Virtual charter schools are a cause for concern. These bills could help.

A slew of education bills this session seek greater regulations for virtual charter schools, and these calls for greater oversight are warranted.  Since the Statewide Virtual Charter School Board was created in 2012, total enrollment in virtual charter schools has soared to over 24,000 students. Students enrolled in virtual charter schools take classes online and may receive some face-to-face instruction with a teacher. Skyrocketing student growth over the past seven years means that virtual charter schools receive a growing share of state funding, and concerns center around how these public dollars are used and their impact on student outcomes. 

One company dominates virtual charter school enrollment in Oklahoma  

Of the four statewide virtual charter schools Epic Charter Schools is by far the largest and has received the most scrutiny over the years.  Epic enrollment has grown from 1,700 students in 2011-2012 to just over 20,000 PK-12 graders in 2018-2019. It now boasts more students than Oklahoma’s fifth-largest school district, Putnam City Public Schools. This year alone Tulsa Public Schools lost almost 500 students to Epic from August to December, and this growth affects funding. In January 2019, Epic Charter Schools received $38.7 million in mid-year adjustments, the largest of any school district and more than the total amount ($33.4 million) that was distributed to the rest of the state’s public schools during mid-year adjustments. The State Department of Education distributes adjustments mid-year largely based on actual fall enrollment counts. Epic’s total state funding has grown substantially as well. In 2019, Epic will receive $112 million in total state aid funding, nearly double what they received in 2017. 

[pullquote]Epic’s graduation rate is considerably lower than the state’s 86 percent average with just 44 percent of students graduating from Epic in 2017-2018.[/pullquote]

Virtual charter schools lack financial transparency and accountability  

Virtual charter schools are not held to the same financial reporting requirements as brick-and-mortar schools, and Epic’s management structure raises questions about the school’s fiscal responsibility. While Epic is the school’s public-facing name, state funding goes to a nonprofit called Community Strategies, Inc. which governs the school, and the for-profit Epic Youth Services provides its management services. Epic Youth Services receives 10 percent of Epic’s total revenue to pay for its management costs along with $125,000 for “development services.” While public schools are required to report how state funds are spent through the Oklahoma’s Cost Accounting System, Epic does not have to issue financial reports for the companies it contracts with. This lack of transparency makes it difficult to hold Epic accountable for the approximately $11 million of public money flowing through Epic Youth Services, its contract management company. 

Virtual charter schools receive the same enrollment-based level of state aid funding as brick-and-mortar charters despite the fact that they do not have school facilities to operate or maintain. This incongruity makes understanding how virtual charters spend state funding especially important. Ensuring greater accountability is also important because the Superintendent of Epic Charter Schools is the co-owner of Epic Youth Services, the for-profit management company. Establishing financial transparency would help reveal any potential conflict of interest this overlap may involve.

Heavy recruitment and advertising efforts are fueling virtual charter enrollment growth

Epic’s ability to pay high teacher salaries raises additional questions about funding and fairness. Epic attracts teachers with salaries more than two times what traditional public schools are able to pay. The school advertises that their highest paid special education teacher made $106,324 in 2016-2017, and their average teacher made $63,093 that same year. Salaries this high are a huge draw for Oklahoma teachers whose average salary plus benefits was $45,245 in 2016-2017. Epic’s salaries call into question whether virtual charter schools receive a fair amount of public funding compared to brick and mortar public schools.

Anecdotal accounts also raise concern over teachers who have been hired mid-year to work for Epic without having been released from their previous contract with a brick- and-mortar public school. Currently, virtual charter schools are not held to the same rules which can revoke certification if a teacher is hired before being released by their former district. This can cause significant disruption for traditional public school students who may be left without a teacher in the middle of the year. 

