Outsized Influence: Online Charters Bring Lobbying ‘A’ Game to States

For five years in a row, the Hoosier Academies Virtual School had been failing.

The school, where students take all of their classes online while at home, had been assigned an “F” grade from the state of Indiana every year it had been open except its first, when it had garnered a “C.” That troubled track record had finally made the virtual school of nearly 4,000 students a candidate for state regulators’ chopping block.

In September, Hoosier Academies representatives appeared before the Indiana board of education to make their case for giving the school another chance.

There, they revealed their strategy: the creation of a second virtual school—one to which they had siphoned students who were most behind. Those students, they argued, would get more support and specialized services.

Glenda Ritz, the state schools chief in Indiana, bluntly noted that shifting the neediest students would raise the original school’s grade and possibly spare it from being shut down.

It was another close call for a virtual charter school run by K12 Inc., a national company based in Herndon, Va.

K12 Inc. is the country’s largest for-profit operator of full-time, online charter schools and runs effective lobbying efforts in more than 20 states, including Indiana, where it has spent nearly $1 million dollars lobbying Indiana lawmakers and donating to their campaigns and political parties since 2007.

The company also had an ally on the Indiana state board, albeit one who could not vote on Hoosier Academies’ fate—Byron Ernest, the head of the school and a K12 Inc. employee. The rest of the board ultimately stalled, and postponed a decision until April 2017, giving the school more time to prove it could turn things around.

Hoosier Virtual Academies’ story is not unusual. Similar scenarios of state scrutiny and near misses involving other online charter schools have played out across the country since the early 2000s.

Despite more than a decade of state investigations, news media reports, and research that have documented startling failures and gross mismanagement in full-time online schools, the sector—dominated by two for-profit companies—continues to expand, spreading into new states and enrolling more students. Virtual charter schools, which collectively receive more than $1 billion in taxpayer money each year, are rarely shut down.

Source: National Alliance for Public Charter Schools

The reasons are often a mix of weak state regulations, the millions of dollars spent on lobbying, and the support of well-connected allies, more than a dozen policymakers, advocates, and researchers told Education Week.

Christopher Cerf, a former education commissioner for New Jersey who was appointed by Gov. Chris Christie, found out firsthand the pressure that K12 Inc. can exert on decisionmakers.

As a strong supporter of charter schools and a former executive at Edison Schools, Inc., a for-profit education management organization, Cerf believes online learning is an essential part of offering students robust choice. But Cerf said he was concerned about K12 Inc.'s track record in other states based on his own research and conversations with other education chiefs.

He nixed two applications for K12 Inc.-backed schools in 2013, but first had to justify his decision to the governor himself.

“I don’t want to go into my private conversations with the governor or the chief of staff, but this was a decision that had to be explained to the highest levels,” said Cerf, now the state-appointed superintendent in Newark, N.J. "[T]hese were politically complicated waters because this application came with extremely high-end and well-placed lobbyists that were exerting their influence at high levels of government.”

Serving the Needs of Students?

The companies that run these online charter schools often turn to a powerful argument that has fueled much of the decades-long movement to expand school choice: Parents have the right to choose where their child goes to school—even if the school is performing poorly in the eyes of state education officials.

“Some of these charters were approved without the intention of being the top charter-performer in the state, but rather providing an important option for parents and meeting other specific goals,” said Mary Gifford, a senior vice president for K12 Inc.

Gifford and other executives argue that the virtual-charter-school model is meant to serve an unusual population made up of extremes, from students who are woefully behind academically, to others with severe health problems, to those who are sports or music prodigies.

But the online school sector, the vast majority of which is made up of charter schools, has struggled with high dropout rates, low graduation rates, allegations of insider dealing and financial mismanagement, and sometimes abysmal academic performance.

A 2015 national study by economists at Stanford University’s Center for Research on Educational Outcomes found that math scores for online charter school students were so low, it was almost as if the students didn’t attend school. While the online school providers disputed the study, the findings were damning.

