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School Reform and the Profit Motive

Critics of current trends in education reform, such as historian Diane Ravitch, often complain that they are up against a phalanx of business executives and rich investors more interested in making money than improving schools. These people, the critics say, march in lock step to replace our traditional public schools with charters, vouchers and online campuses so they can squeeze profits out of taxpayer dollars.

That sense of unity among the corporate types has been shattered in the past few weeks by a bitter quarrel between two of the reform movement’s most prominent leaders. One is hedge fund manager Whitney Tilson, one of the original founders of Teach for America and Democrats for Education Reform and a long-time board member of the KIPP charter school network in New York City. The other is Jeanne Allen, founder and president of the Washington-based Center for Education Reform since 1993 and a former candidate for the Maryland General Assembly.

Their clash has been over K12 Inc., the nation’s largest private operator of public schools, which runs 54 taxpayer-financed online schools in 33 states and the District of Columbia. Tilson started the fight with a presentation last month to the Value Investing Congress, in which he said, “K12’s aggressive student recruitment has led to dismal academic results by students and sky-high dropout rates, in some cases more than 50 percent annually.”

He said he was so disgusted that he was shorting the company’s stock — betting that its value would go down, when most of his investments are in companies he thinks will prosper.

K12 spokesman Jeff Kwitowski said that Tilson has since talked to company executives and declared he no longer believes K12 is deliberately enrolling kids it knows will fail.

Tilson is still shorting the stock, however. Tilson told me that “K12 is a good educational option for some kids, but a total catastrophe for others.” He went on: “In its early days, when the company was small, it was doing right by most students, but then it went public and ran amok, pursuing growth at all costs to satisfy Wall Street, with the result that, today, I believe a large faction — likely a majority — of its 100,000-plus students aren’t engaging and therefore aren’t learning.”

Allen has accused Tilson of sloppy assertions and wrongly giving credibility to academics and journalists who have long been critical of privately funded school reform efforts. “Data and integrity of data matter,” Allen said.

“Whitney tells us that he believes it a ‘catastrophe’ to permit low income students to be enrolled in an online school,” she said in a written response. “Really? It’s a catastrophe for a child whose schools and environment has not served him well and is disadvantaged and has any number of good reasons to do his schooling outside of a traditional classroom?”

Tilson is an excitable guy. His e-mails are full of his latest educational enthusiasms. He has been hard on Ravitch and others who think business executives have the wrong approach to school reform. But it is remarkable to see him publicly upbraid an organization like K12, started by people who share his fondness for charters and other new choices for parents.

The argument over K12 has exposed a long-standing but rarely reported split in the reform movement. Some reformers prefer to work for nonprofit organizations such as KIPP. Some think profit-making institutions like K12 will find more viable ways to improve schools. The profit-seekers, I think, have trouble attracting the best teachers and are more susceptible to bad press. But K12 revenue has grown 32 percent annually for the past decade, so the argument will continue. I don’t see much unity anywhere in the debate over what works best for our kids.