Special Report

Cyber Schools’ Status

By Rhea R. Borja — May 03, 2005 6 min read
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Riding the wave of online learning’s increasing popularity, 22 states have established virtual schools, and more may be on the way.

Legislatures from the Deep South to the Great Plains, encouraged by the relatively low cost of these online programs and their promise of “anytime, anywhere” learning, have paid to start many of the schools in the past few years.

Technology Counts 2005
Electronic Transfer
NCLB Focuses on Data Tools
State Support Varies Widely
• Cyber Schools’ Status
Federal Role Seen Shifting
Schools Eye Future Costs
State Data
State Snapshots
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“An increasing number of high-level policymakers are making the connection between virtual learning and school reform, economic development, and equity of access,” says William R. Thomas, the educational technology director of the Southern Regional Education Board, an Atlanta-based group that seeks to improve education in 16 Southern states. “State virtual schooling is going to become an established, institutionalized way to meet a variety of student needs in all of our states.”

Yet the funding models for these virtual schools vary as much as the states themselves. Some rely almost solely on state dollars. Others use a mix of state and federal funds, as well as tuition or course fees from school districts and parents. A few are supported mostly, if not completely, by federal aid.

And the Florida Virtual School, which jump-started the trend in K-12 online learning in 1997 and is now the nation’s largest state-sponsored online school, has a funding model different from that in any other state. During the 2003-04 school year, it became the state’s 73rd school district—and, as a consequence, it now gets its state aid through a set amount for each full-time-equivalent student, just like any other district.

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Chart: Cyber Schools

But while state virtual schools are gaining prominence and popularity among lawmakers and school districts, the future for such schools is uncertain. State revenue shortfalls and cuts in federal funding for educational technology have meant less money for virtual schools. Almost all those schools that receive state or federal funding have seen less from those sources in the past two years.

Many states, as well as Congress, are now hammering out the details of their budgets for the 2006 fiscal year. And many virtual school leaders, worried about the likelihood of more cutbacks, are searching for grants and other ways to shore up dwindling coffers.

“For state virtual schools to truly become established, … there needs to be a reliable funding stream,” says Thomas. “They can’t go out every year with their hands out to ask for funding. In good times, that works just fine. In bad times—oh boy, you’re in trouble.”

The Florida Virtual School, or FLVS, with headquarters in Orlando, has more ways than other state virtual schools to raise and control revenue.

Student enrollment and, consequently, revenue skyrocketed after lawmakers changed the school’s funding formula in 2003 from a line-item allocation in the state budget to one based on course completion and student enrollment. FLVS receives $5,100 for every full-time-equivalent student.

As it works, one full-time student for FLVS equals six successfully completed online classes, whether those courses were taken by one or six students. About 13,000 actual students, most in Florida, enrolled in an FLVS course in 2003-04. That number jumped to more than 21,000 for the 2004-05 school year.

The huge jump in enrollment happened after the Florida legislature strengthened state school choice laws to better comply with the federal No Child Left Behind Act, says Julie Young, the executive director of FLVS. For the first time, parents were notified that FLVS was a supplementary-learning option for students.

“The stars aligned last year,” Young says.

In Alabama, the Alabama Online High School opened in 2000 with the help of a mix of state, federal, and private funding. By 2002-03, more than 600 high school students took one of 24 online courses developed by the state.

That number increased to more than 1,500 students for the 2004-05 school year, when counting those who take academic courses. Those courses cost their public schools $350 per credit hour. Remedial classes were offered online for high school students at no cost to their schools.

“That’s a lot cheaper than what [the state] spends per pupil in a traditional bricks-and-mortar school,” says Cheryl Sundberg, the manager of the Alabama Online High School, which is based in the college of continuing studies at the University of Alabama’s main campus, in Tuscaloosa.

As it is, the school relies mostly on state aid. During the 2003-04 school year, the online school received about $469,000 from the state. This school year, that funding was cut by 10 percent, for a total of about $422,000.

Just as enrollments and interest by school districts are increasing, funding is decreasing, says Sundberg. Also, the $350 cost per credit pays only for teacher salaries, she says. The actual cost of the online courses—which includes development, Internet connections, and administrative and other fees—is $650 per student.

The 1,500-student Colorado Online Learning program operates mostly with federal funds. It has generated about $285,000 during the 2004-05 school year in course fees from districts or partnership agreements with three colleges, and it has received $700,000 annually from a three-year federal grant, which expires at the end of this school year.

The state is unusual in that any school district can operate an online-learning program for students statewide. As a result, 15 virtual schools, managed by either school districts or for-profit education companies, exist in the state.

But Colorado Online Learning is the only state-sponsored virtual-learning program; students in about half the state’s 187 districts have taken a course through the virtual school. Its mission is twofold: serving students, especially those in high-poverty districts, through its own online courses, as well as helping school districts manage their online programs.

While Colorado’s district-sponsored virtual schools and those managed by for-profit companies—such as McLean, Va.-based K12 Inc. and the Baltimore-based Connections Academy—receive about $5,627 for every full-time online student, Colorado Online Learning gets no per-pupil state funding. Moreover, after the federal grant ends this year, the school will lose about 70 percent of its revenue stream.

“There’s widespread agreement that online learning needs to stay available to Colorado kids,” says Tim Snyder, the executive director of Colorado Online Learning. “But no one knows how to fund it. That’s our dilemma.”

As a result, Colorado Online Learning has raised its course fees for districts to $200 per student, per course, instead of $100 for high-poverty districts—and to $250 for regular school districts, up from $200. Still, Snyder says, the fees pay for little more than half the actual $400 cost per student for each online class.

Michigan is another state whose virtual school uses a mix of state and federal dollars, as well as tuition fees from districts and parents.

The Michigan Virtual High School, based in Lansing and managed by the nonprofit Michigan Virtual University, opened in 2000 with $18 million from the state legislature.

That year, fewer than 100 students used the program, and they took a handful of Advanced Placement courses. But in the 2003-04 school year, those numbers had exploded to almost 8,000 students and 90 online courses, taught by about 100 subject-certified teachers. In addition, up to 20,000 public and private high school students take online test-preparation courses through the virtual school for the state’s standardized 11th grade test.

Schools pay $375 per student per AP course. However, schools pay a lower cost based on volume: If at least 10 students want to take the same AP course, each “seat” costs $350. For other courses, the Michigan Virtual High School charges $275 per seat, or $250 per seat for 10 or more seats.

“We’ve stabilized our pricing and expenditures to the point that we’re going to be around,” says Robert Currie, the executive director of MVHS. “We want to become fully self-sustaining. But that’s very challenging.”

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