K12 Inc. Tries to Pivot from Virtual School Failures to Profit from "Non-Managed" Schools

Submitted by Dustin Beilke on January 7, 2016 – 9:01am

If you were a public school and Wall Street didn’t like you that might not seem like such a big deal. What do financiers know about educating children? It’s a big deal, however, if you are K12, Inc., and enticing investors to buy into your low-cost, high yield "cyber school" idea is key to your bottom line.

At K12, Inc.’s stockholder meeting in December, its own investors criticized the schools’ lamentable academic performance and voted down its executives’ proposed salary increases. This is just the latest piece of bad news, which has been coming in rafts for K12 since 2013.

As K12’s executives were being rebuffed by stockholders inside the law offices of Latham & Watkins, in Washington, D.C., outside K12 was picketed by members of the California Teachers Association for more or less the same list of educational shortcomings, as Diane Ravitch noted.

Some editorial boards crow when they receive criticism from two opposing sides of a controversial issue. "If both sides are unhappy we must be doing something right" is the familiar refrain, as if there are only ever two sides to an issue or the sides have equal merit.

In the case of K12, however, it is hard not to wonder how much longer the company can withstand this loud unanimity of animus–even a firm Wall Street insiders like convicted fraudster Michael Milken helped launch, as the Center for Media and Democracy (CMD) detailed in "From Junk Bonds to Junk Schools: Cyber Schools Fleece Taxpayers with Phantom Students and Failing Grades."

No major supporters have yet publicly called for pulling the plug, but anti-public education zealots like the billionaire Walton family and the Koch brothers have plenty of other places to invest in to try to bring down "government schools."

Big, Big Payouts to Execs at Taxpayer Expense

In its recommendation that shareholders vote against the pay proposal, the advisory firm Glass Lewis & Co. said K12 exemplifies a "substantial disconnect between compensation and performance results." Glass Lewis gave the company an "F" for how it paid its executives compared to peers.

In 2015, K12 CEO Nathaniel Davis was making $5.3 million and CFO James Rhyu was making $3.6 million. Their base salaries were $700,000 and $478,500, respectively, which were dwarfed by additional pay and stock for their "performance." (See more details on their total compensation in the pdf uploaded below.)

In all, K12’s five highest paid executives received a total of more than $12 million in compensation last year. That’s one of the reasons CMD has called K12 Inc.’s former CEO, Ron Packard, the highest paid elementary and secondary school educator in the nation.

Nearly 90% of K12’s revenues–and thus its huge pay for executives</a–<comes from Americans' state or federal tax dollars.

K12 Inc. also pays each member of its Board of Directors between $155,000 and $216,000 annually for a few hours of work each year—far more than local school board members make for much more time spent in general. (See uploaded K12 proxy filings below for the details.)

While K12’s promoters love to mention that it is a publicly traded company, it is also trading at its lowest stock price since 2010, down 75 percent from its September 2013 peak.

Meanwhile, a new report from Stanford University’s Center for Research of Education Outcomes (CREDO) found that online charters do a very poor job of educating children. In general, students in online charters lose 42 days of reading in a year, and 180 days of instruction in math. And there are only 180 days of instruction in most public school years.

Enrollment has also dropped almost 5 percent from its peak. No less a business authority than Bloomberg Business investigative reporter John Hechinger presented grim prospects for K12 as of late 2014, and no one has revised them upward.

Millions in K12 Ads at Taxpayer Expense Too

This decrease in business has come despite massive advertising and marketing expenditures by the virtual schools industry. K12 has spent untold millions in public funds on ads—a luxury budget item that traditional public schools are not permitted even when competing with K12 for students.

It spent at least $20 million on ads in 2012 alone, but it has not publicly disclosed ad spending in recent years even as its ads have become more ubiquitous in markets like Wisconsin and Arizona, for example. K12 does not disclose its ad budget in its public annual report.

Plus Taxpayer Money Helps K12 Pay to Play with ALEC Politicians

K12 also spends taxpayer money lobbying state and federal officials. It recently got a seat, for example, on the corporate board of the American Legislative Exchange Council (ALEC), where for years it has also paid for a seat and vote on ALEC’s "Education and Workforce Development" Task Force, which advances a "cash for kids" lobbying agenda.

ALEC corporations spend tens of thousands of dollars each year for such access to lawmakers, and K12 has also paid many thousands of dollars to underwrite some of ALEC’s docket of events for legislators and lobbyists.

Through the ALEC Task Force, K12 has actually had an equal vote with state legislators on so-called "model" bills to divert taxpayer funds away from traditional public schools toward the objectives of ALEC’s private sector funders, to help their bottom-lines and/or legislative agenda.

ALEC’s "Virtual Public Schools Act," for example, even allows virtual schools to be paid the same amount per pupil as traditional public schools even though operations like K12 have no bricks and mortar school house or desks or air-conditioning or gyms, etc., to maintain.

