K12 Inc.: California Virtual Academies’ operator exploits charter, charity laws for money, records show

By Jessica Calefati, jcalefati@bayareanewsgroup.com© Copyright 2016, Bay Area News Group

Posted:
 
04/18/2016 04:48:09 AM PDT

Frustrated with the quality of their neighborhood schools, parents, teachers and civic leaders have founded hundreds of California charter schools, combining locally sourced ingenuity with the public funding that state law allows them to command.

California’s largest network of online academies is different: Although the schools are set up like typical charters, records show they’re established and run by Virginia-based K12 Inc., whose claims of parental involvement and independent oversight appear to be a veneer for the moneymaking enterprise.

The company — the subject of a two-part investigative series by this newspaper — says the schools operate independently and are locally controlled. But the academies’ contracts, tax records and other financial information suggest something entirely different: K12 calls the shots, operating the schools to make money by taking advantage of laws governing charter schools and nonprofit organizations.

“What this company has done may make sense from a business perspective, but to me, it’s a sham,” said Renee Nash, a business and tax attorney and a member of the Eureka Union School District’s Board of Trustees.

“K12 is clearly taking advantage of the laws in California,” she said, “and the Legislature needs to put a stop to it.”

California law is silent on whether for-profit firms are even allowed to run charter schools. So before applying 14 years ago to open the state’s first online academies, K12 treaded cautiously into a new market, creating a series of nonprofit organizations whose names match those of the schools.

That means each California Virtual Academy is considered by the IRS to be a charitable organization that need not pay taxes, even though K12 effectively controls the schools by providing them with all academic services.

The structure, accounting experts say, makes it tough to tell where the nonprofit ends and where the company begins.

Mike Kraft, K12’s vice president for finance and communication, disputes that characterization. He said the nature of the relationship between the company and the schools is articulated clearly in documents.

“The contracts between K12 and each (academy) outline the parties’ obligations and expressly provide that the governing body of the school retains final decision-making authority and full control,” he said. Still, Kraft acknowledged that K12 personnel “may at times provide newly forming boards that lack any staff with administrative assistance on the organizational documents.”

Tax and education records show that K12 employees started each of more than a dozen online academies in California, even though the applications they filed to open the schools described the founders as a “group of parents,” none of whom were named. For several years, company employees even signed the nonprofit schools’ tax filings.

‘The law is clear’

Federal tax law prohibits charitable organizations from operating to benefit a person or company. And to that end, the online academies’ articles of incorporation vow that the schools’ money won’t be used to enrich “any shareholder or individual.”

“The law is clear: Charities may not use their resources to promote a business, even if that business’ services are helpful,” Eric Gorovitz, a San Francisco attorney who specializes in nonprofit tax law, said, speaking generally about charitable organizations. “And if the violation is bad enough, a charity could lose its exemption.”

According to the nonprofit’s application for tax-exempt status, California Virtual Academy at San Mateo has a board of directors whose members should be willing to cut ties with the company if they feel the school is getting a raw deal. Indeed, the application specifies that all agreements between K12 and the school are the result of “arm’s-length” negotiations.

IS AN ONLINE SCHOOL CASHING IN ON FAILURE?

Bay Area News Group

IS AN ONLINE SCHOOL CASHING IN ON FAILURE?

Bay Area News Group

But a review of minutes from the 2014-15 school year’s board meetings and records of the board’s relationship to administrators hand-picked by K12 suggest the board has little or no independence from the company. A K12 employee led the board meetings, and all 35 resolutions she encouraged the board to endorse won unanimous approval.

The board’s open public meetings are held during the workday in a conference room or around an administrator’s desk in the Daly City-based Jefferson Elementary School District, which authorized the academy’s charter. And board members rarely attend the meetings in person. They usually just call in from home.

All told, the board spent an average of 13 minutes in each meeting.

The board has four members. Two of them, President Don Burbulys, a resident of Soquel, in Santa Cruz County, and Stephen Warren, the board’s secretary, who lives in Riverside County, are related to high-ranking school administrators, who, under K12’s contract with the academy, are selected by the company.

