Cashing In on Oregon school kids

Oregon sends hundreds of millions of dollars to for-profit online schools with poor graduation rates and little oversight. 

By James Neff

Oregon Journalism Project

This investigation is the latest installment in OJP’s ongoing series “Oregon Schools: What Went Wrong.” 

Shortly before Christmas 2021, Matt Bowman met the school board in Nyssa, and told the Eastern Oregon district of 1,100 students how it could generate tens of millions of dollars in additional public funds. 

A former teacher, Bowman had founded OpenEd, a for-profit Utah online education company. He explained how OpenEd and Nyssa could set up an online, or virtual, school for kids across the state. In Oregon, funding follows the student, so by poaching distant students, Nyssa would get money from the state school fund. Nyssa would give a portion of those funds to OpenEd to operate its low-cost schools for distant students. Nyssa could keep the rest of the money—effectively, profit.

Bowman bragged to school board members that a recent story in USA Today had honored his company as one of the “Top 10 online educators revolutionizing the industry.” (In fact, the feature puffing up Bowman’s company was a paid ad.)

Darren Johnson, Nyssa’s superintendent at the time, loved the idea. A virtual school “will bring money to our district and help protect the funding for our schools,” he said.

Nyssa agreed to a contract with OpenEd that gave the Utah company 60% of the funding the district received from the Oregon Department of Education for each enrolled student. The district kept 40% for itself.

grew into a cash cow. This school year, it skyrocketed to 3,060 online students, more than twice the number that actually attend brick-and-mortar schools in Nyssa. After OpenEd was paid to run the program, Nyssa kept about $4,650 for each of its on-line students, or $14 million, nearly one-third of the district’s general fund support. A fraction of the $14 million covers the cost of special education for Nyssa Virtual.

The new money has transformed the Malheur County district: a new, $1.6 million football field, a $600,000 elementary school playground, science labs and, by spring, six new tennis courts. The money came from students who will never set foot in a Nyssa school.

 

Nyssa is not alone. As enrollment at traditional schools has fallen, the growth of online schools in Oregon has nearly tripled over the past 10 years. Today, 31,000 students, or about 6% of the state’s K–12 population, are enrolled in the state’s online programs. And while virtual schools have grown across the country, Oregon’s online schools are growing four times faster than the national average.

For rural districts like Nyssa, Mitchell, Baker City, Prairie City and Gervais, online schools have been a bonanza. But for students, the results are lousy.

Independent research and OJP analyses show virtual students on average fall well behind brick-and-mortar students for rate of graduation and key test scores.

Yet no one in Salem is addressing these shortcomings.

 

The neglect of virtual schools follows a pattern. Over the past year, OJP’s series “Oregon Schools: What Went Wrong” has repeatedly demonstrated how Oregon’s leaders have failed the state’s 531,000 students. The only governor in the nation who is also her state’s superintendent of public instruction, Gov. Tina Kotek found the will to ban cellphones in classrooms. But she has not used her authority to mandate how teachers teach reading, nor has she used it to require students to be tested the way they are across the country. And she has been absent on the issue of virtual schools. In Oregon, the people in charge of public education have mastered the art of not being in charge.

Pooja Bhatt, a former education adviser to two governors, said structural problems with public virtual schools have been ignored by state education leaders.
— Marcela Pulido photoPooja Bhatt, a former education adviser to both Kotek and Gov. Kate Brown, told OJP that the unaccountable growth of online schools in Oregon is an embarrassment.

“Virtual schools have sort of been able to proliferate unchecked by the Oregon Department of Education for many years,” Bhatt said.

“The public really needs to understand that public dollars are essentially going for inferior outcomes—even below traditional schools.”

 

How It Works

Oregon has 76 virtual schools, many of them run by for-profit education management companies such as Stride Inc., Connections Academy and OpenEd.

Some virtual schools, like Nyssa’s, are set up by districts. Others are public charter schools overseen by local nonprofit boards. Both offer online classes to students at a fraction of the money needed for a brick-and-mortar school because costs are lower: Online schools have no building, buses, lunchrooms or utilities and student-teacher ratios can be 150 to 1. Teachers are also paid far less than their unionized counterparts at traditional public schools.

Virtual schools also rely on a parent or guardian to serve as an unpaid learning coach. Much of the coursework can be done on a student’s own schedule, which is more convenient for families, but makes bonding with teachers and classmates more difficult.

The private online schools make big money for Wall Street investors and education companies alike. Stride, which runs three virtual schools sponsored by the tiny Mitchell School District, has a market capitalization of $3.3 billion and reported earnings last year of $338 million. Stride’s CEO received total compensation of $21,496,095 last year.

