The Daily Tell

In the first time a private foundation has backed charter school facility bonds at such a large scale, the Bill & Melinda Gates Foundation has announced that it will grant a $30 million credit support agreement to help fund high-quality public charter school expansion in the Houston, Texas area.

The grant will help Houston charter schools secure $300 million in tax-exempt bond insurance to support further expansion.

"While charter schools have proven to be extremely effective at improving access to quality education, they face unique challenges with respect to expansion," said Vicki L. Phillips, director of education for the Gates Foundation’s College Ready program. "Innovative approaches to financing are critical to addressing the funding gaps that result as successful programs like charter schools endeavor to scale."

The first grant from the $300 million agreement, a $67-million commitment issued on October 28, will enable the Knowledge is Power Program (KIPP) Houston – a network of early childhood, elementary, middle school and high school programs targeted at underserved students – to get a bond at favorable terms in order to "meet surging parent demand for its academic programs."

KIPP and other Houston charter schools receiving Gates Foundation financing will be required to match the foundation’s support "with dedicated resources for the particular bond issues." Local Initiatives Support Corporation will also provide a $3 million guaranty, and will contribute to the required school match.

The KIPP commitment marks the first U.S. investment through the foundation’s initiative announced earlier this year, which aims to give a total of $400 million in program-related investments over a two-year period using non-traditional methods such as low-interest loans, loan guarantees and equity investment.

The Gates Foundation hopes that this kind of philanthropic financing will become a model for other states and private nonprofits focused on supporting charter school development and sustainability.