North Carolina has a dropout crisis--only two thirds of North Carolina high school students graduate. One reason this crisis has not received the attention it deserves is because the state was reporting badly inflated graduation rates (supposedly as high as 97 percent) until it finally adopted a more realistic reporting method earlier this year. This study documents the public costs of high school dropouts in North Carolina and examines how school choice could provide large public benefits by increasing graduation rates in North Carolina public schools. It calculates the annual cost of high school dropouts in North Carolina caused by lower tax revenue, higher Medicaid costs and higher incarceration costs. It then examines how competition from private schools raises public school graduation rates, and calculates the dollar value of the savings to taxpayers that would follow from increasing North Carolina's public school graduation rates by enacting even a modest school choice program. (Contains 5 figures, 7 tables and 26 endnotes.) [This study was released jointly by the Milton and Rose D. Friedman Foundation and Parents for Educational Freedom in North Carolina.]