Taxpayer-Enriched Companies Back Jeb Bush's Foundation for Excellence in Education, its Buddy ALEC, and Their "Reforms"

This week in Washington, DC, Jeb Bush's "Foundation for Excellence in Education" (FEE) is meeting just five blocks away from the post-election conference of the American Legislative Exchange Council (ALEC), the controversial corporate bill mill working on profitizing public education among other legislative changes, but the ties between the two groups are even closer.

Aptly named FEE, Bush's group is backed by many of the same for-profit school corporations that have funded ALEC and vote as equals with its legislators on templates to change laws governing America's public schools. FEE is also bankrolled by many of the same hard-right foundations bent on privatizing public schools that have funded ALEC. And, they have pushed many of the same changes to the law, which benefit their corporate benefactors and satisfy the free market fundamentalism of the billionaires whose tax-deductible charities underwrite the agenda of these two groups.

FEE and ALEC also have had some of the same "experts" as members or staff, part of the revolving door between right-wing groups. They have also collaborated on the annual ALEC education "report card" that grades states' allegiance to their policy agenda higher than actual student performance. That distorted report card also rewards states that push ALEC's beloved union-busting measures while giving low grades to states with students who actually perform best on standardized knowledge tests. As Dustin Bielke wrote for PRWatch earlier this year:

Imagine getting a report card from your teacher and finding out that you were graded not on how well you understood the course material or scored on the tests and assignments, but rather on to what extent you agreed with your teacher's strange public policy positions. That is the best way to understand (ALEC's) 17th Report Card on American Education. ...

The ALEC/FEE scoring is based in part of whether states have embraced changes to the law to advance charter schools or virtual schools (which FEE touts as "digital education") or other corporate-backed reforms. Yet, studies of the actual performance of such schools raise serious questions of the costs versus benefits of market-driven primary and secondary education. As Minnesota 2020 put it in its comprehensive study, "False Choices: The Economic Argument against Market-Driven Education Reform," the "mounting evidence" indicates that"the market approach to education does not produce gains anywhere like those needed for universal student achievement."

As the Center for Media and Democracy/PRWatch previously noted: "The New York Times recently studied one K-12, Inc., school which was failing to educate kids 'by almost every educational measure' but 'by Wall Street standards, Agora is a remarkable success,' profiting off of federal and state taxpayer dollars. A recent study of virtual schools in Pennsylvania conducted by Stanford University showed that online students performed significantly worse than their traditional counterparts. The University of Colorado conducted a study that found only 27 percent of virtual schools met minimum federal standards."

These shortcomings have not stopped FEE's founder, Jeb Bush, from putting his name on the preface to the 16th Edition of the ALEC's Report Card on Education, asserting: "ALEC's Report Card on American Education is a helpful guide for anyone who wants to achieve a quality education for all students."

Conflict of Interest? For-Profit School Corps Backed Both FEE and ALEC

Many of these policies are designed to redirect state taxpayer dollars from public schools to private or for-profit education corporations. It is perhaps unsurprising that corporate beneficiaries of these policies have also been the corporate benefactors of the non-profit groups promoting them, including FEE and ALEC.

As Colin Woodward reported about FEE's role in Maine, critics contend that "This is the ideal form of crony capitalism ... these are free market entrepreneurial companies manipulating the law to create markets for themselves," citing Arizona State University professor emeritus Gene Glass.

Here are just a few examples of the overlap between FEE and ALEC and evidence of this critique:

K-12 is a for-profit corporation that pushes "virtual" schooling. It is traded on the New York Stock Exchange as LRN. While most American families have struggled financially in the four years since Wall Street crashed the economy at the end of the Bush Administration, K-12's revenues have increased by over 300%, from over $226 million in 2008 to over $708 million this year.

As K-12 notes in its most recent annual report, "most of (its) revenues depend on per pupil funding amounts and payment formulas" from government contracts for what it calls its "virtual public schools" and blended schools, among other products.

