Ohio’s Senate Bill 298, Senate Minority Leader Joe Schiavoni’s proposed law to ensure that the state is paying online charter schools for real students, not merely phantom students, will have a fourth hearing this week. Ohio pays on-line charter schools nearly $7,000 per pupil. According to Bill Phillis of the Ohio Coalition for Equity and Adequacy, e-schools are draining approximately $250 million in public dollars to the Electronic Classroom of Tomorrow (ECOT), the Ohio Virtual Academy—a K12 Inc. affiliate, and other e-schools.

Earlier this spring ECOT, Ohio’s largest online charter school, proposed that the legislature allow the state to reimburse the online academies when students sign up instead of paying the schools only for the students who participate actively on a daily basis.  Senator Schiavoni’s proposed law to prevent such a practice is pretty basic—require e-schools to keep accurate records of the number of hours students spend doing coursework—require the online school to notify the Ohio Department of Education if a student fails to log-in for ten consecutive days—require that a qualified teacher check in with each student once a month to monitor active participation.  The bill has been shunted to the Ohio Senate Finance Committee, however, by Republican leaders because the chair of the education committee has seemed overly sympathetic to its provisions. It is known that sponsors of the virtual academies are also key political contributors to Ohio Republicans, and it is feared that the bill will never make it out of committee.  (This blog covered ECOT’s effort to soften attendance regulations for the virtual academies and Senator Schiavoni’s bill to increase oversight here and here.)

Even though some of the charter management companies have affiliates across many states, charters are established and regulated in state law. A very serious problem across the states is the lack of uniform charter school regulations.  Jessica Calefati of the Bay Area News Grouppublished a scathing report in mid-April of some of the California affiliates of K12 Inc., the same national company that runs the Ohio Virtual Academy: “The TV ads pitch a new kind of school where the power of the Internet allows gifted and struggling students alike to ‘work at the level that’s just right for them’ and thrive with one-on-one attention from teachers connecting through cyberspace… but the Silicon Valley-influenced endeavor behind the lofty claims is leading a dubious revolution.  The growing network of online academies, operated by a Virginia company traded on Wall Street called K12 Inc., is failing key tests used to measure educational success. Fewer than half of the students who enroll in the online high schools earn diplomas, and almost none of them are qualified to attend the state’s public universities.”  The Bay Area News Group blames the problem on “a systemic breakdown in oversight by local school districts and state bureaucrats.”

Calefati’s investigation tracks the research from Mathematica Policy Research, Stanford University’s Center for Research on Education Outcomes, and the National Education Policy Center demonstrating that students at the online schools nationwide are far behind their peers in brick and mortar schools in reading and math. Why? The Bay Area News Groupreport attributes low achievement in many cases to the fact that despite that the state is paying the online schools for students who are registered, too few actually attend school and participate: “A handbook distributed to teachers at the start of the school year says attendance credit may be given even if ‘very few lessons are completed daily,’ so long as the student is ‘actively engaged in completing assigned schoolwork.'” Teachers continue to complain about a state rule that students are attending school if they log in for one minute each day.  Mike Kraft, a spokesperson for K12, denies that students remain formally enrolled if they are merely logging in each day.  He claims teachers must “review each student’s work and determine how many days of attendance to credit.  Still, several teachers interviewed by this newspaper confirmed the policy, and in June a group of them filed formal complaints with local school districts and county offices of education seeking investigations of the schools’ attendance practices.”  “In separate complaints filed in June, the teachers seek investigations into the schools’ withdrawal policies because ‘many students who are not sufficiently attending school stay on the rolls with no action taken to withdraw them.'”

