Education Savings Accounts Posted on April 21, 2017 | Policy Report

Education Savings Accounts: Questions and Answers

Education Savings Accounts were signed into law by Arizona Gov. Jan Brewer in April 2011, and Gov. Doug Ducey signed legislation in April 2017 that allows every Arizona public school student to apply for an account. The program opens a new frontier for education reform because parents have more options for their children with these savings accounts than under any other education reform initiative in American history. For the first time, parents can use formula funding from the state to customize their child’s education.

Q: What are Education Savings Accounts?

A: Education Savings Accounts are private accounts managed by parents for use on educational expenses for their child. With an account, the state deposits a portion of a child’s funds from the state education formula into a private account that parents use to buy educational products and services for their children. The state department of education calculates a student’s per pupil amount through the state’s finance formula and makes quarterly deposits into the accounts. Parents can use account funds to purchase private school tuition, tutoring services, books and other curricular materials, or even save for college.

Q: What are the key provisions?

A: First, Education Savings Accounts are private accounts, and parents have direct control over what purchases are made, with certain stipulations (the purchases must be for educational products or services). Second, parents can choose from different educational services or materials and the money is not mandated to flow directly from the state through a parent to a specific vendor.

            According to state law, parents and students can use the accounts for the following educational expenses:

·      Educational therapies from a licensed or accredited practitioner or provider.

·      A licensed or accredited paraprofessional or educational aide.

·      Tuition for vocational and life skills education approved by the department [of education].

·      Associated services that include educational and psychological evaluations, assistive technology rentals and braille translation services approved by the department.

·      Tutoring or teaching services provided by an individual or facility accredited by a state, regional or national accrediting organization.

·      Curricula.

·      Tuition or fees for a nonpublic online learning program.

·      Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination or any exams related to college or university admission.

·      Tuition or fees at an eligible postsecondary institution.

·      Textbooks required by an eligible postsecondary institution.

·      Fees for management of the empowerment scholarship account.

·      Services provided by a public school, including individual classes and extracurricular programs.

·      Insurance or surety bond payments.

·      Uniforms purchased from or through a qualified school.

Q: Who can apply for an Education Savings Account?

A: First time applicants for an account must have attended a public school for at least 100 days in the prior school year, except for incoming kindergarten students, preschool children with special needs, and children of deceased members of the military. The 100 days do not have to be the first 100 days of a public school year.

Additional eligibility provisions are defined as follows:

  • Students with special needs (children with an IEP or 504 plan);
  • Students attending Arizona public schools or public schools in districts that received a "D" or “F” on their state accountability report card;
     
  • Students whose parents are active duty members of the U.S. military;
     
  • Students who have been adopted from the state's foster care system or who are placed with a family and have a case plan of adoption;
     
  • Students living on Native American reservations;
     
  • Siblings of existing accountholders;
     
  • Incoming kindergarten students who meet any of these criteria;
     
  • Preschool children with special needs;
     
  • In 2017-18, students in kindergarten, first grade, sixth grade, and ninth grade. In 2018-19, students in grades K-2, 6-7, and 9-10. In 2019-20, students in grades K-3 and 6-11. In 2019-20, all public school students in K-12.

Q: What changed with the passage of SB 1431 in 2017?

A: First, as mentioned above, every public school student will be eligible to apply for an account by 2021. Second, the program’s enrollment cap of 0.5 percent remains until 2022, at which point no new students can use an account. Between 2017 and 2022, approximately 5,500 new education savings accounts can be approved each year.

            Third, low-income students (adopted children and students from families at or below 250 percent of the federal poverty guidelines) will receive 100 percent of the base student formula in each account. These students will receive accounts worth approximately $5,000. Students from families with incomes above 250 percent of the federal poverty guidelines will receive 90 percent of the base student formula, or approximately $4,000 per account. Children with special needs will still receive 90 percent of the base student formula for such children—this figure varies according to a child’s diagnosis.

            Students that leave a charter school to use an Education Savings Account will receive an additional $1,500 based on technical provisions in Arizona’s funding formula.

            Account deposits will not change for those using an account on or before June 30, 2017.

            Fourth, account holders in grades 3-12 that do not have special needs must take a national norm referenced test, AP test, the state test, or a college entrance exam annually. For private schools enrolling 50 or more account holders, results must be made available on the school’s web site or provided to the public upon request.   

            Fifth, beginning in 2018, the Arizona Department of Education will make deposits in the accounts monthly (instead of quarterly).

            Finally, parents can request assistance from non-profit organizations, including private schools, with the account application process.

Q: Why were Education Savings Accounts created?

A: In 2009, the Arizona Supreme Court issued a decision in Cain v. Horne that found Arizona’s voucher programs for special-needs and foster students unconstitutional. The court ruled that voucher programs violate provisions of the state constitution that prohibit public funds from being directed to private or religious purposes. After the decision, the Goldwater Institute proposed Education Savings Accounts, which provide parents with even more choices than the voucher programs.

