The URL can be used to link to this page

Home My WebLink About083199 Attachment 1aATTACHMENT 1 a Education Funding in Orange County August 31, 1999 Education Funding in Orange County In North Carolina, each county is responsible for supplementing state appropriations to public education. Local current expense appropriations are allocated to each school system based on an equal amount per pupil. In addition, counties provide funds to each system for recurring and long -range capital projects. School systems in North Carolina do not have separate taxing authority and are not allowed to issue debt for school construction and renovation projects. Therefore, issuance and repayment of long -term debt, such as general obligation bonds and private placement loans, are the responsibilities of county government. Many city school units in the state also have special district taxes. These voter - approved taxes, levied within the unit's boundaries, further supplement county funding. Historically, the Orange County Board of County Commissioners has given top priority to funding public schools. The County's number one ranking in total education funding in the state evidences this. The chart to the right compares Orange County's total 1998 -99 General ; Fund appropriations for education • to several other counties in the Total General FUnd Ap ropriations per ADM State. As the graph indicates, Sollne: NVV.VCA( . Cffiitp,�Cl dffi/ IM1111,olIS111-1-cY Orange County's total spending per pupil is almost twice the State $3,000 average. 52.338 $2,500 Recently, the Board of County $2,000 $1,552 Commissioners asked the County $1,500 S11B1 Manager to look at various $1,000 5645 alternatives for funding public $500 education in Orange County and to $o -- Osage Dutham Chatham W ake State Al-ce Peno■ Caswell Robeson develop parameters for future Avenge funding. This report contains ■ Orange County ■ Surrounding Counties ■ State Average possible funding models that the Board may choose for the Manager to use as he develops the annual • recommended budget for schools. While this approach guides staff in developing the annual budget, each year the Board can consider departures from the recommendations based upon particular one -time circumstances such as start up costs for new facilities. Staff contacted several counties throughout the state to determine what, if any, funding formulas are currently in use. The counties responding to the survey included: • Alamance • Brunswick • Charlotte - Mecklenburg • Chatham • Durham • Forsyth • Guilford • Lincoln • Moore • New Hanover • Pitt • Scotland • Surry • Wake Eight of the responding counties use formulas or other guidelines to determine school funding (as shown in Figure 2 on the following page). Staff found few similarities in county funding for school systems. Some counties use a formula for current expense funding only while other counties use a formula to Education Funding in Orange County calculate all funding for education (current expense, recurring capital, debt service and long range capital). The following chart provides information gathered: Figure 2: Results of School Funding Survey County Formula Brunswick County • Contract between County and School system in place • Thirty -seven percent of the tax rate is allocated to current expense • Debt service is funded from the school's portion of the one- half cent sales taxes Chatham County • Formula in place • Current fiscal year per pupil allocation is multiplied by the State Department of Public Instruction projected enrollment. That amount is then increased using the Consumer Price Index (CPI) • If CPI is less than three percent, schools are guaranteed an increase of three percent Forsyth County • No formula in place • County Manager provides guidelines for school requests • Average increase for the past few years has been three -to- four percent Lincoln County • No formula in place • Current expense funding is significantly lower than the state average • Board of Commissioners adopted a four year plan to bring the schools up to the state average • For fiscal year 1999 -00 total school funding is $11.9 million (26% of the County's General Fund budget) Moore County • No formula in place • Annual increase for schools is based on the increase in property valuation increase Pitt County • Formula in place • Current fiscal year per pupil appropriation is base • Annual percentage increase as determined by Consumer Price Index (CPI) and Cost -of- Living Adjustment for County employees • Holds school systems "harmless" for new students • School and County staff disagree on what source to use as average daily membership (ADM) Scotland County • No formula in place • This is the only county in the state that is mandated to fund