Charter schools are not allowed to issue bonds or levy taxes to pay for
building space. Instead, the state provides lease aid that reimburses
charter schools for a large portion of building lease costs. Charter
school administrators view lease aid as essential to charter schools’
financial viability. Without it, charter schools would have to rely on
general education aid to pay for a school building. Although good
comparisons are difficult to make, charter school lease rates appear to
be reasonable when compared to rates state government pays to lease
office space. In addition, charter schools generally lease less space
than the amount called for in Minnesota Department of Education
guidelines. Although state law prohibits charter schools from issuing
bonds and from acquiring buildings with state funds, 11 charter
schools have established affiliated nonprofit building corporations
that issued bonds or obtained loans to acquire school buildings.
Charter schools then leased the building from the affiliated
corporation. We think the time is right for the Legislature to once
again weigh the advantages and disadvantages of allowing charter
schools to buy buildings.
Under state law, charter schools cannot use state funds to acquire land or
buildings.1 They are also prohibited from levying taxes or issuing bonds,
methods used by traditional school districts to pay for facilities.2 As a result,
charter schools lease space from a variety of public and private entities.
Recognizing that operating capital revenue included in the general education
formula was not sufficient to fund appropriate facilities as well as other capital
needs, the 1997 Legislature established building lease aid to help charter schools
pay for leased space.3
This chapter addresses the following question:
Is the lease-aid program an effective way to help charter schools
obtain school facilities?
To answer this question, we interviewed Minnesota Department of Education
(MDE) staff about the lease aid program, and we analyze