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Tag: Public Schools

Public schools push back against ESA program

Key Points: 
  • Public school groups introduced ballot measure to regulate ESA program
  • School choice proponents form political action committee to oppose attempt 
  • Match-up creates race to gather signatures, or dissuade ESA families and voters

With little success at the Legislature, public school advocates and the state’s teachers union are now turning to the ballot to usher in reforms to the Empowerment Scholarship Program. 

But the road ahead is, admittedly, an uphill battle with a pro-school choice group already forming a political action committee and mobilizing ESA families to obstruct its path.

Still, proponents see the fight as well worth it given the need to ensure student safety, fiscal responsibility, academic accountability and stronger reporting and enforcement mechanisms. 

“The Legislature has had bills in front of them to reform this program for years upon years and haven’t done anything,” Beth Lewis, executive director of Save Our Schools Arizona, said. “In the meantime, it’s skyrocketed to a billion dollar program. We’ve seen many, many instances of fraud, waste, abuse and scandal, and our public schools are closing en masse. It’s time to right-size this thing and get some reforms in place that make sense for everybody, for taxpayers, for ESA families, for public school families, for everybody.” 

On Feb. 6, Save Our Schools Arizona and the Arizona Education Association filed the Protect Education, Accountability Now Act, which proposes a sweeping list of changes. 

On the enrollment front, the measure enacts a $150,000 income cap on families whose students qualified under universal expansion, not the prior program categories, like disability, failing schools, juvenile wards or military families. 

Marisol Garcia, president of the Arizona Education Association, said the income cap was based on a rough doubling of the state’s median income, which is just shy of $80,000. 

As for program vendors, private schools and tutors receiving ESA dollars would be required to adhere to local fire and safety codes, conduct background checks on educators and staff, maintain safe storage of heavy machinery and weapons, and prohibit drugs and alcohol on school campuses. 

Private schools, microschools and tutors would also be required to maintain fingerprint clearance cards for anyone with unsupervised contact with children and to investigate misconduct allegations and require all tutors to be at least 18 years old. 

The proposal would also require all ESA funding schools to either have students take statewide assessments at public schools to track academic success or secure a national accreditation. 

Garcia noted the current lack of transparency into the curriculum or academic standing of students in the ESA program. 

“We have no idea what is being taught. We have no idea what kind of growth, graduation rates, none of that. And if we’re paying for it,” Garcia said, “there should be some level of assurance that students are learning.” 

On the fraud front, the ballot measure would ban the use of ESA funds on non-educational and luxury items.

The measure specifically lists household appliances, home or property improvements, jewelry, lingerie, admission to water or amusement parks, swimming pools, hot tubs, saunas, gift cards, out-of-state or international travel, museums or excursions, child care, restaurants, hotels, bounce houses, water slides or motor operated land or water vehicles as unallowable expenses. However, much of the list is already out-0f-line with the ESA handbook. 

And a provision addresses an ongoing lawsuit between an ESA parent, represented by the Goldwater Institute, and the attorney general over whether supplemental materials must be documented in the curriculum to be allowable items.

Per the language, and in line with the current legal position by the attorney general, all supplementary materials would have to be “directly and substantially related to curricular content that are used to teach or enhance approved curriculum.” 

And finally, all ESA funds not spent by a student each quarter would also be swept back by the state into the classroom site fund, which supports teacher compensation, development and student support services. 

Lewis said the measure is aimed at placing most of the work on the Department of Education, the State Board of Education, and private entities that take state dollars, rather than on families in the program. 

But, school choice proponents expect impact across the board. 

Jenny Clark, founder of school choice advocacy group Love Your School, has already formed a political action committee, AZ Loves ESA, to oppose the measure every step of the way, calling it a “really clear attack on all choice in Arizona.” 

“We have over 100,000 students on the program,” Clark said. “They’ve really overstepped by throwing private school regulations and also regulating all these education service providers that are just trying to serve kids.”

The last time Save Our Schools Arizona attempted to pass a ballot measure to stop universal expansion of the ESA program in 2022, ESA families mobilized a “Decline to Sign” campaign, in which ESA families would show up to protest signature gatherers. 

