Cyber Schools: Friend or Foe?

Who pays the freight when your students enroll in other schools' online classes?

The issue for Superintendent Thomas Doluisio isn't technology. It isn't competition. Rather, Doluisio has labeled the underwriting of his state's new wave of cyber schools an "unfunded mandate."

Doluisio, like other superintendents in Pennsylvania, is fuming that he has to send away money to pay for charter schools and cyber charter schools in particular. Throughout this past summer, long after the budget for the 14,000-student Bethlehem, Pa., Area School District was passed, Doluisio continued to receive letters asking him to issue tuition checks from the district to schools across the state at a cost of $6,000 per child.

"I'm not afraid of competition. Bethlehem is part of the academic standards movement. We're doing some unique things here," Doluisio says of Bethlehem, a school district mixed both socioeconomically and ethnically, about 60 miles north of Philadelphia. "Competition doesn't bother me. I can compete with them, but let's not take away money from me in an inequitable fashion."

Only two of Pennsylvania's 65 charter schools in 2000-2001 were cyber schools, with another three launched this fall. That's a fairly modest number, but school officials are expecting to see even more ventures, especially with the entry this fall of for-profit corporations such as former Education Secretary William Bennett's K12. Pennsylvania and, to a lesser extent, Nevada have become a testing ground for how online schools should be funded. Few superintendents in Pennsylvania are happy with the trend.

"I cannot think of one superintendent who is not upset with cyber schools," says Stinson Stroup, executive director of the Pennsylvania Association of School Superintendents. "They're concerned that the quality of some of the cyber programs that are being offered is not good, that they do not have an opportunity to review the programs and that there's no documentation that the cyber schools provide that verifies where the students actually live."

Steve Smith, who follows education for the National Conference of State Legislatures in Denver, is tracking virtual schools that are about to open in Illinois, Maryland, Minnesota, West Virginia and Michigan, joining existing cyber schools in California, Florida, Kentucky, Nevada and Utah. Smith says the interest in using online courses to leverage education is growing.

"We're at the point where technology can finally allow these types of schools," Smith says. "I know there's a heightened interest in the issue, just from the number of calls I've received on this issue."

Cyber schools have a distinct advantage, Smith says. Free of bricks and mortar, the virtual school can grow indefinitely, without the fear of stretching library facilities or adding portable buildings. But many state lawmakers, Smith says, are wrestling with laws so wide open--or even nonexistent--that they fear anyone could throw up a Web page, hire a couple of teacher aides and start recruiting home-schoolers.

That's one underlying issue in the debate. No one, not even the virtual schools themselves, have a clear number on just what it should cost to educate each student in a virtual school. Budgets for established virtual schools vary from $400,000 to just over $6 million. Some are funded with state dollars. Others are a collaborative among school districts. A few are tuition-based programs with targeted individual classes. Some are self-paced with intermittent teacher interaction. Others require regular seat time each day for students.

Money Motivation

Most cyber schools downplay a profit motive for online courses, even when the schools are being run by for-profit companies. Most stress the expanded academic opportunities as their primary interest. However, critics, such as Thomas Gentzel of the Pennsylvania School Boards Association, question just how much of a financial commitment a nonprofit or for-profit cyber school must make to educate students.

"What they're doing in Pennsylvania is offering a $1,000 computer as a onetime investment. You give these kids a computer and hook them up online and for that [school districts] send $6,000 per year," says Gentzel, who is PSBA's assistant executive director. "It's a good deal for the cyber school. They get a ton of money. The home-schooler gets a free computer and he gets to go online for his education, which he can't do now. Meanwhile, the public schools get nailed financially one more time."

Pennsylvania law allows state funding to follow the child, which means that every child who enrolls in a cyber school or any charter school takes $6,000 out of a school district's budget. Doluisio calls that logic "naive and incomplete."

As the bills from charter schools who've taken in Bethlehem students continue to arrive, Doluisio is being asked to send dollars away from his district one child at a time, and that hurts the existing program even if it's only a handful of students from any one school.

"I can't reduce the air conditioning bill. I'm not going to get rid of a custodian or a secretary or a teacher because two of my students will be going to a cyber school," Doluisio says. "If we could send the money away, 'no harm, no foul,' I wouldn't have a beef with it, but that's just not true."

David Mowery, superintendent in Gettysburg, Pa., received letters saying five of his students would be attending cyber charter schools this fall--three at the Western Pennsylvania Cyber Charter School and two at the Einstein Academy, based in Morrisville, Pa. Mowery is troubled by the notices, saying funding ought to be tied to accountability. These schools are not accountable to the local communities that fund them and they aren't a partnership with public schools as promised in legislation, he says.

