GLC Logo

Bruce Baker, (732) 932-7496, x8232,
Justin Bathon, (859) 257-7845,
Dan Quinn, (517) 203-2940,

School Finance 2.0

Policymakers must address a fair and effective way to determine financial support

EAST LANSING, Mich. (Oct. 15, 2013) – As supplemental online education and full-time virtual schools expand, policymakers must address a fair and effective way to determine financial support for these institutions. Online learning opportunities, ranging from individual students attending traditional "brick-and-mortar" schools taking a single online course to students enrolled full-time in online virtual schools, did not exist when typical finance formulas – organized around geography and physical location of students – were formulated. A new brief released today addresses the need for updated funding models for state-supported education.

The brief, Financing Online Education & Virtual Schooling: A Guide for Policymakers & Advocates, was written by Bruce Baker of Rutgers University and Justin Bathon of the University of Kentucky. Accompanying the brief are recommendations and model legislation, dubbed School Finance 2.0: Flexible Financing for a Virtual World. The National Education Policy Center (NEPC) published the brief and model legislation, with funding from the Great Lakes Center for Education Research and Practice.

As states seek to modernize their finance formulas, state and local officials have found it difficult to determine the fair price, contract value, or subsidy rate for alternative education models. According to the authors, "A full analysis of the price of online education, the cost to the various systems, the spending among the parties, the efficiency achieved, and ultimately the subsidy required to achieve the online efficiency comparable to the traditional alternative is a monumental task.” Determining the true costs associated with online education is difficult, because the current analysis of the costs associated with online education and virtual schools compared with traditional "brick-and-mortar” schools is incomplete.

The authors found, "The literature on financing online education and virtual schooling (OE/VS) is, at best, sparse and inconsistent. There exists little, if any credible peer-reviewed analysis of the costs and benefits of education alternatives.”

To better answer the question of how to finance online education and virtual schools, Baker and Bathon provide a new, unified conceptual approach to funding online education. Their proposed unified approach discusses general analytic issues policymakers should consider as they develop finance policy for online alternatives.

Policymakers should develop new funding formulas based on the actual costs of operating virtual schools and link funding to accountability so cost-effectiveness can be determined.

Baker and Bathon provide six tenets of a reformed online school financing system, designed to serve as a practical guide for state and local subsidies. The accompanying model legislation is based on their recommendations.

Find the brief and model legislation on the GLC website:

Also find the brief and model legislation on the NEPC website:


The mission of the Great Lakes Center for Education Research and Practice is to support and disseminate high quality research and reviews of research for the purpose of informing education policy and to develop research-based resources for use by those who advocate for education reform.

Visit the Great Lakes Center Web Site at:

Follow us on Twitter at:

Find us on Facebook at: