First, we will take a look at the visible charter schools and explain why they are contrary to our state constitution. Then we will take a look at the hidden charter schools and explain why they are also contrary to our state constitution.
In November 2012, the charter school initiative 1240 was narrowly passed by the voters by a margin of 50.7% to 49.3% - thanks to millions of dollars in marketing spent by Bill Gates and his billionaire friends. On September 4 2015, the Washington Supreme Court found that initiative 1240 was unconstitutional because it diverted public dollars to private corporations. In December 2015, Bill Gates and his supporters offered $500,000 in bribes (aka campaign contributions) to any legislators willing to pass a charter school fix bill. In the 2016 legislative session, the legislature passed Senate Bill 6194 which supposedly fixed charter schools by claiming that they are separate from our regular public schools and then funding this separate system of charter schools with millions of dollars of lottery funds.
Are the the Half Million Dollars that the WA Charter Schools PAC is giving to Legislators Bribes or Just Campaign Contributions?
I described the half million dollars being given to Washington state legislators as "bribes." Some have objected to my calling these campaign contributions "bribes."
The WA Charter School PAC website described their new program this way:
"The WA Charters PAC delivered checks of $1,000 dollars to 13 members of the house and 11 Senators, on both sides of the aisle last week, including Representatives Pettigrew (D-37), Sawyer (D-29), Senn (D-41), Magendanz (R-5) and Senators Mullet (D-5), Fain (R-47), Litzow (R-41), and Rolfes (D-23). The PAC is continuing to raise funds despite the December 10th cut-off date... WA Charters expects to raise more than $500,000 by the end of session... We know we will have more champions to thank after the session” added Thomas Franta, CEO of WA Charters."
So the $500,000 is simply WA Charters way of saying thank you to legislators for passing a charter school fix bill. But is offering both current money now and the promise of a lot more money later in trade for passing a charter school fix bill a bribe? Here is the Webster's Dictionary definition of a bribe:
Bribe: Something given or promised to a person in order to influence dishonestly a decision or action; something valuable (such as money) that is given in order to get someone to do something; money or favor given or promised in order to influence the judgment or conduct of a person in a position of trust; to try to get someone to do something by giving or promising something valuable (such as money).
Here is what the Washington State Constitution says about the legality of paying off legislators to get them to pass a bill:
Article II, Section 30 BRIBERY OR CORRUPT SOLICITATION. The offense of corrupt solicitation of members of the legislature, or of public officers of the state... to influence their official action, shall be defined by law, and shall be punished by fine and imprisonment... A member who has a private interest in any bill or measure proposed or pending before the legislature, shall disclose the fact to the house of which he is a member, and shall not vote thereon.
It is a fact that the prime sponsors of both charter school fix bills have been given campaign contributions from WA Charters PAC. Numerous legislators have also received direct campaign contributions from SFC, LEV and various members of the Washington Roundtable. This sort of influence peddling is the worst form of corruption. Bills should be passed solely on the merits of whether they benefit the people and children of the state of Washington - not based upon who is offering the most money to legislators and their re-election campaigns.
Is the Charter School Fix Bill a Framework for Fraud?
Fraud is one of the major problems of charter schools in every state that has allowed charter schools. In fact, fraud in the form of robbing from the tax payers is one of the major purposes of charter schools. Without fraud, there would be no financial incentive to push for charter schools or money to bribe legislators into creating charter schools or money to create fake groups to promote charter schools. To be more clear, here is the Webster's Dictionary for the word Fraud:
Fraud: The crime of using dishonest methods to take something valuable from another person, intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right; a copy of something that is meant to look like the real thing in order to trick people.
This is exactly what charter schools are. They are a copy of our public schools in order to trick people into giving private for profit corporations money that should have gone to real public schools. The dishonest methods used include marketing campaigns that falsely claim that charter schools are better than public schools (the perversion of truth) as well as bribing legislators into allowing charter schools. The legal right that is given up is the right of our children to receive a real education from a real, experienced and highly qualified teacher. The primary method charter schools use to increase corporate profits is to use inexperienced, untrained teachers who are paid substantially less than real teachers.
The reason the charter school fix bill is a framework for fraud is that it contains numerous loopholes that are specifically intended to allow charter schools to hire unqualified teachers and then pay them much less than real public school teachers. There is no benefit to children in gutting the pay of teachers. There is only a benefit to for profit corporations in that the less they pay teachers, the more they can make in corporate profits. But before we review the loopholes in the charter school fix bill, let's quickly review the charter school fraud studies from other states:
Three 2015 Studies of Charter School Fraud in other States
A March 2015 national report documented charter school fraud and waste totaling more than $200 million - but says the total is impossible to know because there is not sufficient oversight over charter schools. The report, titled “The Tip of the Iceberg: Charter School Vulnerabilities To Waste, Fraud, And Abuse,” was released by the Center for Popular Democracy.
The report notes that these figures only represent fraud and waste in the charter sector uncovered so far, and that the total that federal, state and local governments “stand to lose” in 2015 is probably more than $1.4 billion.
The report states: "Charter operators have used school funds illegally to buy personal luxuries for themselves, support their other businesses, and more...The vast majority of the fraud perpetrated by charter officials will go undetected because the federal government, the states, and local charter authorizers lack the oversight necessary to detect the fraud.”
The fraud included corruption, asset misappropriation, financial statement fraud, conflicts of interest such as purchasing schemes, bribery, bid rigging, kickbacks and extortion, theft, skimming, billing schemes, payroll schemes, expense reimbursement schemes, shell companies, ghost employees, ghost students, ghost buildings, accomplice vendors, overstated expenses, fake expenses, forged checks, fake refunds, and manipulations of assets and inventories. California alone stands to lose more than $100 million to charter school fraud in 2015. The vast majority of this fraud perpetrated by charter officials will go undetected because California lacks the oversight necessary to identify the fraud.
Ghost Students in Half of Ohio Charter Schools
In January 2015, the Ohio state auditor released a report of the results of unannounced visits by inspectors to 30 charter schools. In nearly half of the schools, the school-provided headcount was significantly higher than the auditors’ headcount. Schools are funded based on headcount, so these inflated figures amount to millions of dollars in taxpayer dollars siphoned away from students.
Epidemic of Charter School Waste, Fraud and Abuse
The second national report called Charter School Black Hole by the Center for Media and Democracy published in October 2015 found what it called an "Epidemic of charter school waste fraud and abuse." Specifically, the report found that more than $3.7 billion dollars just in federal funds has been diverted away from public schools to charter schools. Since federal funds are about 10% of total school funding, the total diverted away from public schools to charter schools may be as high as $37 billion and counting - with little to no accountability as to how those funds are spent because charter school spending is a "black hole."
"This is due in part to the way laws governing charters have been built by proponents,
favoring “flexibility” over rules. That flexibility has allowed an epidemic of fraud,
waste, and mismanagement that would not be tolerated in public schools."
Charter School Closure Chaos
The report found that millions of tax payer dollars going to "dozens of ghost schools where funds were given to charter schools that never even opened." The report also found that charter schools have a much higher failure rate than public schools. For example, Michigan has 300 charter schools and 108 have failed for a failure rate of 25%. Arizona has 600 charter schools and more than 100 closed charter schools for a failure rate of 14%. Florida has 650 charters and more than 120 closed charter schools for a failure rate of 16%. Wisconsin has 240 charter schools and 90 failed and closed charter schools for a failure rate of 27%. California has more than 1000 charter schools and nearly 200 have closed for a failure rate of 20%. According to a 2015 national study, 2,210 out of about 10,000 charters had closed for a national charter school failure rate of 22%.
By comparison, the US has about 100,000 public schools of which only about 1,000 have closed for reasons other than charter conversion during the past 10 years for a closure rate of about 1 percent. https://nces.ed.gov/fastfacts/display.asp?id=619
2,210 Charter School Closures in the US from 2001 to 2013 has disrupted and harmed the education of nearly one million students
Charter school failures have included stunning tales of financial fraud, skimming of retirement funds, financial mismanagement, material violations of the law, massive debt, unsafe school conditions, lack of teacher credentials, failure to conduct background checks, terrible academic performance and test results, insufficient enrollment, inflated enrollment and numerous fraud indictments of charter school operators. There were also several cases of squandering of taxpayer money funding going to religious schools even though state law prohibits funding going to religious schools.
Charter school closures not only cost tax payers millions of dollars but disrupt the education, academic social and emotional development of hundreds of thousands of students. Closing schools is almost as traumatic and harmful an experience for children as losing their homes. Pauline Lipman, a professor of at the University of Illinois at Chicago who has been studying school closures since 2004, said “We know every time you move a child from one school to another it has a destabilizing effect on their education.”
The decision to close schools is often based on the belief that displaced students will be moved to higher performing schools. But research in Chicago has shown that has not often happened. An Oct. 2009 study by the Consortium on Chicago School Research at the University of Chicago examined the closure of 44 public schools in Chicago between 2001 to 2006 (schools closed by Arne Duncan) and compared these thousands of displaced students to a group of similar students whose schools were not closed or replaced by charter schools. The report found that only 6% of displaced students enrolled in high-performing schools, while 82% of displaced students continued to attend schools with very low levels of academic achievement.
Dislocated students are less likely to graduate
In 2014 study, Matthew F. Larsen at Tulane University looked at high school closures in Milwaukee, almost all of which were charter schools, and he concluded that closures decreased “high school graduation rates by nearly 10%."
He found that the effects persist "even if the students attends a better quality school after closure.” http://www.prwatch.org/news/2015/09/12936/cmd-publishes-full-list-2500-closed-charter-schools#sthash.ejeFJq9i.dpuf
Many schools in Chicago were closed twice... First by Arne Duncan and then after the private takeover did not succeed in improving test scores, the “charter” schools were closed again. This is clear evidence that the problem with schools in low income neighborhoods is not the school. The problem is poverty. All parents, all children and all teachers need to be treated with respect, dignity, fairness and opportunity. Closing public schools in poor neighborhoods over and over again is not the answer. It is simply another form of child abuse. Closing public schools and turning them all into private, for profit charter schools does not improve outcomes for poor inner city children because this “solution” does not address the real problem faced by poor inner city kids. That problem is poverty – their parents do not have a living wage job.
Nearly Half of All Charter Schools are Run by National Corporate Profit EMOs
The most recent study of charter school money laundering was published in December 2015 by the National Education Policy Center. This study found that there was virtually no difference between the operation and financial structure of For Profit Education Management Organizations and Non Profit Education Management Organizations. The report concluded that "Most nonprofit EMOs look, act, and have management agreements similar to for-profit EMOs."For example, while the typical public school spends more than 60% of revenue on instruction (teachers), KIPP one of the nation's largest non-profit corporations spends only 42% on instruction mainly by hiring TFA fake teachers. This allows KIPP to pay its administrators up to $400,000 per year. So much for being a non-profit organization!
This chart indicates that about half of all charter school students are enrolled in these national chain charters. The report found four major problems with charter schools:
#1 A substantial share of public expenditure intended for the delivery of direct educational services to children is being extracted inadvertently or intentionally for personal or business financial gain;
#2 Public assets are being transferred to private hands, at public expense;
#3 Charter school operators are self-serving private entities built on funds derived from lucrative management fees and rent extraction; and
#4 Current weak disclosure requirements make it unlikely that any legal violations, ethical concerns, or bad practices are reported.
The report then explained with detailed charts and diagrams how EMO corporations extract profits out of charter schools. One of the concerns raised about adding a profit motive to educating kids is the potential for charters to manipulate enrollment and attendance data “to maximize tax-subsidized per-pupil funding. The report concluded that "The multiple layers of private school operations and management, governing boards of private citizens, and in some cases, authorization by private entities, presents far greater opportunity to shield documents and avoid constitutional and statutory protections in the charter sector."
Does this track record of Systematic Charter School Fraud in other States justify calling the Washington State Charter School Fix Bill a "Framework for Fraud?