Meanwhile, ALEC has pushed a number of bills that help make K-12's profits possible, including a "Virtual Public Schools Act," which provides that virtual schools should be paid the same per pupil rate as public schools that actually provide bricks and mortar public schools, with desks, heating and A/C, lunch ladies, playgrounds, gyms, in-person teachers, and extracurricular activities like sports, orchestra, and student councils. That bill was secretly approved in 2004 as an ALEC agenda item in an ALEC task force meeting where corporate lobbyists and special interest reps voted as equals with state legislators. The bill and various iterations of it have been pushed in numerous states across the country since then, and along with it the number of students K-12 says are enrolled in its programs has increased to almost over 100,000.

K-12's net income (profit after taxes and expenses) was over $17 million last year. But, that was the amount left over after it paid its CEO, Ron Packard, a base salary of $625,000, in addition to a "performance" bonus of $584,375, which was in addition to an award of stock this year worth $1.25 million, plus stock options worth $1.5 million, for a total compensation in 2012 of over $3.9 million. The prior year his total compensation was over $5 million. Its next five highest paid employees received annual compensation of between $3.2 million and $769,000. K-12 also paid its part-time board members fees of between $49,000 and $139,000, plus stock awards. (Meanwhile, ALEC legislators and alums who have backed privatization have claimed that it is public school teachers who receive luxurious benefits like health care or retirement plans, which pale in comparison.)

In addition, K-12's CEO owns about 4% of the company (worth about $24 million at today's share price) and one of its board members, Jon Q. Reynolds, owns over 10% of the company. The "Learning Group LLC" owns 18% and another corporation that is part of a foreign mega-corp that is member of ALEC, Macquarie Group Limited, owns 13% of K-12, as of its most recent SEC filings.

K-12 Inc. was founded in 1999 by Packard, a former Goldman Sachs mergers and acquisitions guy with an MBA from the University of Chicago, and by William Bennett, the Republican writer and talk-show host, with an infusion of cash from felon and former junk bond fraudster, Michael Milken.

Connections Academy, which previously co-chaired ALEC's Education Task Force for a number of years and funded ALEC, is also a funder of FEE. Connections Academy is a division of Connections Education LLC, an entity based in Baltimore, Maryland, that contracts with charter schools, school districts, or governmental entities to provide "online" lessons to students.

Sylvan Ventures started Connections Academy in 2001. In 2004, Connections Academy was sold to Apollo Management, L.P., a corporate investor specializing in real estate, which had total revenue from all of its corporate enterprises of $2.1 billion in 2010. In 2011, Pearson Education acquired Connections Academy's parent corporation, Connections Education.

Pearson Education is part of Pearson plc, a foreign/global corporation based in the United Kingdom, and which also includes the Financial Times (a global financial periodical and competitor of the Wall Street Journal), Penguin Group (famous for Penguin publishing, which includes a number of imprints) and the Pearson Foundation. According to Pearson plc's 2011 Annual Report, the company's earnings overall increased by 20% in the preceding year, with revenue of over 5.8 billion British pounds. The company's revenue attributable to Connections Academy, and its access to a stream of American taxpayers' dollars, over the past year or so is not known.

Until earlier this year, Connections Academy's co-founder, Mickey Revenaugh, co-chaired ALEC's corporate-legislator task force which voted to approve bills to change education law. In July 2012, a Connections spokesperson told the Center for Media and Democracy/PRWatch that it had cut ties with ALEC in order to align "our affiliations with organizations whose central focus is education."

Its other affiliations include FEE and the "International Association for K-12 Online Learning (iNACOL)," a funder and member of ALEC's Education Task Force.

These are just a few of the overlapping corporations benefiting directly from ALEC's legislative agenda that also work through FEE. Others include Charter Schools USA and Apex Learning, which are corporations that are part of trade groups that are members/funders of ALEC, such as iNACOL, the National Association of Charter School Authorizers (a former ALEC member), and the Center for Education Reform (a current ALEC member and the employer of ALEC's former press secretary Raegen Weber), which have participated in ALEC's Education Task Force where legislators and private sector members vote on bills to benefit these industries.

