Facilities, Funding Remain Central Obstacles for Developing Charters

Published August 7, 2012

Local school districts covetously control vacant school buildings across the nation while public charter schools struggle to house students as charter numbers grow in many districts.

The real estate crisis was ranked the number one external obstacle to charter growth by the National Charter School Research Project’s most recent survey. A new report explores the problem.

“Whose School Buildings Are They, Anyway?” concludes charters suffer inadequate and inequitable access to buildings districts own, though charters, while independently managed, are also public schools.

While charter schools did break traditional schools’ “monopoly” on education providers, said report author Nelson Smith, “the essential problem … is school districts have historically had an ironclad monopoly on financing and funding.”

Landowners vs. Sharecroppers
In his report, Smith describes the relationship between charters and districts as “akin to that of landowner and sharecropper, since the charters have no statutory or contractual right to property.”  

Financier wariness about charters was legitimate when the concept was new, but no longer, Smith said.

He cites research of 229 charter-school loans showing only one default, a 1 percent foreclosure rate in the past decade, and a favorable corporate debt default rate.

“[Leasing to charters] is a political nightmare for a lot of school systems because if you have a district that is anti-charter, they see this as a means to prohibit charters,” said Himanshu Kothari, a financier who has studied private loans for public schools.

‘Woefully Under-Serving’ Charters
Smith said passing early charter laws was such a struggle that “financing buildings was allowed to fall off the table.”

Even pro-charter states often do not know how poor their charter school financing and facilities laws are, said Ursula Wright, interim CEO of the National Alliance for Public Charter Schools.

“If you don’t know there’s a problem you don’t take action,” she said. “The vast majority of states in the country are woefully under-serving the charters in their jurisdiction by not understanding the facilities [issue].”

Best State Practices
California, Washington, DC, and Indiana currently have the most equitable charter facilities laws, she said.

Provisions in these high-ranking jurisdictions include: state grant and loan programs for charter school facilities; equal access to tax-exempt bonds; an exclusive charter school bonding authority; a mechanism to provide increased borrowing credit for charter facilities; and equal access to existing state facilities programs.

Indiana recently passed legislation requiring districts to share vacant or severely underused facilities with charters by either leasing or selling for $1 per year.

“That is pretty high stakes,” Wright said.

Florida prohibits stricter facility requirements for charters than for traditional schools. A new Texas law provides bond guarantees for charters. Newark, New Jersey passed a law to lease unused district buildings to charter schools.

Entering a long-term real-estate agreement with a charter remains risky for private investors because most do not have strong business models, Kothari said.


Learn more:
“Whose School Buildings Are They, Anyway?” Nelson Smith, Fall 2012: http://educationnext.org/whose-school-buildings-are-they-anyway/

Image by Wan Mohd.