$1 Billion in voucher spending raises new budget pressures for Arizona schools

By Stacy Mantle
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Arizona’s Empowerment Scholarship Account program passed the $1 billion annual spending mark in early November, based on enrollment and award data posted to the AZDOE ESA dashboard.

At that point, participation had reached 96,802 students, with average awards reported at $10,348, producing an estimated total annual cost of $1.001 billion.

The milestone arrived sooner than some state analysts had projected. While the Joint Legislative Budget Committee anticipated ESA costs eventually approaching $1 billion, earlier projections placed that threshold later in the fiscal time line. Enrollment growth through late summer and early fall clarified the pace of participation more quickly than expected.

Republicans backing the ESA program argue that its rapid growth requires stronger oversight, not retrenchment. Rep. Matt Gress, R-Phoenix, has said lawmakers must align staffing and review capacity with the program’s expanding costs.

Democrats tend to disagree.

“The Republican expansion of government to universal ESA vouchers has put our state’s financial security at risk, and our students at risk without any safeguards,” said Sen. Mitzi Epstein, D-Tempe in a news release advocating changes to the program’s oversight and fiscal controls.

“With all the issues and pressing needs we have as a state,” said Minority Leader Lupe Contreras, D-Tolleson, in the same release, “Republicans knew that an unaccountable subsidy for private schools was more than our taxpayers can afford.”

The fiscal year 2026 state budget enacted in June included funding authority sufficient to cover ESA costs at or above $1 billion. However, updated participation data confirming spending at that level did not materialize until September through November, as enrollment numbers continued to rise.

Arizona’s public K-12 system serves more than 1 million students with an $8.3 billion state budget. National data from the U.S. Census Bureau and the National Center for Education Statistics consistently places Arizona near the bottom nationally in per-pupil funding. With ESA spending now surpassing $1 billion annually, vouchers account for roughly 10% to 12%  of state K-12 funding while serving fewer than 10% of students.

District closures and budget strain

School districts across Arizona report that declining enrollment — driven by a combination of demographic shifts, charter growth and expanded voucher participation — is placing strain on district finances.

During the past two school years, more than 30 district campuses statewide have announced closures or consolidations, citing enrollment losses and rising operational costs.

Arizona’s school funding system allows the money to follow the student, meaning districts lose revenue as enrollment declines while many fixed costs — including transportation, facilities and staffing — remain. The Arizona Association of School Business Officials has warned that even modest enrollment losses can destabilize district budgets and force difficult decisions, including staff reductions and school closures.

Questions about who ESA serves

Universal ESA eligibility was promoted as a way to expand school choice for families across income levels. However, multiple fiscal analyses indicate a majority of universal ESA recipients were not previously enrolled in district or charter public schools.

A 2024 JLBC review found roughly between 70% and 80% of universal ESA participants previously attended private schools or been homeschooled, suggesting the program largely subsidizes existing educational choices rather than shifting large numbers of students out of public schools.

Researchers at organizations including Education Week, Brookings and the Fordham Institute note Arizona does not collect standardized academic performance data for ESA-funded students, limiting the state’s ability to evaluate educational outcomes associated with the program.

Fiscal analyses highlight net costs

The Common Sense Institute reported ESA enrollment reached more than 92,000 students by mid-September 2025 and projected participation could exceed 100,000 students by year’s end — a projection that has since been surpassed. The report estimates total ESA spending at approximately $1.06 billion annually once enrollment stabilizes.

The institute found most new growth is now driven by students shifting between publicly funded education options rather than newly eligible populations.

Some public school administrators dispute claims that ESA participation remains stable through secondary grades. Speaking at a recent education conference, one administrator said districts are seeing students return from homeschooling or private education to public schools during their teenage years — often after the state’s enrollment count date that determines school funding. The comment was made during a meeting held under Chatham House Rule, which allows information to be used but prohibits identifying speakers by name or affiliation.

Under Arizona’s funding system, districts submit enrollment figures around the 100th day of instruction to calculate state aid. Students who enroll after that point generate little or no additional funding for the district, even though schools are legally required to serve them.

“What we’re seeing is that students are not sticking with ESAs through junior high and high school,” the administrator said. “Private schools operate under a different set of rules. They can deny enrollment, public schools cannot. Private schools can accept ESA funding, while public schools cannot. And public schools are held to state testing and accountability requirements to demonstrate student learning, while private schools are not.”