Some apparently believe that Washington State can magically avoid the charter school disasters that have occurred in other states. However, the same legal loopholes that allowed the charter school fraud in other states presents a framework for similar levels of fraud here in Washington state. In this report, we will show that there is an equal potential for fraud in the charter school fix bill Senate Bill 6194 that was passed by the legislature in March 2016. Here is a table listing the loopholes in the Charter School Fix Bill:
|Charter School Fraud Loopholes
||Senate Bill 6194
|#1 Diverts Millions of Dollars Away from Public Schools
|#2 Violates the "Uniformity" Clause of our State Constitution
|#3 Provides no protection for teacher salaries
|#4 Provides no protection for teacher training
|#5 Transfers oversight of tax payer dollars from a publicly elected school board to a privately appointed group of corporate rubber stampers
|#6 Non-profits used in the bill are actually money laundering operations for For Profit Corporations
|#7 Reduces public meetings and public accountability for parents and tax payers.
|#8 Increased Flexibility simply means increased Fraud for Charter School Contractors
|#9 Increases Rate of School Closures Harms Students
The loophole language in Senate Bill 6194 confirms that the purpose of this bill is not to improve the quality of education for children. Rather the point of these loopholes is to use the charter school fix bill to deliberately create avenues for funneling money away from public schools and into the pockets of private for profit corporations.
#1 The Charter School Fix Bill is Unconstitutional Because it Divert Millions of Dollars Away from Public Schools
Senate Bill 6194 only allows about $20 million per year to be diverted away from public schools to charter schools. But in addition, it would set the precedent for diverting billions of dollars away from public schools in the future as all the legislature would have to do is create funding sources outside of the protected education funding accounts to absolve themselves of their paramount duty to fully fund schools. However, the claim that using millions of dollars in lottery funds to fund charter schools would not reduce state funding for public schools is factually false. Historically, Washington lottery funds have been used for both school construction and class size reduction.
Here is a brief history of State Lottery funds taken from a 2014 State School Funding Guide: "As a result of the passage of Initiative 728 in 2000, all lottery revenues were, in fact, dedicated for educational purposes (with the exception of about 10 percent, which was dedicated by previous legislation for debt service on the stadiums in Seattle). For fiscal years 2001-2004, a portion of lottery revenues were distributed to school districts to allow them to make improvements, such as reducing class sizes, extending learning opportunities, and expanding professional development and early childhood education programs. The remainder was deposited into the Education Construction Account, which is used to fund a portion of the state matching funds for K-12 public school and higher education construction. From fiscal year 2005 through 2009, all lottery revenues were deposited into the Education Construction Account. In 2009, the Legislature redirected lottery dollars to the state general fund to support a range of state programs, including education."
The fact that lottery funds have been used for school funds in the past is important because our Supreme Court has ruled that once state funds are "co-mingled" then they become funds subject to the Paramount Duty of funding our public schools. For example, the court ruled that the state general funds were co-mingled with the constitutional protected funds making the general funds also protected: "by diverting common school funds to charter schools, the (Charter School Initiative) Act contravenes article IX, section 2 of the Washington Constitution."
On page 13 of the ruling the Washington Supreme Court explained that:
"The constitutional protection afforded to common school appropriations is not dependent on the source of the revenue (i.e., the type of tax or other funding source) or the account in which the funds are held (i.e., the general fund or other state fund). Rather, this court held that all money "allocated to the support of the common schools ... constitute[ s] a 'state tax for the common schools' in contemplation of Art. IX,§ 2, of the constitution... Once appropriated to the support of the common schools," funds cannot "subsequently be diverted to other purposes. This court cautioned that to hold otherwise "would be calamitous."
The above ruling is similar to a 1983 Washington Supreme Court ruling which held that once the legislature defines a program as an essential part of Basic Education it cannot later cut funding for the program in order to transfer funding to other programs that are not part of Basic Education. The bottom line is that taking one hundred million dollars out of the State budget for other purposes would in fact leave one hundred million fewer dollars for public schools. This makes using lottery funds for charter schools that were previously used to support public schools as unconstitutional as using general funds for charter schools.
#2 The Charter School Fix Bill Violates the "Uniformity" Clause of our State Constitution
Article IX, Section 2 of the Washington State Constitution not only requires the state legislature to fully fund public schools, it also requires the legislature to provide a "general and uniform system of public schools."
In ruling that charter schools were unconstitutional, the Washington Supreme Court specifically stated: "We hold that the provisions of I-1240 that designate and treat charter schools as common schools violate article IX, section 2 of our state constitution and are void. This includes the Act's funding provisions, which attempt to tap into and shift a portion of moneys allocated for common schools to the new charter schools authorized by the Act."
The court explained that one of the things that made charter schools "not uniform" was the loss of local control and local accountability because they were not directed by a locally elected school board. Our Supreme Court quoted a 1909 Supreme Court ruling called Byran which stated: "a common school, within the meaning of our constitution, is one that is common to all children of proper age and capacity, free, and subject to and under the control of the qualified voters of the school district... The system must be uniform in that every child shall have the same advantages and be subject to the same discipline as every other child."The September 2015 ruling then explained that "Here, because charter schools under 1-1240 are run by an appointed board or nonprofit organization and thus are not subject to local voter control, they cannot qualify as "common schools" within the meaning of article IX."
Therefore because the charter school fix bill places the actual control of charter schools with an appointed charter school board, charter schools are not public schools. But this is not the only reason charter schools were ruled unconstitutional. The 1909 Bryan case dealt specifically with whether the legislature could allow some schools to use uncertified teachers. Bryan ruled that the use of uncertified teachers in some schools was unconstitutional because then the schools would not be uniform.
Thus, even in the unlikely case that the Supreme Court ruled that lottery funds were not protected, they would still rule charter schools unconstitutional because the charter school fix bill specifically allow charter schools to use uncertified teachers. (see footnote 10 on page 11 of the 2015 Supreme Court ruling).
In the 2012 McCleary decision, our State Supreme Court has also ruled that the legislature is in violation of the uniformity clause of the state constitution because current laws create a two tier system of rich school districts that can easily pass local school levies and school bonds thanks to high per pupil property valuations - and poor school districts that cannot pass local school levies and school bonds due to low per pupil property valuations (See OSPI Report 1061). The charter school fix bill would turn our current two tier system of rich schools and poor schools into a three tier system of rich schools, poor schools and charter schools that do not provide protection for teachers and students.
The way to improve our education system is not by exempting some schools from school regulations. Instead, it is by complying with our state constitution and restoring a uniform system of fully funded public schools so that every student has an opportunity to receive a quality education including a fully qualified teacher and low class sizes so that struggling students can get the help they need to succeed in school and succeed in life.
Here is the language in the second charter school fix bill saying charter schools will be separate from the public school system: Page 3: "A charter school established under this chapter is... operated separately from the common school system."
#3 The Charter School Fix bill provide no protection for teacher salaries and therefore no protection for students to insure that they receive a quality education.
The primary way charter schools generate massive profits for their promoters is to hire fake teachers with no actual training or experience and then lower the salary of these fake teachers by paying them peanuts instead of a living wage so that the average charter school teacher quits after one year. A 2015 New Jersey study found that charter school teachers make about $20,000 per year less than public school teachers.
In April 2014, the League of Women Voters of Florida issued a report on fraud of charter schools. The report was shocking. They found that while public schools spent more than 80% of their funds on classroom instruction, charter schools spent barely 40% on classroom instruction. Charter schools spent much less on teachers and much more on overhead costs, management and rental fees. Charter schools had a closure rate of 20% per year. Numerous members of the State legislature benefited directly or indirectly from charter school kickbacks.
Here is the language in the Charter School Fix bill that allows charter schools to have any teachers they want, any class sizes they want and distribute public tax payer dollars in any manner they want: Page 6: Charter schools are not subject to, and are exempt from, all other state statutes and rules applicable to school districts and school district boards of directors...Except as provided otherwise by this chapter or a charter contract, charter schools are exempt from all school district policies.
Page 29: This section does not require a charter school to pay a particular salary to its staff while the staff is employed by the charter school.
Page 36: Any bargaining unit or units established at the charter school must be limited to employees working in the charter school and must be separate from other bargaining units in school districts, educational service districts, or institutions of higher education. Any charter school established under chapter 28A.710 RCW is a separate employer from any school district, including the school district in which it is located.
The clear goal of such language is to eliminate the right of students to an experienced teacher and the right of teachers to a living wage.
#4 The Charter School Fix bills provide no protection for teacher training and thus would expose Washington State Students to Poorly Trained and Inexperienced TFA Teachers
In order to cut costs and increase profits, many charter schools use "TFA Fake Teachers." TFA (Teach for America) recruits recent college graduates, gives them five weeks of “training” - which is really nothing more than a five week pep rally - and then ships them off to school districts nationwide to inflict their lack of training on innocent and often very young students. Just imagine being operated on by a doctor with only 5 weeks of training. Subjecting our kids to fake teachers with only 5 weeks of training is a crime. Here is the loophole language in the Charter School Fix Bill:
Page 5: Charter schools...may hire non-certificated instructional staff
How is this even possible?
In the past, both state and federal law regulated who could teach in our public schools. Teachers were required to have years of training in child development, learning theories, and classroom management. They were also required to complete a several month “practice” teaching experience under the guidance of an experienced teacher. After all of this, they were granted a “Provisional Teachers Certificate” which allowed them to teach. But in most states, additional training during several summers was required to get a permanent teachers certificate. The federal court also ruled that TFA recruits should not be concentrated in districts of high poverty and high disadvantage, where children actually need “highly qualified” teachers, not young college graduates with five weeks to training.
For more on this subject, see Renee v. Duncan, decided on September 27, 2010, which struck down Arnie Duncan's crazy regulation that TFA recruits were highly qualified.
All of this changed on December 21, 2010, when state and federal teaching standards laws were changed in order to allow TFA recruits to qualify as “highly qualified” teachers. It should be obvious that a recruit with only five weeks of training can not possibly be “highly qualified.” However, on December 21, 2010, Congress amended federal law to change the definition of “highly qualified to include TFA recruits. This was despite the fact that (or because of the fact that) the federal appeals court in California twice ruled that TFA teachers are not highly qualified.
TFA Cheap, Fake Teachers are a Key Part of the Charter School Scam
TFA’s growth depends on and supports the country’s corrupt charter school movement. TFA teachers are non-union and work for much less than real teachers. They are therefore a key tactic in reducing the cost of teachers if the goal is making money rather than helping kids learn. In 2013, in Connecticut, hundreds of teaching jobs were given to out of state TFA recruits while graduates of Connecticut's 5-Year Teachers College program were not even allowed to apply for these jobs. http://www.washingtonpost.com/blogs/answer-sheet/wp/2013/08/29/how-teach-for-america-recruits-get-preference-for-teaching-jobs/
While a first year salary for a teacher at a traditional unionized school in Chicago is approximately $45,000, the starting salary at many of TFA’s partner charter schools is nearly 30 percent less at $32,000.
Teacher Turnover TFA Fake Teachers versus Real Teachers
A 2010 study found that “more than 50% of TFA teachers leave after two years and more than 80% leave after three years.” By comparison, over 60% of all real teachers - who typically have five years of training – leave after 5 years with most of the remainder staying for more than 10 years. The following chart shows how long TFA recruits remain in the teaching profession.
As a result of the huge turnover of TFA teachers at charter schools, students at TFA fed charter schools are taught by an endless stream of first-year teachers. These students and their TFA fake teachers are doomed to failure.
Teacher Salaries are Already Much Lower than Other Professions
Another reason teachers suffer from a much higher turnover than other professions, besides the fact that they are being attacked by billionaires is that are among the lowest paid of all professions.
Source: Bureau of Labor Statistics Occupation Employment Statistics
#5 The Charter School Fix Bill Transfers oversight of tax payer dollars from a publicly elected school board to a privately appointed group of corporate rubber stampers
One of the most shocking sections in the Charter School Fix bill is the following:
Page 3: A charter school established under this chapter is a public((, common)) school that is... governed by a charter school board.
Page 4: A charter school may enter into contracts with any school district, educational service district, or other public or private entity for the provision of real property, equipment, goods, supplies, and services, including educational instructional services ((and including)), pupil transportation services, and for the management and operation of the charter school ((to the same extent as other non-charter public schools, as long as)), provided the charter school board maintains oversight authority over the charter school. Contracts for management operation of the charter school may only be with nonprofit organizations;
Here is the structure proposed by the Charter School Fix bill: An unelected Charter School Commission sets up unelected charter school boards made up of rubber stampers selected by the very corporations the rubber stampers will oversee. Then the actual charter schools are allowed to set up contracts with any public or private entity while being exempted from all state laws. We have seen earlier that the phrase "non-profit organization is simply a scam shell of a for profit corporation. Thisstructure is truly a framework for fraud!This is like the fox guarding the hen house. Only in this case, it is Wall Street corporations put in charge of guarding one billion dollars in tax payer funds as well as the educational future of thousands of Washington state students!