But online charters have proven to be a lucrative venture for K12 Inc. and the other for-profit companies that manage the schools, which are set up through nonprofit boards.

K12 Inc., which also has other education-related businesses, brought in nearly $873 million in revenue last fiscal year, over 80 percent of which came from schools it managed, according to its most recent filing with the Securities and Exchange Commission. Connections Education, another major player, is owned by Pearson, an international education company that posted $5.5 billion in sales last fiscal year. (Pearson officials would not disclose how much revenue is generated by Connections.)

It’s a business model fueled largely by public dollars. Nearly all of the state and federal money allocated to an online charter school may go to the management company, depending upon the contract and how much of the school’s operations are run by the company. In many cases, the management company provides curriculum, technology services, administration staff, and teachers to the schools.

And it’s a business model that relies on continued growth. As the numbers of students enrolled in virtual education expand, attempts to regulate the schools are often left to wither in state legislatures.

Supporters and skeptics of full-time virtual education do agree that state charter laws and rules are ill-equipped to oversee such nontraditional schools and have been slow to evolve.

But that consensus fractures over what regulations and oversight should look like, and the issue marks a growing philosophical divide among school choice advocates: those who believe consumer demand will regulate the education marketplace, and those who believe parental choice alone is not enough to insure school quality.

Even with strong evidence that shows that full-time online charters struggle to adequately educate students, the schools have largely avoided stringent oversight and limits to their growth.

Lobbying in the States

K12 Inc. and the Baltimore-based Connections Education—the two largest national virtual school management companies—spend millions of dollars on well-connected lobbyists to convince lawmakers to see things their way.

Together, the companies educate over half of the over 200,000 students who are enrolled in virtual charter schools. They have hired hundreds of lobbyists, according to the National Institute on Money in State Politics, and spent more than $14.5 million to retain those lobbyists since 2000 in the 25 states with publicly reported lobbying expenditures examined by Education Week. That dollar amount is likely an underestimate—in several states, lobbying expenditures don’t have to be reported, or, if they do, the dollar amounts are reported in broad ranges.

Connections Education confirmed that it has spent $1.3 million in lobbying in 27 states so far this year.

Pennsylvania and Colorado are among the top states for lobbying by both companies. Since 2007, the companies together spent $1.8 million to lobby lawmakers in Pennsylvania, and since 2003, spent $1.3 million in Colorado.

Despite well-documented weak performance and mismanagement in some Colorado cyber charter schools, the state has never shut one down.

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

K12 Inc. accounts for the vast majority of spending on lobbying and political contributions by the virtual school sector over the last decade or so—including around $1.8 million in political contributions and more than $10.5 million on lobbying.

That scale of spending is considered high for lobbying on education issues, according to one lobbying expert.

“The numbers do strike me as strangely high in the field of state education,” said Thomas Holyoke, a political science professor at California State University, Fresno. “If you’re dealing with state banking policy, that’s pretty common.”

Holyoke says lobbying is a more effective tool for influencing policymakers than spending money on campaigns.

“Whoever hires these lobbyists, is usually given a level of access that nobody else can get,” he said. “They can set up appointments with the regulators. That’s something that campaign contributions doesn’t buy you.”

Lobbying is necessary to have a seat at the table along with other key players in education such as teachers’ unions and school districts, officials with Connections Education say.

K12 Inc. officials say that developing relationships with policymakers is also necessary to stay in compliance with myriad regulations that differ from state to state. And monitoring what’s happening in statehouses, they say, is another benefit in the suite of services they provide to the schools they manage.

K12 Inc.'s clout also extends beyond state legislatures. Some of its employees serve on key governing bodies, such as the Indiana state school board’s Byron Ernest. One of the lobbyists the company retains in Nevada is a member of the state’s Charter School Authority—the entity charged with approving new charter schools and overseeing them once they open. Mary Gifford, one of K12 Inc.'s senior vice presidents, served a similar role in Arizona as a member of the Arizona State Board for Charter Schools. Her tenure with K12 overlapped with her time on the Arizona panel by eight years.

