Venturesome Capital- State Charter School Finance Systems

Some special education costs in school districts come

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Unformatted text preview: percent of the foundation level; charter schools without special education students receive none of this funding. Limited-English Proficiency: The state has a small appropriation ($4.2 million) to partially reimburse school districts and charter schools based on a per-pupil application. Low-Income Students: Like school districts, charter schools receive a payment equal to 11.5 percent of the foundation allowance for each student eligible for free breakfast, lunch or milk. Categorical Programs: Charter schools are eligible for state categorical support (in the same manner as local school districts) for vocational education, gifted and talented, professional development, school-to-work transition, and other small programs. Charter schools must provide qualifying programs. Transportation: No state transportation aid is available to either school districts or charter schools, so transportation is financed entirely from the foundation allowance. Like school districts, charter schools do not have to provide transportation. Most charter schools do not provide transportation, while most school districts do. In effect, charter schools get transportation funding whether or not they provide transportation. Capital Outlay and Facilities Financing: While no state facilities assistance is provided, the state charter school law specifically allows charter schools to issue tax-exempt securities. Based on an Internal Revenue Service ruling that did not specifically disallow the practice, numerous charter schools have successfully obtained tax-exempt financing to purchase or build facilities. Typically, an investment company secures financing for the charter school and gets a fee of approximately 5 percent of the amount financed. In addition to interest, the lender receives “points” approximating 5 percent. Typically, the lender holds a “reserve” of 10 percent. The fees and reserve are capitalized into the financing so no down payment or other up front money is required. In order to build a $1.0 million facility, a charter school would obtain tax-exempt financing for $1.2 million. The universities that authorize charter schools usually must agree to forward payments directly to lenders on behalf of the charter school. Although tax exempt, the higher risk carried by charter school securities results in interest rates substantially higher than those obtained by school districts. State Start-Up Assistance: None. Administrative Fees: Charter authorizers can collect 3 percent of funding to cover monitoring and administrative expenses. Uniform Financial Reporting: Charter schools submit Form B, the uniform financial reporting form used by all school districts. Private management companies are exempt Appendix 151 Venturesome Capital: State Charter School Finance Systems from many aspects of Michigan’s Freedom of Information Act, which limits the usefulness of Form B reporting limited due to lack of detail. Form B reporting is also misleading because facility leases are categorized under the broader category of administrative costs. Auditing Practice: Every charte...
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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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