By Lyndsey Layton and Emma Brown, Published: November 26, 2011
A Virginia company leading a national movement to replace classrooms with computers — in which children as young as 5 can learn at home at taxpayer expense — is facing a backlash from critics who are questioning its funding, quality and oversight.
K12 Inc. of Herndon has become the country’s largest provider of full-time public virtual schools, upending the traditional American notion that learning occurs in a schoolhouse where students share the experience. In K12’s virtual schools, learning is largely solitary, with lessons delivered online to a child who progresses at her own pace.
Conceived as a way to teach a small segment of the home-schooled and others who need flexible schooling, virtual education has evolved into an alternative to traditional public schools for an increasingly wide range of students — high achievers, strugglers, dropouts, teenage parents and victims of bullying among them.
“For many kids, the local school doesn’t work,” said Ronald J. Packard, chief executive and founder of K12. “And now, technology allows us to give that child a choice. It’s about educational liberty.”
Packard and other education entrepreneurs say they are harnessing technology to deliver quality education to any child, regardless of Zip code.
It’s an appealing proposition, and one that has attracted support in state legislatures, including Virginia’s. But in one of the most hard-fought quarters of public policy, a rising chorus of critics argues that full-time virtual learning doesn’t effectively educate children.
“Kindergarten kids learning in front of a monitor — that’s just wrong,” said Maryelen Calderwood, an elected school committee member in Greenfield, Mass., who unsuccessfully tried to stop K12 from contracting with her community to create New England’s first virtual public school last year. “It’s absolutely astounding how people can accept this so easily.”
People on both sides agree that the structure providing public education is not designed to handle virtual schools. How, for example, do you pay for a school that floats in cyberspace when education funding formulas are rooted in the geography of property taxes? How do you oversee the quality of a virtual education?
“There’s a total mismatch,” said Chester E. Finn Jr., president of the Thomas B. Fordham Institute, a conservative think tank, who served on K12’s board of directors until 2007. “We’ve got a 19th-century edifice trying to house a 21st-century system.”
Despite questions, full-time virtual schools are proliferating.
In the past two years, more than a dozen states have passed laws and removed obstacles to encourage virtual schools. And providers of virtual education have been making their case in statehouses around the country.
K12 has hired lobbyists from Boise to Boston and backed political candidates who support school choice in general and virtual education in particular. From 2004 to 2010, K12 gave about $500,000 in direct contributions to state politicians across the country, with three-quarters going to Republicans, according to the National Institute on Money in State Politics.
“We understand the politics of education pretty well,” Packard told investors recently.
K12’s push into New England illustrates its skill. In 2009, the company began exploring the potential for opening a virtual school in Massachusetts in partnership with the rural Greenfield school district.
But Massachusetts education officials halted the plan, saying Greenfield had no legal authority to create a statewide school. So Greenfield and K12 turned to legislators, with the company spending about $200,000 on Beacon Hill lobbyists.
State Rep. Martha “Marty” Walz, a Boston Democrat, wrote legislation that allowed Greenfield to open the Massachusetts Virtual Academy in 2010. She acknowledged that the language was imperfect and didn’t address issues of funding or oversight but said she couldn’t wait to craft a comprehensive plan.
“You do what you need to do sometimes to get the ball rolling,” said Walz, who accepted at least $2,600 in campaign contributions from K12, its executives or its lobbyists since 2008, according to the National Institute on Money in State Politics.
That scenario is repeating nationwide as K12 and its allies seek to expand virtual education.
About 250,000 students are enrolled in full-time public virtual schools in 30 states, according to Susan Patrick of the International Association for K-12 Online Learning, a trade association. Although that’s just a fraction of the country’s 50 million schoolchildren, the numbers are growing fast, Patrick said.
K12 teaches about two out of every five students in full-time online schools. Its next largest competitor is Baltimore-based Connections Education, which was recently acquired by Pearson, the mammoth British textbook publisher. The rest of the industry consists of smaller operators and some nonprofit virtual schools.
