Charter School Funding: Room for Improvement
North Carolina Institute for Constitutional Law
February 26, 2013
Religion, morality, and knowledge being necessary to good government and the happiness of mankind, schools, libraries, and the means of education shall forever be encouraged. N. C. Const. Art. IX. § 1.
The intrinsic value of providing a good education for our children is clear from our earliest drafts of the state constitution to today’s headlines. Through the work of education reformers, North Carolina’s public schools now include 107 charter schools that serve approximately 50,000 students, and those numbers are expected to grow. As charter schools proliferate so, too, do questions about funding those schools. At least one county has asked for statutory authority to fund capital costs associated with charter schools. This whitepaper highlights notable charter school funding cases and describes how the courts have interpreted our constitution to allow for multiple types of schools, like charter schools and traditional public schools.
I. The Basics of Charter School Funding Litigation
N.C. Gen. stat. § 115C-426 identifies three primary sources for the support of public schools: the local current expense fund, the State Public School Fund, and the capital outlay fund. N.C. Gen. Stat. § 115C-238.29H specifically provides that charter schools are entitled to receive funding from just the first two of these three funds, but not the capital outlay fund.
The legislature has chosen to require in one area of funding – operational funding – that localities allocate a precise amount for charter schools. “If a student attends a charter school, the local school administrative unit in which the child resides shall transfer to the charter school an amount equal to the per pupil local current expense appropriation to the local school administrative unit for the fiscal year.” N.C. Gen. Stat. § 115C-238.29H(b). Thus, the statute removes discretion from this area of public charter school funding. And it is well that it does – attempts by counties and county school boards to systematically disadvantage public charter school students have been rebuffed by the courts on this specific ground. Examples of such cases include:
· Sugar Creek Charter Sch., Inc. v. Charlotte-Mecklenburg Bd. of Educ., 655 S.E.2d 850, 854 (N.C. Ct. App. 2008)(Sugar Creek I) (holding that counties and county school boards cannot withhold from public charter schools an equal pro rata share of the local current expense fund);
· Sugar Creek Charter Sch., Inc. v. Charlotte-Mecklenburg Bd. of Educ., 673 S.E.2d 667, 674 (N.C. Ct. App. 2009)(Sugar Creek II), (county not permitted to withhold an equal pro rata share of “all money contained in the local current expense fund”)(citation omitted);
· Sugar Creek Charter Sch., Inc. v. State, 712 S.E.2d 730 (N.C. Ct. App. 2011)(Sugar Creek/State)(charter schools are not entitled to apply for local capital outlay funds.);
· Francine Delany New Sch. for Children, 563 S.E.2d 92, 98 (N.C. Ct. App. 2002) (holding that a county school board’s attempt to withhold from public charter schools “supplemental school taxes and penal fines and forfeitures received by the Board” violated the law).
· Thomas Jefferson Classical Acad. v. Rutherford County Bd. of Educ., 715 S.E.2d 625 (N.C. Ct. App. 2011)(all monies in the “local current expense funds” must be included in the computation of per-pupil distributions to charter schools and yearly school board budgets can not be retroactively adjusted for years already completed.);
· Learning Center/Ogden Sch., Inc. v. Cherokee County Bd. of Educ., 2012 N.C. App. LEXIS 1315 (N.C. Ct. App. Nov. 20, 2012)(charter school was not entitled funds transferred from the “local current expense fund” to a separate fund);
· Union Acad. v. Union County Pub. Sch., 2012 N.C. App. LEXIS 1272 (N.C. Ct. App. Nov. 20, 2012)(allowing year-end budget adjustment and funds transfer prior to the end of the fiscal year and such funds were not part of the State or local allotments for charter schools.).
Notably, not one of these cases held the State is constitutionally prohibited from providing funds, including capital funding, for charter schools.
II. Sugar Creek/State’s Open Door for Funding Reform
The North Carolina Court of Appeals addressed constitutional issues related to capital funding disputes in Sugar Creek/State. While holding that statutes do not allow counties to consider capital outlay funds, Sugar Creek/State left open the possibility of statutory reform that would enable charter schools to ask for capital funding. The Court of Appeals held that charter schools could not apply for capital outlay funding from counties because statutes do not authorize such funding and the constitution does not require capital funding for charter schools. This is not the same as saying the constitution does not allow capital funding.
In Sugar Creek/State, the Court of Appeals construed the Plaintiffs’ first argument as premised upon the notion all public schools are a “single class” and, thus, the Constitution requires they be equally funded. Id. 740. The Court held that the uniformity provision does not require all schools to be of the same class: “We conclude that N.C. Const. Art. IX § 2(1) merely requires that all North Carolina students have access to a sound basic education and does not preclude the creation of schools or other educational programs with attributes or funding options different from those associated with traditional public schools.” Id. 741. Indeed, the Court cited alternative schools, adult education programs, summer schools, and schools for targeted groups like the blind or deaf as examples of various classes of schools supported by North Carolina’s public schools system. Id. 741. The Plaintiffs argued a second constitutional challenge based on the “general and uniform” clause--charter schools should receive equal funding from all funding sources available to traditional public schools because charter schools are part of the “general and uniform” system of free public schools and “they are entitled to funding identical to that available to other schools in the uniform public school system.” Id. 742. The Court reasoned that they did not have to decide whether charter schools are part of the “general and uniform” system of public schools or whether they are part of an additional option above and beyond the “general and uniform” system “since the funding mechanisms that the General Assembly has [sic] authorized for both traditional public schools and charter schools are constitutional regardless of whether charter schools are or are not components of the uniform public school system.” Id. 742.
III. The Effect of Allowing Charter School to Apply for Capital Funds
As a matter of State or individual county discretion, as with all public schools, particular capital funding requests from a public charter school may or may not be granted – not all requests for a new gymnasium or business machine upgrade are equally meritorious or needful. But the counties’ and county school boards’ position that they are and should be shielded by law from even entertaining public charter schools’ requests is contradicted by law. Nor does their position make any sense. All public schools, including public charter schools, should be entitled to bring requests for capital funding and to have those annual requests considered uniformly with the requests of other public schools.
The case law supports the inclusion of various classes of schools with multiple sources and differing levels of funding under the umbrella of a “general and uniform” system of free public education. But, more significantly, the Court of Appeals has opened the door to the creation of schools to supplement those required by the Constitution. The fate of North Carolina’s schools is not a question of funding traditional public schools or school choice; the question is of funding traditional public schools and school choice.
 For more information, please contact Jeanette Doran, executive director, at 919-838-5313 or firstname.lastname@example.org.
 See Editorial, Charter schools may double by 2014, News and Observer. Jan. 26, 2013. http://www.newsobserver.com/2013/01/26/2633395/charter-schools-may-double-by.html. See also, DPI website. Office of Charter Schools: Schools, http://www.dpi.state.nc.us/charterschools/schools/.
 Josh Shaffer, Wake commissioners back county funding for charter construction, Jan. 22, 2013. http://www.newsobserver.com/2013/01/22/2625193/wake-board-backs-funding-for-charter.html.