 1988 and the wide variation 3. How Much State Aid Did Counties Spend?
in reported needs. Between 1984 and 1993, the 100 counties together
2. How Well Have Counties Met Reported spent a total of $3.0 billion on school capital needs,
Needs? During the eight-year period from 1986 to twice the amount of earmarked state aid they received.
. 1993, capital spending in 64 counties exceeded 80 per- However, only 68 counties spent as much on school
cent of the needs they had reported in 1984. In those 64 capital needs as they received in state aid.
counties spending exceeded needs in 50 counties; Of the 68 counties that spent at least as much as
spending exceeded needs by 150 percent in 27 coun- the amount of state aid they received, 49 spent an
ties; and was at least twice as much as needs in 14 of amount equal to more than 150 percent of the aid, 30
those counties. On the other hand, 17 counties spent an counties spent an amount at least double their state aid.
amount equal to less than half of reported 1984 needs. and 8 counties spent an amount at least triple their state
(See Figure 5.) aid. (See Figure 7, page 8.)
Some counties failed to meet their needs because Of the 32 counties that failed to spend as much as
during the period they did not spend all the state aid they received in state aid, 12 spent less than 75 percent
they received. Consider, for example, those counties and 5 spent less than 50 percent. These 32 counties
whose spending from 1986 to 1993 failed to equal at tended to be low-income counties with smaller enroll-
least 80 percent of 1984 reported needs. Of those 36 ments—they include 24 of the 50 counties with below-
counties, 29 spent an amount less than the state aid median per capita incomes, and 21 had enrollment
they received. If those 29 counties had spent an amount below the median size. Of the 12 counties that spent an
equal to the state aid they received, 25 would have met amount less than 75 percent of state aid, 11 had belox-
at least 50 percent of their needs, 9 would have met at median incomes and 8 had below-median enrollment.
least 80 percent of their needs, and 3 would have ex- There are several reasons that a county might
ceeded their needs. spend less than it receives in state aid. First, by its na-
During the five-year period from 1989 to 1993, in ture, construction involves lags in spending because
51 counties spending equaled 50 percent or more of the planning, contracting for, and constructing buildings
ten-year needs reported in 1988. In 25 counties spend- takes time. Second, a county may put its earmarked
ing exceeded 75 percent of 1988 reported needs, and in sales tax receipts into a capital reserve fund and spend
11 counties spending equaled or exceeded ten-year them only after enough money has accumulated for a
needs reported in 1988. On the other hand, 22 counties needed project. Third, it may let funds accumulate in
met less than 25 percent of their needs, and 6 counties the Public School Building Capital Fund. Fourth, a
met less than 15 percent of their needs. (See Figure 6, county also may take advantage of state aid to pay off
page 8.) existing indebtedness, subject to certain restrictions.
8 school La« Bulletin ��in[er 199j
Figure 6 Figure 7
Spending for Capital deeds, 1983-93,as a Percentage Spending for Capital Needs,1984-93,as a Percentage
of Schools'10-Year Needs Reported in 1988,by County of Schools' Earmarked State Aid, 1984-93,by County
100 or More I I 300 or more 8
75-99 I4 v 200--299
7
j Z 50-741 26 175-199 to
�._
z o�v
150-174- 9
35--19 16
100-149 19
25-34 I1
v ti 75-99 20
C_ ss -
cn 15-24 16
50-74 7
Less than 15 6 Less than 50 t=5
Number of Counties Number of Counties
rather than spend the aid or its own funds on new con- of$250 million borrowed by Durham and Wake coun-
struction.18 ties; borrowing by the 24 other counties that borrowed
Counties that spend more than they receive in that year totaled $454.7 million.) Altogether the coun-
state aid do so by spending more than the earmarked ties borrowed $1.5 billion for school construction be-
portion of sales tax revenues, or by providing addi- tween 1983 and 1993. Most of that occurred from 1989
tional funds from local sources. The most effective way to 1993, when borrowing totaled$1.39 billion, equal to
for a county to take advantage of state aid is to leverage more than one-third of the total statewide ten-vear
it by issuing school construction bonds and using ear- needs reported in 1988.
marked sales tax receipts to pay debt service payments. Of course, these trends in county borrowing re-
4.Did Counties Leverage State Aid by Borrow- flect other factors in addition to receiving state aid.
