Executive Summary

Fiscal Year (FY) 2023 was the first year that Arizona’s Empowerment Scholarship Account (ESA) voucher program was expanded from targeted populations, primarily special needs students, to universal eligibility. In addition, home-schoolers and in-home micro-schools became eligible for ESA vouchers. 

As the Grand Canyon Institute (GCI) has already noted, the program’s costs are a significant contributor to budget shortfalls, and failures to address this issue have led to exceptionally poor budget choices, such as taking $115 million from opioid settlement dollars to balance the budget, when $175 million sits unspent in ESA accounts.

The concept of ESA vouchers traces its roots to economist Milton Friedman, who advocated transparency and accountability for such programs. Contrary to this philosophy, Arizona has minimal to no transparency and accountability with its ESA program.

This report aims to improve the level of financial transparency by examining where the approximately $415 million in overall ESA account allocations went during FY2023, the first year of the universal program.

• $304 million was spent overall
• Significant expenses on items not clearly tied to educational curriculum as has been noted by the state Attorney General’s office.
• $173 million was spent on private schools, $97 million (51%) of which went to religious schools and $75 million (44%) went to schools serving special needs students
• Evangelical Christian and Catholics schools made up 86% of the religious school expenditures.
• An estimated $111 million was added to “rollover accounts,” which now amount to $175 million that has accumulated in 60,000 ESA accounts; just over 1,000 accounts have a total of $60 million.

Financial Oversight Recommendations: 

• Audit all independent evaluations submitted to request eligibility for special needs children in the universal program to verify if criteria used is sufficiently consistent with  the federal Individuals with Disabilities Education Act (IDEA).
• End the carry-over of ESA funds from year to year and sweep existing carry-over balances. This would return $115 million swept from opioid settlement dollars and the rest to the General Fund.
• Audit educational expenditures approved to date relative to the educational needs of the child by the Auditor General.
• Require that ESA awards are contingent on education plans that thoroughly document how funds will be used to meet the educational needs of the child.
• Require parents to re-apply each year with an educational plan for the child along with documentation of results and an evaluation from the prior educational plan and changes being made (in the absence of any testing requirement).
• Require all vendors receiving $200,000 or more in ESA funds to submit detailed independent audits that, like charter school audits, would be available for public review. 
• Require that all private schools charging tuition for a comprehensive educational program that receive ESAs submit Annual Financial Reports, like charter schools.

About

Curtis Cardine, GCI Research Associate has over 50 years in education with a concentration in school finances.  He holds an MA in Organizational Change and advanced degree in Leadership and change. His background includes creating public school charters and served as a teacher, principal and superintendent in charter and public schools. He attended private religious schools during his elementary and high school years which were funded by his parents. He can be reached at ccardine@azgci.org.

Dave Wells holds a Ph.D. in Political Economy and Public Policy and is the Research Director of the Grand Canyon Institute. He can be reached at dwells@azgci.org or (602) 595-1025 ext. 2.

The Grand Canyon Institute (GCI) is a nonpartisan, nonprofit organization dedicated to informing and improving public policy in Arizona through evidence-based, independent, objective, nonpartisan research. GCI makes a good faith effort to ensure that findings are reliable, accurate, and based on reputable sources. While publications reflect the view of the Institute, they may not reflect the view of individual members of the Board.

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