Is district exploiting charter school law to enrich itself?

By William MacKenzie

It looks like the really tiny town of Mitchell (pop. approx. 137) in a rugged Eastern Oregon canyon has figured out how to bring in big bucks – sponsor public virtual schools.

City of Mitchell

Since Oregon enacted a charter school law in 1999, virtual charters in the state have spread like a rash, with 20 now offering online courses to some or all grades of K-12 students. Enrollment at the virtual charters in 2022-2023 was 15,711, representing 37.79% of total charter school enrollment.

Charter schools in Oregon, including virtual charters, are publicly funded, so parents don’t pay tuition. Instead, the Oregon Department of Education distributes money from the State School Fund to each school district that sponsors a charter school based upon that school’s enrollment.

Oregon law provides that a sponsoring district must pass on to its charter school at least 80 percent of its per-pupil grant for K-8 students and 95 percent of its per pupil grant for grade 9-12 students.

While the rest of Oregon school districts sponsoring virtual charter schools sponsor only one, the Mitchell School District is taking full advantage of the funding model, sponsoring three virtual public charter schools with total enrollment of 1054 students in 2022-2023:

Insight School of Oregon Painted Hills, serving students in grades 7-12

Cascade Virtual Academy , serving students in grades K-12

Destinations Career Academy of Oregon, serving students in grades 9–12.

Each of the virtual charter schools sponsored by the Mitchell School District  contracts for the use of technology and curriculum from K12, a profit-driven Stride Company (NYSE: LRN).

I asked Melissa Hausmann, Head of School at all three schools, for copies of their contracts with K12 to get a better understanding of payments made by the charter schools to K12. Although Oregon Public Records law requires that a public body acknowledge receipt of a public records request within 5 business days of receipt, Hausmann has not responded to repeated requests for the contracts..

Given the voluminous data maintained by the Oregon Department of Education (ODOE), I assumed securing information on the state money going to the Mitchell School District because of its sponsorship of the three virtual charter schools would be a simple request. Accordingly, I asked ODOE:

• How much money did the State School Fund distribute to the Mitchell School District for the 2022-2023 school year for each of the three virtual public charter schools the district sponsors?
• School district sponsors are allowed to keep a portion of per-pupil funding provided by the state, usually 20% for K-8 schools and 5% for high schools. The rest goes to the charter school. I asked what percentage, and how many dollars, of per pupil funding provided by the state to each of these three schools was retained by the Mitchell School District in the 2022-2023 school year?

Surprisingly, ODOE said it was not the custodian of records that contained the specific information I requested. It suggested I contact the school district directly.

The Oregon Department of Education says it doesn’t know how much it is spending in support of virtual charter schools.

Mitchell School District Superintendent Vincent Swagerty acknowledged that the district had some of the records requested, but said it would cost $800 “to summarize, compile, review and forward these records.”

Oregon’s public records law allows for “reasonably calculated” fees to be imposed for responding to a public records request, but I considered an $800 fee exorbitant, prohibitive and even silly. Was the district really not able to quickly and easily find out. how much money it’s getting from the state in connection with its sponsorship of three virtual charter schools?

So I pursued an alternative, calculating estimated state payments using ODOE guidance on available data posted online by the department. A review of the Mitchell School District’s contracts with the three virtual charter schools then revealed the percentages of state school fund money passed on to the virtual charter schools.

Those calculations led to a rough estimate that the Mitchell School District retained the astonishing amount of approximately $727,000 of the state school fund money it received because of its sponsorship of the three virtual charter schools in the 2020-2021 school year.

The estimated total broke down as follows:

INSIGHT SCHOOL OF OREGON – PAINTED HILLS

The state sent an estimated $3,777,660 to the Mitchell School District. An estimated $130,656 (20% of the state’s money for students in grades 7-8) and $156,773 (5% of the state’s money for students in grades 9-12) was retained by the Mitchell School District. The remaining $3,392,445 went to Insight.

CASCADE VIRTUAL ACADEMY

The state sent an estimated $7,622,080 to the Mitchell School District.  An estimated $357,764 (5% of the state’s money) was retained by the Mitchell School District.  The remaining $6,797,516 (95% of the state’s money) went to Cascade.

DESTINATIONS CAREER ACADEMY OF OREGON

The state sent an estimated $1,681,164 to the Mitchell School District. An estimated $84,058 (5% of the state’s money) was retained by the Mitchell School District. The remaining $1,597,105 (95% of the state’s money) went to Destinations.

Estimate of $ retained by the Mitchell School District in 2020-2021

From Insight contract: $287,429

From Cascade contract: $357,764

From Destinations contract: $84,058

TOTAL: $729,251

Does the Mitchell School District agree with these numbers?

I asked Superintendent Swagerty. He responded that he had accepted a position in a new school district and referred me to two officials from the Mitchell School District. Neither responded to my follow-up inquiry spelling out estimated payments retained by the Mitchell School District in the 2020-2021 school year..

