It costs Arizona $332M to pay for vouchers subsidizing private school tuition, homeschooling

A new report from the Grand Canyon Institute, a nonpartisan think tank, shows that the estimated net cost of the universal portion of Arizona’s school voucher program is $332 million in the current fiscal year — a figure that will grow to around $429 million next year. 

The Grand Canyon Institute found that the net cost of the recently-expanded universal part of the ESA program is equal to about one-half of the state’s budget deficit in the 2024 fiscal year and about two-thirds of the projected deficit in 2025.

The state is facing an estimated $1.3 billion budget deficit in both those years combined, with pressure on Democratic Gov. Katie Hobbs and Republican leaders in the state legislature to work together to balance them before June 30, when the 2024 fiscal year ends. 

The current fiscal year’s budget was crafted assuming that 68,380 students would take advantage of the program, at a cost to the state of $625 million. In January, the Arizona Department of Education boosted its estimates to 74,000 students and a $723.5 million price tag. 

But even more students than that are already participating: Through May, more than 75,200 students were enrolled, with a median cost of $7,000 to $8,000 per student. 

The Education Department estimates that enrollment will increase even more by the end of the next fiscal year, to around 99,000 total participants, according to a May 31 letter from the agency to 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,” GCI said in a statement about the report. 

Public school proponents have staged press conferences at the Capitol in Phoenix two weeks in a row now, calling for the cessation of the costly universal portion of the voucher program or at least a cap on it, but it’s unthinkable that the Republican-led legislature will agree to do so. 

Public school advocates say the program takes money away from the district schools that educate 90% of Arizona’s K-12 students and that universal vouchers are essentially a subsidy for wealthy parents who were already sending their children to private schools before vouchers were available to them. 

The Empowerment Scholarship Account program, as it’s formally known, works by giving the parents of participating students a debit card that can be used to pay for various educational costs, including private school tuition and homeschooling supplies. The money can even be saved for college. Parents can also be reimbursed for educational purchases through the Class Wallet system. 

The voucher scheme was created in 2012 to allow special education students to attend private or parochial schools using state funding. After the Arizona Supreme Court determined that the program did not violate Arizona’s constitutional ban on directing tax dollars to religious entities, the ESA system was later expanded to include other groups like foster kids and those attending failing public schools. 

In 2022, legislative Republicans voted to expand access to allow any K-12 student in the state to attend private school or to be homeschooled using public money, even if that student’s parents were already paying for them to attend private school before a voucher was available.

The Grand Canyon Institute found that the gross cost of the ESA program in 2024 — including universal students and those who qualified under the previous program — was around $700 million, with the universal portion making up about $385 million. 

The cost of the universal expansion was calculated by first determining how many of the universal voucher recipients wouldn’t have been eligible before the expansion. The researchers found that 54,028 students enrolled in the program in December 2023 were newly eligible, while another 17,492 receiving universal vouchers would have qualified anyway. 

The net cost of only the universal students was then determined by using state education data to figure out approximately how many of those students never attended a public school and how many moved from a charter school to a private voucher. 

“GCI estimates that 82% of universal ESA recipients never attended a district or charter school,” the report concluded. 

ESA vouchers were initially designed to transfer 90% of the cost of educating a student in a traditional public school to the voucher, thus saving the state money. But several years ago, GOP lawmakers changed that formula and now base the vouchers on 90% of what the state pays to charter schools for each student. 

Because charter schools aren’t able to tax local property, their per-student payment from the state is substantially higher than for district schools, meaning the cost of school vouchers are markedly higher per student now than when they were first created. The change eliminated the savings of vouchers for nearly all students who use them.

So, the net cost to the state for each voucher student depends on whether the state previously paid for that student’s education and to what extent. Students who never attended public or charter schools are a new cost to the state, while a student who moves from a charter school to a voucher saves the state a modest amount since per-student payments for vouchers are about 90% of what the state pays for a charter student. 

The impact on state coffers when a student switches from public school to a private voucher depends on which school that student attended. Schools in areas with high property values, like Scottsdale Unified, don’t receive state aid and are funded primarily by local property taxes. That means that each of the estimated 283 universal ESA students who previously attended Scottsdale Unified schools but entered the voucher program in fiscal year 2024 are a new cost to the state, to the tune of around $2 million, according to GCI. 

The Grand Canyon Institute also took transportation costs into account when determining the net cost, since public schools usually provide transportation to students, while voucher students generally have to provide their own transportation. 

With all of those factors taken into account, the institute found that the gross cost to Arizona’s general fund for universal voucher students was $385 million, while the net cost was lower, at $332 million. 

The report shows that while Republicans who back the program, including Arizona’s Superintendent of Public Instruction Tom Horne, say it saves the state money, that isn’t actually the case.