Venturesome Capital- State Charter School Finance Systems

Carolina texas hawaii kansas new mexico wisconsin 1

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Unformatted text preview: ts purchased with public funds. 2 Law clear only on unspent fund balances. 3 Left to the charter school, although in state-authorized charter schools, assets revert to the state. Michigan is typical of many states. Property purchased by a charter school remains the property of the charter school, but no specific rules exist for disposing of property for failed charter schools. Illinois is a little more specific. In the event of closure, charter schools in Illinois would also be required to refund to the local school board any unspent funds received from the local school board. The Illinois law is silent with respect to the ownership of property paid for with public funds. As in North Carolina, some state laws clearly indicate that asset reversion applies to “net assets” or the remaining assets after the claims of creditors have been satisfied, which may help overcome the reluctance of some lenders to make loans to charter schools. Why are charter school laws so unclear on the issues of asset disposition? While focusing on establishing charter schools, perhaps legislators overlooked the asset disposition issue and other matters related to shutdown. On the other hand, maybe the disposition of assets is not unclear. In the absence of legislation, assets belong to the nonprofit corporation or entity holding the charter, and the laws governing nonprofit corporations guide the issue of asset disposition. In essence, funds awarded to charter schools are no longer public funds, and the nonprofit’s governing board has the power to disburse assets in the event of school closure. Another issue related to asset ownership is whether charter schools are allowed to carry a positive or negative fund balance from year to year. In most states, charter school ownership of unspent funds rewards frugality, helps solve cash flow problems and represents a major component of financial autonomy. A large, positive fund balance makes it easier for charter schools to secure facilities or loans at lower interest rates. Other public schools do not need a fund balance because school level cash flow is irrelevant. Instead, school districts accumulate fund balances. Especially in environments where charter schools are unable to obtain credit at reasonable rates, healthy charter schools could be expected to carry large fund balances compared to school districts. Fund balance accumulation also allows charter schools to create building funds. 67 Venturesome Capital: How States Pay for Charter Schools TABLE 22 Charter Schools Allowed To Maintain a Positive Fund Balance Yes At Discretion of District Alaska, Arizona, California, Colorado, Connecticut,1 Delaware, District of Columbia, Florida, Illinois, Massachusetts, Michigan, Milwaukee, Minnesota, New Jersey,1 North Carolina,2 Pennsylvania, Rhode Island, South Carolina, Texas Georgia, Hawaii, Kansas, Louisiana,3 New Mexico, Wisconsin 1 Some limitations exist. 2 State funds must be spent, but local funds from school districts can be carried over. 3 State-authorized schools can maintain positive fund balances. Many s...
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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.

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