California School Finance Authority
Three organizations-the KIPP Foundation, the Charter School Development Corporation, and the Local Initiatives Support Corporation-will receive a total of $21.6 million for three grants through the Charter Schools Facilities Grants program, U.S. Secretary of Education Margaret Spellings announced today. These organizations will use the funds to support charter school construction around the country.
On behalf of Secretary Spellings, Valarie Smith, the Secretary's regional representative, visited KIPP Tech Valley Charter School in Albany to award the grants.
The grants, which may be used to obtain facilities for charter schools, include:
- The KIPP Foundation in San Francisco, Calif., has been awarded a $6.8 million grant;
- The Charter School Development Corporation in Washington, D.C., has been awarded a $6.6 million grant;
- The Local Initiatives Support Corporation in New York, N.Y., has been awarded a $8.2 million grant.
Under the department's Credit Enhancement for Charter Schools Facilities Grant program, seven grants totaling $36.6 million are being provided to organizations in New York; California; Arizona; New Jersey; North Carolina; Washington, D.C.; and Texas.
"Charter schools are one of the fastest growing sources of school choice in American education today," Spellings said. "But many can't obtain financing for the facilities they need to house their schools. These grants will continue to help those who need help obtaining suitable facilities to help expand educational options to parents and students across the nation."
The purpose of this program is to provide grants to public entities and non-profit organizations to enhance the credit of charter schools to obtain facilities.
Grantees will place funds in a reserve account, which will then be used to guarantee capital to address the cost of acquiring, constructing, or renovating charter school facilities. The reserve account funds are not for the direct purchase, lease, renovation, or construction of school buildings.
The following organizations received grants under this program:
Community Loan Fund of New Jersey
16-18 West Lafayette Street
Trenton, N.J.
Project Director: David Scheck, (609) 989-7766
Grant amount: $8,150,000
Raza Development Fund
111 West Monroe Street
Suite 1610
Phoenix, Ariz.
Project Director: Mark Van Brunt,(602)417-1402
Grant amount: $1,600,000
Local Initiatives Support Services (LISC)
501 Seventh Avenue, 7th Floor
New York, N.Y.
Project Director: Elise Balboni,(212)455-9884
Grant amount: $8,200,000
Center for Community Self-Help
301 West Main Street
Durham, N.C.
Project Director: Laura Benedict, (919) 956-4430
Grant amount: $2,200,000
Charter Schools Development Corporation
1090 Vermont Avenue, Suite 800
Washington, D.C.
Project Director: Joel D. Scharfer, (202) 454-9916
Grant amount: $6,600,000
KIPP Foundation
345 Spear Street
Suite 510
San Francisco, Calif.
Project Director: Carmen Maldonado, (212) 233-5477 x13
Grant amount: $6,805,000
Texas Public Finance Authority
300 W 15th Street, Suite 411
P.O. Box 12906
Austin, Texas
Project Director: Kim Edwards, (512) 463-5544
Grant Amount: $3,055,299
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Other colonies followed suit with their own issues of paper money. Some were considered government IOUs, redeemable later in "hard" currency (silver or gold). Others were issued as "legal tender" in themselves. They were "as good as gold" in trade, without bearing debt or an obligation to redeem the notes in some other form of money later. The new paper money not only made the colonies independent of the British bankers and their gold but actually allowed the colonists to finance their local government without taxing the people. Colonial assemblies discovered that provincial loan offices could generate a steady stream of revenue in the form of interest income by taking on the lending functions of banks.
The same solution was employed in other countries later. When Argentina's government workers were faced with massive layoffs, their unions persuaded six state governments to pay them instead with state bonds or IOUs in small denominations. The IOUs could then be used to pay for state services and taxes, and everyone in the local economy accepted them in trade.
There's Just One Problem . . .
Why couldn't California do the same thing? The problem with calling its IOUs "legal tender" today is that the ruse violates the U.S. Constitution. Article I, Section 10, says, "No State shall . . . coin money [or] emit bills of credit." The Cornell University Law School Annotated Constitution gives this definition:
"Within the sense of the Constitution, bills of credit signify a paper medium of exchange, intended to circulate between individuals, and between the Government and individuals, for the ordinary purposes of society."
U.S. Supreme Court cases are cited from the 1830s, in which "interest bearing certificates, in denominations not exceeding ten dollars, which were issued by loan offices established by the State of Missouri and made receivable in payment of taxes or other moneys due to the State, and in payment of the fees and salaries of state officers, were held to be bills of credit whose issuance was banned by this section."
That all seems pretty clear cut, until you read a bit further. Article I, Section 10, also says that no State shall "make any Thing but gold and silver Coin a Tender in Payment of Debts." When was the last time any State paid its bills only in gold and silver coin? The States could argue that the Constitution needs to be updated.
They could make some other compelling arguments. The States agreed to give up their right to issue their own currencies because they delegated that power to Congress. Article I, Section 8, enumerates among the powers given to Congress, "To coin Money [and] regulate the Value thereof." Scholars continue to argue about the meaning of "to coin money," but the Constitution clearly gives no entity except Congress the power to create money and regulate its value, and Congress failed to properly husband that authority. It issued coins, but it allowed privately-owned banks to issue "banknotes," which soon made up the bulk of the nation's money supply. Bankers, not Congress, thus "regulated the value" of the currency, through the laws of supply and demand: the more notes they created, the smaller the value of each. In 1913, Congress went so far as to allow a privately-owned central bank called the Federal Reserve to issue its own Federal Reserve Notes and call them the exclusive national paper currency. These notes were then lent to the U.S. government, at interest.
Today, however, Federal Reserve Notes compose only about 3% of the money supply (M3). The other 97% is issued by private banks in the form of loans. "Bank credit" is created simply by entering numbers into the accounts of borrowers, as many authorities have attested. One of the most clear statements of this process came from Graham Towers, Governor of the Bank of Canada from 1935 to 1955, who acknowledged:
"Banks create money. That is what they are for. . . . The manufacturing process to make money consists of making an entry in a book. That is all. . . . Each and every time a Bank makes a loan . . . new Bank credit is created -- brand new money."
Congress has not only reneged on its agreement to create the national money supply, but it has refused to front the funds to bail out California from its relatively modest $26 billion budget shortfall. Californians are justifiably upset, since Congress hardly batted an eye before earmarking some $700 billion in bailout money for the private banking system, and the Federal Reserve has committed trillions more for that dubious purpose. Nearly ten times the sum needed by California was allotted to bailing out AIG, a private insurance company; and half the sum needed by California went to pay off the gambling debts of AIG to Goldman Sachs, a single bank. California underwrites a substantial portion of the federal government's budget, sending a dollar in tax revenue for every 80 cents it gets back. Yet the federal government has even rejected California's request for a loan guarantee, which could have saved the State hundreds of millions of dollars in interest. The clear message is, "You're on your own."
Creative Problem Solving
The situation looks pretty dire, but it may just need some thinking outside the box. The law does not allow the States to issue "bills of credit," but it does allow them to create another form of money called "checkbook" money. All a State has to do is to form its own bank. Quoting again from the Cornell University Law School Annotated Constitution:
"Bills issued by state banks are not bills of credit; it is immaterial that the State is the sole stockholder of the bank, that the officers of the bank were elected by the state legislature, or that the capital of the bank was raised by the sale of state bonds."
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