As CMD’s SourceWatch has documented:

"In 2004 when the ‘model’ bill was drafted and approved, both K12 Inc. and Connections Academy were part of the ‘School Choice Subcommittee of ALEC’s Education Task Force, according to an archived version of ALEC’s website from February 2005. The subcommittee recommended six bills for adoption, including the ‘Virtual Public Schools Act.’ According to ALEC, the bill was drafted by Bryan Flood of K12 along with Mickey Revenaugh of Connections Academy, then-Colorado Representative Don Lee (now a lobbyist for K12, see [below]), ‘and the rest of the Subcommittee.’" (Connections is now part of Pearson PLC, a British mega-corporation headquartered in London.)

K12’s reps at ALEC Education Task Force meetings have been its Senior VP for Government Affairs (lobbying), Bryan Flood, along with its VP for Government Affairs, Don Lee, and its Senior Director of Government Affairs, Bob Fairbank.

ALEC’s Education Task Force is co-chaired by Utah state Sen. Howard Stephenson (R-11). Through the ALEC corporate bill mill, Stephenson has even done a roadshow with K12’s Don Lee to drive more business to K12 through legislation. Given his advocacy of efforts to divert tax dollars from traditional public schools to charters and virtual schools, some press in Utah have questioned whether Stephenson is a public servant or a lobbyist for outside interests. (There is no way to independently verify whether Stephenson has actually ever invested in K12 or Pearson, or not.)

Notably, Lee and Fairbank are both former Colorado state legislators who took the revolving door out of public service into well-paid gigs, like peddling what K12 is selling to legislatures across the country. And, the head of their lobbying shop, Flood, is the former flack for then-Gov. John Engler of Michigan, who is now pulling down big bucks for sitting on K12’s Board of Directors: $55,000 in cash plus $100,000 in K12 stock for a few hours of his time last year.

Making "Friends" Everywhere K12 Goes….

Utah, Arizona, and Wisconsin are not the only states where K12 is active and facing criticism. The "Ohio Virtual Academy," for example, which accounted for 10 percent of K12’s revenue in 2014, received failing grades on a state report card for student test-score progress and graduation rates. A state analysis found that only 37 percent of K12’s Ohio ninth graders earned diplomas within four years.

K12’s operations in California have produced similar results, as In the Public Interest (ITPI) has documented, despite K12’s efforts to blame the state. (CMD has partnered with ITPI on research previously.)

Several online charters have cancelled their contracts with K12, and in Tennessee, education commissioner Kevin Huffman called for shuttering the Tennessee Virtual Academy because it had test results "in the bottom of the bottom tier" and is an "abject failure."

Altogether, K12 has lost management contracts or been threatened with school shutdowns in five states.

The National Collegiate Athletic Association (NCAA) also ruled last April that prospective students from 24 K12 Inc. high schools can no longer count credits toward athletic scholarships.

A pro-union decision by the California Public Employment Relations Board no doubt came as more bad news for K12’s brass. The board ruled that the California Teachers Association (CTA) is the exclusive bargaining agent of the more than 750 teachers at the Simi Valley-based California Virtual Academies (CAVA). Teachers have been seeking a stronger voice in improving working conditions and student learning for CAVA’s 15,000 students.

CAVA teachers had been calling for improvements for years. In March 2015 a study of CAVA by ITPI called for better oversight. In June 2015, CTA filed complaints with school districts that authorized CAVA charters throughout California.

K12 Hoping "Non-Managed" Schools Will Save It?

While no one is publicly calling for K12 to shut down, K12 itself is "diversifying its portfolio" in an apparent effort to ease out of the online charter school business.

K12 has built its brand by operating "managed schools" in which K12 runs and profits from all of the programs at a particular K12 school. In a managed school, the company does all of the teaching, curriculum, assessment for the customers—er, students—who choose it over attending a public school or participating in a traditional home-schooling arrangement.

The new revenue stream K12 is pioneering is in what it is now calling "non-managed schools" in which K12 sells the digital content and platform for a school for some other company or entity to run (and be responsible for the results). Non-managed programs have been growing by leaps and bounds as managed virtual schools have fallen on hard times.

The only problem with this model is that managed schools still bring in much more money than the non-managed kind. Some managed schools, for example, bring in $1,849 per student while non-managed schools bring in only $462 per pupil on average.

But, getting some revenue without being responsible for results may be the way for the future of K12: an analysis of K12 figures comparing September 2015 to the prior year showed that enrollment at "managed" virtual schools was declining 12 percent while it is increasing 34.5 percent at "non-managed" schools.

Non-management could take profiting from taking money out of traditional public schools without real accountability to a new level for K12.

CMD’s Executive Director Lisa Graves contributed research to this report.

k12inc 2.pdf

California Looks Into K12 Inc. The Result: a $168.5 Million Settlement (or $2.5 Million, Depending on Who’s Counting)

Posted

By David Safier

on Tue, Jul 12, 2016 at 9:00 AM

click to enlarge

  • Courtesy of PhotoSpin

Imagine a group of students walk through the school doors sometime during the day, spend a few minutes lounging around the office, then leave. The school marks them present and collects their per-student money from the state.

