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California Gives For-Profit Charters the Boot, K12 Inc. Largely the Reason

September 7, 2018

On September 07, 2018, California Governor Jerry Brown signed into law a bill authored by Assemblyman Kevin McCarty prohibiting for-profit charter schools in California, effective July 01, 2019. From the bill:

On and after July 1, 2019, a petitioner that submits a charter petition or a charter school that submits a charter renewal or material revision application shall not operate as, or be operated by, a for-profit corporation, a for-profit educational management organization, or a for-profit charter management organization. For purposes of this section, a for-profit educational management organization and a for-profit charter management organization are entities that manage or operate a charter school.

For-profit charter schools currently operating in California must convert to non-profit management prior to each school’s renewal deadline.

For-profit virtual charter operator, K12, has a shady, self-serving history in California, including draining a school of funding and presenting the appearance of no debt (and, therefore, the appearance of a successful school) by washing the school’s books via a creation called a “balanced budget credit.” Though in July 2016, California Attorney General Kamala Harris charged that K12 funneled $168.5M via the “balanced budget credits” game, K12 settled (without admitting guilt) for $8.5M– and was still allowed to operate in California.

McCarty’s bill prohibiting for-profit charter schools in California was first introduced in February 2017; the first analysis of the bill (California Assembly, May 09, 2017) focuses on K12’s profiteering as justification for the legislation:

Appropriate use of taxpayer dollars? While current law explicitly authorizes a charter school to operate as a nonprofit corporation, statute is silent on whether a charter school is permitted to operate as a for-profit corporation. Because of the permissive nature of the Education Code and absent a clear prohibition, several charter schools are currently operating as for-profit corporations.

The California Charter School Association indicates there are six for-profit charter schools in California. California Virtual Academies (CAVA) is California’s largest provider of online public K-12 education and a public charter school network that exists entirely online. Students take classes from home, communicating with teachers via computer. CAVAs primary vendor and manager is K12, Inc., a for-profit corporation.

According to the author (McCarty), recently, there has been an increase in the number of for-profit EMOs and CMOs across the country. According to a report from the National Education Policy Center at the University of Colorado entitled, “Profiles of For-Profit and Non-Profit Education Management Organizations,” since the 1995-96 school year, the number of for-profit EMOs has increased from 5 to 97, and the number of schools operated by them has increased from 6 to 840. It is estimated that there were approximately 462,926 students enrolled in charter schools managed by for-profit EMOs.

In California, there are 34 charter schools run by for-profit EMOs or for-profit CMOs enrolling over 25,000 students. In 2016, the largest for-profit EMO, K-12 Inc., which has received over $310 million of taxpayer money over the last 12 years, settled a lawsuit filed by the state for $168.5 million over claims that the corporation manipulated attendance records and overstated students’ success. This same for-profit EMO, which is publicly traded on Wall Street, had estimated revenue of $708 million in 2012. The company estimated their profit at $87 million in the same year. They paid their top 6 executives $11 million in compensation while their average teacher salary was $36,000. At the same time, one of the charter schools managed by this for-profit corporation in California had a graduation rate of 36% compared to 78% statewide. In addition, every year since it began, except 2013, this school had more dropouts than graduates.

If the goal of a for-profit corporation is to maximize profit for the corporation’s shareholders, then the Committee should consider whether it is an appropriate use of state taxpayer dollars for for-profit corporations to operate public schools. Additionally, does this for-profit model provide a perverse incentive for these charter schools to limit services for students in order to increase profits?

Though there was some question as to whether California’s charter lobby would support McCarty’s legislation, support it they did in the end, in conjunction with the state’s teacher unions. And though there was the question of whether California Governor Brown would sign the bill into law, sign it he did.

As of this writing, K12 has not yet offered a press release on the issue.

I’m thinking, maybe they won’t.



Want to read about the history of charter schools and vouchers?

School Choice: The End of Public Education? 

school choice cover  (Click image to enlarge)

Schneider is a southern Louisiana native, career teacher, trained researcher, and author of two other books: A Chronicle of Echoes: Who’s Who In the Implosion of American Public Education and Common Core Dilemma: Who Owns Our Schools?. You should buy these books. They’re great. No, really.

both books

Don’t care to buy from Amazon? Purchase my books from Powell’s City of Books instead.

  1. Tina Alcaraz-Andres permalink

    The California Charter Schools Association (CCSA) proudly state that there are no for profit charters in California and that they supported this bill. Hmmmm.

    • Of course they state that. Wouldn’t want the true nature of the shell games and unfettered profit taking by the owners of charter schools to become known now would they?

  2. Jill Reifschneider permalink

    Wooo hooo!!

  3. Karen permalink

    Does this mean that CAVA and K12, Inc will actually close and cease operations in California at the end of this school year, or is there a loophole by which they’ll be able to continue operations under, perhaps, a different name or different configuration?

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