the school system at the statewide local average (current expense only) • Annual average of $100,000 goes to recurring capital • Debt service paid from schools' portion of one -half cent sales taxes Wake County • Dedicated tax rate of thirty seven cents • This is for current expense and recurring capital • Debt service paid from schools' portion of one -half cent sales taxes Page 2 of 9 Education Funding in Orange County Funding Public Education in Orange County In developing various funding parameters for public education, staff considered the total General Fund appropriation for schools. For fiscal year 1999 -00, the County's allocation to education totaled $48,371,435 or 48.27% of the total General Fund budget of $100,251,148. The following chart provides a breakdown of the categories: Figure 3: Elements of Education Funding The North Carolina Department of Public Instruction (DPI) projected a total student enrollment of 15,309 for the two school districts located in Orange County for the 1999 -00 fiscal year. Taking into consideration the total General Fund appropriation, the 1999 -00 per pupil allocation is $3,160. (In calculating the amount per pupil, the total General Fund appropriation for education [$48,371,435] is divided by the total number of projected students [15,3091). This per pupil allocation represents an increase of 5.43 percent over the 1998 -99 fiscal year. For fiscal year 1999 -00, it is projected that the Chapel Hill - Carrboro City Schools will receive an additional $9,743,228 from the district's special district tax. This equates to an additional $1,094 per pupil for that district ($9,743,228 divided by 8,903 students). Historical Perspective/Trends As shown in the next chart, total funding for public schools in Orange County has comprised an average of 48.12 percent of the General Fund budget over the past five years. Page 3 of 9 % of 1999- 00 General 1999 -00 General Fund Current Expense Based on per pupil $34,537,104 34.46% 3 cents on property tax; allocated to each school Recurring Capital system based on number of students enrolled $2,043,675 2.04% Debt Service Funded from sales tax & portion of property tax $8,968,305 8.95% One -half cent sales taxes and portion of property Capital Projects & Reserve tax $2,822,351 2.82% Total Education d' $4893719435 48.27% The North Carolina Department of Public Instruction (DPI) projected a total student enrollment of 15,309 for the two school districts located in Orange County for the 1999 -00 fiscal year. Taking into consideration the total General Fund appropriation, the 1999 -00 per pupil allocation is $3,160. (In calculating the amount per pupil, the total General Fund appropriation for education [$48,371,435] is divided by the total number of projected students [15,3091). This per pupil allocation represents an increase of 5.43 percent over the 1998 -99 fiscal year. For fiscal year 1999 -00, it is projected that the Chapel Hill - Carrboro City Schools will receive an additional $9,743,228 from the district's special district tax. This equates to an additional $1,094 per pupil for that district ($9,743,228 divided by 8,903 students). Historical Perspective/Trends As shown in the next chart, total funding for public schools in Orange County has comprised an average of 48.12 percent of the General Fund budget over the past five years. Page 3 of 9 Education Funding in Orange County Figure 4. Annual General Fund Appropriations for Education Fiscal Year Ending Current Expense Appropriation Recurring Capital Debt Service Long Range Capital Capital Reserve Total Total General Fund Budget Education % of Total GF Budget 1990 $11,403,973 $1,500,000 $1,792,275 $3,450,300 $0 $18,146,548 $42,494,467 42.70% 1991 $13,057,549 $1,500,000 $2,636,842 $2,044,661 $0 $19,239,052 $46,351,500 41.51% 1992 $14,861,157 $1,500,000 $2,963,400 $1,827,627 $0 $21,152,184 $50,935,148 41.53% 1993 $15,713,450 $1,500,000 $2,879,475 $2,603,953 $0 $22,696,878 $53,887,298 42.12% 1994 $17,258,306 $1,500,000 $4,879,002 $2,606,048 $0 $26,243,356 $60,852,952 43.13% 1995 $19,098,062 $1,500,000 $5,717,540 $1,408,581 $0 $27,724,183 $66,581,662 41.64% 1996 $21,175,309 $1,500,000 $8,524,408 $3,049,749 $476,048 $34,725,514 $73,099,271 47.50% 1997 $24,604,074 $1,624,500 $8,318,118 $4,058,571 $494,442 $39,099,705 $79,259,530 49.33 % 1998 $27,197,822 $1,856,528 $8,767,660 $1,999,147 $618,843 $40,440,000 $85,483,019 47.31% 1999 $30,422,520 $1,949,652 $9,318,087 $2,353,225 $649,884 $44,693,368 $92,685,103 48.22% 2000 $34,537,104 $2,043,675 $8,968,305 $2,597,547 $224,804 $48,371,435 $100,251,148 48.25% In fiscal year 1999 -00, total funding for education increased by more than $3.6 million (8.23 percent). This is lower than the average of the past five (just over 12 