Virtual School Meanderings

June 16, 2022

News Article – In One of the Largest Charter School Scams in History, No One Will Serve Jail Time

Filed under: virtual school — Michael K. Barbour @ 12:04 pm
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As two of my colleagues who were a part of the conversation when we shared this via e-mail said…  “I like that they named names…”  But “our criminal justice system is so messed up.”

NEWS

In One of the Largest Charter School Scams in History, No One Will Serve Jail Time

The ringleaders and others behind a scam that raided millions of dollars from the state will not spend a single day behind bars. Here’s where their pleas and sentences stand.
A3 charter school
District Attorney Summer Stephan discusses the indictment of several people tied to an alleged scam involving the charter school management company A3. / Image courtesy of NBC San Diego

The story of the A3 online charter school empire is one of the largest charter school scandals in U.S. history. The scam had several angles, the most lucrative of which involved enrolling thousands of students who never took any classes, as Voice previously reported.

A3’s 19 online charter schools raked in roughly $400 million from the state between 2015 and 2019. Sean McManus and Jason Schrock, the ringleaders, funneled some $80 million of that money into companies they controlled. Nine other people – including key lieutenants, an accountant and two former superintendents – were also charged for playing a role in the scheme to steal public funds.

Despite such an unprecedented theft, not a single person involved in the A3 case will spend a day behind bars. McManus and Schrock were both sentenced to four years – but both have already been in ankle monitors, on home confinement. They both will get credit for time served. Several other key players had their felonies reduced to misdemeanors and two defendants essentially had their charges dropped for cooperating in the investigation.

To continue reading visit https://voiceofsandiego.org/2022/06/13/in-one-of-the-largest-charter-school-scams-in-history-no-one-will-serve-jail-time/

June 14, 2022

Corporations and Transparency in Public Education Funding

So last week I wrote a bit of a commentary when I posted the notice of John’s blog entry on Student Art and School Funding, and in that entry I mentioned I wanted to return to the topic of how Stride Inc. (formerly K12, Inc. reported its revenue and expenses).  Regular readers of this space will note that I regularly (almost daily when I receive them) post the corporate notices for Stride Inc. (under their ticker label of LRN).  Historically, the court has found that schools managed by corporate educational management organization are private, proprioriety organizations and that they don’t have the same disclosure requirements as traditional public schools (and this is true of both online and brick and mortar examples – and almost all of these court cases have focused on corporate EMOs that operate brick-and-mortar schools).  Even in instances where the online schools provide disclosure, many of the guidelines continue to be written for brick-and-mortar environments- which means that online schools have to figure out where to put X and Y, and they don’t always make the same decision (see Funding Virtual Schools – Michigan Edition for a good example).

What all of this means is that the corporate filings that are required by the SEC continue to be some of the best sources of information for what we know about the corporations.  But that level of detail is changing based on recent business decisions.  If you look at the corporate filings of Stride Inc., historically they have broken down their revenue and expenses based on the following three line.


Taken from the 2020 annual report.

As you can see from the descriptions, the “Managed Public School Programs” provided a great deal of information about the amount of revenue and expenses, number of schools in each category, number of students enrolled in each category, etc..  In fact, even the “Institutional” line was useful, as this was similar data for instances where they partnered with or were contracted by a public school district to provide similar services to what is included in their managed programs.

However, beginning with the 2021 annual report, they have changed those three lines to these two:

  • Products and services for the General Education market are predominantly focused on core subjects, including math, English, science and history, for kindergarten through twelfth grade students to help build a common foundation of knowledge. Programs utilizing General Education products and services are for students that are not specializing in any particular curriculum or course of study. These programs provide an alternative to traditional school options and address a range of student needs including, safety concerns, increased academic support, scheduling flexibility, physical/health restrictions or advanced learning. Products and services are sold as a comprehensive school-as-a-service offering or à la carte.
  • Career Learning products and services are focused on developing skills to enter and succeed in careers in high-growth, in-demand industries—including information technology, health care and business. The Company provides middle and high school students with Career Learning programs that complement their core general education coursework in math, English, science and history. Stride offers multiple career pathways supported by a diverse catalog of Career Learning courses. The middle school program exposes students to a variety of career options and introduces career skill development. In high school, students may engage in industry content pathway courses, project-based learning in virtual teams, and career development services. High school students also have the opportunity to progress toward certifications, connect with industry professionals, earn college credits while in high school, and participate in job shadowing and/or work-based learning experiences that are required to succeed in today’s digital, tech-enabled economy. A student enrolled in a school offering Stride’s General Education program may take Career Learning courses, but that student and the associated revenue is not reported as a Career Learning enrollment or Career Learning revenue. However, a student and the associated revenue, whether in middle or high school, is counted as a Career Learning enrollment or Career Learning revenue if the student is enrolled in a Career Learning program. Like General Education products and services, the products and services for the Career Learning market are sold as a comprehensive school-as-a-service offering or à la carte. The Company also offers focused post-secondary career learning programs to adult learners, through its Galvanize, Inc. (“Galvanize”), Tech Elevator, Inc. (“Tech Elevator”), and MedCerts, LLC (“MedCerts”) brands. These include skills training in the data science, software engineering, healthcare, and medical fields, as well as providing staffing and talent development services to employers. These programs are offered directly to consumers, as well as to employers and government agencies.

As you can see from the descriptions, while it appears that most of their managed public school programs would fall into the General Education line, there are a lot of other things that get included in General Education.  Additionally, some of the managed public school programs that have a specific focus on career and technical education would fall under the Career Learning line.  So a level of transparency that used to exist for those of us in the field is no longer available to us

And this is not to specifically pick on or single out Stride Inc., as historically their corporate filings have told us a lot more about their operations than what Pearson’s filings tell us about the role that Connections Education and their Connections Academies play in their overall revenue.  Pearson is a much bigger and more international corporation with many more streams of revenue and expenses.  So trying to determine what profit margins might exist from managed schools is difficult.  If you look at Pearson’s latest filings, its 2021 annual report indicates that:

Overview

The Group (i.e., Pearson) is a leading provider of educational materials and learning technologies. It provides test development, processing and scoring services to governments, educational institutions, corporations and professional bodies around the world. It provides content across the curriculum and a range of education services including teacher development, educational software and system-wide solutions, it owns and operates colleges and schools (including virtual schools). The Group is run as one global learning company, operating around six geographical areas (UK, Europe, US, Canada, Asia Pacific, Other countries) organized in five main global business divisions, each of which are reporting segments (Virtual Learning, Higher Education, English Language Learning, Workforce Skills and Assessment & Qualifications). Within each geographical area, the Group provides content, assessment and digital services to schools, colleges and universities, as well as professional and vocational education to learners. The results of the Businesses under Strategic Review are reported separately.

If we try and focus in just on the Virtual Learning segment, it includes:

Virtual Learning Virtual Learning comprises our Virtual Schools and Online Program Management (OPM) businesses. There is a growing international demand for virtual schooling, partly down to advances in technology, but also accelerated by the recent pandemic. Our Virtual Learning division offers highly effective online learning for every age and stage of education. Users are able to learn where, when, and how they learn best, giving them a truly personalized experience. It’s designed to be smart, flexible, and inspiring education that propels people forward in their lives and careers. Students in grades K-12 in the US (equivalent to primary and secondary school in the UK) can enrol in full-time online public or private school programs offered by Pearson Virtual Schools. Fully accredited and staffed with specially trained teachers, these online schools have been providing high quality alternatives to the traditional classroom experience for over 20 years. Students are prepared to be adaptable; equipped with the academic and life skills they need to thrive today and in an ever-changing world. K-12 online school options include Connections Academy (US-based public schools), Pearson Online Academies (international private schools), and programs for school districts across the US. Adult learners, universities and employers rely on Pearson for exclusive online higher education programs and Online Program Management (OPM) services, including degrees, certificates and short courses. Students gain access to convenient, compelling online learning to boost employability and advance in their careers, while higher education institutions extend their reach and provide the flexible online options their students want. For employers, our OPM business delivers vital upskilling and reskilling to keep pace with the future of work. This business operates in the US and internationally. See “Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31, 2021 compared to year ended December 31, 2020 — Sales and operating profit by division — Virtual Learning” for a discussion of developments during 2021 with respect to this segment.