According to an investigation by California’s Attorney General, that was business as usual at K12 Inc.’s online school, California Virtual Academy—emphasis on the word “business,” because K12 Inc. is a publicly traded, for-profit corporation. Students would sign into school on their home computers, then leave a few minutes later, and they would be marked present. That’s not just a problem at the California school. According to a number of investigative articles about K12 Inc.’s online schools around the country, teachers are urged to hang onto students who are enrolled but don’t spend enough time online or do enough work to pass their classes. Once they’ve been around long enough to qualify for state funding, they can be cut loose.

Misreporting attendance was only one issue that led California to reach a $168.5 million settlement with the company. According to the Attorney General,

“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.”

The settlement is $2.5 million plus $6 million to cover legal costs to the state, and $160 million to wipe out debts CAVA owes to K12 Inc. 

Charter school supporters aren’t complaining about the ruling. The California Charter Schools Association joined the California Teachers Association in applauding the decision. K12 Inc. is a major reason why some pro-charter organizations recently published a paper demanding improvement of online charter schools.

K12 Inc. hates that $168.5 million figure. According to a corporate press release, it’s really only a $2.5 million settlement with no admission of liability or wrongdoing. As for that $160 million in debt relief to CAVA,

“There is no ‘debt relief’ to the CAVA schools. The balance budget credits essentially act as subsidies to protect the CAVA schools, its students and teachers against financial uncertainties. CAVA schools have not paid that money to K12 and K12 never expected to receive it given California’s funding environment.”

I’m not savvy enough about how K12 Inc. operates to know why it keeps those “subsidies” on the books if it doesn’t expect them to be paid, but I know that another national charter chain, Imagine Schools, also shows outrageously high debts individual schools owe the parent company. It may look good on the books to list it as money to be collected at a later date rather than writing it off, or it may be a way of making sure the schools are too financially indebted to declare their independence from the larger corporation and go their own way.

Problems with CAVA and K12 Inc. were exposed in an excellent series of investigative reports by San Jose’s Mercury News, but the publicly traded corporation has been the subject of continued scrutiny by journalists across the country for years without resulting in state investigations. One probable reason is, K12 Inc. has less political clout in heavily Democratic California than in other states like, say, Arizona, where Craig Barrett, ex-CEO of Intel and current president and chairman of BASIS Schools, Inc., sits on the K12 Inc. Board and is compensated $190,000 for a few hours work. Also, California Attorney General Kamila Harris is running for the U.S. Senate, so a high profile case like this can only help her campaign in a progressive state.

Tags: K12 Inc., California Virtual Academy, Kamila Harris, Craig Barrett, Image

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I work for K12 as a contractor. I can say I have only seen full commitment and dedication to the real and true value online education offers. In my view K12 as a whole and the folks I worked with do their best to produce a product which enhances choice, success and moves education forward.

Posted by

Dylan

on 07/12/2016 at 7:38 PM

Do you think K12 Inc. is one of those companies that would hire a social media company that hires individual contractors to monitor online postings and websites to make positive remarks repudiating anything negative posted about the company?

Posted by

sgsmith

on 07/13/2016 at 12:38 AM

No. That sounds like something the NEA or public school hacks would do. What made you ask?

Posted by

Larry McNeil

on 07/13/2016 at 5:33 AM

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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.

Teachers claim virtual charter school company inflates enrollment

By Jane Meredith Adams | | 5 Comments

More than 30 teachers at the largest online charter school network in California filed complaints against their employer on Thursday, alleging that the schools violated state and federal laws by failing to provide special education services, inflating enrollment figures and paying for conferences in Yosemite and Palm Springs with federal money intended for students from low-income families.

The teachers filed their complaints – 69 in all – with the California Department of Education, county superintendents and nine school districts that oversee nine branches of the California Virtual Academies schools. The network operates 11 schools in California with an enrollment of 14,500 students.

“There is little oversight of virtual public schools in California,” said Cara Bryant, a longtime California Virtual Academies teacher and current teacher trainer based out of the branch known as CAVA @ Sonoma, in a statement.

“I do not believe all students are getting the education they need enrolled in CAVA,” Bryant said.

K12 Inc., the parent company of California Virtual Academies, denied the allegations and suggested they were part of an effort to unionize teachers at the schools. Other allegations included the illegal sharing of confidential student information, such as Individualized Education Plans for special education students, with all teachers; failing to keep adequate financial reserves; and failing to improve a pattern of sub-par student academic achievement and graduation rates.

At the CAVA@Los Angeles school, for example, 274 students were enrolled in the 12th grade in 2012-13 but none of those who graduated had completed all the courses required for UC or CSU admission.

“The latest round of complaints filed by a small group of individuals are consistent with prior complaints brought against the California Virtual Academies by various labor organizations seeking to represent CAVA certified teachers,” said Katrina Abston, head of schools for the network, in a statement from K12.

