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.
  • Charter School Must Pay California Millions

    By DON DEBENEDICTIS 

         LOS ANGELES (CN) — The operator of 14 online charter schools in California must pay the state $8.5 million, provide $160 million in debt relief and reform itself to resolve charges of false advertising and using misrepresentations to increase its taxpayer funding.     The settlement should end a July 8 lawsuit the attorney general filed against Virginia-based K12 Inc. and its 14 California schools, and a 2012 whistleblower lawsuit against K12 and its California Virtual Academy @ Los Angeles.     The profit-seeking K12 and its “virtual,” or online, schools, misrepresented their students’ achievements, test scores, class size, individualized instruction and parent satisfaction, the state says in its Superior Court complaint.     All 14 California defendants are named a variation of “California Virtual Academy”: California Virtual Academy @ San Mateo, California Virtual Academy @ Los Angeles, and so on. All 14 are organized as, or operated by, nonprofit California Public Benefit corporations.     “K12 ‘provides substantially all of the management, technology and academic support services in addition to curriculum, learning systems and instructional services’ for the virtual school defendants,” the attorney general says in the lawsuit, without specifying what she is quoting in the interior quotes.     The complaint continues: “The virtual school defendants receive funds from the State of California every year to pay for the education of the approximately 13,000 students attending these schools. Pursuant to the agreements, the virtual school defendants pay significant management and technology fees to K12 based on a percentage of the total funding the virtual school defendants receive.”     The fees include the cost of using K12’s software to take the Internet classes, for which students must pay, despite the defendants’ offer of a free education, according to the state.     Also, K12 et al. advertised that graduates would qualify for the University of California and California State University campuses, though they did not offer classes in several areas required for UC admission, according to the complaint.     At K12’s direction, the 14 schools inflated their daily attendance to collect unjustified funding from the state Department of Education: They credited students with a full day at school for logging in to class for as little as one minute, according to the whistleblower lawsuit.     “All children deserve, and are entitled under the law, to an equal education,” Attorney General Kamala Harris said in a statement. “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 put the total value of the settlement at $168.5 million because the agreement requires K12 to expunge about $160 million in so-called “balanced budget credits” the company provided the online schools under their contracts. Harris called the $160 million debt relief.     But in an angry retort, K12’s CEO said the company never sought or expected to collect on the credits, which he called subsidies, not debts.     “The attorney general’s claim of $168.5 million in today’s announcement is flat wrong,” Stuart Udell said in a statement. “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.”     Udell put the value of the settlement at only $2.5 million: the amount K12 will pay to resolve claims it inflated attendance figures. It will pay another $6 million to cover the costs of the attorney general’s investigation and to fund other “enforcement cases to protect the rights of children” by the office, according to the main settlement document.     K12’s attorneys, Timothy Hatch with Gibson, Dunn & Crutcher in Los Angeles and Peter Wald with Latham & Watkins in San Francisco did not respond to requests for comment. Neither did the attorney for the charter schools, Paul C. Minney, with Young, Minney & Corr in Sacramento.     K12 did not admit wrongdoing or liability in the settlement, but it had been under fire for some time. In addition to the attorney general’s months-long probe, the California Department of Education was monitoring it, and the San Jose Mercury News published a series of investigative stories on it this spring.     The case began with a whistleblower lawsuit filed under seal in 2012 by a teacher from the California Virtual Academy @ Los Angeles. Susie Kaplar claimed she had been fired for refusing to pad her attendance figures. Because she filed the suit on behalf of the state, the attorney general’s office was able to take it over and bring its own suit.     The settlement agreement for her lawsuit includes the $2.5 million payment on attendance data. Under state law, Kaplar should collect an undisclosed portion of the settlement. She also will receive $80,000 in damages and attorneys’ fees.     Kaplar’s attorney, J. Mark Moore in Canoga Park, did not return a call seeking comment.     The California Charter Schools Association, which usually supports charter operators, praised the attorney general’s actions.     “CCSA condemns the predatory and dishonest practices employed by K12, Inc. to dupe parents using misleading marketing schemes, siphon taxpayer dollars with inflated student attendance data, and coerce [the nonprofit schools] into dubious contracting arrangements,” the association said in a statement.     It also endorsed legislation pending in Sacramento to prevent for-profit companies from controlling or operating charter schools.

