The Challenge of Paying for a New Kind of Learning

Wouldn’t it be great if we had to pay for instruction only when we had evidence that students actually learned something?

That’s the thinking behind proposals that some states are considering to pay for competency-based learning—programs that allow students to master academic content unconstrained by time, place or pace, often in online or digital environments.

This desire to reduce risk and provide some guarantee of student learning is underscored by weak results among some online providers. Given these concerns, states are considering what’s known as “completion-based funding,” – funding that a) is “earmarked” only for personalized learning, and b) includes a performance-pay element, meaning that schools or providers only get the full cash owed for services after they provide evidence of student learning.

While this new funding mechanism may seem like a promising idea at first blush, structuring funding in this way could actually do more harm than good.

My own daughter’s experience offers an example. The rural Wisconsin school she attended didn’t offer Latin. To try to meet her needs, the school worked with a tiny, nonprofit online Latin program. The school then structured the arrangement so she was set up for success: Latin was part of her official school schedule, treated just like a real course taken in a supervised classroom (even though she was working solo on the computer), and regularly followed up on with her advisor to track progress. As a parent, I could see that the extra structure was critical in keeping her motivated and, ultimately, making it a successful experience.

But here’s the problem: I doubt my daughter’s school would’ve taken the risk on the online program if they had been in an arrangement where they didn’t get paid by the state unless my daughter mastered Latin II. And I doubt the online Latin provider, who had no idea if the school would do their part to ensure success, would have taken the chance on completion-based payment either. And yet, this is exactly the kind of solution-based innovation that will ultimately produce promising new practices.

Completion-based funding policies could be an easy sell to state lawmakers eager to fund more personalized learning— but they’re a short-sighted, and ultimately self-defeating, approach.

One problem is that earmarked funds are particularly susceptible to budget cuts. Like the poor kid who unwittingly sports a “kick me” sign on his back, stand-alone funding programs tend to wear a “cut me” sign when budgets get tight. Competency-based learning programs today serve just a fraction of K-12 students. Cutting a program that doesn’t serve all students is much easier than going after funding that affects the entire student population. If the goal is to make competency-based learning approaches more sustainable, creating a conspicuous target for cuts does the opposite.

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Plus, most states are shedding so-called earmarks or categoricals (program allocations that only apply to certain segments of the student population). In 2013, California rolled up dozens of these categoricals and folded the money into a single state formula that deployed funds to districts on the basis of students and student types.

More importantly, performance-driven funding will result in inequitable distribution of dollars. By design, schools or providers that do better by students receive more funding. Advocates of competency-based funding argue that the possibility of winding up with a much bigger (or much smaller) slice of the pie is precisely what will propel schools to hustle on behalf of their students. The problem is that state funds for K-12 education should be seen as belonging to the students, not schools. And under this model, the state will have effectively spent less money on students who perform poorly than on those who perform well.

Finally, making funding contingent on student outcomes may discourage innovation in personalized and competency-based learning. Only big vendors with deep pockets are likely to be able to afford to be paid on a competency-based basis. This could eliminate smaller for-profits, nonprofits or schools themselves that may have much to offer the emerging field but can’t afford the financial uncertainty of a performance-pay system.

So, what should these proponents do to get their models funded?

Ensure state education formulas are student-based and flexible. Competency-based learning doesn’t require a separate formula. Funding students versus programs keeps money and time flexible for schools and providers to pursue diverse digital and personalized learning offerings in ways that work best for their mix of students. In student-based allocation models, dollars follow students and are tied to student characteristics, such as poverty or English language learner status. Under these funding models, schools have the flexibility to spend their money on competency-based learning or any other type of model.

Regulate providers to make low performers ineligible for funds. Accountability seems to be the main driver behind withholding funding until after students show competency—an attempt to solve for bad actors or vendors who produce subpar student results. But we have far more practical ways to deal with these legitimate concerns.

States can vet vendors, making them start slow, on a trial basis, with small numbers of students to ultimately prove themselves worthy of making it onto a state-approved vendor list. Vendors can earn their right to stay on that list—and continue to receive public dollars—only if good performance continues.

Where schools are slow to adopt or consider competency-based learning, use a short-term state investment to spur innovation. By folding competency-based learning into the state’s primary funding formula, all school systems have a shot to pursue this approach. That said, some groups advocating for a set-aside funding stream are doing so precisely because the existing school finance system isn’t sufficiently responsive to students’ and schools’ changing needs around digital learning.

If schools are slow to respond, states can create an innovation grant to spur them on. Ohio did just that with its Straight A innovation fund, dedicating $280 million in grants from fiscal 2014 to 2017 to local educators, supporting several digital and personalized learning initiatives. Such grants are temporary by design: Schools and providers would know that their regular funding base would have to support continued efforts.

In the end, creating a separate, pay-later funding stream could lead to just what proponents say they don’t want: an overly narrow, reductive approach to online learning that stymies innovation and makes the learning approach vulnerable to cuts down the road. In fact, this same caution applies to any number of advocates seeking standalone funding for a specific niche in the education system. (Yes, I’m talking to you, supporters of vocational learning, Early College, STEM programs, and the rest).

A smarter long-term strategy involves working together to expand adoption and development of student-based funding formulas to ensure the education funding structure can support a variety of learning approaches and programs, competency-based models included.