The Bottom Line: Funding Online Courses

The principal of an online school on the fiscal realities of starting and sustaining virtual programs by ROB DARROW

A few school administrators in Clovis, Calif., began a quest to introduce online high school courses in their school district, believing it might cost less to teach classes online than it would to teach students face to face in a classroom. They figured instead of having one teacher fielding a load of 150 students per course, an online course could be bumped up to 200 students per teacher.

In operating on that belief about comparative cost advantages, the administrators were holding to one of the biggest myths about online, or virtual, school programs. What they overlooked is this: Various costs must be factored into the development, implementation and maintenance of a strategically planned online school or virtual program for it to become financially sustainable.

Rob DarrowAs principal of an online school in Clovis, Calif., Rob Darrow has studied the costs of starting and sustaining a program.

After attending the first virtual high school symposium in Louisville, Ky., in fall 2000, the administrators learned that developing a financially sustainable online program takes many years. As a result, they opted to initiate a part-time online program in their school district.

Unstable Financing
The first thing the administrators from the Clovis Unified School District did was to identify discretionary and grant funds to implement an online program. The second was to hire a full-time online school coordinator.

The K-12 Clovis district, with almost 38,000 students in central California, wanted to identify new ways for students to complete coursework beyond the school day so more students could participate in electives, such as fine arts and performing arts.

The online school coordinator researched online course options and made decisions about the course management system, course content, teachers and students. The district began by offering five online courses (each in a different subject area): algebra 1, biology, freshman English, AP government and economics, and students could take one online course in addition to their other courses.

At the same time, teachers from the district were recruited to teach one section of each online course. Training was provided by the Florida Virtual School, which had been running online high school courses for four years at the time.

To move the program forward within six months, the Clovis district licensed course content from the Florida Virtual School.

The part-time online course program began in summer 2001, well before most school districts entered into this new arena of course delivery. The summer was the perfect time to begin teaching online courses because students could earn needed credits, teachers could focus on instructing one group of students while learning how to teach online, and money from the state for summer school courses could underwrite the costs.

Over the next five years, the online program was funded by 12 different grants or one-time district accounts and served 1,330 students in 10 courses. Because no state law in California allowed the funding of part-time online courses as part of the regular educational funding model, the online program was terminated in 2006.

Across the United States during the same time, various states and school districts began exploring online options for their students, and the number of high school students taking online high school courses increased annually. The U.S. Department of Education’s survey of online schools in 2002-03 estimated 328,000 students were taking online courses. One more recent survey conducted by the Sloan Consortium in 2008 puts the student enrollment in online courses at 1.03 million.

Why Go Online?
School districts generally consider offering online courses for one or more of the following reasons:

•  Declining enrollment. The belief that an increasing number of students are leaving a school district because they are attending other online or charter schools, resulting in reduced state aid for the school district.

•  Reduced costs. The belief that developing online courses will lower education costs.

•  Credit recovery. The belief that online courses can more easily help students to make up failed courses.

•  Alternative education. The belief that students need alternative ways to earn a high school diploma.

•  Increasing student opportunities. The belief that establishing online courses will better meet the educational needs of the Millennial generation with its fascination for all things digital.

Financial Fitness
Developing a five-year plan, including how the school will be financed, will ensure long-term success. As a school district, region or state considers the possibility of an online program, the answers to these questions can guide the long-term financial plan:

•  Who will administer and/or coordinate the program?

•  Who will develop and champion the program?

•  Where will the online content come from and how will it be purchased?

•  What course management system will be used and how will it be purchased?

•  Who will teach the online courses and how will teachers be paid?

•  What ongoing funding will support the operation of the online program?

Regardless of the reasons a district or consortium may explore online courses, the costs for the development and implementation are the same — whether students attend full time or part time. Finding the money for startup costs and then adopting a funding model for ongoing costs that sustains an online program is one of the many challenges.

In addition, most state school finance regulations on such matters as full-time equivalency or average daily attendance were not designed with online course delivery in mind. Across the country, most state policies provide funding to school districts only when students are enrolled full time and are physically present in school each day. In some cases, statewide or regional online programs were launched at a time when excess education funds were available for startup costs for innovative programs such as online learning.

Comparing startup costs for a traditional brick-and-mortar school with an online school is useful in understanding the development, implementation and sustainability of a virtual program. In the chart on cost comparisons (scroll to bottom of page), the ongoing expenses for an online school are shown in the “online school only” and “both” columns. These costs are the same whether the online courses are taken by part-time or full-time students and should be considered as a school district decides to invest in any online course program.

Costs Documented
In 2006, more than 20 representatives from online schools across the nation gathered to discuss the costs for online courses, and their conclusions were published in a report called “Costs and Funding of Virtual Schools”. The report, sponsored by the BellSouth Foundation, puts costs into two categories: ongoing and startup.

The report found that ongoing operating costs for online programs are about the same as operating costs of a regular brick-and-mortar school. In addition, the cost per student, whether enrolled in an online course full time or part time, is proportionately the same. The yearly cost per student ranged from $3,650 to $7,500 based on information from 15 different programs — some full time and others part time. As the number of students enrolled in online programs grows, some economies of scale may result in decreasing per-pupil costs.

Over the 15 years or so that K-12 online schools have been in existence, few published reports have documented the comparison of cost per students enrolled in online programs in relation to traditional schools. However, Florida TaxWatch evaluated the Florida Virtual School during 2006-07 and calculated per-student cost as $5,243 at the virtual school compared to $6,291 at a regular public school in the state.

