4 firms submit bids to run ESA program

Four financial management companies put in proposals to run the state’s burgeoning Empowerment Scholarship Account program, the state treasury announced May 22.

The most recent ESA request for proposals is the first since expanding the program to all Arizona students, and it is the first process to see competition as school choice programs grow and platforms to host them follow.

In 2019, current ESA financial vendor ClassWallet secured the contract uncontested. ClassWallet submitted a bid to continue its work in the state alongside newcomers Odyssey, Merit International Inc. and Student First Technologies.

Deputy State Treasurer Mark Swenson sifted through a small pile of envelopes on May 22 and read out the names of the four bidders.

About half of the ESA RFP evaluation team, including ESA Executive Director Christine Accurso, three members from the Arizona Department of Education and two members from the Office of the Arizona State Treasurer were in attendance.

Also in the room were two ESA parents who stopped by after the end of the State Board of Education meeting upstairs.

Swenson said this was the first time a proposal opening had an audience. He read the names of the bidders for the record but clarified the proposals themselves would not be disclosed publicly until after the contract is awarded in the first week of July.

The Treasurer’s Office put out the ESA RFP at the end of March.

Each bidder will be evaluated on a weighted scale with evaluators taking into account the cost of the contract, conformance to scope of work, the method of approach and the experience of the company.

The Treasurer’s Office and ADE seek a vendor who can manage more than 57,000 student accounts, restrict purchases and automate the receipting process.
Ahead of the bid opening, ESA parents of students with disabilities delivered a formal letter of protest to the Treasurer’s Office objecting to an RFP seeking a financial vendor for the program.

The Arizona Coalition of Parents for Equal Student Access claims shortfalls in the RFP’s consistency with state and federal laws on consumer protection, privacy and discrimination, legislative changes to the program, and contracts between ADE and parents.

The group has also consistently expressed concerns over the current financial management vendor ClassWallet.

The company won the contract uncontested in 2019 and now runs payment and reimbursement platforms for five state ESA programs.

According to the 2019 contract, the services provided are free but conditional. ClassWallet initially charged the state a $25,000 setup fee. And they make their money by charging a 2.5% fee for every vendor transaction going through their Direct Pay system.

According to a spokesperson for ClassWallet, the site has processed more than 815,000 ecommerce, automated clearing house, reimbursement and debit card transactions, in excess of $500 million, for more than 47,000 Arizona families and students.

But the site continues to draw some criticism from parents and tutors for late payments, no running account balances and a lack of accessibility for some.
A spokesperson for ClassWallet declined to comment until the contract is awarded.

But in March, Jaime Rosenberg, the CEO and founder, said in a written statement, “ClassWallet has been a consistent backbone of the Arizona ESA program during three different ESA administrations which has seen a 600% growth in the number of students accessing educational goods and services through our platform.”

Odyssey is a fairly new face in the ESA landscape and currently administers programs in Idaho and Iowa. In January, the Iowa Department of Administrative Services awarded Odyssey a contract to run the state’s nascent universal ESA program.

In the proposal to Iowa, Odyssey touted work done in Arizona, including administering a $10 million microgrant program with Love Your School from August 2022 to August 2023 and $5 million Arizona Tax Credit Scholarship Child Opportunity Fund with the Resolute Group, a consulting agency, starting in November 2022.

Jennifer Clark, executive director and founder of Love Your School and a member of the Arizona State Board of Education, said she never partnered with Odyssey to administer a microgrant program.

Clark said the two talked about and conceptualized a microgrant program, but it never came to fruition. She said she had not seen the proposal from Odyssey, and Love Your School intended to serve as a reference for the company.

Resolute did not respond to a request for comment, and the tax credit scholarship cited in Odyssey’s Iowa proposal does not appear on an Arizona Board of Regents list of certified school tuition organizations.

Iowa conducted an evidentiary hearing after two other bidders protested that state’s decision to award the contract to Odyssey over questions about its references, though the state ultimately finalized a contract with Odyssey in April.

Joe Connor, CEO of Odyssey, did not respond to a request for comment before the Arizona Capitol Times print deadline and previously declined to comment about Odyssey’s participation in the Arizona RFP process until a contract was awarded.

Student First Technologies, an Indiana-based company, started out running tax credit scholarships, which it now operates across multiple states. It also runs a private nonprofit ESA-type tutoring program which contracts with the Department of Education in Indiana.

Mark Duran co-founded the company with Forest Fowler. Duran, who now serves as the CEO, was homeschooled growing up and Fowler, the chief technology officer, was in pod learning.

Duran said they strive to remain user-focused and noted the company does not engage in any lobbying.

“We’re really like the in-the-trench workers behind the scenes hooking up all the pipes,” Duran said. “You don’t think about your plumbing in your house until it’s broken. So, our goal is to be the best in the space for the best quality experience for families and administrators of these programs.”

Merit International Inc. administers educational savings programs in Ohio and Kansas, which provide $1,000 credits to sponsor tutoring and other educational activities to remedy learning loss from the Covid pandemic.

The company’s mobile app associated with the Ohio Afterschool Child Enrichment program won an award for innovation from the Business Intelligence Group for innovation in education.

Merit also offers a “No Fraud Guarantee,” which ensures the company will take on the cost of any legitimate fraud occurring in the ESA program or in implementing the marketplace.

A spokesperson from Merit also declined to comment given the ongoing RFP process.

The ESA Evaluation team is now tasked with going over the proposals from the four bidders and is slated to award a contract by July 7. The company chosen will enter into a three-year contract with the Treasurer’s Office, with two potential one-year extensions.