House Select Committee on Public School Construction Funding, report to the 2007 General Assembly of North Carolina

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funds are distributed to the LEAs based solely on ADM. The remaining thirty- five percent of
these funds are distributed to the LEAs that are located in counties that have an effective
property tax rate3 higher than the State average effective property tax rate. As with corporate
income tax receipts, an amount allocated to a LEA that is not used in a given year accrues to
the benefit of that LEA. Unlike with funds derived from corporate income tax receipts, the
funds derived from lottery proceeds do not require a local match and may not be used for
school technology needs. With the funds derived from lottery proceeds there is an additional
restriction that the funds may not be used to retire indebtedness incurred for school
construction purposes before January 1, 2003.
Recurring Sources of Local Funding Generally Available. Currently counties have several sources
of recurring funding that may be used for financing public school construction. The following
sources are available in all counties throughout the State.
 Property taxes. All counties are authorized to levy property taxes to provide for public
schools without any limitation as to the rate or amount of tax imposed. Property taxes
represent the single largest source of revenue for county governments. On average,
property taxes account for roughly 70% of a county's tax revenue and between 38% and
55% of a county's budget4. Nominal and effective tax rates in the State vary
significantly from county to county. Nominal tax rates range from a low of 0.26% in
Dare County ( effective tax rate of 0.2154%) to a high of 1.1% in Scotland County
( effective tax rate of 1.005%).
 Supplemental School Taxes. All counties are currently authorized to levy supplemental
school taxes in the county as a whole or in a particular district in the county for the
support of public schools5. Supplemental school taxes are essentially additional
property taxes which may be used for the support of public schools only. The tax rate is
limited to a maximum rate of 0.5% ( 0.6% if the LEA or district has a population of at
3 The effective tax rate takes into account not only the nominal tax rate but the change in the fair market value in the county
since the last revaluation.
4 The difference in percentages is due to the fact that counties have additional sources of revenue, such as fees and State and
federal aid.
5 If these taxes are levied in a district only, they may be used only for schools within that district.