For the second time in three months, the Walton Family Foundation—which has spent more than $1 billion to create a quarter of the nation’s 6,700 public charter schools—has announced that all online public school instruction, via cyber charter schools, is a colossal disaster for most K-12 students.

“If virtual charters were grouped together and ranked as a single school district, it would be the ninth largest in the country and among the worst performing,” co-wrote Walton’s Marc Sternberg and Marc Holley, respectively the foundation’s director of educational giving and its evaluation unit director, in a recent Education Week commentary. “Online education must be reimagined. Ignoring the problem—or worse, replicating failures—serves nobody.”

Last fall, the giant foundation, which has pledged to spend its second billion to expand charter public schools nationally between now and 2020, simultaneously released three detailed comissioned studies finding more than two-thirds of America’s 200,000 charter students receiving all of their instruction over the Internet were barely learning the basics.

“The majority of online charter students had far weaker academic growth in both math and reading compared to their traditional public school peers,” their experts’ press release said, after noting that kindergarten-through-high school students need to be in classrooms with live teachers, not occasional faces on computer screens. “To conceptualize this shortfall, it would equate to a student losing 72 days of learning in reading and 180 days of learning in math, based on a 180-day school year.”

Stanford University’s Center for Research on Educational Outcomes, or CREDO, which calculated the semesters of lost learning, looked at virtual charter schools in 18 states. It found enrollments had nearly doubled between the 2009-'10 and 2012-'13 school years, documenting a rapidly growing corner of the charter school industry, which presents itself as an alternative to traditional public schools.

“Based on even modest funding levels of $6,000 per student, 65,000 students [in 18 states] represents a public investment of $390,000,000 annually,” CREDO’s report said. With 200,000 students in 200 online schools in 26 states, that means taxpayers are now spending upwards of $1.2 billion annually for these failing charter schools.

Anybody who has teenagers—even kids with good grades with lots of interests—knows how hard it is to get them to focus without prodding by adults. Yet that absence of daily supervision is at the heart of the online education model pushed by Wall Street, Silicon Valley and a charter movement that—until Walton’s retreat—embraced online schools.

“The results are, in a word, sobering,” wrote the foundation’s Sternberg and Holley in Education Week. “As a result of these findings, we at the foundation will ask new, more rigorous questions of online charter operators when we review their funding proposals, in order to expose whether applicants are addressing the problems this research identified… We urge policymakers to make changes, too.”

On its face, the statements from the Walton Family Foundation—which is funded by Walmart profits—are a stunning admission from one of the largest players in the national movement to replace traditional public schools with privately run charters. The dream of entirely online public schools, Walton seems to say, is a fantasy that simply isn’t working in its current real-world iteration. But a closer reading of the language used in Walton's commentary, as well as in the trio of reports it released late last fall, reveals a more sophisticated public relations strategy at play. Walton, which has promoted charters as a reform that can best thrive when exempted from government oversight, is urging states to increase their scrutiny of the schools—but not the rest of the privatized K-12 industry.

The obvious question is, why? Why would a foundation whose principles emanate from the very worst free-market principles begin calling for greater government involvement in these kinds of schools? Chalk it up to keeping their priorities straight. Walton has committed to investing billions to see charter schools upend public education in America, and that overall agenda has been sullied by the dismal performance of the online segment of the industry. In short, it’s tossing them overboard to save their ship.

Even so, the foundation has refused to draw a hard line on cyber charter schools. Walton didn’t call for a moratorium on the online schools; it is merely toughening its grant standards. And even as its researchers detailed again and again why online schools are overwhelmingly failing, the foundation has chosen to call for a “reimagining” of online education—not a repudiation of it.

One could spend hours speculating why this might be, but the most clear-cut answers relate to money: as in, too many important people are making money from what can only be described as one of the biggest education scams pushed upon taxpayers in recent years by Wall Street and Silicon Valley.

That vision was articulated late last month, when the nation’s largest private company running online charter public schools—K12 Inc.—held its quarterly earnings conference call for investors. Executives said they had turned around a franchise that was recently dropped by its biggest school district client, banned by one state, under investigation in another, and has been sued for fiscal mismanagement and settled out of court. K12 is shifting its business model from running cyber public schools to selling curriculum and other “platform” services, which mirrors “ed tech” world trends yet relieves them of responsibility for the results.

“We are well-positioned to benefit in this digital education explosion,” CEO Nate Davis told Wall Street analysts, after reporting K12 had $208 million in fourth-quarter revenues—mostly from taxpayers—for 100,000 students in its virtual public schools. The conference call came two days after Walton published its commentary, “We Must Rethink Online Learning.”