ing for School Construction, or Did They Pay Off First,-the trend toward lower interest rates made bor-
School Indebtedness? Figures 8 and 9 show the dra- rowing more attractive. Interest rates were very high
matic rise since 1984 in the use of debt financing for during-the early 1980s and low during the early 1990s.
school construction (the numbers include a few install- Municipal bond rates exceeded 11 percent in 1981 and
ment and lease-purchase agreements but exclude bor- 1982.20 From 1985 to 1990, rates remained fairly stable
rowing to refinance previous debt at lower interest between 7 and 8 percent, and then fell to 5.6 percent in
rates).19 There was no borrowing during fiscal years 1993 before rising somewhat in late 1993 and 1994.
1981 and 1982, and during 1983 and 1984 all borrow- Second, during the early 1980s almost all counties
ing totaled only $2.3 million. Between 1985 and 1993, were expecting declining or stable enrollments, while
all except 29 counties borrowed for school construc- at the end of the 1980s many school units were expect-
tion, and total borrowing increased to more than $700 ing substantial enrollment increases,
million in 1993. (That amount for 1993 includes a total As noted, borrowing allows counties to leverage
state aid, as well as local resources, to obtain funds to
meet needs. From 1986 to 1993, borrowing equaled at
18. Earmarked funds from the 1983 sales tax can be used to pay off least 50 percent Of the amount Of state aid received in
past debt, while funds from the 1986 sales tax can be used to pay off only
debt incurred in the five years prior to the effective date of the tax in each 52 counties. Borrowing exceeded the amount of state
county. which was during the 1986-87 fiscal year for all counties. Not-
withstanding those restrictions,a county might choose to pay off debt with
money that it might have spent on school construction if state aid had not
been made available. as long as it meets the maintenance of effort prod- 20. Interest rates cited are annual figures for high-grade municipal
sions of the 1986 law. bonds. Ecomunic Report of the President to the Con;res
19. Data on school bond issues were provided by the N.C. Depart- Fehruarc 1994 (Washington. D.C.: Government Pnntin, Office. l yy4 i,
ment of State Treasurer. Table B-72,p. 352.
Winter 1991 Schuui Lark Bulletin y
Figure 8
Number of Counties Incurring School Construction Debt, 1981 to 1993
(Excluding Refunding Issues)
30
26
v 20 21 21
+ I 18
U 14
to- 9 10
! I
c g
Z
6
4
0
0 0 1
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
Fiscal Year Ending
Figure 9
Dollar Value of School Construction Debt Issues, 1981 to 1993
(Excluding Refunding Issues)
800
700
600
s 500
`o
400
300
0
200
100
i
0
1
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
Fiscal Year Ending
aid in 37 counties, was at least double the amount of was double the state aid in 27 counties, and exceeded
state aid in 27 of those 37, and at least triple the amount three times the amount of state aid in 10 counties. Dur-
of state aid in 10 of those 37. In 24 counties the amount ing that five-year period, borrowing alone exceeded 50
borrowed exceeded the amount of needs reported in percent of ten-year needs reported in 1988 in 31 coun-
1984, and in 7 other counties borrowing exceeded 80 ties, and in 6 of those counties borrowing exceeded
percent of 1984 reported needs. 1988 reported needs.
Similarly, from 1989 to 1993 borrowing equaled While counties can leverage state aid through debt
at least half of state aid in 52 counties. Of those 52 financing, they can also take advantage of state aid to
counties, borrowing exceeded state aid in 37 counties. reduce indebtedness and their debt service payments.
10 School Law Bulletin w inter 1991
Figure 10
Total School Debt Service Payments in the 100 Counties
160
140
I I
1_0
I
too-
80-
0
c 60
40
20
0
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
Fiscal Year Ending
For the state as a whole, debt service payments almost during the ensuing eight years? As Figure 13, on page
tripled between 1983 and 1993, despite the trend dur- 12, shows, average spending on capital needs from
ing this period toward lower interest rates. (See Figure 1986 to 1993 as a percentage of 1984 reported needs
10.) Eleven counties had no school indebtedness during was lowest in the lower-income counties. In the 6
that period. Of the remaining 89 counties, debt service counties with per capita incomes below $12,000, aver-
payments at least doubled in 51 counties between 1984 age spending as a percentage of 1984 needs was 82
and 1993. Of those 51 counties, payments at least percent, though that average disguises a range from 27
tripled in 38 counties and increased at least fivefold in percent to 152 percent. In comparison, spending aver-
27 counties. Twelve counties that had no debt service aged 203 percent of needs in the 6 highest-income
payments in 1984 had substantial payments in 1993. counties. For all counties together, spending averaged
(See Figure 11.) 123 percent of needs.