Burbulys is married to Laura Terrazas, dean of student services, and Warren is related to Academic Administrator April Warren, according to a brief filed by teachers. Terrazas and April Warren on Sunday did not return calls or emails seeking comment. Burbulys, Stephen Warren and the board’s other two members have also declined requests for comment.

When K12 sought approval in 2009 to open a charter school for Contra Costa County students that featured a mix of online schooling and traditional classes in a brick-and-mortar setting, Mt. Diablo Unified School District denied the application, citing concerns about the company’s role in running the proposed school day to day.

“Not only does the charter school delegate all charter school-related operations, management and administrative functions to K12 California, but it inappropriately gives K12 California control over areas that should be the responsibility of school site staff and the charter school’s governing board,” the Mt. Diablo school board wrote in a report.

But Contra Costa County, as well as Alameda County residents, can still enroll in a K12 school because there’s a California Virtual Academy in San Joaquin County, and the state allows online students from adjoining counties to enroll.

A close look at the contract between California Virtual Academy at San Mateo and K12 raises questions about why a truly independent board of directors would ever agree to the terms, said Luis Huerta, a Columbia University expert on online schools.

Under the contract, which Huerta reviewed for this newspaper, K12 handles almost every aspect of the public school’s operations. It’s responsible for writing curricula, hiring principals, recruiting students and much more. In exchange, the company is entitled to compensation that can amount to as much as 75 percent of the school’s public funding.

Jefferson Elementary school trustees and administrators are tasked with reviewing the contract, but no state agency is required to examine it.

The school’s application for tax-exempt status states “the charter school determined that it paid no more than fair market rate for the services.” Yet in a bizarre twist, the rates outlined in the contract routinely exceed what the school can afford — by more than 25 percent.

K12 requires all its California academies to pay only what they can without going into debt. The company then issues “credits” to cover the balance.

California Virtual Academy at San Mateo, for example, hasn’t been able to pay its bill in full in a decade. So since 2007, K12 has given the school $8 million in credits. Over the past 10 years, the company has doled out more than $130 million in credits to all the California schools it operates.

Unique arrangement

Accountants and financial analysts interviewed by this newspaper, including several who specialize in school finance, say they’ve never seen anything quite like the arrangement between K12 and the public online academies.

“If the schools can’t cover their expenses and need K12 credits every year to balance their budgets, then the contingent liability to K12 just keeps growing,” said Charlene Podlipna, an accountant who works for Freeman & Mills, a Los Angeles-based litigation consulting firm.

Writing down the operating losses of the schools it manages in California and across the country has allowed K12 to reduce its taxable income by $179.5 million over the past three years, according to the company’s most recent annual report. That raises questions about why K12 consistently charges more than the schools can pay.

Kraft insisted the company doesn’t receive a tax deduction for forgiving the debts of the schools it operates. But when the newspaper presented Kraft with K12’s most recent Securities and Exchange Commission filing and asked him to explain whether K12 wrote off the losses, his answer was hardly straightforward: “A company’s tax provision is based on its net income. A component of net income is the revenue that a company records. Anything that increases or decreases revenue, and ultimately impacts net income, would therefore impact the taxes owed by that company. K12 is no different than any other company in this respect.”

Katrina Abston, K12’s senior head of schools for the academies, defended the credits, saying they “provide a high level of protection” for the schools against financial uncertainties.

Huerta, however, said taxpayers could lose out in the end.

Typically, he said, any extra taxpayer funding on hand when a charter school shuts its doors is returned to the state’s general fund. But tucked away on one of the final pages of the K12 contracts is a clause that requires a school that’s closing to repay the company with any money it has left — meaning it’s highly unlikely the state would recoup anything.

“These companies are exploiting the gray in the law and using clever legal teams to skirt public accountability,” Huerta said. “Taxpayers and policymakers should be alarmed.”

