Advisers pause on charter school idea
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.