School Choice & Charters Explainer

Education Savings Accounts, Explained

By Libby Stanford & Mark Lieberman — March 27, 2023 17 min read
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Nicole Marshall’s seven children attend school in four different settings.

Her oldest is a senior at Gilbert High School, a public high school in Gilbert, Ariz. Two of her children attend Pathways, a private school for students with learning disabilities. Three attend KaiPod, a small, in-person learning center that’s part of a national network of learning pods where parents choose the curriculum and schedule. One is homeschooled.

Marshall uses Arizona’s Empowerment Scholarship Account program to pay the expenses for all six of her children who aren’t in public school. Without the ESA, she says, her kids would be lost in the public school system.

“I can take what I know is true about each of their individual learning styles and really work to their strengths or find programs, tutors, schools, curricula that do work to their strengths,” said Marshall, who also works as a parent specialist for Love Your School, an Arizona-based organization that helps parents navigate school choice options. (Marshall spoke on her own behalf, not Love Your School’s.)

Marshall is one of thousands of parents across 11 states who use education savings accounts, as the school choice policy rises in popularity among conservative lawmakers. On Monday, Florida became the fourth state since the start of the year to pass an Education Savings Account policy that’s available to any student. Nine states have passed some version of an ESA program or expansion to a previous ESA policy since the start of 2021.

Education savings accounts give families access to public per-pupil funds so they can use them to pay for tuition to private schools, homeschooling supplies, curriculum materials, and educational therapy services. They began in Arizona in 2011 and were originally limited to students with disabilities, low-income students, and students in failing schools. Following the pandemic, they’ve grown in popularity with more states opting for universal programs, allowing any student to use them.

Advocates say the programs represent a new frontier in education, in which parents can customize schooling for each of their children and reject the regulations and constraints of the public school system. Lawmakers in Congress have even recently proposed allowing parents to use federal education funding in the same way.

But opponents point to inconclusive research on the academic efficacy of many education programs funded by voucher programs like ESAs. They worry many of the programs are unregulated, lacking academic testing or financial accountability requirements for parents. And they argue that the millions of dollars devoted to ESAs would be more valuable for public schools to close funding gaps and strengthen their services.

Here’s an overview of how the ESA movement grew, what it means for students and parents, and how school districts should expect to feel the effects.

Jump to a Section

  1. How many states have ESA programs?
  2. How much money do states pay for ESAs?
  3. What counts as an eligible expense?
  4. Who uses ESAs?
  5. How do ESAs differ from other forms of state-funded vouchers and tax credits, like 529 and Coverdell savings accounts?
  6. How have ESA policies evolved since they emerged?
  7. Why have ESAs gained political momentum?
  8. Do ESAs take away money and resources from public schools?
  9. What kinds of accountability measures are in place to ensure ESAs aren’t abused?
  10. What does the future of ESAs look like?

How many states have ESA programs?

11, as of March 2023.

  • Arizona
  • Arkansas
  • Florida
  • Indiana
  • Iowa
  • Mississippi
  • New Hampshire
  • North Carolina
  • Tennessee
  • Utah
  • West Virginia

Some restrict eligibility to students with disabilities, to students in certain parts of the state, to students currently attending public or public charter schools, or to students from schools deemed struggling by state criteria. Arizona became the first state to offer ESAs to all students; Iowa, Arkansas, Florida, and Utah are set to follow suit.

How much money do states pay for ESAs?

Some states set a limit on the amount of funds parents can receive through an ESA program. Mississippi, for instance, currently caps awards at $6,779, with annual increases tied to changes in the state’s base per-pupil spending. That amount would cover annual tuition at some private schools in the state, while others cost more than double that amount.

Others offer more wiggle room. The base amount for Arizona’s ESA is 90 percent of the state’s per-pupil sending on public schools—which currently works out to around $6,400.

As of February 2023, when Arizona’s ESA program most recently published a quarterly report to state lawmakers, more than 4,700 applicants in Arizona had received more than $30,000 each, and another 250 had received between $25,000 and $29,999, as families of students with disabilities can qualify for more funds. The average ESA award for a parent was $10,004—several thousand dollars more than the base ESA amount, and roughly equivalent to the amount of money Arizona public schools spend per student from local and state sources.

Florida paid nearly $191 million for 18,585 students who participated in the ESA program in the 2020-21 school year, when the program was still limited to students from low-income families and students with disabilities. That’s roughly $10,555 per student—roughly $1,000 more per student than what public Florida schools spent that year on average in local, state, and federal dollars.

