TribBlog: In Reversal, SBOE Passes Charter Financing [Updated]

Reversing its decision as a committee Thursday, the State Board of Education voted on Friday to allocate half a percent of the $23 billion Permanent School Fund to finance charter school facilities, contingent on a favorable opinion from the attorney general or "express legislative authority." The allocation is part of an overall long-term strategic investment plan for the fund.

The measure passed 7-6 with two members absent: Mary Helen Berlanga, D-Corpus Christi, and Rick Agosto, D-San Antonio. Agosto voted against the measure in committee yesterday and could have killed it today by voting the same way. Agosto said he had business in San Antonio today but would have voted against the charter allocation. "I think there's no merit to this as an investment. I don't even know what it is," he said by phone. "This is really unfortunate." Berlanga's position on the issue is unknown, but she often votes against the conservative members who pushed the measure. 

The board’s bloc of social conservatives usually consists of seven Republicans on the 15-member panel, including chairwoman Gail Lowe, R-Lampasas. While Lowe voted against the plan, the bloc succeeded in pulling a Democratic vote from Rene Nuñez of El Paso. Other members voting for the plan included David Bradley, R-Beaumont, who spearheaded the idea; Don McLeroy, R-Bryan; Ken Mercer, R-San Antonio; Terri Leo, R-Spring; Cynthia Dunbar, R-Richmond; and Barbara Cargill, R-The Woodlands.

Dunbar made the motion to adopt the plan, which authorizes the board to purchase buildings it would then lease back to charter schools. Bradley, however, led the charge and crafted the proposal, arguing that both the Permanent School Fund and charter schools can benefit in the deal. Other members have argued that the plan strays from the legal mission of the fund: To invest solely in the interest of maximizing returns and minimizing risk, regardless of other public policy objectives. Two board attorneys warned the board about potential legal problems and said the measure could invite lawsuits.

Before the final vote, a proposal by Mavis Knight, D-Dallas, to refer the charter schools issue to a special committee appointed by Lowe failed 5-8, with Lowe on the opposing side. Bob Craig, R-Lubbock, tried to postpone the vote on the entire strategic plan for Permanent School Fund investments to September, citing a need for the full board to be present. That also failed 5-8. Lawrence Allen, D-Houston, tried and failed to amend the charter schools line item in the strategic plan to include all public schools.

Bradley argued the board needs to, at the least, signal its "real clear intent" to the Legislature regarding the need for state financing of charter facilities before that body convenes next session. While investing in charter schools may be risky, he said, so are investments in other asset classes in the Permanent School Fund. Charter schools have long struggled with facilities costs because the state provides no additional money, beyond per-student operation allocation, for their buildings. The result is that charter schools often have to dip into operating funds to pay for facilities, while public schools do not. Some charters, though, have succeeded in raising private funds.

Board member Geraldine "Tincy" Miller, R-Dallas, supported the special committee and seemed to oppose financing charter facilities. "We're all for charter schools and for choice," she said, but "highly respected" people in real estate and investment told her investing in charter school facilities would be a high-risk move. 

Sen. Royce West, D-Dallas, who sits on the Senate Education Committee, sent a letter to Lowe expressing concerns about the facilities plan. "I urge you not to take the proposed action suggested by ... [board member David] Bradley, as it is a drastic change from the historical use of the Permanent School Fund," West wrote. The Senate committee will develop a recommendation to help finance charter school facilities, he reminded Lowe.  But West also hinted such a move would face an uphill battle given the $18 billion budget shortfall lawmakers expect to face next year. "In an economic climate that has necessitated the call for state agencies and even school districts to cut their budgets, we shouldn't expend limited funds or resources on a proposal such as this," he wrote.

Board member Pat Hardy, R-Weatherford, said the charter facilities plan was "not well thought through." She called the rate of return investment consultants projected to the board Wednesday — 4.75 percent — "voodoo economics.” Those consultants refused to make a recommendation to the board earlier this week, saying they would work with the portfolio either way. Board attorneys urged getting an opinion from the attorney general because of the — some say high — risk of investing in charter school facilities might be at odds with the board's constitutional responsibility to invest the Permanent School Funds for gains.

Miller said the board was jumping the gun. "It leaves you wondering, is there another issue here? Is there something else going on? Why are we in a hurry?"

The answer may lie in the fact that two members who supported the plan — McLeroy and Dunbar — are lame ducks. And some newly elected board members, who take office in January, have opposed the plan publicly.

The measure still will require a favorable attorney general's opinion on its legality. David Anderson, the board's general counsel, suggested that Lowe include in her request to the attorney general the question of whether the Legislature can even give input on Permanent School Fund investments. That's because the board's authority to invest the funds comes directly from the state constitution. If the Legislature tries to authorize — or prohibit — investment in charter school facilities, the board might have to wait on yet another opinion, Anderson said.