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Foreward

by Thomas W. Carroll

President Barack Obama and U.S. Secretary of Education Arne Duncan strongly support the growth of public charter schools in the nation.

At the same time, a building consensus is developing – among charter advocates, public officials, and philanthropists – that more needs to be done to encourage the growth of the highest performing charter schools.

The fact that literally millions of students currently are consigned to failing schools adds a particular urgency.

A key obstacle to growth is the difficulty in securing appropriate facilities for new and expanding charter schools.  And securing such facilities ultimately depends on access to capital.

As this report outlines, an added obstacle right now is the tightening of the credit markets that has taken place over the last year, which has dramatically slowed the pace of tax-exempt financing for charter school facilities.  For even the highest-performing and best-rated schools, charter school bonds are priced too high in the current marketplace.

In this context, the Foundation for Education Reform & Accountability asked Wendy Berry to author this report.  Wendy is a Senior Vice President at Jefferies & Company, the largest independent investment bank in the nation (thanks in part to recent mergers), and former Senior Vice President for Moody’s Investor Services, where she helped evaluate and rate charter-school financings.  Wendy also served as a fiscal analyst with the New York State Assembly Ways and Means and Senate Finance Committees and thus understands the policy context as well.  Wendy personally has executed charter-school financings in California, Utah, and New York.

The report makes a unique contribution to the current dialogue about the state of the charter-school bond market, providing: a listing and description of every publicly traded charter-school bond transaction since the first issuance in 1998, now totaling more than 275 transactions; assessing the potential of Buy America Bonds, QZABs, and QSCBs; analyzing the extremely small number of defaults; providing detailed historical data on bond rates; and explaining the key characteristics of highly rated charter-school transactions.

Importantly, Berry also outlines how governmental entities and philanthropic foundations could step into the breach by creating credit-enhancement funds for charter schools.

Texas is leading the way with a new Charter School Facilities School Program that could make available up to $200 million in credit enhancement, contingent on a dollar-for-dollar match from private sources.  Already, money is being lined up for a first-in-the-nation mega-deal in Houston.  This development bears watching, and perhaps replication.

We look forward to feedback from you on this important report, and updates from across the country cataloguing your own experiences as we all work together to ensure that children across our nation have access to high quality schools in appropriate facilities.

Thomas W. Carroll is president of the Foundation for Education Reform & Accountability.