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Charter School Intercept and Moral Obligation

C.R.S. 22-30.5-406 allows a charter school entitled to receive monies from the state to request that the State Treasurer make direct payments of principal and interest on capital construction bonds on its behalf. The Treasury withholds the monies needed to make these payments from the monthly equalization payments to the Charter Authorizer (the school district in which the charter school is located or the State Charter School Institute). The Treasurer will only perform an intercept for a charter school that receives sufficient state equalization money to cover the entire annual amount of the principal and interest payments. This program enhances the charter school's ability to obtain favorable financing terms on its bonds. As of September 30, 2014, Treasury has 65 participants in the intercept program (click here for a list of participating schools).


 

In addition to this intercept program the Treasury oversees a complementary program: the "Moral Obligation Program." This program enhances the credit of a "qualified charter school." A qualified charter school is one that has obtained an investment grade credit rating on a "stand-alone" basis. The enhancement enables these qualified schools to obtain even more favorable financing terms on their capital construction bonds. The program is funded from a separate source of monies from which the Treasury would make bond payments in the case of a default by a charter school. C.R.S. 22-30.5-407 created the state charter school interest savings account within the state charter school debt reserve fund. Each qualified charter school allowed into this program annually pays ten basis points of the principal amount of bonds outstanding into this fund. At September 30, 2014, the fund had a balance of $3.6 million. In the event that a default occurs that exhausts the balance in the fund, as well as the $1 million appropriated in FY 2002-2003 from the State Education Fund, the statute directs the Governor to notify the General Assembly so that it may consider whether or not to appropriate funds to pay off the bonds. An additional $6.5 million was appropriated from the State Education Fund to the state charter school debt reserve fund in FY 2014-15. This last element is the "moral obligation" aspect of the program. Failure by the state to make such an appropriation would probably have a substantial negative effect on the state's credit and almost certainly interfere with its ability to issue certificates of participation. As of August 30, 2005, the outstanding par value of the bonds issued by charter schools under this program reached the program's $200 million statutory cap. With the passage of SB 06-119, the statutory cap was increased by an additional $200 million to a total of $400 million; and was, again, increased to $500 million in 2014. As of September 30, 2014, the outstanding par value of the bonds issued under the moral obligation program was $399.0 million (click here for a list of participating schools).

 

Charter School Intercept Applications

 

School District Application 

State Institutional School Application