Virtual Education Is Increasingly a Big Profit Center. But at What Cost to Students? 

L.W. had just begun his freshman year at Roosevelt High School in September 2014 when he got into a fight with a group of seniors in the cafeteria. Police were called, and when officials with the St. Louis Public Schools reviewed the incident, they labeled it a "group fight."

They also determined that L.W. should be placed in an alternative education program at Beaumont High School. But his mother objected, and so the assistant superintendent decided instead to place him in Roosevelt's virtual education program.

In the program, students spent three hours each school day moving through online course material at their own pace under the supervision of a "credit recovery facilitator." But the placement did not last long. On the second day, L.W.'s mother received a call from the school instructing her to take him home because he had allegedly stolen bus tickets from a cabinet in the room. The district recommended expulsion, but after additional back and forth between district officials and the student's mother, who now had an attorney, the district informed the parent that he would be "physically suspended" from school.

With that, L.W. began participation in a remote virtual-education program. The district told his mother that he could take classes via a home computer using curriculum provided by K12 Inc., one of the largest virtual-education companies in the United States. Nevermind that the family didn't have internet access: He could go to the public library.

The number of virtual programs for high school students has increased significantly in recent years. During the 2011-12 school year, there were 311 full-time virtual schools across the U.S. and about 200,000 students enrolled; four years later, 278,000 students are enrolled in 528 full-time virtual schools, the majority of them run by for-profit companies like K12, according to the National Education Policy Center, or NEPC, a research center at the University of Colorado- Boulder.

The growth of virtual schools, promoted as a way to make public education more efficient, has occurred despite the fact that many of their pupils, like L.W., often have difficulty learning when the classes are taught entirely online.

"They assign this kid to this online program as their way to rid themselves of this obligation to teach children," says NEPC's Michael K. Barbour. "But the evidence is overwhelming that these programs are not working."

It wasn't teachers who dreamed up K12, which generally employs a much higher student-to-teacher ratio than traditional brick-and-mortar schools. Ronald J. Packard, a former Goldman Sachs banker, started the company in 2000 with $10 million from Larry Ellison, the chief executive of Oracle Corp., a maker of computer software and hardware, and Michael Milken, a junk-bond financier who famously pleaded guilty to securities fraud in 1990 before becoming an education philanthropist.

The company's cofounder, former U.S. Secretary of Education William J. Bennett, resigned from the board in 2005 after saying on a radio show that aborting black babies would result in a lower crime rate. (In the same segment, he called that idea "morally reprehensible" and later described it as a "thought experiment.")

As the company has grown, performance data has raised questions about whether virtual schools are actually an effective use of public money.

For example, a 2017 NEPC report states that only 37.4 percent of full-time virtual schools received acceptable performance ratings, according to data from eighteen state agencies that provided such ratings. (Missouri was not included in that study.) That compares with a 72 percent acceptable performance rating among "blended" schools, meaning places that combined virtual education and face-to-face activity. And the on-time graduation rate for students in virtual schools was 43 percent, compared with a national average of 82 percent for public schools.

"These for-profit entities go up to 200 students per teacher because [the courses] are all self-guided and students go at their own pace, and what happens is these kids aren't disciplined," says Gary Miron, a professor at Western Michigan University who studies education policy and was an author of the 2017 report.

Despite those figures, officials like U.S. Secretary of Education Betsy DeVos have continued to promote virtual schools. In response to a written question from Senator Patty Murray (D-Washington), about the poor performance of virtual schools, DeVos countered with seven such schools around the country that boasted graduation rates over 90 percent. Those numbers proved to be significantly inflated over actual state data and lifted from a report published by K12, which ran those schools, National Public Radio reported.

"High quality virtual charter schools provide valuable options to families, particularly those who live in rural areas where brick-and-mortar schools might not have the capacity to provide the range of courses or other educational experiences for students," DeVos wrote to Murray. "Because of this, we must be careful not to brand an entire category of schools as failing students."

Michael Brown retired as Grandview R-2's superintendent in 2013, then immediately launched the for-profit Show Me State Virtual Education. - SCREENSHOT VIA YOUTUBE
  • Michael Brown retired as Grandview R-2's superintendent in 2013, then immediately launched the for-profit Show Me State Virtual Education.

