A new report on California’s online charter schools says that the state is “wasting hundreds of millions of dollars a year by funding these schools at a level far above their costs.”

The report, published Tuesday by a Washington -D.C.-based nonprofit research and policy organization called In the Public Interest, also says that the “track record of online charter schools has been uniformly negative for every demographic subgroup of students” despite the promise of online education.

“In a time when school districts everywhere face the heartbreak of knowing they cannot provide all the services their students need and deserve, it is critical that lawmakers act as conservative stewards of the state’s tax dollars by focusing funding on the schools where it can do the greatest good for the greatest number of the state’s students,” the report says.

Charter schools are publicly funded but privately operated. About 10 percent of public school students in California attend charter schools — both brick-and-mortar and online. According to the report, nearly 175,000 California students in 2018-2019 were enrolled in online charter schools, representing 27 percent of all charter school students in the state.

The charter sector in California — which has more charter schools and more charter students than any other state — has long been troubled. Though charter schools are designed to operate outside the rules of school district bureaucracies, the state allowed them to expand for years with very little oversight despite continuing controversy over financial scandals and other problems.

In 2019, Gov. Gavin Newsom (D) signed into law the most substantial changes to California’s charter school laws since passage of the original California Charter Schools Act in 1992. Among the changes was a two-year moratorium on new online charter schools till the end of this year. The state legislature will have to address the issue of whether to extend the ban on new online charter schools in the current session, which ends in September.

On Wednesday, assembly member Patrick O’Donnell (D), chairman of the Education Committee, will host an online briefing about the report for dozens of lawmakers and staff members. He said in a statement: "The research by Dr. Lafer and In the Public Interest highlights the need for accountability to ensure that public dollars are used for public purposes. Their recommendations will inform policy makers of necessary reforms.”

The report’s authors — led by Gordon Lafer, a political economist and professor at the University of Oregon’s Labor Education and Research Center — reported that they identified 156 charter schools that deliver their educational program primarily online, and that the educational outcomes “are significantly below the state average, by every measure.”

For example, data for the 2018-2019 school year from California School Dashboard shows that the average English Language Arts score on the annual Smarter Balanced Summative Assessment for all students in the state was 2.5 points below the level deemed to have met the assessment’s standards for each grade. By comparison, students in online charter schools averaged 29.3 points below that standard.

“Putting that outcome in context, the score for online charter schools as a whole would rank in the 33rd percentile of all California schools. In math, online charter schools were further below the state average, equivalent to ranking in the 12th percentile of all California schools,” it says. “These schools’ graduation rates were 13 points below the state average, and only 12.6 percent of graduating students in online charter schools were deemed ready for either college or a career.”

Online charter schools have long said that their student outcomes are a result of enrolling atypical students, but the report says the poor performance “cannot be attributed to serving a more disadvantaged population.” Online charter schools, it says, “serve fewer students with needs than average schools in two important ways: they have significantly fewer low-income students, and they have less than one-third as many English learners.”

Furthermore, the report says: “Adding insult to injury, the state is wasting hundreds of millions of dollars a year by funding these schools at a level far above their costs.”

While “it is common sense that the cost of operating an online charter school must be less than that of running a brick-and-mortar school,” the report says that “California’s online charter schools, with very few exceptions, receive the same dollars per pupil as a physically existing school with classrooms, buses, a cafeteria, and maintenance and security staff.”

Even teachers’ salaries are less in big online charter networks, the report says. “In 2018-19, for instance, the average California teacher’s salary was $83,059, but the average salary for teachers at the largest Connections Academy school in California was less than $53,000,” it says.

“To the extent that funding for online charter schools exceeds the actual cost of operation, the government is wasting many millions of tax dollars that are desperately needed in school districts across the state,” it says.

In an effort to measure the profits online charter schools make, the report’s authors compared California’s per-pupil funding with fees charged for the same products in other jurisdictions.

The two largest online charter chains in the United States are K12 and Connections Academy. Connections Academy, which operates six schools serving 6,500 students in California, is a subsidiary of Pearson, a multinational corporation. Pearson also operates an online private school called the Pearson Online Academy for Americans stationed abroad who want their children to earn an American diploma, or for those in states that do not allow charter schools.

The curriculum for Pearson Online Academy and California Connections Academy schools are virtually identical. But, the report says:

While the product may be the same, the cost for these courses is dramatically different.
California taxpayers pay approximately $10,300 for every student who attends a Connections Academy school. By contrast, the tuition for enrolling in the Pearson Online Academy is just $4,800 for elementary school students, $5,880 for middle school, and $6,880 for high school.
Pearson Online Academy is a private school run by a for-profit multinational corporation, so presumably the company is earning a profit or it would shutter operations. It seems, then, that even at the highest rate of high school students, California taxpayers are paying a markup of at least 35 percent – approximately $3,500 per student – above all costs including reasonable profit.
Across all the schools in this chain, then, California taxpayers are now wasting over $22 million per year. In other words, if the state of California simply paid all Connections Academy students to attend Pearson’s private online school, taxpayers would save over $22 million per year.

Pearson took issue with the report, noting that states have individual mandates for how public online schools must operate, and that the costs vary according to what those directives. Pearson spokesman Scott Overland said the report was misleading and “focuses on outdated figures from a state with both stringent requirements and high funding levels for public schools.”

“The report then conflates this public, in-state school funding to the cost of a global, online private school — which is a faulty, ‘apples to orange’ comparison,” he said in an email.

The report makes recommendations for policymakers, including:

  • Prohibit public funding for online charter schools if a student’s home district already offers an online education program whose educational track record is as good or better than the charter school (parents who believe their student needs a different type of online program may appeal on a case-by-case basis).
  • Cap the statewide percentage of students that can be enrolled in online charter schools (Oregon caps this at 3 percent).
  • Ensure that per-pupil funding for online charter schools is in line with these schools’ actual operating costs, based on a state study of operating costs for online charter schools as a whole and “homeschool” charters as a special subset of these schools.

Here’s the full report:

(Adding Pearson comment)