Archives for category: For-Profit

This comes from “In the Public Interest,” an organization that reports on outsourcing and privatization, which is usually NOT in the public interest.

Donald Cohen writes:

As we approach Election Day, a number of governors in tight races are finding that privatizing public services isn’t good politics. But it may be good for campaign fundraisers seeking donations from corporations that want government contracts.

A new report released by the Center for Media and Democracy highlights the intensive efforts of governors seeking re-election to privatize important public services to private firms. Time after time, outsourcing has gone awry, generating worse outcomes for the public, scandals, lawsuits, and scorching headlines that are impacting the campaigns. The report includes examples from Florida, Kansas, Michigan, Ohio, Pennsylvania, Maine, and Wisconsin.

Here are examples from the report:

• In Michigan, Governor Rick Snyder outsourced prison food service to Aramark after the company spent half a million dollars on lobbying. The contract has been plagued by scandals, including maggots, employees smuggling drugs and having sex with inmates, and even murder-for-hire allegations.


• In Pennsylvania, Governor Tom Corbett has outsourced millions in legal contracts to major campaign contributors to defend ALEC-style voter ID legislation and other policies. The governor also attempted to privatize liquor sales, which would have benefited another set of deep-pocketed contributors like retail giant Walmart.
 Walmart donated $33,500 to Corbett’s campaign.

• In Florida, Governor Rick Scott has overseen a massive expansion of for-profit online schooling to companies that spent millions on lobbying. Scott signed a bill requiring every student to take online courses and tests benefiting firms like K12 Inc.

The outcomes of these races could very well be an important referendum on outsourcing and privatization. We’ll be watching.
Sincerely,

Donald Cohen
Executive Director
In the Public Interest

The blog has its own poet, who signs as “Some DAM Poet—Devalue Added Model.” Here is his or her poem for Imagine charters in Ohio:

“”Imagine” (sincere apologies to John Lennon)

Imagine no regulation
It’s easy if you try
No tax below us
Above us only $ky

Imagine all the charters
Living for today

Imagine there’s no oversight
It isn’t hard to do
Nothing to sweat or lie for
And no inspections, too

Imagine all the charters
Living life in peace

You may say I’m a dreamer
But I’m not the only one
I hope someday you’ll join us
And the charters will cheat as one

Imagine no prosecutions
I wonder if you can
No need for lawyers and trials
A brotherhood of scams

Imagine all the charters
Ruling all the world

You, you may say I’m a dreamer
But I’m not the only one
I hope someday you’ll join us
And the charters will rule as one

Where have the state watchdogs been while Imagine Charters have profited handsomely with taxpayer dollars?

Where has the media been!

The Toledo Blade reports:

“The charter school Imagine School for the Arts is paying rent of nearly $1 million a year on a downtown building with the education funding it gets from the state, prompting criticism from a progressive advocacy group that studied charter-school finances around the state.

“The complicated financial arrangement also involves a school-affiliated trust company spending more than $7 million last year to buy a building valued at less than $2 million.

“The liberal advocacy group ProgressOhio attacked the size of the rent payments at charter schools operated in Toledo and other Ohio cities by Imagine Schools Monday as excessive. Imagine is a national for-profit educational management company.

“According to ProgressOhio, Imagine’s subsidiary, Schoolhouse Finance, collected at least $14.4 million in public money last year for the company’s 17 Ohio schools. Of that, $8.9 million covered rent for long-term leases to Schoolhouse Finance. The $5.5 million balance went to pay “indirect costs” to Imagine to provide management services.

“The state of Ohio and its oversight have been asleep at the wheel. If you look at the Imagine schools and the annual rents, they are outrageous,” said Brian Rothenberg, executive director of ProgressOhio in Columbus. “These for-profit management corporations have become profiteers, and they are taking this money to enrich themselves.”

The story says ProgressOhio receives union funding, as though that changes the facts. No, it does not. If the state won’t investigate, then welcome to anyone who does.

“According to ProgressOhio, Imagine Schools pays annual rent of $301,320 for the Clay Avenue Community School building, $175,464 for the Hill Avenue Environmental School, and $942,549 for the Madison Avenue School for the Arts.

“In addition, all three pay a management fee to Imagine: $483,852 for Clay Avenue, $124,646 for Hill Avenue, and $608,020 for Madison Avenue.

