School Funding: The 20-Year Debate

The Problem

• As population in the CHCCS service area increases through new development, the demand for schooling in CHCCS increases
  
  
• The ad valorum taxes resulting from that population growth is not sufficient to meet the O&M requirements of the schools.
  
  
• In order to meet the O&M requirements AND all the special services demanded by district parents, the CHCCS budget is becoming increasing dependent on the district tax.
  
  
• The district tax was created to fund non-basic services. The current funding mechanism used by the commissioners balances the basic services budget of the CHCCS district against the full budget of the OCS.
  
  
• The impact of growth in the CHCCS service area and the resulting financial machinations is imposing an artificial ceiling on the OCS budget.
  
  
• If the CHCCS does not use the district tax to cover a portion of its budget, the budget presented to the county commissioners will inevitably exceed the 48.1% targeted limit on school funding set by the BOCC back in the early 1990s. If a larger portion of the county budget is allocated to schools, less funding will be available for other vital human services such as mental health and environmental protection.

The Evidence

• Evidence of growth can be found in the State of the Economy report. The population of Hillsborough, Mebane, and the rest of the county (53,874) is 20% smaller than the population of Chapel Hill/Carrboro (67,091). Between 2000-2004, Chapel Hill-Carrboro experienced 17.3% growth, Hillsborough 4.1% and the county 4.7%.
  
  
• Financial resources between the county/Hillsborough and Chapel Hill-Carrboro are unequally distributed:
  
  
  • The towns generate more ad valorem taxes per capita
    
    
  • The towns generate significantly more retail sales (sales tax) per capita. $1,436,798,693 of revenue was generated through retail sales last year. 73.4% from Chapel Hill-Carrboro; 26.6% rest of county. So while the county population is only 20% less than the population of Carrboro-Chapel Hill, the county's retail sales (sales tax generation) is 64% less than Carrboro-Chapel Hill. That means that the residents of the county pay a larger portion of the taxes for services than does the town population.
    
    
  • According to the Cost of Community Services in Orange County report residential development contributes approx 76 cents for every $1 of service; agricultural land contributes approx $1.38 for every $1 of services, and commercial land contributes approx $4.21 for every $1 of service.

My conclusions

• There is a greater demand for schooling in the towns
  
  
• Taxes in town generate more services than taxes in the county, meaning that there is less tax load on the average town resident than on the average county resident: higher in-town residential property values generate more ad valorum taxes; there is more commercial property in town (less demand for services); and the 64% higher retail base generates significantly more sales tax.
  
  
• The district tax supplements the already larger revenue source availabe to the city schools. But since residential growth doesn't pay for itself and we know more commercial growth is needed, the CHCCS shouldn't be held totally responsible for their dependence on the district tax. (Although the school board members should understand this better.)
  
  
• Current land use policies (which I support and don't wish to change) puts a ceiling on the revenue generating capacity of the county
  
  
• The county residents are already paying a larger % of their taxes for services and receiving fewer services than the town residents
  
  
• When the district tax is used to fund basic services, contrary to the intent of that tax, it becomes a limiting factor in the per pupil funding allocations for the district schools.
  
  
• Creating a new district tax for county residents ignores the basic problems and adds to the already inequitable distribution of wealth and resources between town and county residents.
  
  
• Any real solution must address the financial burden placed upon county residents by an environmentally positive land use policy
  
  
• Any real solution must address the inadequacy of residential growth to adequately fund the O&M budgets of the city schools
  
  
• Any real solution must address the inelasticity of the district tax in relation to the OCS budget.