K12 Inc – The Pride of Wall Street

Writing in their 2015 Annual Report, K12 Inc. Chairman and Chief Executive Officer Nathaniel Davis said;

Our strategy is simple: optimize student success, support market expansion in collaboration with current and future partners, and pursue targeted revenue growth.

Hyping their status as the leader in the for-profit corporate education reform industry, the company reported added;

The U.S. Market for K-12 education is large and online learning is gaining greater acceptance.

The notion that the country’s public school children are little more than lucrative profit centers for Wall Street investors has been growing since Rupert Murdoch famously called America’s public schools, a $500 billion untapped economic opportunity.

And by way of explaining the pro-charter environment and their ongoing success collecting public money, K12 Inc. explained;

Many parents and educators are seeking alternatives to traditional classroom-based education for a variety of reasons.  Demand for these alternatives is evident in the expanding number of choices available to parents and students.  For example, public charter schools emerged in 1988 to provide an alternative to traditional public schools and, have seen enrollments grow by 225% over the past 10 years….and there are approximately 6,400 public charter schools operating in 42 state and the District of Columbia with an estimated enrollment of over 2.5 million students.

While much of the attention related to education reform has focused on charter schools, the Common Core and the Common Core testing frenzy, Internet based, online virtual charter schools have become a significant part of the corporate education reform industry.

According to the International Association for K-12 Online Learning (iNACOL), as of 2013, all 50 states “had established a significant form of online learning initiative, adding that, “1.82 million students participated in a formal online learning program.”

It was with this burgeoning sense of opportunity that a former Goldman Sacks executive and President Ronald Reagan’s former US Secretary of Education formed K12, Inc. in 2000.

With $40 million dollars from Wall Street investors, including $10 million from the infamous junk-bond dealer Michael Milken, Ronald Packard, a former Goldman Sacks executive and William Bennett, a former Secretary of Education, formed K12, Inc. so that they and their investors could profit off the children of the United States.

Other initial Wall Street investors included Andrew Tisch (Loews) and Larry Ellison (Oracle and Knowledge Universe), as well as Milken and his brother.

William Bennett, who by the 2000s had become a right-wing talk show host, served as the chairman of K12 Inc.’s board of directors until he resigned in 2005 following a series of racist comments that he made about African-Americans.

However, despite the controversy surrounding K12 and Bennett’s role in the company, the corporation’s profits have grown exponentially over the years, earning hundreds of millions of dollars for K12’s executives and shareholders.

K12 Inc. began by creating an online “education program” for children in Kindergarten through 2nd grade in Pennsylvania and Colorado.

Today, a decade and a half later, K12 Inc. owns, operates or manages virtual schools in Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin, Wyoming and the District of Columbia.  In addition, the company sells online products to schools in all 50 states and around the world.

The company has been so successful that in 2007 it owners decided to take the company public, raising millions in capital as it joined the New York Stock Exchange (NYSE: LRN).

By 2015, the company’s revenue exceeded $948 million, a 5.1 percent increase over the preceding year.   Since its inception, K12 Inc.’s revenue has exceeded $5 billion dollars, almost all of it paid for by American taxpayers.

The policy landscape supporting virtual charter schools has grown substantially over the years K12 Inc. has been in existence.  In just the last eight years, more than 157 bills passed in 39 states and the District of Columbia, all expanding the online school juggernaut.

In many cases, the anti-public school, pro-cyber school legislation was a result of aggressive lobbying and political involvement by the American Legislative Exchange Council (ALEC) and the member of its Digital Learning Subcommittee, a group of education reform entrepreneurs that includes K12 Inc.

Explaining an important aspect of its success, K12 Inc., its board of directors and staff have been especially active when it comes to political donations and lobbing activities at the federal and state level.

Federal Election Commission reports reveal that since its inception, individuals directly connected with K12 Inc. have donated well in excess of $1.5 million dollars to federal candidates and political action committees, helping to ensure that the company and cyber schools, in general, received a place of honor in both the administrations of President George W. Bush and Barak Obama.