#6 The "Non-profits" used in the Charter School Fix bill are actually money laundering operations for For Profit Corporations
The Charter School Fix bill tries to fool us into thinking that charter schools would be run by non-profits. Here is the language in the bill: Page 2: "(Charter School) "Applicant" means a nonprofit corporation that has submitted an application to the authorizer. The nonprofit corporation... may not be a sectarian or religious organization and must meet all of the requirements for a public benefit nonprofit corporation before receiving any funding.
However, in December, 2014, areport was published called When Charter Schools are Nonprofit in Name Only which explains in detail many ways in which public tax payer dollars are funneled from fake non-profits to for profit corporations. This report described the common practice of charter schools pretending to be “non-profits” only to sweep all of the money out of the fake non-profit front group and into the pockets of private for profit “management” corporations. These “sweep” contracts divert nearly all of the charter school's public dollars to for profit corporations – with very little left to actually run the charter schools. Once the public money goes into the black hole of a private corporation, there is no way to keep track of how it is actually spent.
Here is a quote from the report: “It can be hard for regulators and even schools themselves to follow the money when nearly all of it goes into the accounts of a private company... "We can't audit the (private) management company," said Brian Butry, a spokesman for New York Comptroller Thomas DiNapoli.”
Here is a diagram of how this money laundering operation works:
#7 The Charter School Fix bill would reduce public meetings and public accountability for parents and tax payers.
Elected school boards typically hold public meetings at least once a month during which time parents and other concerned citizens can let the school board know about problems in the schools that need to be addressed. If the elected school board does not listen to the parents and do something to fix the problems, there are elections every two years to vote in a new school board that will listen and take action. None of these protections exist with the appointed charter school board. In fact, the second charter school fix bill does not require any meetings and thus there is no opportunity for local impute on charter school board decisions.
#8 Increased Flexibility simply means increased Fraud for Charter School Contractors
How are charter schools working out in other states? The result of deregulation has been a tidal wave of fraud, abuse and corruption. Here is an estimate from the Pennsylvania State Auditor. Combined with $140 million sucked out of Pennsylvania by gold digger poorly performing charter schools and the total loss to Pennsylvania tax payers is more than $300 million per year. http://thenotebook.org/blog/125416/pa-auditor-general-blasts-cyber-charter-funding-again/
A National Charter School Corporate Crime Wave
In May 2014, the Center for Popular Democracy and Integrity in Education issued a report called Charter School Vulnerabilities to Waste, Fraud And Abuse. This report concluded that fraudulent charter operators in 15 states were responsible for losing, misusing or wasting over $100 million in taxpayer money per year. http://integrityineducation.org/charter-fraud/
Since there are actually charter schools in 45 States, it is likely that the total fraud and abuse of tax payers funds by charter schools exceeds $300 million per year. The report contains news stories, criminal records, and other documents to detail abuses such as charter school operators embezzling funds, using tax dollars to illegally support other, non-educational businesses, taking public dollars for services they didn’t provide, inflating their enrollment numbers to boost revenues, and putting children in potential danger by foregoing safety regulations or withholding services. These are only a few specific examples of the thousands of cases of fraud involving charter schools nationwide.
Here is a quote from the report: “Our examination, which focused on 15 large charter markets, found fraud, waste, and abuse cases totaling over $100 million in losses to taxpayers. Despite rapid growth in the charter school industry, no agency, federal or state, has been given the resources to properly oversee it. Given this inadequate oversight, we worry that the fraud and mismanagement that has been uncovered thus far might be just the tip of the iceberg.”
Charter School Fraud in Ohio...
Ohio has about 400 charter schools affecting more than 120,000 children. Ohio seems to be the nation's leader in charter school corruption which is why we have saved them for last. In 2013, an Ohio man and his brother plead guilty to an alleged $1.8 million charter school fraud in Cleveland. Both were sentenced to one year probation. Also in 2013, in a similar case, prosecutors charged a charter school operator of diverting at least $1.2 million dollars in public funds away from his charter school and into other businesses and multiple homes. In 2014, the judge gave the operator 5 years of probation. http://www.cleveland.com/court-justice/index.ssf/2014/02/lion_of_judah_charter_school_o.html
In another case, a charter school treasurer plead guilty to stealing $470,000 from 4 Ohio charter schools. The funds were supposed to be used for the education of students at four charter schools in Columbus, Youngstown and Dayton between 2005 and 2011, according to the office of the U.S. Attorney for the Southern District of Ohio.
In 2013, 19 charter schools closed in the State of Ohio, joining 150 other charter schools in Ohio that had already been shut down since 2005. With about 400 total charter schools in Ohio, that is a failure rate of over 40 percent!
"$1.4 billion has been spent since 2005 through school year 2012-2013 on charter schools that have never gotten any higher grade than an F or a D,"
As in Florida and many other "charter school" states, charter schools are closing at a record rate in Ohio and sticking tax payers with the bill
Charter schools are closing in Ohio at a record rate after a series of fraud cases were uncovered. The tax payers are left to pick up the pieces and the kids suffer the loss of their schools and their education.
Charter schools are funded by the state on the backs of school districts and taxpayers. Because charter schools are exempt from most state laws and do not have a publicly elected school board, there is almost no oversight of spending at charter schools. Over $900 million dollars per year is diverted away from public schools to charter schools in Ohio every year. But the bill doesn't stop there. When there is financial mismanagement, charter schools can be closed. But it is almost impossible to get the money invested in charter schools back. Nearly $187 million in tax money spent on failed charter schools is still uncollected.
The only solution to corruption and fraud is to not allow private corporations to make profits off of public schools. The only way this will happen is to ban charter schools.
#9 Increases Rate of School Closures Harms Students
As the recent Tulane University study confirmed, allowing charter schools not only creates a framework for fraud, but the chaos created by charter school closures harms students who see their both their public schools and charter schools closed. Specifically, students whose schools are closed have a 10% lower graduation rate than students whose schools are not closed.
#10 The Charter School Fix bill diverts attention away from the Paramount Duty of the State legislature to provide full funding for our public schools.
This is the most disturbing part of the Charter School Fix bill. The State legislature has already been found in "Contempt of Court" for failing to comply with their Paramount Duty under the Washington state Constitution to fully fund our real public schools. As we noted earlier, it would take $3 billion in additional state revenue just to bring school funding in Washington state up to the national average and lower class sizes in Washington state down to the national average.
The real problem faced by our schools is that our class sizes are way too large. Yet despite these massive and urgent problems affecting the lives of one million students, there has only been ONE BILL submitted in the Washington state legislature that would generate the billions of dollars needed to actually reduce class sizes down to the national average and provide our students with the safe schools they deserve. That bill (which I wrote) was Senate Bill 6093 sponsored by Senators Chase and McAuliffe - which would provide more than $4 billion per year in annual revenue by repealing a 1997 tax break used by the very wealthy to avoid paying their fair share of state taxes.
#11 Dozens of Hidden Charter Schools are doing even more damage than the 8 visible charter schools
While there has been a heated debate over the visible charter schools, a huge amount of damage has been inflicted on students in Washington state by dozens of hidden charter schools. These hidden charter schools are run through what is called Alternative Learning Experiences or ALES. These are basically dozens of online learning programs which are fronts for a for profit corporation called K12 INC. You need to know about this program because the goal of the billionaires is to completely get rid of teachers and force all of our students into online schools running by computer programs.
Why All Parents Need to Know About the Drawbacks of K12 INC
One of the worst charter schools in America is a fake online school called K12 INC. This darling of Wall Street has an annual dropout rate of more than 50% and a graduation rate of less than 30%. K12 INC is a profit-driven Wall Street corporation that has branches in nearly every State. This for profit corporation destroys the future of children – many of whom actually regress academically after starting this program.
K12 INC rarely uses its own bad name. Instead, it hides behind dummy non-profit corporations called “Virtual Academies” such as the Washington Virtual Academy (or WAVA) in our home State of Washington or the Colorado Virtual Academy (or COVA) in Colorado. It is likely that your child's school district has a Virtual Academy and that your child has already been subjected to mass marketing campaigns that target and deceive young children with misleading ads on the Disney and Nickelodeon channels with false claims that online learning is much easier and more fun than attending a normal public school. Both of our children have been subjected to these misleading claims and have friends who have been taken in and severely harmed by K12 INC propaganda. Over 90% of K12 INC enrollees eventually drop out of the terrible program – but are left with even lower self esteem than when they entered the program.
The problem with K12 INC is that it is a for profit corporation. It therefore is driven to lie to increase market share and increase sales and profits. It therefore sells itself as the magic cure to education – just as high stakes tests are sold as the magic cure and common core standards are sold as the magic cure and charter schools are sold as the magic cure. Because the future of our children is at stake, parents have a right to know the full truth about all of these programs. All of them harm children rather than help them. So why do they continue to grow like a cancer destroying our education system? The answer is “Greed.” Where there is a profit to be made, some billionaire will be willing to step in and fund the scam in order to get some of the billions of dollars we invest as tax payers in the education of our children. With the case of online education, one billionaire in particular – Bill Gates - has a dream that one day all children will receive the benefits of online education (which just coincidentally benefits his corporation Microsoft). His plan is to turn every school in the US into an online school like K12 INC. We know this sounds crazy. But read on and we will show you.
Four Steps to Converting All Public Schools to For Profit Online Schools
The Real Plan to Takeover and Privatize our Public Schools
The plan to takeover and privatize our public schools is not merely to use Common Core Fake National Standards and high stakes, high failure rate national tests to declare public schools as failures and thereby replace them with private, for profit charter schools – the real plan is to replace charter schools with for profit online schools like K12 INC.
There are many “benefits” to this plan in the eyes of the super rich who are backing it. First and foremost is that the billionaires can get rid of those pesky, expensive and hard to control public school teachers. Also, all children, or at least the children of the poor and middle classes, would receive the same online education – a centralized national education where the standards, the curriculum, the tests and the database of results are all controlled by private corporations which are owned by the billionaires.
There would also be no need for other expensive things like brick and mortar schools, school buses,, school secretaries, school principals, school janitors, lunchroom cooks, school counselors, school nurses, school librarians or playground attendants. The entire process of educating the masses could be accomplished much more efficiently for a fraction of the current cost. Best of all, the entire process could be “programmed,” controlled and monopolized by a few billionaires – just like the Windows operating system. One operating system for all, one set of national standards for all and one giant online national school system for all.
We realize such a monstrous scheme may seem insane to most parents and most teachers. But billionaires live in a different world than the rest of us. They have so much money that they get detached from reality. They have no idea of what it takes to raise a child or educate a child. And they do not really care.
Real parents and real teachers know that real children were never intended to sit in front of a computer screen to be brain washed hour after hour and day after day. Real children need to interact with each other and interact with real teachers in real time. Real children need to sing and play and draw and build. Real children need to watch real teachers and their classmates as they solve problems and improve skills. Each child is different and unique and learns in a different way and at a different rate. Only a real teacher who knows the child and watches the child on a daily basis will be able to help each child achieve their full potential. There is no way that any computer program will be able to replace a real teacher. But in the eyes of billionaires, their plan is not about maximizing the potential of every child. It is about maximizing the profits of every billionaire. The goal is not high standards for children. It is about high profits for the super rich.
The Problem with Replacing Public Schools with Private Profits
The problem with allowing private for profit corporations to control our public schools is that all for profit corporations like K12 INC cut corners at every opportunity leaving children with a very low quality education. The problem is not online education – it is that the profit motive corrupts and destroys education. The for profit motive should never be allowed to run our public schools. The profit motive should never be allowed to destroy the future of our children. K12 INC is the poster child of what is wrong with the for profit motive running our schools. Because K12 INC is out to maximize its profits, it recruits children who do not belong in an online program and have no chance of benefiting from an online program. If there is no publicly elected school board and no public accountability of where all of the tax payers money went, K12 INC is NOT a public school. They are a private corporation pretending to be a public school in order to increase corporate profits.