On the other hand, 31 counties had lower debt ser- Many low-income counties did fairly well in
vice payments in 1993 than in 1984. Fifteen of those meeting needs. Between 1986 and 1993, for example.4
counties reduced payments by 50 percent or more, and of the 10 lowest-income counties spent an amount ex-
8 counties that had debt service payments in 1984 had ceeding their 1984 reported needs. Of the 50 counties
none in 1993. with lowest incomes, spending equaled at least 80 per-
5. How Well Have Poorer Counties Met Con- cent of needs in 26 counties. (In comparison. 38 of the
struction Needs? As noted earlier, the distribution of 50 highest-income counties spent that much relative to
state aid was intended to favor poorer counties. As Fig- their needs.) In those 26 counties, spending exceeded
ure 12 shows, state aid per student from 1984 to 1993 reported needs in 18 counties, exceeded 150 percent of
was much greater for counties with the lowest per needs in 11 counties, and was more than double 1984
capita incomes. The 6 lowest-income counties received reported needs in 5 counties. Of the 24 counties that
more than twice as much state aid per student as did the failed to meet 80 percent of needs, 14 met less than 50
6 highest-income counties. State aid from 1986 to 1993 percent of needs, and 5 counties met less than 30 per-
averaged 98 percent of needs reported in 1984 by the cent of needs. (See Figure 14, page 12.)
10 lowest-income counties but averaged 70 percent in What accounts for the fact that 24 of the low-
the 10 counties with highest incomes. In that period income counties met less than 80 percent of 1984 re-
state aid averaged 86 percent of 1984 reported needs in ported needs?
the 50 counties with lowest incomes, and 77 percent in That their reported needs were relatively high may
the 50 counties with highest incomes. have been a contributing factor. In the 10 poorest coun-
Spending compared to 1984 reported needs. How ties. for example. 1984 reported needs per student aver-
well did the poorer counties meet 1984 reported needs aged 53,013, while in the 10 highest-income counties
«inter 11)9� School Law Bulletin 11
Figure 11 Figure 12
Change in Debt Service Payments between 1984 Average State Aid for Capital Needs Per Student,
and 1993, in 89 Counties with Some Outstanding 1984-93, by 1991 Per Capita Income
School Debt during That Period
53.000
Infinite Increase
(No Debt in 1984)
+1.000 or more 6
u +500 to 999 9 52,000
c f
y +300 to 499 711 3
+100 to 299 13 0.
1.000
0 to+99 7 Q
0 to-49 16
-50 to-100 t5 0
Less $12.000 $13.000 S14.000 $16.000 S18.000 520.000
than —13.999 —13.999 —15,999 —17.999 —19.999 ormore
$12.000
Number of Counties Per Capita Income
the average was $2,446. These differences, however, 3 of those counties spent more than 90 percent of state
do not explain why they failed to meet their needs, be- aid. In fact, 15 of these 26 counties spent an amount
cause the 10 poorest counties also received twice as equal to at least 150 percent of state aid, and 5 of them
much aid per student as did the 10 highest-income spent more than twice the amount of state aid.