In trying to figure out what impact this might have on the overall corporate operations, they write later in the report:

Virtual Learning  Virtual Learning sales increased from £692m in 2020 to £713m in 2021, an increase of £21m or 3%. The Group estimates that after excluding the impact of exchange rates, Virtual Learning’s sales increased by 11% in 2021 compared to 2020. Revenue growth reflects strong enrolment growth in Virtual Schools in the 2020/2021 academic year, with good underlying enrolment growth in OPM. Adjusted operating profit grew 28% in underlying terms, due to operating leverage and efficiency improvements in OPM more than offsetting the investment in our Virtual Schools’ platform and customer care support, as well as margin impact in OPM due to discontinued programs. Headline profit grew 10% with good growth in adjusted operating profit partially offset by currency movements. Virtual Schools performed strongly driven by 43% enrolment growth in new and existing schools for the 2020/2021 academic year. We opened five new full-time, online partner schools in Florida, Rhode Island, Colorado, South Carolina, and Oregon. We also announced our first Connections Academy in the state of Virginia, which begins enrolment in March 2022, one school in New Mexico moved from a partner school to district programme. This brings the 2021/2022 total number of partner schools to 47 in 30 states. Enrolments in the 2021/2022 academic year grew by 2% despite a significant unwinding of the “covid cohort”. In OPM, we saw good underlying enrolment growth of 7% as Maryville University extended its OPM partnership for online degrees in the high-demand field of Nursing through to 2033 and Northeastern University added a new online master’s degree and certificate programs in Nursing and Healthcare. We ended the year with a total of 477 programs across 31 partners with the addition of 43 new programs in North America across 21 partners, and 7 new programs internationally where underlying enrolments grew by more than 80%. The Virtual Learning results also include intangible charges of £25m in 2021 compared to £30m in 2020 reflecting the impact of historical acquisition activity. Major restructuring costs were £48m in 2021 and £nil in 2020.

So not really any details on what virtual learning revenue and expenses come from US-based virtual learning and what comes from international sources, and no real way of figuring out what comes rom their “virtual schools” compared to what is for their other forms of virtual learning.

Anyway, since it came up last week in the entry on Student Art and School Funding – as well as the fact that I was also recently accused of being a Stride Inc. supporter because I post their corporate news as it crosses my electronic desk – I wanted to dive into this topic a bit more and give folks a chance to comment.

March 22, 2022

GAO Report – Department of Education Should Help States Address Student Testing Issues and Financial Risks Associated with Virtual Schools , Particularly Virtual Charter Schools

I’ll be honest and say that this report flew under the radar for me until I say it referenced in a news article.  A day later, or maybe later that same day, a colleague of mine forwarded it around and we got on a bit of a discussion about the report – and specifically why it had gone under the radar for the most part.  That framing got me thinking and I wanted to take a closer look at the report and suggest why it hasn’t been a big deal.

The report is titled Department of Education Should Help States Address Student Testing Issues and Financial Risks Associated with Virtual Schools , Particularly Virtual Charter Schools, and is summarized as:

Why GAO Did This Study

Enrollment in virtual schools has increased faster than enrollment in other types of public schools in recent years. This trend was accelerated by COVID-19, which prompted an increase in distance learning. Virtual charter schools account for about 70 percent of students enrolled in virtual schools.

GAO was asked to review virtual charter school operations and oversight. This report examines (1) how virtual charter schools provide student instruction, (2) how virtual schools’ academic proficiency and participation rates on state tests compare to other school types, and (3) the extent to which virtual charter schools’ operations present challenges for state and federal oversight.

