While there are examples of innovative funding models for virtual schools and online course programs, most struggle to secure sustainable, adequate, and equitable funding, experts in the field say.
One of the biggest areas of funding concern for online education advocates is state-led programs, the vast majority of which are paid for through state appropriations. When a state sets aside an appropriation for a virtual school, it inevitably limits the number of students who can enroll in the program and prevents the school from being able to grow beyond a fixed number. (“Virtual Ed. Enrollment Caps Facing Greater Scrutiny,” this issue.)
In addition, being supported through an annual appropriation can make it difficult to count on sustainable funding during tough budget years, when state legislators are forced to make difficult decisions to balance the budget.
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And when a legislature appropriates money directly from the state’s education budget, it can create competition between the virtual school and local school districts, said Bryan Setser, the executive director of the 50,000-student North Carolina Virtual Public School, based in Raleigh.
“[Districts] see it as taking money from their overall pie,” Mr. Setser said.
But he also pointed out that having an appropriation can be helpful when launching a virtual school because it provides a chunk of startup money, which allows the program to “make a big impact.”
The Florida Model
One of the most oft-cited examples of an innovative funding model for a state-led program is that of the Florida Virtual School, or FLVS, which began operating in 1997. Last year, the school had 154,125 course enrollments.
“The only state virtual school in the country that has a funding model that is at some level sustainable and allows for growth and planning is Florida Virtual,” said John Watson, the founder of the Evergreen Education Group, an online-learning consulting and research firm in Evergreen, Colo.
Two aspects of the Florida school’s current funding model sets it apart from other state virtual programs, said Holly Sagues, the chief strategist and policy officer for FLVS.
For one, in Florida, the funding follows the student, and second, FLVS receives funding only if the student successfully completes the course, tying the school’s funding to student performance.
“That’s why you’ll see that Florida Virtual School’s enrollment is so much bigger than all the other virtual schools,” Ms. Sagues said.
Before 2003, the school operated on an appropriations-based funding model.
“We would figure out how many students we would be able to serve,” said Ms. Sagues. “It really does hurt kids, because we had a waiting list a mile long, but we weren’t funded appropriately. There was no way for us to grow our enrollment base with that model.”
The funding model changed from an appropriations-based mechanism to a per-pupil, performance-based model through legislation that passed in 2003, and during the next school year, course enrollments more than doubled, from 14,000 to 31,000.
Having funding that follows the student, as well as tying funding to student performance, is an innovative model that encourages continuous improvement in not only students and teachers, but also management, said Susan D. Patrick, the president and chief executive officer of the Vienna, Va.-based International Association for K-12 Online Learning.
The ways online education programs receive funding differ significantly from state to state. Advocates for such programs argue that traditional approaches aren’t flexible enough.
Annual appropriation—Most state-led virtual programs are funded through an appropriation, which means that the legislature sets aside a specific amount of money for that purpose each year. Although this model can be useful in the startup of such programs, a limited amount of funding can hamper growth and lead to enrollment caps.
Attendance and seat time—In brick-and-mortar schools, the amount of funding a school receives typically depends on attendance or on seat time, which is how long a student spends in class. But this model doesn’t work well for online learners, experts in the field say, because it limits the ability of online students to work at their own pace as they complete virtual courses.
Funding follows the student—Proponents say this is a more sustainable way of providing funding for virtual schools and online programs because it does not limit the number of students who can enroll. Many states, however, do not have finance and data systems that are able to track student funding closely enough to make this method work at the state level.
Funding based on performance—The Florida Virtual School is only paid once a student has successfully completed a course, thus tying the school’s funding to student performance. Advocates for online education contend that this method frees students from time constraints and promotes continuous improvement in students, teachers, and virtual school administrators.
Source: Education Week
“If we’re going to have an education system that focuses on student learning, then we need to have funding and policies that focus on competency-based pathways, where students have to demonstrate proficiency before moving forward,” she said.
Instead of a performance-based funding model, many virtual schools receive state aid on the basis of seat time—meaning the amount of time a student spends on the course—or attendance, neither of which works well for the online environment, experts say.
“The bottom line is that we’re still in a situation where there are plenty of examples where the letter of the law, particularly as it pertains to funding, doesn’t really fit well with the online environment,” said Mr. Watson, from the Evergreen Education Group.
Part of the appeal of online learning is the flexible schedule it provides, as well as the ability of the student to move at his or her own pace—both of which are curtailed by funding models based on attendance or seat time, he said.
“It’s clear in most states that they really haven’t figured out a comprehensive, robust, and scalable funding model that’s going to apply to online 21st-century schools,” Mr. Watson said. “It’s not there yet.”
One challenge states face when establishing funding models for virtual schools and online programs, said Ms. Patrick, of iNACOL, is “that the data systems and finance systems aren’t sophisticated enough” to track funding for each student’s individual courses.
Most state-led online programs are supplemental, which means that students may take one or two courses through the virtual route, while earning the rest of their credits at a local school. But state data and finance systems typically can’t direct the funding for just one or two classes to a virtual school, while funneling the rest of it to the regular school.
Liz Pape, the president and chief executive officer of the Maynard, Mass.-based Virtual High School Global Consortium, said that the majority of its funding comes from roughly 660 member schools paying their membership fees.
The consortium serves about 13,000 students around the globe and provides yearlong and semesterlong basic courses, gifted and talented courses for middle school students, Advanced Placement courses, and credit-recovery classes.
Classes are taught by teachers from the consortium’s member schools.
Virtual charter schools are often funded as traditional face-to-face charter schools, with the state aid following the student, although many virtual schools receive slightly less funding per student, said Jeff Kwitowski, the vice president of public relations for Herndon, Va.-based K12 Inc., an online-course provider that operates its own schools as well as contracts with schools and districts to serve about 70,000 total students.
“One of the greatest benefits of online learning is access to high-quality courses—and more of them—at a good cost,” Mr. Kwitowski said. “But while [virtual school] costs may be different, there are significant costs to operating full-time online schools.”
Ensuring that students receive adequate and sustainable funding in online programs is essential, he said.
Mary Gifford, the senior regional vice president of the central region for K12 Inc., added: “There is some assumption that [online learning] can just be done on the cheap, and while there are certainly some economies that we can achieve, there are other economies we can’t.”
“To do it for remarkably less is not going to be fair to those kids,” she said. “They’re still worth a high-quality public education.”
For instance, virtual schools do not have to pay for facilities or utilities but may have higher technological expenses.
In addition, online courses can be replicated and scaled up easily to meet the needs of just a few or several thousand students, which can help cut down on costs.
However, it often takes a large investment initially to develop courses, and high-quality online programs adhere to student-to-teacher ratios comparable to traditional schools’, so there are little savings in personnel.
A version of this article appeared in the April 28, 2010 edition of Education Week as Lack of Sustainable Funding A Challenge for Online Ed.