To address some of the thorny problems that can crop up when for-profit companies run nonprofit public schools, the Legislature last year approved Assembly Bill 787, authored by Assemblyman Roger Hernández, D-West Covina, that would have banned the practice.

But Gov. Jerry Brown rejected it, writing in his veto message: “I don’t believe the case has been made to eliminate for-profit charter schools in California.”

Read Part 1 of the investigation: Is online charter school network cashing in on failure?

Contact Jessica Calefati at 916-441-2101. Follow her at Twitter.com/calefati.

What our investigation found

  • Teachers employed by K12 Inc.’s charter schools may be asked to inflate attendance and enrollment records used to determine taxpayer funding.
  • Fewer than half of the students who start the online high schools earn diplomas, and almost none of them are qualified to attend the state’s public universities.
  • K12’s heavily marketed online model has helped the company reap more than $310 million in state funding over the past 12 years.
  • Students who spend as little as one minute during a school day logged in to K12’s school software may be counted as present in records used to calculate the amount of funding the schools get from the state.
  • About half of the schools’ students are not proficient in reading, and only a third are proficient in math — levels that fall far below statewide averages.
  • School districts that are supposed to oversee the company’s schools have a strong financial incentive to turn a blind eye to problems: They get a cut of the academies’ revenue, which largely comes from state coffers.
  • California Attorney General probe leads to $168.5 million settlement with for-profit online school operator

    By Jessica Calefati, jcalefati@bayareanewsgroup.com

    Posted:
     
    07/08/2016 11:54:50 AM PDT

    SACRAMENTO — 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.

    File photo: California Virtual Academies student Lillian Lewis, 11, studies online before her gymnastics practice on Nov. 11, 2015, at her Pleasanton home. (Dai Sugano/Bay Area News Group archives)

    “Knowing that something will be done to address the schools’ problems is very reassuring,” said Gabriela Novak, who pulled her daughter Elizabeth from K12’s San Mateo County school after a year of frustrations and difficulty communicating with her teachers. “Finally, the system is working.”

    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.”

    The California Teachers Association and the California Charter Schools Association both applauded Harris’ announcement and denounced the company’s practices — even though the two special-interest groups are frequently foes.

    But in a news release Friday, K12 stressed that it had admitted no wrongdoing and insisted it had already planned to take up several of the 60 corrective actions required under the agreement over the next few years. It also disputed the attorney general’s description of the size of the settlement, calling it “flat wrong.”

    “Despite our full cooperation throughout the process, the Office of the Attorney General grossly mischaracterized the value of the settlement just as it did with regard to the issues it investigated,” K12 Chief Executive Officer Stuart Udell said in the statement.

    Under the settlement, which is subject to court approval, K12 will pay $8.5 million to settle the state’s claims.

    It also agreed to “expunge” about $160 million in credits it has issued to the California Virtual Academies since 2005 that have helped the schools cover the cost of the contracts they hold with the company, whose rates routinely exceed what the schools can afford.

    But Udell said that the credits should be called “subsidies,” not debts, and that the company’s commitment to expunge them shouldn’t be used by Harris to hike the size of the settlement. He also defended the credits, saying they had protected the schools against financial uncertainties.

    “(The) schools have not paid that money to K12 and K12 never expected to receive it given California’s funding environment,” Udell said.

    This news organization’s investigation into K12’s California schools revealed the company reaps tens of millions of dollars annually in state funding while graduating fewer than half of its high school students. It also showed that kids who spend as little as one minute during a school day logged onto K12’s software may have been counted as “present” in records used to calculate the amount of funding the schools get from the state.

    The revelations show why California needs tighter rules for online charter schools, said Bruce Fuller, an education policy professor at UC Berkeley.

    “Virtual charter schools’ profit-seeking too often leads to deception about their true effectiveness,” Fuller said. “The Legislature should move aggressively to prevent such harm to students and taxpayers.”

    The settlement requires K12 to take a slew of corrective actions.

    The company must: ensure the accuracy of its advertisements, train teachers to prevent improper attendance claims and reform the way K12 contracts with the California Virtual Academies.

