House Committee Questions Treatment of Charter Schools

Special Report - October 9, 2008
On Tuesday, October 7, a North Carolina House Select Committee met to consider the legal aspects of using lottery proceeds to help fund charter school construction in the state. Charter schools are public schools that are free from many of the restrictions and requirements placed on traditional public schools. Charters receive funding from the state on a per-pupil basis for daily operations but are responsible for providing their own funding for school construction. As part of the committee’s work, it heard from Dora Fazzini from the State Treasurer’s office, who presented an overview of the state’s current debt situation and the North Carolina Capital Facilities Finance Agency, which is eligible to provide low interest financing for state capitol construction projects, including charter schools. According to Fazzini, the Agency currently has a backlog of over $3 billion in authorized debt that has yet to be issued, and to-date the Agency has approved approximately $50 million in financings for charter schools.

Because of the fees associated with borrowing through the Agency, schools must borrow close to $3 million to experience a benefit from the low interest financing. The early conclusion drawn by the committee is that neither start-up charter schools nor established, well-funded charter schools would require that level of state-backed financing. However, the committee agreed that Agency financing could provide much needed help for the majority of charter schools that require mid-sized facilities but are not established enough to apply for a private Letter of Credit or bond insurance based on standard investment grade ratings, especially in the current economic market. At the next scheduled meeting in November, the committee will hear a report on possible constitutional, statutory authorization, and appropriation issues with establishing a state-funded “collateral pool” to provide credit enhancement for charter school debt.

Also at the October 7 meeting, Jack Moyer, Director of the Office of Charter Schools in the N.C. Department of Public Instruction, spoke briefly about current charter school growth, performance, and funding. He emphasized the national prestige North Carolina’s charter schools hold in regards to performance and success. Members of the committee struggled with the definition of a charter school, though. They engaged Moyer in a discussion as to the extent to which charter schools are public or private entities. Rep. Laura Wiley (R–Guilford) expressed concern over the inconsistent manner in which the state treats charter schools—as public when the schools close and their assets are to be redistributed locally, but as private when they are seeking funding or debt financing. Moyer sees the possibility of creating a “collateral pool” as a way to aid charter school capital needs. He said that the state’s 10 years of experience with charter schools has led to an increased success rate and more students in more charter schools meeting higher standards. Moyer also argued that the state needs to raise the cap on charter schools to continue this pattern of growth and success.

The final meeting of the House Select Committee on the Legal Aspects of Using Lottery Proceeds for Charter School Funding will be held on November 18 at 2pm. That meeting will include a more detailed presentation on the creation of a “collateral pool” and a report from Mr. Moyer on the experience of other states that have used state funds for charter school capital. The committee does not anticipate making any suggestions for legislation, but will issue a general report on their findings.

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