The Florida Virtual School was established through grants, partnerships and one-time gifts a decade before the tax group issued its report. In addition, targeted state legislation was passed in 2004 to fund the state’s virtual school differently than traditional Florida schools, basing it on course completions.

During the year of the report, the Florida Virtual School reported 113,900 course enrollments among students both full time and part time. The school estimates it will finish the 2009-10 school year with more than 200,000 course enrollments for students in grades 8-12 during the 2009-10 school year.

Startup Expenses
Four important startup costs are illustrated in the “Costs and Funding of Virtual Schools” report. These include course content, the course management system, teacher training and marketing/advertising.

The cost to develop one online course ranges in price from $2,000 to $100,000, according to the BellSouth Foundation study. Some school districts and state programs have teachers develop their own content, while others purchase or lease content from a commercial company. Commercial online course content ranges in price from $300 to $500 per student per course.

The course management system, or CMS, is the password-protected online place where students complete their course work, participate in discussion forums and receive their grades. The estimated cost for a CMS system (Blackboard, Angel, etc.) can range from $15,000 to $25,000 per year depending on the number of students.

Costs for teacher training will vary and can be provided on the job. Few higher education institutions provide adequate degree programs for online teachers.

Marketing and advertising are vital for promoting the online options among students and their parents. Everett Rogers, who developed a theory of “diffusion of innovations,” said in his 1963 book on the subject, “One cannot seek knowledge about an innovation until he or she knows it exists.” A marketing plan for an online education program can cost anywhere from $10,000 to $100,000 per year depending on the advertising media used.

Course Sharing
The challenge is how to manage startup and ongoing costs. Some online programs are reducing their costs by using what are known as “open educational resources” for their course content. These are learning materials freely available for use, remixing and redistribution. Those involved in the open educational resources movement believe a culture of sharing resources and practices will facilitate change and innovation in education.

Although some open resources may not be completely free of charge, the idea may reduce startup and ongoing costs for online schools. Stephen Downes, a senior researcher with the National Research Council Canada, has studied open educational resources and concluded the movement “is making the tools and content for online learning less costly.”

In particular, as teachers develop online content, they can share the content so it can be re-used by others. David Wiley, associate professor of instructional psychology and technology at Brigham Young University and founder of the Open High School of Utah, says the use of open educational resources involves an upfront investment as materials are discovered or created. “But this investment,” he adds, “can be on par with what would normally be spent acquiring commercial materials. Once the investment is made, however, ongoing curriculum costs can be significantly lower than traditional textbook replacement and other costs.”

Additionally, due to the open nature of open educational resources, teachers can make incremental revisions and improvements to the materials, says Wiley, “ultimately resulting in materials that are actually more effective than their more expensive commercial counterparts.”

Various worldwide projects have developed as part of the open source movement, including Moodle, a course management system, and Curriki, whose mission is to support the development and free distribution of world-class educational materials to anyone who needs them. Another company that makes its online course content freely available is SAS Curriculum Pathways.

As more open educational resources develop, this may reduce the ongoing course development and maintenance costs for online learning.

Two online schools opened for full-time students in August 2009 after establishing a charter school in their respective states. Both the Open High School of Utah and the Clovis Online School, which serves students in central California, use open educational resources and other open source online tools, believing they will provide more course content options for students and teachers at a lower cost, better sustaining their programs over time.

Statewide Funding
Across the nation, over one million students have chosen to enroll in full-time or part-time online academic programs with the number of student enrollments increasing by 30 percent annually, according to the International Association for K-12 Online Learning. In some states, legislation has been passed to support these efforts, but most states’ existing school funding models were established more than 20 years ago, before the Internet became a household entity.

For online schooling to be financially sustainable and to support learners in the 21st century, state educational funding formulas must change. States that have passed legislation to better support online schooling — notably Florida, Michigan and Idaho — are important models to consider for all states.

Although online learning may not be for every student today, it may be in the future. In their book Disrupting Class, authors Clayton Christensen, Michael Horn and Curtis Johnson estimate that by 2019 “at the current growth rate, 50 percent of high school courses taken by high school students will be online.” Creating a plan for ongoing funding is one of the first steps in establishing a sustainable online school program.

Rob Darrow is principal of the Clovis Online School, a charter school in Clovis, Calif. E-mail: robdarrow@cusd.com

Cost Comparisons: Brick-and-Mortar School vs. Online School

Brick-and-Mortar School Only
•  Buildings, classrooms and grounds maintenance
•  Security
•  Transportation
•  Energy
•  Computer and Internet access for every teacher
•  Teacher substitute costs (for teacher sick days or professional development)
•  Athletics
•  Music program (e.g., band)
•  Nursing services

Online School Only
•  Space for offices and computer lab for students 
•  Course management system
•  Course content
•  Ongoing course maintenance and development
•  Computer and Internet access for every teacher and student
•  Mobile communication device for teachers (e.g., cell phone) and network
•  Technology support (e.g., help desk, course updating, server maintenance)
•  Marketing and advertising

•  Administration
•  Teachers
•  Professional development
•  Students
•  Student information system
•  State testing system
•  Textbooks
•  Courses approved by school board
•  Access to computers
•  Special education services
•  Student support (counseling, library)
•  Network infrastructure
•  Telephones and network