K-12 Pulse: Is Taxpayer Money Funding The Industry?

With the great migrations towards online learning happening across the U.S. and the world, eLearning and technology providers face questions about the sustainability of their growth track records during COVID-19. Quarterly-oriented investors and analysts might overlook the subtle fact that one-in-a-lifetime adoption figures are, well, owed to events that aren’t expected to happen again soon.

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Yet pressures can mount over executive boards. What has been the executive responses at the Canvas and Schoologies? A deep look into financial statements is unnecessary. As CNN reported, these EdTech companies entered the vernacular of parents. The Canvas LMS website featured among the top most visited for several states. With record usage, a question for the remainder of 2021 and beyond remains:

Who is going to pay for EdTech?

One hint: The U.S. government and taxpayers. The Education Stabilization Fund, or COVID-19 relief, added $30 Billion USD to the Department of Education $242 Billion budget in 2020 according to USA Spending data. For 2021, the Department’s budget rose almost a third to $335 Billion, for which the $229 Billion from the Stabilization Fund accounted for 68% of the total.

A quick look at financial statements from Instructure (Canvas parent company) and PowerSchool’s Schoology reveal how their record growth were fueled by states and school districts suddenly jumping onto LMS and other eLearning platforms. EdTech companies who are cashing in from an unprecedented cash surplus —and little scrutiny— but who by no means account for most of the uses of the Stabilization Fund.

Whether these companies will be able to maintain billings, especially from taxpayer sources, may not be an economic but rather a political argument. There is agreement that the record levels of LMS usage will not be sustained in 2022. As CEOs begin to work on the right messaging that will keep investors at ease while new registrations fall off the COVID cliff, Urban Institute anticipates a struggle as 2022 federal and state budgets are allocated.

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