LISC STUDY: While students wait for classroom seats, charter schools struggle to find funds to build and upgrade facilities

NEW YORK, Sept. 10, 2014 /PRNewswire-USNewswire/ -- As students languish on waiting lists, three states are pioneering ways to help charter schools find low-cost capital to build, expand and upgrade much-needed classroom space, according to a new national report.

A sweeping study by the Local Initiatives Support Corporation (LISC) chronicles a decade of struggle by charter schools that have been unable to keep up with growing demand nationwide. Currently, the names of more than 1 million children are on waiting lists to get into these schools that often bring quality education to low-income neighborhoods.

What growth has taken place has been enabled by nonprofits and private investors boosting their support for school facilities. According to the 2014 Charter School Facility Finance Landscape study, since 1998, $9 billion in charter school bonds have been issued, including a record $1.3 billion in 2013.  Twenty-nine nonprofit organizations have provided another $2.1 billion in funding over the last 20 years.

But private capital markets are not able to keep up with the demand, the study concludes, as even high-performing charter schools struggle to find the financing they need to expand.  "It is time for states to address this fundamental inequity in serving the nation's public school children," the report urges, noting that 2.3 million kids—or 5 percent of the school-age population--now attend more than 6,000 charter public schools.

Three states are doing just that. Colorado, Texas and Utah have developed ways to extend the benefit of their AAA municipal bond ratings to strong charter schools looking to raise capital through the tax-exempt bond market. Charter schools that qualify are able to lower their borrowing costs significantly—freeing up more money to support learning rather than debt service, the study explains.

Reena Abraham, LISC vice president for education, said that charter school advocates are hopeful that this is the beginning of a trend that will catch on nationwide and alleviate a frustrating backlog.

"These creative financing plans," said Abraham, "translate into art programs and music teachers and science labs. Schools can devote more resources to core classroom activities without having to tap already strained public funding streams. Kids will directly benefit."

In fact, she added, the typical charter school borrower could save enough to fund multiple teaching positions each year, just based on lower debt service.

Unlike traditional public schools, charters do not have local taxing authority to raise money to build facilities.  Funding for the only federal program dedicated to charter schools has been level for the last decade despite the fact that there are twice as many charter schools today.

The Landscape report is a snapshot of charter school funding in 42 states and the District of Columbia where charter laws exist. It also describes private nonprofit funding opportunities, outlines the federal response to charter school needs and offers an update of the tax-exempt bond market for investors.

The Landscape is also designed to help charter operators become informed borrowers that can better respond to their community's educational needs. "What we have now is a patchwork approach to financing that is inefficient and, in many ways, unfair," said Michael Rubinger, president and CEO of LISC. "It handcuffs some of the country's best school and leaves hundreds of thousands of families—most of them low-income—to languish on waiting lists.  We need to lift up strong schools so they can reach more kids, and we need the states to help us do that."

To date, LISC has provided more than $140 million in grants, loans and equity investments to finance charter schools in high-poverty neighborhoods.  This is the fourth time LISC has published a Landscape study, with the first edition in 2005.  The report dovetails with LISC research on charter school bond performance and financial indicators of credit quality.

LISC's Landscape and Bond Market studies are available on its web site at www.lisc.org.

About LISC
LISC combines corporate, government and philanthropic resources to help nonprofit community development corporations revitalize distressed neighborhoods. Since 1980, LISC has invested $13.8 billion to build or rehab 310,000 affordable homes and apartments and develop 51 million square feet of retail, community and educational space. For more, visit www.lisc.org.

Contact: Reena Abraham, LISC VP of Education
212-455-9884 or [email protected]

Jackie Adams, for LISC
917-640-9893

SOURCE LISC