Even in Oregon, where students rank at or near the bottom in key performance metrics, an OJP analysis shows that virtual schools are even worse than their brick-and-mortar counterparts. Less than two-thirds of Oregon virtual students are on track to graduate on time, far below the state’s 87% average. Completion rates are even worse. Only 59% of virtual high schoolers graduate in four years—far short of the state’s 83% average. Depending on the virtual school, dropout rates are double or triple the state average.

A 2023 Annenberg Institute study found Oregon’s virtual students have “significantly worse long-term outcomes” for steady employment and earn far less than their counterparts educated in brick-and-mortar schools.

Nonetheless, some parents like Tricia Powell find virtual schools attractive.

Powell, a Douglas County resident, turned to a virtual public school when her husband died, leaving her to support their two school-age children. She got a job working from home and enrolled her kids in Oregon Virtual Academy, an online public charter school sponsored by the North Bend School District. “We wanted to knit together as a family,” she said.

Powell says her son and daughter thrived, and she now serves as president of the Oregon Virtual Public Schools Alliance.

“Parents are with their kids all the time,” she said. “They know their kids’ learning style and what’s best for them. And this has been the best for us. It’s been great.”

 

Tax Dollars for Dolphin Encounters

There is another reason virtual school enrollment has grown. Most of the online schools write parents a check if their kids attend: an annual tax-free amount per student of anywhere from $1,000 to $3,000 for loosely defined “education-related expenses.”

OpenEd, for instance, pays $2,750 per child. On a Facebook group called OpenEd Oregon, parents have detailed the goods and services they’ve purchased with the education funds: $300 a month for horseback riding lessons, a KitchenAid Artisan Stand mixer ($549 retail), golf clubs and greens fees.

One woman said in a post this spring: “I am SO thankful for Open Ed!!! [It] has helped fund a new trampoline, indoor rock wall (holds only, no wood), a gymnastics tumbling mat, gymnastics bar, a bike, magna tiles, legos, internet, dolphin encounters at Hawaii (happening in April), soccer registration fees, educational games, books, chicken brooder, tablets, zoo trips, semi-private swim lessons, and more!”

Another parent asked: “Does OpenEd reimburse for educational things outside Oregon?” A different OpenEd parent piped in: “Yes! We had our snorkel trip in Mexico AND the San Diego Zoo covered last year.”

Such perks are not available to parents who send their children to traditional schools.

The cash stipends infuriate Dan Goldman, superintendent of the Northwest Regional Education Service District, which supports school districts in Clatsop, Columbia, Tillamook and Washington counties.

“So the taxpayer is paying for a family to buy a trampoline so that their student can be in this program that is, statistically speaking, going to underperform their home district’s school,” Goldman said. “To me, it’s insanity.”

George Mendoza, superintendent of the La Grande School District, echoes Goldman’s criticism. Mendoza said the practice of offering stipends to parents is “predatory marketing.”

“When onlines are doing that type of thing,” he said, “it [creates] the potential for fraudulent behavior.”

“It pits one school against another school district,” Mendoza added. “That should not be the standard.”

People responsible for virtual schools in Oregon have been reluctant to answer OJP’s questions. Written or telephone requests for interviews were ignored by Grant Hewitt, the OpenEd executive responsible for Oregon; OpenEd CEO Isaac Morehouse; and Matthew Mauney, the principal of Nyssa Virtual. Ryan Hawkins, the current superintendent at Nyssa, canceled a scheduled interview with OJP and didn’t answer emailed questions.

One educator who defended virtual schools is Liz Barrowcliff, co-founder in 2009 of the Fossil Charter School, which now serves 4,200 K–8 students. She said her kids test well and (for virtual schools) enjoy a relatively low student-teacher ratio, 48-to-1. But for some districts, Barrowcliff acknowledged , “It’s a money grab—they just want students. They don’t care if they get special education services, they don’t hire enough staff to serve.” 

Fossil Charter pays a $3,000 stipend to parents, which Barrowcliff says is only fair. A parent has to devote hours a day to manage their child’s education, she said, and the stipend goes only for approved expenses: high speed internet, curriculum and books, printers, laptops, and athletic gear that kids would get access to in a brick-and-mortar school. 

Money doesn’t motivate parents to enroll their kids in virtual schools, she said. “You’ve got your kid full time at home now, and you’re responsible all day— for the value of a trampoline? I don’t buy it.”

 *  *  *  *  *

The experience of Jessica Roshak, a longtime teacher, illustrates both the promise and ultimately the weaknesses of virtual education in Oregon.

Roshak said she realized early in her career that “traditional public schools stifled freedom of thought and creativity for students of all ages.”

After five years teaching at a traditional high school in Philadelphia, she came to Oregon in 2008 to teach at the Scio-based Oregon Connections Academy, part of a for-profit education provider owned by the private equity firm Apollo Global Management.

Roshak taught high school social studies and saw benefits in the online model. Students seemed more willing to ask for help or describe their struggles without fear of getting mocked by other students.

