Innovations in Education: Making Charter School Facilities More Affordable: State-driven Policy Approaches
December 2008
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Securing appropriate facilities can be a daunting challenge for those intending to open a charter school. Although, like all public schools, charter schools receive per-pupil dollars from the state, they generally receive considerably less—on average, only 78 cents for every dollar in state aid given to their traditional counterparts, according to one study.1 More to the point, however, because traditional public schools rely on their district to provide their school facilities, they can spend 100 percent of their per-pupil operational funding on their instructional program, whereas most charter schools have to stretch those dollars to cover facilities costs as well.

Some districts receive direct funding from the state for their capital expenses, such as school construction or improvements. Districts that do not receive this type of funding or that need additional capital can issue voter-approved general obligation bonds, which are secured by taxes. This is one of the most inexpensive forms of financing and one to which charter schools have had virtually no access because almost no states or local jurisdictions have granted charter schools direct access to local tax revenue. Instead, when looking for capital funds, charter school operators have had to turn to the private sector where, if financing is available, it comes at a significantly higher cost.

Anecdotal accounts suggest that many qualified charter schools never open because they cannot afford facilities.2 And of the 4,3003 charter schools that are already open, almost all have had little choice but to divert some portion of their state operating revenue to cover the expenses of buying or leasing, and in some cases improving, their buildings. Naturally, this leaves them with less money for what counts most—instruction.4

Across the country, state legislators and charter school advocates alike have been seeking innovative strategies to help charter schools keep more of their instructional dollars in the classroom, while, at the same time, giving their students a safe, suitable place in which to learn each day. This guide showcases charter school facility laws and practices that have been developed to tackle the facilities challenge in eight states and Washington, D.C. With few exceptions, these "solutions" do not solve the problem entirely, but all of them are intended to mitigate the facilities barriers charter schools face, and, as such, perhaps can provide some heretofore underutilized models.

Affordable Facilities: Key to Charter School Expansion

Charter schools entered the mix as part of the U.S. public education system in the early 1990s. These schools were established on the premise that they would enter into contracts (i.e., charters) detailing specific goals that they are accountable for achieving in exchange for independence from many of the laws and regulations that govern traditional public schools. This flexibility is intended to allow charter schools to educate students in new and potentially more effective ways and, in doing so, to serve as incubators for innovative ideas that could be adopted more widely as part of the nation's efforts to reform and improve public education. Charter schools provide an academic alternative for students, increasing the public school choices for parents and opportunities for educators to create schools based on a particular mission and vision. According to the National Alliance for Public Charter Schools, there are currently more than 1 million students attending charter schools in 40 states and Washington, D.C.5 However, this enrollment figure can mask the challenges associated with locating and paying for facilities-challenges that some consider to be a major barrier to the expansion of the charter school sector.6

The federal government has initiated several programs to stimulate private and state-level investment in charter school facilities. Specifically, two programs administered by the U.S. Department of Education's Office of Innovation and Improvement are designed to ease the facilities financing challenge by offering federal grant funds for charter school facilities: the State Charter School Facilities Incentive Grants program7 and the Credit Enhancement for Charter School Facilities program.8 The former program provides matching funds to states that offer per-pupil funding specifically for charter school facilities. The latter awards funds to public and nonprofit entities that help leverage other funds from the private sector for the purchase, construction, lease, or renovation of facilities by increasing the creditworthiness of charter schools. (An example of credit enhancement is when, in the home loan arena, a buyer who is able to provide only a small down payment purchases primary mortgage insurance to increase his or her creditworthiness with a mortgage lender.)

Four other federal programs also offer facilities-related support: The Public Assistance Grant Program operated by the Federal Emergency Management Agency offers grant assistance for the replacement or repair of disaster-damaged facilities of qualifying private, nonprofit organizations. The U.S. Department of Agriculture's Community Programs administers programs to finance and develop essential community facilities and services, including schools, in rural areas. The New Markets Tax Credit Program and the Qualified Zone Academy Bond Program, both operated by the U.S. Department of the Treasury, provide federal income tax credits for investing in qualified entities, which can include charter schools.9

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Last Modified: 02/05/2009