Before last fall, the state's nose was firmly out of the business of educating Meredith O'Hara's three daughters. Though a professed supporter of public schools, O'Hara and her husband had either homeschooled their children or enrolled them in private schools, paying the entire cost themselves. Enter the Arkansas Virtual School. This year, O'Hara still teaches her children - Mackie, 12; Casey, 10; and Julie, 7 - at their West Little Rock home. But the government both picks up the tab - upwards of $6,000 per child (about $1,500 more than the state spends, on average, on children in "real" public schools) - and keeps tabs on their progress. O'Hara gets a computer, books and materials and help from a certified teacher; in exchange, the teacher evaluates her daughters' work every couple of weeks, and the girls take the state's standardized tests each spring. O'Hara is thrilled with the arrangement - not because of the financial benefit, she said, but because of the high-quality, all-in-one curriculum and the fact that she's accountable to someone for her children's progress. But as evidenced by last week's dust-up in the legislature, plenty of folks don't share O'Hara's enthusiasm. The Virtual School began in early 2003 as a five-year, 450-student pilot program of the state Department of Education, paid for with a $2.3 million-per-year federal grant. Plans changed quickly, though, when Congress cut the grant program and left the Virtual School with only $1.7 million a year. The state education department kicked in the $650,000 shortfall for the 2003-04 school year, and Virtual School head Randall Greenway began putting together an application for charter school status - a move meant to ensure state funding for the program. The state Board of Education approved the application in October. Charter schools, until this proposal, tended to fit the conventional physical idea of a school, a building where children from different families gathered. In theory, they are constrained by fewer of the rules binding public schools and thus able to be innovative. In practice, many are merely schools operated by private, non-profit entities with public money and some public oversight that don't bear great differences with many conventional public schools. Last week, however, legislators balked at the Virtual School's projected 2004-05 enrollment of 1,500 students and the estimated $7.7 million state-funded budget that came with it. Over Gov. Mike Huckabee's veto, lawmakers voted to block state funding in the 2004-05 school year of any charter school without a traditional brick-and-mortar building. That puts the Virtual School back where it started, although it seems likely to keep fighting for more money. It has the benefit of many committed supporters, particularly among conservative Republicans, including most of those who, it so happens, showed little interest in raising more money for public schools during the recent legislative session. Many of them are legislators who have supported education vouchers, a concept that so far remains a non-starter in Arkansas politics by name. The payment of money to home schoolers bears an uncanny resemblance, however. Three central questions emerged in the debate: How the Virtual School spends its $6,000-plus per student; how many of its students come from homeschool or private school backgrounds; and just who's behind the Virtual School's program anyway. ***** Easiest question first. The Arkansas Virtual School got underway in early 2003 as a pilot program funded by a federal technology grant. Enrollment in the fall was 450 students in grades K-7; about 80 students have dropped out. Greenway, a former high school principal from Conway County, was working as the state Department of Education's charter school liaison when he left to head the Virtual School. The school is the latest in a string of similar programs across the country that use a curriculum created by K12 Inc., a for-profit company founded by William J. Bennett, author of "The Book of Virtues" and secretary of education under President Reagan and a familiar spokesman for Republican causes until a well-publicized story about his excessive gambling habits. Among K12's senior management team are several experienced education entrepreneurs. The curriculum itself is back-to-basics - innovative in delivery but not in pedagogy, according to the Virtual School's charter application (conventional instruction delivered by computer, in other words) - and draws heavily on the Core Knowledge curriculum, a whole-school-reform system in place in traditional public schools and charter schools nationwide. It's test-intensive; students must score 80 percent on each lesson's assessment before moving on. The makeshift schoolroom in the O'Hara house is full of materials supplied by K12 - 100 pounds for each student, Greenway estimated. The girls read from textbooks and regular books like the "Amelia Bedelia" series. The youngest, 7-year-old Julie, uses magnetic letter tiles - think refrigerator poetry set with phonemes instead of full words - to drill on letter sounds and spelling. Sets of plastic blocks help the girls visualize math lessons like counting in 10s. They've learned to play small plastic recorders, and O'Hara said they've got science experiments "all over the house" - equipment and supplies provided by K12. And then there's the online component. K12's program provides lessons and tests online, and gives parents an interactive system for planning lessons and tracking attendance and progress. Students do much of their schoolwork with old-fashioned pencil and paper, but the older students get, the more time they spend on the computer. K12 also provides administrative services for a cut of the school's total revenue. The Arkansas Virtual School doesn't use that arrangement this year, but had planned to when it converted to charter school status in the fall. It's not clear whether that will happen now that the legislature has blocked the school from becoming a charter school. Despite its officers' experience in education and business and, not coincidentally, politics, K12 hasn't been a runaway success. The company has yet to turn a profit, and has actually had to eat significant losses in California after it started several charter schools without waiting to get the necessary approval from local boards of education. Several schools closed mid-year, although their students were able to shift to other K12 virtual charter schools in the state. K12 has also met with skepticism about the amount it charges states to provide curriculum, supplies and management services for virtual charter schools. One Texas legislator has said it "sounded like a scam," and the Pennsylvania