Since the enactment of Minnesota’s Charter School Law in 1991, charter schools have been prohibited from owning land or buildings if and when public funds are involved in the purchase. Folks often ask: why did the legislature prohibit the use of public funds for the purchase of facilities for public charter schools? The answer has both philosophical and practical reasons.
On a practical level, the concept of charter schools was a new, untested idea in 1991, and legislators did not want the state to take on the financial liability of any outstanding mortgages and bonds if a charter school closed. Nor did the state want to be saddled with the responsibility for disposing of the land or building of a closed school.
On a philosophical level, the concept of charter schools was that charter schools were to be focused on creating new and different learning opportunities and to be labs for innovative methodologies, forms of measurements, assessments, and accountability, and professional opportunities for educators and not be encumbered by the conventions of education, including building ownership.
Since charters were prohibited from directly owning buildings, the expectation was that charters would lease space. Eventually, in recognition that charters could not levy for facilities, the legislature enacted lease aid for charter schools. In the 2003 state budget crisis, the pupil lease aid rate was reduced by 20% from its original level, and that cut has never been restored.
As the charter school movement grew, schools found that they faced two problems related to leasing of facilities:
First, charter schools were by necessity moving on a regular basis because the school could only lease enough space to address short term space needs without utilizing general operating funds for extra space until enrollment grew to fill the leased space. A number of schools who leased more space than they originally needed found themselves in financial jeopardy, and some closed because leasing costs were far above what lease aid generated in revenue.
Second, charter schools found it increasing difficult over time to find appropriately zoned and conducive space for their school, so some schools took an innovative step and developed affiliated nonprofit building companies to purchase or build a facility. The charter schools then leased space from their affiliated building company.
In 2003 and 2008, the Office of Legislative Auditor raised the question of whether the practice of affiliated building companies met the intent of the charter law and recommended the legislature address the issue of charter school facility ownership. In Minnesota’s second generation charter school law enacted in 2009, affiliated nonprofit building companies were legally recognized and became an option for charter schools that met the criteria established in the new law.