K12’s stock price jumped 10 percent after the call—and hasn’t come down since.

It’s Not All About Children

This should be a pivotal moment in education policy, as a national leader of the public school privatization movement is admitting a big failure and colossal waste of taxpayer resources. But it’s worth wondering why lawmakers fell for the online ed sales pitch in the first place.

Go back to the teenagers you know. If you put them in front of computers, told them to read a bunch of stuff and absorb it, gave them assignments with future deadlines, and mostly left them alone to do all of this, how soon do you think it would be before they were texting friends, watching videos and doing everything teens do instead of doing their homework?

Last fall, Walton’s experts answered that question, as well as examining what cyber school students were learning, in a series of commissioned reports. Its first report, by Mathematica Policy Research, boasts that it “provides the first nationwide data and analysis of the operations and instructional approaches of online charter schools.” It begins by describing this new industry as the frontline of the web-based education technology boom. “Online charter schools—also known as virtual charters or cyber charters—are publicly funded schools of choice that deliver student instruction via telecommunications… [to] about 200,000 students at the elementary, middle, and high school grade levels.”

Mathematica queried “127 principals of online charter schools” and analzyed federal data on student performance. Here’s how it summed up their defining characteristics. “Student-driven, independent study is the dominant mode of learning… with 33 percent of online charter schools offering only self-paced instruction.” (Self-paced means no deadlines from teachers.) Online schools “typically provide students with less live teacher contact time in a week than students in conventional schools have in a day,” it continues. “Maintaining student engagement… is considered the greatest challenge,” it reports, which “places significant expectations on parents… to actively participate in student instruction.” It concludes: “These findings suggest reason for concern about whether the online charter school sector is likely to be effective in promoting the achievement of its students.”

Put simply, those findings are saying cyber charter schools mostly abandon kids, have far-off teachers, have trouble keeping students focused, and end up relying on parents—all of which it suggests might be "reason for concern."

Walton’s second report looked at what cyber students were learning. Stanford’s CREDO said the academic results from full-time online schools were terrible, but its 114-page report emphasized the sector was rapidly expanding. “Some states have seen enrollment growth which is literally exponential,” it said. “While the overall percentage of students who attend online schools is small, only 0.5% of students in our data, based on increasing growth rates we should expect to see continued expansion of online educational services.”

CREDO’s noted online charters tend to have whiter student bodies than their brick-and-mortar counterparts, which have touted diversity as a selling point. A large majority of students enrolled were white, 69 percent compared to 45 percent in other charters. While the percentage of black and special education students were the same as brick-and-mortar charters, 13 percent and 11 percent, respectively, there were far fewer Hispanic students in online charters (11 percent) compared to brick-and-mortar counterparts (32 percent), and fewer Asian/Pacific Islanders in cyber schools (2 percent) compared to other charters (6 percent).

How bad were the all-online charter schools CREDO examined? After looking at 101 schools, it concluded “only two percent of the online charter schools outperform their comparison [brick-and-mortar charter] schools, 32 percent perform no differently, and 67 percent have weaker growth than their comparison schools. In math, a full 88 percent of online charter schools had significantly weaker growth than their comparison schools.”

Walton funded a third report from the Center on Reinventing Public Education, which reviewed state laws and policies relating to online charter schools. Released last October, before its recent Education Week commentary in which it called for more state regulation, it restated the industry’s sales pitch for the schools, acknowledged there were problems, but said they were being taken care of. It urged legislators not to reject the schools.

The report starts by touting the industry’s selling points to lawmakers that resonate with anti-union right-wingers. Online charters are for “students who can’t attend traditional schools for health or other reasons,” can “tap new labor markets of teachers,” and can efficiently “arrange instruction… to very large classrooms.” Nationwide, three states have the most online students—Ohio, Pennsylvania and California—and Arizona has the “highest proportion” of online enrollment, “one out of every 25 students.”

Some of these online “schools” have so many students it’s more accurate to think of them as privatized cyber school districts, CRPE said, adding that “was not an anomaly.” Its foremost example was “one of the largest online charter schools in the country, Pennsylvania Cyber Charter School, [which] enrolled 10,982 students in 2011-2012. The school, with revenues of $110 million and net assets of $57 million, resembles a mid-sized school district more rather an individual school.”

