Texas

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The Texas Constitution of 1876 set aside half of Texas’ remaining public lands to establish a Permanent School Fund (PSF), to help finance public schools. The fund finances public education through distributions to the Available School Fund (ASF) and the guarantee of school district and charter issued bonds through the Bond Guarantee Program (BGP). 

The BGP was established in 1983, and charters were provided access in 2013 via the Charter District Bond Guarantee Program (CDBG), but the capacity of the guarantee to charters is limited to no more than 50% of the total capacity of the PSF to guarantee bonds. In addition, the law limits the capacity to be used for charter schools to not exceed the percentage of students enrolled statewide in charter schools compared to the total number of students enrolled in all public schools. For the February 2020 round of funding, 6.15% of the total available capacity of the bond guarantee program may be used for the CDBG because charter schools enrolled 6.15% of the total enrollment of students in 2019-2020. 

The BGP enables schools to borrow at lower interest rates because bonds guaranteed by the BGP are rated AAA. Since 2013, the Charter District Bond Guarantee Program has guaranteed 70 bonds totaling $2.7 billion. The remaining capacity of the Charter District Bond Guarantee Program as of December 31, 2020 was $2.81 billion. 

To be eligible to be designated a charter district for the CDBG a charter school must meet all of the following criteria*: 

• Operated at least one open-enrollment charter school with enrolled students in Texas for at least three years
•  Identify in its application which open-enrollment charter school the bond funds will be used for  
• Agree in its application that the bonded indebtedness for which the guarantee is sought will be undertaken as an obligation of all entities under common control of the open-enrollment charter holder 
• Not have an unresolved corrective action that is more than one year old 
• Completed audits for the previous three years with unqualified or unmodified opinions 
• Received an investment grade credit rating within the last year from a nationally recognized investment rating firm  
• Not have materially violated a covenant relating to debt obligation in the past three years 

Additionally, if a charter school applies for the CDBG within the 12 months before their charter is due to expire, application approval will be contingent on successful renewal of the charter and the bonds will not be issued before the successful renewal of the charter.  

Applications for the CBGP are only accepted through the Municipal Advisory Council (MAC) website with each round closing in February of that year. 

*For further details please see the Texas Administrative Code here

Last Updated: February 2020 

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The New Instructional Facilities Allotment (NIFA) is a reimbursement program for start-up costs, such as outfitting classrooms with furniture and equipment for new campuses. To be eligible a charter school facility must meet one of the following criteria: be a newly constructed instructional facility, a repurposed instructional facility, or a leased facility operating for the first time as an instructional facility with a minimum lease term of 10 years. 

The program can provide up to $1,000 per student based on average daily attendance (ADA) for an eligible new campus in the first year of operation and up to $1,000 per additional ADA in the second year of operation to help with any start-up costs associated with opening a new campus. Funding is not guaranteed in the second year and eligible schools must reapply for second-year funding. The total amount appropriated for the program is limited by statute to $100 million per school year and the amount provided per student depends upon the total amount of awards granted annually. In 2018-2019 the total NIFA allotment was limited to $23.75 million and there were 37 charters issued $4.2 million for 80 separate campuses. In 2019-2020, the preliminary award totals were $11.9 million for 26 charters at 53 campuses. In 2020-2021 the preliminary awards are $21.5 million for 29 charters at 84 campuses.  

Additional eligibility requirements: 

• An eligible new instructional facility must meet all of the following requirements: 
  • Have its own campus ID number 
  • Have its own principal or be eligible to receive an accountability rating through standard analysis,  
  • Have its own assigned instructional staff and instructional program distinct from those of other facilities 
  • Must be physically separate from other existing school structures, but a covered walkway may connect the new facility to another building 
• An eligible new instructional facility cannot fall into the categories below: 
  • Cannot be for a program for students enrolled in another public school (summer school, evening school, etc.)
  • Cannot be an expansion of existing facilities
  • Cannot be a portable or temporary structure 

Last Updated: February 2021 

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The Charter School Facility Funding Allotment is an allocation TEA offers using $60 million in annual per pupil facilities related funding. This allocation is limited to $60 million annually and distributed based on ADA and the total number of eligible charter school students. As the number of eligible charter schools and charter school enrollment increases, this per pupil allocation will decrease in proportion. Only open-enrollment charter schools with at least an acceptable overall school performance rating are eligible to receive funding.  

Funds may be used for the following purposes: to lease an instructional facility; to pay property taxes imposed on an instructional facility; to pay debt service on bonds issued to finance an instructional facility; or for any other purpose related to the purchase, lease, sale, acquisition, or maintenance of an instructional facility.  The current allocation for charter schools is approximately $180 per student. 

 Last Updated: February 2021 

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Passed in 2017, Texas Senate Bill 1882 incentivizes districts to partner with open-enrollment charter schools and other nonprofit entities to form two types of schools: Turnaround Partnership schools and Innovation Partnership schools. Turnaround Partnership schools are those that received an unacceptable rating for the prior school year and Innovation Partnership schools include existing schools that did not receive an unacceptable rating in the prior year and new schools created under the partnership. 

The operating partner has sole responsibility for staff, curriculum, calendar, assessments, and other school-level decision-making while the district holds the partner accountable for academic and financial performance. The state incentives for these partnerships include: potential for increased per-pupil funding and exemption from certain accountability interventions for two-years for schools with an unacceptable state accountability rating. 