The virtual school industry has received consistent and bi-partisan legislative and administrative support.

In fact, the No Child Left Behind Act, the Race to the Top initiative and the recently adopted, Every Student Succeeds Act, all make room for the significant expansion of virtual schools.

In addition to the company’s work at the federal level, the Center for Media and Democracy reports;

Since 2004, K12 Inc. and its employees have pumped almost $1.3 million into state-level politics in 23 states (as of 2012), including contributions to candidates for office, party committees, and ballot initiatives.

On top of K12’s direct involvement in political campaigns, K12 Inc. has also focused on direct lobbying activities, spending more than $120,000 spent on federal lobbyists in the last two years, all while hiring more than 150 lobbyists in 28 states between 2003 and 2012, according to the National Institute on Money in State Politics.

A prime example of K12’s involvement in state politics can be found in the role it played in Georgia’s referendum to amend its state constitution in order to make it easier to open charter schools in that state.  K12 was a major supporter of the effort, donating at least $300,000 in 2012 to “Families for Better Public Schools,” a Georgia political action committee behind a constitutional amendment that would further the charter school industry by bypassing the legislature and state board of education to create a new, politically appointed commission that would have the authority to independently override state and local control and approve new charter schools and online virtual schools.

With additional financial support from the Koch Brother’s  Americans for Prosperity StudentsFirst, the Walton Family Foundation and other major corporate education reform players, the amendment passed with proponents outspending the opposition by about ten-to-one.

In yet another example, the Center For Media and Democracy reports,

In Pennsylvania, where ten percent of its revenue is generated, K12 Inc. has spent $681,000 on lobbying since 2007, according to the New York Times.  It registered 11 lobbyists in the state from 2007 through 2012, according to the National Institute on Money in State Politics.

K12 Inc. has also used ostensibly benign front groups to lobby and organize protests on its behalf. The K12 Inc. funded group Pennsylvania Families for Public Cyber Schools spent $250,000 on lobbying in the last five years, according to the Times.

The paper also reports that K12 Inc. is connected to My School, My Choice, a group that organized protests in Ohio against reforming the state formula for financing charter and online schools. The protesters turned out to be paid temp agency workers. Tim Dirrim, the founder of the organization, is the board president of the K12 Inc. managed Ohio Virtual Academy.

In states across the country and at the national level, political donations, lobbying, public relations and advocacy and extensive marketing campaigns have served as the building blocks of K12’s lucrative online schools.

However, perhaps the most telling points about how K12 Inc. and other online charter school succeed in the present economic and political climate can be found in the narrative that the company lists as “Risk Factors” in their most recent quarterly report to the Security and Exchange Commission (SEC), factors that make it clear that the for-profit education reform industry has become an active part of the advanced capitalist system.

Warning Wall Street and its investors, K12 Inc. outlined the potential barriers to its success, noting;

  • From time to time, proposals are introduced in state legislatures that single out virtual or blended public schools for disparate treatment.
  • We have been, and will likely continue to be, subject to public policy lawsuits filed against virtual and blended schools by those who do not share our belief in the value of this form of public education.
  • Opponents of virtual and blended public schools have sought to challenge the establishment and expansion of such schools through the judicial process. If these interests prevail, it could damage our ability to sustain or grow our current business or expand in certain jurisdictions.
  • Beyond academic performance issues, some virtual school operators have been subject to governmental investigations alleging the misuse of public funded or financial irregularities. These allegations have attracted significant adverse media coverage and have prompted legislative hearings and regulatory responses.
  • As a public company, we are required to file periodic financial and other disclosure reports with the SEC…The disclosure of this information by a for-profit education company, regardless of parent satisfaction and student performance, may nonetheless be used by opponents of virtual and blended public schools to propose funding reductions or restrictions.
  • As a non-traditional form of public education, online public school operators will be subject to scrutiny, perhaps even greater than that applied to traditional brick and mortar public schools or public charter schools.  (A claim that is blatantly false considering there is little to no federal or state oversight of virtual charter schools.)