percent) and ten (11.5 percent) years. Major factors influencing increases in the past years are: • Repayment of debt associated with three voter approved bond referenda and private placement funding for school facilities. • Increases in annual current expense funding each year. • Increases in recurring capital appropriations. (From $750,000 per school system in fiscal years 1990 through 1996 to a dedicated three cents on the property tax rate currently). • Creation of a capital reserve fund for School/Park projects. The chart to the right projects funding levels for the school systems if the Board of Commissioners elected to fund the schools at the historical rates. Should the historical percentage increases continue, appropriations for public schools would more than double over the next ten years. $160 $140 $120 $100 $80 $60 $40 $20 $0 Millions of Dollars f• 2001 2002 2" 2002 2" 2" M 2008 2009 2010 1999 -00 Average — —5 Year Average • 10 Year Average Page 4 of 9 Education Funding in Orange County Current Expense Funding Alternatives In order to maintain consistency between the funding formulas, staff made the following assumptions: • Total education funding consists of the following components: debt service, current expense, recurring capital, long range capital, and capital reserves. • All models hold the school districts "harmless" for new students. In other words, special consideration is given to ensuring that there will be no decrease in per pupil funding from year -to- year. • Staff used the past year growth in student enrollment as the base for the next ten years. Student enrollment projections from the North Carolina Department of Public Instruction will not be available until the week of August 30, 1999. • The 1999 -2009 Capital Investment Plan did not include major projects that would require additional debt obligations. Therefore, none of the following models includes additional debt service requirements. Listed below are funding options that staff has explored. Appendix A provides a comparison of all models outlined below. Model 1 This model, similar to the formula used by Chatham and Pitt counties, increases the per pupil appropriation by the annual increase in the Consumer Price Index (CPI). (In Chatham County, if the CPI is less than three percent, schools are guaranteed a three percent increase.) This amount is applied to the projected student enrollment. Figure 6. FY 2000 -01 Funding Example if Model 1 Used Orange County Example 1999 -00 Total General Fund Per Pupil Appropriation $3,160 Guaranteed CPI 3.00% 2000 -01 Per Pupil Appropriation Enrollment Projections $3,254 15,705 The following questions related to the Consumer Price Index (CPI) would need to be addressed before this model is implemented: • What CPI source would be used? • What period of time would be used (January to December, July to June, October to September)? The following chart graphically illustrates the future trend of school funding in Orange County if the Board selected Model 1 (assumes the guaranteed three percent increase). Page 5 of 9 Education Funding in Orange County Figure 7. Model 1: Per Pupil Appropriation Increased by Annual CPI $100,000,000 - - - _ - - $80,000,000 - = - $60,000,000 - - $40,000,000 - - - - $20,000,000 = 99- 00- 01- 02- 03- 04- 05- 06- 07- 08- 09- 00 01 02 03 04 05 06 07 08 09 10 Model 2 While similar to Model 1, this model uses the total education funding as the base instead of the total per pupil appropriation. The base is increased by the rate of inflation as determined by the CPI. Again, schools are guaranteed an annual increase of at least three- percent. The same issues cited in Model 1 are applicable to this funding model. Figure 8. FY 2000 -01 Funding Example if Model 2 Used Orange County Example 1999 -00 Total General Fund Education Appropriation $48,371,435 Guaranteed CPI 3.00% Total 2000 -01 Education Appropriation $49,822,578 Enrollment Projection 15,705 The chart below provides funding projections for the next ten years if the Commissioners selected Model 2. Figure 9. Model 2: Total Education Funding Increased by Annual CPI $80,000,000 - _- -- - - $60,000,000 $40,000,000 $20,000,000 - - o O O o o o O O o 0 o b b b b b b b b o '✓ Page 6 of 9 Education Funding in Orange County Model 3 This formula increases the current year per pupil appropriation by the increase in the County's total property valuation. While the projected increase in fiscal year 1999 -00 is 3.37 percent, the average annual increase in valuation for the past five years is about 3.6 percent. Figure 10. FY 2000 -01 Funding Example if Model 3 Used Orange County Example 1999 -00 Total General Fund Education Appropriation $48,371,435 Five Year Average Increase in Valuations 3.60% Total 2000 -01 Education