U.S. charter schools are increasingly funding their expansion through the issuance of municipal debt, with Texas schools leading the pack.

The schools, which are privately run but publicly funded, have sold $1.6 billion in securities so far in 2014, more than any other year since Bloomberg News began tracking the data in 2007. About $464 million of those sales have come from Texas schools, where the state has guaranteed bonds sold by schools with credit ratings close to junk.

In April, Texas for the first time backed a charter-school deal with its Permanent School Fund, lending bonds sold by the Life School the AAA rating accorded to the state by Standard & Poor’s. Without that backing, the school has an S&P credit rating of BBB-, the lowest investment-grade level.

The state’s guarantee has won over investors, allowing charters in Texas to expand much more quickly. Schools that perform well academically and are able to recruit students have even greater access to financial markets, which in turn allows them to expand, according to financial experts who deal in municipal bonds, including charter-issued debt.

Bloomberg.com, Oct. 20