A charter financing bill sails through the Statehouse: What would it do?

Administrators at Boise’s Sage International School say they could save millions of dollars in interest costs, if a bill to backstop charter school bond issues becomes law.

 

A complicated plan to help charter schools save money on bond payments has been months in the works, according to a charter school lobbyist.

But Senate Bill 1180 is sailing through the Legislature. Just two weeks after its introduction, the bill has passed the Senate and House.

Amidst the drama surrounding Medicaid expansion, an overhaul of the initiative process, and a rewrite of the K-12 funding formula, the charter facilities bill has received virtually no attention. Here’s a closer look.

What would SB 1180 do? In a nutshell, the idea is to help charter schools secure a lower interest rate on building bonds. This, in turn, would free up dollars that charters could keep in the classroom.

How would it work? Sponsors say the plan has several safeguards.

First, a charter school would be required to put up 12 months’ worth of bond payments into a reserve account.

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Second, the bill would put bond trustees at the front of the line for payments from a charter school. The State Department of Education would send payments directly to the trustee, which would then send the remaining balance to the charter school.

Third, charter schools would also need to put money into a second reserve account, which would serve as a backstop in case a charter can’t make its payments.

Could any charter sign on? No. The plan would help only a handful of charters, and those “least likely to default,” Emily McClure, a lobbyist for the Idaho Charter School Network, told the House Education Committee last week. In order to qualify, charters must have been open for at least three years, and according to the bill, they must be in “academic, operational and financial good standing” with their authorizer.

What’s at stake for charter schools? Potentially, a savings of 2 to 3 percentage points on interest. For a charter such as Sage International School — which is looking at refinancing $11.8 million in debt on its Boise campus — a 2 1/2 percentage point reduction in interest could add up to $240,000 a year, or $7.2 million over the course of repayment. “That’s four teachers a year for me, for 30 years,” Sage Executive Director Keith Donahue told House Education last week.

Has this been tried elsewhere? Utah and Colorado have similar programs. Utah’s law has saved charters $91 million in interest over seven years, McClure said.

What’s the cost to the state? Nothing, necessarily. The state need not put money into the reserve account, McClure told House Education, “(but) it would be helpful if the Legislature were to seed this fund.” SB 1180 doesn’t commit any state funding. This would come from a separate spending bill, and none is in the legislative pipeline.

What’s the liability for the state? Utah and Colorado have not yet had to bail out a charter school failure, bill supporters say. If an Idaho school fails, the Legislature may decide to replenish the state’s accounts. The Legislature isn’t legally required to do so, but failure to act could weaken the state’s credit rating, McClure said.

Attorney General Lawrence Wasden has not been asked for a legal analysis of the bill, spokesman Scott Graf said.

Charter advocates support the bill. Where do other education groups stand? Several education groups are notably silent on SB 1180: the State Board of Education, the Idaho School Boards Association, Idaho Business for Education and the Idaho Association of School Administrators. State superintendent Sherri Ybarra also has no position on the bill.

The Idaho Freedom Foundation — a conservative group that generally favors school choice — gives SB 1180 mixed reviews. The foundation likes the potential for taxpayer savings, but is uneasy about the risk to the state’s credit rating. “Even though this would be an unlikely outcome, SB 1180 would put the faith and credit of the state of Idaho and her taxpayers behind quasi-private entities,” the foundation said in an analysis of the bill.

What happens next? Gov. Brad Little gets the final word. The House passed the bill Monday on a 64-2 vote (Republicans Neil Anderson of Blackfoot and Rod Furniss of Rigby cast the lone dissenting votes). The bill passed the Senate unanimously on March 14, and now goes to the governor’s desk.

Disclosure: SB 1180’s supporters include Bluum, a Boise nonprofit group that advocates for school choice. Idaho Education News and Bluum are funded from grants from the J.A. and Kathryn Albertson Family Foundation.

 

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