Testimony given before the Joint Legislative Committee on E-School Funding 11/29/18

State of Ohio

Editor’s Note: Chad Aldis was invited to give testimony before the Ohio General Assembly’s Joint Legislative Committee on E-School Funding. These are his written remarks.

Thank you, Co-Chair Lehner, Co-Chair Cupp, and joint committee members for giving me the opportunity to provide testimony on Ohio’s options for how it funds online charter schools.

My name is Chad Aldis, and I am the Vice President for Ohio Policy and Advocacy at the Thomas B. Fordham Institute. The Fordham Institute is an education-focused nonprofit that conducts research, analysis, and policy advocacy with offices in Columbus, Dayton, and Washington, D.C. Our Dayton office is also an approved Ohio charter school sponsor.

As many of you know, Fordham has been a staunch supporter of school choice for decades. We believe that every family deserves the right to choose their child’s school; however, we also believe that state and local leaders have a duty to ensure that these options are high-quality. Although the Ohio General Assembly has done a considerable amount of work in the last few years to improve charter school laws, the unique nature of online schools has created a specific set of challenges that are yet to be addressed. Most notably, as highlighted by the long-running controversy surrounding The Electronic Classroom of Tomorrow (ECOT), is the best manner to fund online education.

Lessons Learned

ECOT, along with every other online charter school, was historically funded based upon student enrollment. If a student was enrolled in the school during the monthly count date, funding flowed to the school. This changed during the 2015-16 school year after FTE audits examined student engagement in the courses. Calculating the amount of verifiable time spent engaged in learning resulted in ECOT—and a number of other online schools—having to repay a significant amount of state funding. In ECOT’s well-documented and highly-publicized situation, the school was required to repay approximately $60 million of the $108 million received during the 15-16 school year. This situation, the litigation that followed, and the ultimate closure of ECOT has provided some important lessons.

First, funding based upon student enrollment alone is fraught with potential problems. While many people focus on the real risk it poses to taxpayers on the hook for funding an education that may not actually be occurring, the negative impact is even greater for students—many disadvantaged—who enroll in a school that passes them on but requires little effort in return. Funding via enrollment alone can be abused by bad actors more interested in revenue than education and may even play a role in the low academic achievement results posted by some online charter schools.

Second, funding based upon the number of minutes a student is engaged online is at best making the most of a bad situation. It gives weight to the number of minutes a student is logged in and rewards the best record keepers without regard—once again—for student learning. I’ve also heard, even from online schools that are able to successfully navigate this bureaucratic process, that the work it takes to document participation ends up falling on teachers and likely detracts from the education being received. This is a situation where we’ve created a compliance focused environment that may not achieve our long-term goal of boosting student learning.

Both Ohio’s long-time and more recent methods of funding online charter schools are troublesome. They’re, quite frankly, unlikely to deliver the results that students and taxpayers deserve. That’s one of the reasons that I’m encouraged by the work of this joint committee and am looking forward to your recommendations as to whether competency-based funding might be a better option. That being said, I think you have your work cut out for you. From my perspective, there aren’t any ready-made solutions.

The Experience of Other States

I’m not sure that any state has really figured this out. Academic achievement in the online sector has been a challenge everywhere. Some students thrive and others struggle mightily. A number of states have experimented with basing funding on competency and/or course completion. A couple of years ago, two Fordham analysts dug into how competency-based funding works in other states. Here’s an extended excerpt of their findings by state:


The interesting features of Utah’s approach are its differentiation of course-level funding based on the subject matter, and a payment schedule based on three milestones during a student’s course enrollment. Applying to online courses for students in grades 6–12, Utah allocates funds based on the number and types of courses that students choose. The amount of funding tied to each course depends on its “cost category.” Utah disburses funds in the following manner for a one-credit course: Confirmation of enrollment accounts for 25 percent of the course allocation; continuation or “active participation” as determined by the provider (either the student’s school district or charter school) releases another 25 percent; and 50 percent of the funding is awarded upon course completion, which hinges on students’ passage of the course as determined by their instructor.

New Hampshire

New Hampshire focuses on competency in its funding of online education. Funding is determined by the number of competencies, or discrete topics, that a course’s students master, as verified by an online instructor. Each one-credit high school course students complete through the state’s online school, known as the Virtual Learning Academy Charter School (VLACS), includes various competencies that students must master before they pass the entire course. This benchmarking of progress allows for partial funding at the course level. If students master all the competencies in a course, the school receives the full appropriation. If not, it receives partial payment based on the fraction of competencies the student achieved. Each half-credit, semester-long course was worth a maximum of $454 in 2014–15.

To illustrate this approach, the table below displays a hypothetical example. George reaches the end of the year meeting only 25 percent competency in the course, so VLACS receives just $113.50. Sam, however, met all the required competencies, releasing the entire per-course allotment.

