The state will create a backstop for charter school financing, under a bill signed into law Wednesday.
But Gov. Brad Little expressed some concerns about the state’s potential financial obligations.
Senate Bill 1180 creates what is defined as a “moral obligation.” The state is not legally obligated to cover a charter school that defaults on its loan payments. But the state can choose to cover such a debt — in part, to protect the state’s own credit rating.
“I chose to approve the bill because I concluded that the obligation of the state to appropriate funds in the case of a default is not mandatory, is at most a potential liability, and can only occur if funds are available in that year, the Legislature appropriates such funds, and the governor approves that appropriation,” Little wrote Wednesday, in a letter explaining his decision.
Lawmakers quickly — and overwhelmingly — passed SB 1180 in March.
The bill outlines several mechanisms designed to back a charter school’s debts, in hopes of allowing a charter school to secure a lower interest rate.
A qualified charter school would be required to deposit 12 months’ worth of bond payments into a reserve account. The charter would also need to put money into a second reserve account, a backstop that be used if a school cannot make its payments. And a charter school would authorize the state to send bond payments directly to its creditor, before receiving any state funding.
If these backstops fail, the state could be asked to cover payments.
Supporters say the Idaho bill is modeled after Utah and Colorado state laws that have allowed charters to reduce their interest rates, and put additional dollars into the classroom.