CFDA Number: 84.354A
Program Type: Discretionary/Competitive Grants

This program provides grants to eligible entities to leverage funds through credit enhancement initiatives in order to assist charter schools in using private sector capital to acquire, construct, renovate, or lease academic facilities.

The Credit Enhancement for Charter School Facilities program provides assistance to help charter schools meet their facility needs. Under this program, funds are provided on a competitive basis to public and nonprofit entities, and consortia of those entities, to leverage other funds and help charter schools obtain school facilities through such means as purchase, lease, and donation. Grantees may also use grants to leverage funds to help charter schools construct and renovate school facilities.

To help leverage funds for charter school facilities, grant recipients may, among other things, guarantee and insure debt to finance charter school facilities; guarantee and insure leases for personal and real property; facilitate a charter school's facilities financing by identifying potential lending sources, encouraging private lending, and other similar activities; and establish charter school facility "incubator" housing that new charter schools may use until they can acquire a facility on their own.

Why do we need Credit Enhancements for Charter Schools?

In the 1998-99 school year, 32 percent of all new charter schools indicated that inadequate facilities were a barrier to implementing their charter. Despite the immense popularity of charter schools with parents, teachers and the public, these unique public schools face real financial challenges.

• Because charters can be closed if they do not serve students' needs and their charters must be renewed every three to five years, some lending institutions view them as a risk, unable to pay off long-term debt; and

• Unlike traditional local education agencies, charter schools often lack the ability to issue low risk, general obligation bonds backed by property taxes. The only debt some charter schools can issue is bonds that are backed only by per-pupil revenue flows.

Despite these challenges, the demand for charter schools is growing. The public supports charter schools, and charter school laws are now helping children learn in 40 states.

This program furthers the Department's strategic plan to use school choice as a tool for improving student achievement. With enhanced parental choice and increased flexibility that allows freedom from many statutory and regulatory requirements, charter schools are well positioned to stimulate comprehensive education reform. Charter schools can focus on establishing plans to improve student academic achievement, replace rules-based governance with performance-based accountability, and renew the creativity and commitment of teachers, parents, and communities.