AB 1198 (Dababneh): Sponsor

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Creates the CA Credit Enhancement Program


Summary

  • This Legislation would create a California Credit Enhancement Program at the California School Finance Authority (CSFA) within the State Treasurer's office to provide lower cost alternatives for charter school facility financing through a leveraged public-private partnership program.
  • The CA Credit Enhancement Program would provide funds to insure or guarantee school facility bonds at the CSFA to assist charter public schools with the acquisition, renovation, or construction of charter school facilities, or the refinancing of charter school facility debt.
  • Finding suitable facilities is one of the biggest challenges currently faced by charter public schools. Charter schools typically do not receive local funding through bonds, as traditional public schools do, and must pay for their facility out of their general operating expenses, taking money out of the classroom to pay for that classroom. As a result, many charter public schools turn to private financing and bond transactions in order to pay for a long-term facilities solution.

Impact on Charter Schools

  • The funds from the CA Credit Enhancement Program would be used to pay for bond payments in the event of a default that would allow the charter schools to receive a higher investment grade rating for loans up to $20 million. This in turn would provide more favorable financing terms on charter school construction bonds which will provide the charter school significant savings in the long-run and allow them to spend more money "in" the classroom and not "on" the classroom.
  • Charter schools currently financing their facilities via school construction bonds typically pay about a 6% interest rate. We estimate that charter schools participating within the Credit Enhancement program would get lower interest rates, around 4%, which would save charter schools hundreds of thousands of dollars annually.

CCSA Action & What You Can Do

  • The bill is currently on the Senate Appropriations Committee Suspense File, where action will be taken on the bill in August.
  • Your support of AB 1198 is crucial, and we urge you to send a letter of support urging your Senator to support AB 1198 and have the bill removed from the suspense file.

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