Seizing an opportunity
If it were a school district, K12 would rank among the 30 largest of the nation’s 1,500 districts. The company, which began in two states a decade ago, now teaches about 95,000 students in virtual schools in 29 states and the District of Columbia.
And it plans to grow. “We are now that much closer to our manifest destiny of making a K12 Inc. education available to every child,” Packard said in a call with Wall Street analysts this month.
It’s a promising business. In the past fiscal year, K12 had revenue of $522 million — a 36 percent increase from the prior year, according to securities filings. Its net income after a series of acquisitions was $12.8 million. Packard earned $2.6 million in total compensation.
Packard, 48, took a roundabout route to education. A former Goldman Sachs banker, he was working as a consultant with McKinsey and Co. when he got a call from Michael Milken, the financier who pleaded guilty to securities fraud in 1990 and later became a philanthropist partly focused on education.
Packard joined Milken’s education investment holding firm and ran one of his companies, a chain of preschools. About the same time, Packard was trying to find an online math course for his 6-year-old daughter. Frustrated by the dearth of options, he saw a business opportunity.
He founded K12 in 2000 with a $10 million investment from Milken and Larry Ellison, the chief executive of Oracle Corp., maker of software and hardware systems. William J. Bennett, education secretary under President Ronald Reagan, became the company’s chairman, bringing his conservative bona fides and political connections to a company that originally aimed for the home-schooling market. Bennett resigned from K12 in 2005.
In the early years, Bror Saxberg served as the chief architect of K12’s curriculum. With a medical degree from Harvard and a doctorate in electrical engineering and computer science from MIT, he was excited by the potential to transform education by applying what cognitive scientists have learned about how brains work.
“There was a terrific opportunity to finally apply some of this learning science work at scale, to make learning environments that could really make a difference for students,” Saxberg said. He left the company to join Kaplan Inc. in 2009.
Kaplan is a for-profit education provider owned by The Washington Post Co. It competed directly with K12 until May, when K12 acquired Kaplan’s virtual-schools business. Kaplan continues to offer test-preparation courses, and in November the two companies announced an agreement to share distribution of some products and services.
K12 sells a variety of ways to learn online, ranging from hybrid schools — in which students meet in a classroom but take courses via computer — to a la carte courses purchased by traditional schools.
Last year, K12 formed a joint venture with Middlebury College to offer foreign language courses. This year, it bought a stake in a Chinese company that teaches English online.
But K12’s core business — and the one proving most controversial — is full-time virtual public schools.
No need for the bus stop
For Tyler Hirata, going to school used to mean waking up at 6 a.m. and clambering aboard a yellow bus. Now he snoozes until midmorning and pads downstairs to the computer in his Dumfries home.
“This is fantastic!” said Tyler, 8, who had attended a Prince William County school but was enrolled this fall in the Virginia Virtual Academy — a public institution run by K12 and open to any student in the commonwealth.
Tyler said the best thing about taking third grade online is that it requires less than three hours a day. His mother is more excited that, for the first time, Tyler is reading fluently on his own.
“The K12 program is phenomenal,” said Michele Hirata, adding that Tyler blossomed with her daily one-on-one attention. Virtual school has been equally positive for her fifth-grade daughter, Gennifer, 10, a fast learner who spends five hours a day practicing gymnastics, she said.
Virtual class sizes tend to be larger than at traditional schools — the Virginia academy averages 60 students per teacher, according to a school document. So in the primary grades, the model relies on the intensive work of a parent “learning coach,” who provides most lessons away from the computer, using boIn the older grades, the bulk of learning is online, with software that sometimes aims to mimic real-life experiences for students, such as a high school biology lab featuring an animated frog dissection.
Teachers monitor student progress, grade work and answer questions by e-mail or phone. They work from home, aren’t likely to be unionized and earn as much as 35 percent less than their counterparts in regular schools, according to interviews with former K12 teachers.