    K12 must also eliminate any type of incentive compensation for its enrollment staff, provide all students functional computers and give families a subsidy of at least $20 per month to cover the cost of high-speed internet service.

    Emily Bertelli, a spokeswoman for the California Charter Schools Association, called the settlement “a good start,” but said the Legislature must change the law to prevent such abusive practices from happening again.

    When lawmakers return to work in August after a monthlong summer recess, they’ll consider Assembly Bill 1084, authored by Assemblywoman Susan Bonilla, D-Concord, which would ban online charter schools from hiring for-profit companies for instructional services.

    Bertelli’s group has offered amendments that it believes will strengthen that proposed legislation.

    “We are hopeful that the Legislature doesn’t miss an opportunity at this critical juncture to do right by students,” Bertelli said in a statement.

    Contact Jessica Calefati at 916-441-2101. Follow her at Twitter.com/Calefati.

    California Virtual Academies: Bill targeting for-profit operator K12 Inc. clears first committee vote

    By Jessica Calefati, jcalefati@bayareanewsgroup.com

    Posted:
     
    06/30/2016 05:42:09 AM PDT

    SACRAMENTO — A bill that would ban online charter schools from hiring for-profit firms to provide instructional services cleared the Senate Education Committee on Wednesday on a party-line 6-2 vote after a divisive debate about the role private companies should play in public education.

    Assemblywoman Susan Bonilla introduced Assembly Bill 1084 in response to this newspaper’s investigation of K12 Inc., the publicly traded Virginia company behind a profitable but low-performing network of “virtual” academies serving about 15,000 students across the state.

    File photo:Assemblywoman Susan Bonilla introduced Assembly Bill 1084 in response to this newspaper’s investigation of K12 Inc., the publicly traded Virginia company behind a profitable but low-performing network of “virtual” academies serving about 15,000 students across the state.
    (Kristopher Skinner/Bay Area News Group archives)

    The stories revealed that the company reaps tens of millions of dollars annually in state funding while graduating fewer than half of its high school students and that kids who spend as little as one minute during a school day logged onto K12’s software may be counted as “present” in records used to calculate the amount of funding the schools get from the state.

    The two-part series also showed that the online schools are not really independent from K12, as the company claims. The academies’ contracts, tax records and other financial information suggest that K12 calls the shots, operating the schools to make money by taking advantage of laws governing charter schools and nonprofit organizations.

    Lawmakers’ efforts a few years ago to crack down on for-profit colleges and universities sent several of the chains into bankruptcy, and if AB 1084 is passed by the Legislature and signed into law by the governor, it would effectively put companies like K12 out of business in the Golden State, too.

    Bonilla, D-Concord, says that’s fine with her.

    “What my bill says is ‘Let’s just agree they don’t belong here in California,’ ” because allowing online charter schools to contract with for-profit companies creates “a perverse incentive for schools to prioritize profits over students,” said Bonilla, who referenced the newspaper’s findings in her remarks to the committee.

    But parents couldn’t disagree more about whether companies like K12 should be allowed to operate charter schools in California, and a lobbyist for K12 and two other firms insisted they’re being singled out unfairly.

    Two mothers who support the legislation testified that the law is needed to force schools controlled by for-profit companies to re-evaluate their priorities and begin emphasizing student achievement above all else, including profit margins and shareholder whims.

    “Help us transform California Virtual Academies from an enrollment factory that piles up the money into a place that supports teachers, parents and students,” said Stacey Preach, who lives in the Sacramento area. She worked for K12’s network of online schools and briefly enrolled her child in one of them.

    Opponents of the measure, including Virginia Shemansky, who lives in Leona Valley, said signing the bill into law would force some schools to close, squash parental choice and limit the ability of schools that remain open to serve troubled students who need services only specialized for-profits can provide.

    “Sacramento’s special interest groups are playing politics with our students,” said Shemansky, a member of California Parents for Public Virtual Education, which advocates for access to online schools managed by K12 and its leading competitor, Connections Academy. “Parents are demanding that the assault on parent choice stop.”