"There's no collaboration agreement with charter schools and local school districts," Mowery says. "I have no idea about the curriculum. I have no idea about attendance procedures. I have no idea who the teachers are and whether they are certified or not. I have no idea how this school is going to be regulated or even where the school is located."

School districts are so mad about the funding issues of cyber charters that the Pennsylvania School Boards Association and four rural school districts have challenged the state department of education on the validity of funding virtual schools under the state's charter school law. Most Pennsylvania school districts refused to pay the tab on cyber charters last year.

In response, the state department of education said state funding would be withheld in August if the school districts refused to release the money. PSBA asked that an injunction be granted to stop the state department of education from withholding money, but a state judge denied the motion last May. In his opinion, the judge said withholding the money would put Western Pennsylvania Cyber Charter School in jeopardy. PSBA has appealed to the state supreme court.

Nevada's Pitch

Pennsylvania is not the only state wrestling with the transfer of public funds for online programs. Mark Shellinger, former superintendent of Nevada's 3,000-student White Pine County School District, raised $3 million in grants in 1998 to launch the Nevada Virtual High School, which offers online courses in all high school subjects.

Under the arrangement devised by Shellinger, students outside the county or the state pay $3,400 per year for the right to enroll in a full schedule of online courses, The tuition pays for teacher and technical support.

But financial support remained precarious. Shellinger lost his court battle to force the Nevada Department of Education to fund Nevada students who attended the virtual high school. However, the state legislature in June created the funding mechanisms for virtual schools. The measures will take effect next July.

"The state had said they didn't have to pay for virtual schooling and under current law, they didn't," says Shellinger of the virtual program, which enrolled a modest 185 students as of June. "It's my belief that the money should follow the student."

One of the biggest funding issues is competency versus seat time, Shellinger says. Should funding be based on 60 hours of teacher contact time? Or should funding more appropriately, in his view, be based on the ability of the student to master the material?

Shellinger's pitch has been especially persuasive with parents of home-schooled students, who are some of the virtual school's biggest supporters. Online learning, the superintendent says, has a much higher quality than many correspondence courses used by home-school families and it ought to be expanded.

"If we can get home-schoolers and others to come back to public education virtually, why wouldn't we want to do that?" asks Shellinger, who moved this summer from Nevada into the superintendency in Rochester, Minn. "Why wouldn't we do that if we really believe public education has a greater value?"

Funding Dispute

Few public schools can brag about the kind of growth seen by Western Pennsylvania Cyber Charter School, operated in Midland, Pa., on the banks of the Ohio River. When the school's director, Ronald Young, went out to informational meetings to recruit for the new school last fall, he expected to see 25 students sign up for online classes in the first year. He walked away the first night with 43 applications.

"It was like a panic, really. We hadn't even started interviews to get kids in the school yet, and people were lining up to enroll," says Young, a former public school principal. "All of our growth has really been word of mouth."

A Victor Hugo quote--"You cannot stop an idea whose time has come"--scrolls across the top of the school's Web site. Western Pennsylvania Cyber Charter School opened its virtual doors with 250 students. Another 250 children had enrolled by the end of October. Roughly 45 percent of the students come from public schools, another 45 percent are home-schoolers and 10 percent come from private schools. The vast majority do not live in the Midland Borough School District, which issued the charter to the school.

To keep the school afloat, Young borrowed $1.7 million to cover the first year's operating expenses because nearly 70 percent of the school districts from which the students came did not respond to his cyber school's requests for tuition payments.

Young says he went to each school district and offered to cut the tuition rate on each student. The first year, Western Pennsylvania was willing to take $5,000. The second year it would take $4,500. And by the third year the school would take $4,000. The cyber charter had few takers on the offer, he says.

"We don't agree with the funding. We think there's got to be something done there, that the funding should actually reflect the cost of doing business," Young says. "No district should be charged more than it costs us. If there's something wrong with the formula, they should look at it."

Each child who enrolls in the Western Pennsylvania Cyber Charter School is given a computer, a printer and Internet access, as well as class materials. Coursework is prepackaged software produced by the vendor class.com. Certified teachers, known as facilitators, work with each student. Teachers are required to make contact by phone with students at least once per week, and classes are limited to 20 students. The school's only facilities are located in leased space in the 490-student Midland Borough district.

Questionable Charters

The backlash against cyber charters has gotten so fierce that even those groups that have been ardent supporters of the charter movement suggest it might be time to remove online schools from under the charter school law and replace them with a state-run program.