The company has had a prominent profile since its creation in 1999, when William J. Bennett, a former U.S. secretary of education under President Ronald Reagan, was the founding chairman of K12 Inc.'s board.

Although the approximately 200,000 students enrolled in full-time, online charter schools nationally are only a small fraction of the nearly 3 million students in charter schools, and the 50 million in all K-12 public schools, the sector has an outsized influence, said Greg Richmond, the president of the National Association of Charter School Authorizers.

“It’s a very common phenomenon in politics in any issue, when there’s a small interest group that is threatened by legislation, they are often more powerful than the larger group that gets only a marginal benefit if it passes,” he said. “So everyone else, they care about this, but they’re not going to the wall for it. These companies will go to the walls to stop things, and they do.”

The Spread of Virtual Charters

Since the early 2000s, full-time online schools have opened in 23 states. But 35 states allow for their operation, according to the National Alliance for Public Charter Schools.

Among the most recent states to open their doors to the schools is North Carolina.

Last year, Republican lawmakers in North Carolina tucked a provision into the state’s 260-page budget bill, creating a pilot virtual charter school program.

The move avoided broader public debate and scrutiny.

“It has been the practice of the general assembly for many years, if members do not want to have debate, public hearings, about an initiative, then it is added to the budget bill,” said June Atkinson, North Carolina’s state superintendent. “I was not surprised by the general assembly passing the legislation.”

The idea was a long time in coming.

North Carolina already had a state-run virtual school, which offers supplemental online courses through its school districts. Although students can enroll statewide, they can’t enroll full-time unless they are homebound.

Twice in the past decade, the North Carolina board of education had resisted approving two virtual charter schools that planned to contract with K12 Inc. The second denial led to a lawsuit the board eventually won in 2013, when the school tried to go around the state board to get approval.

By that time, K12 Inc. had recruited a handful of well-connected current and former state policymakers to help make its case. The first was a state senator, a practicing lawyer who represented the K12-backed school in the lawsuit brought against it by the state. The other two—one a former lawmaker, the other a onetime governor’s aide, were among a group of lobbyists the company hired in 2012 and would go on to retain and pay nearly half a million dollars over the next three years.

During that period, North Carolina lawmakers ordered the state board of education to study the idea of virtual charter schools. Their directive was to report back to the legislature with proposed rules and changes to state law to govern this new kind of school.

In its 2013 report, the board of education noted that other states had experienced problems with explosive growth, poor academic performance, and high dropout rates in online schools, and that there was little peer-reviewed research on how well such schools performed. The report urged lawmakers to use caution on the issue of virtual education and to learn from other states’ mistakes.

It was in the next legislative session, in 2014, when lawmakers inserted the 4-year virtual charter pilot into the budget bill.

“They hired the top lobbyists,” said former Democratic state representative Rick Glazier, an early skeptic of the pilot program. “It has been an exceptional lobbying effort that overcame very bad facts.”

The new law required the state board to authorize two online charter schools.

The only two applicants were for schools backed by K12 Inc. and Connections Education. Both were approved.

“With a digital environment, we can now deliver the finest education in the world to the poorest and most rural students,” said Craig Horn, a Republican representative who is the chairman of the house education appropriation committee. He was involved with crafting the pilot program.

“We’ve got to prepare our kids for jobs that have not yet been invented,” said Horn, who believes the experience that students get by learning and interacting with teachers virtually is valuable preparation for the modern workplace.

He emphasized that the pilot was a way to test a new idea—to innovate—and that the state could pull the plug on the program if the schools failed.

To Todd Ziebarth, the senior vice president of the National Alliance for Public Charter Schools, the largest advocacy organization for the nation’s charter schools, North Carolina is part of an all-too-familiar pattern.