Missouri's Grandview R-2 School District is one of the rural districts that has promoted virtual education as a way to provide students with classes they otherwise would not be able to access. The online programs have also been a source of money for a poor district — and for a retired superintendent.

Located about 45 miles southwest of St. Louis, the district spent about $9,700 per pupil in 2017, according to the Missouri Department of Elementary and Secondary Education. Compare that with, say, Ladue School District, located in a wealthy suburb, which spent $13,900 per pupil. The majority of that funding came from local tax revenue, something Grandview has little of. There are just two businesses within its borders.

"You can't buy a gallon of gas or a gallon of milk in this district," says current Superintendent Matt Zoph.

In addition to virtual course offerings during the year, the district in 2013 launched a virtual summer-school program, now called the Missouri Online Summer Institute, using K12 curriculum. Students from anywhere in the state can take free K12 virtual classes through the institute. The state then pays the district for that course as though its pupils were enrolled in Grandview, which based on the state funding formula receives more state money than Ladue. In short, Grandview acts as a middleman for K12.

The superintendent who launched the program, Michael Brown, retired after the 2012-13 school year. That August he filed paperwork with the state to form Show Me State Virtual Education, a for-profit company with a mission "to promote online education to students and professional development for educators."

Brown then attended a meeting in October 2013 to "discuss the 2013 virtual summer program results," according to meeting minutes. Brown is not described in the meeting as affiliated with any company, but rather just "former superintendent Michael Brown."

Board member Pam Tisher says she had "a big problem with" Brown retiring from the district and then starting the company, which also has a consulting agreement with K12. "I think it was a major conflict of interest."

At the 2013 board meeting, she suggested that the district table the decision to sign a contract with Show Me State Virtual Education until it got data on the results of the summer school, according to the minutes. The board agreed, but at the next meeting, it unanimously approved the contract, even though Tisher says they failed to get the data.

"We were never provided any of that information," Tisher says. "Dr. Brown could have sold them oceanfront property in Arizona and the school board at that time would have bought it."

Despite Tisher's uneasiness with the arrangement between the district and Brown, she continued to vote to renew the contract. And ultimately, she believes that the virtual course offerings "have absolutely been a success" for students.

"It gives kids an opportunity to earn credits and make up classes that they might not otherwise have," she says. (Other former and current board members did not respond to requests for comment.)

The summer program generated more than $524,000 in revenue for Grandview in 2017, which amounted to $106,000 in "net profit," according to an estimate provided by the district. (In response to an open-records request, the district stated that it did not have estimates for previous years or reports on revenue.)

The summer-school money became crucial to Grandview following a scandal. In 2016, Zoph noticed a financial irregularity concerning the business manager's salary and alerted board members. An auditing firm discovered that she had embezzled $1.6 million over a decade. (The manager pleaded guilty and is now in prison.)

The district's elementary school is now using textbooks that are ten years old or curriculum that is strictly digital; they have not been able to buy new books because of the stolen money, Zoph says. Teachers' salaries also have had to be adjusted because the manager had paid some teachers too much money, others too little.

"You have some upset employees," says Zoph. "As a whole, I think the community is pretty supportive; I think they are watching us more, which isn't a bad thing."

Brown, the former superintendent, was the supervisor for the business manager during seven of the ten years during which she embezzled the money. He declined to comment on the theft.

K12 co-founder William Bennett was secretary of education in the Reagan administration. - GAGE SKIDMORE/CREATIVE COMMONS
  • K12 co-founder William Bennett was secretary of education in the Reagan administration.

After St. Louis Public Schools placed the Roosevelt student in the virtual-education program, his mother would drop him off at the southeast corner of Tower Grove Park, near where she took her younger daughter to a Head Start public preschool. Then he would walk about ten minutes south to a public-library branch.

But though the district had prescribed the library as the solution for the family's lack of internet access, library policy limited L.W.'s computer use to two hours each day. Even beyond that, without anyone to supervise him, L.W. flailed. During the fall semester, he only logged on to the computer six times for a total of six hours of coursework, according to court documents.

