Oklahoma Education and You

Oklahoma’s public charter schools have had a real facilities problem for years.

Charters were forbidden from issuing bonds in the original charter school law. As a result, charter schools have had to solve a public facilities problem with private-sector financing tools. Typically, charters lease facilities from their public school authorizer or the commercial sector. Some have used foundations or LLCs affiliated with the school to purchase facilities and lease them back to the school.

This past session, the legislature passed legislation to help charters with facilities. It created the “Charter School Loan Revolving Fund,” a mechanism by which the state can loan charter schools money for facilities. Initial funding for the program was $5 million. The law also created a Bond Credit Enhancement Program to help charter schools finance facilities through the bond market. Requirements include a reserve fund equal to 12 bond principal and interest payments as a cushion if the charter becomes unable to make a monthly payment. The actual payments are made from the state to the bondholders through a mechanism that intercepts funds from the school’s state aid payments. A $250 million cap was placed on the total number of bonds that can be outstanding at any one time under the program.

Finally, the legislature removed the language in the Charter School Act forbidding charters from issuing bonds. This is particularly interesting because Oklahoma already had three charter schools—ASTEC Charter School, Santa Fe South Charter School, and Tulsa Honor Academy—that had financed facilities through the bond market before this change.

The law leaves several issues with charter school facility financing unanswered.

First, state law prohibits using general fund dollars for capital improvements above a $50,000 threshold per year. Charters have found a workaround by leasing facilities from another entity. However, if a charter has its state aid directly intercepted for debt service, then the provision against using general fund monies for capital improvements above a $50,000 threshold should be removed.  

Second, the use of public dollars for a facility that can be controlled by a private or quasi-private entity remains a public accountability issue. Management organizations and foundations are eligible for both the revolving fund and bond credit enhancement program. When public school dollars are used to pay debt service or lease payments on a building, the public should have a clear long-term interest in the facility. If the facility is owned or controlled by a foundation, development entity, or other private organization, taxpayers may effectively pay for a school facility without receiving the same ownership, transparency, competitive bidding, audit, and oversight protections that would exist for a traditional public school district facility.

Third, long-term facility debt can serve as a disincentive to closing an underperforming charter school. Once millions of dollars in public payments are tied to a facility financing arrangement, authorizers and state officials may face pressure to keep the school open to avoid default, bondholder losses, disruption of lease payments, or uncertainty about the facility’s future. That creates a risk that financial obligations could begin to influence academic accountability decisions. A charter should not become harder to close simply because public money has been pledged to support private or nonprofit facility debt.

Facility costs put pressure on charter school budgets as they are. The Redbud Fund gave charters facility money equivalent to traditional districts’ per-pupil building fund collections, but most charters are still forced to use general fund dollars intended primarily for instruction and operations. The legislature has indicated that it would like to see 60% of operational and salary dollars be spent on instruction. Traditional school districts across the state spend roughly 57% on instruction, virtual charter schools spend roughly 59%, and brick-and-mortar charter schools spend roughly 47%. ASTEC Charter School is an outlier in that during FY25, it spent 37.54% of its General Fund Budget on instruction. Harding Charter Prep, which leases a building from Oklahoma City, conversely, spent 56% of its General Fund Budget on instruction.

Harding has had one sponsor, Oklahoma City Public Schools, during its 20+ years of existence and leases their facility from Oklahoma City. By contrast, ASTEC has had three authorizers in its 20-plus years of existence. The difference in the amount of money available to spend on instruction Harding has compared to ASTEC raises the question of whether the state should even be encouraging charter expansion through private facility funding. Other measures have been attempted to help charters get more access to unused local school district facilities. Harding is a good example of how a high-performing charter maintaining a relationship with a sponsoring district can contribute to lower facility costs and better student outcomes.

Fourth, if the state is going to create credit enhancements, a revolving loan fund, or facility support mechanisms, the program should also be open to traditional public-school districts with low valuations. Many traditional districts with weak local property tax bases face severe facility needs and limited bonding capacity. They too could benefit from the revolving loan fund if it was funded at a higher level.

Fifth, a lot of taxpayer money is flowing to charter school foundations without a requirement for yearly audits submitted to the state. Santa Fe South Charter School is servicing over $2.4 million per year in debt service alone for facilities on behalf of its development corporation. ASTEC Charter School is servicing over $4.5 million per year in debt service alone for facilities on behalf of its foundation. This debt service does not account for all of the money paid each year to their respective development corporation and foundation. Public money should not be used to strengthen private or nonprofit facility financing unless the entity receiving that benefit is subject to annual independent audits, public reporting, conflict-of-interest review, and transparency requirements comparable to those imposed on public school districts.

Charters need help with facilities. The Redbud fund was a good start, and this latest legislation shows that politicians at least recognize the problems charters face. However, the legislature should revisit the issue in the next session and refine the measures put in place to address the concerns mentioned above.