A banker’s advice to charter schools

Finding an adequate, affordable facility is the biggest challenge public charter schools face after providing high-quality education for students.

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    Room to grow: ICS's space and facilities limits are like those of charter schools nationwide – school districts don't provide space for charters.
    Mary Wiltenburg
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[Today's blog is by Jane Ellis, director of charter school lending, at Self-Help, a national community development bank that lends in low-income and underserved communities.]

Finding an adequate, affordable facility is the biggest challenge public charter schools face after providing high-quality education for students.

Atlanta's International Community School was fortunate to find its current facility in its first year. With a favorable lease and room to expand, ICS could concentrate on educating its diverse student population without having to worry about escalating rents or moving to a new facility as it grew. Many public charter schools are not so lucky.

Nationwide, charter schools receive about 75 percent of the state and local funding traditional public schools receive, according to the National Alliance for Public Charter Schools. In most states, charter schools receive no state or local funding for their facilities, and thus they must fund their buildings from their academic revenues.

The search for a schoolhouse can be daunting, because few charter school leaders have the necessary skills to navigate commercial real estate transactions, especially if major renovations are needed.

Self-Help, a non-profit community development lender, has been working since 1997 to help public charter schools solve their facility challenges. We've loaned over $100 million to charter schools across the nation. To evaluate a facility loan to a charter school, Self-Help assesses the school's academics, finances, and governance.

First and foremost, school leaders should set high expectations for all students and provide solid academic programs that meet - and hopefully exceed - federal and state standards. High-performing charter schools use nationally-normed tests to set and track academic performance goals and ensure that all students can succeed.

Second, a public charter school shouldn't spend over 15 percent of its revenue on occupancy (rent or mortgage, plus utilities, janitorial service, etc.). Higher percentages can strain the school's financial health and its academic programs.

Ideally, a school should be able to focus at least 60 percent of its revenues on classroom instruction and teacher salaries and benefits. In other words, a school should be able to keep its occupancy, administrative, and general business expenses to 40 percent or less of revenues.

Some charter schools can raise private funds through donations, but covering all of the school's basic functions within the state and local funding gives a school its best chance of success. Scrambling for private donations, especially in today's economy, can divert a school from its vital educational mission.

Third, public charter schools are governed by independent boards of directors. An effective board understands the difference between day-to-day management and governance, recognizes its fiduciary responsibility, sets and monitors performance standards and goals, and acts quickly and responsively when issues arise.

Diverse skills of board members (lawyer, accountant, entrepreneur, educator, etc.) are critical because a high-performing charter school must also succeed as a business.

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