Concerns about waste and fraud in ESAs are misplaced, especially in comparison to other government programs.
Education Next | Jason Bedrick
As education choice policies sweep the nation, critics are raising concerns about the potential for waste, fraud, and abuse. Yet a closer look reveals that these policies offer a model for accountability.
A dozen states now have K-12 education savings account, or ESA, policies that allow families to use a portion of state education funds to customize their children’s education. Families can use money drawn from an ESA to pay for private school tuition, tutoring, textbooks, homeschool curricula, special needs therapy, and more. In five states, every K-12 student has or will soon have access to ESAs or ESA-like programs.
The flexibility over how education dollars may be spent have raised questions about whether families will spend ESA funds responsibly. Opponents allege that ESA policies, like Arizona’s, have "few legal guardrails" and "loopholes the size of the Grand Canyon." Yet independent audits and the agencies charged with providing oversight tell a very different story.
The most recent review of Arizona’s Empowerment Scholarship Account program by the Arizona Auditor General found an improper payment rate of almost zero.
A prior review in 2018 had found "[m]ore than 900 successful [ESA] transactions at unapproved merchants totaling more than $700,000." Opponents of the school choice blasted the program for its supposed lack of accountability, but they failed to mention that this accounted for only about one percent of ESA spending.
Moreover, as Matthew Beienburg of the Goldwater Institute has documented, much of the misspending was the result of innocent mistakes, not fraud. For example, the grandmother whose had purchased "educational games and supplies for her special-needs grandson that weren’t explicitly required by his at-home curriculum and thus not approved under the program." Other parents found their accounts flagged for purchasing things like pens, pencils, notebooks, and other consumable supplies that are not eligible expenses. Innocent misspending must be reimbursed. The rare instances of intentional fraud are subject to prosecution.
Since the 2018 auditor general’s report, the program has improved financial accountability significantly. The Auditor General reports that "concerns with debit card administration have largely been addressed." The ESA program has also begun shifting to an online platform called ClassWallet. Under the new system, the latest auditor general’s "review of all 168,020 approved transactions identified in the Department’s Program account transaction data" over the prior fiscal year had "found only 1 successful transaction at an unapproved merchant totaling $30."
In other words, the rate of improper payments to unapproved merchants has fallen to 0.001 percent.
Indeed, education savings accounts have proven far more financially accountable than other government programs. According to a 2021 analysis by the federal Office of Management and Budget, the government-wide improper payment rate is 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."
There is always room for improvement, but policymakers should keep things in perspective. Spending on Arizona’s universal ESA constitutes only two percent of the state’s education budget and improper ESA payments are nearly zero.
Of course, for the opponents of school choice, the real scandal is what ESA families are permitted to purchase. For example, a recent >article in The 74 breathlessly reported that ESA families were buying "items like kayaks and trampolines," as well as chicken coops, and "tickets to entertainment venues like SeaWorld."
Yet as Michael Goldstein, a visiting scholar at Harvard University’s Center for Education Policy Research, pointed out, public schools "are already—and appropriately—doing all of these things."
Indeed, Arizona’s former Superintendent of Public Instruction Kathy Hoffman, a Democrat, >allocated $14 million to fund projects in public school classrooms. The public funds went to buy things like hula hoops, color-coded piano keyboards, comfortable seating for reading, folklórico shoes for special dance lessons, K’Nex kits, VR headsets, gardening supplies, and more.
It is not uncommon for public schools to have kayaks or trampolines for physical education or their athletic programs. Chicken coops are a feature in many schools, particularly in rural areas. Washington, D.C.’s Department of Health even published a guide to raising chickens in district school gardens. And what do you think all those public-school buses are doing outside of SeaWorld? Has The 74 never heard of educational field trips?
What salacious media accounts tend to miss is the context in which these purchases are made. ESA parents had to receive approval from the Arizona Department of Education for each purchase. In many cases, parents making unusual requests even reached out to the department’s helpdesk for preapproval, at which point they explained the context of their purchase.
One family recently explained why they used ESA funds to purchase a trampoline for their son, who has autism. Their son struggled to interact with other children and refused to engage in any physical activities. After following numerous suggestions from therapists, they had a breakthrough: a trampoline. In a letter to the department describing the educational value of the trampoline, the parents wrote:
We can’t believe how great it has worked for him! He excitedly goes and exercises by doing fun jumps, runs, and different workout activities on the trampoline that he views as just fun! He told me just the other week, "Mom! I’m not tired all the time anymore!! Before I would pick up one thing and want to go sit and rest on the couch. Now I can do it all!"
He has also opened up with social situations when they play a game on the trampoline with him and his brother (also an ESA student with ADHD that the trampoline could greatly benefit). [Our son’s] occupational therapist has consistently requested that they do many therapies on the trampoline for him and expressed how much he has improved since using it. We are truly so incredibly grateful for this as we couldn’t have done it without ESA, and it educates my son in a way that public school hadn’t been able to.
Likewise, ESA opponents scoff at children receiving horseback riding lessons. But what would they say to the mother of a child with cerebral palsy who describes her "tears of joy" watching as therapeutic horseback riding lessons helped her son develop the balance and muscle control needed to walk, run, and play on the playground?
States have a compelling interest in ensuring that every child has access to a quality education that meets his or her learning needs. Lawmakers and public officials also have a solemn duty to ensure that taxpayers’ hard-earned dollars are spent only for their intended purposes. Education savings account policies like Arizona’s have demonstrated their capacity to empower families with greater educational opportunities while maintaining a high degree of financial accountability.
Jason Bedrick is a research fellow at The Heritage Foundation’s Center for Education Policy.