NC NC AG Advisory Opinion (1996-07-18) 1996-07-18

When North Carolina funds a charter school based on average daily membership, does the state pay based on the average ADM for the whole state or based on the ADM for the local school district where the charter school is located?

Short answer: Local. The AG concluded that under G.S. § 115C-238.29H(a), the State Board of Education must allocate per-pupil funds to a charter school based on the ADM allotment for the local school administrative unit where the charter school is located, not a statewide average. The result is that charter school funding varies from one LEA to another, just as funding for traditional public schools varies.

Disclaimer: This is an official North Carolina Attorney General advisory opinion. AG opinions are persuasive authority but not binding precedent like a court ruling. This summary is for informational purposes only and is not legal advice. Consult a licensed North Carolina attorney for advice on your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official AG opinion. The original opinion (linked at the bottom of this page) is the authoritative source for any reliance.

Plain-English summary

When North Carolina enacted its 1996 charter school law, the funding mechanism in G.S. § 115C-238.29H ambiguously referred to "the average per pupil allocation for average daily membership from the local school administrative unit allotments in which the charter school is located." Jay Robinson at the State Board of Education asked the AG whether that phrase meant the state should allocate based on a statewide ADM average or based on the specific LEA where the charter school operated. Senior Deputy AG Edwin Speas, Deputy AG Thomas Ziko, and Assistant AG Laura Crumpler answered: the local LEA's ADM controls.

Textual hook. Subsection (a) says the allocation is "equal to the average per pupil allocation for average daily membership from the local school administrative unit allotments in which the charter school is located." The phrase "in which the charter school is located" identifies a specific LEA, not the state as a whole. If the legislature had meant a statewide average, the sentence would not have included that locational qualifier.

Structural support. Several other charter school provisions tie the charter school tightly to its host LEA: § 115C-238.9E(a) declares a charter school to be "a public school within the local school administrative unit in which it is located" and makes the charter school "accountable to the local board of education for purposes of ensuring compliance with applicable laws and the provisions of its charter." § 115C-238.29E(e) requires that the charter school "be located in the local school administrative unit with which it signed the contract." § 115C-238.29D(b) limits the State Board to authorizing no more than five charter schools per year in any one LEA. The cumulative picture: charter schools are LEA-specific creatures of the host district, and their funding should match.

Local transfer companion provision. Subsection (b) of § 115C-238.29H is even clearer for the local-funds piece. It says the local LEA where 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." That transfer is unambiguously local, and the AG read subsection (a) consistently with subsection (b).

Policy result the AG accepted. Reading subsection (a) as local-LEA-based means charter school funding varies from district to district. A charter school in a high-ADM-allotment LEA gets more per pupil than a charter school in a low-allotment LEA. The AG accepted this because the same variation already exists for traditional public schools. Applying a statewide average would have created an artificial cross-subsidy: charter schools in low-allotment LEAs would get more than the local public schools (a per-pupil preference for charter students), and charter schools in high-allotment LEAs would get less (a per-pupil penalty). Neither result fit the legislature's apparent intent that charter schools function as alternative public schools within the same funding ecosystem.

Currency note

This opinion was issued in 1996. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. North Carolina's charter school funding statutes have been amended repeatedly since 1996. The original cap on the number of charter schools (100 statewide) was lifted in 2011. The local funding transfer formula in subsection (b) has been the subject of repeated litigation (including the Sugar Creek Charter School and similar cases) over what counts as the "per pupil local current expense appropriation." Anyone analyzing a current charter school funding question should review the current text of the charter school funding statutes, the State Board's allotment policies, and the latest case law on local-fund transfers.

Background and statutory framework

North Carolina's 1996 charter school law created a category of independent public schools authorized by the State Board of Education, operating outside the traditional LEA governance structure but within the host LEA's geographic boundaries. Charter schools receive both state per-pupil funds (subsection (a) of § 115C-238.29H) and a local per-pupil transfer from the LEA in which the enrolled student resides (subsection (b)).

The funding architecture was designed to be revenue-neutral from the host LEA's perspective. The LEA loses a student (and the associated per-pupil costs) and transfers the corresponding per-pupil revenue to the charter school. The state simultaneously redirects its per-pupil allocation. The combined effect: a charter school gets approximately what the LEA would have spent on that student in a traditional public school setting.

For this design to work, the per-pupil amounts must match the LEA's actual allotments. A statewide-average approach would break the revenue-neutrality: a charter school in a low-spending LEA would suddenly draw more than its host district spent per pupil, and the state would effectively be subsidizing the charter school at the expense of equal treatment for traditional students. The AG's reading preserves the design.

Common questions

Did this opinion affect special-needs funding?

The opinion was about subsection (a)'s "average per pupil allocation for average daily membership" language. That provision excludes special needs allocations (subsection (a)(ii) adds "an additional amount for each child attending the charter school who is a child with special needs"). Special-needs funding was treated separately and the local-LEA-versus-statewide question for that piece would require its own analysis.

Was this binding on the State Board?

As an advisory opinion, it had persuasive force only. But the State Board would have had to defend a contrary practice in court, and the opinion's reading aligns with the statutory text and structure. The State Board followed the local-LEA approach in implementation.

How did this affect charter school operating budgets?

Charter schools in higher-funded LEAs (typically urban districts) received more per-pupil state funding than charter schools in lower-funded LEAs. This created funding stratification across the charter school sector. Charter schools serving lower-funded rural areas had thinner budgets per pupil, while urban-area charters could plan against richer per-pupil bases.

What about charter school students from outside the host LEA?

A child could enroll in a charter school located in an LEA different from the child's residence. Subsection (b) addresses that: the local current expense transfer is from "the local school administrative unit in which the child resides." So a student living in LEA A but attending a charter school physically located in LEA B would generate a local transfer from LEA A. The state per-pupil allocation under subsection (a), per the opinion, was tied to the host LEA where the charter school was located.

Did this opinion settle subsequent local-funds disputes?

No, those disputes (mostly about what counts as "per pupil local current expense appropriation" under subsection (b)) were litigated extensively through the 2000s and 2010s. This 1996 opinion addressed only the state-funds question under subsection (a). The local-funds methodology continued to evolve through litigation and statutory amendments.

Could a charter school challenge the local-LEA-based formula as inadequate?

A charter school could litigate the adequacy of its overall funding, but the methodology in subsection (a) is statutory. Challenging it would require either statutory amendment or a constitutional argument about the right to a sound basic education applied to charter school students.

Source

Landing page: https://ncdoj.gov/opinions/funding-for-charter-schools/

Citations

G.S. § 115C-238.29E
G.S. § 115C-238.29D
G.S. § 115C-238.9E
G.S. § 115C-238.29H

Original opinion text

(a) The State Board of Education shall allocate to each charter school (i) an amount equal to the average per pupil allocation for average daily membership from the local school administrative unit allotments in which the charter school is located for each child attending the charter school except for the allocation for children with special needs and (ii) an additional amount for each child attending the charter school who is a child with special needs.

(b) 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.

You have requested our opinion regarding whether subsection (a) requires that the State Board allocate to the charter school based on the average statewide ADM, or requires that the State Board allocate to a charter school based upon the ADM for the school system in which the charter school is located. In our opinion the latter interpretation is the correct one.

First, the specific language used in subsection (a) supports this interpretation. That subsection provides that the amount allocated must be "equal to the average per pupil allocation for average daily membership from the local school administrative unit allotments in which the charter school is located …." Second, the legislation makes it clear that a charter school is a "public school within the local school administrative unit in which it is located." Furthermore, the charter school in an administrative unit "shall be accountable to the local board of education for purposes of ensuring compliance with applicable laws and the provisions of its charter." G.S. 115C-238.9E(a). The legislation mandates that the charter school "be located in the local school administrative unit with which it signed the contract," G.S. 115C-238.29E(e), and further, that "the State Board shall authorize no more than five charter schools per year in one local school administrative unit." G.S. 115C-238.29D(b). All of these provisions strongly support an interpretation of the funding provisions that would tailor the ADM allotments to the LEA involved as opposed to utilizing a uniform allotment based upon average statewide ADM.

Finally, while the interpretation results in differences in charter school funding from one LEA to another, those same differences already exist since ADM allotments differ from one LEA to another. To deviate from the practice followed with respect to non-charter public schools by averaging the statewide ADM would in effect give preference in some LEAs to charter schools while penalizing charter schools in other LEAs. Furthermore, the legislature recognizes those financial differences in subsection (b) of G.S. 115C-238.29H when it addressed local funding of charter schools. That subsection provides that the local unit in which the charter school exists "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."

For the reasons set forth above, in our opinion, the method of funding charter schools must be based upon allocating funds based upon the ADM for the administrative unit in which the charter school is located and not upon a statewide average.

Should you have further questions or concerns, please do not hesitate to contact us.

Edwin M. Speas, Jr.
Senior Deputy Attorney General

Thomas J. Ziko
Deputy Attorney General

Laura E. Crumpler
Assistant Attorney General