    Several parents and teachers who watched the hearing stood up to endorse the bill, but no parents seated in the audience spoke against it.

    Before being sent to Gov. Jerry Brown, the bill will have to be approved by the full Senate, the Assembly Education Committee and the full Assembly.

    The committee’s vote comes a few days after state Superintendent for Public Instruction Tom Torlakson commissioned state Controller Betty Yee to audit the K12-managed California Virtual Academies and several weeks after a bipartisan group of lawmakers called for the state auditor to do a separate probe of for-profit charter schools.

    The company is also being investigated by Attorney General Kamala Harris, who launched an investigation of online charter schools last fall.

    A spokesman for K12 couldn’t immediately be reached for comment on the vote.

    Branche Jones, a lobbyist for K12, testified at the hearing that the intense scrutiny the company is facing is unfair because statements made about its practices and track record by Bonilla and this newspaper are incorrect. The company, however, has never disputed the factual accuracy of the newspaper’s investigative series.

    “There are low-performing schools across the whole state,” Jones said, adding that it’s not fair “to focus on one industry.”

    Sen. Bob Huff, R-Diamond Bar, said he voted against the bill because he doesn’t believe a “one-size-fits-all approach” is the right way to address a problem that may not apply to all online charters contracting with for-profit companies. Huff said he had visited a successful online charter school dedicated to helping dropouts earn enough credits to graduate and didn’t want to see it adversely affected by the bill.

    Representatives of the California Teachers Association and the California Charter Schools Association — two powerful interest groups that oppose one another most of the time — said they agree that for-profit companies like K12 shouldn’t be allowed to run charter schools in this state. But Rand Martin, a lobbyist for the charter school group, testified that the association opposes the bill unless Bonilla adopts a more “surgical approach” to the problem and agrees to a series of amendments it has proposed.

    Instead of broadly banning online charter schools from hiring for-profit companies for instructional services, the association wants to create a “firewall” between charter schools and for-profit vendors by prohibiting the companies from having any role in the selection, interview or appointment of a charter school’s board members; barring them from developing, proposing or approving a school’s annual budget or expenditures; and limiting the number of teachers the firm could employ directly.

    Still, Martin said, the organization supports the spirit of the legislation.

    “We actually agree with the objective of the author,” Martin said. “We should not have a for-profit operating a charter school.”

    Contact Jessica Calefati at 916-441-2101. Follow her at Twitter.com/Calefati.

    Criticism escalates for online charter operator

    By John Fensterwald | June 27, 2016 | No Comments

    Credit: OJO for iStock.

    (Updated  June 28 with statement from K12, Inc.)

    A full audit by the state controller and legislation that will be heard this week could threaten the operation of California Virtual Academies, a network of nonprofit online charter schools tied to the publicly traded education company K12, Inc.

    On Friday, the office of State Controller Betty Yee announced it will conduct a $300,000 audit of CAVA in the wake of news media reports of questionable attendance records, poor academic performance of its 14,000 students and evidence of a conflict of interest regarding the nonprofit school’s connections to its sole-source supplier and operator, K-12. If the audit substantiates mismanagement and improprieties, State Superintendent of Public Instruction Tom Torlakson could recommend that the State Board of Education revoke CAVA’s charters.

    On Wednesday, the Senate Education Committee will take up Assembly Bill 1084, authored by Assemblywoman Susan Bonilla, D-Concord. Primarily targeting K12, Inc., it would ban nonprofit online charters from contracting with for-profit companies for instructional services. The bill also would eliminate for-profit online charter schools, of which there are a handful in California.

    The bill stands a good chance of making it to Gov. Jerry Brown’s desk. The Legislature passed a less sweeping version – banning for-profit online charters but failing to address the K12, Inc.-CAVA connection – last year. But Brown vetoed AB 787, and in his veto message wrote, “I don’t believe the case has been made to eliminate for-profit charter schools in California.” And he cautioned about using “somewhat ambiguous language” that could be interpreted to “restrict the ability of non-profit charter schools to continue using for-profit vendors.”

