California launches investigation into for-profit online schools
Today Education Dive reports that fears are growing in California that students of online schools are falling behind their peers at mainstream, physical schools. This is one issue of online charter shools, apparently among many, now being investigated by the California Bureau of Children's Justice, a new arm of the California Attorney General's Office. A K12 SEC filing revealed a subpoena that was related to an industry-wide investigation of for-profit online charter schools in the state. So far, 31 out of 36 online charter schools operating in California have been ranked “"Below the California Charter Schools Association (CCSA) Minimum Criteria for Renewal."

Inside a carefully decorated home, a young girl in a navy sweater and a plaid scarf sits in front of a roaring fire place. Two framed photographs of her sit in the background, perched on a granite mantel. This is Emma. She's in sixth grade.

"I used to go to traditional schools, and I'd get left behind," she says. "There's 30 students in my class and there's only one teacher, and she can't always get to each student.”

Emma stars in a promotional video on the website for California Virtual Academies, a chain of online virtual schools run by the online school management company K12 Inc.

Yet it's online students like Emma who are now reportedly getting left behind — one issue, among many, that may have helped spark a new state investigation of the virtual schools industry.

On September 24, 2015, K12 Inc. was subpoenaed by the California Bureau of Children's Justice, a new arm of the California Attorney General's Office. A K12 SEC filing revealed that the subpoena was related to an industry-wide investigation of for-profit online charter schools.

"At this early stage, the Company is not aware of any material adverse effect this industry-wide investigation would have on the results of its operation and financial condition," the filing stated.

A history of controversy and complaints

This isn't the first time that K12's California branch has come under scrutiny.

Earlier this year, a searing report from In The Public Interest, a DC-based research and policy institute, found that California Virtual Academies (CAVA), a chain of 11 virtual charter schools in California, was "a failing system that consistently produces more dropouts than graduates."

The report called CAVA's San Diego branch, which serves around 3,000 students, a "low-quality education in a poorly sourced educational setting." It also noted that CAVA only graduated around 58% of its students, as opposed to approximately 80% in California overall.

That's a problem, in part, because high school dropouts cost the state a reported $46 billion dollars in decreased revenue annually.

Before the release of the report lambasting CAVA, the California Charter Schools Association (CCSA) included a CAVA school, CAVA Kern in Simi Valley, in its recommendations of 10 schools to close due to academic underperformance and a failure to meet the association's Minimum Criteria for Renewal.

The other nine charters on CCSA's list included Los Angeles County Online High, run by Olin Virtual Academy, currently still in operation.

A total of 31 charters ranked "Below CCSA's Minimum Criteria for Renewal."

Thirty-six online charters operate in California, according to the National Education Policy Center.

California teachers have also spoken out against CAVA, banding together to stage protests complete with props like empty school chairs meant to represent CAVA's low graduation rates.

"We need local school districts to hold CAVA administrators accountable, so our students can thrive," CAVA Los Angeles teacher Stacie Bailey told the San Gabriel Valley Tribune.

A New Office; A New Investigation

Last February, California Attorney General Kamala Harris opened a new office within the California Department of Justice: the Bureau of Children's Justice. Two of the new bureau's five core priority areas include tackling the state's "elementary school truancy crisis" and "discrimination and inequities in education."

Within seven months, at least one subpoena had already been filed in relation to an industry-wide investigation into for-profit online charters in the state.

Kristin Ford, a press secretary at the California Department of Justice, declined to comment "in order to protect the integrity of our investigations."

A 2013-14 report by the National Education Policy Center, "Virtual Schools in the U.S. 2014," agreed, finding that 30% of online charters hadn't received state accountability or performance ratings.

"Of the 231 schools with ratings," the report says, "only 33.76% had academically acceptable ratings. On average, virtual schools' Adequate Yearly Progress (AYP) results were 22 percentage points lower than those of brick-and-mortar schools."

And in California, only 5 out of 36 virtual schools met AYP targets.

Virtual school performance: A national problem

Around the country, virtual charters have been scrutinized in Maine, Florida, Oklahoma, Ohio, and Massachusetts.

Overall, graduation rates for virtual schools are around half the national average, the NEPC report says.

And a recent 2015 report of 158 virtual charter schools from Stanford's Center for Research on Education Outcomes (CREDO) found that the schools have an "overwhelming negative impact" on student learning as compared to traditional schools.

K12 Inc. has also long been the subject of intense media scrutiny. Last year, Bloomberg reported that the company had "lost management contracts or been threatened with school shutdowns in five states this year."

And in 2011, the New York Times investigated the company, noting that "a portrait emerges of a company that tries to squeeze profits from public school dollars by raising enrollment, increasing teacher workload and lowering standards." High-profile investors began shorting K12 stock.

Are companies anticipating virtual classroom closures?

With ongoing controversy around transparency, student performance, and financial clarity, K12 has expressed interest in turning its focus to ed-tech and curriculum development instead.

A recent Buzzfeed article noted that the company's CEO, Nathaniel Davis, said "... Most growth opportunities exist in the small slice of K12's business devoted to selling content and curriculum," reporting that the company planned to focus on "an increasing amount of energy and investment on selling its curriculum, called FuelEd, as well as software and other individual services …"

Education Week also reported the pending transition, calling it a "rebranding move."

New legislation proposed by Democratic Assemblyman Roger Hernandez that would prohibit all for-profit corporations from operating charter schools, online or not, in the state was successfully adopted by the California legislature earlier this year, in February. Yet the bill won't go into effect until 2017.

For now, California Virtual Academies remain in expansion mode, with a self-reported total enrollment of around 16,000 students.

It's unclear whether the new state investigation into the for-profit virtual school industry by the Attorney General's office will change that.