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

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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
  • 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.

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