Q: What is the difference between an Education Savings Account and a school voucher?

A: School vouchers allow parents to use public funds to pay private school tuition. A state agency issues a check, which is endorsed by a parent and turned over to a private school—or the check can be issued directly to a school under the parents’ names. With Education Savings Accounts, parents can use student funds for many different expenses, including, but not limited to, private school tuition. As a result, the savings accounts provide parents even more educational choice than vouchers.

Q: Are Education Savings Accounts constitutional in Arizona?

A: Yes. Shortly after the first savings accounts were awarded to applicants, the Arizona School Boards Association, the Arizona Education Association (a teacher union), and other groups representing the traditional education establishment filed suit to stop the program. Goldwater Institute attorney Clint Bolick represented the Institute alongside the Arizona Attorney General’s office and the Institute for Justice in defending the program.
     Oral arguments in Niehaus v. Huppenthal were held at the Maricopa County Superior Court on November 28, 2011, and Superior Court Judge Maria Del Mar Verdin issued a ruling on January 25, 2012 that found the savings accounts constitutional. In her opinion, Judge Verdin wrote, “The exercise of parental choice among education options makes the program constitutional.”

     On October 1, 2013, the Arizona Court of Appeals also ruled in favor of the accounts. Judge Jon W. Thompson wrote, “The ESA does not result in an appropriation of public money to encourage the preference of one religion over another, or religion per se over no religion. Any aid to religious schools would be a result of the genuine and independent private choices of the parents. The parents are given numerous ways in which they can educate their children suited to the needs of each child with no preference given to religious or nonreligious schools or programs. Parents are required only to educate their children in the areas of reading, grammar, mathematics, social studies, and science.”

Arizona’s Supreme Court declined to review the case in early 2014, allowing the appeals court ruling to stand. As a result, education savings accounts are not vouchers and are constitutional in Arizona. 

Q: Would Education Savings Accounts be constitutional in other states?

A: At least 38 states, including Arizona, have provisions in their constitutions prohibiting the use of public funds at private or religious institutions (called “Blaine Amendments,” named for the 19th century Maine Congressman James G. Blaine). For these states, in particular, Education Savings Accounts are a constitutional method of education reform because parents have discretion over the use of state funds on a variety of expenses. For those states without such amendments, the savings accounts would also be constitutional.

            As of 2015, lawmakers in four states have passed laws based on Arizona’s accounts: Florida, Mississippi, Tennessee, and Nevada.

Q: What arguments have opponents used to try and eliminate Education Savings Accounts?

​A: The opposition made three main arguments in the trial court. (1) Because some savings-account money may go to religious schools, the program violates the Arizona Constitution’s “Religion Clause.” (2) Similarly, because some Education Savings Account money may go to private or sectarian schools, the program violates the Arizona Constitution’s Blaine Amendment or “Aid Clause.” (3) Because parents must agree to not enroll their child in public school as a condition of enrollment in the program, the program impose an unconstitutional condition on participants. All three of these arguments failed before the trial court.

Q. Do states need to repeal their Blaine Amendments in order to enact an Education Savings Account program?

A: No. Education Savings Accounts were specifically designed to avoid conflicts with Blaine Amendments. Blaine Amendments prohibit public money from being appropriated in aid of private or sectarian schools. Under the program, the only appropriation the state makes is into privately managed accounts. Not a dime of the state’s appropriation is necessarily earmarked for private or sectarian school tuition.

If parents ultimately decide to purchase private school tuition with the funds, the wide scope of parental choice and control sufficiently distances the state from the choice. This distance in turn undermines any finding that the state is appropriating money to private or sectarian schools.

Q: If parents spend funds on tuition at a religious school, does that mean the program violates the separation between church and state?

A: No. To maintain a proper separation between the state and religion, state constitutions forbid the state from appropriating money directly to religious schools. But no such appropriation could occur under the Education Savings Account program. The state may only deposit money into privately controlled accounts. After it does so, the state no longer directs any of the funds. If a parent later chooses to spend savings account funds at a religious school, the state is entirely separated from that decision. That separation means the program does not violate any separation between church and state.

Q: Does participating in the Education Savings Accounts prevent students from returning to a public school?

A: No. Parents participating in the program must agree to not enroll their child in a public school while receiving savings account funds. This policy prevents double dipping of state funds. However, if at any point the parent decides the program is not meeting their child’s needs, the parent may return the funds and re-enroll their student in public school.

For more information, please contact Educational Director Jonathan Butcher at jbutcher@goldwaterinstitute.org or (602) 462-5000.

Author

Jonathan Butcher is a Senior Fellow at the Goldwater Institute. He has researched and testified on education policy and school choice programs around the U.S. His work has appeared in ... Read

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