Chenzie Grignano, director of the Charter School Project at Duquesne University, while acknowledging the value of competition and choice, says current virtual schools have engendered hostility and undermined the charter movement. The hostility, he says, relates in part to how the schools are funded.

"I think most people would agree that the cost and the value of these schools are not in sync. It doesn't cost as much as a traditional school at this particular stage," says Grignano, who also favors funding that addresses "recovered" students--those who have left the public school system but return for online options. "There's a disconnect in most people's minds between a physical plant and a cyber school plant. That's the question that people are debating in Pennsylvania."

Stroup, PASA's director, does not question the spending practices of all cyber schools. Some spend a considerable amount developing courses and tracking progress. On the other hand, he says, other cyber schools on the horizon do nothing more than purchase prepackaged software.

"There are no guarantees," says Stroup. "There's no quality control at all on this program. You don't know whether the program is good or whether it is being delivered with high-quality supervision. I think you have more direct face-to-face accountability in a charter school than a cyber charter."

For-Profit Competition

The Western Pennsylvania Cyber Charter School has enrolled close to 1,100 children this fall, nearly half of whom come from home-school families. Young, the school's director, says he regrets the bad blood that has flowed over funding the online charter school, yet he bristles at the idea that charter schools be required to sign collaborative agreements with public school districts, a proposal currently before the state legislature and supported by PSBA.

"That kind of bill would effectively put us out of business," he says. "These school districts aren't going to send money to me. We can't even agree to get them to reduce their costs."

Even as Young struggles to force public schools to fund his program, for-profit ventures have moved into the marketplace. K12, the brainchild of former U.S. Education Secretary William Bennett, has signed its first contract with the Norristown, Pa., Area School District, a small urban district northwest of Philadelphia. The Norristown school board voted to give a five-year charter to what will be called the Pennsylvania Virtual Charter School. K12 will provide curriculum and management.

Ron Packard, the chief executive officer of K12, says the cyber school project in Norristown ultimately expects to serve 15,000 students. It can serve up to 1,500 students in kindergarten through 2nd grade this fall. Three grades will be added each year. Norristown is K12's only contract with a school district this fall.

"We don't want to take children away from the public school system. We just want to give them a chance to take this option," Packard says. "It's not for all 53 million kids. It might just be for 10 percent of those kids. For those kids, it can be a very powerful educational choice."

Norristown Superintendent Michael Woodall is pragmatic about the cyber charter in his midst. Under state law, if his school board had turned down K12's charter application on the basis of differing philosophies, the company could have gone straight to the state board of education for its charter.

"What I can say about the application we received was that it was a top-quality application," Woodall says. "My office reviewed the application and it entirely met the law, and we felt we had an obligation to approve it."

He expects the cyber school to be popular owing to the lure of a free computer. Yet he is bothered by the fact that the cyber school both takes local dollars and gets to sidestep many state regulations.

"The things that may not make us appear so desirable are some of the things that the charter schools are exempt from under regulations," Woodall says. "If the governor is going to establish other schools, cyber charters or charter schools, then they need to find an independent mechanism to fund it. Why aren't they willing to pay for it?"

While Norristown may lose students, the district will gain some small financial benefit. K12 has offered to pay the school district $300 per student to advise the company on logistics, such as how to implement enrollment procedures and payment notification.

Utah's Growth

Most virtual schools are not stand-alone ventures. Some have grown out of an individual school district's efforts. Others have formed under charter school legislation. Some are the result of state or federal grants.

Utah's Electronic High School sprang from a challenge by Gov. Michael Leavitt to deliver every second course in the state electronically. Even with such high-powered backing, though, dollars were scarce during the school's early years. Principal Dick Siddoway cobbled together brokered courses, federal grant money and private contributions to kick off the virtual school back in 1994.

"It was scary, very touch-and-go the first few years," admits Siddoway, who came to the Electronic High School from a job as director of library sciences for the 60,000-student Davis County Schools, just north of Salt Lake City. "Our Ed Net system, however, has been funded by the state for a number of years now. I think it goes back to Utah's commitment to technology. The state led the nation by wiring every school with at least T-1 connectivity back in 1998."

Siddoway probably didn't hurt his chances for funding when he won a legislative seat in the Utah statehouse in 1996. The Electronic High School was not part of his platform, but the seat did give Siddoway access to lobby his 74 statehouse colleagues on a cause near to his heart. This year, the Utah legislature approved $400,000 for the virtual venture.

