Arizona’s trailblazing Empowerment Scholarships Account policy is at a crossroads.
Although the ESA policy is highly popular with families who benefit from it, a new survey of Arizona ESA families by The Heritage Foundation finds they are also highly dissatisfied with the way it is currently being administered.
Fortunately, the Arizona Department of Education is listening to ESA parents and taking important steps to make the program more user-friendly. With a few additional policy changes, such as bringing back the ESA debit cards, they should be able to restore the ESA’s historically high levels of parental satisfaction.
In the Heritage survey, more than 99 percent of families using the ESA said they support the policy. With an ESA, participating Arizona families receive 90 percent of the state funds that would otherwise have been spent on their child in public school via a restricted-use savings account.
Parents can then use those funds to pay for private school tuition, online learning, special education services and therapies, private tutors, textbooks, curriculum, and a host of other education-related products and services. Unused funds can be rolled over from year to year. There are currently about 84,000 ESA students.
Unfortunately, there has been a steep decline in satisfaction since 2023. The most recent surveys of Arizona ESA families’ satisfaction by the Arizona Department of Education were conducted under the Kathy Hoffman administration in the 2021–2022 school year (Q4) and the 2022–2023 school year (Q1), which found that 70 percent and 67 percent of respondents, respectively, were satisfied with the department’s management of the ESA program.
By contrast, in the Heritage survey conducted this fall, two-thirds of respondents expressed dissatisfaction with the department’s administration of the ESA program, including 22 percent who were “very dissatisfied.”
ESA parents are frustrated with the way the department is running the program. The vast majority of ESA parents report having encountered challenges utilizing their ESAs in the past year. When given a list of common complaints, only 2 percent answered “none of the above.” The most common complaints concerned long wait times for expense reimbursements (86%) and approvals (77%), as well as difficulties reaching a department employee (65%) and getting questions answered about ESA issues (63%).
Many of these issues were caused or exacerbated by the attorney general’s attempt to undermine the ESA program. Earlier this year, Arizona Attorney General Kris Mayes demanded that the department adopt new requirement that ESA families provide a curriculum along with requests to purchase or receive a reimbursement for supplementary materials. Each such purchase must now be justified by being required or recommended by a written curriculum—including such basic items as books, pens, and paper.
Mayes demanded the department adopt this new requirement based on her strained interpretation of the ESA statute—even though it had never been interpreted that way by any prior state attorney general or education department administration, Republican or Democrat, since the program’s inception in 2011. Indeed, as the Goldwater Institute observed in its pending lawsuit against the state seeking to overturn the new regulation, Arizona’s ESA statute “expressly allows the purchase of [supplementary] materials with ESA funds” and the “State Board of Education has likewise approved rules for the program explicitly permitting the purchase of these materials without additional documentation.”
Parents complain that they are spending hours creating curricula for common-sense items that used to be automatically approved. “It feels like we are being punished for having access to the program,” said one ESA parent in the Heritage survey. “We need curriculum for a pencil! It’s ridiculous.”
The supplementary-materials curriculum requirement has not only led to increased denials due to insufficient documentation, but it has also exacerbated the wait times—which have stretched to weeks or even months—for expense approvals and reimbursements because department officials must manually review each curriculum. Eliminating this requirement would make the ESA program run much more efficiently.
However, the curriculum requirement isn’t entirely to blame for the delays. Even before the AG’s meddling, the Arizona Department of Education under Superintendent Horne made a series of changes to how they implement the ESA program that affected the program’s efficiency and user friendliness.
In response to allegations from school-choice opponents that the ESA program was “unaccountable” and “wide open for fraud and abuse,” Horne instructed department staff to manually review every single ESA purchase before approving it. “[O]ur policy of reviewing all requests is far different from that of my predecessor, who did allow a number of inappropriate expenses to be approved,” said Horne, who added that “under my watch we review every expense request regardless of dollar amount.”
As a part of Horne’s push for greater accountability, the department stopped issuing new ESA debit cards in early 2023 in favor of ClassWallet’s online payment system. With an ESA debit card, families could make purchases from approved vendors immediately. However, since approved vendors sell both eligible and ineligible items, the ESA families would still have to submit their receipts to the department for approval before their next quarterly disbursement of funds. Occasionally, this meant that debit cards were used for ineligible items. When that happened, the ESA holder would have to repay the account or risk account closure and prosecution.
The reality is that Arizona’s ESA program was already highly accountable. A 2018 report by Arizona’s auditor general found “[m]ore than 900 successful [ESA] transactions at unapproved merchants totaling more than $700,000.” That might sound like a lot, but that amounted to less than 1 percent of total ESA spending over that period.
A more recent audit concluded that “concerns with debit card administration have largely been addressed.” Indeed, the auditor identified “only 1 successful transaction at an unapproved merchant totaling $30,” meaning that the rate of improper payments to unapproved merchants had been reduced to just 0.001 percent.
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Compared to other government programs, Arizona’s ESA program is a model of accountability. According to a 2021 analysis by the federal Office of Management and Budget, the government-wide improper payment rate was 7.2 percent.
Federal school meals programs are among the worst offenders. A 2019 report by the U.S. Government Accountability Office found that “the school meals programs have reported high improper payment error rates, as high as almost 16 percent for the National School Lunch Program and almost 23 percent for the School Breakfast Program over the past 4 years.”
Fortunately, the department has been listening to the ESA parents’ concerns. Recently, Superintendent Horne announced that his department would be approving immediately all requests under $2,000 to clear the backlog of expense reimbursements and approvals, with risk-based auditing on the back end to ensure accountability. This will go a long way toward addressing parents’ main frustrations.
The next step the department should take is to reinstate ESA debit cards—a policy change supported by 88 percent of ESA families that currently lack access to an ESA debit card. With restricted-use ESA debit cards, families could purchase educational goods and services from eligible vendors immediately, even if they aren’t in the ClassWallet Marketplace. Combined with risk-based auditing, debit cards will give ESA families the freedom and flexibility to customize their child’s education while maintaining a high level of accountability.
Parents have spoken: Arizona’s ESA program needs improvement. But the challenges are not insurmountable. Eliminating the supplementary-materials curriculum requirement and reinstating ESA debit cards would significantly address ESA families’ main concerns and would likely restore the program’s historically high level of user satisfaction.
This piece originally appeared in Arizona Daily Independent
