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Published in Print: July 28, 2004, as Federal Grant Involving Bennett’s K12 Inc. Questioned

Federal Grant Involving Bennett’s K12 Inc. Questioned

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Teresa Kroger has never had it easier in 15 years as a home-schooling mom.

An online education company founded by William J. Bennett plans lessons for her two elementary-age children. The former U.S. secretary of education’s company also provides the children with computers, art and science supplies, and textbooks. What’s more, it hires a teacher who consults with Ms. Kroger every two weeks.

And it doesn’t cost Ms. Kroger a thing.

The services here in Arkansas are provided by a federal grant program intended to expand public school choice, even though Ms. Kroger’s children and many others served under the grant have never attended a public school.

The U.S. Department of Education’s decision to award $4.1 million over the past two years—with the prospect of millions more—to a project involving Mr. Bennett’s company raises questions about whether the privately held, for-profit K12 Inc. benefited from political connections.

An Education Week review of federal and state documents, as well as information from sources familiar with the grantmaking process, shows that K12 and its Arkansas partner received the grant despite the fact that one project that independent reviewers rated higher was not funded. The choice of a lower-rated proposal over a higher-rated one in the department’s competitive-grant process is highly unusual, according to sources inside and outside the department.

The project received approval from political appointees even though some employees inside the department questioned whether it fit a basic criterion for the program: that the students benefiting from the grant attend public schools.

Education Department officials acknowledge that the office of the deputy secretary of education chose to finance the Arkansas-based project even after department employees who managed the competitive-grant program initially recommended a slate of 10 projects that did not include the online school.

The department picked the project because it was "especially innovative," said Susan Aspey, an Education Department spokeswoman.

Ms. Aspey also said department officials were satisfied that the Arkansas online school is a public school because its students are enrolled in a local public school even though they do not attend it.

But even the head of the online school for Mr. Bennett’s company said that it is not a public school. In fact, earlier this year, the Arkansas legislature refused to fund it as a public charter school.

Many people who have worked at the Education Department say the agency’s grant award went against practices of previous administrations. In the competitive-grant process, the department almost always funds projects that peer reviewers rate the best, said Thomas W. Fagan, a former department employee who managed dozens of competitive-grant programs during his 29 years of service under both Republican and Democratic administrations.

"We were very scrupulous about going with the peer reviewers’ recommendations," added Christopher T. Cross, speaking of his tenure at the department under former President George H.W. Bush. "I don’t remember ever going against the peer reviewers’ recommendations."

Mr. Cross, who oversaw competitive grantmaking as the assistant secretary for educational research and improvement, said that the department’s leadership has leeway to choose projects over those recommended by peer reviewers.

"It would have to be an extraordinary situation for that to occur," he said.

One department employee contends that officials of the current Bush administration acted out of political interests in making the Arkansas award and failed to follow the congressional intent for the grant program or the department’s procedures for awarding competitive grants.

"Anything with Bill Bennett’s name on it was going to get funded," said the employee, who has knowledge of how the department decided to make the grant to K12. The employee asked not to be identified.

Picking K12

On Oct. 4, 2002, the Education Department announced that 13 projects would receive a total of $23.8 million in funding in the first year of the Voluntary Public School Choice Program. The competitive-grant program was first authorized as part of the No Child Left Behind Act, which President Bush had signed into law in January of that year.

The program’s purpose is to expand the choice options for public school students. The law directs the department to give priority to programs that offer a wide variety of choices and have the greatest impact on moving students from low-performing public schools to high-performing ones.

The $2.3 million grant for the Arkansas Virtual School technically went to the Arkansas Department of Education, which worked with McLean, Va.-based K12 to establish an online-learning academy. The federal department renewed the grant in 2003, giving the Arkansas project $1.8 million more, according to James Boardman, the state education department’s assistant director for information and technology.

The federal department hasn’t announced how much it will give the Arkansas project and others in the program this year.

Other grants in the program went to school districts such as Chicago; Portland, Ore.; Miami; and New Haven, Conn., which used the money to expand existing magnet school and other choice options. Two other state departments of education—Minnesota and Florida—also received grants.

The K12 program was not on the list of 10 grantees proposed by the program’s staff, which based its recommendation on independent peer reviewers’ grading of all grant applications, according to the source familiar with the grant. The Arkansas project was not on the list because it did not score high enough in reviewers’ grading of all the proposals submitted to the department.