K12 INC spends millions of tax payer dollars on deceptive TV ads targeting young children
An analysis by USA today found that K12 INC spends about $30 million per year suckering kids and their parents into signing up for the K12 fake school program. Here is a quote from the article: “A look at where K12 is placing the ads suggests that the company is 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.” http://www.usatoday.com/story/news/nation/2012/11/28/online-schools-ads-public-/1732193/
Examples of Deceptive K12 TV Ads
In September 2014, K12 INC ran an add on a Nickelodeon cartoon show called Kid Toons. The ad was called “Is Your child happy in School.” The video featured happy kids sitting in their parents lap and playing on a computer. http://www.ispot.tv/ad/7DzG/k12-online-schools
The K12 INC ad fails to mention the fact that their program robs money from public schools (it is not free to tax payers). Nor does the ad mention that the drop out rate at K12 INC is 80% (their online program severely harms most children).
There is an even more deceptive K12 INC ad called “An Introduction to Online Schools” that features a young child extolling all of the wonderful things that will happen to children if they sign up for K12 INC – including becoming an astronaut!
Every K12 INC TV commercial claims that teachers and parents “enthusiastically endorse” this fake online program. They fail to mention that the vast majority of parents and teachers strongly oppose the program due to the extremely high drop out rate. According to former teachers and call in center workers, K12 INC also targets low income students who have almost no chance of success with the K21 INC program. Here is what one former K12 INC teacher from New Orleans wrote: “K12 Inc. targets poor communities and economically struggling regions; they are easily influenced because they are desperately seeking alternatives to devastatingly under-funded schools. These financially strapped schools are being further bled by the exodus of students who are lured by what I now see are empty promises of marketing experts at K12 Inc. It is a vicious cycle in which, as far as I can see, no one but the corporate profiteers are winning,” http://blogs.edweek.org/teachers/living-in-dialogue/2014/01/15_months_in_virtual_charter_h.html?cmp=ENL-EU-NEWS2
What is K12 INC?
We will next examine the history of K12 INC and then explain why students fail in K12 INC programs. K12 INC was founded in 2000 and now sucks nearly one billion dollars per year out of the school budgets of America's cash starved public schools. It has been described as a “Wall Street Cash Cow” because of its ability to suck money out of State tax payers in order to increase Wall Street profits.
K12 INC Founder Michael Milken... From Junk Bonds to Junk Schools
One of the largest initial investors in K12 INC was Michael Milken, the 1980’s junk bond king who cost millions of Americans billions of dollars and was convicted of securities fraud and tax evasion in 1990.
The head of K12 Inc is Ron Packard who makes more than $10 million per year destroying the lives of children. Like nearly all the other Corporate Ed Reformers, Ron has no background or training in Education and has never been a teacher. Ron Packard has a pretty dark background. From 1986 to 1988, Packard worked in mergers and acquisitions for Goldman Sachs – the corrupt investment banking and gambling outfit known for bribing Congress into deregulating the banking industry and whose reckless bets crashed the world economy in 2008. Another name for Mergers and Acquisitions is “Junk Bonds” as these are used to finance the mergers and acquisitions – which are often leveraged buyouts. It was likely during this time that Ron met Junk Bond King Michael Milken. In 1989, the same year that Michael Milken was indicted by a federal grand jury, Ron moved to safer job at McKinsey & Company – the same company where both Common Core scam artist David Coleman worked and the head of Pearson, Michael Barber worked. Ron Packard worked at McKinsey until 1993, which was the same year that Milken was released from prison. Ron then worked on foreign investments until 1997 when a miracle happened. Despite having no background in Education, Ron joined “Knowledge Universe” owned by the former Junk Bond King Michael Milken.
K12 INC... Rise of the Fake Online School Scam
In 2000, Milken and a couple of other billionaires put up $10 million to start K12 INC with Ron Packard as the CEO. The timing was perfect as this was also the beginning of the high stakes testing, Common Core national standards and charter school scams. K12 INC fit right in because it offered charter schools a fake online curriculum to go with fake online testing. Just sit kids in front of computers all day and there was no more need for a qualified teacher!
In 2001, K12 INC's first contract was with the corrupt State of Pennsylvania. The Pennsylvania Virtual Charter School (PAVCS) was the first school in the country to succumb to the K12 marketing scam. Within months, K12 INC ads were everywhere – encouraging kids to abandon public schools and move to K12 INC.
K12 INC Harms the Youngest Students Just to Make a Buck
PAVCS began with 700 students in grades K-2 in Fall 2001 – just before the 911 disaster. The reason they limited the school to just Kindergarten through Second Grade was to escape the No Child Left Behind testing requirement which began with the 3rd Grade. Sadly, the group of students most harmed by sitting in front of a computer screen all day is the youngest children. For example a 2002 report by the National Education Association concluded: “Our current understandings of the characteristics and needs of learners in earlier grades … would suggest we exercise great caution in the use of the online environment to deliver instruction to students prior to middle school.” http://www.edweek.org/media/ew/tc/archives/TC02full.pdf
Despite this fact, the first programs K12 Inc set up were for grades K through 2. The reason? No Child Left Behind (NCLB) required testing and reporting from grades 3 and up. So working with the youngest kids meant no need to report for the first couple of years. In other words, K12 Ind wanted to fly under the radar screen – even if it meant focusing on kids for whom online education was least appropriate.
K12 INC Creates Its Own Online Preschool Market
We know this is going to sound like some sort of sick, twisted joke. But in July, 2013, K12 INC announced that it was entering what K12 INC calls the Online Preschool Market! According to K12 INC the goal of their latest online ed scam is to get toddlers from Cradle to Kindergarten Ready (where they can then be made college and career ready). One ed reform scammer called it “from cradle to grave” data tracking (a dream come true for the NSA). http://www.prweb.com/releases/Kindergarten/Embark/prweb10959407.htm
The founder of K12 INC, the Junk Bond King Michael Milken, already owns a national preschool program called Kinder Care. Looks like these kids are going to have to jump over a higher bar to get Kindergarten Ready. As for marketing, look for K12 INC to put more ads on the Cartoon Channel. Nothing like using tax payer dollars for K12 INC propaganda and promotion.
According to national education researcher, Diane Ravitch, K12 INC keeps “coming up with new ideas to put children in front of computers and absorb public dollars.”
A wise commenter on Diane's blog wrote the following: “Learning is social...What happened to the teaching that captivates their interest; learning without fear and intimidation; and giving kids the sense of freedom to experiment and explore? The computer can not begin to meet the needs of preschoolers and kindergarteners. Reading stories written by fabulous children’s authors, singing... All the basic needs for preschool and kindergarten are met in an interesting and captivating way with literature, music, poems and finger plays: physical, cognitive, social, and emotional...There are countless rich stories, poems and songs to develop cognitive skills... Leave it to the fairy tales... to teach social skills- living and working together, dramatizing, interacting with building and playing. Dramatizing above all provide for their emotional needs- getting positive feed back from classmates and teachers giving them the sense of accomplishment.”
Calculating the Total Harm to Tax Payers
Currently, PAVCS is one of the largest online schools in the country and has about 10,000 students in Grades K through 12. It spends more than one million dollars per year just on advertising! In 2005, K12 INC set up another cyber school in Pennsylvania called Agora. It also has about 10,000 students. Pennsylvania tax payers give these schools about $8,000 per student. The total sucked out of Pennsylvania tax payers is therefore about $160 million per year – or about 20% of K12 INC's annual revenue. For this massive amount of money, PAVCS and Agora have among the lowest test scores and highest drop out rates of any school in the nation. Combine this with $140 million sucked out of Pennsylvania by gold digger poorly performing charter schools and the total loss to Pennsylvania tax payers is more than $300 million per year. http://thenotebook.org/blog/125416/pa-auditor-general-blasts-cyber-charter-funding-again/
One former teacher from Pennsylvania's Agora Cyber Charter School, which is run by K12 Inc., said she was assigned 300 students but had no idea how many attended class. Here is a quote from this teacher: "I taught English at Agora from 2010-12. It was a horrible experience. When I started, I was assigned 300 students, which was very, very overwhelming. For each class, I'd have maybe seven out of 30 students attend – and even among those seven, just because their name was there showing them present doesn't mean they were at their computers. A huge portion of my students never showed up or did anything. I have no clue what happened to them, though I have no doubt Agora was charging the state for them. When it came time to give grades, I was told, whatever I had to do, I had to pass every student. I would not say there was much learning going on.”
One does not have to look far to figure out why the Pennsylvania State legislature allows K12 INC and other charter scam artists to steal $300 million per year from the State taxpayers. Just since 2007, K12 Inc. has spent $681,000 on lobbying, according to the New York Times. It has 11 registered lobbyists, according to the National Institute on Money in State Politics. K12 Inc. has also used a fake grassroots group called “Pennsylvania Families for Public Cyber Schools” to lobby for it. This fake K12 Inc. funded group spent $250,000 on lobbying in the last five years, with all of the money coming from K12 INC according to the New York Times. The head of K12 INC, Ron Packard, has called lobbying (also known as bribery) a “core competency” at K12 INC. http://www.nytimes.com/2011/12/13/education/online-schools-score-better-on-wall-street-than-in-classrooms.html?_r=0
In 2002, K12 INC added the Ohio Virtual Academy (OVA). OVA currently has about 13,000 students sucking about $100 million per year out of Ohio tax payers. It also has extremely low test scores and an extremely high student drop out rate. In 2012, K12’s OVA had a 30 percent on-time graduation rate, compared with a state average of 78 percent. K12's Pennsylvania online charter schools did even worse. Their on-time graduation rate was only 12 percent compared with 72 percent statewide in Pennsylvania. One does not have to look long to figure out why the Ohio State legislature allows K12 INC to steal $100 million per year from Ohio tax payers. The New York Times 2012 article also reports that K12 Inc. is connected to a fake grassroots group called “My School, My Choice.” This fake group organized protests in Ohio against reforming the state formula for financing charter and online schools. The protesters turned out to be paid temp agency workers. Tim Dirrim, the founder of “My School, My Choice,” is the board president of the K12 Inc. managed Ohio Virtual Academy!
A sharp reporter interviewed a couple of the protesters – who openly admitted that they were temp workers who had been paid to protest in favor of online charter schools!
Also in 2002, K12 INC added the California Virtual Academy (CAVA).
CAVA currently has online programs in 10 different locations in California with a total of about 8,000 students for a total cost to California tax payers of about $70 million. Almost half of these students are in the Los Angeles School District – meaning that the loss to the Los Angeles School district is about $40 million per year. At this point, we should explain that in nearly every State, K12 INC offers school districts who “sponsor” them a bribe or kickback of about 5% of whatever K12 INC takes in. So it is likely that the LA school district got about about a $2 million kickback. But K12 INC likely got the other $38 million. It is hard to tell precisely with K12 INC because they have hidden contracts which very from State to State and even from School District to School District.
Also in 2002, K12 INC added the Wisconsin Virtual Academy (WIVA). K12 INC made a deal with the Northern Ozaukee School Board and started with 455 students. The school district got four percent of whatever public funding K12 took in. However, because they were advertising in other school districts and robbing kids from other school districts, there was a lot of conflict and eventually in 2008, the whole program temporarily shut down. In 2009, the program was moved to a new school district, the McFarland School District. It currently has about 1,000 students costing Wisconsin State tax payers about $8 million per year.
In 2003, K12 INC added Colorado Virtual Academy (COVA), which currently has more than 5,000 students and costs Colorado tax payers about $40 million per year. A 2011 study found that over half of all K12 INC students in Colorado fail to make it through even a single year before dropping out of the program. The graduation rate is only 25%! http://gazette.com/article/126009
A former teacher from the Colorado Virtual Academy said, "Three-quarters of my credit recovery kids never logged in, never completed any work, never answered their emails or phone calls, yet they remained on my class rosters. I began wondering about the state-mandated hours for students at the high school level. No one is monitoring this as far as I can see."
According to the New York Times, a Colorado state audit found that the Colorado Virtual Academy received money for 120 students whose enrollment could not be verified. The state ordered the online school to reimburse $800,000 dollars.
