Editorial: Clean the junk out of charter schools

When the Minnesota Legislature agreed to provide lease aid for charter schools a decade ago, the need was clear. Charter programs had trouble securing suitable, stable facilities. Many school districts wouldn't rent to them, and they had no ability to tax or get lower-rate loans. Consequently, the state offered aid to help them rent.

But since then, some creative financiers and school insiders have found ways to work the system to their advantage -- at a disturbing cost to taxpayers. A recent Star Tribune investigation revealed that some growing charter schools have constructed buildings with high-cost junk bonds. Reporter Tony Kennedy's Nov. 29 story also revealed that several schools diverted building funds to pay mysterious fees for lawyers, consultants and school leaders.

The practice must stop. While it is not illegal under the existing and inadequate laws, it is a clear waste of taxpayer dollars.

One example involved St. Croix Preparatory Academy, a charter that recently opened a $21.7 million building near Stillwater. Using junk bond financing, school officials paid about $140,000 in fees -- including some to themselves.

In another case, a local municipality authorized bonds for a charter school in exchange for a $45,000 processing fee that was used to buy a new firetruck. That may be a worthwhile use of public money, but it has nothing to do with education. Charter programs pay off bonds with state aid designated for facilities -- not for unnecessary fees or city equipment.

Under state law, charter schools are not allowed to purchase or construct buildings with lease aid. But as some charters grew and needed more stability and control over their facilities, they created affiliate, nonprofit entities to buy or build facilities and serve as landlords. In essence, the schools were renting from themselves. Technically that's legal, because nothing in the law addressed such an arrangement.

A decade ago, the state spent $1.1 million on charter school lease aid. Today, that bill is about $42.4 million for 35,000 students in 150 charter programs. Eighteen charter schools have been built statewide with $178 million in junk bonds since 1998, the Star Tribune reported.

• Rethink prohibiting charters from directly owning property. That would eliminate the need to create affiliate groups as landlords. Methods to give charters access to lower-cost or state-backed borrowing should also be explored to put an end to junk bond financing.

• Allow charters fair access to existing school buildings. Declining enrollment, shifts to alternative programs and new building have created a glut of school facilities statewide. In the metro area alone, at least 64 school buildings have been vacated since 2000.

• Adopt clear rules about charter school ownership and responsibility. When charters purchase or build using state funds, should the state have an interest in those facilities? Who should benefit or take the loss when a property purchased with tax dollars is sold?