And finally, in what may be the most telling and honest observation of all, K12 reports;

  • Parent and student satisfaction may decline as not all parents and students are able to devote the substantial time and effort necessary to complete our curriculum.

While these “risk factors” paint a picture of potential problems facing K12 Inc. and other virtual schools, the supposed legitimacy of the virtual school industry has allows them to expand operations and continue to rake in the cash, all at the expense of taxpayers and real public schools.

For-profit K12 Inc. virtual charter school giant claims Common Core testing could hurt its profitability???

Education Reform Speak is hard enough to understand, but when K12 Inc., the large online virtual school vendor, sought to warn investors about the dangers of the Common Core — a concept proposed and driven by the corporate education reform industry —the resulting explanation was nothing short of bizarre.

Here, K12 Inc. uses it 2015 Annual Report to explain how the Common Core and Common Core testing scheme puts the company’s profits at risk.

A big kudos to any reader who can figure out what K12 means in the following paragraph, which is taken directly from the company’s most recent annual report. Note the wording that the problem apparently lies in that many states are implementing the common core but failing to use the unfair, inappropriate and discriminatory Common Core SBAC and PARCC testing programs.

FROM K12 INC. 2015 ANNUAL SHARHOLDER REPORT;

The transition to Common Core State Standards and Common Core Assessments could result in a decline in state test scores that might adversely affect our enrollment and financial condition

“Many states have adopted the CCSS, also known as the College and Career Readiness Standards, but are not choosing to use the assessments developed by two national testing consortia that align with the CCSS Curriculum.  Instead, these states are electing to use existing or state-developed assessments to evaluate student performance.  As a result, it has been reported in many states that students learning under the CCSS but continuing to be tested under the existing state proficiency tests have experienced sharp declines in test results.  As managed public schools we serve [to] undertake this transition, and given the growing number of at-rick students enrolling in these schools, perceived academic performance could temporarily or permanently suffer such that these schools may become a less attractive alternative, enrollments could decline, and our financial condition and results of operations could be negatively impact.

K12, inc. 2015 Annual Report, Page 42

#Hashtag# – And education reformers want us to hand our children off to these people?

The on-line scam called K12 Inc.

While children play in the summer heat, parents in Massachusetts and 31 other states across the country are being bombarded with advertisements for the online “learning” giant, K12 Inc., a for-profit virtual school system that is part of the ongoing movement to divert public funds away from traditional schools and give the taxpayer money to privately owned and operated charter and on-line entities that supporters claim are the future of public education in the United States.

But the truth surrounding these corporate education reform strategies fall far short of their advertising claims, a fact that is especially true when it comes to the growing online or virtual charter school industry.

As California’s Mercury News explained in a major investigative series this past spring,

The TV ads pitch a new kind of school where the power of the Internet allows gifted and struggling students alike to “work at the level that’s just right for them” and thrive with one-on-one attention from teachers connecting through cyberspace. Thousands of California families, supported with hundreds of millions in state education dollars, have bought in.

But the Silicon Valley-influenced endeavor behind the lofty claims is leading a dubious revolution. The growing network of online academies, operated by a Virginia company traded on Wall Street called K12 Inc., is failing key tests used to measure educational success.

Fewer than half of the students who enroll in the online high schools earn diplomas, and almost none of them are qualified to attend the state’s public universities.

In fact, a series of academic studies have revealed that despite collecting hundreds of millions of dollars in taxpayer money, most virtual schools are utterly failing when it comes to actually educating children.

Reporting on a major study conducted in 2015 by Stanford University, the Washington Post wrote,

Students in the nation’s virtual K-12 charter schools — who take all of their classes via computer from home — learn significantly less on average than students at traditional public schools, a new study has found.

The online charter students lost an average of about 72 days of learning in reading and 180 days of learning in math during the course of a 180-day school year, the study found. In other words, when it comes to math, it’s as if the students did not attend school at all.

In addition to outright corruption, the widespread academic failures plaguing virtual charter schools are leading to numerous state investigations into a significant number of the on-line schools, including some owned and operated by K12 Inc.