Teachers also look for ways to help students socialize. Bethany Scanlon, a former special education teacher for K12’s Ohio Virtual Academy, shipped hot chocolate and popcorn to her students one winter holiday season. They all settled in with their computers to watch “A Charlie Brown Christmas” streamed over the Internet.
“When you’re teaching online, you have to be very creative,” she said.
In Dumfries, Tyler said he misses some of the best parts of school, such as lunchtime. And recess. And friends.
“Believe me,” he said, “if you are home-schooled, you will want friends.”
During recent deliberations over virtual schooling in Virginia, a member of the state Board of Education raised the issue of socialization.
“This would appear to make it possible to go from kindergarten through eighth grade without ever stepping into a real classroom,” David M. Foster said. “I’m not sure I want to encourage that. . . . Collaborative problem solving, socialization, working with other people is key not just to the global economy but to getting along in life.”
While virtual schools continue to expand, their effectiveness is unclear.
“We have no real evidence one way or another,” said Tom Loveless, a Brookings Institution scholar who served as a paid consultant to K12 in its early years.
A 2009 analysis by the U.S. Education Department found that there wasn’t enough research to draw conclusions about how elementary and secondary students fare in full-time virtual schools compared with classrooms.
On measures widely used to judge all public schools, such as state test scores and graduation rates, virtual schools — often run as charter schools — tend to perform worse than their brick-and-mortar counterparts.
At the Colorado Virtual Academy, which is managed by K12 and has more than 5,000 students, the on-time graduation rate was 12 percent in 2010, compared with 72 percent statewide.
That same year, K12’s Ohio Virtual Academy — whose enrollment tops 9,000 — had a 30 percent on-time graduation rate, compared with a state average of 78 percent.
Last year, about one-third of K12-managed schools met the achievement goals required under the federal No Child Left Behind law, according to Gary Miron, a Western Michigan University professor who called that performance “poor.”
K12 officials say the weak test results are related to the program often attracting students who struggled in regular schools.
One of K12’s oldest and biggest schools is the Agora Cyber Charter, a statewide virtual school that began in Pennsylvania in 2005. The company manages the school under a contract with its nonprofit board of trustees. Enrollment this fall topped 8,000 students.
Agora has never met federally defined achievement goals.
The school markets itself as an option for at-risk students who are failing at their neighborhood school. Last year, about two-thirds of its students were low-income.
Many lived in unstable homes, said Aimee Saunders, who taught history at K12’s Pennsylvania schools for four years until 2009.
Some of those children didn’t have an adult who could serve as the learning coach. Instead, they were left home alone and did little or no schoolwork, she said.
“You take students who normally would struggle because of their home environment and then you put them in their home to learn,” Saunders said. “It doesn’t work that well.”
Rapid student turnover can compound the problem. Of the 8,700 students who enrolled in 2010-11, more than a quarter withdrew during the year, according to school records.
“New students were always coming in,” Saunders said, which “made it difficult to be able to focus on the students I already had.”
Company officials said internal data show that Agora students — and K12 students in general — are learning at a faster rate than the national norm, even if they can’t pass a grade-level test. And the longer students stay with K12, the better they perform, the company said.
But Pennsylvania has its own measure of how fast students are learning, and it showed “significant evidence” that Agora did not meet growth standards last year.
In June 2010, the state threatened to revoke Agora’s charter unless the school made changes, including aligning the curriculum with state standards and expanding remediation programs for struggling students. It also insisted on more transparency so it would be clear how much K12 was receiving for different services.
Agora officials said they addressed those concerns by opening a face-to-face tutoring center in Philadelphia, for example, and hiring staff to conduct home visits.
Saunders, the former Agora teacher, says virtual schools provide an important new option for families and should be forgiven for missteps.
After all, many traditional public schools have failed to help the neediest children.
“A lot of schools are making mistakes by not trying anything different than they’ve tried before,” she said.
Cost to taxpayers
Even some supporters of virtual schools question whether online operators are charging taxpayers fairly.
