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Remarks by Marc Sternberg: 2016 NAPCS Annual Conference

June 28, 2016
Remarks as Prepared for Delivery by K-12 Education Director Marc Sternberg

Everyone here today knows — and many of you know this from firsthand experience – that high-performing charter schools struggle to find facilities to seed new schools and expand existing ones. And when I say struggle, I mean, all too often educators are called away from the work of pedagogy and instruction to the tasks of real estate brokering, construction and interest rate arbitrage.

To make matters more complex, outside of this hall, those struggles would come as a surprise to many pundits. Outside of the charter community, a common view is that rapid growth of high-quality schools is proof positive that additional funding for facilities and space is not a top priority.

We know that a gaping need remains—and today we’re taking what we hope will be a catalytic step to correct this inequity by providing $250 million seed funding for the Building Equity Initiative to give charter schools easier access to capital to create and expand great schools.

We will be incubating this new initiative at our close partner Civic Builders. The goal is that by 2027, a decade from now, the Building Equity Initiative will help add 250,000 new high-quality seats across 17 cities.

We are grateful for Jim and Alice Walton’s groundbreaking leadership on this issue. It’s worth remembering that when charters began 25 years ago, advocates gave a lot of thought as to how charters could pay teachers and principals, and to the freedoms they would need to get the school right. But we underestimated the complexities and expense of facilities loans and real estate transactions needed to find adequate classroom space at scale.

Now, 25 years later, leaders of high-performing charter leaders too often face a host of obstacles in securing facilities that their counterparts in conventional public schools simply never confront. Too often, this draws attention and programmatic resources away from the classroom. And here’s something we can all agree on: educators should be able to properly devote teaching and learning budgets to teaching and learning.

The Building Equity Initiative seeks to level the playing field in obtaining capital for visionary leaders of great schools. It will provide low-interest loans to nonprofit charter school developers, and to lenders, and to local organizations who are developing city-level plans to grow the supply of great schools.

We recognize that this initiative is just a beginning. These funds do not – and frankly cannot – solve the whole problem. Our ultimate goal is clear: all public schools should have equal access to public facilities and financing, and be financed through public dollars.

Today, we’re a long, long way from this kind of equity. Nationwide, about $2.3 billion is spent annually on charter facilities. But just one in three states with charter schools provides facilities funding. About 80% of outlays for charter facilities come from charter school bonds, which are concentrated in a relatively small set of states and districts. And we know that charter school bonds are often more expensive than they need to be. It is time for commercial banks to modernize their thinking about how to assess risk and assign a cost to monies lent to charter schools.

We know that demand for new high-quality seats continues to far outpace supply. Today, some 600,000 individual students sit on waiting lists. Under current conditions, projected costs for charter school facilities will need to jump by more than 50% in the next three years. That’s an increase of $1.4 billion.

So public funding for charter school facilities has to increase geometrically in the next few years to even begin to meet surging demand. But this problem is not fully captured by these analytics. Behind these numbers is a heartbreaking story of educational inequality.

Behind these numbers is the pain and loss of educational access for hundreds of thousands of families, who want their child to attend a high-performing charter school but are denied that opportunity. Behind the numbers are the stories of countless veteran educators who each year have to tell families of delayed openings for want of a suitable school building.

Now, I’ve outlined some of the parameters of what the Building Equity Initiative will do. Let me briefly note two things it won’t do.

First, this effort should not call off campaigns to make public space available for public charter schools. Quite the contrary, government must do its job to make space available and to remove the facilities bottle neck.

Second, we don’t see that this fund will in any way supplant the growing networks of local intermediaries, developers, and CDFIs that are already working to help charters find and finance facilities.

In fact, we desperately need organizations like LISC, IFF, Building Hope and Pacific Charter School Development to work faster and think bigger about what’s possible. And we need more organizations like them.

We applaud their efforts, as well as the development of charter bond markets. Our aim is to supplement and support local initiatives – not replace them.

In the end, the facility challenge must be met with a public-private partnership. Federal and state policy needs to rise above politics to put families, children, and educational opportunity first. And philanthropy needs to do its part to stand up for visionary educators and their students.

In the months and years ahead, we think this new initiative can play a critical role in leveraging more affordable capital for charter facilities. We think it gets us closer to the day when high-quality schools and school leaders finally enjoy financing parity and facilities access.

I know this is a goal and a vision that the charter community has long shared. Today, we’re a step closer to realizing it – thanks in part to Jim and Alice Walton’s generosity, and their commitment to expanding educational opportunity for all children.

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