Arizona private school voucher program evades ballot reckoning

Arizona State Legislature

The latest attempt to rein in Arizona's costly universal private school voucher program, which has raised credit concerns for the state and its public and charter schools, failed last month when a proposition seeking guardrails and reforms was kicked off of the Nov. 3 ballot.

That means no limits are in sight for a program that has consumed a higher-than expected share of Arizona's state budget.

The setback for public school proponents comes as other Southwest states this year launched or expanded funding for their programs.

The Protect Education Accountability Now measure sought to ban questionable spending of Arizona Empowerment Scholarship Account funds by parents and guardians, while setting a maximum $150,000 family income for participation in the program and redirecting unspent voucher funds to public schools. 

Save Our Schools Arizona said backers turned in more than 420,000 signatures – 1.6 times above a 255,949 requirement to get on the ballot, with 292,820 determined to be valid until a successful court challenge left the petition drive about 12,000 short due to what the group called "ticky-tack technicalities."

"This decision has gutted all of us, knowing that the $1 billion voucher program will remain unchecked with no regard to student safety or taxpayer accountability, and knowing that the impacts of the voucher drain on public schools will mean continued school closures, teacher and staff layoffs, and program and resource cuts," an Aug. 22 statement from the group said. 

Republican House Speaker Steve Montenegro called the petition drive's failure "a major victory for parents, students, and educational freedom."

"But no one should mistake this defeat for the end of the fight," he said in a statement. "School choice opponents have spent years trying to roll back educational freedom in Arizona, and they will keep trying."

Efforts by Democratic lawmakers and Gov. Katie Hobbs to put limits on the nation's first universal school voucher program, which was created under a 2022 Arizona law, have failed to gain traction in the Republican-controlled legislature. 

Escalating costs

As of Monday, 104,644 students were enrolled in the program for the 2026-27 school year, up from the previous school year's 100,713 students, whose accounts mostly totaled between $7,000 and $9,000 each, according to the Arizona Department of Education.

As of 2024-25, Arizona public schools, including charter schools, enrolled just under 1.1 million students, according to the department.

The voucher program's cost quickly blew past initial "highly speculative" estimates. As of the third quarter of fiscal 2026, ESA awards cost the state $1.115 billion on an annualized basis — a 23.7% increase from the same period in fiscal 2025. 

Arizona and Florida are among five states with "true universal" publicly funded programs open to all students, according to nonprofit advocacy group EdChoice.

Impact on charter schools

A June S&P Global Ratings fiscal 2025 charter school medians report found median enrollment for rated Arizona schools dropped, while it increased in Florida.

"The educational landscape is being reshaped by the rapid ascent of the school choice movement, a trend accelerated by the pandemic and intensified by the rise of voucher programs and homeschooling," the report said. "This has created a multifaceted competitive environment where charter schools must contend not only with traditional districts but also with a widening array of school choice alternatives." 

Falling enrollment impacts charters' per-pupil state funding, according to S&P analyst Jessica Wood.

 "Generally, there's just increasing competition for a smaller number of students, and we're seeing that impacting charter schools just from a competitive landscape standpoint," she said. "But it really is very state dependent, region dependent, and really school specific."

Declining enrollment for Kaizen Education Foundation, a nonprofit corporation that operates 15 charter schools in Arizona, spurred S&P last week to revise its outlook to stable from positive for the BB rating on $29.1 million of outstanding revenue bonds the foundation issued in 2016 through the Arizona Industrial Development Authority.

"Management attributes some of the recent enrollment loss to the state's Empowerment Scholarship Account program, as well as a decline in birth rates statewide," S&P's rating report said, pointing to the foundation schools' enrollment volatility, comparatively weak student retention, and the absence of a wait list. 

An official with the foundation's contracted management firm did not immediately respond to a request for comment.

S&P raised concerns last year that escalating ESA costs could crowd out Arizona's other discretionary spending and introduce uncertainty into its education funding framework.  

In an April report, Moody's Ratings said the marginal state budgetary impact of additional ESA participation is expected to moderate as Arizona's school-age population declines.

Vouchers spread in Southwest

State funding for voucher programs is increasing in the Southwest amid court challenges.

"The goal of the proliferation of vouchers is to accelerate the loss of funding to public schools and move more towards a marketized version of education and away from public education," said Patrick Cremin, a staff attorney at Education Law Center, a nonprofit advocacy organization for public school students.   

He added that challenges are usually based on a state's constitutional clauses that require a free system of public education for all students with public funding of private schools posing a threat to adequate and equitable funding for public schools.

The fate of Utah Fits All Scholarship program, enacted in 2023, is pending before the state Supreme Court, which took up an appeal of a 2025 district court ruling that found the program to be unconstitutional, but allowed it to continue operating pending a high court decision. 

State funding for education savings accounts of up to $8,000 per pupil annually has grown from an initial $80 million for the 2024-25 school year to $120 million this school year.

A bill passed by lawmakers this year sets a maximum age limit for eligible students and enhances oversight and compliance. A state audit released in June found instances of funding being used "for wasteful and extravagant purchases."

Texas' $1 billion Education Freedom Account program launched this school year with over 118,000 students receiving active awards, state Comptroller Don Huffines announced last week.

The onset of vouchers comes against a backdrop of budget stress for some Texas public and charter schools from years of stagnant per-pupil state funding and elevated inflation, making the  ability to meet enrollment projections more important, according to S&P analyst Luke Gildner.

Gov. Greg Abbott and other officials have called for maintaining current funding "plus amounts necessary to reflect projected program participation" in the 2027 legislative session. 

Oklahoma lawmakers raised the cap for the state's Parental Choice Tax Credit to $275 million from $250 million. The program enacted in 2023 provides refundable tax credits of $5,000 to $7,500 for an eligible student's private school tuition. 

Funding for Arkansas' Education Freedom Account program, which has been the target of constitutional challenges and which EdChoice labels as "true universal," has risen to about $300 million, Gov. Sarah Huckabee Sanders told reporters at an April 29 fiscal 2027 budget signing. A House committee plans to study a proposal for a $100 million education income tax credit program.