Also in 2003, K12 INC added the Arizona Virtual Academy (AZVA) which currently has about 4,000 students costing Arizona tax payers about $32 million per year. This scam operation was caught a couple of years ago outsourcing student essays and other private data to a sweat shop in India.
In 2004, K12 INC added the Idaho Virtual Academy (IDVA), which has about 3,000 students and costs Idaho tax payers about $2 million per year. Like all of the other K12 INC schools it has extremely low test scores, extremely high turnover of teachers, grossly inflated class sizes and a very high dropout rate. Here is what one former parent wrote: “If I could rate this school any lower I would. We have had nothing but problems with them.
Our children cant access their site most days and when they do get on it runs sooooooo slow...our children are falling behind because half the time they cannot access their site. You can complain till your blue in the face but they don't care. This is a terrible home school company. We're having more problems than I can list. Please do your research and see for yourself. Not worth it...NOT WORTH IT”
Also in 2004, K12 INC and a corporate profit driven front group called ALEC proposed “model legislation” for States to use to make it easier for K12 INC to come in and rob from the tax payers. K12 INC is one of ALEC's primary sponsors. This model law was later passed in States all across the US. For example, soon after passage of ALEC law in Tennessee in 2011 - making private virtual school operators eligible to receive public funds - K12 Inc. received a contract allowing it to provide virtual education to any Tennessee student. Tennessee lawmakers also closed down Tennessee's former State-run successful online education program so that K12 INC would not have to compete with the much better state program.
Just 2 years later, in 2013, Tennessee, education commissioner Kevin Huffman threatened to close the K12 INC school. Kevin said that Tennessee Virtual Academy has test results “in the bottom of the bottom tier” and is an “abject failure.” Also in 2013, a K12 INC school in Tennessee sent an email to a teacher telling her to simple delete bad grades in order to increase the pass rate of her students. Here is a quote from the article: “NASHVILLE, Tenn. Are leaders of a for-profit public school trying to hide the fact their students are failing? That's the question that some are asking tonight as a result of an email uncovered by News Channel 5 Investigates. At the center of the controversy is the Tennessee Virtual Academy -- a for-profit, online public school that Republican lawmakers touted as a way to improve education in Tennessee. Two years ago, state lawmakers voted to let K12 Inc. open the school, using millions of taxpayer dollars.
But, now, those lawmakers are concerned about standardized test results that put it among the worst schools in the state. In fact, the email suggests that even school leaders are becoming increasingly concerned by how their students' grades may look to parents and the public...
The email -- labeled "important -- was written in December by the Tennessee Virtual Academy's vice principal to middle school teachers. "After ... looking at so many failing grades, we need to make some changes before the holidays," the email begins. Among the changes: Each teacher "needs to take out the October and September progress [reports]; delete it so that all that is showing is November progress.” http://video.newschannel5.com/story/21129693/email-directs-teachers-to-delete-bad-grades
In 2006, the head of Chicago Schools, Arne Duncan brought K12 INC to the Chicago Public Schools with a “no-bid” contract. The fake charter school is called Chicago Virtual Charter School (CVCS). The school has about 1000 students.
Also in 2006, K12 INC started the Washington Virtual Academy (WAVA) by arranging a bribery and kickback “sponsorship” with the Steilacoom School District in Washington State. In May 2005, the Washington State legislature passed Senate Bill 5828 to allow K12 INC into Washington State. This very bad bill amazingly had the support of the Washington Education Association – the teachers union in Washington State – even though it led to the firing of more than one thousand public school teachers in Washington State as any student in any other school district could sign up for this corrupt program and their home school district would lose $8,000 per student nearly all of which would be passed through the Steilacoom School District to K21 INC! Multiply $8,000 times 8,000 students and the loss to Washington State tax payers is $64 million – or enough to higher 640 normal public school teachers! Within a couple of years, Washington State had several online programs besides the WAVA program. These including Insight Schools (with a bribe and kickback scheme “sponsored by the “Quillayute School district) and Aventa Learning (with a bribe and kickback scheme sponsored by the East Valley School District). However since K12 INC owned all of these programs, there was only the appearance of choice. In reality, nearly all of the money for online education in Washington State goes to K12 INC.
In 2007, K12 INC started the Georgia Virtual Academy (later called the Georgia Cyber Academy) which currently has 12,000 students costs the taxpayers of the State of Georgia about $10 million per year. In 2012, after complaints from several parents, the Georgia State Board of Education condemned the Georgia Cyber Academy for enrolling more than one thousand special needs students without the capacity to assess or teach special needs students.
2007 K12 INC Goes Public and Makes a Killing
In 2007, K12 INC promotion plan (also known as a bribery and kickback scheme) was working brilliantly. So Ron Packard and Michael Milken decided to take their ponzi scheme public so they could start cashing in their chips before the parents got wise to the scheme and started jumping ship. According to K12's 2007 stock offering prospectus, K12 INC got nearly half of their total revenues from just four States – Pennsylvania, Ohio, Arizona and Colorado. (This is still pretty much the case today as we will show in a few minutes.). 2007 was the height of a stock market bubble fueled by a rapid rise in housing prices. Who could have known that in just a few months, the Housing Ponzi Scheme was going to come crashing down? For now, it was time for Ron and Mike to cash in on the Online Education Ponzi Scheme. To arrange this stock Public Offering (also known as a Public Fleecing), they chose a highly respected investment firm called Bear Sterns – which strangely blew up in 2008 at the hands of none other than Goldman Sachs. Perhaps it was all just an unlucky coincidence.
For awhile, everything looked great. More States were signed up every year thanks to the ALEC Online Charter School Law. Enrollment increased every year.
Revenue also increased every year.
The stock opened at about $25 a share. The stock price took a hit during the Stock Market crash of 2008 reaching a low of about $12 a share. But then thanks to the Federal Reserve Free Money program, also called Quantitative Easing, the stock more than tripled to almost $40 a share on April 24, 2011.
But then reality started to set in as study after study from State after State consistently showed that the students were not learning from the K12 INC magic learning program – which also meant that the drop out rate was very high. In addition, there was a lawsuit from investors in 2012 claiming they were given false information in 2010 and 2011 by K12 INC CEO Ron Packard.
The Truth About K12 INC “Drop Out Rates” Finally Comes Out
During the summer of 2011, K12 INC CEO Ron Packard made extremely bullish statements about future student enrollment and revenue growth. This caused K12 INC stock to rise sharply. Then in October and early November 2011, Ron Packard sold millions of dollars in stock options. Finally, on November 16 2011, Packard admitted for the first time that nearly half of all K12 INC students drop out during their first year (only to be replaced by even more students who also drop out) and therefore the promised profits were not likely to happen.
Within days K12 INC stock plunged. Then, on December 13, 2011 a New York Times article entitled "Profits and Questions at Online Charter Schools" revealed, among other things, that K12’s schools had extremely high drop out rates – even higher than what Packard had told investors on November 16 2011. K12’s stock price plummeted 23.6% the very next day reaching a low of $20 per share on December 15 2011. This led to an Investors lawsuit in 2012.
Using Lies to Fool Parents and Children into Enrolling at K12 INC
In sworn declarations with the 2012 lawsuit, former sales employees at K12's call centers described high pressure to make huge enrollment quotas in order to get a commission. Sales employees were provided with a "script" of what to say to prospective students and parents, including purported "statistics" showing that K12 students were years more advanced than brick-and-mortar school students.
Here are a summaries of former K12 INC Call Center Workers: CW2 described a toxic work environment where sales staff were pressured to meet unrealistic quotas, frequently being forced to make as many as 200 outgoing calls daily to keep up. Sales staff were never given any actual data of student performance, but were instead fed statistics from K12's website, and were told to tell parents that students who did the
K12 program for 1-2 years performed better than their peers at brick and mortar schools.
CW4 stated that there was constant pressure to generate sales, describing the Company's sales philosophy as "enroll, enroll, enroll." CW4 stated that enrollment consultants were instructed to refer to the performance of K12 students as "comparable [to] or even better" than the performance of students at traditional schools, and to state that students at K12 schools were "on a better tier" than those at traditional schools. Source: K12 INC lawsuit 6/22/12
In fact, as we will show in the next section, half of all K12 INC students drop out during their first year and only one out of four every graduates from high school. The 2012 lawsuit was finally settled in early 2013 for $6 million.
During the summer of 2013, Ron Packard assured everyone that the trouble from 2011 was over and all of the K12 INC problems had been solved. Then a miracle happened. K12 INC stock started to rise again. It was almost as if some billionaire was pushing the stock price up. By early September 2013, the stock price was back up to $36 per share. It was magic! Sadly, the magic did not last long. As the next chart shows, within days of reaching its high of $36 a share in early September 2013, the stock began to plunge. For the rest of 2013 and all of 2014, it continued to plunge. It was as if someone had pulled the rug out from under K12 INC's investors. As we will show next, this is exactly what happened.
Junk Bond King Michael Milken Jumps Ship - Leaving the Public Holding the Bag
Between September 1, 2013 and October 1, 2013, the stock price of K12 INC fell from $36 a share to $20 a share. There were two reasons for this sudden plunge. The first was that the Junk Bond King had decided to walk away from his Ed Reform Toy. He had been quietly selling his K12 INC stock until by September 2013, he had no stock left in K12 INC. Ron Packard had also been selling his stock. Both Ron Packard and Michael Milken made millions of dollars pumping the stock up and then dumping it. This is actually what market traders call this kind of rigging – pumping and dumping. The rest of us in the general public call this a Ponzi Scheme – and we get left with massive losses. K12 INC stock remained at about $20 per share for nearly a year – even though Ron Packard had announced he was leaving K12 INC in January 2014.
Then in August 2014, the next batch of K12 INC test scores were released by States around the nation. The test scores were horrible. The stock has been in a nose dive ever since. It is currently at a record low of $14 a share. Our advice is to sell now – because eventually this stock is going to be worthless – just like every other Ponzi Scheme.
The Big Short
The other thing that happened in September 2013 was a report released by a major stock analyst and hedge fund manager named Whitney Tilson who somehow figured out that Michael Milken and Ron Packard had been selling all of their shares. Whitney did some research and found out that K12 INC was not all it had been cracked up to be. He reviewed the lawsuits and complaints from former teachers, students, parents and looked at the test scores and drop out rates. He then realized why Michael Milken and Ron Packard were jumping ship. It was because the K12 INC ship was sinking.
At the beginning of September, Whitney told his investors about the sinking ship and encouraged them to “short” the stock. “Shorting” is a Wall Street gamble where you bet the stock is going to fall and if it does, then you make a huge amount of money. On September 17, 2013, Whitney also went public with a 125-page slide show vividly describing why the K12 INC ship was going to sink. In particular, he spilled the beans about Michael Milken's company (called Knowledge Universe) recently distributed all of their remaining shares in K12 INC and he spilled the beans about Ron Packard selling a huge number of shares. Whitney's slide show made it clear that K12 INC was nothing more than a house of cards that would eventually fall over.
Whitney said in an interview, "When you introduce unlimited government money and virtually no government regulation, the industry will run amok."
Whitney noted that K12 Inc. had hired 153 lobbyists in 28 states from 2003 to 2012. But not even 153 lobbyists can save a company from a bad business model. Any school that has a drop out rate of more than 50% per year is eventually going to fail. Parents will eventually find out. And they will no longer send their kids to a program where most were certain to fail.
A Double Whammy... Double Talk from Double Crossers
As if the harsh critique from Whitney Tilson was not bad enough, in a statement on October 8, 2013, K12 INC admitted for the first time that its enrollment and profits would not be as high as it had earlier claimed. In Form 8-K, they lowered their revenue forecast by about $80 million compared to a forecast they have supported just a few weeks earlier!http://investors.k12.com/phoenix.zhtml?c=214389&p=irol-newsArticle&ID=1862757&highlight=#.VKe7A3Wx3UY
Two days later on October 10, 2014, K12 INC released a second written statement admitting that K12 INC would have a projected operating loss of about $9 million in the first quarter of fiscal 2014. http://investors.k12.com/phoenix.zhtml?c=214389&p=irol-newsArticle&ID=1863577&highlight=#.VKe84XWx3UY
Also disclosed in this second statement was the fact that K12 INC was taking a capital expense of $80 million on its software development. In other words, it was writing it off over time. This is not generally how software is accounted for. It is usually accounted as an expense as the software is written. Only things like buildings are written off over time. So had K12 INC followed normal accounting practices, it would have actually lost $89 million in the first quarter of fiscal 2014. This was not what investors wanted to here. No wonder Ron Packard and Michael Milken had jumped ship in August 2013. They apparently had some inside information. After the October 8 announcement, K12 INC stock shares fell 38% in a single day.
