June 15, 2020

Bond...Muni Bond

In my last post, I discussed why now is an opportune time to push for freezes on charter schools. This article is a discussion on why cities and counties have great power to push for that change.

We all know that many education union locals invest heavily in school board elections. The advantages are obvious:  school boards approve collective bargaining agreements, district budgets, and all other operational decisions that affect the working conditions of educators.

Charter school legislation has largely bypassed the power of school boards to regulate all public education within the bounds of their district.  Very generally speaking, the state legislatures that have enabled charter schools have either excluded school boards from approval and oversight of charter schools, or have prescribed very specific guidelines that tie the hands of local districts that review applications for new charter schools. There are exceptions to this pattern, but they are not the rule.

This shift has had its intended effect: education unions have been largely sidelined during the nearly three decades of charter school growth. Many education unions have potent state political operations, and of course both the NEA and AFT have major profiles on Capitol Hill in DC.  But this influence has largely failed to turn back pro-charter growth policies at the state and federal levels in the nearly 30 years these schools have existed.

So if school boards can’t do anything, and states and the feds won’t do anything, what’s left? Cities and counties.

---

A major sticking point in expanding charter education has been the cost of acquiring and maintaining facilities. As the National Alliance for Public Charter Schools states, “[c]harter school leaders report that a lack of access to adequate facilities is one of their primary concerns and one of the biggest barriers to growth.”

While most states that permit charter schools provide them with operating funds, there is a wide divergence in the level of support they provide for capital funding. Many states have allowed charter schools or related non-profits to use the bond financing facilities of state and municipal authorities to borrow money. Municipal bonds (or “muni bonds”) are often the most effective way for charter schools to borrow money because the charter school’s payments to bondholders are often tax-exempt, granting them a lower interest rate than they could find through any other lending type.

Cities play a role in this because municipal authorities, the organizations that issue these bonds, often have boards appointed by the mayor or council of the corresponding city. Many authorities have financed the expansion of charter schools, even in cities with mayors that have spoken out against their unchecked expansion.

Case in point: the Philadelphia Authority for Industrial Development (PAID) has a five-member board appointed by Mayor Jim Kenney. Kenney has largely sidestepped the issue of the district-run schools versus charters schools in Philadelphia, even as a third of city students attend charters. However, in 2020 alone, PAID has issued four separate bond offerings for charter school facilities, totaling over $92 million in funding.  In deed if not word, the Kenney administration supports the expansion of charter schools in Philadelphia.

---

Education unions have long sought charter freezes in some states and localities, and restricting or ending bond financing for charter schools is a strong way to begin to check their unfettered growth. It’s also a compelling way to continue to polarize Democrats on opposition to (or support for) charter schools. While many city leaders can reasonably wash their hands of state laws enabling charter growth, they can hardly do it for decisions made by boards they appoint.

Depending on the goals of education unions in their locality, continuing the practice of tax-exempt bonds for charter schools may prove valuable if the financing is tweaked to attach certain requirements. Many localities have ordinances that attach pro-labor conditions to some recipients of bond financing, including:

Labor peace agreements, which require the financing recipient to execute agreements with all relevant labor organizations to ensure that there is no labor strife that could interrupt the repayment of the bond.
Prevailing wage requirements, which require the financing recipient to meet certain wage and benefit requirements for employees that work for the organization. In this case, it could require charter schools to pay their educators the compensation laid out in the education union contract with the local school district.
Community benefits agreements, which take many different forms, but could prescribe a wide variety of expanded financial, governance, and reporting requirements for bond financing recipients, such as expanded community and parent representation on the charter school’s board of directors.

Bond financing is an important and still growing part of the charter school landscape. But for education union locals looking to place an absolute freeze on charter growth in their district, it’s not a comprehensive solution.  In my next post, I’ll talk about the possibilities of using the zoning powers of the city to assert local control of charter schools.


May 5, 2020
All Bets Are Off

Why times of crisis invite big policy changes

read more

SUBSCRIBE TO OUR BLOG

Get our latest posts and news in your Inbox
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
© 2020 - EDUCATION UNION LAB