Key Points:

• Schools superintendent, treasurer, dispute credit for AI improvement implementation

• Race to rollout new technology comes as two faceoff in July primary election

• AI upgrades remain top priority to address ongoing misspending, oversight woes

An artificial intelligence arms race is unfolding between the state treasurer and superintendent of public instruction over Arizona’s $1 billion Empowerment Scholarship Account program.

The dash to improve the financial platform transpires as Treasurer Kimberly Yee challenges State Superintendent of Public Instruction Tom Horne for Arizona’s top education post.

Both candidates have a stake in the game. The State Treasurer’s Office oversees the contract with ClassWallet, the financial vendor chosen to house ESA accounts, while the Department of Education administers the program.

Horne and Yee have plastered the promise of technological improvements to curb misspending to their respective campaigns in the lead up to the primary election in July and are now vying to take credit for upgrades to the program.

Around 108,000 students will be enrolled in ESA by next school year, but only around a dozen Department of Education staff members work to administer the program and eight people to check purchase requests.

Light staff and heavy enrollment have made the use of AI to vet transactions a high priority for the department.

“We get 2 million requests a year, and we have eight people to check those requests. That’s 250,000 a person,” Horne said. “That’s not humanly possible. We need the help of AI.”

Horne and ESA Director John Ward have been looking into incorporating machine learning into the platform to assist in the program oversight for at least a year. But the road to implementation has been a long one.

In a May report, auditors recommended tools like machine learning or artificial intelligence to identify misspending but noted, despite claiming to the contrary, the department had not yet deployed any such technology.

Horne said the department is coming closer, though, with the expectation to roll out partial AI use for purchase vetting on both ClassWallet’s platform and on the department’s end in the near future. He said the ClassWallet recently sent an amendment to the current contract to the state treasurer.

On June 22, Yee announced “potential breakthrough AI updates to the platform,” and said her office had provided the opportunity to the department to access “advanced technology upgrades, including enhanced AI capabilities and updated processing software.”

“By leveraging advanced technology and AI-driven capabilities, we are providing better service to families while promoting transparency and responsible stewardship of public funds,” Yee said.

But Horne claimed the department had undertaken the lionshare of the work.

“We had our vendor ClassWallet send a contract to her to sign to validate the work we’re doing together with them,” Horne said. “All she had to do was just sign that contract and instead she issued a press release taking credit for work that we’ve been doing,”

The Treasurer’s Office declined to provide specifics on the exact tools and upgrades, the implementation timeline, or the department’s involvement but confirmed the office was in the process of finalizing the contract amendment with ClassWallet.

A spokesperson for ClassWallet also declined to go into detail on program enhancements, implementation timelines or technology rollouts.

With improvements coming to ClassWallet, Yee is still looking to assess the entire field of financial management vendors in anticipation of the contract lapse next year through a request for information process

The Treasurer’s Office is now seeking input from vendors on account set-up, functionality, funding processes, user experience, transaction processing, cashflow management, data dashboard tools, audit management tools, emerging automation technologies, customer support, pricing and cost.

ESA Director Ward previously said the department helped shape the inquiry by providing a list of priorities and necessary improvements — with key areas of interest being an audit management software system and automated tools to assist in curbing misspending and fraud.

Currently, four major companies across the country run programs akin to Arizona’s ESA — ClassWallet, Odyssey, Student First Technologies and Merit International Inc.

RFI responses are due on July 29, but the Treasurer’s Office recently answered a round of questions from prospective participants.

In response to vendor inquiries, the Treasurer’s Office added the desire to see a platform determine the allowability of a purchase or reimbursement before state funds go out the door and is looking for “real-time visibility into transactions and purchasing trends” and a clear show of compliance concerns for the state.

But overall, the state is seeking as much information as possible from vendors.

“In light of the Arizona ESA program’s expanding enrollment with no corresponding increases in operational funding, as well as technology’s evolving capabilities, the state is seeking information pertaining to all aspects that pertain to and enhance available financial management and operational solutions capabilities,” the Treasurer’s Office wrote.