The student's mother told a district administrator at the end of the semester that she felt the courses were too difficult for her son. The district reduced his course load and moved him to an easier English class for the spring semester. The mother again reached out to the district the next month with concerns about the virtual school program, but did not receive a response.

At that point, an attorney with Legal Services of Eastern Missouri, a nonprofit that aims to help low-income people and the elderly, sent an email to a district administrator requesting that the district transfer the student to a more "appropriate environment."

"The barriers [the student] faced — poverty and academic difficulties — made the Home Virtual School Program an unworkable option for him," the attorney explained, according to court records.

The student's mother, S.W., is 35 years old and has five children. She has not been employed since 2006, according to court records. The student's father was found shot dead in 2012 in a 1989 Cadillac in an industrial part of north city.

"I was still suffering, dealing with a lot of stuff after his daddy died because he was in my life for seventeen years," S.W. says of the period surrounding her son's suspension.

That spring semester, L.W. continued to log in to the computer at the library occasionally. An officer once questioned him about why he was there during school hours, according to court records.

In April 2015, Legal Services of Eastern Missouri filed a lawsuit on the family's behalf, alleging that the district had violated the student's rights to due process and an "adequate and quality education." The student's attorneys argued that the placement in the virtual-education program amounted to a suspension, and as such, he should have had the right to appeal the placement.

"I think the point that we were trying to raise is that even if you call it something else, it's still a suspension," says Luz Maria Henriquez, an attorney who represented L.W. and heads the education justice program at Legal Services of Eastern Missouri.

After that, the district started sending a facilitator to the library on Mondays to work with the student for one to two hours.

"Her responsibility was to make sure plaintiff logged in, and once he logged in, to go over the lessons with him and to provide any support he needed while she was there," court records state. L.W. started logging in more consistently but by the end of the year, he had not earned any credits towards graduation.

The Grandview district also had a virtual-education program for students with behavioral issues. At its Management School, there were usually between seven and eleven students using K12 curriculum.

"They seemed to like it," says Sean Wiley, a Grandview teacher who supervised the students and was also the head basketball coach. "It helped with grading; it made keeping track of information a lot easier, because high school students aren't the best at keeping track of notes, paperwork."

But Wiley says it was difficult to supervise the virtual education students: "Instead of teaching one lesson, they could all be doing different lessons in different subjects. That is where it became difficult and challenging — to help them all at the same time."

Many of the students in the program "didn't have a home life," Wiley says. "All the stories are different but some of the stuff I heard" — which included homes with no running water, no electricity — "some of the situations we encountered together, some of the stuff they say to you, is really stuff you never want to hear. It just breaks your heart."

Students often realized that outside of traditional classroom, they wouldn't be able to see their friends anymore. Those students, Wiley says, "would shape up. I would never hear anything bad about them again."

Others "needed that close one-on-one environment, where they got a lot of focus" — teachers from other classrooms would come to the room during prep periods to tutor them. Those students remained in the Management School until they graduated, Wiley says.

And then there was a third group, he says: students "who were going to have problems no matter what."

Mostly, he thought the program was "very effective." The district cut the Management School, however, at the end of the 2016 school year because of the embezzlement and lost funding, says superintendent Zoph.

"When you are in there every day with them and trying to help them get on the right path and get them straightened out — that's the part that bothered me," says Wiley, who lost his job with the district and now works as an insurance agent.

Attorney Luz Maria Henriquez argues students should be able to appeal placement in the K12 program. - COURTESY OF LUZ MARIA HENRIQUEZ
  • Attorney Luz Maria Henriquez argues students should be able to appeal placement in the K12 program.

The district's virtual summer-school program, however, has grown significantly. After all, this one brings in new revenue from outside its borders, not simply the per-pupil money it already has.

In 2013, there were 351 students in the program; in 2017, there were 1,464, according to the district.

"The kids were working from home all across the state," says Wiley, who also worked summer school and sometimes supervised 90 to 100 students in social studies. "They would have set units, and each week there were goal sets on what they needed to do to stay on track. It's got all the lessons loaded — where I came in is I was the facilitator."

Students would ask him questions on a discussion board and he provided answers, Wiley recalls.

"There was a lot of interaction even though we were not actually face to face in class," he says.

