- Associated Press - Sunday, June 14, 2015

INDIANAPOLIS (AP) - The Indiana Senate’s top budget writer is sounding an alarm about a new provision included in the spending plan lawmakers passed this year that gives charter schools access to $50 million in low-interest state loans.

Charter school officials say they need the loan program to be on more equal footing with traditional public schools, and they argue that borrowing to construct new buildings is a better long-term financial deal than leasing.

But Senate Appropriations Chairman Luke Kenley has concerns about the risk to taxpayers, noting that many charter schools have significant debt.

“I don’t think they have the ability to retire that debt. It’s really a problem,” Kenley, R-Noblesville, told The Indianapolis Star (https://indy.st/1Hj2u3l ).

Gov. Mike Pence said the new law, which takes effect July 1, will help charter schools pay for facilities.

Pence had sought a $1,500-per-student grant for charter schools to help fund construction and other capital expenses that traditional public school districts receive funding for through local property taxes.

But Republican senators balked at the $20 million-a-year price tag, and lawmakers finally settled on a $500-per-student grant and the new loan program.

Dennis Costerison, executive director of the Indiana Association of School Business Officials, said he was surprised by the loan program, which gives charter schools access to up to $50 million in loans from the state’s $170 million common school fund at a rate of 1 percent.

“This issue was never really discussed at any time,” he said. “The question is, ‘Have they shown the need and will there be a study of all these issues?’ This should have come after a study showing if there was a need.”

An Indianapolis Star review found that 43 of the state’s 79 charter schools already have outstanding obligations, for a collective debt of about $120 million. Traditional public school districts carry much larger debt loads, but those loans are typically backed by property tax levies, making them relatively safe bets.

Charter schools are less predictable. In 2013, the state forgave and paid off more than $90 million in charter school loans. Several of the schools whose loans were forgiven later ceased operations.

“In the last couple years, there have been about 15 or more school closures in Indiana alone,” said John O’Neal, policy and research coordinator for the Indiana State Teachers Association. “I think it’s definitely something to question whether it’s a good use of tax dollars when these schools can just pick up and leave.”

Only charters that receive an A, B or C under the state’s A-F school grading system are eligible for loans under the new program, which will be administered by the State Board of Education.

Still, Kenley said, protecting the state’s financial interests was “a very real concern” in his budget committee.

“If you give them a loan, you have to structure it in a way that they can’t just take the money and run,” he said. “I’m not sure how you do that.”

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Information from: The Indianapolis Star, https://www.indystar.com


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