“I understand people saying we’d like to provide full-time virtual charter options, but to do it the same way as all these other states have done it in terms of the regulatory framework… we kind of know how the story ends,” he said.

Ziebarth lobbies in state legislatures on behalf of the National Alliance, which has been taking an increasingly tough stand on cyber charters, calling for regulations that are specifically designed for the schools. In many states, virtual charters are regulated the same way as brick-and-mortar charter schools.

“The pattern generally is that they grow too fast, too soon, and struggle with performance almost from the outset,” Ziebarth said. “They have a lot of [student] churn. … And then when it comes to renewing or not renewing the schools, you see an all-out fight.”

Virtual Schools Are Hard to Shut Down

Those issues are not unique to online charter schools—full-time online programs run through school districts have run into many of the same problems. And especially for a small, rural school system, the opportunity to enroll students in their district from across the state can offer a powerful financial incentive.

Take, for example, Tennessee, where K12 Inc. has spent between half a million and $1.1 million hiring lobbyists over several years. One of them was chief of staff to former Tennessee governor and current U.S. Sen. Lamar Alexander, who is the chairman of the education committee in the Senate.

The state passed a virtual school law in 2011 that mirrored model legislation written by The American Legislative Exchange Council, or ALEC, an influential conservative think tank. A few schools opened up, including one run by K12 Inc. through a poor, rural school district in the northeastern part of the state.

Since then, K12’s Tennessee Virtual Academy, whose enrollment at one point ballooned to nearly 2,000 students, has been one of the worst-performing schools in the state ever since, but has so far managed to avoid being shut down.

Both Democratic and Republican lawmakers have proposed bills that would have shuttered failing virtual schools. One, sponsored by a Democrat in 2013, was killed in committee, even after the lawmaker produced a leaked email from a K12 Inc. staff member that appeared to instruct teachers to change students’ grades. Lawmakers did go on to approve a bill that session that gave the state education commissioner the power to close a failing virtual school after three consecutive years of poor performance, but they struck language from the bill that would have capped enrollment.

Republican state Senator Dolores Gresham—who sponsored the original legislation to allow virtual schools—introduced a bill in 2015 that would have also cracked down on failing virtual schools, but it never came to a vote.

That same year, Gresham also sponsored a bill to extend the state’s virtual school program through 2019.

That one passed.

When Kevin Huffman, a former state education commissioner, tried to shutter the Tennessee Virtual Academy with the authority given to him under that 2013 legislation, it devolved into a years-long saga. Parents sued state officials to keep the school open and a judge ruled in their favor. The school could stay open through the 2015-16 academic year.

Then K12 Inc. caught another break.

A botched roll-out of Tennessee’s computerized testing system in 2015-16 forced officials to toss out all student testing data. That extended the life of the Tennessee Virtual Academy another year.

K12 Inc. said the school has persisted not because of lobbying on behalf of the management company, but because it should never have been targeted for closure in the first place. Although company officials acknowledge that the Tennessee school has struggled academically, they say the school was unfairly singled out by state education officials.

The experience led Huffman, a staunch supporter of charter schools who is now a fellow at New America, a Washington-based think tank, to shift his stance on full-time online schools and for-profit companies that run them.

“I don’t see evidence of for-profit models that work,” he said in an email to Education Week. “Theoretically, a for-profit operator could run effective schools, but in practice, the top charter school operators are all non-profits, and I don’t think it’s accidental.”

But being for-profit does not mean that companies can’t provide high-quality education, said executives with Connections Education.

“The for-profit piece of this is really allowing us to innovate in a way and be a leader in providing online education,” said Pat Laystrom, a vice president with the company. “If we don’t do this well, parents will leave, students will leave.”

Power of Parental Demand

As effective as K12 Inc.'s and Connection’s lobbying is, the companies’ efforts may not have been successful without some compelling surrogates: parents and students.

