'It's substantial.' 20 school systems could lose millions of dollars toward educator pay

The school systems are stuck in the middle of a disagreement over how the money for extra educator pay was supposed to be used. Now, they could lose it and more.
Posted 2023-06-13T22:13:10+00:00 - Updated 2023-06-14T09:30:00+00:00

North Carolina school leaders are asking state lawmakers for a reprieve for 20 school systems that are poised to lose millions of dollars in future funding and their thousands of educators who wouldn’t end up getting their state-promised pay bump.

Nearly two dozen school systems — including several in central and eastern North Carolina — appear to have misused some state money, according to a review by the North Carolina Department of Public Instruction. But the department, along with the State Board of Education, believes it may have been an honest mistake amid the rollout of a new state funding program.

Alexis Schauss, DPI’s chief financial officer, said money for the new state program that funds extra pay for teachers wasn’t supposed to replace local money already going toward extra pay for educators. But DPI officials determined after talking with several school systems that some believed the law said the opposite: That the new state money was what couldn’t be replaced.

“That is a difference which some districts did not understand when they were making their year-end adjustments,” Schauss told the State Board of Education recently before the board voted to ask lawmakers not to withhold future funding from the school systems.

The 2021 budget bill that created the state’s new supplemental pay program says schools receiving the money “shall use the funds to supplement and not supplant non-State funds provided for salary supplements for teachers and qualifying school administrators.”

If, for example, they purposefully reduce local funding for teacher pay while new state money comes in (considered “supplanting”), then the law says those schools can’t get their state supplement at all the next year.

It’s unclear if school systems purposefully lowered local funding or how much educators may have been shorted from what they could have received. Educators did, by and large, receive more money from the supplement.

But not receiving supplemental funds for the 2023-24 school year is a penalty that would amount to $37 million, combined, for the 20 school systems and their thousands of teachers and administrators who are supposed to receive a portion of it. The amount of money the school systems are collectively accused of supplanting is $6.6 million — far less than what they’d lose in state funding for having misspent the money.

“These are not small matters,” State Board of Education Vice Chairman Alan Duncan said during a recent meeting, before making a motion to ask lawmakers to not withhold money from the school systems next year. “This is significant money that’s involved.”

Duncan likened the matter to a misunderstanding.

That’s the opinion of Person County Schools.

Julie Masten, assistant superintendent of finance, said the district used its new state supplement to pay qualifying educators about $1,200 more, each. That was on top of the district’s local supplement, which adds 10% to an educator’s salary. That local supplement is, and has always been, funded by both local dollars and a separate state funding source, known as low-wealth county supplemental funding. The low-wealth county supplemental fund, which has existed since the 1990s, can be spent on extra pay for instructional personnel, according to the state’s allotment policy manual.

But DPI officials told Masten that state law doesn’t allow this and that any locally determined salary supplement needs to be paid for using only local or federal dollars, she said.

Now, Masten is worried Person County Schools could lose its low-wealth supplemental funding, which totals nearly $1 million and funds about 15 teachers, in addition to the salary supplements.

“It’s substantial,” Masten said.

The law for the new supplemental pay program, unlike for other state programs, doesn’t explain how officials would determine “supplanting” had occurred.

Typically, state law says “supplanting” has occurred if the local funding dropped to less than 95% of what it used be, before the new state money came in. But because the new supplemental pay program doesn’t define “supplanting” that specifically, DPI officials determined that supplanting occurred if the average local salary supplement dropped below 100% of what it was the year before, giving less leeway to school systems than they typically get.

Lawmakers are proposing changes to how supplanting is calculated and how school systems can avoid a penalty, but it’s unclear what impact the changes would have on reducing the number of school systems facing financial punishment for this next school year. Based on the numbers, at least some school systems would likely still be determined to have supplanted local salary supplements for the new state money.

Masten said Person County Schools leaders are in conversation with the county’s representatives in the General Assembly, asking for a way to help them avoid future penalties.

“They support us,” she said. “They’re willing to come to the table to do what they can.”

In an email to WRAL News, Harnett County Schools spokeswoman Natalie Ferrell said school leaders are also asking for a legislative solution that would keep Harnett County Schools from being penalized.

“Without legislative intervention to address this issue, HCS could be at risk of not having access to several million dollars of funding this coming year for teacher supplements,” Ferrell wrote to WRAL.

Ferrell said the school system disagrees with DPI’s analysis, arguing its average local supplement did not decrease and that it used the new state salary supplement on salary supplements.

Lauren Horsch, a spokeswoman for Senate President Pro Tempore Phil Berger, R-Rockingham, said, “it’s too early to say what the final language will be regarding supplanting” as the budget is still being negotiated. As proposed, the budget would provide an allowance – currently drafted at $6.6 million – for school systems across the state to use to reverse their “supplanting.”

The problem

Here’s the background on the new state salary supplement:

  • The 2021 budget, passed in November 2021, provided $100 million to nearly every public school system in the state for extra salary for teachers and administrators. The supplemental pay was based on the market value of real estate in each county. It had to be used by the end of June 2022.
  • The law had a “non-supplant” provision. That means school systems weren’t permitted to decrease their local funding of teacher and administrator salaries just because they were receiving more salary money from the state. It’s a relatively common provision in state and federal funding programs. Non-supplant provisions are designed to make sure new programs are providing something new, rather than replacing another funding source for an old program — in this case, educator salaries. Almost every county has for decades provided a local salary supplement of their own, to increase educator pay.
  • The 2021 budget bill said, simply, that the average local salary supplement for a school system could not decline while the school system was receiving the new state salary supplement.
  • But the Department of Public Instruction determined that, in the case of 20 counties, the average local salary supplement declined during the 2021-22 school year. That was the first year of the program. Collectively, that could cost them $37 million in future state salary supplements if they don’t make up the difference found by DPI.

The school systems that would lose out on their supplemental educator pay for the 2023-24 school year, if nothing changes, are: