When a NC public charter school enrolls students from a school district that levies a supplemental school tax, does the charter school get a per-pupil share of that supplemental tax revenue or only state funding?
Plain-English summary
NC's Charter School Act (1996) introduced a new category of public school: independently operated but publicly funded through the local school administrative unit. Per-pupil state and local funding had to flow from the school district to the charter school for each district-resident student enrolled in the charter.
Some NC school districts levy a supplemental school tax in addition to county appropriations. The question for the AG: does the per-pupil flow include the supplemental tax money, or just the base state and county funds?
The framework. G.S. 115C-238.29H(b) requires the LSAU to transfer to each charter school a pro-rata share of the "local current expense appropriation." G.S. 115C-426 defines the school district's "local current expense fund" to include:
- Revenues from Article IX, Sec. 7 of the Constitution (fines and forfeitures)
- Monies appropriated by the county commissioners
- Supplemental taxes levied for the LSAU under local act or G.S. 115C-501 through 511
So the local current expense fund expressly includes supplemental taxes.
The "fund" vs "appropriation" wrinkle. The Charter School Act uses the term "local current expense appropriation" while the budget statutes use "local current expense fund." The AG read the two terms as synonyms. G.S. 115C-430 itself refers to county "appropriations funded by supplemental taxes." The terms describe the same flow of money under slightly different labels.
Equal-footing rationale. G.S. 115C-238.29E(a) declares that a charter school "shall be a public school within the local school administrative unit in which it is located." Treating supplemental-tax revenue as off-limits to charter schools would discriminate against charter-school students who reside in the same district as traditional public school students. The Act's structure makes that unworkable: the per-pupil flow is supposed to put both groups on equal footing.
Practical effect. The LSAU must include supplemental-tax revenue in its per-pupil calculation. Every dollar of supplemental tax revenue gets divided across the LSAU's total ADM (charter plus traditional), and each charter school receives its share based on enrolled district residents.
The opinion was one of the earliest interpretations of the Charter School Act's funding mechanics. It set a clear rule that charter schools get the full local funding stream, not just a subset.
Currency note
This opinion was issued in 1998. 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.
NC charter school funding has been litigated and amended repeatedly since 1998. Sugar Creek Charter School v. CMS and subsequent NC Supreme Court decisions clarified specific funding categories. The legislature has amended G.S. 115C-238.29H and renumbered some Charter School Act provisions (now in G.S. 115C-218 et seq.). The general principle that charter schools share in the local current expense fund remains, but the specific calculation rules and which revenue categories count have evolved. Anyone analyzing a current charter funding dispute should pull the current statutes and the post-2018 CMS v. State line of cases.
Common questions
Q: What is a supplemental school tax?
A: A property tax levied in addition to the regular county tax, dedicated specifically to public schools in a school district. NC's largest districts (CMS, WCPSS, Guilford) historically had supplemental taxes; smaller districts varied. The supplemental tax has to be approved by voters under G.S. 115C-501 through 511.
Q: Why does the Charter School Act use "appropriation" while the budget statute uses "fund"?
A: Probably because the Charter School Act was drafted to slot into the funding flow without redefining terms. The AG read the difference as drafting variation rather than substantive distinction. NC courts have generally agreed.
Q: Can the district hold back any of the local current expense fund from charter schools?
A: Not under the 1998 opinion's reading. All money in the local current expense fund gets divided per pupil. Districts have tried in litigation to argue for hold-back categories (administrative costs, indirect costs); the case law evolution has been mixed.
Q: What about federal funds?
A: Federal restricted-use funds (Title I, IDEA Part B, etc.) follow their own rules under federal law. The state-and-local current expense fund flow is what this opinion addresses.
Q: Does the charter school have to spend the money on operations?
A: Yes, the local current expense fund is operational money (salaries, instructional supplies, day-to-day costs). Capital outlay is separately treated under G.S. 115D-31 and other provisions.
Q: What if the supplemental tax was levied to fund a specific traditional-school program?
A: Generally, that does not exempt the revenue from the charter share. Voters approve the tax for "the schools," and the Act treats charter schools as schools within the LSAU. Specific local-act language might create different outcomes; case-by-case analysis is needed.
Background and statutory framework
NC's Charter School Act was a 1996 bipartisan compromise that created a new public school option without dismantling traditional school districts. Charter schools would be public schools within the LSAU's footprint but operated independently. Per-pupil funding from state and local sources would flow through the LSAU to the charter school for each enrolled district resident.
The Act's funding mechanics were drafted hurriedly and contained some ambiguity. The 1998 AG opinion resolved one specific ambiguity: is "appropriation" different from "fund"? No. Charter schools get a share of everything in the local current expense fund, including supplemental tax revenue.
Districts that had spent decades building up supplemental tax bases were unhappy to share that revenue with charter schools. The dispute that produced this opinion was an early example of a recurring tension that has driven much subsequent NC charter school litigation. The 1998 opinion staked out the State's position; later case law largely affirmed the basic principle while refining the calculation rules.
Citations
- N.C. Gen. Stat. § 115C-238.29A et seq. (NC Charter School Act, 1996-2018 numbering)
- N.C. Gen. Stat. § 115C-238.29E(a) (charter school is public school within LSAU)
- N.C. Gen. Stat. § 115C-238.29H(b) (per-pupil transfer requirement)
- N.C. Gen. Stat. § 115C-426 (school budget structure)
- N.C. Gen. Stat. § 115C-426(c) (trust funds, federal grants, special programs)
- N.C. Gen. Stat. § 115C-426(d) (State Public School Fund)
- N.C. Gen. Stat. § 115C-426(e) (local current expense fund definition; includes supplemental taxes)
- N.C. Gen. Stat. § 115C-430 (county appropriations funded by supplemental taxes)
- N.C. Gen. Stat. §§ 115C-500 to -511 (supplemental school taxes)
Source
Original opinion text
[Caption and salutation as scraped from the NCDOJ landing page.]
(1) The State Public School Fund.
(2) The local current expense fund.
(3) The capital outlay fund,
The statute also authorizes funds for "trust funds, federal grants restricted as to use, and special programs." G.S. 115C-426(c).
The "State Public School Fund" includes appropriations from the State Board of Education for current operating expenses. G.S. 115C-426(d). The "local current expense fund" includes the following:
. . . revenues accruing to the local school administrative unit by virtue of Article IX, Sec. 7 of the Constitution [fines and forfeitures], monies made available to the local school administrative unit by the board of county commissioners, [and] supplemental taxes levied by or on behalf of the local school administrative unit pursuant to a local act or G.S. 115C-501 to 511. . . .
G.S. 115C-426(e) (emphasis added).
The Charter School Act uses the term "local current expense appropriation" and that term is almost identical to the term "local current expense fund" which is specifically defined to include supplemental taxes. While the Charter School Law specifies "appropriations" and the budget provisions use the term "fund," the distinction is one without a difference. G.S. 115C-430 specifically refers to county "appropriations funded by supplemental taxes." Thus we do not believe the legislature intended to differentiate between the term "appropriations" and the term "fund," but rather intended the two terms to be synonymous and for the well-established definition of "local current expense fund" to apply to the local appropriations to charter schools.
We think this interpretation is consistent with legislative intent. It is clear from the funding provisions that the same State per pupil allocations would flow to the charter schools as to traditional public schools. In our opinion, it is consistent for the local school system to transfer all monies it has budgeted in the current expense fund pro rata to the charter school. This puts public charter school students on an equal footing with students attending the traditional public schools. See G.S. 115C-238.29E(a) (A charter school . . . shall be a public school within the local school administrative unit in which it is located.)
In conclusion, all funds contained in the local school board's current expense fund are subject to G.S. 115C-238.29H(b) and must be transferred to the charter school on a per pupil basis as required by that subsection. I hope this response adequately addresses your inquiry. Should you have further questions, please do not hesitate to contact us.
signed by:
Thomas J. Ziko
Special Deputy Attorney General
Assistant Attorney General