Venturesome Capital- State Charter School Finance Systems

It is expected that a majority of capital funding

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Unformatted text preview: om private sources and that the public funding will go primarily to the neediest charter schools. The law is so new that funds have yet to be allocated. Equipment and Capital Outlay in General Fund School districts typically spend 1 percent to 2 percent of their general operating funds on equipment, furniture and minor renovations. A study of eight school districts in Pennsylvania found capital projects expenditures ranged from nothing to 3.4 percent, averaging 1.1 percent (Hartman and Keller, 1999). Although clearly insufficient for start-up purposes, most of the resources for capital outlay financed from general operating funds in school districts are passed on to charter schools. In most states, capital outlay funded by general operating revenue is included in the base revenue calculations. In addition to the facilities allowance in Washington, D.C., another $150 per pupil, representing equipment purchases, is imbedded in the base funding formula. North Carolina and Rhode Island also include some capital outlay spending in the average per-pupil cost used to derive charter school funding. The tuition calculation in Massachusetts includes school district costs for acquisition, improvement and replacement of fixed assets (primarily equipment, furniture and minor repairs), as well as expenditures for rent and instructional equipment, averaging about $400 per pupil. 73 Venturesome Capital: State Charter School Finance Systems Programs To Improve Access to Capital While falling short of direct financial assistance for facilities, several states and private entities help improve access to capital, lower the cost of borrowing or provide technical assistance. Access to Low-cost Financing. Two states empowered existing bonding authorities to issue tax-exempt securities on behalf of charter schools through conduit financing (Hassel, 1999; Caldwell and Arrington, 2000). The Colorado Educational and Cultural Facilities Authority (CECFA) expanded the list of eligible beneficiaries to include organizations that “provide an educational program pursuant to a charter from a school district.” North Carolina expanded the mandate of the Educational Facilities Finance Agency to include any “nonprofit institution within the State of North Carolina authorized by law and engaged or to be engaged in the providing of kindergarten, elementary, or secondary education, or any combination thereof.” To date, the North Carolina authority has not been willing to actually issue any securities for charter schools. The CECFA issues the bonds and loans the proceeds to Colorado charter schools after charging transaction fees of $20,00 to $30,000. The bonds issued are “non-course” to CECFA, which means that responsibility for repayment is limited to the charter school and investors will focus on creditworthiness of the charter school rather than the CECFA. Six charter schools have already obtained tax-exempt financing to refinance, purchase or build facilities (Caldwell and Arrington, 2000) Together, the six schools raised over $23 million in financing at an interest rate between 6 percent and 7 percent, cutting borrowing costs in half compared to commercial lenders. While no state facilities assistance is provide...
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