Tag Archives: School funding

Want More Equitable Schools? Look at Housing and District Boundary Policies.

In a new report, Alex Spurrier, Sara Hodges, and I outline the very real impact of policy decisions across housing, funding, and education, made at all levels of government. 

In Priced Out of Public Schools: District Lines, Housing Access, and Inequitable Educational Options, how district boundaries are drawn and where accessible housing is located means that low-income families are priced out of some school districts and segregated from more affluent families. This isn’t only exclusion from certain public schools, but also exclusion from academic opportunities (such as magnet schools or Advanced Placement courses) and extracurricular activities. 

In looking at the 200 largest U.S. metropolitan areas, we found nearly 500 “barrier borders” across the country that have deep funding implications:

  • 12.8 million students live in districts with a high concentration of low-income housing and generate $6,355 per-pupil less in school funding from local, state, and federal sources than their affluent peers in districts with inaccessible housing.
  • Districts with inaccessible housing have an average of $4,664 more per-pupil than the “average” district, while districts with accessible housing have $1,691 less per-pupil than the “average” district.

This work joins a cadre of important studies and news media coverage on how seemingly random boundaries and borders are actually deliberate policy decisions. (Check out the Urban Institute’s latest study on within-district attendance boundaries and race, as well as the archives from EdBuild.)

Simply put, this is an intentional policy decision — sometimes made decades ago, but not always. We can also intentionally address it.

If we want equitable schools, I’ve long argued for making funding more equitable

The radical, but swift policy solution would be to decouple the real estate market from school funding, allowing local property taxes to play a minimal role in funding schools (if at all). Instead, states could create a state-funded education system (essentially replacing local funding) and distribute that funding equitably and based on student needs. 

Alternatively, if the policy landscape makes replacing local property taxes nearly impossible, states could seriously invest their dollars in leveling the playing field so that communities with higher property values do not continue to systematically disadvantage lower-income communities. 

There are also ways to fiddle around the ends if using property taxes for school funding continues, including the state limiting how much property taxes can be used locally and redistributing any amounts over the cap.

But changing funding isn’t the only avenue to pursue. States and locales could simply eliminate the mismatch between school district boundaries and city or county limits. It’s hard to imagine a rationale for one city, such as greater Chicago, to have 353 districts (and 45 barrier borders). Which also makes it hard to imagine what the rationale of these policies might be, if not the resulting exclusion of some families from some schools and resources. States with the highest number of school districts also tend to have the greatest number of barrier borders: eight of the 10 states that account for 70% of the nation’s barrier borders also rank in the top 10 states for highest number of school districts. Some metropolitan areas may be too big to have one mega-school district, but drawing boundary lines to explicitly divide communities based on income is inequitable and wrong.

Finally, there is a role that the federal government can play, and that’s in housing policy. At a baseline, there should be more low-income housing in more communities. The reality is that the need for low-income housing far outpaces the supply of affordable options, and sequestering low-income families together (particularly when physically far from important educational and other resources) is inequitable.

With the infusion of funds from the federal government, now is the time to reexamine and redraw what may seem like random funding, housing, and boundary decisions that are far from random. They are indeed intentional. The question is, can we be intentional about creating a more equitable landscape?

Priced Out of Public Schools: District Lines, Housing Access, and Inequitable Educational Options is part of an ongoing Bellwether examination of how finance and inequity in education shortchange millions of students and families.


How Inequities in Housing Affect Education — and Vice Versa

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As part of the Priced Out of Public Schools: District Lines, Housing Access, and Inequitable Educational Options release, Bellwether asked housing expert Malcom Glenn to weigh in on how finance and inequity in education and housing shortchange millions of students and families across the country.

There’s an old adage in politics, repeated in some form by everyone from Rep. Alexandria Ocasio-Cortez to Sen. Tim Scott to President Barack Obama: a person’s ZIP code should not determine their destiny. More often than not, the two factors at the intersection of ZIP codes and social determinants are fair housing and education. Policymakers tend to think of these as separate issues and address them in silos. But from an equity perspective, rarely do you find two issues as inextricably linked — or as generationally interrelated — as housing and education.

Housing is the foundation for much of what comes after in a person’s life — the Urban Institute called it “the first rung on the ladder to economic opportunity,” and the absence of stable housing has significant negative impacts on health outcomes, family well-being, and overall quality of life.

