The financing challenges facing charter schools.

In this guest blog post, Espinoza reflects on the challenges facing charter schools -- and the need for creative solutions -- in the current economic downturn. His observations reflect the findings of RDF's online series, "Surviving Uncertainty," which focused on charter schools in Arizona, California and Texas.

As the recession continues to plague schools of all kinds, charter schools face a particularly high hurdle to funding. Compared to conventional district schools, charter schools experience additional financial stress because most have facility-related debt. Each charter school must secure its own space, unlike regular public schools, which can draw on the taxing capacity of the district to raise the necessary funds. The additional line item in a charter school's budget -- and the concomitant responsibilities -- make charter schools more vulnerable to budgets cuts or holdbacks. Additionally, as states across the nation are re-evaluating their education budgets, the ripple effect is hitting charter schools -- hard.

Delays in state funding, cuts in education and other economic setbacks have caused many administrators and charter organizations to move quickly to find new sources of funding. While some schools are benefitting from the generosity afforded by a large network of private donors, there are many smaller schools confronting difficult realities. For example, one Phoenix-based charter school, was faced with delays in receiving state payments and a drop in the school's cash reserves to $65,000. As a result, the school had to apply for a bank loan. In July alone, it experienced a shortfall of $128,000. Other schools profiled in California and Texas echoed similar financial strain.

The question is, what's next for these schools and the millions of children they educate? Clearly, innovation and creative thinking about new sources of funding are necessary. It's instructive that, over the years, RDF has built relationships with our borrowers that go beyond providing finance solutions. For instance, we offer technical assistance. Recently, RDF expanded its product line in response to current market needs to include operating lines of credit. In addition, we at RDF recognize the value that education brings to a community both by providing the foundation for economic empowerment and by preparing the leaders of tomorrow.

As financial institutions, we need to think outside the box to continue addressing the lending needs of charter schools. We need to work together to create long-term, integrated solutions for charter school funding. Our strong collaboration with Citi, for example, provides thought leadership as well as support so we can achieve our goals. Working in close collaboration with the Citi Community Development team, we can expand financial inclusion for underserved Americans across the country.

Tom Espinoza is President and CEO of Raza Development Fund (RDF), the largest Community Development Financial Institution (CDFI) fund in the United States serving Hispanic communities. As a CDFI fund, RDF is certified by the U.S. Department of the Treasury to provide access to capital and thus to promote economic growth in underserved communities. RDF provides loans for the development of affordable housing, community facilities and charter schools, with a focus on the Latino community and low-income families.