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An in-depth look by I-News - a Colorado-based nonprofit investigative news collaborative, Education News Colorado, and KUNC at the state’s online K-12 schools. Topics include: online K-12 school performance, state- and district-level oversight, and for-profit Education Management Organizations, such as K12 Inc.

K12 Inc.: Public Online Schools, Private Profits

At a time when public schools are seeing deep cuts in funding, there’s a growing market for companies running online elementary, middle and high schools. The largest for-profit company overseeing these programs in Colorado is Virginia-based company K12 Inc. While public schools are struggling to survive, K12 Inc.—with the support of state tax dollars—is reporting double digit profits. Meantime, it’s not measuring up to state academic standards.

Nowhere is this more clear than Adams 12 Five Star School District, north of Denver. In addition to its brick and mortar schools, the district also supervises the state’s largest online school, Colorado Virtual Academy, or COVA. Last spring while the district was discussing $25 million in budget cuts and laying off 155 employees, COVA’s  management company, K12 Inc., was projecting annual growth in excess of $100 million.

“K12 is almost exclusively funded with public dollars,” says Gary Miron, an education professor at Western Michigan University. Miron studies K12 and other so-called Education Management Organizations, or EMOs. 

Here’s how they work: alternative public schools or virtual schools can choose to contract with an EMO like K12 Inc. to provide the most basic services, from hiring and firing teachers to developing curricula. Miron says EMOs can also be involved in recruiting students and, indirectly, influence who enrolls.

“…and they can change those conditions, those inner workings of a school to maximize their profit,” he says. “That may be targeting particular types of students or pushing out or counseling out some of the students that they don’t want.”

Student enrollment at COVA has grown to about 5,000 thanks in part to marketing by K12. But despite the allure of flexibility and education from home, COVA is finding a relatively high number of students are dropping out. Last year the school reported a 12 percent graduation rate. That’s compared to a 72 percent average for all public high schools statewide.

“I’m not going to lie to you about that. We’ve had some downward trends,” says Katherine Knox, director of school improvement for Colorado Virtual Academy. “But we’ve also had individual and small group successes.”

Overall, the state rated COVA academically as a “turnaround” school—the lowest of four academic rankings after it mis-administered statewide assessment tests last year. But after an appeal, COVA is one ranking better, listed as “priority improvement.” However, academically COVA is not alone. More than half of the state’s online multi-district schools are getting poor marks.

So with the state spending $5900 per pupil what are students, parents and taxpayers getting? Is anyone holding online management organizations accountable?

Amy Anderson, an assistant commissioner in charge of improving academic performance at online schools, says “The Colorado Department of Education doesn’t buy anything from companies.CDE has no role in any of those contracts.” When it comes to accountability, she says that starts with the school district.

COVA’s district superintendant, Chris Gdowski, says the district and COVA are working together on improving academic performance. But evaluating the contract between Colorado Virtual Academy and K12 is up to the school’s all-volunteer board.

“I know the word ‘freaking out’ came up once or twice on the board. This is not good,” says Board President Tim Booker, who works full time as an insurance agent.

During the 2009-2010 school year, COVA paid $22 million out of the $30 million it received in state funding to K12. In terms of improving student performance Booker claims that K12 is paying $2 million out of its own pocket to ramp up teacher interventions. For now he says he thinks it’s the best option.

“From everything that we’ve found, it’s an online issue nationwide, and it’s the same issue,” he says. “It’s kids of last resort coming to online.”

Even so, he says the public does have a right to ask what’s going on with the money. And according to financial statements the $22 million is allocated for “administrative services, technology services, courses, materials, computers and other direct expenses.”

“Yes we are organized as a for-profit company,” says Mary Gifford, senior vice president for School Services at K12.

Gifford says the company is one of many for-profit entities operating in the education field, and dismisses a recent report that criticizes K12’s academic performance nationwide. The report found that only 25 percent of its schools were making adequate yearly progress.

“If we are not able to run accountable schools, we will cease to have schools,” she says. “And so for me the focus is on running quality schools—making sure every teacher is ready to teach on day one, every student is ready to learn on day one, and that we have successful school years.”

Given these findings, some are asking whether the state should be boosting its online accountability standards. But recently passed legislation (HB 1277) is actually returning more oversight responsibilities back to school districts. As for reevaluating online school funding, Colorado Department of Education’s Amy Anderson says that isn’t a top priority right now.

“What’s important right now is to really to get our arms around performance and to see that all of our schools are performing at the level we would expect,” she says. “That’s our real charge going forward.”

Meantime, all public schools across the state are operating with $229 million less this year. And the latest budget forecast is predicting up to a $500 million dollar deficit next year, which could translate into more deep cuts for public districts like Adams 12 Five Star.