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Replaced by lottery money?

School construction money at risk 

Replaced by lottery money?

With Gov. Mike Easley already backpedaling on promises not to use money from the upcoming state lottery to replace other state education funding, concerns have arisen on a new front: school construction.

Representatives from the N.C. Association of County Commissioners met with the governor last month to express their concern that state money now pledged to the counties to build schools might be cut and replaced with lottery money--as was proposed by the governor, the state House and the state Senate in their budgets last year.

"It looks like people over in Raleigh are looking at some other uses for that money to help with the state budget," says Durham County commissioner Becky Heron. "Monies that were allocated for the schools are supposed to stay there. ... It's making a lot of people, myself included, very upset and we're wondering who in the heck we can trust over there if in fact this happens."

The counties are responsible for the construction, renovation and maintenance of school facilities, so any money from the state is supplementary. According to the commissioners' association, last year the 100 counties combined spent $800 million on school construction, renovation and debt service. But that wasn't enough to meet their needs.

"Our counties are in crisis mode in terms of trying to keep up with student population growth and building schools," says Rebecca Troutman, director of research and public technology for the association. The most recent survey of the North Carolina Public Schools Facility Needs (conducted in 2001) put construction needs for all the counties at $6.2 billion. Traditionally the state has helped foot the bill.

For several years, the General Assembly has committed to dedicating about 7.25 percent of the state's corporate income tax to the so-called ADM fund, (for Average Daily Membership, a formula that uses school enrollment to determine funding levels). In fiscal year 2004-05, that amounted to nearly $78 million. (Numbers aren't yet available for this fiscal year, which ends June 30.) Forty percent of net lottery proceeds after reserve fund deductions--an estimated $161 million in the 2006-07 fiscal year--will be added to that amount to create an ADM fund total of nearly $240 million.

But, according to a budget analysis by the N.C. Association of County Commissioners, the Senate wanted to redirect $50 million from the fund and replace it with $70 million of lottery revenue this fiscal year. For 2006-2007, the Senate advocated eliminating corporate income tax proceeds to the fund altogether to allow a reduction in the corporate income tax rate from 6.9 to 6.4 percent. When the budget went to the House, it rejected the corporate income tax reduction but advocated taking $13.3 million from the fund this fiscal year, and $11.3 million in 2006-2007. The governor's budget proposal would have taken $15 million from the ADM fund in fiscal years 2005-06 and 2006-07 to help balance the state's budget shortfall.

"The General Assembly at this point feels very strongly that they can balance their budget on the backs of the counties," says Wake County commissioner Betty Lou Ward.

In the end, however, the final version of the two-year budget left the school construction funds intact.

County commissioners still worry. Fears about school construction funding come after the Independent revealed last month that lottery money is already slated to replace appropriations from the legislature for class-size reduction and the More-at-Four program. Facing rising school enrollments, increasing construction costs and the need for additional construction to accommodate smaller class sizes, commissioners went to the governor this month to express their concerns.

"We do not want those funds spent on anything but school needs," says Cumberland County commissioner and former NCACC president Breeden Blackwell, who attended the meeting. "Many of our counties have committed those funds to pay off bonds or for future construction. We were concerned that with the lottery there may be some tampering with those funds."

Those who attended the meeting say Easley promised to protect the money. "The governor basically committed to protecting the ADM funds," Blackwell says. Buncombe County commissioner David Young and Craven County commissioner George Brown also felt assured that Easley would protect the fund.

But Easley's power to enforce his commitment to protect the fund is limited. Language that would have made it illegal for lottery revenue to supplant state funds was removed from the lottery legislation. And the General Assembly makes appropriations decisions, not the governor. "The General Assembly can change anything," Blackwell says. "Both houses can change anything they want to."

But Blackwell still trusts Easley. "He's a pretty powerful guy. He's got lots of friends in the General Assembly. His party is in control."

"His veto power is pretty strong," Young says. "With the needs that are across the state for school construction, I just don't see the governor or the legislature supplanting those school construction funds...

"What was the purpose of this whole thing," he asks, "if we are just going to trade dollar for dollar?"

  • Replaced by lottery money?

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