A panel of lawmakers on Thursday killed a bill that would have created new safeguards for virtual schools. They instead offered a less-direct response to an alleged $86 million online education scam.

The new proposal calls for the Indiana Department of Education to report all of the students in the state who were enrolled but failed to complete a course this school year. If the department finds cases of wrongdoing, it could ask the State Board of Education to sign off on withholding funding from those schools or revoking their charters.

If approved, the proposal would, at least temporarily, shift some of the responsibility of making sure charter schools comply with student count rules from the authorizer to the education department. It would be a significant change for the education department, considering it currently relies heavily on schools verifying their student counts.

The statewide report for 2019-20 would mimic how the Daleville district found enrollment discrepancies at the two virtual charter schools it oversaw, Indiana Virtual School and Indiana Virtual Pathways Academy. Those schools are accused of improperly collecting more than $68 million from the state by counting thousands of inactive students.

“The reporting requirements in there is, I think, the beginning of the ability to compare across the board,” said Jeff Raatz, the Republican Senate education committee chairman. “Whether students are in traditional public, virtual charter, or charter, or voucher school.”

The Senate Appropriations Committee agreed to add the new language on Thursday without a formal vote, tucking it into a bill that then passed 11-0. It now moves to the full Senate for consideration.

Education department spokesman Adam Baker declined to comment Thursday, saying the department is reviewing the proposal.

No lawmaker attempted to revive the language from the scrapped bill, which sought to define online attendance and add consequences for students and schools when those enrolled don’t spend enough time on schoolwork or take standardized tests.

The committee also rejected multiple Democrat proposals that would have gone a step further in cracking down on virtual schools, including by capping enrollment at 1,200 students for each school and putting authorizers directly on the hook for virtual charter school operations. They were ideas also recommended by the education department.

“It’s clear that Republicans are more focused on placing blame on the Indiana Department of Education than holding virtual charter schools accountable for state funding and student participation,” said Rep. Ed DeLaney, D-Indianapolis. “This should be about fixing the problem so that Hoosier students and taxpayers do not suffer.”

One failed Democratic proposal aimed to prevent insider dealing by charter school operators by prohibiting them from entering contracts worth more than $1,000 with a relative, or in cases where they would benefit from the proceeds. Operators of the Indiana Virtual Schools funneled millions to a tangled web of related companies.

Lawmakers have been walking a tightrope on virtual charter schools: taking small steps to crack down on the publicly funded sector’s low academic results, while not wanting to impose too many regulations on what they see as an important school choice option for students struggling in brick-and-mortar settings.

As the education department and Democratic minority see it, the funding abuse points to a vulnerability in how Republican leaders set up the virtual school system. As Republican leaders and school choice advocates see it, the alleged scam stems in part from a serious failure of the department and could be exploited by any type of school.

“Somebody had the information and wasn’t paying attention,” said Sen. Liz Brown, R-Fort Wayne.

The department currently runs some 70 checks on enrollment counts used for funding, including steps to verify that students aren’t being claimed by more than one district. But they don’t go as far as to cross-reference that data with which students are recorded as completing a course.

On Thursday Sen. Eric Bassler, R-Washington, urged lawmakers to continue to be careful when putting restrictions on virtual schools to leave the door open for more.

“Ten years from now are we going to have more or less virtual education?” he asked. “I think we all know the answer to that. We’re going to have more virtual education, really, at all levels.”