The Permanent School Fund (PSF) allows schools to participate in a bond guaranty program and in order to be eligible for PSF, charter schools must achieve an investment grade rating from a national firm. PSF allows charter schools to access bonds with the full faith and credit of the State of Texas, which gives them the highest bond rating available (AAA).
Call to Action
Next week, the State Board of Education (SBOE) is scheduled to meet and part of their agenda includes discussion on the multiplier for the School Finance/Permanent School Fund. We encourage you to contact your SBOE Member and support charter schools by expanding the capacity of the Permanent School Fund (PSF).
Click here to identify your SBOE member.
Additionally, if you would like to consider testifying on this matter, you must register by 5 p.m. on Monday, November 14. Instructions to register are here.
Background
In 2011, Senate Bill 1 was enacted by the Texas Legislature and authorized the use of the PSF to guarantee revenue bonds for charter schools. The capacity is based upon the statewide charter enrollment, which is adjusted annually.
The Texas Education Agency and the State Board of Education regulations became effective on March 3, 2014. Since then, certain high-quality charter schools have had access to the PSF Bond Guarantee Program and the capacity for new and refinanced debt for charter schools was exhausted by August 2016. In less than two years, there were 30 issuances totaling $1.059 billion.
Expansion of the PSF is a Wise Investment
• Texas has extremely stringent eligibility requirements that public charter schools must meet to access the PSF bond guarantee program.
• Public charter schools must remit 10 percent of the savings realized by the PSF program to a Charter Reserve Fund (currently over $800,000/year).
• Leveraging the PSF and investing in these excellent schools has already realized a savings of about $6.5 million annually for the next 25 years (That keeps $81 million in Texas classrooms).
The Charter Reserve Fund
• To date, this program has yielded a healthier fund than was required by the state – more than 12 percent of savings realized by public charter schools under this program have been returned to the Charter Reserve Fund.
• All three major bond rating agencies have given the PSF Committee and the full SBOE multiple assurances that this new capacity will not create unfavorable risk and will not affect Texas’ bond rating.
The Consequences of a ‘NO’ vote cannot be understated
• Private bond covenants typically dictate that refinancing cannot occur until about 10 years after issuance – forcing public schools to lose out on savings for up to a decade!
• Eligible charter schools will be forced to seek financing at higher interest rates, which results in a direct loss of savings for our classrooms.
• A delay in implementation has absolutely no impact on this program’s risk to the PSF; Delay only creates unnecessary and costly delays to ongoing construction projects that are badly needed for over 100,000 families on a charter school waitlists.
• The Charter Reserve Fund will suffer a decrease in revenue.
