Arizona’s voucher program costs far above projections

Enrollment in the state’s new universal school voucher program is approaching 34,000 students and will cost the state at least an extra $200 million this year, the latest records show.

That’s far above what budget officials estimated in June 2022, when a narrow party-line vote opened up empowerment scholarship accounts to students statewide.

At the time, the estimated cost for the first year was $31.2 million, which would cover about 4,500 students, plus $2.2 million for administrative expenses. But the figures were “highly speculative,” the Joint Legislative Budget Committee cautioned in a memo. Predicting enrollment was difficult and there was no model to follow as Arizona is the first state to create universal vouchers.

The program’s fast-out-the-gate launch in July quickly changed the numbers landscape. By January, the JLBC estimated the program would draw 42,700 students by late June, the end of the current budget year, at a cost of $274 million.

As of mid-March, with nearly three months left in the budget year, the number of students with universal vouchers is at 79% of the year-end projection.

The only certainty appears to be that predictions are hard to make.

“We have no template for forecasting future growth,” the budget committee reported in January. But it took a stab at it, estimating enrollment will hit 52,500 students by June 2024, at a cost of $376 million.

The costs, while not precise, are of little concern to lawmakers as they work on a new state budget.

“We will always fund education,” said Rep. David Livingston, R-Peoria and the chairman of the budget-setting Appropriations Committee in the House.

The universal ESA program, long sought by Republican lawmakers, is the priority, he said.

His Senate counterpart, Sen. John Kavanagh, agreed. Besides, the state has a $1.8 billion surplus this year that will easily absorb the costs.

While Republican legislative leaders are confident the state can cover the cost of the booming program now and in the future, Democratic Gov. Katie Hobbs sees a train wreck coming.

“(T)he previous Legislature passed a massive expansion of school vouchers that lacks accountability and will likely bankrupt this state,” Hobbs said in her State of the State address in January.

She predicted the nascent program’s cost would cost taxpayers $1.5 billion over the next 10 years. Four days later, she upped that figure to $2.3 billion after another round of enrollment figures was announced.

How will Arizona pay for expanding program?

Skeptics have looked at the climbing costs and compared it to the alternative-fuels scandal of 2000, when a state subsidy to encourage motorists to convert to electric and hybrid vehicles quickly spiraled out of control and was repealed.

Some Democrats have dubbed the program “alt schools,” playing off the alt-fuels moniker that became a sign of shame 20 years ago and led to the later defeat of the bill’s chief proponent.

But unlike a push for cleaner fuels, funding schools is a constitutional obligation. The trick, especially with the rapid growth of the ESA program, is getting the budget guesswork right so there aren’t shortfalls.

While the state currently has a hefty surplus for the coming year, that won’t last long. The JLBC predicts that it will dwindle to $1 million by the start of the following year.

“We have substantial capacity for 1time budget proposals, but ongoing initiatives would create a shortfall in FY 25,” according to a January report. The 2025 fiscal year begins in July 2024 and runs through June 2025.

Kavanagh noted if the ESA program exceeds the projections in the budget lawmakers are working on now, there is always the state’s rainy-day fund, which stands at $1.4 billion. That would be more than enough to tide the state over, he said, if there were to be a recession, as many expect in the coming year.

In addition to the expanding universal voucher program, the state also has seen some growth in the specialized voucher accounts that were created over the previous decade. However, their increase has been modest, consistent with past years, and currently total 14,713 students.

The those scholarships serve students who fit in specific categories, such as foster children, children of military and children with special needs.