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Indiana lawmakers could soon approve a big spending hike on students who attend virtual schools, giving them the same base funding as students who attend in-person classes.
This would be a change after lawmakers slashed funding in 2019 for virtual schools to 85% of the per-student amount that in-person schools receive, citing concerns about their low performance.
House Republicans have recently pushed to equalize these two funding levels. House Speaker Todd Huston’s office said in a Friday statement that caucus members “believe parents and families should have the freedom and flexibility to educate their children in the way that works best for them.”
As a result, the two-year budget approved by House lawmakers and now moving through the Senate would increase per-student base funding for some virtual public schools by as much as 50%, according to projections. Meanwhile, the budget would provide districts that primarily educate students in person increases in base funding that are much smaller.
The new funding system would reward virtual schooling, which has a checkered track record in the state, and by extension the for-profit companies that have partnered with districts to provide it.
Two virtual charter schools in Indiana are facing an ongoing federal criminal case as well as a civil suit brought by the state’s attorney general. Another virtual program landed in hot water for offering what state lawmakers described as enrollment incentives in violation of state law.
At the same time that they are moving closer to this huge funding boost for virtual students, lawmakers also appear to have drastically undercounted the number of students from low-income backgrounds who attend virtual schools. As a result, the extra funding these schools receive to educate these students has dropped by as much as 100%.
Wade Coggeshall, a spokesperson for Indiana House Republicans, attributed this to “some inconsistencies in this data” that budget analysts are working with the Indiana Department of Education to identify.
It’s not clear how many schools the data “inconsistencies” affect, or what adjustments lawmakers might make as a result.
If legislators don’t revisit this issue, they could be cutting money earmarked to help districts educate these particular students, known as “complexity funding.”
But if lawmakers do revise this specific student count upwards, then state funding for virtual students could rise still further. It would also mean that districts who send students to virtual school could get a significant funding bump, which others that only provide in-person learning would miss out.
One trend that this budget plan doesn’t address: Indiana school districts’ complexity funding — which pays for additional teaching and counseling positions — has been declining for years due to what critics describe as a flawed methodology for counting children who live in poverty.
Indiana calculates this funding for every school based on the number of students who are in foster care or receive benefits through two federal programs: the Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families. But districts say this method adds barriers for families, and misses students who would qualify under another metric like the National School Lunch Program.
“When you put the onus on individuals, it’s a big hindrance,” said Rep. Greg Porter, a Democrat and the ranking member on the House Ways and Means Committee
Statewide, the draft budget passed by the House would cut complexity funding by $50 million from 2025 to 2026, from around $710 million to $660 million, according to the bill’s fiscal note compiled by the Legislative Services Agency. In the last budget, this funding remained basically flat year over year.
Base funding grows for virtual schools despite complexity issue
Even without a future adjustment in complexity funding, base funding for virtual schools is poised to grow if virtual students are funded at 100% of the per-pupil amount.
In some cases, much of this funding will go to private, for-profit online education companies that have contracted with public Indiana school districts to run virtual schools. While the details of these partnerships are not readily available, typically the district keeps a small portion of state funding and pays the rest to a company to operate a virtual school.
The programs are typically free to students and open to enrollment outside the school district’s boundaries.
Because these students are public students, they deserve “the same resources and opportunities, regardless of their location or mode of instruction,” said Brooke Gabbert, senior director of communications for Stride, a for-profit online education company previously known as K12 that operates six virtual programs in two districts and one charter school in Indiana.
“We believe all public school students should be funded equitably,” Gabbert said in a Friday statement. “Indiana’s school funding policies should not tell thousands of families that their children are worth only 85% of what other public school students are worth.”
The Clarksville School Corporation represents how the proposed budget could be a boon for virtual school funding.
The budget projections estimate Clarksville schools will enroll 1,500 brick-and-mortar students and around 6,700 virtual students by 2026. Its base funding is projected to grow by 52% to around $57 million in 2026, but its complexity funding would decline by 76% to just $1.6 million.