In California, school districts themselves can collect substantial fees if they sign on to oversee an online charter school, and several small school districts have undertaken this responsibility.  “In California, bureaucrats don’t monitor the day-to-day operations of charter schools.  Instead, state law requires districts that vet and approve charter applications to oversee the schools once they are open.  But there are no guarantees—and no monitoring from the Department of Education—to assure that is happening.  Jefferson Elementary School District is responsible for overseeing California Virtual Academy at San Mateo’s operations, and the duty comes with a reward.  The school has paid the district more than $1 million in oversight fees since the small Daly City-based school system approved the academy’s application in 2006, allowing it to enroll students of all ages who live in San Francisco, San Mateo, Santa Clara and Santa Cruz counties. Larger schools pay even more. The Los Angeles Academy, which enrolls quadruple the number of students as the San Mateo Academy, typically pays the West Covina Unified School District more than $1 million a year.”  And farther south, “a tiny district with 35 pupils called Spencer Valley Elementary is responsible for overseeing the more than 3,000 students who attend California Virtual Academy at San Diego.”

Calefati interviewed Bernie Vidales, Superintendent of the Jefferson Elementary School District which is responsible for California Virtual Academy in San Mateo: “In an interview last year, Jefferson Elementary Superintendent Bernie Vidales conceded that he knew very little about the online school for which he’s responsible.  Vidales said he wasn’t sure how many kids were enrolled, where they lived, or even how well they had done on the last round of state tests—even though the California Charter Schools Association insists state law requires authorizers to monitor student performance closely… Vidales acknowledged that Jefferson Elementary is paid to look after the online school.  With close to 1,000 pupils, it is easily the largest school the 6,000-student district oversees.  But, he said, the district did little more than review the academy’s budget and make sure it has enough cash to cover costs.”

In part 2 of its report, Bay Area News Group explains that California law does not speak to the issue of whether for-profit corporations like K12 Inc. are permitted to operate tax supported charter schools.  To protect itself, “(B)efore applying 14 years ago to open the state’s first online academies, K12 treaded cautiously into a new market, creating a series of nonprofit organizations whose names match those of the schools.  That means each California Virtual Academy is considered by the IRS to be a charitable organization that need not pay taxes, even though K12 effectively controls the schools by providing them with all academic services… Tax and education records show that K12 employees started each of more than a dozen online academies in California, even though the applications they filed to open the schools described the founders as a ‘group of parents,’ none of whom were named. For several years, company employees even signed the nonprofit schools’ tax filings.”

And, if K12’s schools cannot cover all of their costs during a school year, K12 covers their expenses to balance the budget:  “Writing down the operating losses of the schools it manages in California and across the country has allowed K12 to reduce its taxable income by $179.5 million over the past three years, according to the company’s most recent annual report.” K12’s spokesperson, Mike Kraft, “insists that the company doesn’t receive a tax deduction for forgiving the debts of the schools it operates.  But when the newspaper presented Kraft with K12’s most recent Securities and Exchange Commission filing and asked him to explain whether K12 wrote off the losses, his answer was hardly straightforward….”

Lack of oversight of the charter school sector, clearly a problem in Ohio and California, seems also to be a federal problem.  Just last week, Arn Pearson, General Counsel for The Center for Media and Democracy filed a formal appeal demanding that the U.S. Department of Education search documents of the federal Charter Schools Program more carefully for records about the charter schools that have received federal funding but may have been closed.  The Charter Schools Program has been bragging in press releases about the important grants it has made to states for charter schools as well as touting its transparency, but when the Center for Media and Democracy filed a FOIA request for information about schools funded by this program that had failed or never opened, the U.S. Department of Education replied that it was ‘unable to locate any documents that were responsive to your requests.'”

In his appeal of the Department’s failure to locate records, Pearson writes: “It strains credulity and common sense that, despite spending billions in taxpayer dollars on charters and putting out this press release—among several—on the accomplishments of the Charter Schools Program, the Department claims to have no databases, no data analyses, and no internal communications about the program mentioned in its press release and charters that received funds but closed or never opened, nor any external communications with charter school grant recipients about the success or failure of those charters.”

Charter schools were created as an experiment to encourage innovation by removing what critics of public schools called the bonds of bureaucratic regulation.  Clearly more than twenty years into this experiment, what is happening instead is widespread profiteering from tax dollars.  And too few people are paying enough attention to build sufficient political will to stop the ripoff.