The National Federation of Municipal Analysts Wants Extensive Charter School Disclosure
The National Federation of Municipal Analysts (NFMA) is
a not-for-profit association with the goals of promoting professionalism in municipal credit analysis and furthering the skill level of its members through educational programs and industry communication, providing an informed perspective in the formulation of legal and regulatory matters relating to the municipal finance industry, and facilitating the flow of information between investors and issuing entities. …
Membership in the NFMA totals over 1,300, representing the major participants in the municipal market, including institutional investors, bond rating agencies, bond insurance companies, portfolio managers, investment banking firms and financial advisors. Beginning in 2013, the NFMA began a Student Membership category.
On September 28, 2016, NFMA published this 24-page draft of recommended best practices (RBP) for establishing charter school disclosure expectations that will help inform charter school investors.
From the September 28, 2016, Bond Buyer, Washington securities law section:
WASHINGTON – The National Federation of Municipal Analysts is urging charter schools to provide detailed financial, academic, and staffing information in primary and secondary disclosure documents. …
The [RBP] draft constitutes NFMA’s first disclosure recommendations for charter schools. …
The paper will be open for public comment through Nov. 30. After that date, NFMA will review comments and finalize the paper. …
According to the RBP, a charter school’s POS (primary offering statement) should disclose all material financial agreements, including the proposed indenture, loan agreement, capital leases, management agreements, and tax regulatory agreements. …Descriptions of facilities and their financing, pledged revenues, and projected cash flows. …Descriptions of debt service, repair and replacement, operating and deficit, as well as insurance and property tax reserve funds.
…Academic performance as well as school management and operations. …
…Charter board membership, compensation, and tenure; information available on the school’s website; management qualification, experience, and compensation; third-party manager control, compensation, and replacement; and charter school teaching faculty, classroom ratios, and teachers’ union affiliation. …Teacher and staff compensation, including retirement benefits, any complaints and claims the school is facing, as well as operating and funding information related to extracurricular activities.
…Information about the size, capacity, and condition of facilities, including equipment, along with descriptions of future capital improvement needs, insurance support, and transportation and parking capabilities for students and staff, respectively.
…Discussion of audited financial statements and interim financials, current budgetary processes, financial covenant compliance and projections, and existing banking relationships…. State aid and other governmental support… information about planned future debt and reliance on endowments, fund drives, contributions, and gifts.
…School’s location, enrollment, potential competition from other schools in the area, and future projections on such topics are also important….
[And] separate but related suggestions to consider credit risks and continuing disclosure.
The actual RBP also includes this disclaimer– and addendum to its scope of disclosure:
The recommendations contained in this RBP are not intended to be a thorough discussion and analysis of each state’s specific chartering laws and process, charter school funding systems, state and federal laws regulating the education of students in general, or federal tax laws regarding the tax-exemption of charter school transactions. Appropriate federal, state, and authorizer charter law disclosure is required in the POS so that investors obtain an adequate level of knowledge regarding the legal and regulatory program requirements needed to maintain the charter school and the attendant risks of non-compliance with such laws and requirements (e.g., charter revocation).
The entire, 24-page RBP is worth a read.
In short, NFMA wants comprehensive “sunlight” on charter schools so that investors fully understand the charter school “investment”– including disclosing both federal as well as varied state charter regulations (or the lack thereof).
Notice also that NFMA has not asked for such information from the charter school sector to date– and they wouldn’t have to ask at all if charter schools were indeed “public” schools. If charter schools were really public schools, then comprehensive financial and other information would be a matter of public record and discussed in public meetings. The school’s overseers would be considered public servants.
The quasi-public-private nature of charter schools makes the NFMA call for comprehensive charter school disclosure an imperative for reining in a sector that cries “public” when it is advantageous to be public and “private” when it is not.