Venturesome Capital- State Charter School Finance Systems

1 charter schools apply directly to us department of

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Unformatted text preview: ly to U.S. Department of Education. 58 Start-Up Assistance In the states where charter school developers apply directly to the federal government, start-up grant amounts are determined on an individual basis. Planning and implementation grants are available, and grant competition is based on the strength of the application and need. Four states did not receive federal grants for various reasons in 1998-99. Arizona decided not to apply, in part, due to controversies over schools that were receiving other forms of federal funding and therefore were being “double funded.” In Hawaii and Rhode Island there were so few charter school developers that it made little economic sense for the SEA to apply for the funds and as a result the developers applied directly to the federal government. New Mexico’s charter school law did not meet federal requirements. 59 Charter School Financial Structure and Accountability CHAPTER 6 Charter School Financial Structure and Accountability In addition to determining funding levels, charter school finance systems address a number of other financial and accountability issues. These issues include requirements for audits, participation in the uniform financial data reporting system, ownership of charter school assets, responsibility for debt and bankruptcy, and the timing of revenue allocations to charter schools. While none of these provisions affect the actual dollar amounts that flow to charter schools, together they have an important impact on how charter schools operate and the information that policymakers and the public need to evaluate these schools. Some of these issues are of major importance to charter schools, particularly the timing of revenue allocations. Others issues, such as ownership and disposition of assets purchased with public funds, represent important long-term concerns for taxpayers. Timing of Payments and Cash Flow Assistance An issue related to start-up, the timing of per-pupil payments has understandably been an issue of concern to charter schools. Expenditures are larger at the beginning of the school year for both charter schools and school districts. The inflow of revenue also varies over the course of the year. Thus, straightening “out the kinks in the channels and cycles by which cash flows to charter schools” is one of the fiscal recommendations of the Hudson Institute report (Finn et al. 1996). School districts deal with their cash flow needs by engaging in short-term borrowing and investing. Charter schools engage in the same strategy if they qualify for a line of credit from a private institution or a state-sponsored revolving loan fund. Not all charter schools, especially new ones, can get lines of credit. Some alternatives exist. The Massachusetts Industrial Finance Agency, for example, provides partial guarantees for cash flow loans for several charter schools. In any event, the short-term interest rates for charter schools are greater than for public school districts. The timing of charter sc...
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