Discrepancies in quality related to both housing and education are unfortunately the result of intentional decisions: just a few of the countless outgrowths of America’s history of racial discrimination. Not all of them show up in concrete, government-backed policies. As author Richard Rothstein writes, much of these discriminatory practices amounted to de facto segregation, where private actors were free to discriminate without any engagement from policymakers. That began a cycle that persists today.

From real estate agents unwilling to sell homes to people of color to discrimination in appraisals to mortgage lenders offering significantly higher interest rates to prospective Black borrowers, racist policies depressed Black wealth creation for generations. As white families in previously more racially diverse neighborhoods were able to favorably engage in the house-buying market, they moved elsewhere, and Black residents maintained significantly less net worth than their white counterparts. Over time, key pieces of infrastructure were at best, neglected, and at worst, purposefully used to further separate, segregate, and subjugate Black families and neighborhoods.

As property values dropped, there was less tax revenue to help fund investment in improving public school quality, widening the gap between high- and low-quality schools. As students at underfunded schools continued to see lower educational attainment, it deterred families from moving to those neighborhoods and further exacerbated plummeting property values in these communities. Without significant growth in property values, families remained stuck in a cycle of limited housing options resulting in limited educational options — the limits of which were passed on from generation to generation. In the past decade, housing costs near high-performing K-12 public schools were more than twice as much as costs near low-scoring public schools, according to a 2012 Brookings Institution report.

Data from recent years shows the results of more than a half-century of policies, neglect, and cyclical marginalization, and it starts at the very beginning of a child’s educational journey and continues as long as they’re in school. According to a 2016 report, there’s an association between lower kindergarten readiness scores and “cumulative exposure to poor-quality housing and disadvantaged neighborhoods.” 

Research from that same year also found that household crowding — defined as having more people living in a home than there are rooms — has a direct impact on educational attainment, particularly during a student’s high school years. And passing rates in virtually every subject are lower for children experiencing homelessness than children in stable housing situations. It’s not just the students who suffer from housing difficulties, either. Increases in teacher pay have been outpaced by rising home prices, making many teachers significantly more likely to depart their jobs in high-cost school districts within just two years. 

Fixing this problem requires addressing the fundamentally interrelated aspects of fair housing and education. Policymakers, education advocates, families, and more should consider a range of solutions, including the following.

It’s these types of efforts that will make housing more equitable in its own right, while importantly creating better educational attainment. And it speaks to a philosophical shift that can and should occur, with a clear recognition of the impact of quality housing policy on good education policy. Too often, a person’s ZIP code still does determine their destiny. It’s only by unraveling the inequitable policies of the past and leveraging smart policies of today that we can provide better futures for America’s schoolchildren.

Malcom Glenn is a fellow at New America’s Future of Land and Housing Program and the director of public affairs at Better, a platform that makes homeownership easier and more accessible. He’s a former national director of communications at the American Federation for Children

Loan Funds Help Charter Schools Finance Facilities. Here’s What You Need To Know. “Infrastructure Insights: Financing Charter School Facilities” Series

Photo courtesy of Yan Krukov for Pexels

As the Biden administration’s historic infusion of federal education funds are spent in states, coupled with a potential $1 trillion bipartisan infrastructure package making its way through Congress — a package that could include money for K-12 building safety and technology upgrades — we must ensure that charter school facilities are included in the policy debate. This concludes the “Infrastructure Insights: Financing Charter School Facilities” weeklong series, where Bellwether Education Partners shared insights into a range of issues facing charter school facilities.

Charter school loan funds are more affordable ways for charter leaders to pay for a new facility without diverting funds away from the things that matter most: educating and serving underserved students. But they can be complex. That’s why I’ve done the leg work and can share key findings to help you understand options available for your charter school. 

What is a charter school loan fund?

A charter school loan fund is created when an investment manager pools together a pot of money from people who have excess cash and are looking for ways to invest it. These low-interest, short-term loans offer temporary financing during a time when a traditional lender would not extend credit to a new entity. Loan funds such as these exist in many sectors outside education (e.g. residential and commercial real estate and start-up companies, among others). 

How are loan funds specifically used in the charter sector?