“They have no business trying to charge as much as the brick-and-mortar schools, at least over time,” said Finn, of the Fordham Institute, which has commissioned a study of the cost of online schools. “Once you’ve got the stuff that you’re going to use for fourth-grade math, for instance, you don’t really need to do much with it. And it should be cheaper.”
Online education companies say they are no different from textbook publishers and other businesses that profit from sales to schools.
But payments for a year’s worth of online schooling can vary wildly. For instance, K12 received $3,728 per full-time student in 2009-10 for its virtual school based in Broward County, Fla., but $5,000 per student in Greenfield, Mass. K12 is getting $6,200 for each student in its D.C. school, which enrolls about 100 students.
In Pennsylvania, because of a complicated funding mechanism, K12’s Agora Cyber Charter receives $6,000 to $16,000 per student for an identical course load, depending on where that student lives.
“We don’t have a real handle on what the real cost is for a virtual school,” said Mitchell D. Chester, commissioner of elementary and secondary education in Massachusetts.
Jeff Kwitowski, K12’s vice president for public relations, said it’s “impossible” to pinpoint the true cost of educating a child in any environment, whether virtual or face-to-face. Prices vary because some schools purchase different K12 services, he said.
Targeting rural counties
The Virginia Virtual Academy, another K12 venture, began enrolling full-time students across the commonwealth in fall 2009, more than a year before state law addressed this new kind of education.
The Virginia school offers a lesson in how K12 relied on political savvy and statehouse connections to build its business.
The Virginia venture was a partnership between the traditional schools of Carroll County — a rural county bordering North Carolina — and K12. Children who enrolled in the Virtual Virginia Academy were counted as Carroll County students no matter where they lived.
That was no accident.
State aid varies by school district and follows a formula based on poverty, among other factors. Affluent Fairfax County receives $2,716 per pupil from Richmond, whereas relatively poor Carroll County receives $5,421, according to the state Education Department.
This year, 66 Fairfax students are enrolled in the virtual school. Richmond is paying the virtual school twice as much for those students as it would if they attended neighborhood schools in their own county.
“Clearly, it’s not a logical or equitable system,” said state Sen. George L. Barker (D-Fairfax). “It’s a horrible deal for taxpayers.”
Barker has twice tried to change funding so that subsidies are based on where students live. Twice he was rebuffed by Gov. Robert F. McDonnell (R), a champion of school choice who successfully promoted legislation to authorize full-time virtual schools in 2010.
K12 was the only private company present during talks to craft that legislation. McDonnell has received $55,000 in campaign contributions from K12 or its executives since 2009, including a $15,000 payment to his political action committee this month.
McDonnell was on a trade-related trip to India late last week and unavailable to comment. But his spokesman, Jeff Caldwell, said K12’s political support had not influenced decisions regarding virtual schools.
“They’re a corporation that is making donations to several folks,” Caldwell said. “The fact that they gave some to the governor certainly did not sway his opinion.”
The governor recognizes that the state needs a better way to fund virtual schools but does not want to make abrupt changes that would harm the new schools, his staff said.
McDonnell “came into office really wanting to provide options and innovation to Virginia schoolchildren,” state Education Secretary Laura Fornash said. “Virtual schools [were] a major part of that.”
This year, K12 opened a second virtual school in Virginia, signing a contract with Buena Vista City, near Lynchburg, where the per-pupil state subsidy is $5,850. The two schools combined have an enrollment of 540 students.
While K12 executives see unlimited horizons for online education, traditional schools are struggling with severe budget cuts.
In Carroll County, the Virginia Virtual Academy provides a revenue stream for the public school system, which collects a $500 registration fee for each out-of-district student. On top of that, the county collects a management fee — 6.5 percent of the taxpayer dollars that flow to K12.
In what may be an unintended irony, Carroll County is using that windfall — $178,450 last year — to buy old-fashioned but much-needed textbooks for its brick-and-mortar schools.
Staff researcher Lucy Shackelford contributed to this report.