“All three had a performance index grade of D in the most recent statewide report card. The district in which those schools are located, Toledo Public Schools, had an overall performance index grade of D.”

Imagine buys the building, then leases it to itself at inflated rentals. That’s the business plan.

Read more at http://www.toledoblade.com/Education/2014/10/14/Charter-school-rent-stirs-debate.html#c7BTQOGG4UQjbbxI.99

Many Imagine charter schools are part of a portfolio owned by an entertainment and real estate corporation. Nine Imagine schools are in Ohio. They have a business plan that makes them a good investment as long as they don’t get shuttered for poor performance. Imagine buys a building, then rents the building to itself for the school. It pays a very high rent, above market rates. Imagine turns a profit on these sale-leaseback deals.

The New York Times scrutinized Imagine’s business dealings a few years ago.

St. Louis closed six Imagine charters in 2012.

Most taxpayers assume that they are paying for education, not for corporate profits. They don’t understand how for-profit charters work. ProfitsFirst.

Governor John Kasich has been charter-friendly, to say the least. Ohio is home to some of the nation’s most profitable charter operators. Think ECOT. Think White Hat. These charters gove generously to friendly politicians (think Kasich and the Ohio Republican Party). But now Imagine charters had some embarrassing publicity about some of their lucrative sale-leaseback deals, and even charter champions are calling them “crony capitalists.”

So ProgressOhio has called for an investigation of Imagine.

““Our ‘fiscally conservative’ governor needs to explain why he’s allowed all this money to be wasted and all these kids to be hurt. And his charter school watchdog needs to go,” said Brian Rothenberg, executive director of ProgressOhio.

“Rothenberg asked why David Hansen, who heads the state Department of Education’s charter-school accountability office, has ignored the problem, noting that he formerly served on the board of an Imagine school in Columbus and should have known about its lease arrangement.

“Hansen, husband of Kasich’s chief of staff, was on Imagine Academy of Columbus’ board and among those recommending that the school be closed because of poor academic performance. The school closed but reopened weeks later as a new Imagine school with the same lease, which directs more than half of its state aid to rent.”

And more:

“The Dispatch reported on Sunday that five Imagine schools in Franklin County received a combined $20.2 million in per-pupil state aid in the 2012-13 school year. A quarter of that money — more than $5.1 million — was spent on rent, all under long-term leases with Schoolhouse Finance, an Imagine subsidiary.

“A sixth school, Imagine Integrity Academy, spent 81 percent of its $440,009 in state aid on rent in the 2011-12 school year, the most recent audit available.”

High profit margin, no?

“Research by ProgressOhio showed that, despite Imagine’s poor academic performance, Imagine and Schoolhouse Finance collected at least $14.4 million in public money last year for their 17 Ohio schools, according to records from the schools and state auditor.

“More than half — $8.9 million — covered rent for long-term leases to Schoolhouse Finance. The $5.5 million balance went to pay “indirect costs’’ to Imagine to provide management services.

“Rothenberg said the arrangement leaves little money for classroom instruction, and administrators for some of the schools complain that low teacher salaries have caused high staff turnover, which further undermines student achievement.”

Crony capitalism? Yes. Ripoff of public funds intended for children? What do you think?

K12 Inc. is a for-profit virtual charter school chain that trades on the New York Stock Exchange. It was founded by Michael Milken and Lloyd Milken. It is funded with taxpayer dollars. It advertises and recruits heavily to keep enrollment up. It has a high attrition rate.

Its cash-cow operation is the Ohio Virtual Academy. Look for significant lobbying in New Jersey, Illinois, Connecticut, Kentucky and New York, according to the investor conference call.

I don’t know about you, but I had a hard time reading this transcript. They might just as well have been discussing a corporation that sells tires, toothpaste, bundled mortgages, or manure. These guys are profiting from taxpayer dollars that are supposed. To pay for public schools, for bands, for nurses, for guidance counselors, for reduced class sizes, for libraries. They are taking money away from real instruction, real children, real schools. Have they no sense of shame? Would any of the investors on this call put their own children in a K12 virtual charter school? Bet not. Bet their kids are in really nice suburban schools or elite private schools.Not sitting in front of a computer and calling it a “school.” It’s not. It’s a business, and the kids it recruits don’t get an education.