In other words, while the cyber school industry wants the public and policymakers to discuss these schools as if they are similar to traditional classrooms with teachers supervising students, the reality is anything but. They are corporate-run franchises, called “education management organizations” in Wall Street’s parlance, that rely on delivering the same instruction to large volumes of student to profit.

The Center’s report discussed what it said “can be cause for concern,” calling them “suspicions” but not facts. It noted two-thirds of online charters “contract with for-profit education management organizations (EMO), raising suspicions that schools will skimp on quality to maximize profits.” It said government regulators “often raise concerns about the quality of teachers… and how charter authorizers can ensure that taxpayer money is being used productively in online schools.”

But then it said states were sufficiently responding to the industry’s problems. Exhibit A was K12. “States have taken action to sever ties with for-­profit providers, such as K12 Inc., due to perceived resource mismanagement and poor performance… In the 2010-2011 school year, only 27.7 percent of K12 Inc.­â€operated schools across the nation met the Adequate Yearly Progress standard.”

Admiting there are problems before the regulators show up is an old lobbying strategy. The Center’s report said some states were taking a serious look at online charters and praised them for responding cautiously; that is, without alarm that multi-millions are being spent on public schools that are failing two out of three students.

“We saw no direct cuts to online charter school funding, but determined that there are plenty of new regulations that affect online charter school revenues,” CRPE said, offering examples. “Colorado changed the way it counts online students, from enrollment once per year to monthly counts, which reduced overall allocations. Florida recently started funding online charter schools based on course completion, effectively reducing overall online charter school funding.”

When confronting the for-profit industry’s biggest fear—a moratorium, which Illinois enacted—the example was framed as a reaction by an outlier state. “This is one of the few instances where a state issued an allâ€out ban on opening new schools for several years in order to ensure that existing laws and administrative rules reflect the unique characteristics of online charter schools.”

Who’s Fooling Who Here?

The three reports commissioned by Walton came out late last year before it announced it would spend $1 billion between 2015-2020 to expand all charter schools across the country. Initially, charter industry lobbyists told reporters they were “shocked” by the findings, but were quick to defend this failed public school experiment.

“I think we had a sense…that there were some problems in terms of performance…but we were alarmed by the results,” Todd Ziebarth, senior vice president of state advocacy for the National Alliance for Public Charter Schools, told the arch-libertarian Heartland Institute. “Thirty to 40 percent of kids are faring better in this environment,” Ziebarth continued. “So it does work for some families."

That line—it’s okay that online public charters are failing two-thirds of students—was the primary public relations response until late last month, when Walton’s top education officials published their Education Week commentary, stating they would “ask new, more rigorous questions” before awarding grant money to online charter operators and urging state charter regulators to “create new accountability systems… rethink their expectations and policies, and test novel policy arrangements.”

They said Walton has only given $550,000 to cyber charter schools, out of $385 million in startup funding—a figure that seems low but is difficult to verify based on publicly available records. State regulators “must take action if schools are failing students,” the foundation’s Sternberg and Holley wrote, but then drew the line on where they don’t want government interference. “To be clear, our comments about online charter schools are not an indictment of instructional technology or online learning more generally, nor how these stand to help create more high-quality educational options.”

In other words, as state legislatures, which are the primary overseers of education policy, convene across the country, Walton is giving lawmakers a green light to go after online charters—just not the rest of the burgeoning industry that’s also dominated by corporate franchises with other failed experiments. That highly political response begs the policy question of why lawmakers and education policymakers should stop there, as what has emerged as the charter school industry since the 1990s is not what lawmakers envisioned when they were sanctioned as local experiments in public education. They weren’t burgeoning private brands funded by taxpayers.

How Walton’s criticism and call to action on online charters plays out remains to be seen. But two days after its Education Week commentary appeared, K12 CEO Nate Davis held his 2015 fourth-quarter conference call for Wall Street analysts. He ended by listing the “business development growth targets” for 2016 and beyond—including K12's shift to selling teaching materials and platforms to online charter school operators, lessening its responsibility for academic outcomes. The targets include Alabama, West Virginia, Nebraska, Missouri, Connecticut, New Mexico [where they had been banned], Texas, Wisconsin and Virginia.

Last fall, after investors heard during K12's 2015 third-quarter call that it was losing its biggest contract, its stock fell by more than 20 percent. Perhaps they hadn’t seen Walton’s Education Week commentary before January's investor call, though that’s doubtful, as it's their job to track the industry. Or maybe they just don't care, because Davis said K12 was stabilizing as a company with revenues in the hundreds of millions. After the call, K12 stock jumped nearly 10 percent. This week, it was up by another 7 percent.