Thanks to a mysterious legislative mandate tacked onto the state
budget, North Carolina will now be home to two new experiments in
online schooling.
Don Douglas/Don Douglas
It has taken three years, a court case, an appeal, a half-dozen
hearings, and a posse of lobbyists, but controversial education
company K12 Inc. has finally won a battle to operate an online
charter school in North Carolina.
The Board of Education approved today the opening of North
Carolina Virtual Academy, an online charter school that will be
managed and operated by K12 Inc. After years of resistance from the
state school board, the approval was essentially mandated by a
last-minute legislative rider slipped into the state's budget.
Another virtual charter school, which will be operated by a
subsidiary of education giant Pearson, was also approved.
In online charter schools, students take classes at home on
their computers, interacting with their teachers via chat and video
calls; as at traditional charters, taxpayers foot the bill.
The opening of North Carolina Virtual Academy is a key victory
for K12, the nation's largest operator of online charter schools,
which has been weathering increasing
pushback across the countryin
the face of poor academic results and high student turnover in the
online schools it manages. K12 does not dispute those results, but
attributes them to the struggling student population it says it
serves.
K12 was targeted by a high-profile campaign from
activist investor Whitney
Tilson, who criticized the school's practices and compared it
to subprime mortgage lenders, as well as two shareholder lawsuits,
which were both dismissed. The company was
cited in Floridafor failing to
provide adequately certified teachers, and last year, the
NCAA ruledthat it would no
longer accept coursework from two dozen of the company's virtual
schools.
In 2013, the company
lost its management contractin
Colorado, which cited the school's poor results; last year, it
lost a major contractto manage
its largest school, in Pennsylvania, which at its peak made up 14%
of K12's revenue. It is now on the verge of being
driven out of Tennessee.
"K12 has a lot riding on North Carolina Virtual Academy," said
Matt Ellinwood, an attorney and policy analyst at the progressive
North Carolina Justice Center, which has long publicly opposed
K12's expansion into the state. "They're in a grow or die industry,
and that's how their model works."
K12, currently valued at around $615 million, saw its stock rose
almost 3% on Thursday, the day the company won the right to operate
the North Carolina school. To increase revenue and satisfy
shareholders, Ellinwood said, the company needs to replace its lost
contracts with new ones, opening new schools in as many states as
it can.
The complex legal and legislative battle K12 has waged in North
Carolina shows just how far the company is willing to go to achieve
that goal.
Getty Images Peter Macdiarmid
While NC Learns, a nonprofit, will technically operate North
Carolina Virtual Academy when it opens this September, K12 is
contracted to provide day-to-day-operations, management, and
curriculum, with the nonprofit redirecting virtually every dollar
of public money it receives to K12. NC Learns was funded solely by
K12, which has paid its legal costs and sat alongside its members
at every meeting and hearing since the board's founding.
K12 and NC Learns first submitted an application to open a
virtual school in North Carolina more than three years years ago,
in 2011, when a change in state statute appeared to open the door
to the legality of virtual schools. K12 Inc. said that NC Learns'
founder Chris Withrow, a longtime advocate of virtual charters,
approached the company.
The state board's chairman had said in October of that year that
the board would not approve any virtual schools. So rather than
apply to the state — as is the protocol in North Carolina — K12
took the application directly to Cabarrus County, a midsized county
near the state's center.
Cabarrus' superintendent first heard from K12 and NC Learns by
way of a lobbyist named Jeff Barnhart, a five-term state
representative of Cabarrus County who had left the state House just
two months earlier. The deal, he proposed, was that Cabarrus would
approve the virtual school's application — and share in a fraction
of the school's revenue, which K12
projected to top $34 millionby
the end of its fifth year. The lawyer K12 paid to represent its
interests was the current state senator from Cabarrus.