Some teachers at the California Virtual Academies have formed a group known as the California Virtual Educators that is seeking to unionize and affiliate with the California Teachers Association, according to Stacie Bailey, a high school science teacher at California Virtual Academies.

“As with the prior complaints, CAVA absolutely believes these current complaints are without merit,” Abston said. The charter schools undergo annual financial audits by independent external auditors, Abston said, and have “a strong record of compliance.”

David Thoming, superintendent of the New Jerusalem Elementary School District, said the district would investigate the complaints and asked the letter writers to send evidence of non-compliance. Families in the New Jerusalem district have been very happy with the CAVA@San Mateo school, he said, which provides homeschool families a structured curriculum and high school students a more flexible schedule. One student in the district is an accomplished gymnast who is enrolled in CAVA@San Mateo so she can take classes around her workout schedule.

“They love it,” Thoming said. “They wouldn’t be as large as they are if families didn’t like it.”

He added, “No one’s forcing them to go there and along the same line, for the teachers, no one’s forcing them to work there.”

Links to the complaints can be found on the California Virtual Educators website. The California Virtual Academy schools named in the complaints and the districts that oversee them are:

  • CAVA@Fresno – Orange Center School District
  • CAVA@Jamestown – Jamestown Elementary School District
  • CAVA@Kings – Armona Union Elementary School District
  • CAVA@Los Angeles – West Covina Unified School District
  • CAVA@Maricopa and CAVA@Maricopa High – Maricopa Unified School District
  • CAVA@San Diego – Spencer Valley Elementary School District
  • CAVA@San Joaquin – New Jerusalem Elementary School District
  • CAVA@San Mateo – Jefferson Elementary School District
  • CAVA@Sutter – Meridian Elementary School District

Jane Meredith Adams covers student health and well-being.

No one knows “findings based on incomplete and inaccurate reporting” better than K12…

What the Mercury News Didn’t Want Readers To Know About California Virtual Academies

The Mercury News published several recent stories critical of K12 and the online charter schools California Virtual Academies (CAVA).  The paper claims to have established certain “findings,” however these are largely based on incomplete and inaccurate reporting. It is a classic case of advocacy journalism:  ignore key facts and information that do not support a desired narrative. 

For example, on student attendance, the Mercury News stated that CAVA schools claim funding for students who log on for one minute.  (It happens to be the exact same charge made by the California Teachers Association in its campaign to disparage the CAVA charter schools and force them to unionize).  It is not true. 

A log on alone—regardless of duration—would not be submitted by CAVA nor eligible for funding. Under California’s Independent Study law, a student’s education activities are used to determine attendance – not seat time.  Teachers at CAVA schools are required to determine the days the student was working and the education activities completed during the work period (both online and offline). The Mercury News simply ignores the latter. 

So what did the paper rely on to support its “one minute” attendance claim? A snippet from a teacher training audio recording taken wildly out of context and huge pile of hearsay from the teachers union’s organizing committee.

More amazing is what the paper did not report.  None of its articles even mention California’s Independent Study law under which the CAVA schools, and other online school programs, operate.  It gets worse.  Not only does the paper ignore the law, it ignores the written guidelines provided by the California Department of Education (CDE) for how independent study programs determine and report attendance, including specific guidance for charter schools operating under independent study.

Further, the paper disregards the CAVA schools’ approved policies regarding attendance which are consistent with California’s independent study law and the guidelines from CDE.  Here is an excerpt from CAVA @ San Mateo’s Parent Student Handbook:

“In order for a student to receive attendance credit for a given school day, the student must be actively engaged in completing assignments given by the teacher on that school day…At the end of each learning period, the teacher evaluates the work or work products completed by the student and determines how many attendance days can be credited for the learning period.”

CAVA teachers are trained on how to accurately credit verifiable attendance consistent with California’s independent study rules for non-classroom based charter schools.  Teachers sign Attendance Agreement forms demonstrating that they understand the policies and agree to accurately credit verifiable attendance for each student.  Attendance reports at CAVA schools are regularly audited by independent, licensed auditors, and submitted to the CA Department of Education, per state law. 

All of these facts are either public information or were provided to the Mercury News, but were left out of its articles.  Rather than accurately and honestly report the facts, the lead reporter doubled down, repeating the same false claims about CAVA’s attendance policies, and firing off a broad email to California legislators that read like something a lobbyist from a special interest group would send, asking if Assemblymembers “believe an audit of the attendance records is needed to ensure taxpayers haven’t been defrauded.”

Well, independent audits on CAVA’s attendance are conducted regularly and sent to the CDE but nobody would know since the Mercury News didn’t report that or any of the other important facts and information detailed above.  But why let the law and those other pesky facts get in the way of a good story?  It’s no wonder trust in the mainstream media is at an all-time low.

Also overlooked by the Mercury News were the most important stakeholders: the nearly 14,000 students at CAVA schools.  Here the reporter utterly failed at any semblance of neutrality by dismissing the predominant views of the thousands of CAVA families and hundreds of CAVA teachers who are committed to their schools. 