NOTE: I just learned that I am allowed to quote only 400 words from the transcript, so accordingly, I will count 400 words and delete what remains.

http://investors.k12.com/phoenix.zhtml?c=214389&p=irol-reportsannual

RISK FACTORS (Page 33-48)

Page 42

“We generate significant revenues from two virtual public schools, and the termination, revocation, expiration or modification of our contracts with these virtual public schools could adversely affect our business, financial condition and results of operation.

“In fiscal year 2013, we derived approximately 11% and 14% of our revenues, respectively, from the Ohio Virtual Academy and the Agora Cyber Charter School in Pennsylvania. In aggregate, these schools accounted for approximately 25% of our total revenues. If our contracts with either of these virtual public schools are terminated, the charters to operate either of these schools are not renewed or are revoked, enrollments decline substantially, funding is reduced, or more restrictive legislation is enacted, our business, financial condition and results of operations could be adversely affected.

“Note at a k12, inc investor conference call on 10/9 the company addressed the loss of the management agreement for Agora Cyber Charter School in PA. http://www.huffingtonpost.com/2014/10/01/charter-schools-k12_n_5914580.html

“The school will continue to use the k12, inc curriculum, but will self-manage.
http://www.marketwatch.com/story/k12-inc-awarded-contract-to-be-curriculum-provider-for-agora-cyber-charter-school-2014-10-09″

Here is the transcript of the investor conference call. Grab your vomit bag.

http://seekingalpha.com/article/2559155-k12-inc-2015-guidance-update-call-oct-09-2014?part=single

K12, Inc., 2015 Guidance/Update Call, Oct 09, 2014

Oct. 9, 2014 3:30 PM ET | About: K12 Inc. (LRN)

K12 Inc. (NYSE:LRN)

October 09, 2014 8:30 am ET

Executives

Mike Kraft – Vice President of Investor Relations

Nathaniel Alonzo Davis – Executive Chairman and Chief Executive Officer

James J. Rhyu – Chief Financial Officer and Executive Vice President

Timothy L. Murray – President and Chief Operating Officer

Analysts
Jeffrey P. Meuler – Robert W. Baird & Co. Incorporated, Research Division
Corey Greendale – First Analysis Securities Corporation, Research Division
Jason P. Anderson – Stifel, Nicolaus & Company, Incorporated, Research Division
Trace A. Urdan – Wells Fargo Securities, LLC, Research Division
Sou Chien – BMO Capital Markets Canada

Operator

Greetings, and welcome to the K12 Inc. Guidance Conference Call for Fiscal Year 2015. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mike Kraft, Vice President of Finance. Please go ahead, sir.

Mike Kraft – Vice President of Investor Relations

Thank you, and good morning. Welcome to K12’s Fiscal Year 2015 Guidance Conference Call. Before we begin, I would like to remind you that in addition to historical information, certain comments made during this conference call may be considered forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and should be considered in conjunction with cautionary statements contained in our guidance release in the company’s periodic filings with the SEC.

Forward-looking statements involve risks and uncertainties that may cause actual performance or results to differ materially from those expressed or implied by such statements.

In addition, this conference call contains time-sensitive information that reflects management’s best analysis only as of the day of this live call. K12 does not undertake any obligation to publicly update or revise any forward-looking statements.

For further information concerning risks and uncertainties that could materially affect financial and operating performance and results, please refer to our reports filed with the SEC, including, without limitation, cautionary statements made in K12’s 2014 Annual Report on Form 10-K. These filings can be found on the Investor Relations section of our website at http://www.k12.com.

This call is open to the public and is being webcast. The call will be available for replay on our website for 60 days.

With me on today’s call is Nate Davis, Chief Executive Officer and Chairman; Tim Murray, President and Chief Operating Officer; and James Rhyu, Chief Financial Officer. Following our prepared remarks, we will answer any questions you may have.
I would now like to turn the call over to Nate. Nate?

Nathaniel Alonzo Davis – Executive Chairman and Chief Executive Officer

Thank you, Mike. Good morning, everyone. Thanks for joining us on the call today. We wanted to provide you with an update on our fiscal year 2015 count date enrollment as well as a guidance for the first quarter and for the full year.

