Ad­vis­ers pause on char­ter school idea

Austin American-Statesman - - METRO & STATE - By Kate Alexan­der AMER­I­CAN-STATES­MAN STAFF kalexan­der@states­man.com; 445-3618

Le­gal and in­vest­ment ad­vis­ers of­fered State Board of Ed­u­ca­tion mem­bers no clear an­swers Wed­nes­day on whether they should use pub­lic school en­dow­ment dol­lars to fi­nance char­ter school fa­cil­i­ties.

The ad­vis­ers said there were too many un­knowns to of­fer an up or down as­sess­ment on ded­i­cat­ing as much as $100 mil­lion of the $23 bil­lion Per­ma­nent School Fund to de­vel­op­ing and leas­ing char­ter school build­ings.

“We have thought­fully de­clined to make a rec­om­men­da­tion,” said Rhett Humphreys of NEPC LLC, the fund’s gen­eral in­vest­ment con­sul­tant.

Gary Law­son, a lawyer who spe­cial­izes in eth­i­cal and gov­er­nance is­sues, said the board is on the edge of the in­vest­ment fron­tier with the pro­posal. He sug­gested the board seek some le­gal cover from the Texas at­tor­ney gen­eral be­fore mov­ing for­ward.

Chair­woman Gail Lowe, R-Lam­pasas, will de­cide whether to ask the at­tor­ney gen­eral if such an in­vest­ment is al­low­able and pru­dent.

If the board de­cides to­day to in­clude the char­ter school in­vest­ment in the fund’s as­set mix, Lowe said she will seek the opin­ion.

At is­sue is whether the fund could gen­er­ate a re­turn from the char­ter school in­vest­ment com­men­su­rate with the risk. NEPC es­ti­mates that such an in­vest­ment could pro­duce a 4.75 per­cent re­turn with a high level of volatil­ity.

By com­par­i­son, non-in­vest­ment-grade bonds, also known as junk bonds, have an ex­pected re­turn of 8 per­cent with much lower risk than the char­ter school pro­posal, NEPC said.

The pro­posal is be­ing pushed by board mem­ber David Bradley, R-Beau­mont, who says the fund helps pub­lic schools pay for fa­cil­i­ties and that pub­lic char­ter schools should get the same ben­e­fit.

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