GAO interviewed state and charter authorizer officials from four states collectively serving over 50 percent of all virtual charter school students in 2019-2020. GAO analyzed federal data on virtual charter school enrollment and academic outcomes; reviewed a nationally representative sample of virtual charter school websites; reviewed school financial information; and interviewed federal and school officials.

What GAO Recommends

GAO is recommending that Education examine lower testing participation rates in virtual public schools, and ensure states report comparable attendance information for public schools in a state as well as accurate information on charter schools’ contracts with management organizations. Education agreed with these recommendations.

What GAO Found

Virtual charter schools—public charter schools that operate entirely or mostly online—largely depend on self-paced, asynchronous (accessed at any time) instruction and often rely on parents to act as instructors, according to GAO’s review of a nationally representative sample of virtual charter school websites and interviews with school officials. Officials told GAO that families may choose these schools partly for these reasons, but students can struggle with the level of independence and parents can find the time commitment overwhelming.

Virtual charter schools had significantly lower proficiency rates on states tests compared to other school types. For example, the average math proficiency rate for virtual charter schools was 25 percentage points lower than the rate for brick and mortar traditional schools (see figure). In addition, a smaller proportion of virtual school students participated in state tests. However, there is a lack of systematic information about why virtual schools have lower participation rates and what common challenges across states may be contributing to low rates.

Virtual schools may pose increased financial risks due to challenges measuring attendance and—for charter schools, specifically—contracts with management organizations. State officials in the four states GAO reviewed reported different ways of measuring attendance for virtual compared to brick-and-mortar schools. Attendance calculations can affect the amount of certain state and federal funds a school receives. In addition, an estimated 42 percent of virtual charter schools had contracts with for-profit management organizations based on GAO’s review. These contracts can pose heightened financial and programmatic risks to federal funds, according to Department of Education officials. To better understand the scope of the issue, Education officials told us they required states to report information about their contracts with charter school management organizations, including their for-profit status. However, GAO found inaccuracies and undercounting of management organizations in these data. Education’s 2020 Data Strategy calls for using appropriate, accurate data. Unless Education takes steps to improve data quality, and to examine and address barriers to measuring and reporting student attendance consistently, inappropriate allocation of federal funds will remain a risk.

Now the question is, why isn’t this bigger news?  I’d suggest the answer is because it is old news!

For example, in my 2019 Handbook of Distance Education chapter I wrote:

While this discussion thus far has focused on the effectiveness (or lack thereof) of supplemental forms of K-12 online learning, it is interesting to note that full-time forms of K-12 online learning have been found to be even less effective compared to face-to-face instruction. Over the past five years, the National Education Policy Center – through their annual Virtual Schools in the US reports – have documented how full-time K-12 online learning have underperformed brick-and-mortar or traditional face-to-face schools on a consistent basis (Miron & Gulosino, 2016; Molnar et al., 2013, 2014, 2015, 2017). These annual findings have been consistent with the existing research into the effectiveness of full time K-12 online learning – regardless if that research has come from empirical studies, think tanks or policy centers, investigative journalists, or legislative audits. Even the National Alliance for Public Charter Schools (2016), an advocacy organization that supports school choice initiatives, concluded that full-time online charters and the students that attend them perform worse than traditional public schools. (Barbour, 2018, pp. 527-528)

Two years earlier I described over 5-8 pages these findings in a 2017 chapter in the Handbook of School Choice.  That content was followed by section entitled “Motivation for the Growth of Full-Time K-12 Online Learning,” which outlined corporate profits and ideological positioning as the main motivations for the push for virtual charter schools.  In between these two chapters, I conducted some of the research that led to the Network for Public Education’s Online Learning: What Every Parent Should Know guide.  As a part of that guide I wrote:

Online charter schools, the various governmental agencies and foundations that support digital learning, and the for profit education technology sector employ an aggressive strategy to encourage popular support and ensure a favorable regulatory environment. There are four main avenues that the for-profit cyber charter companies use to expand and promote weak governmental oversight and regulations: direct lobbying, donations directly to candidates and legislators, involvement with and support of advocacy groups, and advertising.

