Along with my business partner, Buzz Brown, I spend a great deal of time each day mired in Michigan local government and school district data and often ask myself questions about the information the data provides. For example, on the hot-button topic of school funding, the state provides equal state reimbursement for students who attend a virtual school, versus a traditional K12 or charter school.  Why?  Is this trend filling the coffers of for-profit virtual schools while draining much needed funds from traditional schools?

Virtual schools in Michigan currently serve over 5,000 students that would otherwise be attending a public or private school. Assuming the majority would attend their public school district, it’s easy to quantify the dollars that districts are losing to virtual academies. Sure, virtual schools can often meet the unique needs of some students who, for a variety of reasons, are not able to attend or thrive in a traditional school setting, but why are they receiving the same state reimbursement per pupil as public schools when their bricks and mortar and infrastructure costs are virtually non-existent?  They have no classrooms, no busses, no cafeterias, no swimming pools, no football fields, and yet, they get the same amount of money?  Something seems wrong with this equation.

A typical district’s State Aid Payment on a per-student basis was $7,126 in the 2014-2015 school year.   The average spent on operations, maintenance and transportation is between 12-15% of a school’s budget, with educational expenses including teacher salaries and benefits, accounting for 80% or more of every dollar spent.  Administration and other support services balance out the rest.  The chart and table below is a typical representation (click to enlarge).

Munetrix Blog_Pie Chart on spending allocation_12-15           Munetrix Blog_Chart on Expenditures_12-15

Given the nature of virtual academies, where students generally learn remotely using their own computer, technology is geared to a general education platform with little need for secured platforms, expanded Wi-Fi networks and upgraded software; building expenses are low (with the opportunity to rent facilities rather than buy);and staffing ratios are about 10x different compared to public schools.  Equal student reimbursement makes no financial sense to me, and the graphics below show some of the major differences (click to enlarge).

Munetrix Blog_Pupil to Staff Ratio_12-15          Munetrix Blog_Virtual Charter_12-15

Take away the fairness issue (although it’s a legitimate one) and look at the business case. Businesses generally set fees based on specialized knowledge and the cost to perform a service or produce a product and take it to market. The state should look closely at the operational costs of businesses providing virtual education and set fees accordingly.

The taxpayers can’t afford to be a cash cow for entrepreneurial business owners who see big profits in on-line elementary and high school education.

Thankfully, the State of Michigan commissioned an adequacy study to investigate this very issue, which should shed more light on matching cost to the delivery of services.  This study is due to be submitted as a report to the Michigan Legislature by March 31, 2016.

Let’s hope for the best.

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