Texas charter schools to get $500 million boost to back bonds

Millions of dollars will remain in the coffers of public charter schools after the State Board of Education freed up more state money to back their construction bonds.

On Friday, the board signed off on dedicating an additional $249 million of the Permanent School Fund in March to back bond issues for charter schools and then another set for $317 million in September. The backing of the fund, which at $30 billion is the largest education endowment in the country, allows charter schools to pay lower interest on bonds.

The board will hold one more vote in February to finalize Friday’s decision.

READ: Texas charter schools see obstacle to growth

To get an idea of the magnitude of the board’s decision, Karalei Nunn, chief operating officer of Meridian charter school in Round Rock, told the board’s members that, had the school’s recent $30 million bond been guaranteed by the fund, Meridian could be saving $14 million over the lifetime of the bond, equivalent to about half a million dollars a year.

The money “could’ve been used in the classroom, to improve programs, additional tutoring services in school for children, additional staff … transportation for some of our students,” Nunn told the American-Statesman. It’s a matter of “Texas taxpayer dollars going to teach students versus going into investors’ pockets,” she said.

Funding inequity

David Dunn, head of the Texas Charter Schools Association, has said that one of the greatest funding inequities of charter schools — which are privately run public schools — is on facilities.

Unlike traditional public schools, charter schools can’t levy property taxes to help pay for their facilities, so they rely on fundraising and setting aside some of the state money they receive for day-to-day operations.

Because they must renew their contracts with the state every five years and don’t have collateral like traditional school districts, charters also have a harder time borrowing money.

Guy Sconzo, executive director of Fast Growth School Coalition which advocates for facilities funding for traditional public schools, said expanding charter schools’ bond capacity is risky.

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If traditional school districts default on their bond, the local tax base must repay the bond. If a charter school defaults, the Permanent School Fund is on the hook to repay the debt. No charter or school district has ever defaulted as far Dunn and Sconzo know.

“To me, that’s a significant difference, and it puts the children’s funds of Texas at risk,” Sconzo said.

But on Friday, board members said that saving charter schools millions of dollars is fiscally responsible.

“You see that a million dollars a year in a charter school that they have to pay out because they don’t have the bond guarantee is a very compelling argument to support this,” said board member Pat Hardy, R-Fort Worth.

Facilities needs

In 2014, charter schools got a break when lawmakers allowed the Permanent School Fund to guarantee charter school bonds, not just school district bonds. When that money opened up — about a billion dollars’ worth — charter schools quickly used it to back bonds.

Dunn expects charter schools to seize the borrowing power of the newly available money, too. That’s why he hopes that lawmakers next legislative session will expand the bond capacity of the Permanent School Fund for charter schools to at least the level for traditional public schools — $2.5 billion to $3 billion.

“There is incredible demand for the services that these schools are providing. These schools want to grow to meet the demand the best they can,” Dunn said.

Dunn’s association estimates that about 130,000 children across the state are on a waiting list for charter schools.

Many of the students on the waiting list are enrolled in traditional public schools, which have slowly been losing students to charter schools over the last several years, creating at times an antagonistic relationship between the two.

The board’s decision to expand capacity for charter schools won’t negatively affect traditional school districts, which have sufficient bond capacity now, according to the Texas Education Agency.

Sconzo said that traditional school districts are also in need of funding relief for their facilities. He said state funding for school district bond repayments has fallen from 44 percent to 7 percent over the last 15 years.

On top of that, some school districts that have rapid population growth don’t get any state funding for bond repayments because of outdated funding formulas.

“The irony is that the fast-growth district attracts more residents and has to serve more children, as property values continue to increase, it’s the state’s coffers that are enjoying it. It’s not the local school district,” Sconzo said.

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