Grant Targets Experiment in Charter School Financing

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A small grant, tucked within the massive federal budget, aims to give charter schools in the nation's capital a leg up in obtaining private financing for their bricks-and-mortar needs.

The Washington-based Charter Schools Development Corp., a nonprofit organization, is hoping that a $750,000 Community Development Block Grant in the fiscal 1999 budget will help it design a credit-enhancement program in the District of Columbia that could become a national model.

"If it's a question of whether to open a [charter] school here or there, it's always a facility question," said Richard E. Thompson, the president of the development corporation.

If it gets beyond the planning stages, the program--to be called Kinder Mae--would make it easier for charter schools to obtain private financing for facilities through loan guarantees, interest-rate subsidies, and other lender incentives.

Kinder Mae could join the ranks of Fannie Mae (the Federal National Mortgage Association), Ginnie Mae (the Government National Mortgage Association), and Sallie Mae (the Student Loan Marketing Association), which are publicly chartered, usually privately owned entities that work to improve borrowers' credit options.

"We're just delighted that somebody has had the vision to try to put this together," said Joseph W. Gauld, the president of the Bath, Maine-based Hyde Foundation and the project manager of the Hyde Leadership Public Charter School in Washington. "There is such a tremendous need for it."

Kinder Mae, which originally sought $2.3 million in federal dollars, received design funding within the Community Development Block Grants in the appropriation for the Department of Housing and Urban Development, rather than the charter school program managed by the Department of Education. Kinder Mae is not guaranteed funding for fiscal 2000.

Kinder Mae officials lobbied unsuccessfully for a place in the recent HR 2616, the Charter School Expansion Act of 1998. Mr. Thompson testified before House Committee on Education and the Workforce's Subcommittee on Early Childhood, Youth and Families, but he said last week that "in the end, we were not able to sell our point."

For fiscal 1999, Congress appropriated $100 million to help expand the ranks of the nation's charter schools, which the Department of Education numbers at more than 1,000.

The development corporation was funded out of a $190 million package of 332 economic-development grants that Congress earmarked for HUD to distribute, said James Selvaggi, the special projects manager for HUD's community planning and development division.

Congressional staff members familiar with the Kinder Mae grant could not be reached for comment last week.

Exploring a Possibility

Many charter schools cannot get private financing because such schools are a relatively new concept and lack a financial track record, Mr. Gauld said.

"We got our charter approved a year ago, but we had to delay opening the school because we could not find a facility that was suitable," he said, adding that Hyde is looking at a building that would be a charter "hub," housing more than one charter school.

A charter school is a publicly funded but largely independent school created by a formal agreement, or charter, between individuals and a governing entity. The idea is to free the schools from standard state and district rules to allow flexibility for innovation while still holding the schools accountable for results. Their allotments of public aid typically do not specify money for facilities.

The Heritage Foundation, a conservative think tank here, argued in a paper last month that civic entrepreneurs could best help charter schools in four areas: technical expertise, regulation, effective accountability, and start-up capital and facilities.

The six-member volunteer board of the Charter Schools Development Corp., which includes former HUD Secretary Jack Kemp, met last week to begin designing and planning how to leverage private funds for the Kinder Mae model. The District of Columbia currently has at least 18 charter schools, but many more have been proposed.

"This is the early exploration of a possibility," said Mr. Thompson, who is also the president of the Thompson Publishing Group in Washington. "I don't want to suggest that we are out there with a credit-enhancement program."

Mr. Thompson estimated that, at the earliest, Kinder Mae could be in place in 18 to 24 months, depending on the support it receives. The charter-development group may ask for funding from large employers such as the Hewlett Packard Co. and the NationsBank Corp. (which recently became Bank of America Corp.) that have shown interest in education.

Mr. Thompson said Kinder Mae could move charter schools beyond serving small groups of students. "We have so much demand. Many of the schools that have started have been small, but larger schools will need Kinder Mae," he said. "In the long run, they will get bigger and they will need larger campuses."

Kinder Mae could also stave off some criticism of charter schools.

"The people we could win over are the ones who say charter schools are destined to fail because [the educators who design them] don't know how to manage a school," Mr. Thompson said, "We will be there assisting them with management and financing."

Vol. 18, Issue 12, Page 15

Published in Print: November 18, 1998, as Grant Targets Experiment in Charter School Financing
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