Meanwhile, since K12 INC's 2007 initial public offering, Packard had made $21 million from share sales and exercising options according to Insider Score in Princeton, New Jersey. In the three months before the share drop in October 2013, Packard made about $3 million in profit from option-related sales according to Insider Score. Milken made even more of a killing. In September 2013, a month before K12’s disappointing results were announced, Milken's companies distributed about $270 million in shares according to a securities filing. http://www.bloomberg.com/news/2014-11-14/k12-backed-by-milken-suffers-low-scores-as-states-resist.html
Misleading Claims, Bad News and Two Lawsuits Make for Irate Investors
The shocking revelations in October 2013 combined with the shocking information from Whitney Tilson on September 17 2013 led to the second investor lawsuit in January 2014 – this time by another group of stockholders (the Oklahoma Firefighters Pension and Retirement System – who had lost millions of dollars as a result of Ron Packard's deception). This second lawsuit, like the first one, cited overly optimistic statements made throughout the Spring and Summer of 2013 by company officials, including misleading statements Ron Packard and Nate Davis, K12’s current CEO, about the company’s ability to grow.
Only later on October 8 2013 - after Milken and Packard had sold their stock – did Packard reveal that K12 INC had missed key enrollment and revenue targets.
The April 2014 lawsuit, like the 2012 lawsuit, alleged that former K12 CEO Ron Packard “reaped the rewards” of the bullish company projections by selling $6.4 million dollars worth of stock in the months before an October announcement of disappointing news sent its stock price plummeting. He sold his stock at a rate that was 8 times higher than his prior rate of stock sales. Below is a table from Page 9 of the January 2014 Complaint:
2014 Oklahoma Firefighters Pension & Retirement System versus K12
The lawsuit alleges that Ron Packard deliberately inflated the stock price of K12 INC with knowingly false and misleading statements in order to increase his profits from sales of his stock. Many examples of these false and misleading statements were given. After K12 INC finally revealed the truth, K12 stock fell by more than 38%, falling from a closing price of $28.59 on October 8, 2013 to a closing price of $17.60 on October 9, 2013.
The Seven Hundred Million Dollar Heist
We mentioned earlier that Milken's companies distributed $270 million in K12 INC stock before the stock crashed. However, for every winner on Wall Street, there has to be a loser. In this case, the losers were retired people who belonged to pension funds which invested in K12 INC stock. We will next estimate how much these pension funds lost as a result of the stock crashing from $36 per share in early September 2013 to $16 per share on October 9 2013. As of January 2 2015, the stock is at $11.70 per share and falling.
How many shares of K12 INC are there?
The loss from September to October 2013 was about $20 per share. The current market capitalization is $450 million at $11.70 per share. This implies that there currently are about 39 million shares of K12 INC stock. However in 2013, there were only 36 million shares of K12 INC stock. http://www.marketwatch.com/investing/stock/lrn/financials
36 million share times $36 per share means that the market capitalization of value of all stocks in September 2013 was $1,296 million. The loss to all investors stuck with K12 INC stock in October 2013 was $20 per share times 36 million shares equals $720 million. Therefore while Michael Milken made $270 million and Ron Packard made $6.4 million and folks who are clients of Whitney Tilson made hundreds of millions, retired pensioners lost $720 million. Think of this as a transfer of wealth of $720 million from senior citizens living on a fixed income to billionaires like Michael Milken.
There are at least ten reasons to believe that the K12 INC stock crash and $700 million wealth transfer was a pump and dump operation
First, on August 29, 2013, just 40 days before the October 8 2012 K12 INC announcement that they would lose about $80 million, their chief financial officer (Rhyu) and their chief executive officer reassured investors that “we are comfortable with the fiscal 2014 estimates posted to First Call through yesterday as follows: revenue of $986.8 million.” Then on October 8 2013, they announced that revenue would only be about $900 million. This was an $80 million change in just 40 days. This was equal to an entire month of revenue.
Second, in the four months preceding the stock price crash, the person who knew the K12 INC stock value best, Chief Executive Officer, Ron Packard, started selling his stock stock at a rate that was 8 times faster than he had previously sold his stock.
Third, in the two months preceding the stock price crash, the person who was the founder of the company, Michael Milken, cashed in all of his chips.
Fourth, on September 17 2013, stock analyst Whitney Tilson, provided detailed information on the major problems at K12 INC. Even if K12 INC leaders were not aware that they had problems on August 29 2013 when they reassured investors that they were heading for record earnings, they certainly must have known about Whitney Tilson's Presentation which went into devastating detail about the problems at K12 INC.
Fifth, it was obvious from Whitney Tilson's presentation that he spent several months analyzing K12 INC and interviewing former employees of K12 INC. This means that Whitney suspected months before the stock actually crashed that it was going to crash. It was also clear that he told his clients that K12 INC stock was going to crash at least a full week before he told the general public. He admitted that his clients made millions of dollars on his advice by shorting the stock. It is not reasonable to conclude that Whitney knew more about K12 INC than their chief executive officer Ron Packard.
Sixth, Ron Packard had also withheld other key information from investors in the months before the stock price crash. For example, there had been a 9% decline in enrollment in the spring of 2013. This was not disclosed to investors until October 10 2013 – after the stock had already crashed.
Seventh, K12 INC leaders had used a highly questionable accounting trick to hide expenses and hide losses by “capitalizing” $80 million in software development expenses over time rather than declaring them as current expenses. Ron Packard knew they were doing this. But investors did not know until October 8 2013.
Eighth, according to the complaint filed by the Pensioners, on March 11 013, Ron Packard told investors: “Our customer satisfaction is extremely high. It has been since the very beginning.” We will provide substantial and irrefutable evidence in the next section that this statement was false and misleading and that Ron Packard knew it was false and misleading – and has known for years that it was false and misleading. The truth is that nearly 90% of all customer's – including parents and students – have a very low opinion of K12 INC – which is why K12 INC has to spend $30 million per year every year to recruit a new batch of suckers.
Ninth, this was not the first pump and dump operation pulled off by Ron Packard and Michael Milken. Both have a long history of pump and dump operations going all the way back to the 1980s – including a K12 INC pump and dump that they pulled off in 2011 which led to the 2012 investor lawsuit that was also about hiding important information from investors. The 2013 pump and dump was a mirror image of the 2011 pump and dump.
Tenth, as we will show in greater detail in the next section, the entire K12 INC operation is nothing but one huge fraudulent enterprise. There are literally hundreds of examples of K12 INC leaders lying to students, parents, teachers, legislators and investors with year after year of false and misleading statements going all the way back to the hatching of the K12 INC scam in 1999.
November 5 2014 Judge Anthony Trenga Grants K12 INC Motion to Dismiss
Despite the mountains of evidence that Ron Packard and K12 INC had misled and defrauded investors, on November 5 2014 Judge Anthony Trenga granted K12 INCs motion to dismiss the complaint. Here is a link to his ruling. https://cases.justia.com/federal/district-courts/virginia/vaedce/1:2014cv00108/302903/49/0.pdf?ts=1415302891
The judge stated: “Plaintiff is required to prove:
(1) a material misrepresentation or omission by the defendant;
(2) scienter (the defendant knew the misrepresentation was false or misleading);
(3) a connection between the misrepresentation and the purchase of a stock;
(4) reliance (by harmed investors) upon the misrepresentation or omission;
(5) economic loss; and
(6) loss causation (that the loss was caused by the misrepresentation.”
The judge then decided that it was theoretically possible that Ron Packard had no idea that K12 INC was in trouble or that the stock would crash. To make it clear, I agree that defendants should be given the “benefit of the doubt” and that the burden of proof is on the person making the allegation. However, the evidence summarized above not only meets the civil standard which is more likely than not – it also meets the criminal standard of beyond a reasonable doubt. It is simply not credible to conclude that Ron Packard had no idea that K12 INC was in trouble and he just happened to sell 43% of his stock in the 3 months before it actually crashed.
If Whitney Tilson knew it was going to crash in the summer of 2013, and many of his investors knew, then so did Ron Packard. It is also beyond belief that the head financial officer of K12 INC did not know that enrollments had been down by 9% just months earlier or that revenue would be down by 9% ($80 million) just 30 days later. This was not just a coincidence. It was a predictable event.
Three Remedies... It is up to all of us to seek and demand justice
The first remedy would be for a new group of harmed K12 INC stockholders to use the evidence I provide in the next section to bring a new class action lawsuit against Ron Packard and K12 INC. The original January 2014 complaint was not well researched and not well presented to the court. Given that the total lost by investors was more than $700 million, one would assume that someone would be interested in getting their money back.
The second remedy is to use the Court of Public Opinion. If the court system will not hold Ron Packard, Michael Milken and K12 INC accountable for defrauding senior citizens of more than $700 million, then it is up to the rest of us to hold them accountable by voting with our feet and with our voices and with our cash. Do not send your kids or grand kids to any program run by K12 INC!
The third remedy is to get informed about K12 INC and then share this information with others. Take the time to read the next section. Share the link to our book and our website with other parents, teachers, seniors, legislators and concerned citizens. Together we can hold K12 INC accountable for the educational crimes they have committed against our children and the financial crimes they have committed against our senior citizens.
A Warning... The Goal of K12 INC is to Harm Even More Millions of Children
According to the 2014 Investors Complaint, in early 2013, Ron Packard told investors that K12 INC was planning a massive expansion. Here is a quote from Ron Packard: “if you look at the size of U.S. public education market, its $650 billion or it’s about 58 million kids. We have 130,000 kids today. So we can grow at a high rate for a long time. And even if you double every three years, which is about 24% growth rate, it’s a long time before you can get to the 2 million home school kids that are out there...The last count,(home school) is about 11% of the students who come into our program. The other 89% are coming from that brick-and-mortar component... So believe that high growth rates can be sustained at K12 for a long time.”
K12 INC clearly has a goal of using false and misleading advertising to expand their “market” in coming years – as if they have not already harmed enough children. With a planned growth rate of doubling every three years, they apparently want to harm millions of children every year.
The 5 original K12 INC States, Arizona (2003), California (2003), Colorado (2004), Ohio (2002) and Pennsylvania (2002) are shown in red above. Note that 5 of the 6 worst States for subjecting children to online schools are the original K12 INC States. All five States were subjected to a massive K12 INC propaganda campaign that misled tens of thousands of parents and students into believing that a fake online school was better than a real public school. http://nepc.colorado.edu/files/virtual-2014-appendix_b-numbers-final_0.pdf
My mom always said “Fool me once, shame on you, Fool me twice, shame on me.“ K12 INC has been fooling too many parents for far too long. For the sake of our children, we need to stop this corrupt monster before it grows into a cancer that destroys our schools, our kids and our democracy.
K12 INC Distortions, Deceptions and Outright Lies
In this section, we will present hard evidence of the horrific harm K12 INC has inflicted on the children in its programs here in Washington State as well as evidence that K12 INC leaders know that the marketing information they are giving to students, parents and investors is false.
Why are we using Data from Washington State?
The reason we are using the state of Washington for our example is first because we have better access to data about students in the State of Washington than we have in other states. Also, there has already been a great deal written and published online about the harm inflicted by K12 INC on children in other States – including the states of Pennsylvania, Florida, Colorado and Ohio (just do a Google Search). As you will see, the story in Washington State is remarkably similar to the story of harm in these other states. This is because all children and all parents in all states will have about the rate of failure if they try to replace a real public school and public school teacher with the fake K12 INC program. The one difference we noted here in Washington State was that K12 INC appears to be targeting wealthy white children rather than poor minority children. The result is still the same – a huge percentage of children fail in this program regardless of their family income level.