District spokesperson Brian Shaw said the administration is aware of the decline but unsure of the reason, and has asked the Indiana Department of Education for an explanation.
Clarksville contracts with Stride to provide virtual schooling. Shaw said the district shares 94% of its virtual school program revenue with Stride, but did not give a dollar figure for the contract. Stride is responsible for hiring and paying teachers.
The school’s 2021 financial report, the most recent available, indicates the school paid $12 million in 2021 for the education of around 2,300 virtual students.
The superintendent of Clarksville schools is Tina Bennett, the wife of Tony Bennett, the former Indiana schools superintendent who is now president of schools at Stride. In 2013, Bennett resigned as Florida’s top K-12 official in connection with questions about how he handled an Indiana charter school’s rating on the state’s accountability system.
In a statement, Shaw said: “Dr. Tina Bennett filed all necessary public disclosures for potential conflict of interest since Clarksville Schools engaged in the contractual relationship with Stride, and the Clarksville Community Schools Board of School Trustees has accepted that disclosure in a public meeting each year.”
During the 2023 budget session — the last time Indiana lawmakers attempted to raise funding for virtual students — Indiana Capital Chronicle reported that Indiana House Speaker Todd Huston consulted for Stride. At the time, Huston said at the time that he stayed out of the discussions on funding for virtual charter schools, but that his caucus wanted to see equal funding for students.
Huston also previously served as Tony Bennett’s chief of staff when he was Indiana’s state superintendent.
Gabbert said in her Friday statement that Huston ended his consulting relationship with the company on March 1. (Huston’s office said the end date was Feb. 28.)
Both Huston’s office and Gabbert said Huston has not performed work on Stride’s behalf in Indiana.
Gabbert also said that Tony Bennett would retire from the company on March 21.
Like Clarksville, the Union School Corporation contracts with Stride.
The district is projected to enroll just 224 brick-and-mortar students but 8,000 virtual students. Union schools’ base funding would increase by 25% to around $58 million in 2026, according to budget projections. It’s not clear how much of those dollars will go to Stride. The district paid $41 million to the company in 2021 for the education of around 6,000 students, according to its 2022 financial report.
But the same budget estimates show that Union schools’ complexity funding would fall from $10.5 million this year to $1.2 million in 2025, a decline of 82%.
Representatives for the district did not return a request for comment.
Representatives for Indiana Connections Academy and Indiana Connections Career Academy referred a request for comment to House Republicans. The virtual charter schools are operated by the for-profit company Pearson and this year enroll 5,400 and 900 students, respectively, according to budget projections.
Indiana Connections Academy would receive an increase in base funding of around 28% to $37.8 million in 2026. Yet it would lose all but 0.2% of its $4 million in complexity funding.
Its sister school would get a 34% foundation amount increase to $7 million in 2026 but would lose all of its complexity funding, which is currently $521,000.
Complexity funding for districts is complicated — and declining
Porter, the Democrat on the House Ways and Means Committee said the potential data issues with complexity funding don’t affect funding for Indiana’s brick-and-mortar public schools, although he did not explain why.
But irrespective of those issues, some of Indiana’s largest public school districts are also projected to lose the complexity funding for students from low-income backgrounds in the next two-year budget, due to the way the state counts students who qualify.
This has been an ongoing trend, according to studies by groups like the Indiana Urban Schools Association. Ahead of the last budget session, Fort Wayne schools officials told lawmakers in 2022 that around 67% of students qualified for the subsidized meals, while just 29% were identified under the method based on food assistance and foster care.
This steady decline in funding is linked to a decline in the number of students in qualifying programs. But the actual numbers of these students is not readily available. House Republicans said that information rests with the state education department, which did not reply to a request for the number of students included in the complexity count this year or in past years.
The Senate Appropriations Committee is scheduled to hear the state budget bill in its March 11 meeting.
Aleksandra Appleton covers Indiana education policy and writes about K-12 schools across the state. Contact her at aappleton@chalkbeat.org