Today’s guidance is a reflection of the trends in the markets that I outlined during our fourth quarter earnings call. Specifically, we saw a couple of our charter schools deciding to self manage their online learning programs. We’re also seeing more traditional school districts offering their own full-time online programs, along with supplemental learning options and online summer courses.
Education is evolving for the better, and families today have more choices in choosing full-time or part time virtual programs for their child. We believe that overall demand for virtual options in education is increasing, and this is translated into stronger demand for our institutional group, Fuel Education or FuelEd, which provides content and curriculum to school districts as well as private and charter school operators. At the same time, these market dynamics have also created a challenge to enrolling students in our traditional managed programs. And to help you understand this transition, we’re providing new guidance on student enrollment and revenue to clearly outline how K12 is participating in the growth of online learning use in public school classrooms.

Student enrollment and revenue data will now be provided for Managed and Non-managed Programs. Managed Programs are where K12 provides substantially all of the administration and education program management for an online program. Non-managed Programs include schools where K12 is the primary provider of content and technology and we may even provide instruction, management or other educational services, but K12 is not providing primary administrative oversight for the virtual school program.
And as you can see from the data we provided in this morning’s release, the 4.7% reduction in student enrollment from managed schools reflects this new market dynamic. It also reflects the events in Tennessee, where the state imposed an arbitrary enrollment cap midway through the enrollment season; and in Colorado, where our school partner took longer than expected to finalize their charter and subsequently, the curriculum contract with K12. We believe that enrollment in these 2 states were impacted by over 4,000 students this season. Also, this year, K12, in collaboration with the school boards we serve, made a concerted effort to keep students enrolled only if they were truly engaged and ready to learn, which also affected Managed Program enrollments.

Our partners are serious about running high-quality charter schools, with students who realize this is hard work. And they want to succeed by putting in the work. And while this is slow to growth in the near term, it better matches students to our core curriculum strengths and improves our reputation as a firm who is serious about providing high-quality education.

Even with the market evolution that’s beginning to unfold, we continue to see strong demand in Managed Public Schools. This year, we saw solid growth in select markets, including Texas, Michigan, Florida and Georgia. And at some point, we believe states like New Jersey, Illinois, Connecticut, Kentucky and New York will become states that allow online charter schools, although these states could take quite some time before opening up.

We will also attempt to be one of the educational management organizations chosen in North Carolina as that market commences an online charter trial next year.

[NOTE: I deleted the remainder of the conference call to abide by the guidelines of the company that supplied the transcript. It was hard to know which words count towards the 400 permissible, like instructions, the operator's comments, the names of participants, etc. I cut copiously.]

I have always hoped that leaders of the charter industry would call out the frauds in their midst. Where to start? It looks like they have finally turned against the profiteering of Imagine charters. This is from politico.com:

“CRONY CAPITALISM IN THE CHARTER SECTOR? Imagine Columbus Primary Academy in Ohio plans to spend $700,000 on rent this school year. That’s more than the charter school will spend on salaries and benefits, The Columbus Dispatch reports [http://bit.ly/1yrG77D ]. The cost of rent will eat up more than half of the school’s annual state revenue. Meanwhile, Imagine Schools Inc. – one of the nation’s largest charter school operators – rakes in hundreds of thousands in public tax dollars. It’s all thanks to a complicated real estate maneuver, the Dispatch said Sunday. A subsidiary of Imagine Schools Inc., named SchoolHouse Finance, buys buildings and resells them for two or three times the purchase price. SchoolHouse Finance then leases the building from the new owner and rents the space back to Imagine. “It’s legal, but that doesn’t mean it should be,” said Greg Harris, Ohio director of StudentsFirst, an advocacy group that supports charter growth. “We don’t want charter-school operators profiting as landlords.”

- “Let’s call this what this is: Crony capitalism,” Fordham Institute President Michael Petrilli tweeted [http://bit.ly/1s7ZXzT]. At least three states and Washington, D.C. are investigating Imagine for similar practices, the Dispatch noted. One state even shuttered schools operated by Imagine. After an investigation conducted by the St. Louis Post-Dispatch in Missouri, the state board of education shut down six schools run by Imagine in 2012. The paper uncovered real estate deals similar to the ones happening in Ohio and poor academic performance.”

This is a dynamite article about the predatory for-profit higher education sector by Glen Ford of Black Agenda Report. He pulls no punches.

He writes:

“The dominos are falling in the for-profit college racket, a cauldron of corruption that has crushed the dreams of millions of African Americans in desperate search for tools to navigate their way through a racist, cut-throat capitalist society. Corinthian College’s stock fell from a peak of $33 a share, ten years ago, to 33 cents last month, when it became clear that the federal government intended to pull the plug on the $1.6 billion a year rip-off. Corinthian – known to victims by the brand names Heald College, Everest, and WyoTech – will soon file for bankruptcy protection, shielding its bankster and hedge fund profiteers from liability for wanton theft and massive life-wrecking. More than 70,000 students at 107 campuses, half of whom were statistically certain to drop out before completely their courses, will struggle to find another route to mobility and dignity.

“Corinthian is only the third or fourth-worst offender in the pantheon of for-profit colleges created for the sole purpose of diverting public money to the coffers of hedge funds and mega-banks. Although the titans of this fraudulent industry have committed crimes far larger than Bernard Madoff, none of them will join him in prison, since their victims are largely Black people whose usefulness to Wall Street is limited to availability for super-exploitation, demonization and incarceration.

“Corinthian’s collapse – and the panic that reigns in the rest of the for-profit education pack – was triggered by the Obama administration’s decision to shut off the criminal enterprise’s federal funding faucet, which accounted for at least 83 percent of the company’s revenue stream. Since Corinthian, like its sister shysters, was created as a pass-through of federal dollars, it could not withstand the slightest pause in payments from various federal agencies. So, it folded. Other corporate educational fraudsters will soon follow Corinthian into bankruptcy, causing a shakeup in the industry that will probably result in a leaner and more vertically integrated structure of dream-sploitation. Billions of educational dollars will continue flowing straight from federal programs to Wall Street, but with little improvement to the life-chances of the supposed beneficiaries: the educationally deprived.

“The Obama administration may abhor the chaos in which players like the University of Phoenix and Ashford University have become the top producers of baccalaureate degrees among Blacks. But the administration – and the Democratic Party, as an institution – also worships at the alter of privatization. Rather than eliminate the felonious educational enterprises root and branch – and spend the money on a nationalized system of free education – Obama will continue to provide tens of billions to nourish the poisoned tree.”

Every year we spend $32 billion on these for-profit institutions. Why not use that money for tuition-free colleges for students who need higher education–and bypass Wall Street?

Ford adds:

“In previous decades, African American political leaders would have been out front in demanding a public agency to respond to the phenomenal Black craving for educational services. However, much of the Congressional Black Caucus has succumbed to the bribery of for-profit sugar daddies who, according to Sen. Durbin, “own every lobbyist in town.” Among the legions of for-profit lobbyists is Black former Maryland Rep. Al Wynn (who, while in office, acted as the Black Caucus bag-man for the corporate Democratic Leadership Council). Florida Congressman Alcee Hastings collected at least $54,500 from the education rip-off industry, according to David Halperin’s April 3 article in The Nation, “The Perfect Lobby: How One Industry Captured Washington, DC.”

“Hastings featured prominently in the groundbreaking May 27 Huffington Post piece “How the Congressional Black Caucus Went to War with Itself Over Wall Street,” which described his “epic argument” with Rep. Maxine Waters (D-CA) in 2011. Waters blasted Hastings “for sponsoring a measure that was seen as a gift to shady for-profit colleges. What was more embarrassing than selling out, Waters told her assembled colleagues, was selling out cheap to nickel-and-dime scammers like the for-profit college industry. If you’re going to sell your soul, she admonished, have some self-respect and sell high. (Hastings didn’t dispute the conflict, but he did dispute Waters’ point. ‘It would be a mistaken premise,’ he says, smiling. ‘There are a hell of a lot of for-profit schools.’)”
Key members of the unelected Black Misleadership Class are also beholden to Wall Street’s for-profit federal educational money conduits. The National Urban League got a $1 million check from now-doomed Corinthian Colleges after president Marc Morial wrote a favorable op-ed in the Washington Post. Morial then joined Corinthian’s board of directors, a sinecure that is worth between $60,000 and $90,000 a year in cash and deferred stock.