These programs create other costs for states, too. Many outsource administration of the grant programs to private companies like ClassWallet, Odyssey, Merit, and Step Up for Students, in arrangements similar to IRS-sanctioned Health Savings Accounts, which allow people to use pre-tax dollars to pay medical costs.

Odyssey proposed a contract with Iowa for around $600,000 a year to administer the state’s newly passed education savings account program. The state announced in February that it had signed the contract.

What counts as an eligible expense?

Arizona’s list includes big-ticket items like private school tuition, public transportation to a school of the parent’s choice, and fees for standardized tests, textbooks, and uniforms. Many other states allow similar categories of expenses.

Arizona also includes a list of supplemental materials for which parents don’t have to provide documentation, including books, backpacks, educational CDs and DVDs, desks and chairs, single tickets for educational purposes like museums and plays, and mats and rugs. And parents may also demonstrate that other unlisted items relate to their homeschool or private curriculum.

During a public hearing last June, state Rep. Kellie Butler, a Democrat, read from a state government website a list of items for which the state had allowed parents to use ESA funds. Among the selections: an inflatable bounce castle, a home freezer, a tonal home exercise gym, a kayak, a San Diego whale watching trip, an in-home tower garden, and a hair dryer for dogs.

“If you have a curriculum that says you need these things, apparently you can get these things,” Butler said.

Not every state is as permissive. Mississippi only allows parents to spend $50 on school supplies, and requires that computers purchased with ESA dollars be donated to a public school or library once the student is done with them.

Who uses ESAs?

School choice advocates have used families like Marshall’s to demonstrate the need for ESAs for years. Marshall adopted four of her children from the foster care system, and six of her kids have learning disabilities, including autism, dyslexia, dyscalculia, dysgraphia, speech delays, and behavioral disorders. Some also suffer from mental illnesses like anxiety and depression.

Marshall said she was frustrated with a lack of support and resources from the public school system after the onset of the COVID-19 pandemic. Her son, Andre, who is now homeschooled, had extreme behavioral issues and she worried he might “become a statistic” and get caught up in the school-to-prison pipeline. Her other children struggled to connect with peers at school and she said school staff didn’t have the resources to support her children with autism.

The ESA program has been “incredibly freeing,” Marshall said. “With my son, Andre, it’s made me hopeful.”

When Marshall first applied for the ESA program, each of her children qualified because of their learning disabilities or the fact that they were formerly in foster care. Since last year, those qualifications aren’t necessary because Arizona expanded the law to be universal, applying to any student regardless of income, background, or whether they have disabilities.

At the end of the 2021-2022 school year, roughly 31,000 students, or just .06 percent of the nation’s 50 million public school students, were participating in an ESA program, according to EdChoice. There haven’t been any major studies on the demographics of families who use ESAs.

The nationwide number has risen in recent months as Arizona has transitioned to a universal ESA. That program alone now enrolls more than 50,000 students, or 4.3 percent of the state’s students, according to state data. Only one school district in Arizona enrolls more students than the state’s ESA program.

In late 2022, a few weeks after eligibility for the Arizona ESA became universal, an analysis from the state department of education found that three-quarters of students who were enrolled in the program had already been attending private school, rather than using the ESA funds to leave a traditional public or charter school.

Recent estimates in states that have passed or are pondering ESA programs suggest tens of thousands more students will enroll in the coming years.

Some ESA programs are far more obscure than Arizona’s, at least for now. Only about 140 students have enrolled in Indiana’s ESA program for students with disabilities since it was established in 2021, according to Dennis Costerison, executive director of the Indiana Association of School Business Officials.

How do ESAs differ from other forms of state-funded vouchers and tax credits, like 529 and Coverdell savings accounts?

School choice vouchers and tax credits must be used for tuition or other expenses at private schools. By contrast, ESA dollars can go to a much wider range of expenses, with a much less tangible link to academics. Proponents say they offer parents more freedom to structure their children’s education how they see fit.

Whereas existing tax-exempt savings accounts including 529 plans and Coverdell savings accounts are managed by states but funded by individual account holders, ESAs are both sponsored and funded by the state.

How have ESA policies evolved since they emerged?

Universal programs have grown in popularity over the last two years. Seven of the 11 states with ESA laws have passed those policies since 2021, and four states have passed laws this year alone, according to FutureEd, a Georgetown University think tank that tracks education policy. Six states—Arizona, Arkansas, Florida, Iowa, Utah, and West Virginia—have made those policies universal or near universal.

Robert Enlow, president and CEO of EdChoice, said he and his colleagues developed the initial concept of ESAs for students with disabilities after the Arizona Supreme Court ruled that the state’s original voucher program was unconstitutional in 2009. Arizona passed the first ESA law in 2011, and later expanded it to apply to all students in 2021.

