There has been a rapid expansion of school choice programs over the last few years in Texas. With Dallas and Houston alone possessing around 300 charter schools, the state’s education system is expected to build on the flexibility needed to serve the growing number of students. There is no doubt that Texas’ academic future will, by necessity, involve more charter schools that offer an alternative to traditional public schools and costly private institutions.
Unfortunately, the state provides no facilities funding for charter schools. While this practice has been controversial, the financial strain for charter schools in Texas is grave. In fact, most startup charter schools incur debt initially to make lease improvements on rented space, finance the purchase of facilities or land, or to renovate or construct a building. How can charter schools in Texas overcome these financing challenges?
Here are some tips for charter school financing in Texas:
The Public Charter School Start-Up Grant
The Public Charter School Program Start-up Grant provides financial assistance for the overall planning of charter schools, the design of education and school programs, and the initial implementation of charter schools. Such grants play a huge role in facilitating charter management organizations as they strive to achieve better growth and development. They are also used to expand the number of high-quality charter schools that are available to students.
The use of funds for this grant includes but is not limited to:
- Planning, development, and purchase of charter school curriculum
- Education program planning and design
- Initial implementation activities like teacher and staff recruiting, curriculum development, and integration
- Instructional and administrative personnel salaries during the planning and initial implementation phases
- Purchase of non-consumable educational materials and supplies
- Purchase of one-time equipment needed to implement a charter school like desks and chairs
- Installation of computers, networks, data systems, and telephones
- Special learning support
- Financial training and management training
- Professional training and development of teachers and staff, including registration fees and travel
- Property insurance that covers purchased equipment with grant funds
- Specific legal related fees for the startup of the charter school
- Other operational costs resulting from allowable activities that can’t be supported by other local or state funds
The majority of charter schools in Texas are unable to finance construction, renovation, or purchase of their facilities through public funding streams. Perhaps this is the reason why loans tend to be a common solution for charter school financing in Texas. Loans in the form of mortgages are a common way in which charter schools finance permanent facilities. In cases where charter schools are only allowed to lease property, the best option is to go for long-term lease agreements. Loans for charter school financing come at a fixed cost, unlike lease costs that can increase by a percentage every year.
When a charter school agrees to purchase, construct, or renovate a property, they agree to repay the loan with a negotiated interest rate and repayment period. The schools take on the associated debt obligations. Financial experts recommend that charter schools should go for fixed rate interest rates that allow them to have a set payment over the entire loan period. This eliminates uncertainty regarding future rate increases, allowing charter school management to plan and budget more effectively.
Charter-Focused Advocacy Groups
Charter-focused advocacy groups have over the years become one of the most reliable sources of technical and financial support for charter schools in Texas and across the U.S. While these groups have different agendas, they offer an alternative charter school financing option in Texas, especially for schools that serve low-income and economically underserved communities. Some offer funding as mission-driven community development groups, national non-profit lenders that offer financial support to charter schools, and supporters of high-performing charter schools on a short-term basis.
For instance, the Charter Schools Development Corporation (CSDC) helps promote innovation and excellence in education by offering financial support to quality charter schools of choice. Their goal is to develop and finance affordable charter school facilities throughout the U.S., with the ultimate goal of improving student achievement through increased school choice. CSDC focuses mostly on new schools, schools catering to predominantly low-income students, and schools in communities with low-performing traditional schools. Charter-focused advocacy groups offer financial help in the form of loans, complete turnkey facilities, or credit enhancements.
Charter schools in Texas don’t have access to funding through local tax revenues that are available to traditional public schools. It’s no secret that they are significantly less funded than traditional schools. Although driven by a vision to try and provide the best quality education and give parents an educational choice, charter schools face major financial hurdles in almost every step of development. To secure funding to drive development, charter schools are opting for other alternative financing options. Charitable donations help bridge this gap in charter school financing in Texas.
That’s why more and more charter schools are asking parents and approaching businesses, foundations, community members, and friends to partner with them to bridge the ever-growing funding gap. Any charitable donation that goes into funding development, renovation, or construction of charter facilities goes a long way into impacting the future of thousands of students. With responsibly spending, efficiency, and accountability at the highest levels, charter schools can use both public funds and private donations to facilitate student education and development.
These funding options for charter schools in Texas vary in access as well as practice. However, they are reliable options for providing the much-needed resources to charter schools. While state lawmakers and charter school funding advocates are working together to approve more funding through legislation, charter schools have to explore different ways they can increase their resources and ensure a stable financial footing to develop academics. Better charter school financing in Texas will ultimately result in more high-performing charter schools for students to access.
Charter Asset Management is one of the leading providers of charter school funding in Texas. Whether you’re experiencing cash flow issues, need operational funding, working capital, or growth funding, CAM is your best option. Learn more about how we can help you meet your school’s funding needs or fill out this form today to apply for funding.