    Bonilla is convinced that mounting criticism of profit-driven online charters, CAVA in particular, and calls within the charter industry for reform warrant tight restrictions. And she said for-profit companies shouldn’t be running charter schools. “There is a conflict between making money for shareholders and spending it for educating students,” she said.

    In a statement Tuesday, Mike Kraft, vice president of finance and communications for Virginia-based K12, Inc., wrote, “There has been an enormous amount of misrepresentations made about the California Virtual Academy, CAVA, schools as a result of unfair and biased reporting, and by the agenda of some Sacramento special interests. Each of the CAVA schools we serve are transparent and are also audited each year by the California Department of Education for compliance with state education laws and regulations.”

    “The CAVA schools and their Boards will work with the Controller to review the various issues identified,” he continued, “and we believe the result of the audit will clarify the many inaccurate reports and allegations that are circulating about the CAVA schools.”

    The California Charter Schools Association estimates that 2 to 3 percent of the state’s charter schools are affiliated with or run by for-profit entities and enroll 20,000 to 30,000 students – 4 to 5 percent of charter school students in 2015-16. Only one organization, Opportunities for Learning, with six schools, is an actual for-profit corporation, according to the association.

    CAVA, with 14 schools, enrolls approximately 14,000 students. In a two-part investigation by reporter Jessica Calefati this year, the Mercury News reported that fewer than half of CAVA students graduate, and “almost none” pass the courses required for admission to the California State University and the University of California. CAVA told the newspaper that the graduation rate for students who stick with the program for all four years is 79 percent, about the state average. Go here for its response to the series.

    The newspaper reported that CAVA teachers were instructed to record the attendance of students who check in online for as little as one minute daily, enabling the school to bill the state for a full day’s tuition payments. In June 2015, more than 30 CAVA teachers filed complaints with the state and charter authorizing districts charging that CAVA violated state and federal laws by failing to provide special education services and inflating enrollment figures. CAVA denied all of the charges, and suggested they were part of an effort to unionize teachers at the schools (see EdSource story).

    Related

    A study of online charters in California by the Center for Research on Education Outcomes, or CREDO, at Stanford University found that online students were far behind their classroom-based peers. Based on test scores, CAVA students on average fell a third of a year behind their peers in math.

    Virtual schools fall under the larger category of independent study schools under current state law. Because of how they are geographically located, CAVA’s charters can enroll students in all but remote counties in Northern California. The Mercury News reported that CAVA prefers to pursue authorizing approval through small districts without the capacity for effective oversight. The California Virtual Academy of San Mateo is authorized by the 7,000-student Jefferson Elementary School District in Daly City, which, the newspaper reported, has taken in more than $1 million in oversight fees during the past decade. The superintendent acknowledged that he knew little about the charter organization’s operation that his district by law is required to monitor.

    Independence questioned

    The state controller’s audit will examine whether the boards of trustees of the CAVA campuses have maintained the arm’s-length distance in their dealings with K12, Inc. that the law requires between charitable organizations and entities they contract with. The Mercury News investigation found that K12, Inc. named the trustees of the CAVA of San Mateo, who routinely approved all motions at meetings run by a K12 employee. By providing all instruction services, such has hiring and managing teachers and running the school operation, K12, Inc. is entitled to as much as 75 percent of a school’s revenue, the Mercury New reported.

    In a report earlier this month, the National Alliance for Public Charter Schools and the National Association of Charter School Authorizers pointed to “significant problems” with online charter schools and concluded, “Left unchecked, these problems have the potential to overshadow the positive impacts this model currently has on some students. We urge state leaders and authorizers to address these problems head on instead of turning a blind eye to them.” The associations called for enrollment criteria for admission to online charters, caps on school enrollments and for regional charter authorizers with the expertise to oversee online charter schools.

