“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” — Upton Sinclair
We’ve known something fishy was going on with virtual charter schools since 2017, when a Chalkbeat Indiana investigation exposed shady business practices and lousy test scores and graduation rates at Indiana Virtual School and its sister school, Indiana Virtual Pathways Academy.
A blockbuster report this week from the State Board of Accounts shows just how bad it was – and it was worse than we’d imagined. The report charged that the schools overbilled the state by $68 million by vastly inflating the number of students who were enrolled in and attending classes online.
It also found schools made $85.7 million in questionable payments to vendors in which school officials or family members had an interest. Much of the taxpayer money that the schools received, the report shows, went to a network of for-profit businesses tied to school founder Thomas Stoughton and his associates.
The state investigatory report suggests officials at the virtual schools were “focused on maximizing profits and revenues,” not on serving students.
How did they get away with it? For one thing, they appealed to the dominant ideology in the Republican-controlled state government, which holds that choice and competition in the educational marketplace are an inherent good. For another, they played the game of politics.
Businesses that were associated with and benefited from Indiana Virtual School and Indiana Virtual Pathways Academy gave over $140,000 since 2016 to the campaigns of Republican legislators and Gov. Eric Holcomb. The schools also paid over $300,000 to a high-end lobbying firm, according to the report.
That’s in addition to similar amounts paid by other online education providers – e.g., K-12 Inc. and, for a time, Connections Academies – to promote an environment conducive to virtual schools.
Indiana Virtual School and its initial operator, the Indiana nonprofit Business Consulting Inc., worked with politicians from the get-go. In July 2011, just a month after the school got its first charter, its board approved a contract with the consulting firm of state Sen. Travis Holdman, R-Markle.
Holdman said in a statement that the schools paid him a monthly retainer from 2011 to mid-2019 to be “available for general business consulting on legal and personnel matters, contract interpretation, the relationship with the school’s authorizing entity and strategic planning.” He said he had no day-to-day involvement with the schools and terminated the contract once news media reported “alleged malfeasance” by school officials.
Early board members of Indiana Virtual School included Sue Richardson, a former member of the State Board of Education, and Linda Chezem, an influential retired state appeals court judge.
Daleville Community Schools, a small, rural school district near Muncie, approved the charters for Indiana Virtual School and Indiana Virtual Pathways Academy and was supposed to monitor their performance. That’s an unusual situation. Most charter schools in Indiana are authorized by Ball State University, the mayor of Indianapolis or the Indiana Charter School Board.
But Daleville, by serving as authorizer, was able to collect 3% of all money the two virtual schools received from the state. As enrollment ballooned, so did Daleville’s revenues. In a sense, the authorizer was another “related party” with a financial stake in the schools’ growth.
Another connection between Daleville Community Schools and the virtual charter schools hasn’t been widely reported: David Stashevsky, a Daleville administrator, was chief academic officer of Indiana Virtual School in 2011-12. He quit after one year and sued, alleging he hadn’t been paid. Court documents suggest Stashevsky intended to work part-time for the virtual school while keeping his full-time position at Daleville; but Stoughton, the Indiana Virtual School founder, thought he should be devoting more effort to recruiting and enrolling online students.
The lawsuit was settled in 2016. According to Indiana Virtual School’s 2015-16 audit, the school agreed to pay an unnamed former employee, presumably Stashevsky, $200,000 to settle litigation. The suit had been pending in 2015, when Daleville agreed to extend Indiana Virtual School’s charter for five years.
Enough blame to share
Who’s responsible for this mess? As Chalkbeat Indiana says in a story following up on the state investigation, there’s plenty of blame to go around.
You have to start with the network of people who ran and profited from the schools. It’s clear that they pushed relentlessly to grow enrollment without much concern for whether students were learning; now the state is looking to them to recover $68 million or more. And you can’t disregard Daleville Community Schools, which had plenty of evidence of problems but waited until 2019 to revoke the schools’ charters.
But state legislators and policymakers can’t escape responsibility. In their rush to promote alternatives to public schools, they created a Wild West environment where virtual schools could play fast and loose with public funds.
When problems with Indiana Virtual School and Indiana Virtual Pathways Academy came to light – thanks to reporting by Chalkbeat’s Shaina Cavazos – it became clear the state had to do something. A State Board of Education committee created recommendations for strengthening regulation of virtual schools. But the full board struck some of them, fearing they would stifle “innovation.”
Then the General Assembly, in its 2019 session, watered them down further. The law it passed required orientation for students in virtual schools and barred districts, like Daleville, from authorizing them. But the legislature balked at checking the schools’ growth or requiring minimum student-teacher ratios.
Lawmakers seem to think they’ve fixed the problem. They haven’t.