Cost of the Universal ESA Voucher Program

In a new analysis, the Grand Canyon Institute (GCI) estimates a $332 million cost to the state’s General Fund in FY2024 (July 2023-June 2024) for the universal component of Arizona’s Empowerment Savings Account (ESA) voucher program based on a student’s school of origin. Using recently released Arizona Department of Education (ADE) projections, in FY2025 that net cost will rise to $429 million.

Prior estimates of the impact of Arizona’s ESA voucher program have focused on the entire program based on data made available by ADE which does not disaggregate universal and other types of vouchers, i.e., for disabled students. 

In subsequent reports, GCI will analyze how the money was spent.

GCI’s results are largely consistent with the Learning Policy Institute’s estimate released this February, though GCI had access to a broader set of data, so was able to refine that estimate. Overall, GCI finds the gross cost of the total ESA program to be $700 million in FY2024. Universal vouchers had a gross cost of $385 million. However, when costs were estimated net of the school of origin—charter schools, district schools, or neither the net cost of the universal ESA program is $332 million,  The school of origin matters as the state general fund partially funds district schools, but fully funds both charter schools and ESA vouchers.

$332 million represents more than half of the projected state budget shortfall in FY2024 ($650 million) and is on pace to represent two-thirds of the projected shortfall in FY2025 ($429 million of $676 million) from the Joint Legislative Budget Committee. Failure to rein in these costs means critical areas of state government expenditures will be cut to balance the budget. See Figure 1.

Method

GCI utilized data on voucher recipients’ school of origin from 2017 and 2019 which the Arizona Republic published from a public information request as well as ESA quarterly reports to estimate the distribution of schools for the pre-universal targeted ESA program. In FY2024, the Arizona Department of Education started providing better data on the actual school of origin. With this data, GCI modeled the distribution of the pre-universal targeted ESA program for FY2024 and then subtracted to estimate the distribution of universal recipients. More details along with the derivation of estimates is found in the Technical Appendix.

Figure 1