Bond market gets an ‘F’ for charter school funding

Friday, July 19, 2013

One of the biggest impediments to the growth of the charter school movement isn’t anger, fear or even politics. It’s financing—and Wall Street can help.

More dollars could go toward teachers, guidance counselors and books, if only the municipal bond market was prepared to be a ready source of affordable capital. Sadly, underwriters and investors aren’t sure how to assess charter risk profiles. So, they charge a premium for the rare school that does try to tap the bond market—much more than public school districts pay to borrow. That leaves charters with less to spend in the classroom and keeps some schools from opening altogether.

A new survey, for example, found that in New York State charter schools are forced to direct millions of dollars away from classrooms to pay for facilities. If they aren’t housed in school district space, they spend 15% of their budget just on rent or mortgage—even more if they’re operating in New York City.

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