counties. And for other low-income counties, the dif- Debt financing in the poorest counties. Did the
ferences were not as great—the 50 lowest-income poorest counties make good use of debt to finance
counties had average 1984 needs of$2,573 per student, school construction needs, or did they pay off existing
compared with $2,203 per student for the others. debt? Remarkably, 9 of the 10 lowest-income counties
Spending less than the state provided. Yet an- borrowed money for construction during the period
other reason may explain why some of the 50 lowest- 1986 through 1993. Of those 9 counties, the amount
income counties had low spending relative to reported borrowed at least equaled 1984 reported needs in 3
needs: many of them spent less than they received in counties and equaled more than 90 percent of needs in
state aid. Twenty-six of those 50 counties spent less 1 other county. Most of that borrowing was in the five-
than they received in state aid-16 spent an amount year period 1989-93, when 4 of the same 9 counties
equal to less than 75 percent of state aid, and 6 spent an borrowed amounts equal to at least 50 percent of ten-
amount equal to less than 50 percent. In comparison, year needs. Only 2 of the 10 poorest counties paid off
only 10 of the 50 highest-income counties spent less debt—one reduced debt service substantially, and the
than they received in state aid, and only 4 of those other eliminated its modest payments.
counties spent less than 75 percent of state aid. However, many low-income counties made less
Of the 24 low-income counties that met less than use of debt or paid down their debt, as indicated by
80 percent of 1984 reported needs, 10 of them spent debt service payments. While 9 of the 10 lowest-
less than 65 percent of state aid and 6 spent less than income counties borrowed money, only 2 of the next
half of state aid. Only 3 of them spent an amount at 10 lowest-income counties did so. Three of those 10
least equal to state aid. If all those 24 counties had counties used no debt at all, 2 paid off all debt, and 4
spent at least the amount of aid they received, 2 of counties reduced debt service payments by one-third
them would have met 100 percent of reported needs, to two-thirds.
and 5 other counties would have exceeded 80 percent The 50 lowest-income counties included 9 of the
of reported needs. 11 counties that had no school indebtedness during the
In contrast. of the 26 low-income counties that period 1984 to 1993 and 5 of the 8 counties that paid
met 80 percent or more of 1984 reported needs, only 5 off their debt between 1984 and 1993. Fourteen other
counties spent less than they received in state aid, and low-income counties had lower debt service payments
12 School Lark Bulletin Winter 19Qi
Figure 13 Figure 14
Average Spending for Capital Needs, 1986-93, Spending for Capital Needs, 1986-93, as a
as a Percentage of Schools' 1984 Reported Needs, Percentage of Schools' 1984 Reported Needs in
by Per Capita Income 50 Counties with Lowest Per Capita Income
S 20.000 or More �� 200 or More 5
18,000--19.999 v 150-199 6
7
16,000-17.999 v 100-149 7
`Z
i�
U 14,000-15,999 i
} 80-99
a 13,000-13.999 50-79 l0
a
a 12.000-12,999 I j 30-49 9
j
Less than 12,000 I Less than 30 5
0 50 t00 150 200 250
Percentage of Reported Needs Number of Counties
in 1993 than in 1984(compared with 10 of the 50 high- How much have needs actually increased? Com-
est-income counties). Only 22 of the 50 low-income paring change in reported needs of individual counties
counties increased their debt service payments (35 of between 1988 and 1993 without taking into account
the 50 highest-income counties did so). spending on school construction during that period
Spending compared to 1988 reported needs. De- gives a false indication of actual change in reported
spite the increases in reported needs between 1984 and needs.
1988, the 50 low-income counties did fairly well in Take, for example, a hypothetical county that re-
meeting 1988 reported needs. In 20 of those counties, ported ten-year needs of $10 million in 1988 and $12
spending during the five-year period 1989 to 1993 ex- million in 1993, which appears to be a modest increase
ceeded 50 percent or more of ten-year needs reported of 20 percent. Let us suppose that between 1989 and
in 1988. Spending exceeded 70 percent or more of 1993 the county spent $6 million to meet construction
needs in 9 counties and exceeded needs in 2 of them. needs reported in 1988.
Thirty-four of the 50 counties spent more than they re- Thus, of this county's 1988 reported needs, S4
ceived in state aid, and 18 of them spent twice as much million was unmet as of 1993. If needs had not
as they received in state aid. changed since 1988, the county would have reported
1993 needs of $4 million (ignoring, for simplicity. in-
Construction Spending and creases in construction costs). Therefore, the S12 mil-
lion of needs actually reported in 1993 represents an
Escalating increase in reported needs of$8 million, equal to an 80
If most counties have done well in using state percent increase in needs between 1988 and 1993.
