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Facilities Funding: Some New Tools for the Never-Ending Challenge
By Holly Alexander
Facilities are almost always a challenge for charter schools. A high proportion are required to lease rather than own facilities, and funding is highly competitive. In addition, many districts provide little or no facilities funding to their public charter schools, so many charters need to pull some of their facilities money from per-pupil operating funds, and raise additional dollars from foundations or other sources. The unfortunate reality is that per-pupil operating funds for charter schools are almost always lower than those for traditional public schools in their districts. Currently, charter schools receive per-pupil operating funds at an average of only 73 percent of the amount given to traditional public schools in the same districts.
Only a handful of states have provided per-pupil facilities funding to public charter schools, though 26 states provide some state aid, such as the use of vacant school district buildings, while 14 states provide no facilities assistance of any kind for charters.
However, there are some bright spots in government funding and private sector partnerships and resources.
Several types of opportunities for school funding in the new economic stimulus plan, officially the American Recovery and Reinvestment Act (ARRA), signed by President Barack Obama on March 6, are of interest.
The bill first addresses the fact that there are major funding problems on all fronts as states and communities, which must operate with balanced budgets, have begun slashing education funds. The bill allots $48 billion for general education spending to state and local governments. It requires that 81.8 percent of that be used to restore recent cuts, including higher education. This may be especially important to charter schools since they already need to stretch their per-pupil funds so far.
The remaining 18.2 percent of the funding may be used to support instruction, although it can also go to other state and local needs, including modernizing schools. The report accompanying the bill recognizes charter schools as beneficiaries of the funding, so they can’t be overlooked when distributing the funding; however, it doesn’t mandate any funding, either.
Governors have been able to request ARRA funding since April 1. For the discretionary money as well as other parts of the act directed toward school facilities funding, projects that are ready to go have a significant advantage, since the goal is to stimulate the economy as quickly as possible and monies must be spent by December 31, 2010.
Some states and communities say they may prefer to spend the unrestricted portion of the stimulus money on facilities or technology upgrades rather than operating costs, because they don’t want to increase general school funding that they won’t be able to continue after 2010.
The ARRA also offers several tax programs that can benefit public charter schools, including $1.4 billion in new funding to Qualified Zone Academy Bonds, $22 billion for a school construction bond program, $10 billion to the New Markets Tax Credit Program and $25 billion in Recovery Zone Bonds, all of which might be tapped for school facilities. These are all bond programs, not grants. They generally require a package of funding through community development agencies, who in turn work with banks and other financial institutions to issue, sell and manage the bond issues. Foundation and other grants may be combined with these funds.
Administered by the U.S. Department of Education, the Qualified Zone Academy Bonds is a revival of a federal program funded in 1999 - 2004, and can only be used for schools. It may not be used for new construction, but can underwrite renovating school buildings, purchasing equipment, developing curricula and/or training school personnel.
The newly authorized school construction bonds will provide $22 billion, $11 billion in 2009 and the remaining $11 billion next year. They, along with other public-entity bonds, use a new structure with a mix of traditional non-taxable bonds and taxable bonds offering above-average returns. The bond money will be distributed to states, the 100 “large local education agencies” recognized by the federal government, and to Native American tribes based on the number of people aged 5 to 18 in their populations.
Charter schools have built facilities with funding assistance from the New Markets Tax Credits Program since its inception in 2002. Directed to building projects in low-income communities, most of the funding goes to housing, but community and business projects can be funded, too.
One such project is $14 million to refinance facility debt for the Thurgood Marshall Public Charter School in Washington, D.C., put together by City First Bank. The school says the bonds will save $50,000 per year, with a total value of $5.5 million, and allow it to begin spending all donor money on education for the first time in its history. The high school’s new building, completed in January, includes 13 classrooms, three science labs, a library and media center, and a moot courtroom. January was a great month – Thurgood Marshall was also named the most-improved school in D.C. by Business Week magazine and the Council of Great City Schools.
City First Bank put together a similar package for the E.L. Haynes Public Charter School, also in D.C., which allowed it to purchase property and build a new 46,000-square-foot building to serve 468 K - 8 students. The new $21 million facility opened in 2008. In addition to two classrooms for each grade, the building has a large cafeteria/auditorium space, regulation-size gym, a state-of-the-art science laboratory, and both art and music rooms.
View Park Preparatory Accelerated Charter Schools in the Crenshaw area of South Los Angeles were the first to be financed by the Los Angeles Charter School New Markets (LACSNM) fund. View Park’s latest funding award is for its high school, which will build a new, three-story, 19,000 square-foot building, including 12 regular classrooms plus one for performing arts, a college center, administrative offices, a cafeteria, storage areas and underground parking. View Park is one of a number of Inner City Education Foundation Public Schools (ICEF) in Los Angeles.
Another of its partners is the New Schools Venture Fund, which raises venture capital for projects focused on low-income and minority children in urban communities, and has put together funding packages for both individual and groups of charter schools across the nation.
The Michael and Susan Dell Foundation, dedicated to improving urban education, has been another contributor, and donated to many more charter schools organizations, including the California Charter Schools Association, Green Dot Public Schools in Los Angeles (which opened a school in New York in 2008), Aspire Public Schools in Oakland, California, and YES Prep Public Schools in Houston, Texas.
California, the District of Columbia, Minnesota and Utah are generally far ahead of other states in funding charter school buildings because they were originally the only states eligible for a federal program called the State Charter Schools Facilities Incentive Grants Program, which awarded five-year grants in 2004, but was never funded again. Funding was limited to the states and the District that provided state per-pupil funding for charter schools, and they were the only four that did so.
While it isn’t part of the stimulus bill, it should also be noted that some of the most significant funding for charter school facilities to date was provided by a federal grant program titled the Credit Enhancement for Charter School Facilities, which has assisted a much broader group of charter schools since 2002. Grant funds are used to help charter schools improve their credit rating, which in turn help them borrow and leverage money for facilities.
In 2008, credit enhancement funds went to Civic Builders, Inc., which received $8.3 million to help build and renovate charter schools in New York and New Jersey. In 2007, $36.5 million in funding went to Housing Partnership Inc. in Boston, the Illinois Facilities Fund, the Low Income Investment Fund in San Francisco and the Michigan Public Educational Facilities Authority.
Previous enhancement fund winners were America’s Charter (now part of Building Hope), Center for Community Self-Help, Charter Schools Development Corporation, Community Loan Fund of New Jersey, Inc., Local Initiatives Support Corporation, Raza Development Fund and Reinvestment Fund.
These and other organizations and businesses interested in charter schools are developing additional facilities resources for charter schools. Individual businesses have also helped charter school facility needs with resources including donated faculties, low-cost leases for buildings and direct grants to a school’s capital campaign. Some businesses have provided loans, or loan guarantees similar to the federal credit enhancement program.
The fourth bond program in the stimulus bill, Recovery Zones Bonds, will be awarded to states based on their decrease in employment as compared to the national rate. Each state will be required to allocate money to counties and municipalities with populations of 100,000 or more, based on how much their decrease in employment exceeds the state average. These bonds may be used for whatever economic recovery priorities the state, county or municipality may choose.