Dayna Smith/For The Washington Post - Gennifer Hirata, 10 — pictured with her mother, Michele — and her brother, Tyler, 8, are enrolled in the Virginia Virtual Academy, a full-time public school through which students take all their classes online.
“We understand the politics of education pretty well,” Packard told investors recently.
K12’s push into New England illustrates its skill. In 2009, the company began exploring the potential for opening a virtual school in Massachusetts in partnership with the rural Greenfield school district.
By selecting a “host” school district in a poor, rural area receiving more state aid per pupil to provide on-line classes, K12 Inc. draws students from wealthier areas with lower per-pupil subsidies.
School Days 2011-12
But Massachusetts education officials halted the plan, saying Greenfield had no legal authority to create a statewide school. So Greenfield and K12 turned to legislators, with the company spending about $200,000 on Beacon Hill lobbyists.
State Rep. Martha “Marty” Walz, a Boston Democrat, wrote legislation that allowed Greenfield to open the Massachusetts Virtual Academy in 2010. She acknowledged that the language was imperfect and didn’t address issues of funding or oversight but said she couldn’t wait to craft a comprehensive plan.
“You do what you need to do sometimes to get the ball rolling,” said Walz, who accepted at least $2,600 in campaign contributions from K12, its executives or its lobbyists since 2008, according to the National Institute on Money in State Politics.
That scenario is repeating nationwide as K12 and its allies seek to expand virtual education.
About 250,000 students are enrolled in full-time public virtual schools in 30 states, according to Susan Patrick of the International Association for K-12 Online Learning, a trade association. Although that’s just a fraction of the country’s 50 million schoolchildren, the numbers are growing fast, Patrick said.
K12 teaches about two out of every five students in full-time online schools. Its next largest competitor is Baltimore-based Connections Education, which was recently acquired by Pearson, the mammoth British textbook publisher. The rest of the industry consists of smaller operators and some nonprofit virtual schools.
Seizing an opportunity
If it were a school district, K12 would rank among the 30 largest of the nation’s 1,500 districts. The company, which began in two states a decade ago, now teaches about 95,000 students in virtual schools in 29 states and the District of Columbia.
And it plans to grow. “We are now that much closer to our manifest destiny of making a K12 Inc. education available to every child,” Packard said in a call with Wall Street analysts this month.
It’s a promising business. In the past fiscal year, K12 had revenue of $522 million — a 36 percent increase from the prior year, according to securities filings. Its net income after a series of acquisitions was $12.8 million. Packard earned $2.6 million in total compensation.
Packard, 48, took a roundabout route to education. A former Goldman Sachs banker, he was working as a consultant with McKinsey and Co. when he got a call from Michael Milken, the financier who pleaded guilty to securities fraud in 1990 and later became a philanthropist partly focused on education.
Packard joined Milken’s education investment holding firm and ran one of his companies, a chain of preschools. About the same time, Packard was trying to find an online math course for his 6-year-old daughter. Frustrated by the dearth of options, he saw a business opportunity.
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