Table 1. Example of VLAC’s Funding Formula for a half-credit (or semester-length) course


Unlike Utah and New Hampshire, which allocate partial payments, the Florida Virtual School (FLVS) only receives funds upon course completion, as determined by course grades which includes the results of a statewide end-of-course assessment, if applicable. Course funding for FLVS is determined in the following way: The state’s weighted per-pupil amount is divided by six—the number of credits equal to a full load. If only one credit is completed online, the virtual school receives a one-sixth share of the per-pupil allocation (contingent upon course completion). FLVS submits five enrollment estimates throughout the year and receives regular payments based on these estimates, assuming full course completion. The final enrollment calculation occurs at year’s end, and adjustments are determined based on confirmation of course completion.


Minnesota’s online-learning program also provides funding based on course completion. But unlike Utah, Florida, and New Hampshire—which created single, statewide online education providers—Minnesota certifies multiple, independent entities to serve either as fulltime online schools or as providers of supplemental courses (to students primarily enrolled in a traditional district or charter school). Currently, thirty-three online schools have been approved by the state. Each of them sets its own definitions for course completion, and the Minnesota Department of Education is responsible for verifying the completion of courses. Minnesota’s use of many providers is more akin to Ohio’s online learning environment, with its many e-schools, and could serve as a model.


Some thoughts based upon Ohio’s experience and the work in other states:

  1. Generally, competency-based funding is based upon a student passing a course. This creates a rather explicit incentive, and perhaps even pressure, for teachers to pass students. This might be the best policy option, but the unintended consequences should be considered. As a thought experiment, I’d be curious how many ECOT students received passing grades in their courses that didn’t end up generating funding based upon the student participation requirements.
  2. While Florida has experimented with requiring the passage of an objective assessment to generate funding, that’s the exception rather than the rule. Furthermore, this approach would generally be limited to subjects and grades where a relevant test exists to assess how much a student learned. The alternative would be to develop a competency-based assessment for every grade and subject—something that seems rather impractical in today’s antagonistic environment toward testing.
  3. Florida has developed additional guard rails around its online courses that are worth noting. See the link below for the documentation found in the “Course Completion” section of the Florida Virtual School (FLVS) Full Time K-12 Student and Parent Handbook. They’ve broken each class into modules and require: each course to have a semester exam, assignments built-into each course that are completed verbally between the teacher and student, and the completion of all required course elements in order to generate course credit and funding. Worth noting, the FLVS is state-operated which has probably made it easier to create a regimented approach to online courses.

A Critical, Related Idea

Exploring how best to fund online charter schools is the charge of this committee, but a tangentially related idea deserves consideration. We support a proposal mentioned by the auditor and included in House legislation introduced last spring that requires the adoption of rules to determine when an online charter school may dis-enroll a student for not actively participating in learning opportunities. This idea is already being utilized in Indiana.

The proposal is premised on the acknowledgement that in a traditional classroom, teachers are able to directly observe students and select instructional strategies that ensure student engagement. Teachers in online schools, on the other hand, are far more limited in how they can interact with students. Under current law, online schools are only able to monitor and enforce a student’s attendance; they have little power to hold students accountable for active participation. This means that hundreds or even thousands of online students could be cruising through school and not learning anything as long as they log in every day. Even if the school knows there’s a problem and the student isn’t learning much or isn’t engaged, its hands are largely tied because the student is meeting minimum attendance requirements. In such cases, students are being academically harmed and taxpayer dollars are being wasted. By allowing ODE to establish rules that would permit (but not require) online schools to dis-enroll students who are actively refusing to participate, the legislature can greatly reduce the risk of online students falling behind. An additional step that should be included—either in law or rule—would be to require schools to document their attempts to contact families about student engagement issues and to notify the student’s school district of residence when a student is being dis-enrolled.

Without adopting a provision like this, there’s a real possibility that Ohio could devise a competency-based funding system that results in students who aren’t doing school work not being funded and the online school not being able to do anything about it. The result: the state saves a little money and likely a significant number of students escape truancy but receive little or nothing in the way of education. Quite simply, that’s an untenable situation.


Tens of thousands of Ohio families utilize online schooling each year making the stakes high. Yet whatever course this committee recommends is likely going to be the first of its kind in the nation. There’s no one that has really figured it out and no research evaluating whether competency-based funding actually drives better student outcomes. Given the challenge of crafting an online charter school funding system, switching abruptly to a completely new funding system would be needlessly risky and logistically challenging. There’s fairly ample evidence that we’ve gotten funding and incentives wrong in the past, so it’s reasonable for this committee to take the time it needs to get it right moving forward. We’d also recommend the use of a pilot program in one or more schools—if you thought it was necessary—to make sure a new system has the desired impact.

With that, I’m happy to answer any questions that you may have.

Chad L. Aldis
Chad L. Aldis is the Vice President for Ohio Policy and Advocacy of the Thomas B. Fordham Institute.