Why do parents choose CAVA? Because children who enroll in CAVA are often dealing with challenging circumstances:  bullying, special needs, autism, medical issues, academic issues, and many others. Parents are looking for alternatives and the freedom to choose the school they believe is best for their children.  For many families, schools like CAVA are the only public school option they have.  Take it away and they have nothing. They would be forced back into schools they fled.

Next week, over 800 students across California will graduate from CAVA schools (over 200 graduated last semester).  Real kids. Real lives. Real successes.  I wonder, will the Mercury News tell their stories? 

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

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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.

Bay Area Lawmakers Call for Financial Audit of K12 Inc.

Jun 6, 2016

CHARTER A COURSE TO CONFLICT: A group of lawmakers on both sides of the aisle is calling for a state probe into California Virtual Schools, a network of online charter schools operated by K12 Inc, after a two-part San Jose Mercury News investigation (Part 1Part 2). The Mercury New reports that Representatives Phil Ting, D-San Francisco, and Catharine Baker, R-San Ramon, will be collaborating on a bill to remedy K12 Inc’s reported wrongdoings.

The Mercury News’ investigation found that “[K12] reaps tens of millions of dollars in state funding while graduating fewer than half of the students enrolled in its high schools” and that “teachers at K12’s California Virtual Academies have been asked to inflate attendance and enrollment records used to determine how much state funding the schools receive.”

K12 Inc responded to the original investigation with a statement reprinted by the newspaper. The online charter provider said that the paper’s claims closely mirrored those of the California Teachers’ Association.

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California Virtual Academy: San Mateo board’s statement about investigation

Bay Area News Group

Posted:
 
04/18/2016 03:12:14 PM PDT Updated:   about a month ago

The board of directors from the California Virtual Academy at San Mateo issued the following statement Monday in response to a Bay Area News Group investigation published Sunday and Monday into the online charter and its partner schools run by for-profit K12 Inc.

Recent articles in The Mercury News are a gross misrepresentation of our school and its operations, and the independence of our nonprofit charter school board.

We are members of the California Virtual Academy @ San Mateo public charter school board. Our school is part of one of the CAVA public charter schools, each governed independently by their nonprofit school boards made up of California residents, including parents, educators, and local community leaders who are committed to providing families with educational options for their children.

Alleging that we have any other interest except for our children and the CAVA families is both wrong and insulting. We take our role as governing board members very seriously. We are volunteers. We are not paid. Many of us have children in the CAVA schools. We have experience serving on other nonprofit boards. Our school has its own independent attorneys who guide us to ensure we are in compliance with state charter school regulations. We provide input and work together with our school administrators, just like other charter schools.

The allegations made in these articles about our schools are inaccurate. They are the same attacks made repeatedly by opponents of public charter schools, including by the California Teachers Association, an organization that has been aggressively attempting to unionize all eleven of the CAVA network of schools. The union has disparaged our schools and lobbied for legislation directly aimed at shutting our schools down and taking these options away from our parents, students, and teachers.

Our parents are extremely thankful that CAVA is an option for their children. Thousands of families choose CAVA schools. Many students are succeeding. We see hundreds of students graduating from CAVA schools each year. Unfortunately, the paper all but dismissed the successes. Further, the paper never asked why parents are leaving their local schools and choosing CAVA schools. Parents would not choose alternatives if their local school was working for their child. Sadly, the paper completely ignores the positive experiences of the vast majority of CAVA families and teachers, electing instead to quote a small handful of critical voices. It is exactly what opponents of charter schools have done for years. This is classic case of unfair and biased journalism.

Parents want choice in education. Students deserve options, because one size does not fit all. We love our school. We are proud to represent and stand with CAVA’s educators and families. We are proud of the achievements and the hard work of our students, staff, and volunteer board members.

— Don Burbulys, President, CAVA @ San Mateo

Erin Wong, Board Member, CAVA @ San Mateo

Christa Enns, Board Member, CAVA @ San Mateo

Stephen Warren, Board Member, CAVA @ San Mateo

K12 Inc.: Bay Area lawmakers call for audit of California Virtual Academies operator

By Jessica Calefati, jcalefati@bayareanewsgroup.com

Posted:
 
05/31/2016 05:08:41 AM PDT

SACRAMENTO — A bipartisan group of lawmakers is calling for a state audit of a profitable but low-performing network of online charter schools following this newspaper’s investigation of K12 Inc., the Virginia company at the heart of the operation.

Published last month, the two-part series revealed that the Wall Street-traded company reaps tens of millions of dollars in state funding while graduating fewer than half of the students enrolled in its high schools. It also found that teachers at K12’s California Virtual Academies have been asked to inflate attendance and enrollment records used to determine how much state funding the schools receive.