A charter school loan fund helps new or growing charter schools finance the rental, purchase, or construction of a school building. Traditional lenders often don’t extend credit to a new or expanding charter operator because these schools haven’t yet demonstrated viability through meeting enrollment targets, proving financial sustainability, or reaching academic success. Other investors might not have the industry expertise to understand if a charter school is a good investment.

People with excess funds they want to invest, including philanthropic entities, will turn to a charter school loan fund investment manager, who then uses their background in the education sector — and knowledge of the challenges facing charter leaders — to act as a steward of the money. This trusted professional writes loans to several charter schools, often providing these loans at lower interest rates than other options available in the market. Like any loan, charters must pay back these funds within the term of their contract (this varies by fund and can range anywhere from one to 30 years; many funds trend toward a five-year repayment term). After this time, a charter will have a stronger track record and lower risk profile, enabling them to secure loans from traditional lenders who are now willing to play ball and extend credit to the school.

Charter school loan fund overview

Do different kinds of charter school loan funds exist?

Yes. Here are a few examples,* though it is worth mentioning that this isn’t an exhaustive list:

Across all of these funds, one common theme emerges: the willingness to lend at subsidized interest rates. The combination of the power of philanthropy, short-term investment timelines, and the investment manager’s education expertise enable lenders to extend a charter operator credit at below-market rates while the operator builds a track record of success and creditworthiness. 

This sounds great. How can I access one of these charter school loan funds?

To get you started, we recommend a few practical tips: 

1. Know your options: Research facilities funds that are actively looking for schools to finance; some of them may even be in your own backyard.

2. Understand your needs: Before speaking to a loan fund professional, define your charter facility needs with key inputs such as: enrollment, master schedule, specials and amenities offered, etc. Think ahead about what compromises you’re willing to make and which you’re not. 

  • Have you built a financial model to understand how much debt you’ll require and the interest rate you can afford? If so, are the assumptions in your model realistic based on what the investment manager has seen?

3. Ask Questions: Many of these funds are willing to provide technical assistance to navigate this process. Know what questions to ask to tap into the knowledge of these investment managers.  

  • Where are real estate prices in your target market? 
  • Are suitable school facilities readily available or is the market highly competitive? 
  • What have other charter leaders recently paid to secure a building? 

If you’d like more information on how to navigate the charter facilities financing process, or want to collaborate with our team, email contactus@bellwethereducation.org. And if you missed any installments of our “Infrastructure Insights: Financing Charter School Facilities” series, click here.

(*Some organizations listed include past or present clients or funders of Bellwether.)

How Federal Funds and State Policy can Support Charter School Facilities “Infrastructure Insights: Financing Charter School Facilities” Series

Photo courtesy of Mary Taylor for Pexels

As the Biden administration’s historic infusion of federal education funds are spent in states, coupled with a potential $1 trillion bipartisan infrastructure package making its way through Congress — a package that could include money for K-12 building safety and technology upgrades — we must ensure that charter school facilities are included in the policy debate. Join us in an “Infrastructure Insights: Financing Charter School Facilities” weeklong series, where Bellwether Education Partners will share insights into a range of issues facing charter school facilities.

My colleagues have noted many of the challenges and potential supports for charter schools that struggle to access facilities. Many of these solutions are funded by philanthropy or by private sector investors; the public sector also supports access to facilities through federal and state policy. These programs provide a patchwork of solutions that are each an essential step toward more systemic support for charter school facilities. 

Charter schools can leverage several federal programs to support facilities access. These programs provide loans and grants, various forms of credit enhancement, access to bond markets, and incentives to encourage per-pupil funding at the state level. 

As with most education policy, however, most of the action is at the state level. Although state policies to support charter school facilities access vary significantly in their design and implementation, in general, they fall into four categories: 

  1. Access to existing school facilities
  2. Moral obligation and credit enhancement
  3. Loan and grant programs
  4. Direct per-pupil funding

Access to Existing School Facilities

In some states, charter laws ostensibly help charter schools access existing school facilities by requiring districts to share, lease, or sell underutilized district buildings, often at or below fair market value. For example, D.C. law requires that the mayor give charter schools the “right of first offer” to purchase, lease, or otherwise use an excess school facility. First preference is given to existing charter school tenants that have occupied most or all of the facility or property, followed by any charter schools that the DC Public Charter School Board has determined to be high-performing and financially sound. Unfortunately, these programs are rarely implemented as intended. 

