Walton Foundation Taps Wall Street to Fund Charter Schools

One of the more interesting of those reports came from the Walton Family Foundation (WFF) – an organization well-known for its devotion to charter schools. The foundation released a three-year report on its Building Equity Initiative, an initiative that focuses on meeting a particular challenge many charter school operators face – securing adequate real estate.

Launched in 2016, the Building Equity Initiative was WFF’s attempt to remove some of the barriers to securing adequate physical space, and to make buying or fixing up that physical space more affordable.

Since 2016, the foundation has supported over 100 schools through the initiative, focusing on high-performing charter operators in high-need communities, and channeling more than $185 million into the effort. These schools will save nearly $29 million in facilities-related costs as a result, according to the report. The aid takes various forms, including low-interest loans and grants, and go toward planning and building new schools, or renovating old ones.

Perhaps the most notable part the initiative is what WFF refers to as its “Equitable Facilities Fund” (EFF). This fund combines philanthropic dollars with money from capital market investors. Even though foundation leaders had some initial uncertainty about whether investors would see charter schools as worthwhile investment, EFF’s initial bond offering managed to close $111 million in bond sales. By aiming to combine one philanthropic dollar for every three dollars raised via bond sales, WFF was able to increase the reach of its program substantially.

Bringing private dollars to the table does more than expand the number of schools one can assist, it also reframes the conversation around charter school funding in an important way. The most frequent complaint charter school detractors make is that charters suck resources away from traditional public schools. The debate is not merely on the academic performance of charters, but on their impact on the overall school system.

The priority, whenever there are tax dollars or philanthropic dollars involved, ought to be serving the public good. The question is, do charters provide a benefit, not just to some individual students, but to the public as a whole?

The answer is, it depends.

There is evidence that the value of a charter school depends greatly on the location and on the demographic makeup of the community. Studies have shown that charter schools have the greatest positive impact on low-income students, students in urban locations, and those who are struggling academically.

Meanwhile there are large variations in performance among charter schools and they clearly aren’t a panacea. On average, students in charter schools tend to perform about the same as those in traditional public schools on tests. But some national charter school organizations consistently outperform traditional schools, while others consistently underperform. Even in the best cases, the academic gains tend to be modest.

Again, since the loudest and most consistent criticism of charter schools is that they siphon students and money away from traditional public schools, one may reasonably ask: Is there a public benefit? Relevant research gives us at least one surprising answer to that question.

Clearly, the existence of substantial fixed costs such as utilities ensures that the cost of educating each individual student increases as enrollment drops at a traditional school. That certainly doesn’t sound like a public benefit. Yet studies have shown that black students achieve significant academic gains when charters open in their communities, even if they don’t attend a charter school. So, the impact of charters on students who attend nearby traditional schools can’t be measured in dollars alone.

For this reason, when considering whether charters benefit the public (and are therefore worthy of public support), the WFF’s initiative, combining philanthropic dollars with capital market investment for funding charter facilities, helps reframe the question. That investment not only increases the reach of the program, but it also makes charter schools more accountable to the market, and therefore more accountable for producing positive educational outcomes that sustain enrollment and repay the market’s investment.

In the end, a school that is incentivized to do a better job educating students can only be defined as a public good.