Other For-Profit Corporations Backing Both ALEC and FEE

Education companies are not the only corporations in common that back both of these groups. Other corporate benefactors of ALEC and FEE include:

State Farm Insurance. State Farm, the largest seller of auto insurance in the US, was listed on FEE's "Meet the Donors!" page which was deleted by the organization today. State Farm has a seat on ALEC's corporate board. Its CEO, Ed Rust, is also the co-chair of the Business Roundtable, which includes the U.S. Chamber of Commerce, and he previously chaired the Financial Services Roundtable, which advances the interests of Wall Street bank and investment firms. In 2010, State Farm had revenue of $1.8 billion and paid Rust $10.2 million in compensation.

Under Rust's leadership, State Farm has not only backed ALEC and its extreme agenda but also refused to advertise on the progressive Air America radio syndication along with other right-wing corporations. In 2011, State Farm was named ALEC's "Private Sector Member of the Year."

Roland Spies, General Counsel at State Farm, represents the company on the corporate ("Private Enterprise") board of ALEC as of 2011. Emory Wilkerson, Lead Counsel and Managing Attorney at State Farm, represents the company as the corporate co-chair of ALEC's Commerce, Insurance and Economic Development Task Force as of 2012.

In addition, at least two corporations that benefit directly from the push for virtual schooling have been underwriters of both ALEC and FEE:

Intel. This computer chip maker has been a financial supporter of both ALEC and FEE.

Microsoft. Bill Gates' company has previously paid for a seat on ALEC's Communications and Technology Task Force, where its corporate representative has voted as equals with legislators on bills to change state laws on telecomm issues.

Other corporations that are not donors to ALEC but have given to FEE include, Apple, Inc., Target, McGraw Hill, and Electronic Arts, and acronymed corporations such as ETS, SMART, and SAS.

CEO-Funded Philanthropies Bankroll Both FEE and ALEC

The Bill and Melinda Gates Foundation. Just as the Microsoft corporation funds these groups, its founder's foundation has funded both FEE and ALEC to push changes in education law. The Gates Foundation recently gave FEE over one-half million dollars ($501,485), funding FEE called its highest or "Vanguard" level, and it gave ALEC a grant of over a quarter million dollars ($376,000). Earlier this year, the foundation announced it would not be renewing this grant to ALEC, in the wake of controversy over ALEC's role in laws to make it easier to get away with shooting people -- as with the delayed prosecution of Trayvon Martin's shooter -- and make it harder for Americans to vote, after CMD helped connect the dots between those bills and ALEC, and other organizations and concerned citizens spoke out against ALEC.

The Walton Foundation. This foundation has funded both FEE and ALEC. It is also a "Vanguard" level funder of FEE, giving it $1,692,000 in 2010, and $600,000, the year before that. The foundation was a "Chairman" level sponsor of ALEC's Annual Conference in 2011 (which amounted to at least $50,000 in 2010), and one of its consultants, Lori Drummer (the former staff Director of ALEC's Education Task Force), spoke on "Enacting a Comprehensive K-12 Education Reform Agenda" at that ALEC meeting on August 3, 2011.

The corporation whose fortunes have made the Walton family able to fund this foundation was also a long-time ALEC member until earlier this year when Wal-Mart announced it would no longer fund ALEC, in the wake of the Trayvon Martin shooting and other ALEC controversies. Wal-Mart -- the largest retailer of rifles and ammunition in the U.S. -- had co-chaired the ALEC task force meeting that approved the "Stand Your Ground/Castle Doctrine Bill" pushed by the NRA as a national model; that is the same task force that later approved restrictive voter ID legislation to make it harder for citizens to vote.

However, the Walton family foundation did not join Wal-Mart in leaving ALEC.

