Matt DeFour wrote an interesting article in the State Journal last week about McFarland’s virtual charter school, known as the Wisconsin Virtual Academy or WIVA. I have written some critical words about the school in the past.
The virtual school is operated by K12 Inc., a national charter school operator headquartered in Herndon, Virginia. K12 had revenues in 2011 of about half a billion dollars and paid its CEO about $5 million for his efforts. The New York Times ran a long investigatory piece on K12 last December. (The New York Times reporter actually spoke to me about my prior blog posts on K12 while she was researching the article but I apparently had nothing newsworthy to say.)
K12 organized a Wisconsin non-profit entity, Four Lakes Education, Inc, which in 2009 entered into a five-year contract with the McFarland School District for a non-instrumentality virtual charter school.
WIVA opened its virtual doors for the 2009-10 school year with 468 students. The school grew to 819 students last year and enrolled 1,058 students this year. According to the State Journal article, applications for next year are up 50% and so the school is likely to have more than 1500 students for 2012-13. Next year K12 will be responsible for educating more than 40% of all students enrolled in McFarland schools, regardless of whether K12’s leaders could find McFarland on a map.
K12’s arrangement with McFarland is designed to take advantage of Wisconsin’s open enrollment rules. Under the open enrollment law, a student living in one school district can enroll in a neighboring school district instead. The school district the student is leaving is required, in effect, to pay the school district the student is entering an amount established annually by the state. For 2011-12, that amount is $6,867.
Under K12’s deal with McFarland, these open enrollment transfer payments go to K12. K12 pays McFarland $300,000 per year, plus 3% of the open enrollment transfer payments received for each student beyond the first 800 enrolled in the school, which works out to a bit more than $200 per student in excess of 800.
The rest of the state funding goes to Four Lakes and K12. This is the leading example of privatization of public education in Wisconsin outside of Milwaukee. WIVA received more than $7 million in state aid this school year, which is more than most school districts in the state receive. (WIVA should be in line for about $10 million next year – state aid apparently only goes down for those schools that have, you know, actual schools.) K12 looks to have a pretty good thing going, since this year out of that $7 million, WIVA appears to be spending less than $1 million on salaries and next to nothing on benefits for its approximately 30 FTE teachers.
Last fall, I attended a talk at the Urban League given by Greg Richmond, of the National Association of Charter School Authorizers. One point Richmond was adamant on was that charter school authorizers should establish clear performance standards for new charters and should not hesitate to revoke the charters of the schools that fall short of their requirements.
The contract between McFarland and K12 does include performance standards. The school is required to meet No Child Left Behind’s Adequate Yearly Progress (AYP) Measures. There is also a requirement that the performance of the students in the charter school must enable McFarland to maintain or improve its ranking on WKCE scores as compared to other school districts in Dane County.
The State Journal article reported that WIVA’s state test scores are not meeting the contractual benchmarks. It’s in the area of high school graduation rates that the school seems to fall most dramatically short. The charter contract requires the school to have a graduation rate of at least 80% or “show growth” over the prior school year. In 2009-10, the school had a four-year graduation rate of 37.5% and that figure fell even further last year to a dismal 30.4%.
But don’t hold your breath waiting for the school’s charter to get yanked. The agreement between McFarland and K12 is drafted in such a way that the school could not be compelled to close, no matter how poor its performance, at any time before the end of the fourth year of the five-year contract.
More significant is the quote from the McFarland superintendent in the State Journal article: “There’s not been pressure to discontinue the relationship from any source.”
To me, this is the nub of the issue. The arrangement with K12 has obvious benefits for McFarland. This year, K12 will pay it about $350,000 for serving as host district for the charter school. The amount will be closer to $450,000 next year. The charter school is almost entirely distinct from the rest of McFarland’s schools. With a handful of exceptions, the families served by the charter school do not live in McFarland. In fact, the contract between K12 and McFarland specifies that unless the school district decides to the contrary, “pupils enrolled in the Charter School shall not be eligible to participate in any extracurricular or cocurricular activities of any kind sponsored or offered by the District.”
Under these circumstances, what incentive does McFarland have to exercise vigilant oversight authority over the K12 school and actually revoke its charter if its performance falls short of the contractual standards?
I know how the issue would appear to me if I were on the McFarland school board and I were considering whether to revoke the school’s charter or decline to renew it on the basis of the school’s abysmal graduation rates.
On the one hand, continuation of the arrangement and hence of the income stream from K12 would mean that the district could spend at least $150 more per student on the education of the kids who actually live in McFarland, which is a not insignificant sum. On the other hand, revocation of the charter would mean that K12 would shop around for some other relatively small school district in the state that would be willing to host the virtual school, cash K12’s checks and provide even less oversight. K12 wouldn’t miss a beat and nothing would be accomplished. On top of this, as the McFarland superintendent pointed out, no one’s complaining. I suspect that I wouldn’t be leading the charge to revoke the charter and kiss away that very handy K12 money.
This situation reminds me of the State’s settlement with the tobacco companies about ten years ago. I worked at the state Department of Justice at the time and was tangentially involved in the settlement. The tobacco companies agreed to pay the settling states large sums of money on an annual basis that were keyed to their sales performance. The settlement terms turned out to be functionally equivalent to a sales tax on the settling tobacco companies. The settling states quickly became quite attached to the settlement income stream and so were transformed from regulators to partners with the tobacco companies.
It just doesn’t work for a regulator to have a significant financial stake in the success of an entity that it’s regulating, whether it’s a tobacco company or a virtual charter school. While I’m all for local control, virtual charter schools like WIVA that are marketed on a statewide basis should be authorized and regulated by DPI rather than by local school boards.
I’m not happy about the approximately $170,000 that the Madison School District has to pay to McFarland and hence to K12 for the 25 MMSD students enrolled in the virtual charter school. But I might feel slightly better about it if I felt that some professionals at DPI were keeping a close eye on the virtual school rather than local school board members who are no more qualified than I am to supervise effectively this kind of statewide educational enterprise.