Appropriation $50,112,807 Enrollment Projection 15,705 2000 -01 Per Puipil Amprouriation $3,191 Figure 11 illustrates future trends in school funding if Model 3 were implemented by the Board (the five year increase of 3.6 percent is used as the annual multiplier). Figure 11. $100,000,000 - - = -- -- - - - - = -- - = � =_ - -- - - - $80,000,000 $60,000,000 $40,000,000 $20,000,000 - -- - 99- 00- 01- 02- 03- 04- 05- 06- 07- 08- 09- 00 01 02 03 04 05 06 07 08 09 10 Model 4 Model four guarantees that the school systems receive a designated percentage of the total General Fund budget. For the purposes of this report, staff assumed that the Board of County Commissioners would want to maintain the current forty -eight percent of General Fund funding threshold for education. Page 7 of 9 Education Funding in Orange County Figure 12. FY 2000 -01 Funding Example if Model 4 Used Orange County Example 1999 -00 Percent of General Fund Appropriated to Education 48.27% Projected 2000 -01 General Fund Budget (total) $108,435,000 Total 2000 -01 Education Appropriation $52,341,575 Enrollment Projection 15,705 The graph in Figure 13 provides information regarding future funding if Model 4 were selected. Figure 13. Model 4: Education Funding as a Percentage of Total General Fund $125,000,000 - $100,000,000 $50,000,000 $25,000,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Model 5 This model proposes that the percentage increase in education funding is equal to the annual increase in county departments and outside agencies. The five -year average increase for county departments and outside agencies is just over 6 percent (6.04 %). (During this same period, the average increase in total education funding is about 12 percent.) Figure 14. FY 2000 -01 Funding Example if Model 5 Used Orange County Example 1999 -00 Total General Fund Education Appropriation $48,3711)435 Five Year Average Increase in Appropriations 6.04% Total 2000 -01 Education Appropriation $51,293,070 Enrollment Projection 15,705 2000 -01 Per Puipil A ro riation $3,266 Page 8 of 9 Education Funding in Orange County Figure 16. M odel 6: Education Funding Increases at County D e artment H is toricaI Trend $100,000,000 - - -- $80,000,000 $60,000,000 -- - _ -- $40,000,000 - $20,000,000 - -= O [__ 00 Ols O O O O O O O O O O O O O O O O O O O O O O N N N N N N N N N N N Chapel Hill Carrboro City Schools Special District Tax Staff recommends that the Board of County Commissioners continue to address increases or decreases in the special district tax each year. Over the past few years, Chapel Hill Carrboro City Schools have used the district tax mainly to address start up costs for new facilities or new programs. When submitting their annual budget request, the Board of Education should make a separate proposal for use of the district tax proceeds. While this is a suitable use of the special district tax, the Orange County Schools does not have a district tax upon which they can rely. One alternative would be as follows: • For the start-up year, the Board of County Commissioners could chose to increase its General Fund commitment to schools and reduce Chapel Hill- Carrboro's special district tax. While Orange County could use the increase to pay for one -time start -up costs, Chapel Hill - Carrboro could supplant lost district tax revenue with the increased General Fund appropriation. Conclusion As the Board considers future education funding concepts, it is reasonable to look at models that closely align themselves with historical trends. Of the models presented in this report, model four appears to be the formula that keeps public education funding at the high level with which Orange County prides itself. The Board may be aware of other formulas that could be considered. Page 9 of 9 Appendix A: Education Funding in Orange County Comparison of Models Presented in August 31, 1999 Report 1999 -00 Per Pupil Projected 2000 -01 Per Pupil Total FY 2000 -01 Education Funding $52,352,191 $54,178,442 $53,429,174 $51,111,346 $49,822,578 $50,112,807 $52,341,575 $51,293,070 Model 3: Per Model 5: Pupil Percentage appropriation Model 4: Increase in Based on 1999- 00 Increase Based on 5 Year Historical Average Increase Based on 10 Year Historical Average Increase Model 1: Per Pupil Appropriation Increased by Annual CPI Model 2: Total Education Funding Increased by Annual CPI Increased by Average Annual Increase in Property Valuation Guarantees that Schools Receive at least 48% of General Fund Budget Education is Equal to the Annual Increase in County Departments $3,160 $3,160 $3,160 $3,160 $3,160 $3,160 $3,160 $3,160 $3,333 $3,450 $3,402 1 $3,254 $3,172 $3,191 $3,333 $3266 $52,352,191 $54,178,442 $53,429,174 $51,111,346 $49,822,578 $50,112,807 $52,341,575 $51,293,070