Their efforts ultimately blocked the measure from the ballot. 

“I anticipate all of that and more this time,” Clark said. 

The Goldwater Institute also came out in early opposition, as did the Arizona Christian Education Coalition. 

Matt Beineburg, director of education policy, called the policy proposals “disingenuous” and “phony,” claiming the regulations on private schools and families will prove burdensome and ultimately “smother private and homebased education in this state and force families into schools that aren’t meeting their needs.” 

Lewis said she expected school choice proponents to claim an impact on tens of thousands of families, though she challenged the claim, noting that only families at the top of the income scale would truly be affected. 

“That is not true, that it’s going to hurt families with kids with disabilities, that is not true, that it’s going to hurt homeschoolers – unless you’re buying luxury items – that’s not true,” Lewis said. “It’s really important to get the truth out there about who this will impact and who it won’t.”

Lewis and Garcia said the next steps lay in voter education, awaiting review from the Legislative Council and then, starting signature gathering. 

To get on the ballot, the groups need to turn in 255,949 valid signatures by July 2. 

ESA program reaches 100,000 students, costs soar past $1B

Key Points: 
  • ESA enrollment tops 100,000, leaving gross cost to state over $1 billion
  • Growth fuels debate over public schools’ funding, enrollment levels
  • Analysts dispute oversight, future growth, budget impacts

Enrollment in the Empowerment Scholarship Account program has officially surpassed 100,000 students, with the milestone reigniting conversations about program costs and oversight. 

Since allowing any student to enroll at the end of 2022, the program has grown from around 12,000 students to 100,474 as of Jan. 26, and has increased gross costs from $189 million to around $1 billion. 

Proponents of school choice herald continued growth as a signal of the program’s success. 

Matt Beienburg, director of education policy at the Goldwater Institute, said, “That’s a milestone, that’s a testament to the demand and demand for the program, the value of the program, I think that’s something that reflects the interest amongst parents and students for the opportunities the program provides.”

Meanwhile, those opposed claim a greater student count means continued funding and enrollment trouble in district and charter schools, while public school advocates cite increased school closures and inadequate funding for public education. 

“This isn’t the only factor, but it’s the straw that broke the camel’s back,” Tyler Kowch, communications director for Save Our Schools Arizona, said. 

In a departure from past years, program growth has now come in closer alignment with projections from the Joint Legislative Budget Committee. 

JLBC estimated the program would reach 101,602 in FY2026 and 113,602 in FY2027. 

Yet with more students comes rising costs, with the Department of Education needing $59.8 million above its original appropriation in FY2026 to cover an increase in ESA awards and an estimated $154.2 million more needed to cover growth in FY2027. 

Dave Wells, research director of the Grand Canyon Institute, a nonpartisan public policy research center, said ESA enrollment had grown faster than he and others had initially expected, but he still expected it to taper off. 

He noted, too, that enrollment increases are not exclusive to universal eligibility, pointing out that the program’s disability population continues to grow. 

According to the latest quarterly report, students with disabilities accounted for about 19% of the program, up from 15% at the start of 2024. Growth across the board in the ESA program naturally prompts a discussion of enrollment flux in public schools. 

As for migration between the school systems in the state, JLBC found ESA recipients increased by 16,000 in the past year while public school enrollment has declined by 25,000, with the average cost per child increasing by about 3%. 

About two dozen schools have closed in the last year, raising questions about the ESA program’s role in declining enrollment. 

Kowch claims the increased enrollment in the ESA program correlates with an uptick in school closures. And though he acknowledges it’s not the sole reason, he notes that it worsens an already financially strapped school system. 

“Arizona public schools were defunded to the bone following the 2008 financial crisis, and they have been struggling for years. And the combination of Covid funding going away, continual lack of investment from the Arizona state Legislature. And then, this,” Kowch said. “Tiny changes in enrollment have massive impacts.” 

Beidenburg claims enrollment drops are primarily driven by factors outside the ESA program, pointing to declines in birth rates, building space outpacing enrollment and competition among public schools, as students either enroll in another district or opt for a charter school. 