"When they go to college, they are going to have a lot of assignments they have to do online, and I think that's the beneficial part," he adds.

Some of the most popular summer-school courses are health, personal finance and physical education. Virtual physical education attracted 300 students last summer, according to Elaine Schlett, a Grandview employee who now oversees the summer school program.

"They do readings, graded assignments, brochures, book work, but they also have physical fitness logs," says Schlett. For example, a student's parent would be the one to verify that they have run a mile.

It's not a traditional P.E. class, where students learn to work together and compete in sports, but Brown defends it: "It's like cross training or getting on the bike in your house and riding or working out on your own. But it is P.E."

For Grandview, the program makes sense — and brings in dollars.

"We're never going to have what a district with a lot of businesses has," says its superintendent, Zoph. "I'm going to go out on a limb — and I don't know that this is true — but you're not going to see many schools, percentage-wise, with more students taking virtual classes. It truly is how we try to compete with the surrounding districts." He says that his own son took five virtual classes last fall, though those were college level to get ahead for his upcoming graduation.

Not everyone is so motivated. In 2017, the completion rate for Grandview's summer-school courses was 54 percent.

"We are working through Ms. Schlett to ensure my students are 'completers' rather than dropping the virtual program after enrollment," Zoph said at a 2016 school-board meeting, according to the minutes.

If a student completes half the course, Grandview receives 47 percent of the state funding that they would receive for a traditional course. If a course is followed to completion, the district gets 94 percent.

Since Brown retired from Grandview, his Show Me State Virtual Education company has received $60,000 each year from the district. The contracts also include incentives. For example, the 2015 contract states that if the district earns more than $200,000 in net profit, Show Me State Virtual Education will receive 25 percent of the profits above that threshhold. In 2017, the contract states that if there are any net profits that year, Brown's company receives ten percent.

The use of the word "profits" on the contracts, which are one-page documents with typos and parts scratched out in pen, is "ridiculous," Miron argues.

"Virtual schools can bring in extra money for public schools, but you can't call it 'profit' because they are nonprofit entities," he says.

Luis Huerta, a professor of education policy at Columbia University adds, "If there is 'profit,' it should be returned to the district for students' services."

Brown is also a paid consultant for K12, according to the Virginia-based corporation. Zoph says the district pays Brown to promote the virtual school program around Missouri. Brown now lives in Tennessee, but Zoph says he drives to Missouri each month.

"From Grandview, I get paid for expenses and that's all you need to know," Brown says when asked about compensation from the district. "What my personal company does and how I get money is not of your concern."

In promoting Grandview's Missouri Online Summer Institute in various publications, Brown is usually not identified as the owner of Show Me State Virtual Education or as a paid consultant for K12; he has variously been described as the "former school superintendent" or the "summer school director."

In a 2017 column in the St. Louis Post-Dispatch, "Why Missourians need to know about this summer school," Brown is described as the "coordinator of the Missouri Online Summer Institute" and his district email is listed. That's even though he is no longer a Grandview employee.

In the op-ed, Brown writes that his passion for virtual education is what keeps him from just retiring and fishing.

"I will eventually retire from education and spend more time down by the river," he writes. "But right now I'm just not ready. I remain in the field because I'm passionate about online learning and the ways it's transforming learning for students. With every fiber of my being, I feel that the online model is the future of education."

S.W. sits in her living room in south St. Louis on a Saturday morning in March. Her son L.W. is still sleeping, but a younger child walks in wearing a pair of headphones with cat ears attached.

A year ago, after their rental home was condemned, S.W. and her family moved into a different house, which she likes better because it is one floor. Things are looking up: L.W. returned to the classroom in fall 2015 at Vashon High School as a sophomore and later started again receiving individualized education program assistance. Prior to that, court documents state, he was reading at a fourth-grade level.

Working with a teacher "one on one instead of a room full of people" is better, his mother says, "because it's easy for [L.W.] to get distracted."

In February, attorneys for Legal Services of Eastern Missouri and the St. Louis Public Schools reached a settlement in L.W.'s case.

In the settlement, the district admits no wrongdoing but agrees to provide $30,000 to L.W. and his mother. The settlement also requires the district to provide students who have been placed in the virtual-education program for disciplinary reasons the right to appeal and requires that the district provide an instructor to monitor the students' performance in the program.