Due to a lack of regulation in the online charter school sector, there is insufficient information in many states regarding the amount of money companies spend promoting their interests. Most of the information that we have regarding lobbying, political contributions and advertising generally comes from investigative journalists. According to Education Week, K12 Inc. and Connections Education spent more than $14.5 million dollars on lobbying since 2000 in the 25 states with public records. Google and nine other technology companies spent more than $61 million dollars lobbying Washington, D.C. officials in 2013.

The for-profit corporations that run the online charter schools are also active in supporting political candidates and legislators directly. Arianna Prothero from Education Week reported that:

“Together, K12 Inc. and Connections have spent nearly $2 million on contributions to political campaigns and parties since the mid-2000s, according to the National Institute on Money in State Politics. That number does not include spending on political action committees or donations made by individuals who work with either company.”

For-profit online organizations increase influence through their membership in the American Legislative Exchange Council (ALEC). Corporations pay to become ALEC members and then donate money to sponsor state legislators to attend private conferences where they urge elected officials to introduce bills written by them or by ALEC staff. They also provide talking points on how to sell these bills to other legislators and to constituents.

An example of the interconnectedness of the first three aspects is useful. As the issue of opening up the educational marketplace to online charter schools was being debated in Maine in 2012, Colin Woodward of the Portland Press Herald undertook an in depth special report on the political influence and relationship between corporate providers of online learning and the advocacy organizations that support this mode of instruction. His reporting, which won a George Polk Award, revealed how the decision to expand online learning in the state was the result of direct lobbying and contributions to Governor Paul LePage by K12 Inc. and Connections Academy, as well as the influence of ALEC and Jeb Bush’s Foundation for Education Excellence, which receives funding from K12 Inc., Connections and other ed tech corporations.

The fourth and final way by which these corporations gain support and recruit students is through advertising. Like the amount of money spent on lobbying, there are generally no requirements for these corporations to disclose how much money is spent advertising and promoting their schools. As a part of a USA Today investigation, Greg Toppo reported that his “analysis found that 10 of the largest for profit operators have spent an estimated $94.4 million dollars on ads since 2007. The largest, Virginia-based K12 Inc., has spent about $21.5 million dollars in just the first eight months of 2012.” He further indicated that:

“A look at where K12 is placing the ads suggests that the company is also working to appeal to kids: Among the hundreds of outlets tapped this year, K12 has spent an estimated $631,600 to advertise on Nickelodeon, $601,600 on The Cartoon Network and $671,400 on MeetMe.com, a social networking site popular with teens. It also dropped $3,000 on VampireFreaks.com, which calls itself “the Web’s largest community for dark alternative culture.”

Though intensive lobbying and large donations often forestall rigorous oversight and regulation of online charter schools, some states are attempting to hold these schools accountable. The California Attorney General sued K12 Inc. alleging that K12 and the California Virtual Academies (CAVA) schools it operates falsely advertised its results. The lawsuit was settled by K12 Inc. for $168.5 million dollars. Most recently, the ECOT charters, the largest online chain in Ohio, lost its authorization after the state ordered it to pay back $80 million dollars for inflating the number of students enrolled. It was forced to close in January 2018, even though thousands of its students re-enrolled in other online charter schools with similarly poor records. (pp. 13-15)

In fact, as early as 2014 in the first National Education Policy Center virtual schools in the US report that I contributed to, I was sounding the alarm about the poor student performance and profit motive involved in virtual charter schools.

It is evident that this body of research is rife with issues. Results vary with such methodological choices as how to measure student achievement; much of the literature applies to supplemental rather than full-time offerings; findings are often over-generalized from specific to general contexts, and vice versa. Based on this decidedly mixed research, one would expect that policymakers would approach online learning cautiously. (Molnar et al., 2014, p. 39)

So again, this is old news!  And it isn’t like I’ve done a lot of work in this area.  In fact, all of the work I’ve referenced above was largely reviews of others’ work – some of which goes back to the early 2000s.