aid and local resources to meet previously reported Equivalently, 1993 reported needs plus the amount of
needs, why have reported needs continued to rise so 1988 reported needs already met by spending equals
dramatically? S18 million. an 80 percent increase over 1988 reported
Let us examine how reported needs changed be- need,, of $10 million.
tween 1988 and 1993 in the 100 counties, taking into %%hen «e calculate true increases in reported
account the spending that occurred during that period. needs to this fashion, the results are much different
Can those changes be explained by factors that nor- from \.hen \,ve simply compare changes in reported
mally could be expected to affect school construction needs. Fir.t. as noted earlier, statewide needs did not
needs, such as increased construction costs, enrollment increa,,c h� S1.8 billion, or by 50 percent, between
changes, or increased numbers of classroom teachers 1988 and 1993. Rather, needs increased by S4 billion,
provided through the Basic Education Program`.' or b- more than 100 percent.
ll"inter 1991 School Lai k Bulletin 13
Second, the escalation in needs was not limited to Figure 15
only a few counties but rather involved about two-thirds Now Counties' Reported School Needs Changed
of the counties. Whereas 36 counties reported lower from 1988 to 1993, Taking into Account Spending
for Capital Needs from 1989 to 1993
needs in 1993 than in 1988, when construction spending
is taken into account,reported needs actually fell in only
10 counties.=' In 16 other counties the increases were 300 or more 3
modest—below 25 percent. Of the remaining 74 coun- 200-299 7
ties, all except 9 had increases above 50 percent. Thirty I50-199 to
counties had increases of 100 percent or more, and of .3 loo-lag 9
those counties 21 had increases of 150 percent or more, V
11 had increases of 200 percent or more, and 4 had in- 75-99 is
creases of 300 percent or more. (See Figure 15.) ` 50-74 20
Changes in reported needs per student averaged$2,891 a 25-49 9
but ranged from a decline of$4,500 per student to an 0-24 16
increase of more than $25,000 per student. Decrease to
As Table 2, page 14, shows, the escalation in re-
ported needs was not limited to those with growing en-
rollments, or to large or high-income counties. Number of Counties
How to explain escalating needs? Three factors
that might be expected to explain some of the growth in
reported needs are increased construction costs, enroll-
ment growth, and increased needs for classrooms be- ten-year enrollment growth of 5 percent or more, and
cause of the increased numbers of teachers provided by 63 units expected declines of 5 percent or more.
the Basic Education Program. Statewide enrollment began to increase in 1991.
Construction costs increased about 14 percent be- and in 2003 is expected to be 15.6 percent higher than
tween 1988 and 1993, and therefore do not explain the 1993 enrollment. At the time of the 1993 survey, 105
large increases that occurred in most counties.22 of 129 school units expected some enrollment increase
Enrollment trends cannot explain the general es- during the next ten years.21 However, only 60 units ex-
calation in reported needs during the 1980s, because pected increases of 10 percent or more, and only 21
enrollment was declining then. In 1981 statewide en- units expected increases of 20 percent or more.
rollment had fallen 5 percent below the peak enroll- As Table 2 shows, the escalation in needs is not
ment of 1976-77, and it fell another 5 percent by limited to those counties that are expected to have large
1990. enrollment increases. Average net increases in reported
In 1981 only 12 of the 144 school units expected needs were largest in the counties that had the highest
increased enrollment during the next five years, and projected growth rates, but the average increases were
only 1 unit expected an increase of more than 5 per- large even in counties that expected declining enroll-
cent.21 At the time of the 1984 survey, only 19 of the ment. Increases in reported needs were not significantly
142 school units expected enrollment growth during correlated with projected enrollment growth during the
the next ten years, and only 10 of those expected period 1988 to 1993.
growth of more than 5 percent.2; In 82 school units en- The absolute increases in enrollment that were
rollment was expected to decline by more than 10 per- expected in 1993 also do not seem to explain why
cent. In 1988, 42 of the 140 school units expected needs escalated in so many counties. Of those 60
counties that in 1993 expected enrollment growth of
10 percent or more during the coming ten years, 10
21. in four of those counties, there seems to have been a major, counties expected fewer than 500 additional students.
