Southeast Alaska's Tenakee Springs is a small village on a big island, hardly more than a fishing camp surrounded by a wilderness of forest and sea. There's no cell phone service, no paved roads and – on a good day –  maybe 100 residents. Jobs are scarce.

But Darius Mannino and his wife, Chris, fell in love with the place while on a kayaking trip in 1996 and stayed in the area for eight years. "It became the home of our hearts," Darius says. The couple eventually moved to Los Angeles for work, but when they had a daughter in 2010, they decided they wanted her to grow up in Tenakee.

Ila Wren Mannino is now 3, and the family is settled here. They own a bakery, participate in local government and live in a house with plumbing and electricity – a step up from their earlier years in a moss-chinked cabin, when they hauled water and read by oil lamp. But though the Manninos are committed to staying, there's no longer a school here for Ila to attend.

The $3 million building still stands, built in 1987 during a burst of optimism. But this August, the district locked its doors. Besides no preschool through 12th grade education, that means no place to hold town meetings or even community volleyball games in the winter. Seven people – including Darius Mannino, who worked as a teacher's assistant and janitor – lost their jobs. Their hardship sends ripples through a community this small. "It's not cheap to eat here as it is," Darius says. "If (people) have less money, they're less likely to come to the bakery."

The problem isn't unique to Tenakee. By state law, Alaskan schools with fewer than 10 students have their funding ratcheted down over a three-year period until they're eventually forced to close. Each October, the state completes its official headcount to determine which schools will continue to receive money. It's a tense time in small communities; if a single student drops out or one family moves away, everyone could suffer.

In the 15 years since the law was passed, 32 schools have permanently closed their doors. More teeter on the brink: Last year, 41 schools had fewer than 15 students. And with the majority of Alaskan communities accessible only by boat or plane, students who lose their schools can't just get bused to a neighboring town. Many turn to online correspondence courses, which will serve about 11,300 Alaskans this year, while others are sent to regional boarding schools. Some families simply move away.

"Closing a school is one of the death knells to a community," says Brad Allen, a superintendent who had to close the school in Red Devil in interior Alaska's Kuspuk School District three years ago. A school is often a town's largest employer as well as its largest user of electricity and shipper of freight through the local post office. Without its school, there's even been talk of Red Devil's commercial airstrip closing, Allen adds. "There are so many interconnected lines."

Nothing in rural Alaska is cheap, education included. Gas can reach $10 a gallon, and in the tiny village of Stony River, pop. 45, in the Kuspuk District, a 33-ounce box of cereal costs $14. The price of heating a school and paying a teacher a living wage to educate fewer students is largely why education in bush villages is more than twice as expensive as in urban areas. Last year, the five most urban Alaskan school districts received an average of $15,000 per student from local, state and federal sources. In the more rural parts of the state, the figure rose to $31,000. And in the remote Aleutian Islands, schools received more than $52,000 per student – nearly five times the national average.

Yet despite the funding, standardized test data suggest that rural schools still lag behind. Sixty-five percent of students in urban Alaska were rated as proficient in reading in 2011, while only 46 percent of rural students were. Urban students outperformed their rural counterparts by similar margins in writing and math.

Retired Republican State Sen. Gary Wilken, who was deeply involved in the 1998 reform that led to the 10-student mandate, thinks the data underscore a basic truth: Smaller schools simply aren't able to prepare students for college and careers the way larger schools can. They lack extracurricular activities, science labs and advanced instruction in subjects like physics, and teachers are often stretched across a range of grade levels.

Wilken says that online correspondence has proven more effective, both financially and educationally. Despite opposition by Democrats like Georgianna Lincoln – an Alaska Native whose hometown school was shuttered soon after the law went into effect – the bill passed the state House 29-11 and the Senate 11-9.