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Published in Print: November 8, 2000, as Charters Hit by Facilities Funding Woes

Charters Hit by Facilities Funding Woes

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The report "Charter Schools: Limited Access to Facility Financing," is now available from the United States General Accounting Office. (Requires Adobe's Acrobat Reader.)

After spending the first month of the school year meeting for lessons in a municipal park, the 75 students at the Redwood City, Calif., charter school now attend classes on the showroom floor of a former furniture warehouse.

"Our kids want a traditional school setting—they want a real high school experience," Alice M. Miller, the school's founder, said. "I actively follow any and all possible leads, almost on a daily basis. It is time-consuming, demoralizing work, with virtually no hopes for success."

Aurora High's trials are not uncommon among the more than 2,000 charter schools operating in 33 states and the District of Columbia, according to a new report from the U.S. General Accounting Office, the investigative arm of Congress

While all charter schools receive per-pupil public financing for their operating costs, most of them, the GAO found, get no extra money for facilities and lack access to municipal bonds, the most common source of capital financing available to regular public schools. In addition, charter schools can't raise property taxes, as many school districts can.

Securing private financing for the largely independent public schools is seldom any easier. Few of the schools have received buildings from private donors, according to the report. And start- up charter schools have trouble getting bank loans, because they own little in the way of assets and operate on short-term contracts.

Getting a Share

Even charter schools in states that allow districts to share construction funds with them may not get a piece of the pie. Instead, supporters of charter schools say, they often lose out to regular public schools that have their own building and renovation needs.

Charter operators "really have to be astute business people, because they're probably not going to get much help from local school officials," said Robert G. Holland, a senior fellow with the Lexington Institute, a think tank in Arlington, Va., that supports charter schools.

But some education groups argue that districts are right to put the needs of regular public schools first.

"Our public schools are facing a crisis in school construction—we're talking about needs totaling $112 billion to $127 billion," said Daniel B. Fuller, the director of federal programs for the National School Boards Association in Alexandria, Va. "Quite frankly, this problem is a lot worse for traditional public schools than it is for charter schools, and as long as 95 percent of our children are attending the traditional public schools, that's where the money should go."

How much financial support charter schools receive for facilities varies from state to state.

Of the 36 states with charter school laws, two provide tax benefits to help cover the cost of facilities; six have expanded the scope of bonding authorities to include charter schools; three enable such schools to obtain tax-exempt financing; two have publicly financed revolving-loan funds; four require schools districts to provide space for charter schools; and five give charters revenue specifically for facilities, according to the Denver-based Education Commission of the States.

In California, schools like Aurora High don't receive direct public funding for leases or renovation costs. Instead, the state set up a $25 million revolving-loan pool that allows a charter school to borrow up to $250,000 with no interest for five years.

But the funds are not reserved specifically for facility needs, and many of the state's start-up charter schools use the loans to cover first-year operating expenses until they receive regular state-aid payments in February.

In the District of Columbia, charter schools receive an annual $1,058 per-pupil allocation for facilities, but that amount doesn't go far in a high-cost urban area like Washington, local charter advocates say.

"In D.C., we have limited geography and limited parcels, and some schools are having to lease private property at very high rates," said Shirley Monastra, the executive director of the District of Columbia Public Charter School Resource Center.

Many charter schools in the nation's capital are getting around the problem by leasing abandoned public school buildings, but even that solution is a "a mixed blessing," Ms. Monastra said. "Many of these buildings have not been maintained," she said, "and charter schools have to bring significant resources to them for renovation."

Federal Role

Charter schools that don't receive additional financial help for facilities usually have to dip into the base per-pupil allocations they receive annually from school districts or states. But that money is often not enough to cover both the operating costs for which they are intended—teachers' salaries, books, supplies, and maintenance—and rent or building renovations, according to the GAO.

Some charter schools supporters are calling on the federal government to help ease the crunch.

The U.S. Department of Education's $145 million charter school program awards grants to states on a competitive basis; schools can use the federal dollars for planning and assessing their classroom needs, making minor renovations, and offsetting lease or rent payments.

Two other federal initiatives—the Department of Agriculture's Rural Housing Service and the Qualified Zone Academy Bond program administered by the Department of the Treasury—have also helped some charter schools meet their facility needs, according to the GAO report, which was requested by Republican Reps. Heather A. Wilson of New Mexico and Bill Goodling of Pennsylvania, the chairman of the House Education and the Workforce Committee.

The scenario for greater federal involvement most likely to unfold as the 106th Congress wraps up its business is the creation of a $100 million pilot program that would be included in a larger school construction package, some observers predicted recently. Under the direction of the Education Department, the program would pay for at least three demonstration projects aimed at stimulating new solutions and resources for charter schools' facilities needs.

"We're not necessarily supporting a huge federal role, but we really would like to see this demonstration leverage more activity by the states and the private sector," said Jon Schroeder, the director of the Charter Friends National Network in St. Paul, Minn.

Late last week, school construction was one of the few remaining spending issues still dividing the Republican leadership in Congress and the White House.

Meanwhile, both major-party candidates in this week's presidential election pledged their help during the campaign. The Republican nominee, Gov. George W. Bush of Texas, proposed a plan that would provide $3 billion in loan guarantees to charter schools over two years. The Democratic candidate, Vice President Al Gore, promised to increase spending on the existing federal charter school program and to create a fund to help provide temporary space for charter schools until they found permanent facilities. ("Gore's Support of Charters Comes From Afar," June 14, 2000.)

The offers of government aid make some charter school advocates leery.

"The money is welcome—no question about it," said David DeSchryver, a policy analyst with the Washington-based Center for Education Reform. "But it becomes a policy question of where we want to be 10 years from now and how fiscally self-reliant we want these schools to be."

Creative Space

What charter school operators lack in money for facilities, they often make up for in originality.

In "Out of the Box: Facilities Financing Ideas for Charter Schools," a 1999 guide for charter school operators, author Bryan C. Hassell cites charter schools that set up shop in movie theaters, factory buildings, and museums as examples of innovative solutions to the housing dilemma.

Some schools enter financial partnerships with community-development corporations, city governments, and private businesses. Still others link up with school-management companies that have deeper pockets and more clout with lenders.

"Since they don't get facilities handed to them, charter schools have to work [a solution] out, which can be problematic but can also lead to innovations you don't see in the traditional public school system," said Mr. Hassell, the director of Public Impact, an education consulting firm in Charlotte, N.C. "Policymakers ought to try to solve this problem in a way that still provides incentives for charters to be creative."

In the meantime, many charter schools are making do with classrooms that are "not optimal" for education, as Aurora High's Ms. Miller puts it.

During social studies classes, Aurora students jump at the sounds of police-academy trainees beating punching bags with batons on the other side of the thin partitions that serve as the school's walls in the warehouse. Once a month, SWAT officers hold rifle practice on the floor above them. Added to these distractions is the fact that the building is scheduled for demolition next year.

Ms. Miller received a loan from California's charter school fund, but she is still struggling to find a permanent site in the San Francisco Bay area, where charter operators compete with dot-com companies for expensive and increasingly scarce commercial real estate.

Running out of options on land, she is eyeing the shoreline.

"I have an order in for one of the Coast Guard's decommissioned buoy breakers," Ms. Miller said last week. "There'd be enough room on the ship for about four classrooms, and I could berth at the Redwood City Pier."

She paused before adding, "Hey—you have to do something."

Funding for this story was provided in part by the Ford Foundation.

Vol. 20, Issue 10, Pages 1,18-19

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