A cooperative public education bank
Public schools need more money, but they lack it everywhere—particularly when it comes to infrastructure.
In the United States, public schools have to pay high fees and interest when borrowing from private credit markets for capital programs, shelling out cash for consultants and credit raters to counsel and underwriters.
We know that better school facilities and infrastructure improves test scores, absenteeism, and other crucial outcomes, and yet the cost of providing these better facilities is prohibitively high and the manner in which resources are provided intimidatingly complicated.
The market for school bonds is opaque and creates knowledge asymmetries between school finance officials responsible for managing public education money, educational leaders responsible for deliberating and administering school districts, market actors profiting from school infrastructure needs, and communities: parents who send their kids to schools, teachers and staff who work there, taxpayers who vote on bond referenda, voters who elect school board members—few of these constituencies know how the money behind school facilities actually works, much less how to make it better.
For instance, school district officials and communities may be interested in mitigating carbon emissions from their buildings, but a lack of knowledge about financial practices around green public infrastructure—as well as contrary incentives from private credit markets—create barriers to entry for those interested in such a project.
Further, there’s little uniformity and information sharing for districts across state and national contexts, so it’s difficult for school district officials to learn best practices informed by others’ decisions. Data about school bonds is diffuse and hard to come by.
How to solve these issues institutionally? Many of them stem from the fact that school districts are treated like private firms seeking credit on international credit markets, while public school district financing is a hyper-local affair, embedded within municipal, state, and federal regulations, only some of which are conducive to public school district success.
To be more specific, what kind of entity could provide low-cost options for public school district capital program resources, as well as technical expertise in the financial mechanisms for providing and spending those resources?
Could that entity also provide in-house educational materials for school communities, from students and parents to board members and superintendents and budget officials, detailing best practices nationally for school capital program financing?
Even further, could that entity also provide data to those its serves, refining the best ways to provide public school infrastructure?
I propose that public school districts come together and create a Cooperative Public Education Bank (CPEB) for these purposes.
A member-owned, accredited bank that is federally insured could be a one-stop shop for school districts and their capital financing needs.
How would it work?
Member districts would deposit their unreserved funds at the bank, paying a membership fee.
The bank would act as specialized underwriter for school bonds, providing legal, technical, and financial consulting in-house oriented towards public education.
The bank would also aggregate market data to provide for members.
By using school district reserves as deposits and investing those deposits in new school bonds, while providing technical assistance, the Cooperative Public Education Bank would lower borrowing costs for school districts, make the market for school bonds more efficient and rational, and align district financial needs, available resources, and educational goals, as well as furthering progressive aims such as carbon emissions.
The first step towards creating such a bank would likely be for legislators, district budget officials, and community members to come together for the purposes of drafting a white paper proposal, after which initial investments might be raised. The benefit of creating a non-state entity, as opposed to a public bank, would be a streamlined founding process that does not require new legislation.
If you’re interested in such a project, let me know!