DALLAS — Debt issued by charter schools in Texas can be enhanced by the state’s Permanent School Fund under a measure signed into law Wednesday by Gov. Rick Perry.

The enhancement provision is a part of SB 1, which provides the revenue needed to balance the state’s two-year, $172.3 billion budget.

The bill allows charter schools in the state with an investment-grade rating to participate in the PSF debt-enhancement program for the first time. The triple-A backing had been provided only for local public school debt.

The measure limits the total amount of charter school debt eligible for the PSF enhancement to 2% of the total $24.4 billion fund, which is equivalent to the number of students in the schools. About 120,000 students attend Texas charter schools.

The charter schools must first obtain a favorable ruling from the Internal Revenue Service on the enhancement program before the measure can go into effect.

Colorado is the only other state that provides enhancement to charter school debt.

The Colorado Educational and Cultural Facilities Authority said charter schools have issued $429 million of debt covered by the state program.

David Dunn, executive director of the Texas Charter Schools Association, said $350 million of charter school bonds could be issued over the first three years of the enhancement effort.

“The Texas charter school movement turns an important corner today,” he said.

Most charter schools lease their facilities or purchase them through commercial loans, according to Dunn.

“Money spent on charter classrooms instead of bank loans is clearly a better, more efficient use of taxpayer dollars,” he said. “Charter schools are public schools with no access to a local tax base to pay for school buildings, and no eligibility for the two state programs that help traditional public schools meet the cost of providing facilities.”

The charter school debt-enhancement provision was included in a Senate bill that died in the House, but it was amended into the finance bill during the special session that began June 1.

The measure was introduced by Sen. Florence Shapiro, R-Plano, chairwoman of the Senate Education Committee.

Since its inception in 1983, the PSF enhancement program has guaranteed 4,243 school district bond issues for a total of $88.9 billion.

At the end of fiscal 2010, there were 2,452 issues outstanding with a balance of $49.3 billion.

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.