Since approximately 10 years ago, we have seen a significant overall narrowing of the funding gap between district and charter school students. Despite the funding cuts due to the recession, massive cuts to public education and districts’ ability to pass overrides, my organization (Arizona Charter Schools Association) successfully advocated for solutions that minimized the impact to charter schools. School finance continues to be a top priority for us as we work proactively at the legislature and with the Arizona Charter Schools Association to fund schools. The following chart represents the per pupil expenditures for district and charter schools and the relative gap from fiscal year 2001 through fiscal year 2015.
Unlike public district schools, public charter schools do not have access to local tax revenues. District schools rely on bonds and overrides to help fill there funding gaps; however, since charter schools do not have access to these sources of funding they have to solely rely on state funding for all their capital needs. Given the gap in funding illustrated above, how do charter schools pay for their facilities?
The short answer is through debt financing.
Unlike public district schools, public charter schools do not have access to local tax revenues. District schools rely on bonds and overrides to help fill there funding gaps; however, since charter schools do not have access to these sources of funding they have to solely rely on state funding for all their capital needs. Given the gap in funding illustrated above, how do charter schools pay for their facilities? The short answer is through debt financing.
Financing Options
There are many factors that determine which financing options are available to a charter school. Factors like operating history, financial performance, academic performance, operational performance, enrollment trends, status with the authorizing body, among other factors are all considered by financiers of charter schools. Here are just a few options for charter school financing:
- traditional bank (requires equity, existing relationship, usually only finance low risk deals)
- financing companies (buy-leaseback arrangements, high risk deals, higher cost of capital)
- traditional lease (may require long-term commitment if expensive TI’s are needed, may not meet space requirements or growth trajectory of school)
- tax-exempt bonds (issued through conduit issuer, long-term possibilities (30-years), usually cheapest rates, high issuance costs (attorneys, underwriting fees, etc.))
