NC voucher fund leaves millions unspent while growing by $10 million a year

State lawmakers keep adding money for North Carolina’s Opportunity Scholarship program, which sends low-income kids to private schools, even though there aren’t enough takers to spend the money it already has.

With millions going unspent each year, the state budget approved in 2017 guarantees the voucher program will get a $10 million bump each year for the next decade.

That needs to stop, a key Republican lawmaker says.

“We’ve got other needs,” said Rep. Craig Horn of Union County, who chairs the House Education Appropriations Committee. “We need to right-size this thing.”

The two-year state budget approved in 2017 cited “the critical need in this State to provide opportunity for school choice for North Carolina students” and spelled out Opportunity Scholarship budgets that would start at $44.8 million in 2017-18 and top out at $144.8 million in 2027-28.

When that plan was approved, the fund had already left a total of $12.6 million on the table during its first three years, numbers provided to The Charlotte Observer show. Even in 2017-18, when a cap on administrative expenses was lifted and that bill more than tripled, the fund used only about $29.5 million of the $34.8 million available.

Any unused money rolls over for use in the voucher program the following year, then reverts to the state’s General Fund if it remains as surplus for a second year, according to the state’s budget legislation.

The Observer asked for details about surpluses in the program after the Charlotte-Mecklenburg school board voted in January to ask the General Assembly to stop adding to the voucher fund.

Charles Jeter
Charles Jeter

Charles Jeter, a former state representative who now serves as the Charlotte-Mecklenburg Schools government relations coordinator, says that the history of unspent voucher money gives lawmakers an easy way to free up some money for public education. Based on numbers he had gotten from the Opportunity Scholarship web page, he reported that the program had used only $28 million of $45 million allotted for the 2017-18 school year.

“So why do taxpayers across NC need to increase the funding for these vouchers by another $10 million when we’re only spending about 63% of the money now?” he wrote in his weekly “Jetergram” email.

Kathryn Marker of the North Carolina State Education Assistance Authority, which administers the Opportunity Scholarships, says the gap is actually much smaller once you account for administrative costs and a formula that requires holding back some of each year’s allocation for the following budget year.

Based on the numbers she provided, the program left about $5.8 million unspent in 2014-15, $4.1 million in 2015-16, $2.3 million in 2016-17 and $5.5 million in 2017-18. Marker said about $2 million of the 2017-18 surplus was spent on technology improvements.

Growing, but how much?

State tallies show that demand has been growing, but not at the rate state lawmakers seemed to expect. In 2014-15, when the program started handing out scholarships based on family income, 1,216 students got scholarships. This year 9,341 are participating during the first semester.

Craig Horn
Rep. Craig Horn

But this year’s allocation would cover about 1,000 more, even if each student received the maximum $4,200 a year scholarship. And that doesn’t include roughly $3.5 million — enough for another 800 scholarships or more — that rolled over for use this year.

“It appears we’ve gotten a little bit too exuberant in filling the demand,” Horn said last week.

Cumberland County is the biggest user of the program, with 1,115 recipients, followed by Wake (817) and Mecklenburg (631). Durham County has 314 low-income students in the program.

A controversial start

North Carolina lawmakers approved Opportunity Scholarships in 2013, starting with $10 million the first year, according to Observer reports at the time.

Voucher programs, which provide public money for private education, are popular with conservatives across America, who argue that they give low-income families the same alternatives rich ones have to seek a better education than their public schools offer.

The North Carolina Association of Educators, the N.C. Justice Center, the state’s School Boards Association and 71 school districts sued to block the program, saying it violated the constitutional mandate to provide a sound basic public education by diverting money to private schools. An early victory for the plaintiffs delayed start-up, but the state Supreme Court upheld the program in 2015.

The 2015 biennial budget expanded the program by roughly $8 million a year, and the 2017 session brought the pledge to add $10 million a year for a decade. Now lawmakers are back in session and working on a new budget.

Horne said he supports the Opportunity Scholarship program but it makes no sense to keep boosting a budget that appears to be more than adequate now. He says he needs to study the details but plans to propose reining in or ending the automatic increases.

“We have to do a lot better,” Horne said. “We’re talking about kids’ lives here.”

Not enough takers

So where are the students?

Every year some applicants are eliminated because they don’t meet income guidelines or other eligibility standards, said Marker, whose agency also administers college financial aid. And some who are declared eligible and awarded scholarships don’t take them, she said.

This school year, 11,935 new applicants dwindled to 5,257 who qualified for and accepted scholarships. Students who remained in the program from previous years brought the total past 9,000.

The scholarship program faces the same challenges that planners for school districts and charter schools do, according to Marker: Families move around a lot and change their mind about where to send their children.

Some accept scholarships but never show up at an eligible private school, she said (payments are made to schools, not families). Some start but are quickly withdrawn, perhaps because families discover they can’t get transportation to a private school or have to buy uniforms, Marker said.

“They have the funds, but they don’t end up using it,” she said.

For the first three years, administrative expenses for the Opportunity Scholarship program were capped at $400,000 a year. In 2017, when lawmakers lifted that limit, administrative spending shot to $1.3 million, more than the first three years combined.

Marker said $400,000 wasn’t enough to provide good customer service. She now has nine full-time staff, as well as legal, financial and IT support, to handle all K-12 scholarships. In addition to the Opportunity Scholarships that includes two smaller programs: Vouchers for students with disabilities and tax-deductible Education Savings Accounts that can be used for private-school tuition.

“The customer service is intense,” Marker said. “We’re basically running a call center.”

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Ann Doss Helms has covered education for the Observer since 2002, long enough to watch a generation of kids go from preK to college. She is a repeat winner of the North Carolina Press Association’s education reporting award.