Prep Schools In The News & Media

State borrowing (CT) for private schools in CT (not just colleges). For those of you interested in real-world economics and finance, or paying taxes in CT, this is an interesting story.

The Connecticut Mirror misunderstands the US News article regarding endowments. Yale has the second largest endowment (Harvard has the largest) and Yale is ranked #4 in a tie (with MIT) in the US News rankings for best colleges. The two rankings are exclusive of each other.

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Thanks for the correction - but do you find it interesting about the financing? It seems to be a win-win for the schools and having financially robust private schools is a win for the state. I posted the article not for the rankings (but appreciate the correction), but about the financing. When I worked at Fordham years ago, they had something similar with the state of NY. BTW - there were strings attached.

I would like to hear / read the private schools’ position & justification for these benefits to wealthy private schools such as Yale.

Benefiting education–both public & private–is good, but at what cost ? Are state supported schools being ignored ?

Great article as a starting point for a debate once an opposing viewpoint is shared.

Additionally,it would be interesting to know the specific Internal Revenue Code sections which are claimed to permit this practice.

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The state has no obligation whatsoever on the CHFEA bonds issues for higher ed institutions in CT. CHEFA is what’s called a “conduit issuer” in the municipal bond world. They are lending their statutory authority to issue bonds for IRS approved purposes but provide no financial support. Each bond issue is sold/priced based on the credit of the underlying institution. There are hundreds of conduit issuers around the country like CHEFA. They fund,non-profits of all types (higher ed, health systems, affordable housing). A total non-story.

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Cate in the news

IRC Section 103 is what permits the issuance of tax-exempt bonds for governmental issuers. Section 145 permits the issuance of tax-exempt bonds by 501c3s.

State/local supported schools are not being ignored. Local school districts are collectively perhaps the biggest issuers of municipal bonds in the country. Since they are governmental entities, they have the statutory ability to issue bonds in their own names as opposed to having to use a conduit issuer like CHEFA. In CT, the UCONN system is funded by bonds issued directly by the State and backed by the state’s general obligation credit.

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Are these bond issues ?

Hmmm. Interesting :face_with_monocle:

Since several private schools (listed) benefit from this program….Does that mean my tax dollars are investing in Choate?

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…and exceeds your annual giving to Deerfield! :rofl:

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Most private schools are structured legally as non-profits. That’s why you can make a tax-deductible contribution to them. As a 501c3, the IRS gives them the ability to fund capital expenditures through the issuance of tax-exempt bonds under Section 145. The bonds issued normally receive no support from a state or local government, so the short answer is no, your tax dollars are not supporting any 501c3 who issues bonds this way.

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Yes - these are municipal bonds being issued by the Connecticut Higher Education Financing Authority. The authority takes the bond proceeds it receives from investors and lends them to the underlying higher ed institution (Yale). Yale pays back the loan (principal and interest) and those payments are used to pay back the bondholders (principal and interest). No state/local tax dollars are used anywhere along the way.

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@HazeGrey Thanks for this information.

Just curious - in the event of a default by the education institution, is the State of CT on the hook to bondholders?

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When the DA development folks call me next time, I am going to inform them that I have already given to Choate! :grin:

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No. CHEFA doesn’t have it own credit rating and the bonds it issues aren’t supported by the State. Yale’s CHEFA bonds are rated AAA because Yale is a AAA credit. The CHEFA bonds issued for Brunswick School are rated A1 because Brunswick is an A1 credit.

If a conduit bond issue defaults, bondholders can only look to what was pledged to them as collateral which normally doesn’t include any kind of state/local government revenues or GO.

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Positive story for the day @ an inspiring teacher from Tabor Academy on leadership development. The course sounds great.

More news coming from the NYC private school community . Will this have an impact on enrollment in future years given the annual tuition price tag ? Will NYC families flee to the suburbs or boarding schools in accelerating numbers ? There could be a big shift in NYC family educational decisions in the coming years ?

No, no, and no.

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This article seems to be very heavily biased and politically charged. Given that these schools have mostly been doing fine (as have boarding schools, many of which have implemented similar programs), I doubt it’ll have a significant impact.

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It’s the New York Post. Heavily biased and politically charged appear right under the masthead. :rofl:

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