Bruce D. Baker, Rutgers University Jason Bathon, University of Kentucky
This policy brief addresses considerations for state and local policymakers as they decide whether and how to finance supplemental online education alternatives and/or full-time virtual schools. We begin with a discussion of the sparse and inconsistent literatureregarding the financing of new online models. Then, to help inform price setting or subsidy rates, we present empirical illustrations for determining costs. We start with a top-downexample, isolating typical cost components of brick-and-mortar schooling and thenmatching them to cost components of virtual models considered all-inclusive (althoughthey typically provide far fewer services than their traditional counterparts). Next, we offeran alternative cost analysis framework that can be used to add individual cost componentsin order to calculate total overall costs for virtual schools. After discussing general analyticissues that policymakers should consider as they develop finance policy, we conclude withmodel legislation for a uniform financing and accountability policy applicable to bothsupplemental and full-time online education.
This backdrop leads us to what we might refer to as
School Finance 2.0
Flexible Financing for a Virtual World.
Our central recommendations are:1.
OE/VS alternatives should be funded based on the instructional units provided tostudents to advance their progress toward program completion. Using brick-and-mortar rates as the basis for funding online offerings is inappropriate; the scope of services provided by OE/VS alternatives varies so greatly that an offering is rarely,if ever, equivalent to that provided in a traditional setting offering a fullcomplement of services.2.
Maximum subsidy rates for online instructional units should not exceed the costs of producing the same unit in the brick-and-mortar setting.3.
States should consider determining the average costs for various units of traditional brick-and-mortar courses, particularly at the secondary level, to provide a base forcalculating state subsidies for full-time online program as well as for calculating forschool district subsidies for supplemental online courses.