“All of those are vastly larger impacts than the number of kids who’ve left the district for an ESA,” Beienburg said. 

But, Beienburg said it was hard to say exactly where enrollment trends will go from here. 

“I think you will continue to see more students switching from public schools to ESA,” Beienburg said. “You’ll continue to see as families are having kids just entering the system, or perhaps even moving to Arizona from out of state, I think you are going to still see growth. Where that lands exactly is yet to be seen.” 

On the financial side, annual ESA awards range from around $4,700 to around $47,500. The vast majority of students, about 61,918, receive $7,000 to $7,999. About 9,768 students receive more than $30,000. 

As far as cost to the state, Wells urged a focus on the net cost rather than the gross cost, which he estimates at about $350 million to $400 million. 

When a student previously enrolled in a public or charter school takes an ESA, they are funded at about 90% of the charter total, meaning a student switching from a public or charter does not levy a totally new cost on the state, while those coming directly from a private school or enrolling as a homeschooling student represents a new cost to the state. 

A report from the RAND Corporation estimated that about 71% of the students in the program came directly from private schools or homeschool settings, though the number had decreased from 79%. 

The Department of Education reported that about 56.5% of the universally eligible students who enrolled in grades 1-12 since the prior fiscal year came directly from a public school. 

Beienburg acknowledged each student from a private or homeschool setting previously unfunded by public dollars ratchets the cost up, but he noted students switching from public or charter schools do not create a substantive change in education funding, given the 90% formula. 

“With awards, and hundreds of millions of dollars, it sounds scary,” Beienburg said. “But in terms of budgetary impact, it ends up essentially being a wash.” 

Still, the program remains in the crosshairs amid a tight budget year. Gov. Katie Hobbs, with support from Democrats, again called for limiting the program to families earning less than $250,000 and continued to push for additional guardrails to prevent misspending of taxpayer dollars. 

Superintendent of Public Instruction Tom Horne and ESA Director John Ward, joined by Republican lawmakers, continue to push for additional staffing to administer the program. 

Ward said the department has enough funding to cover 42 staff members, but it currently has only 35 employees. To truly run an efficient program, Ward estimated a need for three times more employees. 

“We operate on about four-tenths of 1% of the dollars that we distribute in this program. I don’t believe there’s likely any other public program in this state that operates on that slim of a margin,” Ward said. 

Court finds Legislature failed to provide adequate public school maintenance funding

Key Points: 
  • Judge rules public school facilities funding scheme unconstitutional
  • Ruling identifies disparities between districts based on bonding capacity
  • Legislature found at fault, leadership plans to appeal ruling 

One school district boasts freshly renovated facilities, manicured turf fields and a new performing arts center, while another has hundreds of failing HVAC units and collapsed and leaking roofs. 

After years of litigation and discovery and a two-week bench trial in 2024, a Maricopa County Superior Court judge found the disparities in funding and subsequent state of school facilities across Arizona to be a constitutional failing, with blame falling squarely on the shoulders of the Legislature. 

“After carefully and thoroughly reviewing the record and considering the parties’ arguments, the Court concludes that the current public school capital finance system does not meet the constitutional minimum standards established by the Arizona Supreme Court,” Judge Dewain Fox wrote in a ruling on August 11. 

In 2017, four school districts, a taxpayer and three education organizations — the Arizona School Boards Association, the Arizona Education Association and the Arizona School Administrators — sued the state for facilitating an allegedly slow-moving and underfunded system that puts districts lacking the tax base and property wealth to pass bonds at a significant disadvantage in upkeep and condition of schools. 

The plaintiffs, represented by the Arizona Center for Law in the Public Interest, claimed the Legislature failed to meet obligations to provide a “general and uniform public school system” as provided in the state Constitution. One requires appropriate funds to ensure proper maintenance, development and improvement of all state educational institutions. 

The Arizona Center for Law in the Public Interest litigated the same issue before. It successfully argued that passing the buck to local taxpayers to pass bonds to cover school maintenance costs disadvantages low-income areas. 