    Colin Miller, vice president of policy at the California Charter Schools Association, disagreed with the report’s recommendations but said that his association “shares some of the same concerns” about for-profit charters and is “open to middle ground” on restricting them.

    AB 1084 would define online charters as schools in which “at least 80 percent of teaching and pupil interaction occurs via the Internet.” It would “prohibit a charter school from contracting with a for-profit entity for the provision of instructional services.” Bonilla said it was written this way to exclude the purchase of textbooks and curricular materials from for-profit companies.

    But Eric Premack, executive director and founder of the Sacramento-based Charter Schools Development Center, said the bill raises “basic definitional issues” that Brown foreshadowed in his veto message last year.

    “A lot of charters contract for special education services and for staff development. What do you mean by instructional services, and where do you draw the line?” he asked.

    John Fensterwald covers education policy.

    Thank you, Assemblywoman Susan Bonilla, for writing a bill to ban for-profit operators of virtual schools.

    The bill, Assembly Bill 1084, “would prevent charter schools that do more than 80 percent of their teaching online from being operated by for-profit companies or hiring them to facilitate instruction. If passed and signed into law by Gov. Jerry Brown, the legislation would effectively put companies like K12 out of business in the Golden State.

    “Our taxpayer dollars should be spent in the classroom to help our students, not used to enrich a company’s shareholders or drive up its profits,” Bonilla said in an interview.

    But K12 spokesman Mike Kraft railed against the proposal, calling it “another cynical effort to take away the rights of parents to choose the way their kids are educated.”

    How cynical are those “special interests” who want to take away K12 Inc.’s ability to profit while providing inferior education!?

    That company is K12 Inc., a publicly traded Virginia firm that allows students who spend as little as one minute during a school day logged onto its software to be counted as “present,” as it reaps tens of millions of dollars annually in state funding while graduating fewer than half of its high school students. Students who live almost anywhere south of Humboldt County may sign up for one of the company’s schools.

    Assemblywoman Bonilla was acting in response to a brilliant series of articles by Jessica Calefati in the San Jose Mercury News, exposing the profitable but educationally bankrupt K12 Inc., the corporation founded by the Milken brothers and publicly traded on the New York Stock Exchange.

    I hope Assemblywoman Bonilla and the media will review the abundant research on K12 Inc, such as the Credo study or the NEPC study. What she will learn is that students in online charter schools lose ground and fall behind their peers in real schools.

    If California chooses to waste millions of taxpayer dollars on bad schools to enrich the stockholders and the Milken family, shame on the legislators and the governor.

    via Diane Ravitch’s blog

    http://ift.tt/1UowL7f

    California ‘virtual’ academies: Bill targets for-profit operator K12 Inc.

    By Jessica Calefati, jcalefati@bayareanewsgroup.com

    Posted:
     
    06/10/2016 05:42:47 PM PDT |Updated:   about 22 hours ago

    Related Stories

    SACRAMENTO — Online charter schools would be prohibited from hiring for-profit firms to provide instructional services under a new bill that the author says is a direct response to this newspaper’s investigation of the company behind a profitable but low-performing network of “virtual” academies.

    That company is K12 Inc., a publicly traded Virginia firm that allows students who spend as little as one minute during a school day logged onto its software to be counted as “present,” as it reaps tens of millions of dollars annually in state funding while graduating fewer than half of its high school students. Students who live almost anywhere south of Humboldt County may sign up for one of the company’s schools.

    File photo:Former California Virtual Academies student Elizabeth Novak-Galloway, 12, plays a video game on her laptop in her San Francisco home on Feb. 18, 2016. (Dai Sugano/Staff archives)

    Assembly Bill 1084, authored by Assemblywoman Susan Bonilla, D-Concord, would prevent charter schools that do more than 80 percent of their teaching online from being operated by for-profit companies or hiring them to facilitate instruction. If passed and signed into law by Gov. Jerry Brown, the legislation would effectively put companies like K12 out of business in the Golden State.

