With the Texas school financing trial hearing testimony in Austin, financial executives also met in Austin to learn about the fiscal strength of many of the state’s largest charter networks like Uplift Education. Uplift is one of about a dozen charter networks in Texas with an investment grade bond rating that now have access to $800-900 million of loan guarantees from the state’s Permanent School Fund (PSF).
Uplift’s chief financial officer Bill Mays, addressing representatives from the financial community at the Bond Buyer’s Texas Public Finance Conference Feb. 4, said meeting the growing demand for educational options in North Texas is at the heart of the network’s financial strategy. Thanks to access to the PSF granted by the state legislature and the IRS, Uplift will be able to leverage Texas’ AAA credit rating to drive down rates, potentially saving the network millions as it expands its debt capitalization.
“Finding affordable facilities is key to Uplift’s ability to expand and meet the needs of the thousands of families on our waitlists who want to send their children to high-performing schools like ours,” Mr. Mays said.
Because the State does not provide funding to charters for their school buildings, Uplift must finance those facilities by going to the bond market.
“In our last bond sale, we were able to get a slightly more attractive interest rate purely from the strength of our financial position. Those savings could then be directed towards supporting instruction versus paying higher debt service cost,” he said.
Currently, Uplift’s bond debt is about $192 million. As the network expands to 37 schools and 13,000 students by 2017, Mr. Mays expects financed debt to expand to more than $250 million. He participated in the panel to help introduce the financial community to the opportunity now available in the charter sector. Uplift was the first charter to seek public financing in 2000, and as it has grown, its position has continued to improve.
The availability of bond financing does not offset the need for access to additional public funding though. According to Tracy Young, vice president of government and public affairs for the Texas Charter Schools Association, traditional ISDs receive on average $1,000 in facilities funding per students, while charters receive no dollars. Add to that the fact charter students do not receive equitable funding, and charters constantly find themselves in a position of having to do more with less.
“Texas Charters have grown by 14 percent in the last five to six years, representing more than three percent of the state’s enrolled students. Through the lawsuit, we’ll be looking to gain equitable funding and facilities funding. As difficult as it is for charters to find facilities, this is especially important right now,” Ms. Young said.
Yasmin Bhatia, Uplift’s CEO, said she finds the funding disadvantage an untenable position in which to be.
“Our scholars are making important academic gains as we introduce innovative teaching practices and support services like our Road to College program, all the while pursuing as much funding as we can find. We’ve had the wonderful support of our philanthropic friends in North Texas and national supporters, but we believe the playing field should be level in Texas. The funds should follow the children, and we are in favor of having broader options for facilities acquisition and expansion,” she said.
Though it is not being discussed in the lawsuit, Ms. Bhatia also believes the state should revisit its charter funding model. Currently, charter allocations are made monthly, where traditional ISDs receive a large percentage of their funds up-front, making it easier to acquire academic resources for their students.
The funding issues are being argued this week at the Texas school finance trial, but most expect that the case will likely find its way to the state Supreme Court before it is settled. In the meantime, charters like Uplift will continue to help the financial community understand their viability so they can continue to provide a high quality education to more of the state’s thousands of underserved students.