Indiana forgives charter school loans

2013-08-31T19:58:00Z 2014-01-22T13:41:04Z Indiana forgives charter school loansCarmen McCollum carmen.mccollum@nwi.com, (219) 662-5337 nwitimes.com

Many local educators and politicians are calling outrageous a recent law forgiving $91.2 million in loans to charter schools, in light of tight finances faced by public schools across the region and districts that have had to raise taxes to maintain programs and quality teachers. Moreover, they say, they are not forgiven such loans and must pay back any loans provided by the state's Common School Fund.

Indiana's General Assembly approved a provision in last session's budget bill calling for the state to forgive the Common School Fund loans made to charter schools, erasing nearly $92 million of their debt to the state.

Stacey Schmidt, superintendent of the Porter Township School Corp., said her district has borrowed from the Common School Fund for technology and construction. She said the district most recently used loans to support its one-to-one computer program for grades nine through 12 and to address needs at the high school's wastewater treatment plant.

Schmidt said the district owes $3.4 million and is scheduled to make the final payment in 2028.

"If we want to be fair and equitable, the same standard should be applied to all schools, so the loans should be forgiven for everyone," she said.

"Charter schools are being given some advantages that traditional public schools are not given. In this financial climate, we'd like to be afforded the opportunity of having our Common School Fund loan forgiven as well."

Charter schools are public schools have more flexibility to operate than traditional public schools. They also do not have unions. There are nine charter schools in Northwest Indiana.

Gary Rep. Vernon Smith also said the charter debt forgiveness was unfair.

"All other schools have to pay back their Common School Fund loan," he said. "Part of the justification used was that they (charter schools) don't get money for transportation and a couple of other things. My point is that the charter schools understood the playing rules when they were established. We are constantly taking money from traditional public schools and giving it to charters."

Indiana Sen. Luke Kenley, R-Noblesville, said traditional public schools just want more money.

"Public schools have already been funded for that (the first six months of operation). At first, we were in a recession and we didn't have the money to deal with it. We have the money to deal with it now. All we're doing is making it a level playing field. We also changed the funding formula so that the money flows to schools with the school year rather than a calendar year. Moving forward, it won't create a problem," he said.

Rationale behind the provision

Kevin Teasley, president and CEO of the Indianapolis-based GEO Foundation, which operates 21st Century Charter School and Gary Middle College locally along with charter schools in the Indianapolis area, echoed Kenley's remarks and said the payment is incorrectly identified as a loan.

"It's the amount of money the state gave charter schools for the first six months of operation before the school received tuition-support funding," he said.

Teasley said charter schools were eligible to apply for a loan at the beginning of each school year if they were able to show enrollment growth. For example, if a charter school opened with 200 students, it had to grow by 15 percent or 30 students the following year to apply for another Common School Fund loan.

"It's really all about cash flow and how the state funds schools," he said.

"It used to be that you count students in September on ADM (average daily membership, which refers to student enrollment) and the state would pay you for those students in January. It would pay you from January to December. If you were a brand new charter and opened in August, you didn't receive a payment until January so the state 'loaned' you money to operate for the first six months. It wasn't fair to charters, because traditional schools were already up and running and were receiving their operating funds."

Rather than a loan, the state now calls it a grant to charter schools — money they don't have to pay back.

Dana Johnson, GEO vice president, said, "Charters are not applying for a Common School Fund loan because the state has revised the process. It's a grant program, and that six-month lag time no longer exists," she said.

Gary Middle College, which opened last year, received a grant of about $600,000, Teasley said. The other new charter that opened last year was New Vistas High School in Portage, with an estimated grant of about $352,000 for about 130 students.

Some contend standards still different, unfair

LEAD College Preparatory Charter School in Gary closed its doors in June when the Office of Charter Schools at Ball State University did not renew its charter for a variety of reasons, including poor academic performance. LEAD College Prep owed $2.02 million in six Common School Fund loans from 2006 to 2010. The Lighthouse Academies reorganized, withdrawing an application to renew West Gary Lighthouse Charter when it learned that charter might not be renewed. West Gary Lighthouse Charter owed four loans totaling about $2.6 million from 2006 to 2008.

Charter School of the Dunes in Gary, which also was scheduled not to be renewed, found a new authorizer in Calumet College of St. Joseph. Charter School of the Dunes owed two loans totaling $1.9 million.

Duneland Superintendent Dave Pruis remembers the time when Bethlehem Steel Corp. filed bankruptcy, and the school district lost thousands of dollars in tax money. He said the district applied for and received three separate emergency loans from the state totaling about $13.79 million.

"We just paid off the last loan this summer," he said. "Nothing was forgiven for us, even though it was a situation that was completely out of our hands. The requirement was that Duneland had to pay the money back out of our general fund. Eventually, we were able to get legislation passed that allowed us to pay it back out of the debt service fund or the general fund."

But Pruis said the Indiana Legislature elected to do something different for charter schools. "I think they could have put that $91 million or about another half percent into the tuition support formula, benefiting more school corporations," he said.

Gary Community School Corp. Superintendent Cheryl Pruitt maintains that taxpayer money is being used to fund both traditional public schools and public charter schools, so they should be treated the same. Gary owes nearly $25.3 million to the Common School Fund loan. It used the money for new technology and construction of three new schools — Williams, Marquette and the Glen Park Academy for Excellence in Learning.

"Public schools in good faith cannot support this decision, because that $91 million could have been used to help fund the shortfall we're experiencing today," she said.

"That money could help us to put teachers back to work, build new state-of-the-art schools or fund other educational programs. This was an opportunity to put us on equal footing, but it looks like we missed it again."

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