Nearly 10 years after virtual charter schools launched in Indiana, the fast-growing sector could face its first set of meaningful regulations aimed at cracking down on some of the state’s most problematic online schools.

In a 7-1 vote Wednesday, the Indiana State Board of Education recommended that state lawmakers impose stricter rules on virtual charter school and the agencies that oversee them. The proposed rules would stop school districts from overseeing virtual schools, eliminate a fee structure that officials say disincentivizes oversight agencies from intervening in struggling schools, and limit the growth of new and chronically underperforming virtual schools.

The recommendations would most affect two virtual charter schools that have been among Indiana’s largest and lowest-performing online schools: Indiana Virtual School and Indiana Virtual Pathways Academy, which are overseen by the small Daleville school district.

The state board also suggests new requirements to improve student engagement — an issue for the schools since students work remotely — including setting minimum student-to-teacher ratios and making an orientation mandatory before students are allowed to enroll in virtual schools. And the board calls for virtual education programs in traditional public school districts to follow similar rules as virtual charter schools.

“We’ve seen a very poor return on investment of taxpayer money for virtual education,” said board member Gordon Hendry, who led the examination of virtual charter schools. “There’s little regard for student outcomes, and virtual charters perform worse than the worst of brick-and-mortar schools.”

It remains to be seen how lawmakers might act on the recommendations in the legislative session that starts in January. Even after Gov. Eric Holcomb called for action on Indiana’s failing virtual charter schools following a Chalkbeat investigation, lawmakers declined to act last year on bills aimed at improving them.

But, since then, Indiana’s virtual charter schools have attracted more attention, with their poor performance falling under the spotlight in a Congressional committee and a new virtual school making last-minute changes to its model after another Chalkbeat investigation into its oversight.

The leader of Indiana Virtual School and Indiana Virtual Pathways Academy, Percy Clark, criticized the state board’s recommendations as being contradictory. He said that because the state funds virtual charter schools at lower levels than brick-and-mortar schools, capping enrollment would prevent schools from being able to afford prescribed teacher-student ratios.

Clark also raised concerns that more rules would interfere with virtual charter schools’ ability to innovate by “forcing virtual schools to comply with traditional standards.”

Still, Hendry touted the recommendations as a critical step to setting “guardrails” for Indiana’s troubled virtual charter schools, which serve about 13,000 students and have consistently posted dismally low test scores and graduation rates.

He came down particularly hard on authorizers, the oversight agencies tasked with monitoring virtual charter schools and stepping in when schools struggle.

“I think there should be a vote of ‘no confidence,’” Hendry said, blaming authorizers for not holding virtual charter schools accountable. He said the money flowing to authorizers of virtual schools causes “a significant conflict of interest” since it’s not in the authorizers’ financial interest to close or limit the growth of schools, making them essentially “too big to fail.”

But the board balked at suggesting that a single authorizer oversee all virtual charter schools — a proposal that Hendry said came out of looking at laws in Colorado, Maine, and Oklahoma, and recommendations from national organizations such as the National Association for Charter School Authorizers and the conservative Fordham Institute.

Board member Katie Mote said that would “push too far,” raising concerns about limiting Indiana’s school choice environment.

Among the board members supporting the proposed regulations was Byron Ernest, the former head of three online schools under the Hoosier Academies network. That included Hoosier Academy Virtual School, Indiana’s first virtual charter school, which closed this year after years of failing grades.