Professional lobbyists can only do so much, said Matt Wicks, also a vice president at Connections.

“The policy issues get very complicated very quickly, and that’s a much harder conversation to grapple with,” Wicks said. “But when a policymaker sees or hears a story of how their opportunity to attend a virtual school made such a positive difference in their life, … it helps the policymakers realize that although online school is not necessarily for every single student, and we’ve never claimed that it is, they’re able to see clearly, for certain types of students, how important it is.”

Attempts by education officials to close online charter schools are often met by organized and fierce resistance from families. Some of the most vocal families argue that virtual schools are the last and best hope for their children who may have been bullied or became too sick to attend regular school.

“It’s hard to close any school … it’s hard to ask public officials to shut down a school and disrupt the lives of 500 children.” said Richmond, of the National Association of Charter School Authorizers, which advocates nationally for tougher policies for closing poorly performing charter schools.

“You’re asking them in virtual schools to disrupt the lives of 5,000 or 10,000 children. And that makes it all the more harder to unplug,” he said—both procedurally and politically.

Officials in Nevada recently faced this conundrum.

Last spring, the state’s charter school board announced it was starting the process of revoking the charter contracts of Nevada Virtual Academy and Nevada Connections Academy, which contract with K12 Inc. and Connections respectively, over poor performance and low graduation rates. But the board’s plans were not well-publicized, said Jay Schuler, a real estate agent in Reno whose daughter is enrolled at the school. His older son, now 20, had struggled in a traditional district school, prompting the family to enroll him in the Nevada Virtual Academy.

“Zackary couldn’t read at all, except basic books that said, ‘I can run. I can run fast,’” said Schuler, who felt his son’s original school took too long to identify that he had a learning disability. After that, Schuler said educators told him that Zackary would likely never earn a diploma. He was in 4th grade.

Schuler said his son received a much more personalized education from his online school, which helped him to excel. "[H]e took his state exit exam in 10th grade and passed with flying colors. He’s now in his second year in college going for a radiology program.”

The experience has turned Schuler into a fierce defender of online schools. So when he got word from a national school choice advocacy organization, called Public School Options, that the state was considering shutting down Nevada Virtual Academy, he immediately started mobilizing other virtual school families.

They flooded the charter board’s next meeting, by Schuler’s account, and gave hours of passionate testimony on why the schools should remain open. Although the board is pursuing action against the Connections-affiliated school and a third, unaffiliated virtual charter, it is not taking immediate steps to close the K12 Inc.-affiliated school.

A group of parents and Nevada Connections Academy, which contracts with Connections Education, are now suing the state charter board to prevent the school’s closure.

This highlights the organizing power of Public School Options, which also led the lawsuit to keep the Tennessee Virtual Academy open and helped advocate for getting approval for the online charter schools pilot in North Carolina.

The group describes itself as a grassroots, parent-driven organization made up of a network of about 30 state chapters or affiliate groups.

Public School Options runs a sophisticated operation, tracking bills and hearings across state legislatures and charter school authorizers, the state-approved groups that oversee charter schools. It uses email blasts to keep its network of parents informed on what policymakers in their states are up to, and trains family members on how to campaign for their schools, through arranging and conducting face-to-face meetings with lawmakers and writing letters to the editors of newspapers. Every year, it flies a group of parents to D.C. for a special advocacy boot camp and sets up meetings between parents and members of Congress.

Although the group lists no full-time, salaried employees on its federal tax forms, it does disclose the names of seven board members who receive no more than $1,000 a year in compensation. According to its 2014 Form 990—the federal tax form required for tax-exempt organizations—it spent more than $500,000 to hire consulting firms based out of Washington D.C., Tennessee, and Iowa.

