As Washington school districts wrangle with massive enrollment drops during the pandemic, new statewide data shows that nearly 6,000 children transferred to a type of school that has faced criticism for closed financial books and poor academic performance: virtual schools paid for by taxpayer dollars and run by for-profit companies.  

Together, Washington’s five largest for-profit virtual schools will collect roughly $117.5 million in public dollars this school year — about $47.5 million more than they did last year.

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The increase is part of a broader move away from traditional public schools during the pandemic. In all, about 35% more of the state’s children are now enrolled in a variety of publicly and privately owned “alternative-learning experiences,” as they are called. In these schools, even when there’s no pandemic, students learn outside typical classroom settings at least part of the time.

These programs have gained particular popularity among families of young children. For instance, kindergarten enrollment fell more than 14% in public schools but shot up by 85 to 90% in alternative-learning programs, state data shows. 

The overall increase shifts an additional $132.5 million in taxpayer dollars — 50% more than the state spent last school year — away from traditional public schools; in all, Washington will spend approximately $388.5 million on alternative programs.

The increase is tiny relative to the state’s $26 billion biennial K-12 education budget. But families’ sudden interest in online or other alternative schools represents a major change in how many Washington children attend school — and who is tasked with educating them. 

At the state’s largest online for-profit school, Washington Virtual Academies (WAVA), the state Superintendent of Public Instruction’s office (OSPI) estimates that enrollment spiked by at least 80% to about 6,568 students (about 6,300 are full-time students there).

The school’s leader says WAVA had an enrollment of 4,432 in 2020 and now has 6,658 students, for an increase of 55%.

“That’s just unprecedented,” said T.J. Kelly, the OSPI chief financial officer. “The only rational explanation for that is the migration of students and families toward proven online-learning options that they felt they could commit to for the entire school year.”

The shift has also raised a host of concerns. In virtual for-profit schools, class sizes are larger than typical schools, and available data from the state’s education department suggests students who enroll perform far below state averages; a 2015 Stanford study shows students who enroll in for-profit schools also improve more slowly than peers with the same academic scores. In general, these schools operate with little government oversight. 

“If they were getting spectacular outcomes, would we care about the profit? But that’s not really been the case at all,” said Marguerite Roza, a Seattle-based education-finance-policy professor at Georgetown University.

The new data doesn’t show the types of students who are switching to options outside the typical school setting. But a Seattle Times analysis shows about 40% of students who are new to alternative programs switched to for-profit online schools.

Like traditional public schools, for-profit schools such as WAVA are funded by taxpayers. Any Washington student is eligible to enroll, and these programs often attract more students than the public districts that authorize them; for example, WAVA — with an enrollment topping 6,000 — is authorized by the Omak School District, which enrolls about 1,400 students

WAVA is one of two Washington virtual schools operated by Stride, Inc., which as of December is the new name for a titan in the for-profit education world formerly known as K12 Inc. The company is publicly traded and runs about 70 online schools in 30 states. In Washington, lawmakers and the Washington state Auditor have some oversight over such schools; the state auditor’s office said as recently as 2018 that data quality and reporting issues remain.

Recent calls with investors illustrate how much the company has benefited from the pandemic. The company’s latest quarterly report shows Stride now enrolls more than 195,000 students in its education programs, a 57% increase over last year. And relative to last year at the same time, it generated 44% more in revenue during its last quarter, or about $371 million. 

Washington fits with the trend. About 3,000 more Washington students attend Stride schools this year than last, state data shows, bringing with them an estimated $25 million in additional taxpayer-funded revenue.

Stride officials say 9,600 students are now enrolled in its Washington programs. “Families are sticking with their choice,” said Mike Kraft, Stride senior vice president for corporate communications. “There is little or no melt or movement.”

When he reported the company’s quarterly results to investors in October, Stride CEO Nathaniel Davis said: “By all measures, we’re stronger, we’re growing faster than any time in our recent history.”

Transfer trouble

One night around 10 p.m. last summer, Star Downey and her husband were each glued to a separate computer as they began the lengthy process of transferring their 5- and 7-year-old daughters to WAVA.

Then the phone rang. It was somebody from WAVA, asking Downey if she needed help with the application. The late hour of the call made Downey suspect the person on the line was from a corporate call center.

Downey and her husband first began researching WAVA when they found out their daughters’ private school planned to resume in-person. Downey has a congenital heart condition, and there was “no way” her family could take the health risk that her children might bring the virus home, she said.

In interviews, students at WAVA say they work with a teacher online for a half-hour to a few hours a day, then spend the rest of the school day working independently. Before the pandemic, the typical enrollee may have struggled at their previous school or sought flexibility in their schedule. 

Stride officials say they provide an essential, well-established service for families seeking alternatives during a tumultuous school year. And they point to an independent survey of Stride parents from July — long before many public schools had ironed out online learning strategies — where more than 86% said their children in existing virtual schools “learned a lot” during the pandemic, compared with about 13% of those who learned online from traditional public schools. 

