The state Senate has cleared a bill that would help save Texas charter schools money by allowing them more state-backed construction bonds.
Senate Bill 1480, which would allocate an additional $3 billion of the Permanent School Fund to back charter school bonds, passed the Senate Monday, with four Republicans voting against the measure. The $30 billion Permanent School Fund, the largest education endowment in the country, guarantees bonds from traditional school districts and charter schools, allowing them to borrow money for construction at lower interest rates.
“This legislation will help public charter schools keep funds in the classroom to educate students instead of paying higher interest rates and fees for buildings,” said David Dunn, executive director of the Texas Charter Schools Association.
Having the money to build facilities has been one of the biggest challenges for charter schools, which face long student waitlists. Charter schools cannot levy property taxes so they must rely on their savings or the philanthropic community to pay for construction. Charter schools face higher interest rates, as charters are considered riskier investments because they don’t have local tax revenue to back their bonds like traditional school districts do.
However, it’s that risk that makes using the Permanent School Fund to back charter school funds a bad idea, too, traditional public school supporters have said.
Dunn has said that he is not aware of a charter school ever defaulting on its bond debt.
Currently, about $1 billion of the fund is used to guarantee charter school bonds. SB 1480, filed by Sen. Bryan Hughes, R-Mineoloa, would increase that to $4 billion. In February, the State Board of Education approved allocating an additional $500 million of the fund to back charter school bonds, half of which was dispersed in March and the other in September.
According to Hughes, the Permanent School Fund has saved charter schools $20.5 million in interest payments over the last three years.