In 1998, the Legislature enacted the Students FIRST Act and created the School Facilities Board to administer funds to cover capital needs across the state and determine a set of minimum adequacy guidelines to ensure schools could provide an environment conducive to achieving academic standards. 

The Legislature got off to a strong start, doling out about $1.2 billion to fix deficiencies in schools across the state and administer additional programs for building renewal and new facilities. 

But over time, appropriations to respective funds declined, or were repealed or modified in statute. 

For one, the Legislature changed Building Renewal funding from a formula structure based on the size and age of a facility to the Building Renewal Grant program, which excluded funds for any non-academic buildings and required that schools must fall below the minimum adequacy guidelines to qualify. 

Danny Adelman, attorney for the plaintiffs, said,“Initially, after those court rulings, they did it and fixed a lot of schools. And there were decent schools all throughout the state. And then just bit by bit, and then more than bit by bit, they started taking away all that funding until we’re largely right back where we were.” 

Adelman said the burden again falls to districts to seek bonds to make up the difference, which proves difficult for areas with low property wealth or with voters lacking a desire to greenlight a bond. 

“In either case, you’re just doing without,” Adelman said. 

In a 114-page ruling, Fox agreed with the plaintiffs that the state had failed to appropriate funds for the “establishment and maintenance of a general and uniform public school system,” in violation of the state Constitution.

Fox pointed out the Building Renewal grant program “routinely” lacks funding to complete approved projects and defers millions in repair year over year. 

Strapped funds make it so schools with “an eligible and urgent fire/life and safety” minimum adequacy guidelines (MAG) deficiency are pushed to the top, which creates a system that “guarantees that districts must operate below the MAG – often for significant periods of time – before state funding is provided to correct the deficiency,” Fox wrote.

And, because not all districts can secure bonds or override funds in the meantime, and solely rely on the Building Renewal Grant, they are left to “operate their schools in deficient facilities for months or even years while awaiting funding.” 

Fox’s ruling recounted schools with cracking walls, ceilings and floors, water damage, broken toilets and sinks, aging windows, failing HVAC units, collapsed and leaking roofs and sinkholes.

While others, with the bond capacity and voter base, could afford to fix deficiencies fast, as well as build and renovate schools and facilities. 

Fox found that the setup and lack of funding to the state system itself created the disparities, and it is therefore the responsibility of the Legislature to remedy them. 

In response to the ruling, the plaintiffs put out a joint statement. 

“Our state’s constitution requires the legislature to fund our public schools. It’s time for our legislature to fulfill its constitutional obligation to fund public schools in every corner of Arizona so that all students, whether or not they live in a wealthy area, can receive a quality public education.”

The court has yet to enter a final appealable judgment, but plans to do so soon. Fox noted, though, that he intends to grant a temporary stay while the issue makes its way through the appellate process. 

In a statement, Senate President Warren Petersen said, “We will appeal.” 

Adelman said the Legislature had “every right to do that,” but again made a plea for a more immediate fix. 

“They can say they’re going to appeal, but the evidence is the evidence, and the law is the law, and all they’re doing is digging the hole deeper,” Adelman said. 

He continued, “These roofs that are leaking, if they’re not fixed, it just causes more damage. And so when you do ultimately fix it, it’s more expensive, and there’s more things to fix, and there’s mold and you have to replace insulation, and it’s just not good management. They would never run their own buildings like that. They would never run their own businesses like that.” 

Businessman claims charter school favoritism in Legislature led to criminal charges

Key Points:
  • Consultant claims pro-charter school sentiment led to improper criminal charges
  • Complaint alleges state’s dismissal of charges with prejudice show no crime  
  • New lawsuit alleges malicious prosecution, reputational damages 

A consultant who faced criminal charges for constructing two public schools using private dollars claims favoritism for charter schools among elected officials led to malicious prosecution, a smeared reputation and tens of millions in damages. 

Steven Nielsen and a string of his affiliated businesses sued the state, the current and former attorneys general, the auditor general and the Maricopa County Attorney’s Office after the court dismissed felony charges for fraud and conspiracy with prejudice.

