Gates blog touts LISC charter school study

Charter schools often struggle to find affordable facilities financing, and it impacts their ability to meet the needs of tens of thousands of children on charter waiting lists around the country. Now, Don Shalvey, a leading charter school voice is calling on the tax-exempt bond market to look closely at LISC's 2012 study of charter school credit quality and respond. Writing in a Gates Foundation blog, he calls the LISC study a teaching moment for the financial markets.

A Teaching Moment for the Financial Markets

13 Feb 2013 - Don Shalvey, Bill & Melinda Gates Foundation


As a classroom teacher, vice principal and principal the bond market seemed a faraway place. Certainly not anything I thought about as I planned Language Arts lessons, constructed schedules or designed professional development for my staff. Bonds were the purview of my friends who chose careers in banking, finance, real estate and the like. Even as a school district superintendent I saw the bond market as a burdensome and necessary step to assist education but certainly not a significant factor in helping the students in my care achieve their aspirations.

Then in 1998 I co-founded the first charter management organization and my naiveté was on public display. I was completely wrong about the importance of bonds. Here's the deal:

LISC-financed Charter Schools

Those of us who care about education in charter schools have to care about things like debt ratings and spreads. In 2001 I couldn't meet the demand of 4000 students on the waiting lists for Aspire Public Schools and today we can't meet the needs of the more than 600,000 kids (yes that's right, "600,000 kids") on waiting lists for these innovative public schools without a robust market for charter school bonds. And, right now, it doesn't exist, even though charters, particularly those that have consistently raised student achievement, have long-since proven themselves both as educational institutions and as borrowers. For low-income children and communities, the impact is particularly damaging because municipal bonds could be an extremely low-cost and stable way for high-performing charter schools to serve more children, and right now they are not.

The truth is Wall Street doesn't fully understand charters. They view charter schools as too young, too unstable and at the end of the day too risky. Rating agencies point to the tough budget environment. Investors assume stormy political threats. Both extrapolate from isolated school failures. They put all of that together and assume charters are on shaky financial ground despite a default rate by the highest performers of less than one half of one percent. That's right. One-half of 1 percent. Yet still, that perception of uncertainty makes borrowing through the bond market prohibitively expensive for many schools and that in turn leaves charter operators to cobble together financing from banks and other lending institutions at rates that far exceed those given to traditional school districts.

But the market's assumptions are off-balance. And, now, there is data to prove it.

A recent study by the Local Initiatives Support Corporation (LISC) evaluates the 15-year history of charter school borrowing through the municipal bond market. Continued[+]...

> Read the full Impatient Optimists blog post on the Bill & Melinda Gates Foundation website.

> Download the full study, Charter School Bond Issuance: A Complete History, Volume 2 (PDF, 5.19 MB)

> Learn more about LISC's Education Programs.

Article Type: Blog Post