State board considers limits on charter school loans

A proposal that could limit the amount a charter school can borrow from a new state loan program based on a school’s enrollment is facing opposition from some school advocates.

Months into the program taking effect, state officials are working on a mechanism to determine the loan amount a school can receive under a controversial $50 million program approved by the state legislature earlier this year.

One proposal before the Indiana State Board of Education could lead to some charter schools receiving less than what they requested. That’s because it would place a per-student funding cap on a charter school’s loan amount.

State board staff say they’re recommending the cap to ensure charter schools only borrow what they can pay back. But one charter school advocate worries the cap would limit what schools, especially those with lower enrollments, can achieve with a loan.

James Betley, executive director of the Indiana Charter School Board, said charter schools have wildly different enrollment numbers than traditional public schools. For example, two of the Carpe Diem Innovative School locations requesting funds serve fewer than 70 students. But Irvington Community Schools, which also is requesting a loan, serves 1,040.

“If you are school that has an enrollment of 100 but want to take out a loan in order to purchase a building you’re unlikely able to do that at a capped per pupil rate,” Betley said.

Debate surrounding the loan amounts follows the program having a controversial beginning.

The program was slipped into the new state budget in the final days of this year’s legislative session. The maneuver drew a prominent critic in fiscal leader state Sen. Luke Kenley, R-Noblesville. He worried about the debt loads charter schools already carry. Two years ago, the state forgave and paid off more than $90 million in charter school loans.

As of now, 12 charter schools have requested $25 million in loans to help afford a wide variety of expenses from purchasing new facilities to covering other costs for technology, furniture, and in one case, a playground. A final amount for the requests will be known later this month when schools face a deadline to apply for a loan for this school year.

The proposal envisions a per-student cap, in part, to help ensure schools can repay the amount borrowed and to ensure charter school students can equally benefit from the funds, said Marc Lotter, spokesman for the state board.

According to board materials, the cap would kick in if the total requests for this school year exceed $40 million. Among the recommendations is the state will provide $40 million in loans this school year and save $10 million for next school year.

Board staff devised the cap by dividing the $40 million in available loans by the number of students attending eligible charter schools. That means charter schools could receive a maximum advance of $1,836 per student from their state tuition support. Two of the schools are requesting approximately $45,000 per student.

The proposal before the state board is a working document for members to weigh, Lotter said.

“We believe this approach is fair and fiscally responsible. It is fair because it ensures sufficient advance funds to all public school children in charter schools. It is fiscally responsible because these loans will be repaid solely by deducting loan repayments from a charter school’s tuition support,” according to a memorandum by John Snethen, interim executive director of the state board.

Betley said he would prefer a more flexible distribution of funds, but ultimately it’s the state board’s decision.

The leader of Geist Montessori Academy says the school has a strategy to pay its $5 million loan request back. Currently, the school is split at two locations and pays about $33,000 per month in rent. Through the move, the school, which currently serves about 350 students, could expand to 400 students, said Susan Fries, the school’s executive director.

“We’ve already hired somebody as a controller who is very knowledgeable about forecasting and doing budgets,” Fries said.

Under the program, eligible charter schools can request a maximum of $5 million. Interests on the loans are at the rate of 1 percent.

The state board is expected to discuss the program at its monthly meeting that begins at 9 a.m. Wednesday in Indianapolis.

Star reporters Tony Cook and Kris Turner contributed to this article.