K12
Overview
Founded in 2000, K12 is one of the largest for-profit virtual schools in the country. The company currently operates schools in 27 states and the District of Columbia, with plans to expand in the future. K12 is a publicly traded company on the New York Stock Exchange (Symbol: LRN). Early start-up capital for K12 came from junk bond king Michael Milken, Larry Ellison of Oracle, and Andrew Tisch of Loews Corporation.
Profits
K12’s annual report for 2012 estimated $708.4 million in revenue, up from $522.4 million in 2011. The company estimates $87 million in profits for 2012, up from $67 million the previous year. Approximately 25% of all revenue comes from two schools, the Ohio Virtual Academy (12%) and the Agora Cyber Charter School in Pennsylvania (13%).
In order to boost profits, K12 spends heavily on advertising. A USA Today analysis found that K12 spent over $20 million in the first eight months of 2012 alone.
K12 CEO Ron Packard received just over $5 million in compensation in 2011. According to the company’s 2012 proxy statement, Packard received $3.9 million in 2012.
Controversy
A New York Times investigation into the company indicated a variety of problems, including pressure to enroll students ill-suited to online learning.
In an attempt to boost enrollment numbers, and hence profit, former K12 employees allege the company pushed to enroll students ill-suited for online learning, and manipulated enrollment numbers to increase revenues. These allegations and other media coverage of the company led to a class action lawsuit filed by K12 investors. The parties reached a preliminary settlement in 2013 with K12 agreeing to pay $6.75 million to investors without admitting any wrongdoing.
Legislators, school board members, and state education departments in a variety of states have expressed concerns about K12.
A confidential memo obtained by the Florida Center for Investigative Reporting and StateImpact Florida indicated the student-teacher ratio reached 275:1. An investigation by the Florida Department of Education revealed the company used teachers without proper certification.
K12’s first year operating a school in Tennessee did not get off to a good start. Poor academic results drew criticism from lawmakers, and a leaked email from the school instructing teachers to erase bad grades further tarnished the company’s image. The state refused to allow K12 to open a second school, citing ongoing concerns.
The Georgia Department of Education threatened to close one of K12’s schools for special education violations. A Virginia district cited concerns about being held liable for special education students served by the school and the time required to oversee the school.
New Jersey’s charter-friendly commissioner, Chris Cerf, declined to give K12 final approval to operate two schools in the state citing “serious concerns regarding its ability to effectively oversee such schools.”
In Brian Bissell, a K12 shareholder and head of the Colorado Virtual Academy (COVA) board, explained why the school chose to fire K12 as the school operator: “It became clear that at certain points in COVA history the interests of COVA—that is our students and their families, their teachers and Colorado’s taxpayers—these have not always been aligned with K12’s interests.”
Just days after COVA dropped K12, the Colorado State Board of Education approved a different school that will contract with K12 to provide services.
The Portland Press Herald’s award-winning special report on virtual schools in the state of Maine showed how K12 works with advocacy organizations, including Jeb Bush’s Foundation for Excellence in Education and the American Legislative Exchange Council (ALEC) to pass legislation that benefits for-profit education providers.
The company came under fire in 2005 when then-Chairman of the Board and former Education Secretary William Bennett suggested, “…you could abort every black baby in this country, and your crime rate would go down." Bennett resigned in the wake of his comment.
Academic Performance
A 2012 study by the National Education Policy Center found that students attending K12 “are falling further behind in reading and math scores than students in brick-and-mortar schools.” The report also indicated the proficiency rates at schools operated by K12 were significantly lower than the statewide average. A 2011 report (PDF) by Stanford’s Center for Research on Education Outcomes (CREDO), using a different methodology, indicated students in Pennsylvania’s online charter schools “have significantly smaller gains in reading and math than those of their traditional public school peers.” While the study looked at all online schools in the state, K12 enrolled a significant portion of those students.
Political Contributions
K12 has dedicated more than $1 million to political expenditures during the past 9 years. However, this figure does not include the amount K12 spends on lobbying and the company’s support of the American Legislative Exchange Council and other organizations.
Further reading
Profits and Questions at Online Charter Schools
