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Group Urges Overhaul on Funding of Full-Time Virtual Schools

States' current systems for funding full-time online and virtual schools need to be overhauled to better account for the actual cost of providing online education and to better account for student outcomes, argue the authors of a report released last month by the National Education Policy Center.

The keys to making that happen, they say? Allocating funding to online and virtual schools each time a student successfully completes a course, instead of on a per-pupil basis tied to enrollment, and using a rate calculated to ensure that online schools don't receive more than traditional brick-and-mortar schools do to deliver the same course and generate a similar student outcome.

"Right now, there are about four different models for paying virtual education providers, but across the board, we don't know what we're getting for those dollars," said Justin Bathon, an assistant professor at the University of Kentucky and one of the report's authors, in an interview with Education Week. "We're trying to more closely tie the dollars to the actual education that is provided, and we think the way to do that is to provide some clarity around the cost structure of [individual] credit units."

The report, titled Financing Online Education and Virtual Schooling: A Guide for Policymakers and Advocates, is the latest in a series of critical looks at full-time online and virtual schools by the NEPC, a research and advocacy organization housed at the University of Colorado in Boulder. The group has previously taken on for-profit online school managers like K12, Inc. and has aggressively questioned those promoting the growth of such schools without evidence that they can demonstrate dramatically improved academic results.

Included with the new report is "model legislation," which Bathon said he expected to provoke "consternation" among virtual education providers "that are used to just getting a big lump sum and then functioning as a private business without really explaining where the money is going."

But Nina Rees, the president and CEO of the Washington-based National Alliance for Public Charter Schools, which advocates for the nation's 6,000 charter schools, including 227 virtual charters, said she "tends to agree that we should rethink the funding model [for full-time online schools] in a pretty fundamental way."

"In every state where we are talking about this issue, the question of the actual cost of [delivering online] education is a very difficult one to measure," she said, adding that "it's important to keep in mind whether these programs are successful at educating students."

'Sparse and Inconsistent' Information

The heart of the problem, according to the NEPC, is that states continue to know very little about how full-time online and virtual schools actually spend taxpayer dollars, leaving policymakers to fumble in the dark when it comes to ensuring accountability for academic performance. The report describes credible literature on the financing of such models as "sparse and inconsistent" and not focused "on an analysis of actual costs, cost-benefits, or cost-effectiveness."

Another big issue, according to Bathon, is that most of the funding models currently in place operate under the assumption that online and virtual schools are providing roughly equivalent services as traditional brick-and-mortar schools, when the reality is that it's often extremely difficult to know if that is indeed the case.

And according to Gary Miron, a fellow at the center and a professor at Western Michigan University, those problems are compounded when states award money to online and virtual schools for simply enrolling a student, regardless of how long that student stays or how well he actually performs.

"Some states are still allocating funding for the whole year based on a headcount in September, and many [online and virtual] schools receive funding for students who don't last very long," Miron said. "That's one of the reasons for the poor performance of many of the schools. They're advertising far and wide and getting anybody they can in the door so they can get that headcount."

One state that does not use that per-pupil, enrollment-based model is Florida, which Miron and Bathon said was a partial model for the NEPC's proposed legislation. In the Sunshine State, online-ed providers only receive money when a student stays in a course for an entire year and successfully completes an end-of-year exam.

But even in Florida, said Bathon, there is still tremendous uncertainty about what it actually costs both online-education providers and traditional brick-and-mortar schools to successfully get a student through, for example, 9th grade algebra.

That's why its key, the NEPC contends, for states to calculate an accurate baseline for delivering various instructional units. After lawmakers know what it typically costs a traditional school to help a student successfully complete 9th grade algebra, they can set that figure as a bar for online providers, too--an approach that the NEPC maintains is key.

"The baseline efficiency consideration for policymakers when subsidizing [online and virtual schools] is to avoid paying the same, or more, for options that provide fewer services or lesser outcomes," Bathon and Baker write in their report.

Bathon and Baker also maintain that it's important for states to conduct more regular and thorough longitudinal studies to track online schools' academic performance and compare the results to traditional brick-and-mortar schools.

Opening Up the Market

As Rees of the National Alliance of Public Charter Schools noted, there does seem to be a growing consensus around the need to better calculate the actual cost of providing online and virtual education. She also said that many states have already moved to slow the growth of full-time online schools even as they look to rapidly expand more "blended" options that include more significant opportunities for students and teachers to interact face-to-face and in-person. 

For his part, Bathon said that he, and the NEPC, are actually enthusiastic about the possibilities of online education--they just want to open up what he described as "a very closed marketplace."

"What I'm trying to do is build structures that provide more information about the overall market so we can have the same faith in virtual schools as we do in traditional public schools," he said.

Follow @BenjaminBHerold and @EdWeekEdTech for the latest news on ed-tech policies, practices, and trends.

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