I’m sure there are other reasons why this report has flown under the radar – pandemic pedagogy and the reality that an experienced virtual charter that performs poor compared to brick and mortar schooling is still doing better at remote learning than that same brick-and-mortar school that is stuck in an emergency remote teaching mindset.  Regardless, I think we can all agree that this is old news.  Heck, it’s even been six years since the National Alliance for Public Charter Schools and National Association of Charter School Authorizers came around to the same conclusion.

 

References

Barbour, M. K. (2019). The landscape of K-12 online learning: Examining the state of the field. In M. G. Moore & W. C. Diehl (Eds.), Handbook of distance education (4th ed.) (pp. 521-542). Routledge.

Barbour, M.K. (2017). K–12 online learning and school choice: Growth and expansion in the absence of evidence. In R. A. Fox & N. K. Buchanan (Eds.), The Wiley Handbook of School Choice (pp. 421-440). Wiley Blackwell.

Molnar, A. (Ed.); Rice, J. K., Huerta, L., Shafer, S. R., Barbour, M. K., Miron, G., Gulosino, C, Horvitz, B. (2014). Virtual schools in the U.S. 2014: Politics, performance, policy, and research evidence. National Education Policy Center.

February 7, 2022

Report – PA Disconnect in Cyber Charter Oversight and Funding

This report came across my electronic desk this past week.

PA Disconnect in Cyber Charter Oversight and Funding

Pennsylvania’s cyber charter schools are over-funded and under-regulated compared to similar programs in 27 other states.The PA Disconnect in Cyber Charter Oversight and Funding, a new report by the PA Charter Performance Center, explores how other states successfully monitor and fund cyber charters, and offers concrete recommendations on how we can do it right in the Commonwealth.

You can access the full report at https://www.childrenfirstpa.org/wp-content/uploads/2022/01/PA-Disconnect-in-Cyber-Charter-Oversight-and-Funding-Children-First-2022.pdf

August 31, 2021

Virtual Schools Got Equal Pandemic Aid, Despite Little Disruption

A colleague of mine sent me this news item.

Virtual Schools Got Equal Pandemic Aid, Despite Little Disruption

By The Associated Press — August 27, 2021  6 min read

While many schools scrambled to shift to online classes last year, the nation’s virtual charter schools faced little disruption. For them, online learning was already the norm. Most have few physical classrooms, or none at all.

Yet when Congress sent $190 billion in pandemic aid to schools, virtual charters received just as much as any other school because the same formula applied to all schools, with more money going to those in high-poverty areas, an Associated Press investigation found.

“It’s scandalous that they’re getting that much money,” said Gordon Lafer, an economist at the University of Oregon and school board member in Eugene, Oregon. “There were all kinds of costs that were extraordinary because of COVID, but online schools didn’t have any of them.”

To continue reading, visit https://www.edweek.org/education/virtual-schools-got-equal-pandemic-aid-despite-little-disruption/2021/08

At the time he sent it, I commented to our group that this was an issue that continues to bug me.

If the whole idea behind public schooling is that we collect taxes for the public good and distribute those public dollars across the system so that everyone has a base value for their education, why is it that my child gets funded at a lower rate because I’ve made the decision to send them to an online school?  I mean we don’t look at two brick-and-mortar schools and say – School A can subsidize use of public transit, whereas School B must run its own bus system, so we should fund them differently!

At the same time, why should my public tax dollars be used to line the pockets of greedy executives and shareholders who see students as widgets and their corporate goal is to maximum profit per widget?
This is the problem you have when you allow corporations to directly or indirectly run schools.  As an academic, the second question is the bigger one for me because it is one that legislators could do something about – if they weren’t so spineless, ideologically entrenched, or beholden to their corporate masters.  But I do have some sympathy for the parent who finds themselves in the first position.
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