According to records obtained by Education Week under the Freedom of Information Act, peer reviewers gave the Arkansas Virtual School’s proposal a score of 95 on a scale of 115, ranking it 11th among the 13 selected for funding.

The office of William D. Hansen, then the deputy secretary of education, chose to add K12 and other projects, said Ms. Aspey of the department.

"We always have the discretion to fund additional applications, and that’s exactly what happened in this case," Ms. Aspey wrote by e-mail in response to questions submitted in writing. "We wanted a diverse pool of grantees that were each trying innovative, distinct approaches to expand parental options in education."

One project on the original list was eventually not funded, according to Ms. Aspey. Other projects received about half as much as they would have under the proposal submitted by the program’s staff, according to the department source.

Such changes at the upper levels of the department’s management are uncommon, Mr. Cross and Mr. Fagan said.

"You have to have pretty good justification for bypassing a higher-scoring application in order to fund a lower-scoring one," said Mr. Fagan, now an independent consultant. "It would have to be rooted in the legislation itself."

School at Home

In the cozy wood-paneled den of Ms. Kroger’s Little Rock home, the mother of eight shares a chair in front of a computer with her second-youngest child, Gabriel, 6. The kindergartner and his mother study a lesson about Abraham Lincoln and slavery. Later, Gabriel gets out his crayons and colors a map of states gray or blue for those that had slavery and those that didn’t.

Next to them, 11-year-old Carrie sits before another computer, surrounded by shelves stacked with bins of supplies designed to help complete lessons in mathematics, art, and science.

Ms. Kroger, who has home-schooled all of her seven school-age children (her eighth child is 2 years old), is thrilled with the K12 program. It provides step-by-step lessons with options for enhanced lessons or for sticking to the basics. Online lessons provide parents with a script and follow-up assessment questions. There are online progress reports and attendance; a certified teacher tracks students’ progress and provides guidance.

"This program literally tells you what to say," Ms. Kroger said. "If you can read, you can do it."

Though Ms. Kroger had amassed a library of resources for home schooling over the years, she said K12’s lessons are more creative and provide more depth than those she did on her own. For example, when her children learned about ancient Egypt, they built a pyramid out of sugar cubes.

"The very idea that I could come up with this [kind of detail], this advanced on my own is impossible," she said.

The Arkansas Virtual School began operating in January 2003 with about 400 students. As of March of this year, 60 percent of the virtual academy’s K-7 students were previously home-schooled, and 15 percent came from private schools or their schooling history was unavailable, according to a June 11 report by the Arkansas Division of Legislative Audit. The other 25 percent came directly from public schools.

Nearly 90 percent of students in the program are white, and 5 percent are African-American, Mr. Boardman said. The others are Hispanic, Asian-American or Native American.

With a majority of the program’s participants coming from a home-school setting, critics say the Arkansas online school doesn’t move the state’s students from low-performing schools to high-performing ones—one of the priorities in the federal legislation.

"I don’t think there’s any evidence that’s what’s been happening here," said Richard A. Hutchinson, the government-relations director for the Arkansas Education Association.

Bryan W. Flood, a spokesman for K12, said that the company’s virtual school slots are typically filled by home-schoolers at first, but that their ranks gradually decrease over time.

Randall Greenway, the head of school for the Arkansas Virtual School and an employee of K12, said that his academy is targeting those affected by substandard public schools, and that the program has been wildly popular. For the upcoming year, he said, there are 1,375 applications for 430 K-8 slots (the school has added a grade). Though school officials use a lottery to choose students, they will give preference to any child in the attendance zone of a school labeled "in need of improvement," he said.

That includes home-schooled students who live in those attendance zones, Mr. Greenway said. "They’re still residents of the local school district," he said. "This was a new public school choice that brought students back into the local school system."

Schools that consistently fail to meet testing requirements for two or more years receive the "needing improvement" label under the No Child Left Behind Act.

Public School?

In the days before the public-school-choice grants were announced in 2002, federal Education Department officials had concerns about whether the Arkansas project qualified to receive money, according to department documents.

On Sept. 26 of that year—just four days before the deadline for awarding the fiscal 2002 grants—three federal officials convened a conference call with Mr. Boardman, the Arkansas education official who had applied for the grant.

According to a written record of the call, the federal officials asked whether the online school would be considered a public school.

In response, Mr. Boardman said the school would not be considered a public school under state law.

