$10,000 Per Student: The Estimated Cost of Arizona’s Private School Tuition Tax Credit Program

February 29, 2016

$10,000 Per Student: The Estimated Cost of Arizona’s Private School Tax Credit Program

Enrollment flat, scholarships now exceed students


Dave Wells, Ph.D.

Research Director, Grand Canyon Institute


The Arizona Senate has already passed SB1279 and the House is considering its version HB2482. The bills would expand educational savings accounts (private school vouchers) eventually to all public school students in the state who enroll for at least 100 days in a public school first.

If passed, Arizona will join Nevada as the only states with such an expansive program.  However, in Nevada the context for passage was in the wake of Republican Governor Brian Sandoval’s effort to pass a $1.1 billion (over two years) tax package aimed at improving funding for public education. The package made permanent some temporary taxes as well as adding new tax levies that would up general fund education funding by 16 percent. Another additional $336 million would be directed to the state school fund. Part of his negotiations with Republican lawmakers led to the expanded ESA private school voucher program, as he needed a two-thirds vote in both chambers to increase taxes.[1]

Unlike Nevada, there’s no proposed tax increase for education. Prop. 123 is on the ballot to settle a lawsuit due to the state failing to meet legal minimum funding for education.[2] Arizona already has perhaps the most expansive private school tuition tax credit scholarship program in the country. Tuition tax credits for private school tuition organizations are currently up to $1,067 for an individual and up to $2,134 for a couple under two separate programs.  These amounts are roughly five times the limits for public school tax credits.[3]

Figure 1

Figure 1 Tax Credit Scholarships Exceed Private School Enrollment


In addition, Arizona provides private school tax credit options for corporations. That cap rises 20 percent per year, and for FY2017 will cap at $62 million.[4]

This analysis looks at how this program has impacted private school enrollment. Even though private school tax credits have proliferated and now cost the state more than $140 million, enrollment has not grown in Arizona’s private schools.[5]

This analysis finds that despite that growth in the program, including the expansion of the individual and corporate tax credits, that enrollment has modestly declined in private schools.  Using 2013-2014 data, the most recent data available, the number of scholarships granted through these programs now significantly exceeds the number of private students enrolled, confirming that students are receiving multiple scholarships (See Figure 1).

Regression analysis estimates that the cost for Arizona taxpayers per private student enrolled due to the tuition tax credits is about $10,000 from the General Fund.

Private school enrollment has been declining nationwide relative to total enrollment. Catholic Schools nationwide have the sharpest decline. Some analysts suggest this is due to priest scandals and the movement of Catholics on the East coast to the suburbs.[6] Another factor is the growth of charter schools. In many parts of the country, charter schools are primarily in inner cities. In Arizona the opposite is the case with many charters in suburban areas.  Arizona has the largest portion of school-age children enrolled in charter schools in the country.[7] Some private schools switch to charters (as Scottsdale Country Day School did a few years ago) or charters emerge as an alternative to private schools.  Arizona’s charter schools and substantial charter school enrollment growth should depress private school enrollment.

By contrast, the proliferation of private school tuition tax credit scholarships should expand private school enrollment.  Regression analysis estimates that the cost for Arizona taxpayers per student enrolled due to the credits is about $10,000 from the General Fund.  This amount far exceeds the general fund and local contributions to educate students in the public school system. This estimate that there is a positive impact from the tuition scholarship program (as opposed to no effect) meets a 90 percent confidence interval, which is lower than the threshold normally accepted (95 percent is the norm).

[1] Chereb, Sandra and Sean Whaley (2015), “Nevada legislature ok’s record budget, adjourns,” Las Vegas Review-Journal, June 1, http://www.reviewjournal.com/news/nevada-legislature/nevada-legislature-oks-record-budget-adjourns. Roerink, Kyle (2015), “Nevada Senate sends $1.5 billion tax plan to governor,” Las Vegas Sun, June 1, http://lasvegassun.com/news/2015/jun/01/nevada-senate-sends-15-billion-tax-plan-governor/. Layton, Lyndsey and Emma Brown (2015), “The ultimate in school choice or school as a commodity?” Washington Post, June 3, https://www.washingtonpost.com/local/education/in-nevada-school-choice-on-steroids-and-a-breakthrough-for-conservatives/2015/06/03/3cdd2300-09ff-11e5-95fd-d580f1c5d44e_story.html. Morton, Neal (2015), “Private school parents decry education savings account rule,” Las Vegas Review-Journal, July 17, http://www.reviewjournal.com/news/education/private-school-parents-decry-education-savings-account-rule.

[2] For a full analysis Prop. 123, see Wells, Dave (2016), “A Fiscal Analysis of Proposition 123 and Arizona’s Underinvestment in K-12 Education: an essential first step for K-12 funding,” Grand Canyon Institute, Jan. 7, http://grandcanyoninstitute.org/a-fiscal-analysis-of-proposition-123-and-arizonas-underinvestment-in-k-12-education-an-essential-first-step-for-k-12-funding/.

[3] FAQ’s, Arizona Tuition Organization, http://azto.org/faqs/.

[4] Children’s Action Alliance (2016), “Private School Tax Credits Divert Public Dollars for Private Benefits,” Return on Education: A Series of Funding Briefs on K-12 Funding Issues, January, http://azchildren.org/wp-content/uploads/2016/02/Private-School-Tax-Credit-brief-12-151.pdf.

[5] Rau, Alia Beard (2015), “Arizona private-school families cash in on state’s tax-credit program: a program that in 1997legislative budget staff estimated would cost $4.5 billion now tops $140 million,” July 26, http://www.azcentral.com/story/news/arizona/investigations/2015/07/26/private-school-families-arizona-tax-credit-program/30647833/

[6] Jennings, Jack (2013), “Portion of U.S. Students in Private Schools is 10 Percent and Declining,” Huffington Post Blog, May 28.  Note this article uses pre-K to grade 12, while this paper focuses only on K-12 enrollment.

[7] Ewert, Stefanie (2013), “The Decline in Private School Enrollment,” SEHSD Working Paper Number FY2012-117, U.S. Census Bureau: Social, Economic and Housing Statistics Division, January, https://www.census.gov/hhes/school/files/ewert_private_school_enrollment.pdf.