Some districts have adopted charter schools as important partners, such as Denver. Even here, however, efforts to distribute facilities equitably between district and charter schools have become more contentious as empty school buildings become more scarce. 

Moral Obligation and Credit Enhancement

Other states offer charter schools credit enhancements, by creating some sort of payment guarantee on charter schools’ debt. Payment guarantees, backed by the state, reduce charter schools’ risk of default, leading to lower interest rates from lenders and allowing schools to access additional capital to purchase, lease, renovate, or construct facilities. Arizona has created a credit enhancement fund for public schools, including charter schools, which can be leveraged to provide low-cost financing. In addition, the Arizona Credit Enhancement Board guarantees the bonds of charter schools who have earned an “A” on the state’s academic performance rating.

One specific type of credit enhancement are moral obligation bonds, which are revenue bonds backed by a state’s pledge to make up for missed payments with funds appropriated through the budgeting process. While these pledges are not legally binding, states take them seriously. If a state fails to honor its pledge, it risks a downgrade of its credit rating, which could trigger increased borrowing costs across the board. Similar to other credit enhancement programs, the moral obligation bond provides charter schools with higher credit ratings and lower interest rates. States use these bonds for a variety of purposes across multiple sectors; however, only a handful of states (Colorado, Idaho, Indiana, and Utah) currently use them to support charter schools.

Loan Funds and Grant Programs

States can also establish loan funds or grant programs that specifically support charter school facilities. Colorado’s Building Excellent Schools Today (BEST) program provides competitive, need-based grants to public schools (district and charter) to use toward major capital projects. BEST funds can be used for the construction of new schools, as well as general construction and renovation of existing school facility systems and structures. Since 2008, BEST has awarded approximately $2.5 billion in grants to more than 525 Colorado schools, including many charter schools. Other states, such as Utah and South Carolina, have loan programs that provide funding for school facilities projects. Similar to private sector loans, as schools repay the loans, lenders (in this case the state) can recycle the funding to provide additional loans to more schools. 

Direct Per-Pupil Funding

Rather than offering various financing mechanisms, states can also fund charter schools’ facilities based on their enrollment. Florida provides per-pupil charter facilities funding on a formula basis for eligible charter schools, which include those that have been in operation at least two years, are part of an expanded enrollment feeder pattern, or are accredited. Similarly, Indiana provides a facilities allotment for charter schools of $750 per pupil, which must be used primarily for facilities and transportation purposes, provided the schools meet performance expectations. California, meanwhile, created the Charter School Facility Grant Program, which provides up to $1,117 per pupil in lease reimbursement for charter schools where 55% of students — either at a particular charter school or within its local elementary school attendance area — qualify for free and reduced-price meals.

In assessing how best to support charter schools’ access to facilities, state policymakers have numerous trade-offs to consider. For instance, providing access to existing facilities is perhaps the best way to protect taxpayer dollars, since it limits the instances in which charter schools are paying to refurbish and rent a facility when a suitable facility sits empty. But these programs typically only work with the partnership of district leaders, who are often disinclined to help charter schools open and operate. Meanwhile, grant programs and per-pupil allocations are often the most flexible sources of funding for schools, but are also mostly likely to be funded through line items in state budgets — making them politically vulnerable during periods of austerity like that which will unfold in the wake of the COVID-19 pandemic. 

The characteristics of a state’s sector also have implications for which policies have the greatest impact. In cities with a growing student population and few underutilized district facilities, policies that require districts to share excess space with charter schools may be moot. In sectors with fewer schools operated by seasoned charter management organizations, moral obligation bonds may feel too risky. Where charters receive particularly low per-pupil funding for general school operations, meanwhile, a per-pupil facilities allocation provides helpful flexibility that school leaders can use to creatively meet the needs of their school and students. 

No single policy “best” supports charter schools’ facilities access; the best approach is a quilted one, with numerous policies in place that can support charter schools in accessing facilities, in the way that makes sense for them and their needs.  

Stay tuned for the final post in our “Infrastructure Insights: Financing Charter School Facilities” series, examining one promising solution to help charter schools secure facilities.

