Editor’s note: This commentary from Jason Bedrick, a research fellow at The Heritage Foundation’s Center for Education Policy, appears in the Spring 2023 issue of Education Next.
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%.
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