“Al Sharpton, the MSNBC host and presidential pit bull, reciprocated the University of Phoenix’s sponsorship of his TV special Advancing the Dream with a puff piece on the for-profit giant’s online offerings, featuring the NFL’s Larry Fitzgerald, a Phoenix student and booster. Phoenix University excels all others in funneling Black people’s educational dollars directly to Wall Street via the Apollo Group, a $5.36 billion corporation with ties to the super-predatory Carlyle Group.”

“For-profit education has diverted many billions of dollars that Black students never actually possessed for even one moment– but will owe for much of the rest of their lives – into the accounts of the fabulously wealthy.”

And Ford writes:

“One exception is historically Black colleges and universities (HBCUs), now reeling from a funding crisis set in motion by Obama administration “reforms” in student aid, which led to dramatic decreases in student enrollment. HBCU’s and community colleges attempt to serve much the same demographic that is so grievously exploited and damaged by for-profit vultures. Therefore, these two step-children of American education are the logical starting points for building a publicly funded, virtually free higher educational system, sustained by a lion’s share of the $32 billion in federal moneys that annually pass through for-profits on the way to Wall Street. (Total federal spending on HBCUs is currently less than $1.5 billion a year, and California’s community college system, the nation’s largest, is in constant crisis.)

“Nobody can claim that the feds don’t have the money; Washington spends it lavishly on edu-criminal enterprises. Most importantly, history shows conclusively that most of established U.S. public and private higher education is institutionally incapable of serving anything approaching sufficient numbers of darker and poorer Americans – who are then corralled by scurrilous aid-snatchers and dream-breakers.

“The for-profits should be put out of business with all deliberate speed, but it would be a further crime to shift that portion of federal aid to schools that have never demonstrated a willingness or competence to serve the demographic so cruelly exploited by the likes of Corinthian. The federal dollars that made Phoenix and Ashford Universities the top sources of Black baccalaureate degrees (for whatever that’s worth) should not be diverted to institutions that are manifestly hostile to Black people, based on enrollment figures.”

Ford takes no prisoners. Read the article in full.

“The Notebook” reports on the disgraceful funding of schools in Pennsylvania, especially Philadelphia.

Corporate tax breaks mean more to Governor Corbett and the Legislature than children. Public schools don’t make campaign contributions. Charter operators and corporations do.

Says “The Notebook”:

“It’s hard to overstate the deplorable conditions facing Philadelphia school children again this fall: another year of bare-bones education, overcrowded classrooms, and gaps in essential services like counseling and nursing.

“But Philadelphia is by no means the only Pennsylvania district to see budgets slashed and the jobs of teachers, librarians, nurses, and counselors eliminated. Districts across the state are reeling from four years of austerity. Here’s how some were responding this summer:

“Cutting activities: More than one-fourth of districts were expecting to cut extracurricular activities this year, according to a survey by the Pennsylvania Association of School Business Officers.

“Laying off teachers: Allentown’s school district axed more than 60 teaching positions – on top of more than 400 cut in the three prior years.

“Eliminating the arts: A district near Scranton announced it can no longer afford music instruction for students through 2nd grade.

“Something is seriously wrong with this picture. Pennsylvania is not a poor state and is situated in one of the richest countries in the world. But many districts can’t provide our children with school personnel we once took for granted. Not to mention books, technology – and in some cases, soap and toilet paper.

“The Corbett administration would like us to believe that the problem in Philadelphia is that teachers haven’t sacrificed financially. But teachers deserve to be adequately compensated for their vital work and are right to resist a race to the bottom in education spending.”

Corbett is a disgrace.

There’s is a lot of money to be made in education but not by teachers.

 

“In the Publiic Interest” reports on privatization scams. Today it wrote:

 

“Politico reports that the National Urban League “is stepping up its advocacy in support of the Common Core with new radio and TV spots narrated by CEO Marc H. Morial.” In July, Black Agenda Report reported that “the National Urban League got a $1 million check from now-doomed Corinthian Colleges after president Marc Morial wrote a favorable op-ed in the Washington Post. Morial then joined Corinthian’s board of directors, a sinecure that is worth between $60,000 and $90,000 a year in cash and deferred stock.”

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