DALLAS – Bonds issued by Texas charter schools could be eligible for triple-A coverage from the state’s $18 billion Permanent School Fund within months, after a go-ahead from the Internal Revenue Service on Sept. 19.

The federal rules proposed by the IRS will allow the Texas Education Agency and the State Board of Education to develop regulations to implement state laws, education commissioner Michael Williams said.

The Texas Legislature in 2011 expanded the bond enhancement program to open-enrollment charter schools with an investment-grade credit rating. The program was opened to refunding bonds by the 2013 Legislature.

Charter school bonds are supported by the per-student stipend from the state of some $8,800 a year. The school group said it costs the tuition-free schools more than $800 a year per student for school and classroom facilities. 

Charter schools can reallocate the savings realized through lower interest rates to teacher salaries and other educational expenses, said Denise Peirce, general counsel of the Texas Charter School Association.

“Eligible charters will be able to use the PSF bond guarantee to save money and return those funds for use in the classroom," she said.

Charter schools may be able to access the state enhancement program as early as February, the school association said.

The legislation limits the state fund enhancement for charter school bonds to the percentage of Texas students enrolled in the schools, or about 4% of the total. Refunding bond enhancement is capped at 50% of the total available capacity.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.