K12 Defies... Well, Everything

K12 remains the top dog in the junkyard of cyberschooling. It provides an instructive lesson in how a good pile of cash and friends in the right places can keep a business afloat even after people have poked holes in the hull.

There was never anything about the organization that didn't look like a red flag. It was set up by hedge fund manager Ronald Packer and propped up with money from junk bond king Michael Milken (an iconic Wall Street greedhound of the eighties who pioneered the art of getting caught, convicted and sent to prison, and still remaining rich and powerful). William Bennett, a former Secretary of Education and GOP pundit who was for many reformster ideas before it was cool, was a founding figurehead as well. More recently, Nathaniel Davis began rising through the executive ranks on the board (his previous experience-- CEO of XM radio).

K12 has been "embattled" all along. Here's a fairly brutal shot they took from the New York Times way back in December of 2011. Former teachers routinely write tell-alls about their experience, like this more recent guest piece on Anthony Cody's blog. The NCAA put K12 schools on the list of cybers that were disqualified from sports eligibility.

In February of this year, the Center for Media and Democracy named Ron Packard one of the highest paid public workers in the country (i.e. person paid with tax dollars). This despite "the alarming fact that only 28% of K12 Inc schools met state standards in 2010-2011."

A look at this report on executive compensation gives a picture of how lucrative the cyber charter business can be. Back in 2009, K12 was delivering a total of $5.51 million dollars in executive compensation. By 2012 that had climbed to $10.89 million, and the following year it jumped a whopping 96% to $21.37 million. And every last bit of it is our tax dollars at work. K12, like all charters, does not "make" money-- they just collect it from taxpayers.

Cyber schooling has long been a darling of ALEC, who, as they are wont to do, whipped up some helpful model legislation for states to follow. And legislatures have been mighty friendly to cybers. In PA, school districts must send their computed cost-per-student to the charters, but prior to 2011-2012 the state gave some of that money back to the bricks-and-mortar schools. Now, nothing.

Meanwhile, a cyber school can assign, say, 250 students to one teacher per subject. Each student gets a "free" computer. If we figure about 30K per teacher and about $500 per computer, that's a rough outlay of  $245,000. So, we spend about 1K per student, while taking in anywhere from 8K to 20K per student (students with special needs are golden). That is a mighty pleasant profit margin.

K12 may have suffered remarkably few consequences for their educational achievements, but when you make your business all about the benjamins, you may have to answer for financial issues. Packard stepped down at the beginning of this year, apparently with a giant suitcase full of personal gains that some stockholders felt was a bit ill-gotten, and they decided to get the courts involved. This is part of a cascade of lawsuits covering everything from artificially inflating stock prices to lying about what the company is actually accomplishing.

It remains to be seen what happens next for the biggest star in the cyber-educational firmament. If my browser ads are any indication, they still have plenty of money for advertising, which only makes sense-- in the cyber charter business, your success is not based on how many students you teach, but on how many you enroll. I'm going to cross my fingers and hope that those numbers finally start heading down.

To learn even more about this story, I cannot recommend enough the website TheTruth About K12-- they've followed this story carefully and have a thoughtful and thorough compendium of useful info. Stop on over and educate yourself.