School Boards Association actually sued the state over its contract with K12 because, the school boards association said, K12's potential profit was too great. For the Arkansas Virtual School, the cost for curriculum, materials and the online program was over $2,100 per student this school year. Arkansas legislators last week challenged that amount, as well as the notion of using state money to pay for homeschooling - a phrase that's close to fighting words for the families in the Virtual School, despite its apparent truth. Supporters of the Virtual School insist that there is a difference between "public schooling in the home" and homeschooling: namely, that homeschoolers choose any curriculum they want and aren't accountable to the state for what their children learn. The numbers, however - and the Virtual School's application for charter school status, approved by the state Board of Education last fall - seem not to split that hair so finely. "The majority of students that will choose to access this innovative public education program are homeschool and private school students," Greenway wrote in the Virtual School's charter school application. Of the 450 students who started the 2003-04 school year, 55 percent were homeschooled previously, with 24 percent coming from public schools and 8 percent from private schools. The remaining 13 percent were kindergartners, Greenway said. Of the more than 1,000 applications for the 2004-05 school year, 33 percent were for homeschooled children, 51 percent from public school, 4 percent from private school, and 12 percent from kindergartners. State Sen. Jim Argue, D-Little Rock, an opponent of state funding for the Virtual School and co-author of Arkansas's charter school law, said he fails to see the distinction. "It seems to me to be a stretch to say if you're being homeschooled but take periodic tests that somehow makes it part of public education," he said. Greenway, O'Hara and other supporters of the Virtual School say that it's an important option for many families who believe traditional public schools don't meet their needs - families who pay taxes and have a right to public education, even if their children haven't previously gone to public schools. Greenway said the program is ideal for students with disabilities such as behavioral disorders, although it's not clear if any special-needs children are enrolled this year or had applied for the 2004-05 school year. It's an ironic argument. Public school advocates often argue how expensive their schools must be because the law requires them to accept all children and put them in mainstream classes, no matter how diverse or difficult their learning situations. Because families in the Virtual School must be able to have an adult at home full-time, it's effectively off limits to many, although Greenway said that about 30 percent of children in the school this year are low-income, and some live with only one parent. The online-school model, though, is beyond the intent of Arkansas's charter school law, Argue said, and widening the umbrella of public education to include homeschooling simply because it meets the needs of a certain segment of families would be taking the first step down a perilous road. "If we redefine public education to include homeschooling, the next logical debate is, why not broaden it to include private schools or church schools?" he said. It's not surprising, then, that legislators' positions on unlimited funding for the Virtual School broke largely along party lines, with virtually all Republicans (one notable exception: Sen. Dave Bisbee, R-Rogers, co-chairman of the Joint Budget Committee) supporting it. Nationally, the school voucher concept - giving parents public money to pay for private-school tuition - is mostly a Republican baby. ***** Finally, there's the issue of how the Virtual School spends its money. That was perhaps the hottest question at the Capitol last week, and trying to break down the school's budget, it's not hard to see how legislators came out feeling confused at best and deceived at worst, even though Greenway said he provided all the information he was asked for. The central question legislators wanted answered was how the Virtual School could ask for the same $5,400 per-pupil allocation as traditional public schools when it had a rented office instead of a full-size school, no transportation costs, no janitors, no athletic teams, no stadium, no band, no debt service expenses and a drastically higher pupil-teacher ratio than regular public schools (50-1 compared with 14-1). Greenway's explanation: In addition to providing each family with a computer and internet access, the Virtual School's costs for materials and supplies are much higher than a regular public school's. Items like books, equipment for science experiments, and hands-on learning tools ("manipulatives" in education lingo) that are shared by many students in a traditional classroom are provided to every student in the Virtual School, he said. The budget also includes money to ship all that equipment back to K12 at the end of the year. But do higher unit costs on books and mailing costs really approximate that of, to name one item, three times as many teachers, all with health insurance and retirement plans? Greenway has not released specific expenditures. For the current school year, the Virtual School started with a budget of $2 million in federal grant money for a 300-student program (this included some grant money left over from the previous year) - a per-pupil cost of about $6,785. Because that grant was cut from its original amount, the state Department of Education kicked in another $650,000 for up to 130 more students, according to the department's Jim Boardman, director of technology. (It's not clear whether the state money will be available in the 2004-05 school year.) That works out to $5,000 per student. The difference is a result of fixed costs that didn't increase with the addition of more students, such as administrative salaries, rent and utilities. Taken together, it's about $6,246 per student for all 430 students. (Greenway's charter school application for 2004-05 cited a budget of $4,977 per student for a projected enrollment of 1,500 students. As enrollment goes up, the cost per student decreases because the fixed costs are spread among more students.) First, 2003-04 per-pupil costs for the Virtual School's curriculum, instructional materials and equipment: Computers: $525 each, or about $438 per student (families with more than one student in the Virtual School get only one computer). Internet access: $160. Instructional materials leased from K12: $862. (Fully funded, that would kick $1.5 million to K12 in a 