    Online school operator agrees to $168.5 million settlement after being accused of manipulating records

    July 9, 2016

    Updated 4:48 p.m.

    SACRAMENTO – A for-profit company that operates online charter schools in California has reached a $168.5 million settlement with the state over claims it manipulated attendance records and overstated the academic progress of students.

    The deal announced Friday by Attorney General Kamala Harris also requires Virginia-based K12 Inc. to take a slew of corrective actions, the East Bay Times reported Saturday.

    The settlement comes almost three months after the Bay Area News Group published an investigation of K12 Inc., which received more than $310 million in state funding for its profitable but low-performing network of California Virtual Academies, or CAVA, which serve about 15,000 students.

    Harris’ office found that K12 and its 14 “virtual” schools in California used deceptive advertising to mislead families about students’ academic progress, parents’ satisfaction with the program and their graduates’ eligibility for admission at the University of California and California State University.

    The Attorney General’s office also found that K12 collected more state funding than it was entitled to by submitting inflated student attendance data.

    “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.

    Under the settlement, 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.

    K12 said in a statement it had admitted no wrongdoing and insisted it had already planned to take up several of the corrective actions required under the agreement.

    “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.

    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.

    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 PDTUpdated:
     
    04/18/2016 09:04:42 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.

    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.
  • Virtual Academy in Greenfield seeks new content provider

    By ANITA FRITZ

    Recorder Staff

    Wednesday, December 16, 2015

    (Published in print: Thursday, December 17, 2015)

    GREENFIELD — The Massachusetts Virtual Academy is looking at its options as its contract with Virginia-based K12 Inc. curriculum provider expires in June 2016.

    Carl Tillona, executive director of the Greenfield-based virtual school, said MAVA received three proposals after issuing a request for proposals last month.

    K12 was one of them, and Connections Academy and Edgenuity were the other two, said Tillona.

    “We’re going to choose what’s best for our students,” said Tillona. “We want the absolute best curriculum for our students.”

    The first diploma-granting virtual school in the state has a current enrollment of 651 students. Tillona said that includes 19 students from Greenfield. Local school districts pay $6,700 per student per year for those who choose the virtual route with MAVA.

    Tillona said the virtual school, which teaches students across the state via the Internet, serves many different types of students, including those with medical problems, athletes who have to train during the day, and students who find brick-and-mortar schools are not a good fit for them.

    In 2010, Greenfield School Committee voted to open the state’s first virtual school, but that same committee vote 7-0 unanimously to shut it down in 2013.

    The virtual school, which is a public school controlled by the state and structured like a charter school, opened shortly after, changing its name to Massachusetts Virtual Academy, which is headquartered in Greenfield.

    “There are a lot of great curriculum providers for virtual schools now, a lot more than when MAVA first selected K12,” said Tillona.

    He said the contract that is expiring was for three years. He said he believes the next contract will be for one year with an option to extend it.

    “We want to have the best curriculum alongside the best teachers in Massachusetts,” said Tillona. “To do that, we need to explore all of our options.”

    The virtual academy currently takes an active role in all of the teacher hiring and training, and also in the curriculum choices that K12 provides, said Tillona.

    The virtual school intends to continue those practices to ensure that its instructors, teaching materials and techniques meet and exceed state standards, he said.

    Tillona said can’t be sure what, if any, changes there will be, because a provider has not been chosen, yet.

    “We’ll have to see,” he said. “We could choose K12, or we could choose someone else. We could choose two providers. We just don’t know, yet.”

    In October 2014, the Massachusetts Board of Secondary and Elementary Education placed the virtual school on a 20-month probation, after the department raised concerns about its academic programs and compliance with regulatory requirements. That probation will end in June 2016 — at the same time its new contract will begin.

    Tillona said the virtual academy has worked hard to provide the best education possible to its students.

    For more information about Massachusetts Virtual Academy at Greenfield, visit www.mava.k12.com.

    K12 Inc. Reports Profitable Second Quarter of $12.3M

    Image via K12

    Herndon, Virginia-based K12 Inc. held its second quarter earnings conference call Thursday morning, reporting a profitable quarter after suffering a loss in the same period a year ago.

    The edtech company provided proprietary curriculum, software systems and educational services to support individualized learning for students in pre-K through high school. The company had quarterly net income of $12.3 million, or 33 cents per share. At the same time a year ago K12 lost $3.7 million, or nine cents per share.

    Fiscal second quarter revenue reached $231.3 million, according to K12, which is up from $223.9 million in the second quarter of FY 2014.

    K12 stocks went up after the earnings release, which is likely because the results exceeded Wall Street expectations. Zacks Investment Research predicted that the average estimate for earnings would be 29 cents per share and that revenue would come in at $229.8 million. That said, its stock lost more than 40 percent of its value over the course of the last year.

    Still, the second quarter earnings report was a promising one. Total enrollment increased by 0.9 percent and revenue was up 3.2 percent. K12 expects full-year revenue to come in between $230 million to $240 million.

    “The academic progress of our students and successes of our managed public schools continue to drive K12 forward,” said Chairman and CEO Nate Davis. “After years of focused investment coupled with an unrivaled commitment to putting students first, we are beginning to see improvement in student proficiency on State academic assessments. The K12 team remains passionate about supporting students, teachers and our partner schools to continue this trend toward academic excellence.”

    Take a look at the full results for the second financial quarter that ended December 31, 2014 here.

    Gov. Haslam invested in K12 education company at one time

    The Tennessean 12:15 p.m. EDT September 9, 2013

    Gov. Haslam once owned shares of the troubled online school, but sold them before becoming governor.

    http://thetruthaboutk12.com//wp-content/uploads/2015/09/

    (Photo: The Tennessean)

    SHARECONNECTTWEET COMMENTEMAILMORE

    By Chas Sisk | The Tennessean

    Gov. Bill Haslam owned a block of shares in K12 Inc., the education company behind a troubled online school in Tennessee, but sold the investment before taking office or weighing in on two bills that affected the company directly.

    Haslam invested at least $10,000 in K12 Inc. in July 2008, when he was mayor of Knoxville, but had sold off all of his shares by July 2009, when he was running for governor. The investment was reported in a filing with the Tennessee Ethics Commission, as required under state law.

    Haslam said he did not know about the investment before The Tennessean inquired about it last week. The governor said the investment, one of about 350 listed in a disclosure that he signed in January 2009, had been made by an investment manager.

    “The honest answer is I wasn’t aware that I ever did,” he said at a meeting with The Tennessean’s editorial board. “I, a long time ago, found that there were people who know how to manage my investments a lot better than I do, so I haven’t made investment decisions in a long time.

    Haslam declined to provide details about the amount he invested in the company, how many shares he owned or the timing of the transactions. Spokeswoman Alexia Poe cited the governor’s long-standing policy against sharing such information about his investment portfolio.

    Poe said the governor’s track record suggests his one-time investment has not swayed him to favor the company.

    “We’ve been tougher than not on K-12,” she wrote in an email.

    Virginia-based K12 Inc. was founded in 1999 and currently provides online teaching to more than 100,000 students, mostly by partnering with local school districts. The company’s early supporters included former U.S. Secretary of Education William Bennett, Oracle CEO Larry Ellison and so-called “junk bond king” Michael Milken, who pleaded guilty in 1990 to six charges related to securities fraud.

    Company criticized

    K12 Inc. reported an operating income of $45.7 million in the fiscal year that ended June 30, but the company has been criticized as providing an inadequate education to large numbers of its students.

    The Tennessee Virtual Academy, which K12 Inc. operates on behalf of Union County Public Schools, has ranked among the worst in the state in each of its two years of existence.

    Haslam’s investment came about eight months after the company’s initial public offering in December 2007. The governor said he sold off the stock at a loss, a claim consistent with the company’s stock history.

    The investment appears only once in his disclosure filings. State law does not require him to record stock sales on which he earns less than $1,000.

    Haslam moved his stock portfolio into a blind trust when he became governor in January 2011, making it impossible for anyone other than his investment manager to know whether he has reinvested in the company since then.

    Haslam signed the bill in 2011 that allowed K12 Inc. to begin operating in Tennessee, but he also has been critical of the school’s performance. Last year, he introduced and signed legislation that allows the Department of Education to close virtual schools that repeatedly post failing test scores.

    Reach Chas Sisk at 615-259-8283 or csisk@tennessean.com, or on Twitter @chassisk.

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