The next day, Mr. Boardman wrote to the federal department’s office of general counsel responding to "the concern raised by one of your attorneys about home school and private school students enrolling" in the virtual school.

Mr. Boardman wrote: "Only students who are enrolled in a public school district are eligible for this program." To ensure that eligibility, the virtual school would require all students coming into the program to enroll with their local public school districts.

In practice, students never have to take a class in a public school, however, to be considered enrolled in the school and eligible for the virtual school program, though they do take statewide tests in their local school buildings.

"I don’t look at it as just a way to get around something," Mr. Boardman said of the arrangement.

According to Ms. Aspey of the federal Education Department, "the department worked closely with the Arkansas Department of Education to ensure that, under Arkansas law, the school was in fact a public school (and therefore eligible for support under the Voluntary Public School Choice Program)."

But in an interview this month, Mr. Greenway the head of the Arkansas Virtual School, insisted that it is not a public school under state law.

To Mr. Flood, the K12 spokesman, the question of the school’s status is just "splitting hairs."

"It’s run by a government entity; it’s accountable to take standardized tests; there’s a set curriculum," he said. "By almost any objective standard, this is a public program."

Critics, though, question the reasoning behind the grant award and whether it’s appropriate for money intended to help rescue public school students from low-performing schools to be spent educating students who were previously home-schooled.

"To see money diverted from our public school coffers to support a for-profit company helping parents home-school does not seem like an appropriate use of public money," said Barbara Stein, a policy analyst at the National Education Association.

Politics and Connections

When the Arkansas school started, Mr. Greenway hoped it would soon be declared a charter school and receive state funding for the students enrolled. But the charter application got caught in a swirl of state politics and now rests in limbo.

Though state board of education members had signed a charter for the school by January of this year, the legislature had other plans. Lawmakers declined to finance the school and specifically wrote a clause into a school funding bill saying that the state would fund only charter schools that "provide education services in a traditional public school setting." Virtual, or online, schools were excluded.

Gov. Mike Huckabee, a Republican, vetoed the provision, but the legislature overrode the veto in February.

Mr. Greenway said that had the charter been approved and funded, the Arkansas Virtual School would have started a full-service virtual public school, adding components such as special education and physical education. School officials will seek funding again in the next legislation session.

State Sen. Percy Malone, a Democrat and member of the joint budget committee, said the charter-funding request had raised "a lot of red flags," including the fact that the virtual school was recruiting home-schooled and private school students. The charter application also included no cap on the number of students who could enroll or on the amount of money the state would be forced to pay, Mr. Malone said.

"The more I learned, the more distraught I was over what’s going on here," he said of the debate over potential charter status for the school.

Some have concerns about the ties between the federal and Arkansas departments of education and K12 Inc.

U.S. Secretary of Education Rod Paige was an unpaid K12 advisory-board member for about a year until he left to take his Cabinet position in 2001.

Michael J. Petrilli, an associate deputy undersecretary in the federal department’s office of innovation and improvement, served as vice president of community partnerships at K12 before moving to his federal position. Mr. Petrilli, who worked in the office of the deputy secretary in 2002, was not involved in decisions related to the grant to K12, Ms. Aspey said.

And of course, there’s Mr. Bennett, who served as secretary under President Reagan and remains active in Republican politics, fund-raising for GOP candidates and serving as a conservative voice for interviewers.

In Arkansas, Mr. Greenway served as the state department’s charter school liaison until December 2002, when he left to run the virtual school. Two other K12 employees, the Arkansas school’s operations manager and the technology director, were also state education department employees.

In 2001, the federal Education Department awarded a $2.5 million grant to the Pennsylvania Virtual School, which subcontracts with K12 to provide curriculum. At the time, Charles B. Zogby, K12’s senior vice president of education and policy, was the state’s education secretary. That grant came from the department’s Fund for the Improvement of Education, a pot of money that Congress gives the department broad discretion to allocate based on the agency’s priorities.

Unlike that grant, however, the department awarded the Arkansas grant from a program that Congress specifically directed the department to administer based on the quality of the applications.

Observers and veterans of the federal Education Department say the agency should limit its discretionary grantmaking to the Fund for the Improvement of Education.

"The discretion should be in that pot," said Mr. Cross, the former assistant education secretary, "not in others that are peer-reviewed."

Michelle R. Davis reported from Little Rock, Ark., and Washington. David J. Hoff reported from Washington.

Vol. 23, Issue 43, Pages 1,24-25

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