downward reassessment of needs. For example. reported needs in one 13 counties expected from 500 to 1,000 additional stu-
county fell from S106 million to Sal million,despite spending of only 515
million from 1989 to 1993. -
dent.. and 16 counties expected from 1,000 t0 x.000
22.This figure is based on the implicit price deflator for nonresiden- students. In fact, of the net increase in enrollment ex-
tial,tructures. pected in .ill counties from 1993 to 2003. 10 counties
23.Charles D. Liner."Projected Enrollments of the 1980s.-School
Laic Bulletin I I (July 1980): I, 10-13. — --
24.Charles D. Liner,-Trends Affecting North Carolina School En- C tim i,:, D. Liner. "Update: School Enrollment Projections,"
rollment.-School Law Budlehn 15 Oan. 1984): 1. 12-20. Sch..../Lw� lialirlin 24(winter 1993): 11-13.
14 School Lsw Bulletin winter 1991
Table 2 from 1985=to 1993 was 17 percent, while the average
Average Change in Schools'Reported Needs,1988 increase in needs from 1984 to 1993 was 162 percent.
to 1993,after Adjustment for Construction Spending, Further, there was only a weak correlation between the
1989 to 1993(by projected enrollment change,
enrollment size, and 1991 per capita income) increased number of teachers and increased needs.
In only 7 counties did the number of teachers in-
Change in Reported Needs, crease by more than 30 percent, and in only 32 counties
1988 to 1993 did the number of teachers increase by more than 20
percent. In 28 counties the number of teachers either
Number Range of fell (due to declining enrollments) or increased by less
of Average Change(%) than 10 percent. Yet of these 28 counties, needs at least
Counties Change Low High doubled in 12 counties and at least tripled in 6.
Projected Enrollment
Change, 1993 to 2003 Summary and Conclusion
Less than -5% 9 +92% -15 +431
0 to -5% 12 +56 -55 +262 In 1981 local school officials in all 100 counties
0 to +5% 13 +59 -25 +237 began to report their needs for funds to replace obsolete
+5% to 9.9% 21 +94 -47 +737 and temporary school buildings and to provide "attrac-
+ 10% to 14.9% 15 +106 +7 +230 tive, safe, and functional facilities" for their students.
+15% to 19.9% 13 +88 -55 +191 Despite declining enrollments during the 1980s, these
+20% to 29.9% 12 +122 + 1 +397
+30% or more 5 +150 +11 +312 reported needs escalated sharply, from a total of $1.8
billion in 1981 to $3.7 billion in 1988. In 1993 school
1993 Enrollment officials still complained of obsolete and inadequate
Less than 3,000 20 +86 -55 +737 school facilities, and reported needs escalated further,
3,000 to 5,999 25 +76 -55 +311 to $5.6 billion.
6,000 to 9,999 19 +100 +2 +261 These figures disguise the fact that both the state
10,000 to 19,999 26 +91 -6 +277 government and most counties responded forcefully to
20,000 or more 10 +134 -47 +397 meet the needs reported by school officials. The Gen-
1991 Per Capita eral Assembly authorized new local sales taxes in
Income 1983 and 1986, earmarking a portion of counties' re-
Less than $12,000 6 +10 -55 +94 ceipts to be set aside for school construction and
$12,000 to 12,999 15 +34 -55 +82 school debt, and in 1987 provided additional funds
$13,000 to 13,999 21 +83 -6 +431 through the School Facilities Finance Act. Funds from
$14,000 to 14,999 17 +122 -25 +737 these sources were distributed in a way that favored
$15,000 to 15,999 15 +105 +1 +311
$16,000 to 19,999 20 +100 -40 +278 Poorer counties.
$20,000 to more 6 +208 +113 +397 Counting only the earmarked portion of county
sales tax receipts and receipts from the Public School
Building Capital Fund and the Critical School Facility
Needs Fund, both created by the 1987 act, state aid for
account for 56 percent of the net increase, and 2 coun- school construction totaled almost S 1.5 billion from
ties (Wake and Mecklenburg) account for 33 percent 1984 to 1993.
of the net increase. This state aid amounted to a substantial share of
Beginning in 1985 with the enactment of the Ba- the schools' reported long-term needs. For example.
sic Education Program, the state began providing addi- during the eight fiscal years following the 1984 survey.
