Numerous Hurdles Challenge Performance-Based Funding in Online Learning

The idea of funding education based on measurable student outcomes rather than seat-time is gaining momentum in some states as an incentive to encourage schools to be innovative. A new 54-page report by International Association for K-12 Online Learning (iNACOL) delves into the funding models and policies related to that practice in order to guide states that are considering a similar structure. The primary question addressed by the report is how performance-based funding "would work to incentivize increased student performance and performance-based education systems, and ensure adequacy and equity."

iNACOL teamed up with education research firms Augenblick, Palaich and Associates and the Evergreen Education Group to develop the data examined in "Performance-Based Funding & Online Learning: Maximizing Resources for Student Success"

Historically, the report explained, "most state funding formulas have relied on funding methods based on counting student enrollments, often with seat-time parameters, to create a consistent method for state budgets to pay for students to attend school for 180 or so days per year."

The concept of performance-based funding is nothing new. It already exists in several states, particularly in online programs. Minnesota, for example, ties performance-based funding to supplemental online courses; in that state, 88 percent of the course funding is given to the course provider and up to 12 percent of the remainder is passed along to the enrolling district or charter school. New Hampshire has experimented with performance funding in its Virtual Learning Academy Charter School, which provides online courses to students state-wide. There, rather than pinning funding to completion of the entire course, it's tied to competency milestones within the courses; and it plans to make funding even more granular by tying it to proven mastery of specific competencies.

Although the report focuses on online courses, the use of performance-based funding won't stop there. For example, Florida's online courses already have performance-based funding tied to whether a student completes the course successfully; in the future the state will add a similar component to its traditional schools as well and tie funding to end-of-course assessments.

But numerous hurdles pose challenges in setting up performance-based funding as a regular practice in either environment. The report's authors set out an ambitious list of 10 elements that would need to be in place "in an ideal world" for this type of funding to work:

  • Consistent and high standards with clear learning objectives and progressions;
  • Assessments with clear rubrics for teachers to evaluate learning at high levels of proficiency;
  • Evidence by the student of his or her mastery of a competency through a demonstrated performance;
  • Individual student performance profiles and maps to indicate progress;
  • Data systems, task banks and content management linked to e-portfolio systems to maintain evidence of student learning;
  • Strong support systems for students and teachers, including sufficient resources for helping students with individual needs;
  • Strong accountability and independent assessments to validate performance data;
  • Auditing to ensure that classroom-level evidence of student learning is validated;
  • Agreement at the local, classroom, school, district, state and federal levels on how to ensure accountability for closing achievement gaps and increasing student performance; and
  • Funding systems that can provide stable, adequate funding per pupil while still rewarding and incentivizing growth in student performance.

At the same time, the report provided a set of principles upon which to build performance-based funding. For example, the goal should be to improve student outcomes, not save money; and the formula should be "predictable, stable and auditable."

In the course of understanding the expenses related to performance-based funding, researchers developed a cost model to understand the cost of providing the resources required for offering supplemental online courses: about $600 per student. The biggest variable is the cost of the instruction. "This can be very different across programs with different student to teacher ratios, staffing roles and salary levels," the researchers reported. A supplemental course makes up "roughly" seven percent of full-time online learning, given a full load of six courses per semester.

The report urged states to "continue improving their accountability systems" with better performance metrics and the ability to benchmark student learning "across time and within programs." In online schools, that equates to "being able to track student proficiency upon entry and exit, competency development, as well as mobility, student goals, student persistence and performance of subgroups." For online course providers, it means delivering pre- and post-assessments with independent end-of-course exams.

The report was based on research funded by the Bill & Melinda Gates Foundation.

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