California Virtual Academies teacher Julianne Knapp teaches her students during her online class on Nov. 18, 2015, at a public library in San Jose. (Dai Sugano/Bay Area News Group)
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Dai Sugano
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Assembly members Phil Ting, D-San Francisco, and Catharine Baker, R-San Ramon, say an audit is needed because the Legislature takes allegations of misspent public money seriously — and that any company profiting while students struggle deserves intense scrutiny. Lawmakers say its findings would likely set the stage for legislation aimed at addressing the problems at online schools.

“This reporting raises serious questions that demand a more thorough investigation, which is why I will work with my colleagues to pursue an audit of for-profit charter schools and the mechanisms in place to hold them accountable,” said Ting, who is joining with Assembly Speaker Anthony Rendon and other Assembly members to craft the audit request.

Nationally, 70 percent of students enrolled in online charters attend schools managed by for-profit companies such as K12 and its leading competitor, Connections Academy, while 30 percent attend charters that are independent or run by nonprofits.

Sacramento lawmakers aren’t the only ones troubled by K12’s track record. Tom Torlakson, California’s superintendent of public instruction, vowed last week to collaborate with the legislators on possible fixes.

“I am concerned by some issues and practices exposed in this article,” Torlakson said. “I am exploring options to investigate laws and regulations governing these types of charter schools and will work closely with legislators interested in this subject.”

But coming up with solutions to such politically charged problems won’t be easy.

Gov. Jerry Brown is a strong supporter of charter schools and has already vetoed bills that sought to force all charters to comply with conflict-of-interest and transparency rules and ban for-profit companies from operating them. And earlier this year, two bills that would have addressed some of the problems highlighted in this newspaper’s series stalled under pressure from interest groups.

The newspaper’s investigation found that students who spend as little as one minute during a school day logged on to K12’s school software may be counted as “present” in records used to calculate state funding. The investigation also revealed that 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 the schools, which now enroll about 15,000 students.

“Taking the bull by the horns and regulating these irresponsible for-profit companies shouldn’t be a wild idea,” said Bruce Fuller, an education policy professor at UC Berkeley. “If nothing happens and K12 faces no consequences, the company stands to poison the legitimacy of the whole (charter) movement.”

Asked about the possible audit, K12 spokesman Mike Kraft did not comment. But he argued in an email that a student logged onto the company’s software for a minute would not result in additional state funding for K12 without a determination by the student’s teacher that he or she had completed required work.

“In other words, a log on alone — regardless of duration — would not be submitted by CAVA (California Virtual Academies) nor be eligible for funding,” Kraft wrote.

Any bill that creates a new rule for charter schools will require Brown’s support. But a group of Assembly Democrats hope the weight of a Joint Legislative Audit Committee’s findings is what’s needed to draft something the governor finds “palatable,” said John Casey, a spokesman for Rendon, D-Paramount.

Members of the upper and lower house who sit on the committee meet several times a year to consider lawmakers’ audit requests. Once those requests are approved, they’re transferred to California State Auditor Elaine Howle, who is currently working on more than a dozen committee requests. Typically, audits take several months to complete.

“As a parent of school-age children and education advocate, I don’t see any integrity in counting a student who has logged in to an online class for as little as one minute as ‘present’ for instructional purposes or for calculating attendance funding,” said Assemblywoman Baker, the Bay Area’s lone GOP lawmaker.

Drafting legislation that the powerful California Charter Schools Association and California Teachers Association can both support will be another big hurdle to regulating schools run by companies like K12.

In March, Assemblywoman Patty López, D-San Fernando, introduced Assembly Bill 2242, which would have banned for-profit corporations such as K12 from operating charter schools. But the bill also sought to block charters from being part of a network that allows them to share administrators and pool resources to purchase curriculum, banning a structure used today by nearly half the state’s charter schools.

Lopez soon abandoned the bill after charter advocates flooded her district office with letters and calls urging her to drop it.

“After hearing many concerns from families in my district, many of them that I personally know, I have made a decision to not move forward with AB 2242 in the form that it is today,” López said in a statement. “My intent with the bill was not to harm charter schools, but to bring transparency when it comes to public funding.”

The California Charter Schools Association would support legislation that bans for-profit companies like K12 from operating charter schools, but so far no bills have been introduced that deal strictly with that topic, spokeswoman Emily Bertelli said.

Sen. Steve Glazer, D-Walnut Creek, encountered equally passionate opposition to Senate Bill 1434, which sought to impose new restrictions on the school districts that review prospective charter schools’ applications and oversee them once they open their doors.

Glazer’s bill, which was sponsored by the California Charter Schools Association, would have required all school districts that authorize charter schools to annually submit financial statements to the charters, showing how they spent the oversight fees collected. Once the California Teachers Association voiced numerous concerns with the sweeping proposal, which the union detailed in a lengthy April letter addressed to Glazer, the measure stalled before being heard by the Senate Education Committee.

K12’s critics such as Diane Ravitch — a New York University education historian and former U.S. Department of Education assistant secretary — say the company’s track record in California is so worrisome that there should be no excuse for lawmakers dragging their feet.

“The California Legislature should feel obligated to do something about it,” Ravitch said. “It’s incomprehensible that no one seems to care.”