“We’re just seeing massively disparate outcomes at least in terms of how parents are reporting,” how much their children are learning, said Ian Kingsbury, who led the research and is a policy fellow at the Empire Center for Public Policy, a fiscally conservative think tank in New York. The study has significant limitations such as relying only on parent reports, not data on student achievement.

Families like Downey’s sought out WAVA purely because of the pandemic. Interest in WAVA was so strong, as it turned out, that Downey’s girls ended up on a wait list. 

In September, at least nine families posted on WAVA’s Facebook page reporting another issue. They received notice that their children were enrolled, only to find out there wasn’t enough room for them.

“Our family is devastated,” wrote Elizabeth Bray, of East Wenatchee, who hoped to enroll her fourth-grade son.

Head of school Summer Shelton said those “families may have received mixed communication regarding enrollment.” WAVA handled more than 14,000 transfer requests this school year, and to accommodate increased enrollment, hired 40 additional teachers. Emails obtained by The Seattle Times suggest that over the summer, a backlog at least 3,000 transfer requests had piled up.

Shelton said most families who enrolled in the summer have stuck with WAVA all school year. “It’s expected that some students and families will return to their home school (after the pandemic),” she said. “We also know and hear from families that they came because of COVID but they are sticking around for other reasons like the curriculum.”

As the school year got underway, Downey eventually decided to take her daughters off the WAVA wait list and enroll them in Eastmont Virtual Academy, an online program run by Eastmont School District.

But she took her family’s experience as a sign that WAVA might be in need of more teachers. She applied, she said, and after speaking with The Seattle Times, was hired.

Booming business

Last spring, roughly 250 students switched to WAVA and another 530 or so started at Stride’s other virtual school here, Insight School of Washington. State officials paid more than $1 million in extra funding to help cover WAVA and Insight’s increased costs of enrollment: $393,803 went to the Okanogan County district that contracts with WAVA, Omak School District, and $644,259 to the Forks-area district that contracts with Insight, Quillayute Valley School District.

WAVA and Insight’s funding works like this: Stride contracts with public-school districts to provide online services. Washington sends about $8,679 to those districts for every full-time student enrolled in their Stride programs, or about $3,000 less than students in typical public schools; the school district then sends a vast majority of those funds to Stride, but keeps a small administrative oversight fee.

As the Spokane-based newspaper Inlander reported in 2017, small districts such as Omak and Quillayute Valley could benefit in another way: With more students enrolled in their districts, they qualify for more “local effort assistance” from the state, a form of levy equalization that helps offset differences in their ability to raise property taxes to support schools. 

Education experts have for years said that virtual for-profit schools are driven by profits — not the public good that comes from an equitable and strong public-education system. The New York Times in 2011 and many stories that followed examined the business and standards of online schools. In 2018, Stride’s CEO, Davis, received compensation valued at $6.4 million; his compensation more than doubled to $15.9 million in 2020

Stride officials say about 3% of revenue goes toward profit; the company earned about 2% in profit last year, they said. 

“Every dollar not spent on education is a dollar being taken away from education,” said Donald Cohen, executive director of In the Public Interest, an Oakland, California-based research and policy center. .

It’s tough to know exactly how much is spent on overhead, but Cohen said he suspects it’s “tiny” since virtual schools don’t come with building costs. The company’s SEC filings show it spent $108.2 million on advertising from 2018-2020.

Last school year, Stride’s Insight Academy spent about 71% of its funding on expenses directly related to student instruction and the rest — or more than $2,000 per student — paid for administrative fees and other noninstructional costs, documents provided by Quillayute Valley Superintendent Diana Reaume show. 

Reaume said the district is accountable for the virtual school’s work and has to report to OSPI about Insight’s staff; state officials say districts are also responsible for these schools’ performance and compliance with the law. But, Reaume said, “My role isn’t to track down the money once it’s gone to the contracted services.”

Insight has traditionally offered online courses to high-school students, but expanded to middle school this year. About 250 middle-schoolers had enrolled as of January.

According to Reaume, the district also decided to expand its partnership with Stride in a new way this year. Officials are paying the company for an online learning platform for the students who are enrolled in the district’s traditional brick and mortar schools. 

“We don’t know what the future will be,” Reaume said, “Whether or not our families will want an online program or will mostly want in-person. But we fully intend on supporting whatever their needs are.”

The other large for-profit education company that operates in Washington, Connections Academy, also expanded this year. 

Even state officials sought guidance from for-profit virtual-school representatives. 

Just a week after Washington schools closed in March, the director of the state’s Alternative Learning Department, Rhett Nelson, reached out to a Stride lobbyist in search of remote-learning resources for parents; Nelson said he also reached out to other established online-learning programs. 

Emails show the lobbyist directed Nelson to Stride’s website. The lobbyist wrote: “I am surprised so many districts are trying to reinvent the wheel across the state rather than relying on the already approved online platforms.”

Staff reporter Daniel Gilbert contributed to this report.