Roshak said virtual schools can serve students failed by traditional schools in a variety of ways. They might have been bullied, stymied by anxiety, or far behind—or ahead—of classmates. Or they might simply have lived so far from their schools that transportation made their lives miserable. 

But after 14 years, Roshak came to believe a long list of negatives outweighed the positives: “Lack of oversight, taking funds out of the brick-and-mortar schools, obscuring neglect and abuse of kids that would otherwise be noticed in traditional classrooms, the Wild West of academic quality and approaches.” 

Discouraged, she left virtual education in 2021.

 

Choice, But Little Accountability 

For districts such as Nyssa, there’s an obvious appeal in signing up kids who yield 40 cents on every dollar. But just because that arrangement is legal and lucrative doesn’t make it right.

Alisha McBride, superintendent of the Vale School District, said her board considered setting up a virtual school to bring in extra funds for her district. After reading the research, the board decided lousy results outweighed the financial benefits.

“I would not be able to sleep at night,” McBride said, speaking personally, not in her role as superintendent. “That’s not why I got into education.”

Krista Parent, executive director of the Coalition of Oregon School Administrators, an influential group of 3,000 superintendents, principals and other Oregon school leaders, defended her members who went for the money. 

“Everybody’s looking at what are ways that we can stay alive and provide the kind of resources our kids need,” Parent said. “It’s not like people are sitting around and being evil.”

Her ambivalence doesn’t address the fact that school enrollment is a zero-sum game. Every student a virtual school lures away from a brick-and-mortar school costs that school more than $11,000.

Further, an OJP analysis of state data shows that Oregon’s virtual school students have more advantages: They are mostly white and more affluent, and far fewer require special education or are English language learners. After these students exit traditional schools for online ones, their former districts are left with more challenging students who are costlier to educate.

The worse student outcomes at online schools are undeniable. Even Darren Johnson, the former Nyssa superintendent, now has regrets about signing that first contract with OpenEd.

“From an ethical, professional standpoint, you’d want to serve the population correctly,” said Johnson, who is now an elementary principal in Utah. “You want to provide a service that is going to be helpful to people—graduating high school, preparing for life after. Whoever’s doing an online school needs to consider that.”

Another problem with virtual schools: Those run by private companies are far less accountable to the public than traditional public or charter schools.

For example, when OJP asked for Nyssa Virtual’s expenditure reports for the school year—how exactly it spent $12 million in public funds—Hawkins said he had none. He suggested asking OpenEd for them. The secrecy may be explained by OpenEd’s contract. It says OpenEd is not obligated “to disclose any information to the District.” The contract also bars Nyssa officials from ever disparaging OpenEd, even after the contract is over.

The lack of transparency, the poor student outcomes, the cash incentives—none of these shortcomings should be a secret to Oregon education leaders.

In 2017, when virtual schools were educating far fewer students in Oregon, an audit by the Secretary of State’s Office showed systemic problems with them, particularly for at-risk students. While other states increased oversight of virtual schools, the audit noted, Oregon allowed its virtual schools “to increase enrollment rapidly regardless of their performance.” Other states require online schools to meet state averages for English and math proficiency before being allowed to expand. Oregon does not.

The audit made 15 recommendations, among them “establish and monitor standards for crucial practices, such as annual district evaluations of these schools.” The 600-employee Department of Education agreed in writing to address them all.

In 2018, not long after the audit landed, Bhatt joined Gov. Kate Brown’s office as an education policy staffer. She told OJP that no one in the governor’s office ever discussed the audit or its recommendations.

A year later, a follow-up audit found that ODE had not fully implemented any of the 15 recommendations, and partly implemented only three.

“We’re just passing the bucks, literally, from the state to the families with very little accountability,” said Bhatt, who in 2025 founded the Oregon Network for Education Excellence. “It is really something that the state could help fix overnight. They don’t even need to wait for the legislative session. The state board, or the governor could choose to act via executive action or via administrative rule.”

So far, there have been no serious efforts at reform. 

Gov. Kotek, who has spoken forcefully on the campaign trail about the need to increase accountability in Oregon’s low-achieving schools, released a statement to OJP that said she is “is actively reviewing the state’s current approach to virtual education and is concerned about how public dollars are distributed and what accountability measures are in place.” (OJP could not find any evidence the governor had publicly discussed problems with Oregon’s online public schools.)

Her Republican opponent, Christine Drazan, a proponent of expanding virtual schools, didn’t respond to repeated requests for comment.

Goldman, the Northwest Regional ESD chief, said the entire K–12 system is crying out for clear direction on virtual schools.

“We are long past the point of needing state regulation on what these programs can and cannot do and how much money they actually receive when the cost to serve a kid in this way is so much less,” Goldman said.

“I don’t see any effort by the state to take it on, and that’s a shame.”