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

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K12 Inc. Tries to Pivot from Virtual School Failures to Profit from “Non-Managed” Schools

By Dustin Beilke on January 7, 2016 – 9:01am





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If you were a public school and Wall Street didn’t like you that might not seem like such a big deal. What do financiers know about educating children? It’s a big deal, however, if you are K12, Inc., and enticing investors to buy into your low-cost, high yield “cyber school” idea is key to your bottom line.

At K12, Inc.’s stockholder meeting in December, its own investors criticized the schools’ lamentable academic performance and voted down its executives’ proposed salary increases. This is just the latest piece of bad news, which has been coming in rafts for K12 since 2013.

As K12’s executives were being rebuffed by stockholders inside the law offices of Latham & Watkins, in Washington, D.C., outside K12 was picketed by members of the California Teachers Association for more or less the same list of educational shortcomings, as Diane Ravitch noted.

Some editorial boards crow when they receive criticism from two opposing sides of a controversial issue. “If both sides are unhappy we must be doing something right” is the familiar refrain, as if there are only ever two sides to an issue or the sides have equal merit.

In the case of K12, however, it is hard not to wonder how much longer the company can withstand this loud unanimity of animus–even a firm Wall Street insiders like convicted fraudster Michael Milken helped launch, as the Center for Media and Democracy (CMD) detailed in “From Junk Bonds to Junk Schools: Cyber Schools Fleece Taxpayers with Phantom Students and Failing Grades.”

No major supporters have yet publicly called for pulling the plug, but anti-public education zealots like the billionaire Walton family and the Koch brothers have plenty of other places to invest in to try to bring down “government schools.”

Big, Big Payouts to Execs at Taxpayer Expense

In its recommendation that shareholders vote against the pay proposal, the advisory firm Glass Lewis & Co. said K12 exemplifies a “substantial disconnect between compensation and performance results.” Glass Lewis gave the company an “F” for how it paid its executives compared to peers.

In 2015, K12 CEO Nathaniel Davis was making $5.3 million and CFO James Rhyu was making $3.6 million. Their base salaries were $700,000 and 478,500, respectively, which were dwarfed by additional pay and stock for their “performance.” (See more details on their total compensation in the pdf uploaded below.)

In all, K12’s five highest paid executives received a total of more than $12 million in compensation last year. That’s one of the reasons CMD has called K12 Inc.’s former CEO, Ron Packard, the highest paid elementary and secondary school educator in the nation.

Nearly 90% of K12’s revenues–and thus its huge pay for executives–come from Americans’ state or federal tax dollars.

K12 Inc. also pays each member of its Board of Directors between $155,000 and $216,000 annually for a few hours of work each year—far more than local school board members make for much more time spent in general. (See uploaded K12 proxy filings below for the details.)

While K12’s promoters love to mention that it is a publicly traded company, it is also trading at its lowest stock price since 2010, down 75 percent from its September 2013 peak.

Meanwhile, a new report from Stanford University’s Center for Research of Education Outcomes (CREDO) found that online charters do a very poor job of educating children. In general, students in online charters lose 42 days of reading in a year, and 180 days of instruction in math. And there are only 180 days of instruction in most public school years.

Enrollment has also dropped almost 5 percent from its peak. No less a business authority than Bloomberg Business investigative reporter John Hechinger presented grim prospects for K12 as of late 2014, and no one has revised them upward.

Millions in K12 Ads at Taxpayer Expense Too

This decrease in business has come despite massive advertising and marketing expenditures by the virtual schools industry. K12 has spent untold millions in public funds on ads—a luxury budget item that traditional public schools are not permitted even when competing with K12 for students.

It spent at least $20 million on ads in 2012 alone, but it has not publicly disclosed ad spending in recent years even as its ads have become more ubiquitous in markets like Wisconsin and Arizona, for example. K12 does not disclose its ad budget in its public annual report.

Plus Taxpayer Money Helps K12 Pay to Play with ALEC Politicians

K12 also spends taxpayer money lobbying state and federal officials. It recently got a seat, for example, on the corporate board of the American Legislative Exchange Council (ALEC), where for years it has also paid for a seat and vote on ALEC’s “Education and Workforce Development” Task Force, which advances a “cash for kids” lobbying agenda.

ALEC corporations spend tens of thousands of dollars each year for such access to lawmakers, and K12 has also paid many thousands of dollars to underwrite some of ALEC’s docket of events for legislators and lobbyists.

Through the ALEC Task Force, K12 has actually had an equal vote with state legislators on so-called “model” bills to divert taxpayer funds away from traditional public schools toward the objectives of ALEC’s private sector funders, to help their bottom-lines and/or legislative agenda.

ALEC’s “Virtual Public Schools Act,” for example, even allows virtual schools to be paid the same amount per pupil as traditional public schools even though operations like K12 have no bricks and mortar school house or desks or air-conditioning or gyms, etc., to maintain.

