A smart tool for helping to address Idaho’s school facilities challenge

“Idaho had the largest percentage population growth in 2021, followed by Utah, Montana and Arizona” read the December 27th, 2021 headline. It is well known to those of us living here that our state is growing. As a result of this growth in new residents we need more classroom space. Public Impact, a national research firm, reported earlier this year that based on Idaho’s K-8 expected population growth rates for 2020 to 2030 we will need to build 104 new schools. This is a heavy new school construction lift for our school districts and public charter schools. It is also going to ask more of our taxpayers.

To help meet this facility financing challenge the Idaho House of Representative’s recently, and with overwhelming bipartisan support, passed HB 545 on a 68-1-1 vote. HB545 would create a Public Charter School Revolving Loan Fund to “assist qualifying charter schools in obtaining financing for facility purchases, improvements and construction.” Idaho is not alone in this effort to support new school growth through a publicly-funded revolving loan fund. New Mexico’s HB 43, which was signed by their governor on March 1, created their “Charter School Facility Revolving Fund.”

A revolving loan fund is a unique and smart way to support school facility construction because it allows public dollars to recycle while attracting private lenders and bond markets to invest in Idaho public charter schools at lower interest rates. This ultimately keeps more taxpayer dollars in the classroom. Idaho’s revolving loan fund, as passed by the House, would also provide serious protections for the state and our taxpayers. Idaho is lucky because it has an outstanding financial institution in the Idaho Housing and Finance Association (IHFA); which has a distinguished track-record of administrative expertise that can be accessed for financing charter school facilities.

Idaho’s HB 545 outlines a six-step process. Step 1, schools would have to meet rigorous eligibility requirements that would include having a school budget plan approved by a state sanctioned charter school authorizer that demonstrates the school’s total facilities costs will not exceed 20% of their operating revenue. The school will also need to demonstrate that it has at least $1 million cash on hand to be eligible to access the revolving loan fund, thus demonstrating fiscal probity and protecting taxpayer dollars. Step 2, eligible schools would need to secure a loan from a Community Development Financial Institution (CDFI), or other charitable lender to cover a minimum of 20% of project cost.

Step 3, apply to and receive approval from IHFA to withdraw up to $2.5 million from the revolving loan fund. Step 4, combine funds from CDFI and revolving loan fund managed by the IHFA to apply for a loan of 60 or 65% of the overall project costs from a commercial lender. Step 5, secure the commercial loan from the private lender. This means that before Revolving Loan Funds can be accessed, a CDFI, IHFA and a commercial lender have all analyzed the charter school’s finances and determined to move forward with financing. Step 6, buy or renovate the public charter school facility and begin repaying the revolving loan fund using monthly payments.

Now, a school has made it through these six steps. What does it mean in practice? Securing $14 million of financing for a charter school facility using a bank, a CDFI and the revolving loan fund based on current interest rates would save the school about $2.4 million over its first five years of operation as compared to just straight bond financing. Schools can do a lot for students with an extra $480,000 a year! Now think of ten schools, that’s $24 million over five years in taxpayer dollars going to students and their education rather than to financial institutions.

Communities across the Gem State are going to have to build new schools over the next decade just to keep up with enrollment. The Revolving Loan Fund bill passed by the House would allow, if it became law, public charter schools to finance their new school construction at lower interest rates. The loans would recycle as schools made their monthly payments back to the IHFA managed fund. In future years, as the dollars recycled, other eligible charter schools would be able to access these funds through the six-step process described earlier. Thus, a $30 or $50 million revolving loan fund would in time lead not only to more classrooms for our students, but also tens of millions of dollars in savings for Idaho taxpayers.

An Idaho Revolving Loan fund is not the solution to Idaho’s school construction needs, but it would be a really good tool in helping our communities build schools for their growing student populations. Done well, it could also become a model for providing funds to our traditional districts, especially our rural districts.

Terry Ryan

About Terry Ryan

Terry Ryan is CEO of the Boise-based education nonprofit Bluum and Board Chair of the Idaho Charter School Network.

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