Washington Virtual Academy (WAVA)
The Washington Virtual Academy is an online education program being run through the Omak and Monroe School Districts. It is the second largest of about a dozen online schools being run here in Washington State. The largest is called Insight Academy and is run through the Quilayute School District.Each has a different name and is run through a different school district. But in the end, they are all the same online program and they are all actually run by a national for-profit corporation called K12 INC.
What can we learn from K12 INC problems in other States?
Lawsuits and court declarations from more than 20 former K12 teachers and other former K12 employees accuse K12 Inc of using uncertified teachers and having teacher case loads of 300 to 400 students per teacher. They also accuse K12 of lying to parents about the record of K12 in order to deceive parents into signing their children up for the K12 program.
K12 spends $30 million per year (all from the tax payers) to advertise to children on the Disney channel. K12 INC also spends millions more dollars bribing our elected representatives into passing laws making it easy for K12 INC to rob public schools and increase their corporate profits.
Huge Turnover in Students every year
K12 INC gets $6,000 to $9,000 in State tax payer dollars for every student they convince to enter their program. Nationally, over 120,000 students out of our nation’s 50 million school children sign up for the K12 program each September. Of these 120,000 children, about 70,000 children – or well over half of these children - drop out during their first year.
Ironically, because K12 Inc continues to recruit more parents and children throughout the school year, the 70,000 children who drop out are replaced by 70,000 more students so by the end of the school year in May, there are actually more students in K12 online classes than there were at the beginning of the school year – despite the fact that more than half of the initial students dropped out and they are all different students!
Huge Declines in Test Scores on Washington State Standardized Tests
The test scores of WAVA/K12 INC students are much lower than the Washington State average. (Source OSPI Report Card, Omak SD, WAVA schools)
2011-2012 WAVA students % Passed compared to the State Average
The result was similar for the 7th Grade Writing test where 40% of WAVA students passed compared to 71% of statewide students. On the 8th Grade Science test, 33% of WAVA students passed compared to 66% Statewide. Having a REAL teacher makes a huge difference in helping students learn!
Struggling K12 INC Students Disappear on State Testing Days
Note: Most of the information in this section comes from the 2013 OSPI annual report on online programs in Washington State: http://www.k12.wa.us/LegisGov/2013documents/OnlineLearningAnnualReport.pdf
These very low K12 INC test scores are despite the fact that K12 INC has a known practice of dropping struggling students from their rolls in the weeks before the standardized tests in an effort to raise their test scores- and despite the fact that huge numbers of WAVA students do not even take the tests.
The huge number of K12 INC students who fail to take State testing calls into question even their current meager results. Former K12 INC teachers and administrators have submitted statements in various K12 INC lawsuits that they were instructed to release poor performing students before State testing to try to artificially raise K12 INC test scores
K12 INC students are much less likely to complete courses
K12 course completion rates are about 80% versus a state average in normal schools of 97%. The following table shows total K12 INC students per school followed by the number who completed courses:
Student Grades in K12 INC completed courses are also much lower:
One in four of these students who completed an online K12 course received an F. This means that the actual pass rate for K12 is now 60% versus a State average of 90%. The following table shows the number of K12 INC students who completed their courses followed by the percent who receive at least a C and the percent who received at least a D.
Below is a graph of the percentage of Grades Earned in K12 INC courses versus traditional non-online courses.
The combination of not completing courses and getting a failing grade in courses they do complete means that K12 INC students are much less likely to graduate from high school than students who attend real public schools in real classes with real teachers.
What is the average graduation rate of K12 INC online students?
According to OSPI, the 2011-2012 Graduation rate for WAVA was only 22%. The Washington State average graduation rate is 75%. In Colorado, the average graduation rate of K12 INC online students was only 20%. In Ohio, the K12 INC graduation rate was 30%. By comparison the average graduation rate for all students in Colorado is about 72%. In Ohio, it is 78%. Below is a chart showing the two year graduate rate of several K12 online schools compared to the average high school graduation rates in the same state:
The Washington State WAVA result is based on a small number of students. However, the Colorado and Ohio, K12 INC graduation rates are based upon thousands of students in each state. In general, the more years a student is subjected to the K12 INC online program, the less likely they are to graduate from high school as students tend to fall further behind every year they are in the K12 program.
So the graduation rate of K12 INC students is much worse than almost any public school – despite the fact that K12 INC students in Washington state typically come from families with higher than average incomes and therefore should have a higher graduation rate.
Who are K12 INC aka WAVA students?
Note: Most of the information in this section comes from the 2013 OSPI annual report on online programs in Washington State:
There are about 10,000 students enrolled in online education programs in Washington State. About 8,000 of these students are enrolled in K12 INC programs such as WAVA. To be clear, this is just the enrollment at the beginning of the school year. During the school year, over 4,000 K12 INC students drop out to be replaced by another 4,000 new student victims. So the total number of students harmed every year by the K12 program is about 14,000 students – even though there are only 10,000 students in the program at any given time.
K12 INC claims that the reason their students do so poorly is because they are “at-risk” students to begin with. However, the facts in Washington state show that just the opposite is the case. There is a strong relationship between poverty and low school performance. Yet K12 students typically come from families which are much wealthier than the State and national average. For example, only 15% of WAVA students are from poor families (eligible for free or reduced price lunch) while 42% of all Washington State students are from poor families who are eligible for free and reduced lunch. Because student test scores are highly related to family income, WAVA students should score much higher than the State average.
Instead, they score much lower than the State average. Source OSPI Report Cards. Also, only 4% of WAVA students are special education students while the State average is 14% special ed. This also should increase K12 INC scores.
K12 also serves fewer minority at risk students than normal schools:
In Washington, lower income minorities make up only 25% of K12 INC programs compared to over 40% of normal schools. This should increase K12 INC scores because upper income students always do better on high stakes tests than lower income students. Instead we see just the opposite. Even high income can not make up for a terrible program.
If the students are not low income or minority at-risk students, then why are so many of them failing in the K12 online program?
There are several reasons. Below we will review the top four reasons so many middle class students fail in the K12 INC online program:
#1: Poorly qualified, over-worked and under-paid teachers.
#2: Overburdened Parents are also not well trained to meet the academic needs of their children.
#3: Overburdened students are not able to handle prolonged “independent study.”
#4: K12 has extremely poor Grading and Attendance policies
#1: Poorly qualified, over-worked and under-paid teachers.
K12 INC’s entire program is based on devaluing the roll of highly trained and certified teachers and replacing teachers with parent coaches. K12 INC has a court case well documented history of hiring uncertified teachers and abusing them with huge case loads. This is how K12 INC is able to maintain their huge profit margin. In a normal public school, two thirds of our taxpayer dollars go towards teacher salaries and one third goes towards administration. However, with K12 Inc schools, only one third of our tax payer dollars goes towards teachers and the other two thirds goes towards Wall Street Profits.
Normal public schools use certified teachers and limit caseloads to 100 to 150 students per teacher per day (5 classes of 20 to 30 students each). For example, North Carolina, state statutes call for no more than 150 students per teacher in grades 7 through 12. In both Florida and Colorado, K12 inc teachers were assigned 250 to 300 students per day, two to three times the national average).
In both States, K12Inc teachers were paid a meager $35,000 per year (far below what public school teachers are paid). More than half of these teachers quit in less than one year.
See for example K12 INC under investigation for high teacher case loads
In one documented case in Florida, a K12 manager ordered a certified teacher to sign a class roster of more than 100 students. The certified teacher refused because she only recognized seven names on the list. “I cannot sign off on students who are not my actual students,” K12 teacher Amy Capelle wrote to her supervisor. “It is not ethical to submit records to the district that are inaccurate.” Many other teachers have also come forward with similar allegations of K12 falsifying records to increase profits.
Here is what one former COVA teacher wrote about K12Inc: From what I have personally observed there is one goal, and one goal only and that is making millions of dollars for K12. They have never cared about quality teachers, and in fact, K12 lobbied NOT to have certified teachers, so they could save money on employee salaries. They could care less about the students' education. How can anyone justify 77 cents out of every dollar going to a private for profit company, when that money is tax payer money set aside for the education of our children? COVA should be shut down immediately and K12 should be held responsible for the tax payer money that they have pocked over the years!!
A 2012 National Study on K12 INC also found that they spent far less than normal schools on teachers, administrators and counselors and almost nothing on facilities. Thus, the bulk of the funds they received went towards corporate profits. Here is a quote from another study: “K12 has more than three times the number of students per teacher compared with overall public school student-teacher ratios. The higher student-teacher ratio and the reduced spending on teacher salaries, as well as on salaries for all other categories of staff typically found in schools, help explain the poor performance of K12’s schools “
Former employees allege that K12-managed schools aggressively recruited children who were ill-suited for the company's model of online education. They say the schools then manipulated enrollment, attendance, and performance data to maximize tax-subsidized, per-pupil funding.
Does the total number of students assigned to a teacher matter?
Those who defend the K12 INC program say it is a different model of education from a normal public school. They therefore claim that the total number of students assigned to a teacher does not matter. However, former K12 INC teachers have said that the total number of students they are assigned does matter and that it is physically impossible for them to meet the needs of their students when they are responsible for 300 kids.
What is the average training, experience and pay of K12 INC teachers?
K12 INC does not release this information. However, reports from former K12 INC teachers confirm that the average K12 teacher has less than one year of teaching experience. Most quit during their first year – leaving students with a constant turnover of teachers to deal with the constant turnover of studentts. In addition, former K12 teachers report that they are paid less than $35,000 per year – half of what a normal teacher is paid. By contrast, the average teacher in the Snoqualmie Valley School District in Washington State has more than 10 years of experience and a Master’s Degree in Education.
#2: Overburdened Parents are not well trained to meet the academic needs of their children
Defenders of the K12 program claim that they do not really need teachers because K12 relies on parents to “coach” their children through the K12 program. Some parents have strong enough social skills to act as their children’s teacher and coach. Some parents also have the time to stay home and help their children through their course work. Some parents also have adequate academic knowledge of math and learning methods to help their children. However, many parents lack one of more of these crucial skills. This leaves many children without the resources they need to succeed in school.
#3: Overburdened students are not able to handle prolonged “independent study” Defenders of the K12 program claim that online courses place less pressure on students because students can study at their own pace. In fact, online courses place much greater pressure on students because any time they fail to perform, their parent will be right there watching them as they fail. Students are therefore under tremendous pressure to retain their relationship with their parents. While home school may help some students, other students are too distracted by other things which are at home but not at school – things such as the TV or video games. They are also quickly bored with the online programs because they lack interaction with their former school friends.
One former K12 INC teacher explained it this way: “When you have the television and the Xbox and no parental figure at home, sometimes it’s hard to do your schoolwork.” Both young girls and young boys struggle with online programs.
Online programs are particularly hard on young boys who are often cognitively as much as two years behind young girls in their brain development.
#4: K12 Inc has extremely poor Grading and Attendance Policies
In addition to under-paying and overloading uncertified teachers with huge student case loads, K12 Inc inflated enrollment numbers by counting attendance merely by the number of students who logged in rather than the amount of time they spent online. In a normal public school, a student has to actually be at the school for a minimum of 3 hours in order to be counted in the daily attendance.
The state audit of the Colorado Virtual Academy, which found that the state paid for students who were not attending the school, ordered the reimbursement of more than $800,000. State auditors found that the K12-run Colorado Virtual Academy counted about 120 students for state reimbursement whose enrollment could not be verified or who did not meet Colorado residency requirements. Some had never logged in. The lawsuit alleges that K12 Inc. used lax grading and attendance practices to maintain and artificially inflate enrollment. One former COVA academic advisor claimed there was a push by administrators to keep students enrolled until the October count date, which determines school funding. Despite having information on date, time and duration of students’ engagement with the K12 Inc. software, “the only factor that was taken into account for attendance purposes was whether the student logged in.”http://kunc.org/post/institute-reject-colorado-virtual-academy-application-ripples-felt-wall-street
Below are quotes from a lawsuit court filing on June 22, 2012. The quotes are all from former K12 teachers and other K12 employees.
“It was very easy to cheat on exams because there was no way of knowing who was actually taking the online test. Parents or other family members could be taking the test. Students received passing grades on courses for which they had never even logged in. Teachers were threatened with being fired if they did not pass more students.”
