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Funding school capital outlays in North Carolina

North Carolina has had a unique school system. The independent school districts were abolished in 1931, and the legislature has created instead geographically defined school administrative units overseen by locally elected boards of education with no taxing power. In the 2005-2006 school year, the state was divided into 115 school units, including 100 county units and 15 city units. These units are often informally called school districts, but they are fiscally dependent on the counties and state government.

Since 1930s, North Carolina has established a basic structure of school finance with a division of responsibility between state and county (G.S. 115C-408(b)). The state is responsible for current expenses necessary to maintain the minimum nine-month term, while counties are responsible for financing construction and maintenance of school facilities. However, the state has frequently supplemented funds for school construction, and counties often provide funds to supplement state funding for schools boards’ current expenditure.

Local funds for school capital outlays may come from three sources. First, counties may appropriate part of their general revenues to school capital outlay fund through the regular budget process. Second, the voters within a school unit may approve by referendum the levy of supplemental property tax for any item of expenditure in the school budget. Finally, counties may raise money for school construction through a general obligation school bond issue, which is guaranteed by a full-faith-and-credit pledge that a county will “levy whatever amount of property tax is necessary to repay the debt.”

Besides local funding, the state has increasingly responded to the need for new and improved school facilities by offering direct and indirect assistance for construction costs. In recent years, two major types of state assistance for school capital outlays have been earmarked local option sales taxes and state aid programs.

For more information about school systems in NC, see the CMG report of UNC School of Government. Some financial data can be found through North Carolina County and Municipal Financial Information.

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