Additionally, the need for greater financial accountability and transparency is heightened by Epic’s heavy use of advertising, referral bonuses and gifts to recruit students and teachers. Epic advertises through outlets ranging from TV commercials to sponsored children’s play areas in malls.  They also offer parents prizes such as tickets to concerts and family vacations as a reward for recruiting additional families. Epic reportedly rewards successful recruitment efforts by depositing additional money into a $900 Learning Fund, which students can use to pay for extracurricular activities such as soccer or dance. Epic has stated that these incentives do not come from state funds, but these aggressive growth efforts raise general concerns over stewardship of public dollars when placed in the context of well below average educational outcomes. 

Low performance and student outcomes

It is reasonable to expect that Epic’s large investments in student and teacher recruitment and teacher pay would produce high student outcomes. Instead, issues surrounding funding and transparency are much more alarming when placed in the context of Epic’s below average student performance. Epic students perform considerably lower on state tests than their peers overall. The most recent test data available for tenth-grade students from 2016-2017, shows that 26 percent of students statewide scored proficient or advanced in math compared to just 11 percent of Epic tenth grade students. Epic eighth-graders showed similar under-performance, with just 7 percent scoring proficient or advanced in math compared to 20 percent of students statewide. In addition, Epic’s graduation rate is considerably lower than the state’s 86 percent average with just 44 percent of students graduating from Epic in 2017-2018. Finally, Epic high school received an F in overall performance on their 2017-2018 school report card, while the middle school earned a C and elementary school scored a D. This performance mirrors national studies which show that not only are virtual schools less successful than traditional public schools, but that virtual schools managed by for-profit companies perform more poorly than non-profit virtual schools.  

A revolving door between virtual charter schools and traditional public schools 

Problems related to student churn between virtual charter schools and public schools is another cause for concern. Officials say this revolving door places a burden on public schools that may have to catch students up or recover credit hours when they return. While statewide data is not available on the number of students transferring between virtual charter schools and public schools, Tulsa Public Schools reported that of the 469 students who transferred to Epic this school year, more than one-third had returned to TPS by December. 

Legislation designed to address these concerns

A number of bills were filed this session to help address some of the concerns outlined above, but only a few remain active. HB 1395 (Rep. Dills and Sen. Pemberton) would enact substantial new oversight by subjecting virtual charter schools to same reporting requirements, financial audits, and audit procedures as school districts. In addition, it would require virtual charter school boards to uphold the same conflict of interest guidelines as public school boards of education. Epic currently has four board members who are also directors of Community Strategies, Inc., the non-profit that receives Epic’s state funding. HB 1395 would also address teacher transfer issues by including virtual charter schools in the provisions that revoke certification if a teacher leaves a school mid-year to work for another district while still under contract. HB 1395 is an important first step in collecting the financial data needed to better understand how virtual charter schools are spending public dollars. 

Two additional bills waiting to be heard in the House are SB 147 (Sen. Stanislawski and Rep. Bush) and SB 148 (Stanislawski and Rep. Fincher).  SB 147 addresses academic concerns by requiring the superintendent of a school district receiving a transfer student to file a statement detailing the student’s credit deficiency with State Board of Education, and SB 148 would restrict student enrollment to virtual charter schools to specific months during the year. SB 143 (Sen. Stanislawski and Rep. Fincher) was laid over in committee on April 9th, but it would require any charter school that contracts with a management company to provide detailed financial reports to the Oklahoma Cost Accounting System. 

While these bills are worth applauding, a number of other promising bills failed deadlines. HB 1229 and HB 1859 would eliminate the Statewide Virtual Charter School Board and place oversight under the State Board of Education.  SB 57 and SB 761 would address student and teacher recruitment practices while SB 82, SB 56, HB 2139, and HB 2522 would address student and teacher transfer issues. Lastly, SB 52, SB 54 and SB 212 would have addressed issues related to funding and how funding can be spent.

The good news is that while these bills are dead this year, they can still be heard during next year’s legislative session. The tremendous growth in virtual charter school enrollment and subsequent increase in the share of state aid dollars going to these schools, rightfully raises red flags over how this funding is spent and their impact on student outcomes. The legislature’s attempts to hold virtual charter schools to the same requirements as traditional public schools are laudable steps forward.