The Electronic High School has a particular appeal for Utah lawmakers. Utah has a population of 2 million, but 1.7 million of those people live in a 70mile strip on either side of Salt Lake City. That means the Electronic High School offers courses that many rural and even some urban students have not been able to access, such as horse management. A state scholarship program that encourages students to pick up college credits before they graduate is also a draw for the online campus.

Home-schoolers in Utah constitute roughly 3 percent of the state's schoolage population. At the Electronic High School, home-schoolers are 10 percent of the enrollment.

The virtual school started with two courses required for graduation in the state--9th-grade earth systems and 10th-grade world civilizations. This year, the school will offer 30 courses, up from 15 last year. The classes are delivered two ways: six hours of instruction each day via two public broadcast stations or via a two-way voice-data transmission system known as Ed Net. Last year, the school delivered 32,000 credits to a total of 4,600 students, with 2,000 of those students using the Internet to access courses, Siddoway says.

Siddoway and his half-time secretary are the only administrative staff for the Utah virtual school, based in Salt Lake City. Teachers are paid a stipend of $6,000 per course.

Siddoway hopes state funding will be indexed to the number of classes being offered. "We obviously have a payroll to meet, and we still have 30 classes to develop. If we can maintain our current funding level for a year or two and then move up to $600,000 a year, we'll be happy."

Generous Support

Even at the higher level, Siddoway's budget proposal would be dwarfed by the Florida Virtual School. The school, recently rechristened the Florida Virtual School by the legislature because of the plan to add adult education, started as a pilot project of the Orange County and Alachua County, Fla., school districts back in 1996. A $200,000 state Break the Mold grant underwrote the startup costs of the Orlando-based program. The school enrolls public, private and home-schooled students for a single course or a complete program of study.

"Most students do not look for us to be their entire academic career," says Phyllis Lenrz, the business development manager for the Florida Virtual School. "They might want to accelerate their academic career. They might want to take a course they can't get. They might want to do it for grade forgiveness. It meets a certain need."

The guidelines for the operation of the online school are written into the state's public education statute. The school, with an annual budget of $6.2 million, is governed by a seven-member board appointed by the governor and operated by the Florida Department of Education. It cannot grant a high school diploma although students can sign up for multiple courses.

The Florida Virtual School offers 66 courses and employs 74 teachers. Most staff members are full-time, although the school has added some adjunct faculty this fall. The school's budget calculates to a cost of more than $1,000 per student per class--all paid for by the state--but Lentz attributes the expense to the front-end costs associated with development of online courses. As students are added, the cost per class should level off, she says.

"We have been a research-and-development school," Lentz says. "A good amount of our personnel time has been spent and our dollars have been spent on noninstructional costs."

School administrators now are taking a clear-eyed look at costs, hiring an outside consultant to analyze the campus' use of expenditures. On every academic front--meeting the needs of individual students, finding ways to help students who haven't been successful in other settings, leveling the playing field for academic opportunities across the state-the Florida Virtual School is succeeding, Lentz contends.

"We do hope that we are more cost-effective than face-to-face instruction because we don't have to include busing and transportation and classrooms in our budget and expenditures," she adds.

Fiscal Independence

Even those virtual schools that benefited from generous seed money are coming to a point where they have to stand on their own two feet financially. The Virtual High School in Concord, Mass., for instance, becomes a not-for-profit corporation this fall, having exhausted its initial $7.8 million startup grant from the U.S. Department of Education that paid for the computer servers, staff and training for the online instructors.

The Virtual High School is a joint project of the Hudson Public Schools and the Concord Consortium (see related story, page 16).

The school's principal, Bruce Droste, says his program enables schools in rural areas to offer some higher-level and specialized courses for the first time to students.

"I wouldn't want this to replace high school," Droste says. "I think there are important social benefits in having kids walking down the hail bumping into each other. On the other hand, this isn't taking textbooks and scanning them and putting them up on a screen, either. We've had students go out and interview a Vietnam veteran and then come back and have a classroom discussion. We're trying not to have a 'heads down' kind of learning here."

Over the last five years, the course schedule at the Virtual High School has grown from 30 courses in 1997-98 to 156 courses in 2000-2001. More than 1,700 students from 200 schools participate in 30 states and 10 foreign countries.

This fall, with its federal money gone, the Virtual High School is charging participating schools a $6,000 membership fee. This covers the cost of central administration, registration, server management and school operations and entitles the school to enroll 20 students in fall and spring classes. Each school also agrees to provide personnel to teach one NetCourse a year.

"If we tighten our belt, we should be sustainable," Droste says. "I think we'll break even this year."

Kimberly Reeves is a free-lance education writer in Dallas.