Several current and former staff members said that a lax policy had allowed students to remain on the rolls even when they failed to log in for days. Officials of the Elizabeth Forward School District in western Pennsylvania complained that Agora had billed the district for students who were not attending. One of them was a girl who had missed 55 days but was still on the school’s roster, according to Margaret Boucher, assistant business manager at Elizabeth Forward.
When a student failed to log in for a class day, parents were instructed to log in for the student. When the parents failed to log in, teachers were allowed to log in for the student. When teachers failed to log in for the student, administrators were allowed to log in so that K12 would receive the maximum funding for the student having attended classes that day.
Poor attendance and disengaged students have been such a problem that Agora dismissed 600 students last year for nonattendance, 149 of them just before state tests were administered, according to school board minutes.
It can be difficult to determine whether students are actually doing the work, or getting help from their parents or others. “Virtual schools offer much greater opportunity for students to obtain credit for work they did not do themselves,” said a report in October from the National Education Policy Center. Due to rampant reports of cheating on online tests, in 2012, the NCAA announced that they are no longer accepting credits from K12’s Aventa Learning.
Fact checking K12 distortions, deceptions and outright lies
Despite all of the above evidence, K12 still falsely claims in their recruitment meetings and in their promotional literature and on their websites that K12 students do significantly better than normal students. We will therefore examine several of their claims:
Claim #1: K12 INC claims that their students do better than normal students
Claim #2: K12 INC claims that parents approve of K12 school
Claim #3: K12 INC claims that their schools have received State and National awards
Claim #1: K12 Inc claims that their students do better than normal students
I attended a K12 recruitment meeting where parents were told that K12 students did much better than normal students. When I asked what evidence this claim was based on, I was told to go to the K12 Inc website and read their 2013 Academic Report. In this report, K12 INC claims that their “norm based Scantron” tests are more reliable than “achievement based” tests approved in most States. According to the Washington State MSP test, K12 students are doing much worse than the State average. However, according to the K12 Scantron test, K12 students are doing slightly better than the Scantron national average:
Look carefully and you will see that for three years in a row, less than 1,000 K12 “WAVA” students in our State took the Scantron test. The problem of course is that each of these years, there were over 3,000 total students in the WAVA program. So less than one in three students even took the Scantron test. This indicates that K12 cherry picked the students who would take the test in order to inflate their results.
Below are the Scantron test results for the Insight School of Washington State – another K12 school:
Look closely and you will see that only 75 students took this test. The problem here is that there are 1750 high school students in this online program. Only 3% of these 1750 students even took the test! What happened to the other 1675 students???
What exactly is the Scantron Test?
We were curious to read about the K12 Scantron test. What we learned was that there is almost no published data on how the crucial “normed national sample scores” were determined. In fact, there are only a couple of objective scientific studies even done on this test. One was a controlled test in Illinois where the same group of students was given standardized tests and then given the Scantron test. A standardized test, while graded by turning in computer cards, is actually done with the student reading a written test guide and where the student fills in their answers on a multiple choice answer sheet. All questions range in difficulty but are the same questions which are answered by all students. The reason for using a paper test booklet and paper answer sheet and a pencil is to simulate as much as possible how a student normally works – with paper books, paper sheets and a normal pencil.
Students taking a Real Paper and Pencil Standardized Test
With a real standardized test, it is possible for parents to see a copy of the actual test questions that were administered to their child because all test questions for all grades are publicly available. This is not possible with Scantron tests because they use a completely different test process in which every child gets a different test and no two tests are alike. Because Scantron tests are scored online, no parent or teacher can verify the results.
Students adapt easily to paper and pencil tests
Scantron Tests are Online Tests using a computer key board
The Scantron test is radically different from a traditional standardized test. It is done on a computer screen with internet access to the Scantron testing center. Each time a student gives a right answer, the next question is harder. Each time a student gives a wrong answer, the next question is easier.
Surprisingly, the following study found that there was very little relationship in the scores received between the normal standardized test and the Scantron test. In other words, a student can score high on one but low on the other. This means that Scantron tests are measuring different skills from standardized tests.
Many students who did well on a standardized test saw their scores drop on the Scantron test by as much as 20%. Strangely, when the students took the Scantron test a second time, their scores rose dramatically. While student scores generally rise with re-tests, the rises with the Scantron test were much higher.
Middle School Students taking the Scantron Online Test
Here is what the author of the study concluded: “The wide range of gains within classrooms supports the idea that the Scantron test results are not valid or reliable for some students...The Scantron issues raise important concerns for teachers, parents and administrators. If the goal of testing is to accurately assess student learning, then something is amiss with the testing of these students”
This is why students did much better on re-tests. It is because they had more skill in reading the computer monitor and using the computer keyboard.
Should Scantron testing be called Scamtron testing?
This is why K12 students may do better than normal students on Scantron tests. When you spend your days looking at computer screens and typing answers into computer key boards, you will naturally get more comfortable with this process. The evil geniuses at K12 were quick to realize this. And they have been hyping the Scantron tests ever since. Sadly, these test results do not correlate with standard test results. Nor do they correlate with student knowledge. Nor do they correlate with student SAT scores or student achievement in college.
In fact, the college rate of attendance for K12 students is only 10%. This compares to a 55% rate of college attendance for normal high school students.
Claim #2: Parents approve of K12 schools?
K12 also frequently claims that 88% of all parents report that they are happy with the progress their children make in the K12 online program. On page 67 of their nationwide 2013 Academic Report, K12 presents charts claiming that 88% of their parents are satisfied with the K12 program as indicated by a response of 5, 6 or 7 on a scale of 1 to 7. They do not disclose the percentage of parents who failed to respond to the survey. However, they did list the sample size for the survey. If you look very closely, you will see that only 9,174 parents completed the survey out of 190,000 parents that year.
K12 has 120,000 students at their schools on average at any given time. But because 70,000 drop out and are replaced by 70,000 new students during the year, the total sample size of students is 190,000. So out of 190,000 students, less than 5% of their parents even returned the surveys.
This is a very low response rate. It is unknown what happened to the other 95% of the surveys. It is like having an election where one does not know what happened to 95% of the ballots. What is known is that parents and students voted with their feet. Over half of them left the program in the first year.
This problem is also true here in Washington State. About 90% of all parents turning in K12 Satisfaction surveys indicate they are satisfied with the K12 program. However, in the Omak WAVA program only 130 parents turned in the form out of more than 2,000 students who started out the school year in the program. Considering that there were actually more than 1000 students who dropped out of the program during the year – only to be replaced by another 1000 new students, the total number of parents was more than 3000. Therefore, the response rate to this survey was less than 5% - with 95% of all parents not turning in the survey and 50% of all parents voting with their feet by pulling their kids out of the program before the end of the first year.
Claim #3: K12 schools have received State and National awards
On the home page of the K12 Washington Virtual Academy, they proudly claim that they were awarded an OSPI School of Achievement Award in 2012. Knowing how badly the WAVA school actually does, it is hard for me to imagine this online school ever getting an award for anything. So I clicked on the link to see the award. Instead of going to the award, the link led to the K12 national website home page where there was a press release describing the award and what a great achievement it was to have gotten this award in Washington State. At the bottom of this press release was a link which claimed to go to the award. So I clicked on this link. This link went to the OSPI website which described the award and the process for getting the award.
There was a link on this OSPI page to see the actual award winners. Curious to see how many schools got this award, I clicked on this link. This took me to an Excel spreadsheet listing 383 who got this award in 2012. I examined this very long list very carefully. Strangely, WAVA was not on the OSPI list. Nor was any other K12 Inc school! I then went back to the OSPI page and clicked on the PDF version of the list. WAVA was not there either. I then checked 2011 and 2010 to see if perhaps WAVA was on one of these lists. Not there either. So I called OSPI. They said that WAVA – Monroe School District did receive an award for “improvement” in 2011 by having their scores better than they were in 2010. We will therefore look at the Monroe WAVA scores compared to the State average to see how WAVA managed to game the system to get an award that they clearly do not deserve. For reference, here are the most recent test scores Statewide (the average test scores for all students in Washington State):
Below are the average test scores for students in the Snoqualmie Valley School District:
Students in the Snoqualmie Valley School District are far above the State average in every category. Now here are the Monroe School District WAVA program test scores. Because it is only a 9-12 program, they do not list test scores for the lower grades:
Monroe WAVA students are far below the State average. This is very sad considering that there are 900 students in this program. Half of them are failing. Below are the charts of the WAVA performance for the past three years in Reading and Writing:
Notice that the scores in both reading and writing went from below average to average in 2010-11. Both he Reading and Writing test scores rose dramatically during the year that WAVA was given the award. But they both fell back down below average the very next year. This indicates that K12 administrators did something to manipulate the test scores in both reading and writing on the 2010-11 test - indicating that WAVA rigged the test in order to get this award.
Because of the potential for rigging scores in order to temporarily raise them, OSPI eliminated the “Improvement” award the year after WAVA Monroe managed to game the system. This kind of conduct is despicable. But this is what we should expect when we allow a Wall Street corporation to bring in a Hollywood marketing firm to fool local parents into sending their kids to this failing program.
How much does K12 INC receive per pupil and what percent goes towards teachers compared to our normal public schools?
The average State funding here in our State is about $6,000 per child. More than 60% of every dollar spent by our normal public schools goes to teacher salaries with the rest spent on all kinds of special programs (including bus transportation) and less than 20% is spent on administrative overhead. Public school districts have no profit margin and are controlled by a publicly elected school board whose members are not paid anything for their service to the community.
In sharp contrast, K12 INC devotes more than 60% of the tax payer income they receive on salaries and bonuses for their upper management and profit for Wall Street Hedge Fund Managers who own K12INC stock. Last year, K12 INC reported more than $900 million in revenue and their upper managers were paid millions of dollars each.
K12 INC gets about $6,000 per student in Washington State because they also get local levy dollars in their contracts with school district. The total currently is about 8000 students. Multiple this times $6,000 per student and it is likely that K12 INC takes $48 million per year out of public schools in our state.
What is happening to K12 INC programs in other States?
There are currently lawsuits in Colorado and Florida with complaints filed in many other States. Virginia just voted to close their statewide K12 INC online school after similar disastrous online student performance in that State. A Tennessee study found their online schools ranked in the bottom 11% of all schools. K12 INC taxpayer-supported, privately operated online schools have been receiving increased public scrutiny, including criticism of their performance and their funding arrangements. Also see the following link for a national study of online school performance:
Calculating the negative impact of K12 INC on students in Washington
There are currently about 8,000 K12 INC students in Washington State – with 4,000 of these students dropping out of the K12 INC programs every year only to be replaced by another 4,000 unsuspecting students and their parents. Assuming that K12 INC gets $6,000 per student from the several school districts which are “hosting” their program, the total loss of funds to our public schools is $48 million per year. The total number of normal public school teachers that have to be fired to make up for this huge loss in revenue is about 800 teachers.
Therefore, if we offered our online students a better program using free open source educational programs, we could rehire 800 teachers – half of whom could be used to support our online education programs in Washington State and the other half of whom could be returned to our normal public schools to reduce class sizes in 400 schools in our State.
A better option... Local Control over a Local Online Educational Program
So far in this report, we have looked mainly at the negative impact of K12 INC on students in Washington State. However, by addressing the shortcomings of the K12 INC program, we could offer an online program which helps students rather than harms them. Some of the changes we should make include:
#1: Warn parents of the actual track record of the K12 INC program.
#2: Offer parents a better alternative than the K12 INC program.
#3: This better alternative would increase the use of a higher number of local public school teachers.
#4: Screen students to insure that only students who have a track record of being able to complete an independent study program are allowed to sign up for more than one online course at any given time.
#5: Provide a training program for online teachers to help them better meet the needs of online students and their parents.
#6: Provide school districts with a list of approved free open source online courses and programs in order to improve the quality of the online curriculum.
#7: Provide multiple types of online learning experiences including not only videos and exercises, but also more and better online interactive books, online student clubs, online forums organized by topic and parent support groups.
But most important, we need to elect new leaders in Olympia who understand the dangers of privatizing our public schools. If we don't, it will be only a matter of time until real public schools are a thing of the past.
As always, I look forward to your questions and comments.
David Spring M. Ed.
Candidate for Superintendent of Public Instruction