State Policy

State Policy

At the heart of the charter school facility conversation is the role of state and local governments in funding capital improvements for all public schools, including public charter schools. Much of the debate over the first 30 years of public charter schools has been about receiving equitable operating funds – we have struggled to secure equitable facility funding. FRED makes it easier to have discussions with public officials about public funding for public school facilities. The following sections discuss some of the key strategies for states to provide equitable funding for charter schools. This overview highlights some of the most promising practices identified around the country and provides local leaders with a framework for analyzing and prioritizing their local ecosystem of charter school facility policy, finance, and real estate solutions to improve charter school facility options.

State Credit Enhancements

While access to free buildings or per pupil facility funding streams are the ultimate goal for charters, another lesser known strategy is very effective. The most cost effective state policy for charter school facilities is the Texas Permanent School Fund (PSF) whereby the state’s credit rating supports charter school debt. This allows select public charter schools to borrow money at the same rate as the state, saving tens of millions of dollars in interest. Other versions of this credit enhancement strategy exist in Utah, Colorado, Idaho, and Arizona. The following resources can help public officials understand this type of policy.

Revolving Loan Funds

One of the more popular strategies to help charter with facilities is to create a revolving loan fund. These can be national in scope of place-based investment strategies. Some of the RLFs are privately supported by foundations, others are publicly supported by state funding. The most creative involve a mix of public and private funds bringing the Public-Private Partnerships (P3) model into the K-12 sector. These are more effective than supporting a single school, they can scale relatively quickly, and they can recycle and last forever. The following resources highlight some of these models.

District Bonds and Charter Schools

Charter schools issue their own tax-exempt bonds because they are not included in the local school district bonds for school construction. That means higher interest rates that leave less money for education programming. However, there are a few instances where charter schools have been able to be included in a school district or state bond offering. By working together, charter schools and school districts achieve more favorable financing conditions. Many of these partnerships are voluntary and collaborative while others are mandated by regulations.

These papers provide the charter school community and policy makers with lessons learned from these partnerships to expand the practice of including charter schools in district and state bond offerings:

Access to Buildings

Taxpayers own public school buildings and they should be available to all public school students, but that’s not the reality. Access to school buildings is one of the biggest obstacles to expanding charter school options. Charter schools rarely have access to taxpayer-funded facilities, even if those facilities are vacant. We should not be spending taxpayer funds on new schools when there are already vacant school buildings. The following blog posts review the experience of charter schools and district buildings.

Per Pupil Facility Funding

Few states provide direct funding for capital outlays. These solutions are limited in both their reach and funding and do not come close to meeting the charter sector’s facility needs. Unlike district schools, charter schools typically do not receive funding that is sufficient to cover more than their operating costs and must pay for facilities costs out of their operating budgets – meaning money that should be going into the classroom is instead paying for the classroom. This report summarizes state facility payments.