"It concerns me that virtual education is used as a form of discipline," says the family's attorney, Henriquez. "Assuming that a student did" commit an offense, "virtual education might not be the appropriate way to help address those discipline issues."

At SLPS, enrollment in virtual-school programs has also increased in the last few years. In 2014, 201 students were enrolled; this school year, more than 600 were projected, according to a presentation by Carey Cunningham, the district's virtual service-learning coordinator. That's even though the district does not have any reports evaluating the success of the program, as he acknowledges.

"Virtual school is one of the options," said Cunningham, who has worked for the district for 23 years. "Parents in this district have many options — send them to charter schools, public schools, [desegregation programs] and the virtual — so it is just one of the options that is available to students."

And while virtual programs may be failing some students, brick-and-mortar options aren't always successful either. According to data from the state education department, Roosevelt and Vashon — the two high schools that L.W. attended — had 2017 graduation rates of 47 and 50 percent.

Still, it's better than the graduation rates for K12 virtual schools evaluated in the NEPC's 2017 study: 37 percent.

Virtual education's main benefit might be that it lowers both physical costs and labor costs — with average student-to-teacher ratios of 34 to 1, compared to 16 to 1 in brick-and-mortar schools, according to the NEPC study.

But Brown pushes back on the idea that online education is more consumed with making money off kids, not educating them. Sure, it's not for everyone, he acknowledges, but neither are old-school classrooms.

"It's also not as effective for some kids to learn in the traditional classroom as they do in virtual," says Brown. "You know, it's an option. Virtual is not for everybody. It takes a lot of self-discipline, and a lot of kids can't handle that."

On his last day as Missouri governor, Eric Greitens, who resigned June 1 after multiple scandals, signed into law legislation that would allow students anywhere in the state to take free virtual courses. The school district in which the student lives would pay for the course.

Previously, students were allowed to take classes in any district — including, yes, Grandview — during the summer, but had to be either "medically fragile" or in an unaccredited or provisionally accredited district to take virtual courses outside their own district during the school year. Under the new law, a student must only have been enrolled in a public school for one semester to begin taking virtual classes. They must be approved by the student's district, but if it determines that a course is not acceptable, the student now has the right to appeal to the state.

Proponents of the legislation describe it as a way for students in rural areas to take courses that their district does not offer.

"Grandview is exploring their options and hopes to be able to offer something after the governor signs the bill," Brown stated in a news release from the Children's Education Alliance of Missouri, a school-choice advocacy organization. "What we do know is that this is a great thing for the students of Missouri."

Not everyone is certain of that.

"Our concern is that this is not going to actually focus on providing good education for kids, but that this might be an opportunity for for-profit companies to come in and receive state aid to educate students or that this is the beginning of creating a virtual charter school in Missouri," says Susan Goldammer, an attorney and associate executive director with the Missouri School Boards' Association. "The bottom line is that we want to make sure that all courses, all education provided to students using taxpayer dollars, is rigorous and aligned with a school district's curriculum."

The association thinks virtual education "has a lot of potential," Goldammer says. But the success of the new law, she suggests, will depend on how much the state regulates the quality of virtual courses.

She adds, "We are very weary of any sort of scheme that would allow people to profit off of students."

In May, L.W. graduated from Vashon High School. His final year in school, at long last, brought relief, and he's been offered a management position at an Arby's. "I'm happy with how everything is going," his mom reported in April.

Still, that May graduation date meant that L.W. made it through high school in three years, despite being diagnosed with a language impairment and struggling for so many years. His mother explains that L.W. ended up again taking K12 virtual classes, only this time he took them at Vashon, in addition to traditional classes.

Henriquez, the attorney who represented L.W., says the first step for students in circumstances like her client is to "get kids in school, but then looking at the quality of the education is also crucial."

"I think there is a difference between earning credits and actually learning," she says. "That's always been a concern with these programs where you can advance but you're not necessarily learning."

L.W.'s family also now has internet at home. But his mother remains skeptical of virtual education.

"I'm OK with it because [L.W.] is graduating," his mother says. "But I feel like every child needs to be placed with a teacher." 0x006E

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