Charter School Debt Escrow (percieved) Needs

MYTH:

Charter Schools need greater financial oversight, thus, Senate Bill 1085 requires:

“Any charter school entity that elects to issue a debt shall hold in escrow an amount sufficient to pay the annual amount of the sum of the principle maturing or subject to mandatory redemption and interest owing by the charter school entity or sinking fund deposits due by the charter school entity.” (SB 1085, page 19, (d))

 


TRUTH:

The Reinvestment Fund, on their website, examined data from 15 lenders representing $1.2 billion in charter school loans.  Of these loans, only 1.0% of the total loan amount in the study ended in foreclosure.  Among outstanding loans, just over 3% were reported as delinquent for 60 days or more at any point in their history. 85% of loans maturing during the last 3 years of the student (2000-2009) were paid off.  The remaining 15% were extended and were still outstanding.

Sara Vernon Sterman, EVP for Community Investments and Capital Markets at TRF concluded:

“The results of this study offer a strong case for more conventional lenders to invest in charter schools that offer educational choice to thousands of low income children and families.” *

The additional financial burden placed on charter schools with SB 1085 could tie up 5% or more of the charter school’s annual budget at the same time that this same bill is cutting the funding for all charters by 5% and cyber charters by 10%.

* http://www.trfund.com/decade-of-data-shows-charter-schools-strong-borrowing-record-and-links-school-and-loan-performance/

MYTH / TRUTH prepared by:

Dr. James Hanak, CEO, PA Leadership (Cyber) Charter School