Public School Options is a nonprofit and operates on a budget of $1.5 million in donations, according to the last three years of available tax forms. The group’s 501c4 tax-exempt status keeps it from having to report who its donors are, and representatives of the group declined to share that information with Education Week. K12 Inc. officials also declined to say whether they have contributed to the group. Connections Education said it gave Public School Options $50,000 in 2013 to help support the parent boot camp initiative.

State Laws Are a ‘Forced Fit’

While online charter operators have benefited from the lobbying of the management companies and the advocacy of parents, the rules they are governed by come from states’ original charter school laws, which some observers say do not adequately regulate these cyber charter schools.

Many state charter laws were not designed for full-time virtual schools, said Robin Lake, the director of the Center on Reinventing Public Education at the University of Washington. Lake was a co-author on a report on online charter school regulations that was released in tandem with the Stanford University report on student achievement last fall.

“It’s kind of a forced fit,” she said. “And people haven’t gotten in there and fixed the policies in large part because nobody wants to mess with the online school lobby.”

The center is among a growing number of organizations, several of which are supportive of charter schools, that have started beating the drum for more regulations for full-time online charter schools.

A report released in June by the National Association of Charter School Authorizers, the National Alliance for Public Charter Schools, and 50CAN, an education advocacy group, called for capping how many students can enroll in online schools and tying school funding to student performance instead of enrollment, among other policy recommendations.

None of the organizations are calling for getting rid of online charter schools—they believe the solution lies in better regulations.

Among their ideas: creating laws and policies to govern full-time online schools that are separate from those for brick-and-mortar charter schools. They argue the schools should function more like a magnet program that can screen students for likely success in an fully online environment.

But there’s not unanimous agreement among charter school supporters that problems in virtual schools can be solved by tweaking state laws.

“From my perspective, that’s not good enough,” said Huffman, the former commissioner of education in Tennessee. “The ‘mend it, don’t end it’ viewpoint, suggests that there’s some evidence somewhere that these virtual schools can be good.”

Officials with K12 Inc. and Connections Education agree that state laws now are flawed. They especially find fault with how student enrollment is calculated and how school success is measured by four-year graduation rates. But company executives made clear that they do not support admissions criteria.

“The parents are making these choices, and I think we have to respect these choices,” said Jeff Kwitowski, a senior vice president for K12 Inc. “And one of the things that’s most concerning, when these recommendations call for essentially taking parents out of this process, denying the equal access all students should have to these schools … that’s just something that we fundamentally reject.”

K12 Inc. has faced difficulties in recent years. Revenues are down by $75 million from last year. Investors sued the company in 2014 claiming it had mislead them before its stock prices fell in 2013, although a federal judge dismissed the suit last year. And the California attorney general launched an investigation into the company for alleged false advertising and unfair business practices. In July, K12 Inc. agreed to pay $8.5 million dollars in settlement claims as well as provide $160 million in debt relief to the schools it manages. As part of the settlement, K12 Inc. did not admit to any wrongdoing.

But the company is also expanding into new states. In addition to North Carolina, it’s managing new charter schools in Maine and Alabama that opened last year, as well as another virtual school targeted to home schoolers through the Omaha school district in Nebraska that opened this year.

Connections Education opened new schools in Arkansas, New Mexico, and Washington this year.

Online Charters Catch Break in North Carolina

In North Carolina, the state’s online charter school pilot program is now in its second year.

Grades for its two virtual charter schools—run by K12 Inc. and Connections Education—have recently come in. Both received D’s.

Both schools also struggled with student departures—31 percent of Connection’s students and 25 percent of K12 Inc.'s students left the first year. The law, as originally written, said the schools should not exceed a student withdrawal rate of 25 percent.

But in the most recent legislative session, Republican lawmakers fixed that by relaxing the rules around student withdrawals—although only for virtual charters. Unlike district schools and brick and mortar charters, students who move out of state, fail to log in, or leave for a medical reason will no longer be counted as a withdrawal for the state’s virtual charter schools.

And just like with the original pilot program, GOP lawmakers got the change approved by inserting it into the state budget bill.