What are the Four Characteristics of a Healthy Charter School Facilities Ecosystem? “Infrastructure Insights: Financing Charter School Facilities” Series

Photo courtesy of Yan Krukov for Pexels

As the Biden administration’s historic infusion of federal education funds are spent in states, coupled with a potential $1 trillion bipartisan infrastructure package making its way through Congress — a package that could include money for K-12 building safety and technology upgrades — we must ensure that charter school facilities are included in the policy debate. Join us in an “Infrastructure Insights: Financing Charter School Facilities” weeklong series, where Bellwether Education Partners will share insights into a range of issues facing charter school facilities.

Finding and affording adequate permanent facilities or land to house a charter school is one of the biggest barriers to charter growth. Suitable existing facilities or land are hard to find and typically expensive, the work is highly technical and complicated, and the process takes a considerable investment of time. 

Given lean operating teams at most charters, school and network leaders that should be focused on driving academic gains find themselves instead navigating this unfamiliar and complicated terrain. 

For charters to thrive, we need more systemic solutions that lower the significant facilities barriers that exist. 

Through our work with charter operators and funders across the country, Bellwether has identified the four characteristics of a healthy charter school facilities ecosystem; the graphic below captures three ideal-state market characteristics (in blue) as well as policy characteristics (in red).

Market (in blue) and policy (in red) characteristics of a healthy charter school facilities ecosystem

1. ACCESS: There must be a supply of affordable buildings (or land that can be developed) that is accessible to charter schools. The most economical option, and the one most operators look to first, is securing an existing school building and modifying it to meet their needs. In many markets, districts typically hold on tightly to their vacant buildings; access to buildings previously occupied by private schools (many of which have shuttered due to declining enrollment) is much more limited. Local policies that incentivize or compel districts to make vacant buildings or excess space available (at market or discounted rates), including co-locating charter schools with traditional district schools, can add needed building supply, if enforced.

When existing school building space is limited, charters must look to commercial spaces that are more expensive to modify. This can be prohibitively expensive in many dense, urban markets such as Boston, San Francisco, and Seattle. Overly restrictive zoning regulations and bureaucratic permitting processes can also create barriers in many markets, severely limiting the options available to charters and significantly extending the time it takes to navigate the process. 

These barriers can be reduced or eliminated through a mix of smart zoning and incentives. Local zoning regulations should permit the construction of schools in most commercial or mixed-use areas. In dense markets, incentives can encourage developers of mixed-use buildings to include a school as a tenant. And, a nonprofit “incubator” space that is used by charters in their early years as they scale up (before they move to a permanent building) can help make the economics work by lowering the cost of facilities in the early growth years.

2. FINANCING: Operators must have access to affordable financing, which typically requires schools to contribute ~10-20% equity. When an operator does identify a suitable building or land, it must secure the financing required for the purchase and any renovation/building costs. Most charters cannot issue bonds (the primary mechanism for districts to finance facilities construction). Instead, they must look to the private lending market. This is often an issue because most private lenders don’t have familiarity with the charter market and are reluctant to make investments as a result. 

To secure financing, schools typically must provide some amount of equity, which is a major struggle for most as a result of the relatively low (compared to district schools) per-pupil funding and limited dedicated facilities funding charters receive. There are multiple mechanisms for addressing this gap. A nonprofit or mission-driven lender (e.g. CDFI, loan fund, or philanthropist) can provide a low/no-interest loan that serves as equity and stimulates private lending and other nonprofit lenders that provide higher-risk capital. A publicly funded loan fund can provide credit-worthy charters access to low-cost capital. And the State can provide credit enhancements (e.g. in the form of a loan guarantee) that lower the cost of borrowing. 

3. EXPERTISE: Schools must have — or have access to — the expertise and resources to navigate the complicated facilities process. The leaders of individual charter schools and small networks often have academic backgrounds and limited expertise in facilities. Unfortunately, because most leadership teams are lean, these leaders must also drive the facilities process. 

In an ideal situation, these leaders can access support from a local expert to navigate the often multi-year process to secure a permanent facility (see graphic below). Local nonprofits, facilities developers, or individual consultants can provide technical expertise, funded by philanthropy, to operators across the full facilities process or more targeted support at different stages.

Support levers to secure a permanent building in a healthy charter school facilities ecosystem

4. STATE POLICY: There must be supportive state policy. State policy has a major impact on access and financing in a healthy charter school facilities ecosystem. Come back tomorrow for another post in our “Infrastructure Insights: Financing Charter School Facilities” series, focused on the different ways that federal funds and state policy impact the charter school facilities ecosystem.