    “Our taxpayer dollars should be spent in the classroom to help our students, not used to enrich a company’s shareholders or drive up its profits,” Bonilla said in an interview.

    But K12 spokesman Mike Kraft railed against the proposal, calling it “another cynical effort to take away the rights of parents to choose the way their kids are educated.”

    “This bill is nothing more than a PR effort designed to appease big money special interests that hide in the shadows, harming California families,” Kraft wrote in an email, alluding to the support teachers unions have given to similar legislation in the past.

    “Today, more than 14,000 California children attend virtual public charter schools, many in the Assemblymember’s own district,” Kraft added. “How many of their families has she spoken with before deciding to try to take away their choice?”

    Before the newspaper’s two-part investigative series was published in April, Bonilla said, she didn’t know how wide the achievement gap was between students enrolled in K12’s California Virtual Academies and those who attend other public schools. But the more she learned about the company’s track record, the more she felt motivated to act.

    The series highlighted research that shows online schools’ hands-off learning model isn’t appropriate for most children and found that accountability for student performance is sorely lacking. In fact, the districts tasked with overseeing K12’s California schools have a strong financial incentive to turn a blind eye to problems because they receive a cut of California Virtual Academies’ revenue to oversee them.

    The stories also showed that the online schools are not really independent from K12, as the company claims. The academies’ contracts, tax records and other financial information suggest that K12 calls the shots, operating the schools to make money by taking advantage of laws governing charter schools and nonprofit organizations.

    Earlier this month, another bipartisan group of lawmakers responded to the newspaper’s findings by calling for a wide-ranging state audit of for-profit charter schools.

    “We’re already more than half way through the legislative session, so I knew we had to act quickly,” Bonilla said. “This bill is focused, targeted and designed to get through the legislative process this year.”

    Because deadlines for introducing new legislation have already passed, Bonilla had to “gut and amend” another bill so that her new measure could move forward as soon as possible.

    For the measure to advance, it must be approved by the Senate Education Committee before lawmakers break for the summer in early July. After they return in August, the bill would need to clear a floor vote in the Senate, a policy committee in the Assembly and an Assembly floor vote within a matter of weeks.

    Assemblyman Roger Hernandez, D-West Covina, authored similar legislation last year, but Brown rejected Assembly Bill 787, writing in his veto message: “I don’t believe the case has been made to eliminate for-profit charter schools in California.”

    The governor went on to state that “the somewhat ambiguous terms used in this bill could be interpreted to restrict the ability of nonprofit charter schools to continue using for-profit vendors” such as textbook publishers or transportation providers.

    Bonilla said she doesn’t know if Brown will support AB1084 — he typically doesn’t reveal his views on pending legislation before squashing it or signing it into law. But Bonilla said she attempted to address the governor’s concern about ambiguity by specifying in her bill that online charter schools can’t hire for-profit companies for instructional services. So the schools could still contract with publishers and private transportation companies.

    “Profit doesn’t belong in public education, and taxpayer dollars shouldn’t be spent on for-profit instruction,” said Bonilla, who will be termed out in December. “This has been going on here for years, and it has to stop.”

    To reach the governor’s desk by the end of August, AB1084 will likely need support from powerful interest groups such as the California Teachers Association and the California Charter Schools Association. The CTA sponsored Hernandez’s bill, and while spokeswoman Claudia Briggs said the union would need more time to review Bonilla’s bill before taking a formal position, she said it sounded like “a bill we could get behind.”

    Emily Bertelli, a California Charter Schools Association spokeswoman, has previously said the organization would support legislation that bans for-profit companies such as K12 from operating charter schools.

    Asked to comment on AB1084, Colin Miller, the association’s acting senior vice president for government affairs, said the group is still evaluating the impact of the proposal’s language.

    “The association has been committed to operational transparency, authorizer accountability and quality academic performance for all charter schools,” Miller said. “But we also want to ensure that optimal flexibility is maintained. We hope to work with the author to find the right solution.”

    Contact Jessica Calefati at 916-441-2101. Follow her at Twitter.com/Calefati.