Separate analyses from the Grand Canyon Institute estimate that, in FY 2025, the universal ESA expansion imposes a net cost of approximately $350 million on the state General Fund after accounting for where students would have otherwise attended school. While the gross cost of the ESA program that year was projected at about $872 million, GCI adjusted its estimate based on “school of origin” to calculate the net fiscal impact.

GCI found about 73%  of universal ESA recipients had never attended a district or charter public school. The remainder transferred from public schools, partially offsetting — but not eliminating — the overall fiscal impact.

Accountability and oversight concerns

Advocacy groups and fiscal watchdogs continue to raise concerns about oversight and transparency in the ESA program.

“Arizona’s voucher program remains the least accountable and least transparent private school voucher program in the nation, with zero safety oversight, zero financial transparency, and zero academic accountability,” Beth Lewis, executive director of Save Our Schools Arizona said in a recent article.

Lewis cited ADE policies that automatically approve ESA purchases under $2,000, arguing the change has reduced scrutiny of spending. ADE implemented the policy in spring 2024 to reduce administrative backlogs, but critics say it has increased the risk of misuse.

Supporters of the universal ESA program argue the funding follows students rather than institutions and reflects parental demand for educational options outside traditional district schools.

“Parents know their children better than any government system,” said Arizona Superintendent of Public Instruction Tom Horne. “The Empowerment Scholarship Account program gives families the freedom to choose the educational environment that best meets their child’s needs.”

Advocacy groups backing the program say enrollment growth reflects voluntary participation rather than policy failure.

“The growth of ESA participation shows that families value having options and flexibility in how their education dollars are used,” the Goldwater Institute said in a statement responding to criticism of the program’s cost. “Funding students instead of systems ensures education dollars serve children directly, not bureaucracies.”

Costs since universal expansion

ESA eligibility was expanded to all Arizona students in 2022. Since then, annual program costs have risen from roughly $175 million to about $1 billion. JLBC projects cumulative ESA spending from fiscal year 2023 through fiscal year 2026 will exceed $3 billion, driven primarily by the universal eligibility tier.

Fiscal analysts warn without changes to oversight, reporting or eligibility, continued ESA growth could further strain district budgets and complicate long-term education funding decisions.

Independent analysts project that Arizona’s ESA program will cost more than $1 billion in fiscal 2026, reflecting continued growth in participation and state awards. “The total cost of the ESA program in FY 2026 is on track to exceed $1.03 billion, with an average award of about $10,349 per student,” said Glenn Farley, director of policy and research at the Common Sense Institute, citing the group’s quarterly ESA report.

Independent analysts also caution that the expanded program’s financial footprint could strain the state’s basic education funding. “The cost of the universal ESA program represents a significant share of Arizona’s education budget and competes with funding available for traditional public schools,” said an analysis by the Learning Policy Institute, which found that costs surged following universal eligibility and could crowd out other K-12 priorities.

Arizona’s ESA program has reshaped the national debate over school choice. But if choice is meant to expand access — not just options — policymakers and education providers will need to address structural barriers.

Aligning tuition and award levels, coordinating scholarships, accommodating student participation in public school activities and supporting flexible schooling models could help ensure the program serves a broader range of families.

Editor’s note: A grant from the Arizona Local News Foundation made this story possible. The foundation awarded 15 newsrooms to pay for solutions-focused education reporters for two years. Please submit comments at yourvalley.net/letters or email them to AzOpinions@iniusa.org. We are committed to publishing a wide variety of reader opinions, as long as they meet our Civility Guidelines.

Stacy Mantle
Education Solutions Reporter

smantle@iniusa.org

Meet Stacy
Stacy Mantle is joining the team at Independent Newsmedia, Inc. as an Education Solutions journalist, thanks to a grant from the Arizona Community Collaborative. She has a long history in education that ranges from teaching junior high and middle school to developing curriculum and standards-based assessments.

Community: A longtime advocate for animal welfare, Stacy is deeply involved in rescue efforts and volunteers with several nonprofit organizations.

Random Fact: Once upon a time, she shared her home with a pet coyote and two wolf hybrids. The experiences were wild enough to become the subject of her first book!

Education: She holds a BA in English with a minor in Political Science, a Post-baccalaureate in Secondary Education, and an MBA with a emphasis on Marketing.

Hobbies: In her spare time, Stacy writes fast-paced urban fantasy novels, crafts small-batch artisan soap, and is always up for hiking or off-roading through the Arizona wilderness with her husband of 23 years.