Since the early 1970s, moral obligation bonds have been used to finance housing, higher education facilities, hospitals, corrections facilities, and more. Some states are now using this tool to help charter schools save on borrowing costs.
As more charter schools access the bond market to finance their facilities, the interest they pay is funded by a school’s operating costs (which are provided through taxpayer dollars), meaning every increase in interest represents fewer dollars available for textbooks, teacher salaries, and field trips. As states seek to use their education budgets more efficiently, moral obligation bonds are an attractive option to lower interest rates without overburdening the state’s balance sheet.
To learn more, we suggest the following resources:
- Moral Obligation and Charter School Financing- outlines Utah and Colorado’s active Moral Obligation programs for charter schools.
- Lowering the Cost of Capital for Public Charter Schools-examines how and why some states are turning to moral obligation bonds to fund charter school facilities.
Examples of state bills and statutes:
- Colorado Moral Obligation Statute
- Utah Credit Enhancement 2012 Bill
- Utah Charter School Credit Enhancement-Excerpts