The Lynde and Harry Bradley Foundation. This Wisconsin-based foundation has also funded both FEE and ALEC. It has given at least $50,000 to FEE and at least $145,000 to ALEC in recent years. Bradley has been embroiled in controversy over its close ties to Republican politicians like Wisconsin Governor Scott Walker and its funding of an array of right-wing operations. Its most recent controversy was making a grant that was used to pay for billboards in African American communities warning observers that they could go to jail for voter fraud, despite the infinitesimal amount of such fraud in the U.S.

The Dick and Betsy DeVos Family Foundation. This foundation has been spending heavily on efforts to privatize the public school system in the U.S., pursuant to Betsy DeVos' ideological hostility to public schools under the guise of pushing for "school choice." She also leads a group called "American Federation for Children," which has actively pushed for privatizing schools.

As John Nichols has reported in The Nation, one of Betsy DeVos' groups, "the political action committee 'All Children Matter,' was fined a record $5.2 million by the Ohio Elections Commission after it was charged with illegally shifting money into the state to support candidates considered friendly to private-school 'choice' initiatives. [It] was also fined for political misconduct in Wisconsin, where the secretive group's 2006 campaigning violated campaign finance laws by expressly urging voters to cast ballots against legislative candidates who were strong backers of public education. Those troubles led to the evolution of 'All Children Matter' into 'American Federation for Children,' which has collected money from a who's who of right wing millionaires and billionaires, including the political operations of Charles and David Koch ... "

The billionaire DeVos' family is active in Republican donor circles. Betsy, whose maiden name is Prince, is the sister of Eric Prince of Blackwater infamy, and they are the children of right-wing political activist and industrialist Edgar Prince. She married Dick DeVos of the Amway family fortune. The DeVos family ties to ALEC run deep: in 1993, ALEC gave its first "Adam Smith Free Enterprise Award" to Richard DeVos. (The following year, ALEC gave that award to Charles and David Koch.)

Other Foundations. Numerous other foundations fund FEE and/or ALEC including the Pearson Foundation, affiliated with Pearson plc. Other foundations that have given to FEE -- but are not known to have donated to ALEC in recent years -- include the Charles and Helen Schwab Foundation, Robertson Foundation, The Broad Foundation, Houghton Mifflin Harcourt Foundation, Susan and Bill Oberndorf, Doris & Donald Fisher Fund, Koret Foundation, and the William E. Simon Foundation.

Other Commonalities: Legislators, "Experts," and Staff

At FEE's education summit in DC this week, seven of the eleven state lawmakers on FEE panels are legislators who are known members of ALEC:

• Sen. Luther Olsen, Wisconsin
• Sen. Kelli Stargel, Florida
• Rep. Pam Myhra, Minnesota
• Sen. Chip Rogers, Georgia
• Sen. Anitere Flores, Florida
• Rep. Bill O'Brien, New Hampshire
• Sen. Peggy Lehner, Ohio

Rogers is on ALEC's Board of Directors and this past month he withdrew from his bid to be state majority leader in disgrace after news surfaced of his role in spearheading a Republican Caucus meeting in the Georgia statehouse featuring a video making the absurd conspiracy theory claim that President Obama is using "mind control" on Americans.

Rep. O'Brien has been a staunch defender of ALEC, peddling its spin in an op-ed in the Nashau Telegraph.

Sen. Lehner, like many of these elected representatives, has pushed for ALEC legislation to become law. Other legislators on FEE panels at the summit are not listed as ALEC task force members but have pressed for ALEC bills to become legally binding, including Rep. Jason Nelson of Oklahoma, Sen. Conrad Appel of Louisiana who has pushed ALEC's education bills, Rep. Todd Huston of Indiana (who has strongly backed charter schools), and Del. Algie Howell of Virginia.

