Charter Closing Fund Raises Concerns | Eastern North Carolina Now

    Publisher's note: The author of this post is Barry Smith, who is an associate editor for the Carolina Journal, John Hood Publisher.

Advocates: Requirement for $50,000 reserve puts urban schools at disadvantage

    RALEIGH - An advocacy group has raised concerns about a nine-month old law that they say places an undue financial hardship on some charter schools.

    Eddie Goodall, executive director of the N.C. Public Charter Schools Association, said the problem lies with a provision stuck into the budget bill that became law last summer. That provision requires charter schools to maintain a $50,000 reserve to pay off final expenses in the event the school closes.

    Schools are allowed to have the money in an escrow account, or through a letter of credit, a bond, or a deed of trust.

    The provision is similar to one found in a bill filed last year by Rep. Rick Glazier, D-Cumberland. Last year's measure would have required charter schools to have the $50,000 reserve in cash. The budget included a provision adding options other than a cash escrow to meet the reserve requirement.

    "It's saying put up your personal resources to guarantee that we'll have $50,000 to do something with if you go out of business," Goodall said Thursday during a press conference at the Legislative Building. Goodall said the mandate isn't necessary to protect taxpayers in case a school closes and has unpaid debts.

    Goodall is a former state Republican senator from Union County. Marcus Brandon, a former Democratic state representative from Guilford County and executive director of CarolinaCAN (the North Carolina Campaign for Achievement Now), also had qualms with the requirement.

    "Most of the cases where you've seen charter schools close down, that $50,000 wouldn't have helped them one way or the other," Brandon said.

    Brandon said the requirement could hurt urban charter schools, whose operators often have less capital than suburban charter holders. "We don't have $50,000 that we can just go pick up," Brandon said.

    Terry Stoops, director of research and education studies at the John Locke Foundation, agreed.

    "The dissolution fee is the latest in a long line of state regulations that penalize small, community-based charter schools," Stoops said. "We should not maintain a system that allows charter management companies and well-heeled charter boards to maintain an advantage over less-connected applicants. Rather, the state should level the playing field."

    Goodall noted that all charter school advocates aren't on the same page on the issue.

    Debbie Clary, a former Republican state senator from Cleveland County and lobbying and membership services director for the N.C. Alliance for Public Charter Schools, said the alliance supports responsibility and accountability in the charter schools.

    "We felt very strongly that this is a piece of accountability," Clary said. "We don't want to see charter schools close without some responsibility back to the taxpayers and the teachers of the school."

    Clary said that the charter schools' boards of directors need to understand their fiduciary responsibility.

    "If an operator of a charter school can't put a $50,000 letter of credit or bond, then we have a problem," Clary said. "Then that board had better wake up to that problem and pay better attention to their finances."

    Alexis Schauss, director of school business for the state's Public School Fund, said the reserve would help pay final expenses when a charter school closes.

    "There is a concern that when they close, the retirement fund is often left with a liability of unpaid bills, and teachers are unpaid," Schauss said. "Some schools close very cleanly. Others don't and teachers are left unpaid.

    Goodall agreed that charter schools need to be financially accountable. But he said there are ways to accomplish that goal than requiring the $50,000 school closure fund.

    He urged state officials who oversee charter schools to be more assertive in determining debts that charters may have run up.

    Goodall also said it's important for the public to understand that taxpayers are not on the hook for charter schools' debt. He said the charter's board members bear that responsibility.