After a pair of meetings dominated by K12 employees —
representatives from the nonprofit partner appear not to have
spoken, according to
minutes of the meetings—
Cabarrus County school board approved the school. But when the
state's school board did not provide an approval of the decision,
K12 turned to legal action, asking a judge to file an injunction
against against the state school board compelling the school to
open. K12 lost subsequent appeals, including a final appeal on
December 3, 2013.
Three days later, on Dec. 6, K12 and NC Learns submitted another
application for a virtual charter school, this time directly to the
state. It was joined by a second application for a virtual school,
North Carolina Connections Academy, which would be managed by
Pearson subsidiary Connections Education. Connections' application
made it through the first round of approval; K12's did not. It was
unanimously rejected by the state's charter board. So was the
appeal that K12 filed a day later.
K12 Inc. deferred comment to Withrow, the NC Learns founder, who
declined to speak to BuzzFeed News. In a statement, Withrow said of
NC Learns: "Our mission has always been to provide innovative
digital learning charter school option to NC families. Our members
contacted K12 to help us provide that opportunity."
The charter board's concerns about K12 ran deep. They praised
the nonprofit's experience, but expressed worries about improper
and infrequent oversight of K12 Inc. They said there was little
rationale for allowing K12 to run the school, aside from the
company's massive size: the company's academic performance was
poor, the proposed student to teacher ratio was "too high," and the
budget projections were "inadequate."
Others in North Carolina were equally critical of the K12-backed
application. Beyond the issues of quality are concerns about
budget, said Mark Jewell, the vice president of the North Carolina
Educator's Association, another longtime K12 foe. "Every student
that goes to a virtual school is sending student dollars away from
a state system that's looking at a couple hundred million dollar
shortfall this year," Jewell said. "And the money's going to a
for-profit company on Wall Street."
The school board's concerns, however, were essentially
overridden by a mysterious act of legislative fine print. On May
15, two days after the K12 application had been rejected for a
second time, a provision appeared in the state budget that would
change the company's fate in North Carolina. The school board, the
budget mandated, was now required to approve two separate pilots of
virtual charter programs by the start of 2015.
The legislative rider passed without ever being discussed
publicly. K12 representatives, activists, and school board leaders
said they did not know who had introduced it; the minority leaders
of the state house and Senate declined to comment.
K12 Inc. and Connections jumped on the chance the Senate had
given them, and were the only companies to apply for the slots.
When it came time to approve the K12-backed application and send
it to the state board for final approval this past December, the
school board's special committee appeared to be hesitant, according
to
transcriptsof the meeting. They
had grilled a K12 representative — who spoke more frequently than
the nonprofit's president — about the company's reputation and
proposals, receiving answers that at times skirted the reality of
K12's troubles in other states with technicalities.
"I don't want to be next," one committee member, Helen Nance,
said when she was called on.
"I didn't want to be first," another replied.
"I didn't want to go at all," said a third.
"I know," Nance said. "It's hard."
Ultimately, though, all of the state committee's members voted
to move the application forward.
Before the state board, K12 and NC Learns were grilled yet
again, in two separate meetings. They received several pointed
questions about K12's background, with one member asking repeatedly
how the company could explain "what I read on the internet."
But for most board members and observers, the legislative
mandate made the question of approval moot: there were two charter
applications, and two mandatory slots. "There's a lot of fear and
trepidation over things we don't know," said one board member.
"This has been done in other states, and there have been some
challenges there. But we do have legislation in front of us that
says to offer a pilot program for two schools."
Technically, the school board could have denied the K12-backed
application, reopening the process. But few saw that as a
possibility. The virtual charter pilot legislation made approval
such a foregone conclusion for K12 that, a week before the school
board was set to meet to vote on North Carolina Virtual Academy, NC
Learns' president, Chris Withrow, began tweeting a countdown to a
"super colossal announcement." "I just can't wait," he tweeted. The
countdown coincided exactly with the time of the school board's
meeting.
Minutes after the board had voted, Withrow tweeted: "I am proud
to announce the State Department of Public Instruction of North
Carolina has awarded us a contract to open the first K – 12th grade
Virtual School."
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