In addition, the following staff of FEE have been part of ALEC's Education Task Force:

• Mandy Clark, Director of State and Strategic Initiatives
• Dr. Matthew Lander, Director of Policy and Research
• Dave Myslinski, State Policy Director for Digital Learning Now
• Adam Peshek, State Advocacy Director

Lander previously worked at the Koch-funded Goldwater Institute, part of the "State Policy Network" of groups that work in tandem with ALEC to push its legal policy agenda in the states, and has been the co-author of a number of ALEC's education report cards. Ladner was previously the director of state projects at the Alliance for School Choice. The most recent such report card was co-authored by him in his capacity as a leader of FEE.

FEE reps have also attended ALEC meetings -- such as Angie Recker, FEE's National Policy Advisor and the former Special Advisor to Vice President Dick Cheney on domestic policies -- and have worked to influence ALEC's legislative agenda.

Meanwhile, the FEE/ALEC Education Reform Story Is Not So Sunny

Questions have been raised about FEE, the success or failure of Jeb Bush's Florida reforms on which it makes many of its claims, and the organization's relationship with for-profit firms, including the firm that was controlled by its top two staff leaders.

As Stephanie Simon reported in Reuters, voters in conservative states -- Idaho and South Dakota -- rejected Jeb Bush-style reforms and "ousted the Indiana state schools chief, who had enacted much of the Florida formula." Yet, FEE invited Indiana's controversial governor Mitch Daniels to address the summit this week.

As Simon noted:

In Florida, meanwhile, the durability of the Bush-era gains has come into question. High school graduation rates rose during Bush's tenure but remain substantially lower than in other large and diverse states, including California, New York and Ohio, according to new federal data. Students' average score on the ACT college entrance exam has not improved and remains well below states such as Missouri and Ohio, where a comparable percentage of students take the test. Florida's scores on the National Assessment of Educational Progress, widely considered the most reliable metric, dropped on all four key tests last year -- fourth- and eighth-grade reading and math. On all four tests, low-income students fell further behind their wealthier peers.

Some suggest the FEE reform agenda deserves an F with results like these, which is not exactly achieving "a quality education for all students" as touted by Jeb Bush and ALEC, which recently gave Florida a B+ while giving several states with higher test scores lower grades.

Despite the failure of these costly experiments of outsourcing public education to private for-profit enterprises, some interested parties -- other than students, at least based on their test scores -- are doing well.

Recent tax filings reveal that FEE, a tax-exempt/tax-deductible 501(c)(3), has grown from less than a quarter million in revenue ($243,655) in 2007 to a multi-million dollar operation in 2010, with almost six million in donations as of its last public report as a non-profit ($5,943,765). FEE has been led by two of Jeb Bush's closest advisors from the Governor's office from his tenure as the leader of the state.

Its 2010 filing indicates that its Executive Director, Patricia Levesque, and its Deputy, Deirdre Finn, worked 40 hours a week for FEE but were paid no salary. Its highest paid employee, Christy Hovanetz, was listed as working 40 hours a week for $102,000 in compensation. But, Levesque and Finn were also reported as working 20 hours a week each for a related 501(c)(4) organization, the Foundation for Florida's Future (FFF); and Hovanetz was listed as working 40 hours a week for FFF as well. The tax filings indicate that FFF and FEE paid the consulting firm Levesque and Finn were then equal partners in, Meridian Strategies LLC, $276,000 that year. As a private for-profit consulting firm, Meridian Strategies LLC did not dislose other work and revenue from other sources, if any, that year.

And, the IRS forms indicates that Jeb Bush receives no compensation from either FEE or FFF. What consultancy agreements or other sources of income, if any, is Jeb Bush receiving fees from? The filings of FEE and FFF indicate that in 2010 he worked at least 15 hours a week for them for free.

Although Bush is not being paid by the non-profit groups he founded, FEE and the for-profit education corporations that back it are thriving, even if the students that are being enrolled in the companies fed by FEE/ALEC reforms are not profiting so handsomely from the free market's growing role in taking money away from public schools to provide enormous private profits and executive compensation for companies like K-12.

(To learn more about ALEC's education agenda, click here, and to see a list of the education bills ALEC has pushed, click here.)