1,500-student program.) Access to K12's online curriculum program: $1,265. (This works out to almost another $2 million for K12 with 1,500 students.) Teacher salaries and benefits: $941. Seven teachers earn an average of about $34,000, including 10-percent performance bonuses, with another 26 percent devoted to benefits. None has a conventional class to conduct every day; instead, they monitor children's work online and talk with parents on the phone. Administrator salaries and benefits: $880. All told, this is over $378,000 for four administrators and a secretary who, arguably, have little in the way of a conventional school district to administer. Field trips and school events: $35. Teacher training and professional development: $103. Shipping, printing, mailing and postage, $85. Teacher travel, $112. Teachers' phone and internet costs, $50. Student records and reporting, $102. Given the format of public school finance data in Arkansas, it's all but impossible to compare the Virtual School's costs with traditional public schools, except to note that the average per-pupil expenditure in Arkansas for the 2002-03 school year, counting federal, state and local money, was $6,168. For 2003-04, the state allocation was $4,721 per pupil; on average, $558 of that paid for district maintenance and operations, and $211 went to student transportation (those figures don't include local revenue). Legislators also questioned last week why the Virtual School asked for $4,977 per pupil in its charter school application last fall but stood to get $5,400 per pupil now. Charter schools, by law, get the state's average per-pupil allocation and no local tax revenue. Last fall, that was projected to be $4,977 for the 2004-05 school year. When the legislature passed a new funding formula last month, it rose to $5,400. That doesn't, however, explain how the Virtual School planned to spend the money. The charter school application gives a breakdown of proposed spending at the $4,977 per-pupil rate. Greenway said last week that he gave lawmakers a draft of a $5,400-per-pupil budget, but Bisbee said what he got from Greenway simply wasn't detailed enough. "I have their total budget, but I don't know what that budget tells me," Bisbee said. "It's like getting the total budget for GM and trying to ascertain what it costs to build a car." Greenway didn't provide the $5,400 budget in a public meeting and refused to give a copy to the Arkansas Times. While his Virtual School is clearly a publicly funded enterprise, and thus covered by the state Freedom of Information Act, he claims that the same employees and same enterprise, though seeking public money for next year, are not covered by the law for purposes of records concerning that application until it receives public money. Greenway, however, is receiving public money while he plans for next year and thus work he's doing on that effort would seem to be covered by the FOI. The earlier 2004-05 budget, however - $7.7 million for 1,500 students - gives some idea of how Greenway envisioned the school's per-pupil spending changing as its enrollment ballooned: Administrator salaries and benefits dropped to $387 per student. Teacher salaries and benefits increased slightly to $1,009. Foreign language was added at a cost of $35 per student. Curriculum and online school program and computer leasing remained about the same, but instructional materials decreased to $715 per student. He offered no explanation why there was no volume discount for duplication of the curriculum services from K12. Special education services were added, at $523 per student. Argue, Bisbee and state Sen. Percy Malone, D-Arkadelphia, all said last week that they believed Greenway had been evasive as well as vague, changing the information he gave them on how many former homeschoolers were in the Virtual School and even on how many students are currently enrolled. Greenway changed the enrollment number in his conversations with the Times as well. During an initial interview last week, he said that 450 students were in the program now, and that 150 would lose their places if the legislature cut state funding for the program. After being asked in a later conversation about a legislator's statement that 100 students had dropped out this year, Greenway acknowledged that only 368 students are still in the program. State money wouldn't pay for anyone from a waiting list to take the dropouts' place, he said. Greenway said he'd given legislators every spending number and enrollment figure he had, but said he realized there had been crossed wires during last week's Joint Budget Committee meetings and conversations with lawmakers. "We were trying to justify our costs and explain our program," Greenway said. "We're very passionate. Somewhere, I'll clearly admit, there was some misunderstanding." Part of that was whether Greenway would be open to a compromise - agreeing to cap enrollment in the program or limit state funding. Several legislators said Greenway wouldn't even consider a cap; Greenway said Virtual School officials were "willing to be agreeable" to a funding limit of $4.8 million, which would have paid for about 800 students, but that no one offered him such a compromise. Virtual School opponents in the legislature also were upset at what they suggested was special treatment of the Virtual School's charter school application because Greenway is a former Department of Education employee. The Virtual School's charter application, submitted last August, was approved unanimously by the state Board of Education in October, immediately after the required public hearing. That is very unusual, said Michael Scoles, who replaced Greenway as the state's charter school liaison, but it's not illegal. And the Virtual School's 61-page application and presentation were "jaw-dropping," Scoles said - not surprising, since Greenway arguably knows more about charter schools than anyone in the state. But Greenway didn't help his case with legislators by rushing to sign a charter school contract with state Board Chair JoNell Caldwell on the evening after lawmakers first discussed capping funding for the school. The contract seemed to cement the funding and expectations for the charter school, and Greenway said that because other charter schools weren't approved until January, the Department of Education simply hadn't gotten the contracts together yet. He rushed to get a contract signed last week on the advice of legal counsel, he said. Turns out it didn't matter: under state law, the contract is automatically void if the legislature doesn't provide funding for it. And that leaves the Virtual School back where it started, as a pilot program with a capacity of 300 students.