For example, earlier this month California Attorney General Kamala Harris announced that the Bureau of Children’s Justice and False Claims Unit of the California Department of Justice had reached a settlement agreement with K12 Inc. and its 14 affiliated California Virtual Academies over the company’s “violations of California’s false claims, false advertising and unfair competition laws.“

Covering the settlement agreement, the Mercury News reported;

Facing a torrent of accusations, a for-profit company that operates taxpayer-funded online charter schools throughout California has reached a $168.5 million settlement with the state over claims it manipulated attendance records and overstated its students’ success.

The deal, announced Friday by Attorney General Kamala Harris, comes almost three months after the Bay Area News Group published an investigation of K12 Inc., a publicly traded Virginia company, which raked in more than $310 million in state funding over the past 12 years operating a profitable but low-performing network of “virtual” schools for about 15,000 students.

[…]

Harris’ office found that K12 and the 14 California Virtual Academies used deceptive advertising to mislead families about students’ academic progress, parents’ satisfaction with the program and their graduates’ eligibility for University of California and California State University admission — issues that were exposed in this news organization’s April report.

The settlement could help spur legislation that would prevent for-profit companies like K12 from operating public schools in California.

The Attorney General’s office also found that K12 and its affiliated schools collected more state funding from the California Department of Education than they were entitled to by submitting inflated student attendance data and that the company leaned on the nonprofit schools to sign unfavorable contracts that put them in a deep financial hole.

“K12 and its schools misled parents and the State of California by claiming taxpayer dollars for questionable student attendance, misstating student success and parent satisfaction and loading nonprofit charities with debt,” Harris said in a statement. “This settlement ensures K12 and its schools are held accountable and make much-needed improvements.”

K12 Inc. and its 14 “non-profit” virtual charter schools enroll about 13,000 students in California.  According to the Attorney General’s investigation, only about one in three students in the K12 Inc. schools actually graduate. The statewide graduation rate for California’s public schools is close to 80 percent.

The California controversy is just one of many surrounding K12 Inc.

Overall, about 315,000 students in the United States attend “virtual” schools and like those in California, the vast majority aren’t getting the quality education that the taxpayers are paying for.

But that doesn’t even slow down the cash flow.

In 2015, K12’s revenue exceeded $948 million, a 5.1 percent increase over the preceding year. Since its inception, K12 has collected over $5 billion dollars for its investors and executives.

K12’s false claims may have cost it money in California, but it continues to make similar claims of success in advertising that is presently running in a number of states.

If there was real truth in advertising, the K12 and other virtual charter schools would be using the tag line,

“America’s Virtual Schools – Ripping off the taxpayers, not even coming close to providing children with an adequate education.”

Check back for more on K12 and the virtual charter school industry.

K12 Inc.; Leading the Corporatization of American Education (with thanks to Paul Vallas)

And now K12 Inc., has ads running in Connecticut even though they aren’t licensed here.

Lets face it, E-Learning is big business, pulling in $5.4 billion a year.

And a primary leader in the “e-learning” industry is the for-profit company K12 Inc., a company formed in 1999.  William Bennett, the right-wing ideologue and Reagan’s former secretary of education, was the company’s first Board Chairman.

According to their investor reports, K12 offers “proprietary curriculum and educational services created for individualized learning for students primarily in kindergarten through 12th grade…”

The company was originally focused on the home school market. When asked by a Christian radio station, Bennett said that their  science curriculum presents evolution, creationism, and intelligent design as equally tenable explanations for the existence of life,” adding “We’re centered in the Judeo-Christian tradition, we do not ignore faith and religion, we do not ignore the arguments against evolution, because there are some…”

However, with the passage of George Bush I’s No Child Left Behind law, the company quickly expanded to take advantage of the new business opportunities created by the new law.

Today, K12 Inc. is one of nine major for-profit companies running on-line public schools around the country.  With over 147,000 students enrolled in their various divisions, K12 Inc. is the largest of them all and is producing annual revenues of over $650 million

This past February, a New York Times investigative report determined that K12’s performance doesn’t come close to their rhetoric.