tional teachers in all units, thus lowering pupil-teacher state atd to the 100 counties averaged 81 percent of
ratios. Of course, this factor was offset partly by falling needs reported that year. In 78 counties state aid ex-
enrollments in many units during the 1980s. While the ceedecl 50 percent of the schools' reported needs, in 39
program undoubtedly created a substantial increase in coutitie, it exceeded 80 percent of reported needs. and
needs for classroom and other space after 1985, in- in 20 counties it exceeded all reported needs.
creases in the number of teachers does not appear to Counties and their school systems responded by
explain the sharp escalation in needs in the various creatin`a a dramatic boom in school construction, alto-
counties. The average increase in number of teachers =ether ,pending twice as much as they received in state
Winter 1995 School Law Bulletin 1
aid. School capital outlay increased from$75 million in state aid they received and would have done better still
1984 to more than 5500 milhon i. 1991, and retrained if they had leveraged their state aid through borrowing.
above $400 million in 1993. During the periods follow- Many low-income counties made good use of debt to
ing each survey of needs, spending at least equaled re- leverage state aid, but others did not borrow at all or
ported needs on a proportional basis, assuming reported reduced their indebtedness.
needs in each survey were ten-year needs (the 1988 and Second, why have reported needs escalated so
1993 reported needs were specified as ten-year needs). sharply?Reported needs totaled$3.7 billion in 1988 and
Many counties did very well in meeting reported $5.6 billion in 1993,but if we count the school construc-
construction needs. For example, in half the counties tion spending from 1989 to 1993 as meeting needs re-
spending between 1986 and 1993 at least equaled needs ported in 1988, in effect reported needs increased by $4
reported in 1984, and exceeded 150 percent of needs in billion, thereby doubling between 1988 and 1993. Tak-
27 counties. On the other hand, 17 counties spent less ing into account construction spending between 1989
than half of reported needs. Despite the sharp increase and 1993, reported needs actually doubled in 30 coun-
in reported needs between 1984 and 1988, during the ties between 1988 and 1993 and at least tripled in 11 of
five-year period 1989 to 1993 half the counties spent an those counties. The escalation in needs reported by the
amount at least equal to half their ten-year needs re- various counties since 1981 cannot be explained,except
ported in 1988, and in 11 counties spending exceeded in part, by inflation in construction costs, enrollment
the estimate of needs. However, 22 counties met less changes, or increased numbers of teachers provided by
than 25 percent of reported needs. the Basic Education Program.
This analysis of reported needs, state aid, and Third, why do reported needs vary so much from
construction spending raises a number of questions county to county and change so drastically during rela-
and issues. tively short periods? Needs reported in 1993 varied
First, why have some counties met their reported from $485 per student to more than $27,000 per stu-
needs so well, while others have met only a fraction of dent. In one county reported needs per student fell by
their reported needs? One reason some counties were more than $7,000 between 1988 and 1993, while in
Cable to do so well is that they leveraged state aid by another county they increased from about $3,500 to
borrowing money. Of the counties that did not meet more than $27,000 per student. Between 1988 and
their reported needs, many did not spend as much as 1993 the total amount of reported needs fell greatly in
they received in state aid. Some of them are apparently some units but increased several hundred percent in
saving up the annual receipts from state aid until they others.
have enough money stashed away to build their Finally, after all the funds that have been made
schools. Other counties have taken advantage of state available by the state and all the money that has been
aid to reduce their school indebtedness, rather than us- spent on school construction since 1981, why is it that
ing the money to build schools. the superintendent of public instruction can still point
Although poorer counties generally have not met to obsolete and inadequate school facilities as a way to
their reported needs as well as wealthier counties, justify additional state aid? The 1981 survey of school
many poor counties have done very well. For example, needs found that the total cost of replacing all obsolete
from 1986 to 1993, 4 of the 10 lowest-income counties school facilities was $827 million, just over half the
spent an amount at least equal to their 1984 reported amount of state aid that has been made available since
needs, and 26 of the 50 lowest-income counties met at 1984 and just over one-quarter of the $3.2 billion spent
least 80 percent of the schools' reported needs during on school construction from 1982 to 1993.
that eight-year period. Other poor counties would have Why have those obsolete and inadequate buildings
done much better if only they had spent the amount of still not been renovated or replaced? ■