Last Updated: December 2021 

Statute

Note: To date, the program outlined below has not been implemented due to a lack of matching funds.

In June 2009, the 81st Texas Legislature passed and the Governor signed into law House Bill 3646, an act relating to public school finance and programs. The act amended numerous provisions of the Education Code and created a new credit enhancement program. This program was intended to assist school districts and charter schools by providing credit enhancement for debt issued by these entities for their instructional facilities. Rulemaking authority for the program lies with the Commissioner of Education. 

The statute authorizes the Commissioner of Education to establish a credit enhancement program to assist open-enrollment charter schools in obtaining financing for the purchase, repair or renovation of real property, including improvements to real property, for their facilities. The program requires a one-to-one match in private funds for at least the first ten years of the term of the financing which is being guaranteed, with the state portion funded by an allocation of no more than 1% of the amount appropriated for the Foundation School Program, the primary program through which the state distributes funds to local school districts. The Commissioner may limit program participation to charter schools that meet certain financial, academic and administrative requirements and may require schools to fund a debt service reserve to additionally secure the borrowing.  

Last Updated: November 2020 

Statute

Note: Successful use of this law by charter schools to obtain a facility has been limited.

Texas law states that if an independent school district intends to sell, lease or allow use for a purpose other than district purposes of an unused or underused district facility, the board of trustees must give each open-enrollment charter school located within the boundaries of the district the opportunity to purchase or lease the property before offering it for sale to another party.  However, the independent school district board of trustees is not required to accept an offer made by an open enrollment charter school and successful use of this law by charter schools has been limited. 

Last Updated: February 2020 

Disclosure: Information on this page has been provided by the organization. Any questions related to figures or programs listed should be directed to the contact shown above. Keep in mind that each school’s situation will differ slightly and you’ll need to speak to the contact listed for information specific to your school

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Conduit Financing

The Texas Public Finance Authority (TPFA) is a public authority and body politic and corporate created in 1984 by the Texas Legislature to provide capital financing for certain State agencies and institutions of higher education.  In 2003, pursuant to Section 53.351 of the Texas Education Code, the TPFA established the Charter School Finance Corporation (CSFC), a public nonprofit corporation, to issue revenue bonds on behalf of authorized open-enrollment charter schools for the acquisition, construction, repair or renovation of educational facilities.  The TPFA provides administrative and staff support for the CSFC.  To date, the CSFC has issued $328 million in charter school facilities debt for the benefit of 66 charter schools. 

For more information on how to access funding from the CSFC, please see their resource page linked here: http://www.tpfa.state.tx.us/csfc/CSFC_Resources.aspx

Last Updated: November 2020 

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Pursuant to the Higher Education Facility Authority for Public Schools Act (chapter 53 of the Texas Education Code, as amended), an education finance corporation (EFC) created by a city of the State of Texas is authorized to issue tax-exempt and taxable revenue bonds on behalf of authorized charter schools for the purpose of financing or refinancing their facilities. The majority of charter school debt in Texas is issued by local government EFCs. The Texas Bond Review Board reports that as of October 31, 2020, 4.93 billion of debt had been issued for charter schools by EFCs and other higher education authorities.*   

Contact your local EFC to learn more about securing bonds through this act.  

*Source: Municipal Advisor Counsel of Texas  

Last Updated: December 2020 

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Texas Credit Enhancement Program

The Charter School Finance Corporation (CSFC) has entered into a consortium agreement with the Texas Education Agency (TEA) and the Texas Charter Schools Association to operate the Texas Credit Enhancement Program (TCEP). Utilizing a $10 million ED credit enhancement grant and a $100,000 contribution from TEA, TCEP provides credit enhancement for municipal bonds that provide financing for the acquisition, construction, repair or renovation of Texas charter school facilities, including certain refinancing of facilities debt, by funding a debt service reserve fund for such issuances. The debt service reserve funds are held in the state Treasury solely to provide security for repayment of the bonds. 

Eligibility criteria:

To be eligible a charter school must meet the following criteria:  

• Meet the federal definition of a “charter school” 
•  Have earned an academic accountability rating of “A”, “B”, “C”, or “D”, or in the alternative, either “Met Standard” or “Met Alternative Standard”, at the district level and for each campus for the two most recent years, as reported by TEA 
• Hold the status of “Accredited” as defined in Texas Administrative Code  
• Have earned a financial accountability rating (School FIRST) of at least a “Meets Standard” for the most recent year as reported by TEA 

The CSFC board may waive one or more of the above stated eligibility requirements if such a waiver would further the objectives of the TCEP program. If the proposed financing does not close within 12 months of the award and no extension has been requested and granted, the award recipient will forfeit access to the allocation of guarantee funds.  

TCEP awards totaling approximately $20.21 million have closed or are in progress as of December 2020.  As of December 2020, TCEP has $780 thousand available for new awards.  

On September 28, 2020, TPFA was notified by the US Department of Education that a new grant of $10 million was awarded to the TPFA Charter School Finance Corporation to assist charter schools. The new award has not been funded as of December 2020, but TPFA expects the new funds will be available during fiscal year 2021. 

*Total awards closed or in-progress as of December 2020.  Does not include forfeited TCEP awards. 

Last Updated: December 2020