While they brag of their successes, the New York Times found that “nearly 60 percent of its students are behind grade level in math. Nearly 50 percent trail in reading.

A third of the students do not graduate on time. And hundreds of children, from kindergartners to high school seniors, “withdraw within months after they enroll.”

K12 Inc. is even facing a shareholder lawsuit for misrepresenting its performance to its shareholders.

However, K12 Inc. isn’t alone when it comes to a record of failure.  A major study out of Stanford University found that “in every subgroup, with significant effects, cyber charter performance is lower.”

Paul Vallas and K12 Inc.

While K12 has become international in reach, the company got its big break in Philadelphia, Pennsylvania in 2005, when Paul Vallas was the CEO of the Philadelphia Schools.

The details about how K12 went from a small company in the home school market and a few thousand on-line students to the nation’s largest E-Learning for-profit company was outlined by Sheila Simmons, a reporter for the Notebook, an on-line education newspaper. (see link below)

Today, Charles Zogby serves as Pennsylvania’s budget director.  However, before that he served for nine years as K12’s senior vice president of education.

But before Zogby was named a senior officer at K12 Inc., he served as Pennsylvania’s Secretary of Education from 2001 – 2003 where he led the state takeover of the Philadelphia school system, a takeover that led to the selection and hiring of Paul Vallas to serve as the CEO for the state oversight-board assigned to running Philadelphia’s schools.

A year later, Zogby was working for K12 Inc., and Philadelphia was selecting a vendor to provide all of its K-3 students with a new science curriculum.

Vallas’ administration ended up giving the $3 million contract to K12 Inc. Not only did K12 Inc. beat out “two nationally renowned science materials providers” but with that contract, “Philadelphia became the first school district in the nation to adopt K12’s materials district wide.”

Interestingly, after the contract was given to K12, the 30 Philadelphia science teachers who were assigned to develop the new curriculum and identify the best vendor reported that there was little if any discussion about K12’s materials.  Instead, the group focused on the two major providers of science curriculum.

As concern about the controversial decision grew, Paul Vallas admitted to a reporter that he had, as the reporter wrote, “provided some direction on the science curriculum.”  In fact, Vallas’ quote was “I told them that we needed to standardize the curriculum. I talked about models they should look at. I didn’t say, ‘Here’s K12, I want you to bring them in.”  Asked about whether he had recommended any other companies Vallas said “There’s not a lot of work done in primary science curriculum, let’s face it.”

Meanwhile, Vallas’ associate superintendent for curriculum and instruction, who was responsible for selecting the vendor, said that it was only after the committee review process ended that K12’s materials become available for review.

Soon after K12 was selected, the Notebook’s reporter contacted a number of “major science education experts” around the country.  Not one of the experts said they were familiar with K12 Inc. or its curriculum.

At the time, Vallas critics pointed out that K12’s chairman, William Bennett, and Paul Vallas had built a strong relationship when Vallas was in Chicago.

According to the Washington Post, Bennett even recommended that Vallas be appointed U.S. Secretary of Education by President Bush I, after Bush’s initial secretary of education, Rod Paige, announced his retirement.

To the accusation that Vallas directed the contract to Bennett’s company, Vallas said, “I don’t think I’ve ever had a discussion on K12 with Bennett. Ron Packard is K12’s person. He’s their CEO, the one we interact with…”

As the saying goes, the rest of the story is history.

Except for that one interesting side note…that although K12 Inc. is not licensed to do business in the State of Connecticut, the company has television ads that are running on at least one network in the state.  If you go to www.K12inc.com and follow the instructions to check out their program in Connecticut, the following warning will pop up. “There are currently no public schools using the full K12 program in this state. But new schools are always being added! Sign up to receive notification when a full-time public program using the K12 curriculum becomes available in your area.”

Although they hardly need the additional revenue, maybe they think that with Paul Vallas taking over the Bridgeport Schools, lighting will strike twice and more contracts will be coming their way.