POLICY AGENDA As we approach the 2025 session, we have spent hours upon hours discussing with legislators the structural opportunities for charter schools to thrive better. Those conversations have gone remarkably well, and we are hopeful that we will make significant progress in several key areas. First, we want to expand which schools can qualify for the state’s credit enhancement or moral obligation program. Second, we want to free charter schools from many of the regulatory strings imposed by various restricted streams of funding. Expanding Who Can Qualify for Enhancement Because charter schools are incapable of imposing a property tax, the state does not back charter school debt with its “full faith and credit.” That typically means that we pay between 75 and 125 basis points more in interest than school districts, whose debt is backed by the “full faith and credit” of Utah. To help high-performing schools obtain better terms, in 2012 then-Sen. John Valentine created the credit enhancement or moral obligation program. Under this program, schools performing very well operationally, academically and financially can apply to the Charter School Finance Authority (CSFA) to sell credit-enhanced bonds. If they meet the CSFA’s rigorous standards — including obtaining an investment grade rating from Fitch’s, Moody’s or S&P — the state will put a moral obligation behind that school’s bonds, meaning that they will repay the bondholders in the event of a default. This credit enhancement lowers the interest rate on those bonds by somewhere between 50 and 75 basis points. To date, the Legislature has never had to go into its pocket to repay any charter school debt, let alone to repay credit-enhanced charter school debt. Moreover, about 25 schools have qualified for this program, selling $500 million in bonds. Over the term of those bonds, those charter schools should save about $100 million. Given that strong track record, it seems appropriate to look at how the state can expand access to this program. Rep. Neil Walter is running legislation that we expect will provide access to this program to another 25 high-performing charter schools. It would provide $3 million into the CSFA’s moral obligation backup account, effectively giving them a “warm fuzzy blanket” to assure them that the state wants to expand the program. Our expectation is that the CSFA will expand access to this program by allowing more small (probably enrollment between 200 and 500 students) but highly effective schools to participate. We are pleased by the warm reception Rep. Walter’s bill is already receiving. Expanding Charter School Options For several years Sen. Fillmore has led the effort to remove unnecessary regulatory strings on all of public education. In fact, he has explicitly permitted schools to treat as unrestricted up to 35% of state-restricted funds. The next step in this process will be a bill this year to create a “charter pupil unit.” The concept here is really very simple. As schools of choice, charter schools face the ultimate accountability mechanism: the decisions of families to send their students to a school. This competitive pressure requires that schools remain in close contact with their school community, and that they provide the education and programs students and families want. Schools failing to do so lose enrollment and may even close. With such a supple and effective accountability mechanism, it is, at best, awkward to layer additional restrictions on how schools can use the funds the Legislature provides them. So Sen. Fillmore’s bill would sever the strings between about 10 of the Legislature’s restricted funding streams, stack the statewide per pupil average of those streams on each other, and provide that amount to each charter school. Importantly, severing these regulatory strings won’t alter a charter school’s obligation to meet the needs of their students. At all. The obligation to meet those students’ needs predates any of those funding streams. In reality, all Sen. Fillmore’s bill will do is allow charter schools a freer hand in meeting the needs of their students. In a state as committed to parents and families as Utah is, Sen. Fillmore’s bill will be a natural fit. With growth-focused funding, eliminated restrictions and the continued excellence of charter school leaders, teachers and staff, we look forward to another great 25 years of charter schools in Utah! HENRY SUDWEEKS Henry.Sudweeks@playandpark.com 435-619-7625 www.playandpark.com 5
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