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As CMD’s SourceWatch has documented:

“In 2004 when the ‘model’ bill was drafted and approved, both K12 Inc. and Connections Academy were part of the ‘School Choice Subcommittee of ALEC’s Education Task Force, according to an archived version of ALEC’s website from February 2005. The subcommittee recommended six bills for adoption, including the ‘Virtual Public Schools Act.’ According to ALEC, the bill was drafted by Bryan Flood of K12 along with Mickey Revenaugh of Connections Academy, then-Colorado Representative Don Lee (now a lobbyist for K12, see [below]), ‘and the rest of the Subcommittee.'” (Connections is now part of Pearson PLC, a British mega-corporation headquartered in London.)

K12’s reps at ALEC Education Task Force meetings have been its Senior VP for Government Affairs (lobbying), Bryan Flood, along with its VP for Government Affairs, Don Lee, and its Senior Director of Government Affairs, Bob Fairbank.

ALEC’s Education Task Force is co-chaired by Utah state Sen. Howard Stephenson (R-11). Through the ALEC corporate bill mill, Stephenson has even done a roadshow with K12’s Don Lee to drive more business to K12 through legislation. Given his advocacy of efforts to divert tax dollars from traditional public schools to charters and virtual schools, some press in Utah have questioned whether Stephenson is a public servant or a lobbyist for outside interests. (There is no way to independently verify whether Stephenson has actually ever invested in K12 or Pearson, or not.)

Notably, Lee and Fairbank are both former Colorado state legislators who took the revolving door out of public service into well-paid gigs, like peddling what K12 is selling to legislatures across the country. And, the head of their lobbying shop, Flood, is the former flack for then-Gov. John Engler of Michigan, who is now pulling down big bucks for sitting on K12’s Board of Directors: $55,000 in cash plus $100,000 in K12 stock for a few hours of his time last year.

Making “Friends” Everywhere K12 Goes….

Utah, Arizona, and Wisconsin are not the only states where K12 is active and facing criticism. The “Ohio Virtual Academy,” for example, which accounted for 10 percent of K12’s revenue in 2014, received failing grades on a state report card for student test-score progress and graduation rates. A state analysis found that only 37 percent of K12’s Ohio ninth graders earned diplomas within four years.

K12’s operations in California have produced similar results, as In the Public Interest (ITPI) has documented, despite K12’s efforts to blame the state. (CMD has partnered with ITPI on research previously.)

Several online charters have cancelled their contracts with K12, and in Tennessee, education commissioner Kevin Huffman called for shuttering the Tennessee Virtual Academy because it had test results “in the bottom of the bottom tier” and is an “abject failure.”

Altogether, K12 has lost management contracts or been threatened with school shutdowns in five states.

The National Collegiate Athletic Association (NCAA) also ruled last April that prospective students from 24 K12 Inc. high schools can no longer count credits toward athletic scholarships.

A pro-union decision by the California Public Employment Relations Board no doubt came as more bad news for K12’s brass. The board ruled that the California Teachers Association (CTA) is the exclusive bargaining agent of the more than 750 teachers at the Simi Valley-based California Virtual Academies (CAVA). Teachers have been seeking a stronger voice in improving working conditions and student learning for CAVA’s 15,000 students.

CAVA teachers had been calling for improvements for years. In March 2015 a study of CAVA by ITPI called for better oversight. In June 2015, CTA filed complaints with school districts that authorized CAVA charters throughout California.

K12 Hoping “Non-Managed” Schools Will Save It?

While no one is publicly calling for K12 to shut down, K12 itself is “diversifying its portfolio” in an apparent effort to ease out of the online charter school business.

K12 has built its brand by operating “managed schools” in which K12 runs and profits from all of the programs at a particular K12 school. In a managed school, the company does all of the teaching, curriculum, assessment for the customers—er, students—who choose it over attending a public school or participating in a traditional home-schooling arrangement.

The new revenue stream K12 is pioneering is in what it is now calling “non-managed schools” in which K12 sells the digital content and platform for a school for some other company or entity to run (and be responsible for the results). Non-managed programs have been growing by leaps and bounds as managed virtual schools have fallen on hard times.

The only problem with this model is that managed schools still bring in much more money than the non-managed kind. Some managed schools, for example, bring in $1,849 per student while non-managed schools bring in only $462 per pupil on average.

But, getting some revenue without being responsible for results may be the way for the future of K12: an analysis of K12 figures comparing September 2015 to the prior year showed that enrollment at “managed” virtual schools was declining 12 percent while it is increasing 34.5 percent at “non-managed” schools.

Non-management could take profiting from taking money out of traditional public schools without real accountability to a new level for K12.


CMD’s Executive Director Lisa Graves contributed research to this report.

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End of Year 2015 Proxy Statement with Exec Compensation for K12 1.13 MB
Dustin Beilke

Dustin Beilke is a freelance writer from Madison, WI. He has written for a number of publications, including Newsday, Salon.com, The Nation, The Progressive, In These Times, Mother Jones, The Capital Times, and The Onion.

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