NCPA - National Center for Policy Analysis

Charter Schools Hampered By Lack Of Money For Facilities

December 11, 2000

Charter schools formed by teachers, parents or other community members, are public schools created to address concerns about educational quality, parental choice and the burden of school bureaucracies. These schools hold three- to five-year charters and must meet certain student performance standards or risk losing public funding. Since 1991, more than 1,600 charter schools have been established in 36 states, the District of Columbia and Puerto Rico.

A recent General Accounting Office report says the greatest limitation on these schools is getting a facility set up and running. Unlike most public schools, charter schools don't have access to the most common source of facility funding -- tax-exempt bonds.

  • The most common financing uses the state's per pupil allocation; however this is usually only a percentage of the actual state amount and must also cover teachers' salaries, books and supplies.
  • While loans from commercial lenders are available, new charter schools are considered bad credit risks due to poor cash flows, lack of a credit history, the short terms of their charters and administrators with limited business skills.
  • Private donations of buildings or funds for facilities have been small; for example, of 64 charter schools in Colorado only five identified donated buildings.

And even though these are public schools, school district officials have generally required them to be established as separate legal entities and have refused to share their facilities funds. Of eight states surveyed in the report, which contain 60 percent of the charter school population, only a few districts had made money available.

The report notes that there are a number of ways to provide access to more funds for facility financing such as grants, direct loans, loan guarantees, tax-exempt bonds and tax credits.

Source: "Charter Schools: Limited Access to Facility Financing," GAO/HEHS-00-163, September 2000, General Accounting Office, Washington, D.C.

For GAO report:


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