Whether or not my calculations are on the money, is the Mitchell School District using Oregon’s charter schools law as a cash cow to generate revenue for minimal effort?

Are the estimated 2020-2021 revenue numbers typical of annual payments retained by the Mitchell School District?

Does this put conservatives who oppose reckless government spending, but support school choice, in a quandary?

Are the district, the virtual charter schools and K12 in a parasitic relationship, each feeding off the other and Oregon taxpayers?

Is the funneling of so many taxpayer dollars to public school districts sponsoring virtual charter schools what the legislature intended with the charter school law?

For that matter, is it acceptable that the Oregon Department of Education, which dispenses millions of taxpayer dollars to school districts sponsoring virtual public charter schools, can’t, or won’t, tell the public precisely how much money it is sending to the sponsoring districts, how much those districts are keeping for themselves and how much they are sending on to the charter schools? Is that responsible governance?

The time has come for oversight that ensures public money is meeting its public purpose.

And then, of course, there’s the question of whether the taxpayer-supported virtual public charter schools are a public good in any case.

A June 2023 analysis from the US Census Bureau linked statewide education records from Oregon with earnings information from IRS records housed at the U.S. Census Bureau to provide evidence on how virtual charter students fare as young adults. “Virtual charter students have substantially worse high school graduation rates, college enrollment rates, bachelor’s degree attainment, employment rates, and earnings than students in traditional public schools,” the study concluded. “Although there is growing demand for virtual charter schools, our results suggest that students who enroll in virtual charters may face negative long-term consequences.”

BACKGROUND

Insight School of Oregon

Insight opened its doors in Oregon in 2012 as Insight School of Oregon Charter Option sponsored by the Crook County School District in Central Oregon. To operate the school, its board contracted with K12, Virtual Schools LLC, a wholly owned subsidiary of publicly traded for-profit K12 Inc. (LRN:NYSE] ). Insight’s Oregon headquarters was located in a nondescript one-story office building at 603 NW. 3^rd St. in Prineville.

In its first three years, Insight’s K-12 enrollment grew to more than 500 students from around the state.

But all was not well.

K12 Inc. argued that. its education program was “proven effective,” but the numbers told a different story to the Crook County School District. Even though the district netted $231,592 in the first year of its contract with Insight and $436,554 in the second, it began to have serious reservations about continuing the relationship.

In Nov. 2014, the Crook County School District sent a blistering letter to Insight expressing grave concerns about the school’s operations and academic performance. School Superintendent Dr. Duane Yecha and school board Chair Doug Smith told the school they had major concerns about Insight’s: inadequate tracking of student attendance and enrollment; academic achievement; poor test participation; low four-year graduation rate (16.18 percent in 2013-2014); and failure to meet financial requirements stipulated in the district’s contract with Insight.

“…these issues have given the district reason to consider whether Insight is able to meet its ongoing obligations under the Charter Agreement and under ORS Chapter 338,” the letter said.

In 2015, even though the district was set to net $480,710 from its sponsorship of Insight in the 2014 – 2015 school year, it decided not to renew the sponsorship.

So Insight went shopping.

It quickly found a new partner, signing a sponsorship contract with the Mitchell School District 55 on April 29, 2015. The district had just one school serving a few local kids, some teens from around Oregon and a few international high students from Germany, Thailand, and Hong Kong. The international and regional students all lived in a school dormitory at the school.

With a new sponsor in hand, Insight changed to a grade 7-12 school and renamed itself Insight School of Oregon – Painted Hills.

Another change was the financial arrangements. Under its contract with the Crook County School District, Insight had agreed to the district keeping 5 percent of the State School Fund money it received for Insight students in grades 9-12 and 20 percent of what it received for kindergarten-8 students. Under the new contract with the Mitchell School District, the district agreed to keep just 10 percent of the total State School Fund money

Destinations Career Academy of Oregon

Destinations Career Academy of Oregon, a full-time online public charter school authorized by the Mitchell School District, began its inaugural school year on September 4, 2018. It initially served students in grades 9-11, expanding to offer 12th grade for the 2019-20 academic year.

As part of the Oregon public school system, Destinations Career Academy is tuition-free, providing parents and families the choice to access the curriculum provided by K12 Inc. (NYSE: LRN) a provider of K-12 proprietary curriculum and online education programs.

Cascade Virtual Academy

Cascade Virtual Academy, a full-time online public charter school, began its inaugural school year sponsored by the Mitchell School District on September 4, 2018, offering a tuition-free to option students statewide in kindergarten through eighth grade.

Confusingly, there is also a Cascade Virtual Academy based in Aumsville, Oregon that provides a comprehensive online education for students in grades six through 12 who live within Cascade School District #5. The district , which operates six schools, serves approximately 2,500 students living in Aumsville, Turner, and Marion, Oregon.