Texas Charter School Facilities Funding Approved by State Board

Published September 13, 2010

Texas is one step closer tapping the state’s education trust fund to aid charter schools in securing permanent facilities. The state legislature and Texas attorney general are reviewing a new policy the state Board of Education narrowly approved over the summer, which would authorize the state to buy or construct new schools and lease the properties to nonprofit charter organizations.

The controversial plan narrowly passed with a 7-6 vote, and it could be reversed when a new state board is seated after the November general election.

The Texas School Fund, established in 1854 with a $10 million federal grant, is a $22 billion endowment that receives annual revenues between $160 million and $200 million from land sales, mineral lease royalties, and interest. The state board of education oversees the fund, which distributes about $1.2 billion a year to local school districts.

David Bradley (R-Beaumont), who cosponsored the measure, says the board could allocate up to $100 million for charter school facilities from the fund.

Charters at Disadvantage

“Traditional schools get local property tax dollars and money from the state for operations and maintenance, and localities can enact bond measures for facilities,” Bradley explained. “The permanent school fund guarantees those bonds to help the district. This helps them by giving them a triple-A [bond] rating, which saves them money on interest and insurance.”

“On the other hand, charter schools get their funding from the state based on enrollment. They can’t get facilities dollars from the state or through bonds. So they are at a disadvantage because they only get about 80 percent of the funding that traditional schools get. Plus, they aren’t able to use the [Permanent School Fund] to guarantee bonds,” he said.

Bradley notes the state legislature hasn’t authorized funding for school facilities, charter or otherwise. With the state facing an estimated $11 billion to $18 billion budget deficit, the legislature is unlikely to act on school facilities in the next session, which convenes in 2011. Bradley’s proposal could allocate funds for charter facilities in the meantime.

Authority Questioned

The board’s decision drew opposition from some fiscal conservatives, including at least one candidate for the state school board.

“There is a substantial question whether the action was within the board’s authority, a question the attorney general will need to decide,” said Marsha Farney, a Republican candidate for the state board vying to replace incumbent Republican Cynthia Dunbar, who is retiring.

“If the attorney general were to conclude that the board has a role to play in this area, I still believe the board should consider the matter with caution,” she added.

“Our focus should be to take care that 100 percent of the Permanent School Fund investments are always working to receive the highest investment return for the public school children of Texas,” Farney said.

Small Amount of Money

Bradley says the board has already asked the attorney general’s office for an official opinion. He says he expects skeptics’ fears to be alleviated.

“First, this amount represents only about one-half of one percent of the total assets of the fund,” he explained. “Second, it is a prudent investment.

“The money, of course, will only go to vetted charter schools that meet quality standards,” he added. “It could be used to offer to help purchase existing facilities or to secure land to build a new facility. The title would be held by the state and leased back to the school. The expected rate of 4 3/4 to 5 percent guaranteed income from this investment is significant and less risky than current hedge fund investments.”

‘Charters Broaden Choices’

Bradley predicts a positive response to the board’s facilities plan from the legislature next year. “Leaders on the education committees have expressed support for the measure,” he said. “I hope that they will help to facilitate this program or they could take the lead and offer bond guarantee or facilities funding themselves.”

Bradley says he supports charter schools because every parent should be able to direct the education of their child, not the government.

“The wealthy can pay private school tuition. The middle class can afford to relocate to better school districts,” he said. “But, the children who suffer are those whose families cannot afford these other options. Charter schools broaden the choices these families have.”

Charter Operators ‘Optimistic’

Josie Duckett, vice president of public and government relations at the Texas Charter Schools Association, hailed the Board’s decision.

“Investing in charter schools is a smart idea for the future of Texas,” Duckett said. “We solidly support a plan that simultaneously benefits the state and the charter school movement.”

“In many Texas communities, the local charter school presents a viable choice beyond the traditional public school and a private school,” she said. “The distinct ability to offer tuition-free, quality options across our state absolutely empowers Texas families. Real choice means real chance.”

Duckett said the state aid would be a real boost for charter schools. “We are making do with our current circumstances, but charter school students deserve better than portable trailers, transformed grocery stores, or vacated churches,” she said.

Although the charter schools group would like to see more standalone facilities, Duckett said the legislature could also provide charter schools with greater access to existing public school facilities, particularly in districts with vacant schools or unused property.

Sarah McIntosh ([email protected]) is a constitutional scholar writing from Lawrence, Kansas.