Surprise charter school loan program raises new questions
In the final days of this year's legislative session, Republican lawmakers dropped into the massive state budget bill a provision giving charter schools access to $50 million in low-interest state loans.
The measure was a last-minute effort to appease Gov. Mike Pence, who had sought more funding for charter schools, and it received virtually no public scrutiny.
Now some critics — including the Senate's chief budget writer — are sounding an alarm about the new program, given the significant debt of many charter schools.
The main concern: Who will be on the hook if charter schools don't repay the loans?
"Some of these charter schools have some pretty enormous debt pictures right now," said Senate Appropriations Chairman Luke Kenley, R-Noblesville. "I don't think they have the ability to retire that debt. It's really a problem."
Pence dismissed the potential risk to taxpayers. He noted that the new law gives the state a security interest if charter schools use the loan money to build or purchase new facilities.
Charter school officials say the loan program is needed to put them 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 if history is any guide, Kenley has reason to worry.
In 2013, the state forgave and paid off more than $90 million in charter school loans. The move drew protests from traditional public schools whose loans were not forgiven and consequently charter schools were no longer given access to the loan money.
Kenley said Pence and House Speaker Brian Bosma plan to do the same thing again with the new loan program — an assertion that neither denied outright.
"It's always a possibility in the future," Bosma said.
Loan program part of compromise
The new program slipped into the budget during the waning hours of the legislative session in late April.
Throughout the session, Pence and Bosma had pushed for a $1,500-per-student grant for charter schools. The intent was to give them money for construction and other capital expenses that traditional public school districts receive through local property taxes.
But the proposal hit a snag in the Senate, where GOP lawmakers balked at the $20 million-a-year price tag.
Ultimately, they settled on a $500-per-student grant and the new loan program, which gives charter schools access to up to $50 million in loans from the state's common school fund.
The fund has about $170 million available — money that would normally be reserved for traditional public school loans for construction and technology purchases. Now, Surprise charter school loan program raises new questions:
