3:10pm

Tue November 20, 2012
Education

Institute to Reject Colorado Virtual Academy Application, Ripples Felt on Wall Street

Charter transfer applications for K-12 schools are rarely of interest on Wall Street. But for K12 Inc., the two topics collided this week.

Publicly traded education management company K12 Inc. was negatively impacted by news that its 5,000-student Colorado Virtual Academy won’t be allowed to transfer a charter to the Colorado Charter School Institute (CSI).

CSI staff recommended denying the transfer in a draft report issued before a Nov. 27 meeting on the topic.

Among the issues highlighted are:

“Extremely concerning” student performance: In 2012 COVA received its third straight rating of Priority Improvement, producing scores that in all three years place the program below the 10th percentile of schools statewide in performance.

Student Turnover: According to CSI, in 2012 COVA had nearly 25% student turnover between October Count and the state assessment window for elementary and middle school students. High School turnover was nearly 50%.

Board Governance: CSI states that the board has a rubric for holding K12 Inc. accountable but the rubric hasn’t been used to date. “Staff is concerned that the ESP [K12 Inc.] is actually in charge of the school, rather than the board.”

Curriculum: CSI praises the K12 Inc. materials as “well suited” to some student populations, but says adjustments need to be considered to address the increased number of at-risk student populations.

The discouraging marks come as the state’s largest and oldest online school struggles to correct academic performance and other issues.

KUNC first reported on the academic challenges at COVA in 2011. The school's current graduation rate is 22 percent. A follow-up story highlighted potential understaffing issues at the state’s large online K-12 school.

The CSI report’s findings are of great interest to Wall Street because K12 Inc. is a publicly traded company and COVA is one of the company’s oldest schools.

As we previously reported, a Wells Fargo downgrade Monday sent K12 Inc.’s stock into negative territory, and that slide continued Tuesday. Wells Fargo wrote in its 11-page report of K12 Inc. and COVA:

One of the company’s longest-standing schools, with per-pupil revenue (to K12) of approximately $5,000 (or an estimated 75-80% of the state’s $6,474 per-pupil funding,) COVA is experiencing enrollment contraction, declining parent and teacher satisfaction and deteriorating academic performance. Aggregate K12 data suggests the COVA issues are anomalous. However, given the relative maturity of the school, they remain unsettling. If they are representative of the execution issues that await other schools in maturity, there could be more far-reaching negative implications for future performance.

K12 Inc. issued a response Monday to the Wells Fargo report, citing growth in at-risk populations as a challenge for the school:

A special operations team has been put in place at COVA, and significant improvements in teaching and other practices are being made to ensure the school’s efforts are fully consistent with intervention practices at other K12-managed virtual academies serving at-risk youth. The special operations team is carefully analyzing the academic growth model data at COVA in order to put additional plans and programs in place to help the school make further adjustments to serve this changing population, improve academic performance and increase accountability.

According to the K12 Inc. statement, the school is in discussions with other charter authorizers. K12 Inc. Regional Vice President Mary Gifford said the school is considering whether to withdraw its application with CSI. She said the COVA board has submitted a renewal application to the Adams 12 Five Star School District, which is its current authorizer.

As the laundry list of problems with the 11-year-old school continues to grow, so does the bill for taxpayers. COVA received an estimated $30 million in state taxpayer dollars last school year.