A New Mexico school district has terminated its partnership with Stride Inc., a major for-profit virtual education provider, amid serious allegations of financial mismanagement and educational neglect. The Gallup-McKinley County Schools district claims the company inflated attendance numbers and failed to support students, leading to a sharp decline in academic performance for its online learners.
The dispute, which has escalated into multiple lawsuits and state-level complaints, highlights a growing national debate over the role of private corporations in public education. Stride Inc. has denied all allegations and is actively pursuing legal action against the district.
Key Takeaways
- Gallup-McKinley County Schools (GMCS) ended its five-year contract with Stride Inc., a for-profit virtual education company.
- The district accuses Stride of inflating student attendance for profit, neglecting special education students, and violating teacher-to-student ratio laws.
- Academic data from the district shows significant drops in reading and math proficiency for online students under Stride's management.
- Stride Inc. has filed five lawsuits against the school district, alleging breach of contract, and denies any wrongdoing.
- Despite the controversy, Stride has secured new contracts with two other New Mexico school districts, continuing its operations in the state.
A Partnership Formed in Crisis
In 2020, as the COVID-19 pandemic forced schools to close, the Gallup-McKinley County Schools (GMCS) district faced a significant challenge. Spanning nearly 5,000 square miles of rural terrain with limited internet access, the district needed a way to educate its predominantly Native American student body remotely.
The district turned to Stride Inc., a leading company in virtual schooling. Under the agreement, Stride would provide teachers, laptops, and internet hotspots for students enrolling in the newly formed New Mexico Destinations Career Academy. The district agreed to pay Stride approximately $8,000 per student.
What began with about 1,000 students in the 2020-21 school year quickly grew, with enrollment quadrupling over the next few years. For many families in the vast district, where long bus rides on difficult roads are common, the virtual option offered convenience and stability.
The Challenge of Rural Education
The GMCS district is larger than Los Angeles County but has less than 1% of its population. It encompasses parts of the Navajo and Zuni reservation lands, and the regional poverty rate is three times the national average. According to district data, 100% of its students qualify for reduced-price lunch programs due to family income levels.
Allegations of Neglect and Mismanagement
After several years, district officials began to uncover what they describe as a pattern of prioritizing profits over student welfare. An internal data analysis in December revealed that Stride had allegedly included students in its enrollment figures months after they had stopped attending classes, a practice the district claims inflated revenue.
Further investigations by the district led to more serious accusations. In lawsuits and official complaints, GMCS alleges that Stride:
- Failed to properly screen or provide specialized staff for dozens of special education students.
- Assigned teachers caseloads of over 200 pupils, far exceeding state-mandated limits which range from 20 to 160 depending on the grade level.
- Hired dozens of teachers who were not properly licensed to teach in New Mexico.
- Oversaw a dramatic decline in academic outcomes for virtual students.
Declining Academic Performance
According to data released by the GMCS district, from 2022 to 2024, the reading proficiency rate for students in the Stride-run online academy dropped by 5 percentage points. During the same period, math proficiency fell by 10 percentage points. These scores were well below both the state and GMCS district averages for in-person students.
The allegations were supported by a whistleblower complaint filed with the New Mexico Public Education Department. An employee reportedly claimed that top Stride executives were aware of the teacher ratio violations for at least two years but did not address them.
"It was our students that were taken advantage of," said Mike Hyatt, the Gallup-McKinley superintendent. "They’re the ones — whether they know it or not — that were harmed in this. And that just makes me sick inside that a company did this on our watch."
A Contentious Legal Battle Ensues
Stride Inc., a publicly traded company valued at $6 billion, has forcefully contested the district's claims. The company has filed five separate lawsuits against GMCS, alleging breach of contract and violations of open meetings laws. Stride has also refused to pay the district for services during the past academic year.
In a statement, the company defended its record. "The situation with GMCS is highly unusual, and we believe the district’s actions have left us with no choice but to seek legal resolution," Stride said. "Stride is committed to fair and equitable business practices with our partner districts, and we deny the allegations made by GMCS."
The company also filed a conflict-of-interest complaint against Superintendent Hyatt, noting that he had unsuccessfully applied for a job with Stride in December before the dispute became public. Hyatt has stated there is no connection between his job application and the district's findings.
Stride's Defense and Continued Operations
Stride argues that its virtual schools often enroll students who were already facing academic challenges. The company points to high parent satisfaction rates, stating that 84% of families in its New Mexico program chose to remain enrolled. It also disputes the district's data on academic performance and attendance, claiming its students have better attendance than their in-person counterparts.
Despite the termination of its contract with GMCS, Stride has maintained its presence in New Mexico. In July, the company signed new contracts with two other rural districts, Chama Valley Independent and Santa Rosa Consolidated. More than 3,000 students across the state remain enrolled in Stride’s virtual academy.
State-Level Scrutiny and Calls for Reform
The conflict has attracted the attention of state officials and lawmakers. GMCS has filed complaints with multiple state agencies, including the Securities and Exchange Commission, urging a broader investigation into Stride's business practices. Superintendent Hyatt also sent an email to every superintendent in New Mexico with the subject line, "Warning about online company STRIDE Inc./ K12 that put profits above kids.”
The New Mexico state auditor's office has opened investigations into the new contracts Stride secured, following complaints that other vendors were not fairly considered. The controversy has also prompted discussions in the state legislature about the need for greater oversight of virtual schools.
State Senator Mimi Stewart, the Senate’s president pro tempore, expressed surprise that a for-profit virtual school had grown so large without legislative awareness. She indicated that new legislation to regulate virtual schools is expected soon.
"We have got to stop spending this much money on virtual schools when there’s very little regulation," Stewart said. "I think it’s the state’s issue that we need to fix."
The situation in Gallup-McKinley serves as a critical case study in the ongoing debate about the privatization of public education, raising important questions about accountability, transparency, and the fundamental mission of schooling in the digital age.
