What Will Happen to Charter School Bonds in the Fall?  The Answer May Surprise You
Alan Wohlstetter Alan Wohlstetter
July 20, 2020 | Municipal Bond Investing

What Will Happen to Charter School Bonds in the Fall? The Answer May Surprise You

Will charter school buildings open in the fall? Were their budgets affected by COVID-19? How have they kept students engaged during the spring and summer? Combing EMMA for this information can be frustrating for even the most experienced and determined muni research analyst. Until now.

In its role as Continuing Disclosure Agent for charter school borrowers in six states, School Improvement Partnership encouraged its reporting schools to file Voluntary Material Event Notices to disclose to the bond market the effects of COVID-19 on charter school finances, operations and academics. The results of the Notices are surprising in a number of areas.

Per Pupil Payments. The level of per pupil payments is going down as much as 10% in some states. In North Carolina, charter schools are planning on a 10% decrease. In California, the state has approved a tentative budget that decreases incoming revenue from FY 2020 by approximately 10% in most categories. In Indiana, with a two-year budget cycle, per pupil payments will not change for FY 2021. In Pennsylvania, the FY 2020 Education Budget levels were renewed for FY 2021. That said, Philadelphia charter schools have seen an increase of 7% for basic education students and 5.3% for special education students, since local contributions make up the lion’s share of per pupil payments.

Are Students Returning? Due to the seamless adjustment by many charter schools to distance learning in the spring compared to their traditional public school counterparts, charter schools are seeing stabilized enrollment, and in some cases increases for the fall. Partnerships to Uplift Communities, with 14 charter schools in California, is seeing 97% of its students return, which represents less attrition than usual. Similarly, Research Triangle High School in North Carolina had all of its students return, and added another 17 (or 3%) from its waiting list to offset state budget cuts. In Pennsylvania, the Governor has not decided how schools will open in the fall, which has delayed enrollment decisions for students and their families.

What Have Charter Schools Learned from COVID? While charter schools, state Education Departments and school districts are still determining the form schools opening in the fall will take, one issue is decided: schools will have a larger distance learning component than they did in FY 2020. What’s more, distance learning strategies were tested and improved in the spring, as detailed in the panel “What Works: Remote Learning During COVID-19” moderated by Tressa Pankovits, the author of Charter School Investor. The successful distance learning strategies for the reporting charter schools of School Improvement Partnership are set forth in their Voluntary Material Event Notices on EMMA, giving the charter school bond market comfort that these charter schools are better prepared than ever for what is to come.