Although early reports did not indicate that virtual learning would generate cost-savings, later research suggests that virtual schools can be more cost-effective over time. Even the Southern Regional Education Board, which projected similar per-pupil start-up costs for state-run virtual schools and conventional brick-and-mortal schools, predicted, “Economies of scale should benefit states in funding state virtual schools over time.”
Bill Tucker of Education Sector, a nonpartisan education policy think tank, came to a similar conclusion in his study of virtual learning. In analyzing state-run virtual schools, he noted that they have cost-structures different from conventional brick-and-mortar schools. Instead of spending resources on buildings, physical services, facility maintenance and transportation, virtual schools must pay more for other items, such as technology infrastructure, personnel development (specific to remote teacher online instruction) and computer software. However, much like the SREB, Tucker concludes, “[T]here is the potential for significant cost efficiencies” for state virtual schools, because the cost of infrastructure can be spread over many more students.
Potential economies of scale are becoming apparent in colleges and universities. From 1999 to 2003, in response to grants financed by Pew Charitable Trusts, 30 institutions of higher education that created new online learning programs demonstrated improved student performance in two-thirds of the cases, with the remaining one-third showing no statistically significant improvement. Perhaps even more striking was the finding that these programs reduced per-pupil operating costs by an average of 40 percent compared to conventional brick-and-mortar classes, saving a combined $3.6 million annually.[*] A 40 percent reduction in costs is almost unheard of in education.
The effectiveness of online education is increasingly accepted at colleges and universities. In fact, according to a report published by the Babson Research Study Group of the Massachusetts-based Babson College, 25 percent of all students in degree-granting postsecondary institutions were enrolled in at least one online course in the fall of 2008.
Some studies find real savings from K-12 online programs, as well, though not quite as high as those in the Pew program.
A detailed study of FLVS may have been the first to conclude that state-run virtual schools can operate with lower per-pupil expenses. In 1997, FLVS became the nation’s first statewide school to offer courses through the Internet. The school provides supplementary courses to Florida students; it does not grant diplomas. Initially the school only delivered high school content, and it had 77 course enrollments in 1997. By 2009-2010, FLVS had almost 214,000 annual course enrollments and served students in kindergarten through 12th grade.
In 2007, the Florida TaxWatch Center for Educational Performance and Accountability compared the per-pupil funding average for conventional school districts in Florida with that of the FLVS. It found that counting only local and state revenues for operating expenses, FLVS cost Florida taxpayers $1,048 less per pupil (or 17 percent less) in the 2006-2007 school year than did conventional districts.[†] The authors concluded, “FLVS gets solid student achievement results at a reduced cost to the State.”
The savings for FLVS have only increased since 2007. In 2009, the Florida Legislature, trying to balance the state budget, reduced FLVS’ per-pupil funding allotment by 10 percent for the 2009-2010 school year. Still, enrollments were expected to increase by 50 percent. The enrollment spike was due to the program’s becoming available to every school district in the state. Julie Young, president and chief executive officer of FLVS, projects that the increased enrollments and reductions in funding will combine to make FLVS cost about $1,500 less per pupil in operating costs than the state’s conventional schools.
Pennsylvania’s virtual charter schools have shown even greater cost-savings potential than FLVS. These are taxpayer-funded public schools that are open to all students, grades K-12, from anywhere in the state. They use nearly all forms of virtual learning, including computer-based, Internet-based, remote teacher online, blended learning and facilitated virtual learning. Unlike FLVS and other supplemental state-run virtual schools, Pennsylvania’s virtual charters may grant diplomas to students.
Pennsylvania funds its virtual charter schools on a per-pupil basis, with resources provided by each enrolled student’s resident school district. These districts are required to make a payment from the local and state funds they receive to the virtual charter schools. This payment does not include the per-pupil portion of district funds that go to transportation; physical facilities construction; acquisition and improvement; debt services; or adult and community education programs.[‡] This funding arrangement resulted in the virtual schools receiving on average 27 percent less per pupil than conventional schools. This amounted to virtual charter schools in Pennsylvania spending about $3,000 less per pupil in the 2005-2006 school year.
Surveys of online schools in other states suggest that the cost-effectiveness of Pennsylvania’s virtual charter schools may be the rule rather than the exception. In 2008, professor Cathy Cavanaugh surveyed 20 virtual schools in 14 states.[§] She found that the schools spent an average of only $4,310 per pupil on operational costs. She estimates that virtual schools benefit from minimal costs for instructional facilities, transportation and support services staff. Additionally, she notes that online courses can handle larger class sizes without adding instructional personnel. This ability helps virtual schools create economies of scale.
[*] Carol A. Twigg, “Improving Learning and Reducing Costs: New Models for Online Learning,” 30, (EDUCAUSE Review, 2003), goo.gl/swKEh (accessed Jan. 26, 2011). Additional information about the Program in Course Redesign can be found at http://www.thencat.org/PCR.htm.[†] “Final Report: A Comprehensive Assessment of Florida Virtual School” (Florida TaxWatch, 2007), 24-25, goo.gl/dpXb3 (accessed Jan. 13, 2011). The Florida TaxWatch Center for Educational Performance and Accountability did not factor in federal funding, because FLVS does not receive federal funding. (Betty Coxe, Florida TaxWatch Center for Educational Performance and Accountability, telephone correspondence with Michael Van Beek, Jan. 12, 2011.)
[‡] Resident districts in Pennsylvania are also reimbursed by the state for about 30 percent of the payment that they make to the virtual charter school on behalf of one of their students. Benefield and Runk, “A Primer on Pennsylvania Cyber Schools” (Commonwealth Foundation for Public Policy Alternatives, 2008), 2, http://www.commonwealthfoundation.org/ docLib/20090904_CyberSchoolPrimer.pdf (accessed Jan. 24, 2011).
[§] Cathy Cavanaugh, “Getting Students More Learning Time Online” (Center for American Progress, 2009), 12, http://www.americanprogress.org/ issues/2009/05/pdf/distancelearning.pdf (accessed Jan. 9, 2011). The virtual schools she surveyed included state virtual schools, virtual charter schools, private virtual schools and virtual programs run by school districts (Cathy Cavanaugh, e-mail correspondence with Michael Van Beek, Oct. 6, 2010.)
 “Cost Guidelines for State Virtual Schools” (Southern Regional Education Board, 2006), 4, http://publications.sreb.org/2006/06T03_Virtual_School_ Costs.pdf (accessed Jan. 24, 2011).
 Bill Tucker, “Laboratories of Reform: Virtual High Schools and Innovation in Public Education” (Education Sector, 2007), 6, http://www.educationsector. org/usr_doc/Virtual_Schools.pdf (accessed Jan. 9, 2011).
 “Charter Annual Report” (Pennsylvania Department of Education, 2008), 1-3, http://www.pacyber.org/about/files/CharterAnnualReport%202008.pdf (accessed Jan. 14, 2011).
 Benefield and Runk, “A Primer on Pennsylvania Cyber Schools” (Commonwealth Foundation for Public Policy Alternatives, 2008), 4, http://www.commonwealthfoundation.org/docLib/20090904_Cyber SchoolPrimer.pdf (accessed Jan. 24, 2011).
 Cathy Cavanaugh, “Getting Students More Learning Time Online” (Center for American Progress, 2009), 12, http://www.americanprogress.org/issues/ 2009/05/pdf/distancelearning.pdf (accessed Jan. 9, 2011).