set­back for plan to in­vest in char­ters

Fi­nal vote due to­day on tap­ping $100 mil­lion for pri­vately run schools

Austin American-Statesman - - FRONT PAGE - By Kate Alexan­der

The State Board of Ed­u­ca­tion opted Thurs­day not to ded­i­cate pub­lic school en­dow­ment dol­lars to fi­nance char­ter school fa­cil­i­ties.

But that de­ci­sion prob­a­bly will not be the fi­nal word on the pro­posal to in­vest as much as $100 mil­lion of the $23 bil­lion Per­ma­nent School Fund into de­vel­op­ing and leas­ing Texas char­ter schools.

The 7-7 split, which scut­tled the pro­posal Thurs­day, could change when a fi­nal vote is taken to­day.

Even if Thurs­day’s de­ci­sion holds, the pro­posal could be re­vived if the Texas at­tor­ney gen­eral deems the in­vest­ment ap­proach suit­able.

Chair­woman Gail Lowe, R-Lam­pasas, agreed to seek the at­tor­ney gen­eral’s opin­ion, as the board’s le­gal ad­viser rec­om­mended, de­spite her own reser­va­tions about the pro­posal.

In the mean­time, leg­is­la­tors have an op­por­tu­nity to ad­dress the lack of state as­sis­tance for char­ter school fa­cil­i­ties, said board mem­ber David Bradley, R-Beau­mont.

“I be­seech the Leg­is­la­ture to fix it for us,” said Bradley, who has pushed this idea for the past two years.

Leg­is­la­tors could ex­tend to char­ter schools, which are pri­vately man­aged pub­lic schools, a debt guar­anty sim­i­lar to the ben­e­fit that the Per­ma­nent School Fund pro­vides tra­di­tional school dis­tricts. That guar­anty sig­nif­i­cantly re­duces the dis­tricts’ bor­row­ing costs be­cause they get can lower in­ter­est rates with the state’s back­ing.

An­other pos­si­ble leg­isla­tive fix would be to pro­vide a prop­erty tax break for land­lords who lease space to char­ter schools and re­quire them

to pass on those sav­ings to the schools, said David Dunn, ex­ec­u­tive di­rec­tor of the Texas Char­ter School As­so­ci­a­tion.

The cost to the state, Dunn said, is es­ti­mated at $2 mil­lion to $3 mil­lion a year to make up the lost tax rev­enue to school dis­tricts.

Both changes might re­quire vot­ers to ap­prove changes to the state con­sti­tu­tion, Dunn said.

At is­sue Thurs­day was how the board should in­vest the full Per­ma­nent School Fund, an en­dow­ment cre­ated in 1876 to ben­e­fit Texas pub­lic schools.

The $100 mil­lion char­ter school al­lo­ca­tion would have been a very small piece of that pie, but it dom­i­nated much of the dis­cus­sion.

De­ci­sions on in­vest­ing the fund must be based on achiev­ing a re­turn that is com­men­su­rate with the risk.

The board’s in­vest­ment ad­viser, Rhett Humphreys of NEPC LLC, said it was “very tricky busi­ness” to land on an ac­cu­rate risk-re­turn ex­pec­ta­tion for a char­ter school in­vest­ment be­cause there is no per­for­mance his­tory for such an in­vest­ment.

The NEPC anal­y­sis put the ex­pected re­turn at 4.75 per­cent with a high risk level.

For com­par­i­son, the re­turn for non-in­vest­ment grade bonds, also known as junk bonds, was 8 per­cent with much lower risk, NEPC es­ti­mated.

Op­po­nents said such an in­vest­ment would not be a pru­dent use of Per­ma­nent School Fund money.

“I cer­tainly want to help char­ters, but not in this way,” said board mem­ber Bob Craig, R-Lub­bock.

But Bradley main­tains that mem­bers’ op­po­si­tion was grounded in hos­til­ity to al­ter­na­tives to tra­di­tional pub­lic school.

“The vote wasn’t about the Per­ma­nent School Fund,” Bradley said.

The op­po­nents roundly dis­agreed.

“I am not hos­tile to char­ter schools, but I am hos­tile to illthought-out con­cepts,” said Mavis Knight, D-Dal­las. “I’m also hos­tile to hav­ing a de­ci­sion forced upon me with­out hav­ing ad­e­quate sup­port­ing in­for­ma­tion.

“I will not ab­ro­gate my fidu­ciary re­spon­si­bil­ity … to sat­isfy some­one else’s agenda.”

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