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Unformatted text preview: tates have policies seeking to minimize excessive charter school fund balance
accumulation. In Connecticut, for example, up to 10 percent of current year reserves can be
used for next year’s expenses, and 5 percent can be used as a reserve to finance a specific
capital or equipment purchase. New Jersey allows charter schools to maintain positive fund
balances, but also empowers school districts to request an adjustment in the funding
provided to charter schools. In states where charter schools receive funds in the same way
as other schools—such as Georgia, Hawaii, Kansas, New Mexico and Wisconsin—fund
balances may be carried over at the discretion of the school district according to the terms
of charter. 68 Facilities and Capital Outlay Financing CHAPTER 7 Facilities and Capital Outlay Financing
Funding adequate facilities—after start-up funding and operations funding—ranks as the
biggest implementation problem for start-up charter schools (RPP,2000). Aggravating the
problem, charter schools in many areas are viewed as a partial solution to an already
existing shortage of space in other public schools. While district schools generally have
dedicated funding sources for capital, charter schools with insufficient public funding for
facilities pay for facilities out of regular operating funds or raise money from private
sources. As a result, the capital funding issue is not just a matter of bricks and mortar—it
has implications for the quality of education. Class size may be higher, teacher salaries
lower or instructional materials lacking. Or schools may have to eschew services such as
Charter schools that lease facilities through commercial landlords usually pay property
taxes to local school districts as part of the rent. Lenders, investors and property owners
often regard charter schools as risky and charge a premium, or refuse to do business
altogether. The private sector capital supporting management companies helps companyrun schools on the facilities issue, but it puts parent-run and grassroots charter schools at a
disadvantage. Capital provided by management contractors may also endanger the
independence of nonprofit charter school boards to monitor and enforce contracts. One of
the stronger arguments for public and private conversion schools is that they do not face
the daunting facilities problem.
Charter schools in many states are unable to take advantage of the low-cost financing
available to school districts through tax-exempt bonding authority. Tax-exempt financing
of charter school facilities, however, is rapidly spreading in Michigan and Colorado, and
Texas. Although tax exempt, the higher risk carried by charter school securities results in
interest rates substantially higher than those obtained by school districts.
While most states attempt to provide operating funds to charter schools on the same basis
as school districts, states have been reluctant to provide comparable capital financing. 69 Venturesome Capital: State Charter School Finance System...
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This note was uploaded on 02/11/2013 for the course ECON 101 taught by Professor Smith during the Spring '09 term at Harvard.
- Spring '09