“It’s sad. It ruined Steve Nielsen’s reputation. It destroyed his business,” David Black, Nielsen’s attorney, said. “He’s a brilliant man who made it possible to fund public schools in a time when there was no tax basis to do so, and for a variety of improper reasons, he was pursued.” 

Before wading into the consulting business, Nielsen worked for both the city of Tempe and Arizona State University in real estate and development, garnering expertise in utilizing private funds to finance public projects with tax exempt bonds. 

He set out with his business partner, Gary Aller, to found Education Facilities Development Services, a consulting firm focused on arranging public-private partnership funding for local governments. 

In 2012, Higley Unified School District approached Nielsen to develop a funding model to build two new middle schools, as the district experienced growing student counts and neared its bond limit.  

Nielsen and Aller established a model utilizing a lease-purchase agreement. The district then issued a request for proposals and ultimately awarded the contract to Nielsen’s company. 

The schools opened but Nielsen, Aller and Higley’s administration faced a fair share of scrutiny in the aftermath. 

The complaint claims that the zeal for charter schools led to the investigation, law change and eventual prosecution of Nielsen and his associates as the public.private partnership funding model would undermine or threaten the growth of charters in the state. 

Black described the successful construction of the Higley Unified School District as a “poke in the eye to the pro-charter school faction of state government,” and noted the “pro-charter school legislature” took no issue with allowing charters to pursue adding new schools to districts lacking funds but in need of new facilities. 

“The State and the County wanted to make an example of Nielsen and Aller to score political points and to undermine the use of “PPP” funding to build public schools as an alternative to charter schools,” Black wrote. 

The complaint notes vocal opposition by then-Sen. Andy Biggs, Auditor General Lindsey Perry and Attorney General Mark Brnovich initially stirred the investigation.

Biggs raised his concern about the funding arrangement with Brnovich, who then looped in the auditor general. The auditor general and attorney general launched an investigation. Meanwhile, the Legislature changed Arizona law and procurement code to prevent similar public-private partnerships from taking shape in the future.

In 2021, the auditor general released a final report alleging procurement fraud through improper communications prior to the bidding process, including the preparation of the request for proposal and the concealment of facts, as well as the signing of false documents. 

Brovnich then indicted Nielsen, Aller, and Superintendent Denise Birdwell, claiming EFDS, Aller and Nielsen had a competitive advantage by participating in the pre-bid process in violation of procurement rules under Arizona Administrative Code. 

Nielsen and Aller both faced felony charges for conspiracy, fraudulent schemes and artifices and fraudulent schemes and practices. Birdwell was charged with the same offenses, as well as procurement fraud, violation of duties of a custodian of public monies, conflict of interest and false return.  

The trial court remanded the first indictment after finding the state had improperly prosecuted under an amended procurement code as opposed to those in play when Nielsen worked with the district. 

The state secured a second indictment on grounds that Nielsen prepared specifications for the request for proposal. Nielsen moved to dismiss the case with prejudice, as neither he nor EFDS was tasked with preparing specifications in any capacity. 

In March, a new prosecutor at the Attorney General’s Office was assigned to the case. And the state then followed with its own motion for dismissal, though it asked for dismissal without prejudice. After oral argument, the trial court later dismissed all the charges against Nielsen with prejudice, which means it is permanently dismissed and cannot be brought back to court. 

“They basically kept trying to fit a square peg into a round hole, Black said. “They would not let it go until a fresh set of eyes took a look at it and agreed that nothing improper happened.” 

In the aftermath, Nielsen claimed his reputation deteriorated, lost existing and prospective contracts and suffered severe emotional distress. The notice of claim estimates Nielsen’s claimed damages amount to $79.7 million.

He filed a lawsuit on May 6 claiming malicious prosecution, abuse of process, violation of civil rights, interference with contract or business expectation, intentional infliction of emotional distress, defamation and false light invasion of privacy.

The Attorney General’s Office and the Maricopa County Attorneys Office declined to comment. The auditor general’s general counsel did not respond to a request for comment, nor did former Attorney General Brnovich. 

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