The universal versions of the accounts represent a new development for the school choice movement, Enlow said.

“[There’s] a real serious increase with parents saying, ‘I want something different out of education. I want something more customizable,’” Enlow said. “All of a sudden you see in 2021, a real drive to say, ‘Hey, let’s make these things really broad.’”

In Arkansas, where Gov. Sarah Huckabee Sanders signed the LEARNS Act earlier this month, any student will be able to access “educational freedom accounts” starting in the 2024-25 school year. The state government will deposit 90 percent of combined state and local per-pupil funding to the accounts, which families will be able to use to pay for private school tuition and fees, uniforms, school supplies, tutoring services, transportation costs, and any other educational expense approved by the state’s education department. The remaining funds stay with the local school district the student would have attended.

The only qualification for the Arkansas program? The student must live in Arkansas.

Why have ESAs gained political momentum?

Enlow described the idea of the programs as “funding education through parents,” meaning that parents, rather than the state or school districts, should have full control over how per-pupil funds are spent.

That is one of the aspects of the program that Marshall likes the most.

“I do believe that there are a lot of public schools and public school teachers out there who truly value the student, but they can only do so much,” she said. “I can be the expert on my kid and spend all the time in the world looking for things that are going to benefit them the most.”

The ESA programs reflect one part of a growing parents’ rights movement, in which conservative lawmakers are using parents’ bill of rights policies to justify more scrutiny over curriculum, classroom materials, and lessons surrounding race, gender, and sexuality. Lawmakers in all of the six states with universal or near-universal ESAs have introduced or passed bills that establish “parental rights” following the growing movement out of the pandemic.

Do ESAs take away money and resources from public schools?

Some districts say the programs haven’t yet had a direct effect on their enrollment or operations. But that could easily change.

The Chinle district in rural Arizona, for instance, is located on a Native American reservation with few private school options for students. Quincy Natay, the superintendent, said his district specifically hasn’t lost many students or much funding to ESAs. But when the state prioritizes ESA funding, public schools lose out in the process, he argues.

“Let’s allocate more resources to Arizona public schools because we’re ranked 49th in the nation,” he said. “Maybe those resources could be better expended to help students in high-poverty areas like myself.”

Districts in Arizona and most other states receive fewer dollars overall when their enrollment drops, even as many costs from teacher compensation to utilities stand firm or even grow year over year.

But Arizona schools have been spared significant financial impacts from ESAs so far because so many students who use them weren’t attending public schools to begin with, said Chuck Essigs, director of government relations for the Arizona Association of School Business Officials.

That could change as the program continues to grow, though.

The concept of giving parents full control over public funds doesn’t sit right even with some school choice advocates.

“It’s one thing to say parents should be able to review curriculum and have more say in what the schools are teaching and what is in the library,” said Chester Finn Jr., president emeritus of the Fordham Institute, a conservative education policy think tank, and a former assistant secretary at the U.S. Department of Education during the Reagan administration. “It’s a different thing to say parents should actually control the dollars that are spent on behalf of their child’s education and should be able to decide where those dollars are going and where that education is being delivered.”

The universal version of ESAs runs the risk of neglecting the public side of education, which ensures taxpayer dollars are responsibly spent, Finn said. Not every parent is trustworthy, he said.

“We can’t assume that every child is going to be well educated if the parents are put in charge, because not every child has parents who can responsibly take charge,” Finn said.

What kinds of accountability measures are in place to ensure ESAs aren’t abused?

Finn’s concerns about accountability are echoed by more vocal opponents of ESAs. The policies don’t require students to participate in standardized testing and students with disabilities waive federally mandated protections when they transfer from public to private schools.

Kevin Welner, director of the National Education Policy Center and an education policy professor at the University of Colorado, described ESAs and the vouchers that came before them as a “deregulatory reform.”

“The idea is to be deregulated,” Welner said. “For advocates of vouchers, transparency is not a good thing. Protections against discrimination in private schools is not a good thing. Oversight and data reporting and data collection, program evaluations, and accountability back to the government, none of those things are good things if you are coming from the perspective of voucher zealots.”

Welner sees universal ESAs as the next iteration of what he considers a movement toward deregulation of schools. Because the ESAs are so flexible in nature, it’s impossible for the state to track whether the public funds are actually helping students improve learning, he said.

“ESA vouchers can be used by families that are using the money to prepare good little Nazis for the next generation,” Welner said, referencing the “Dissident Homeschoolers” movement to homeschool students in Nazi principles. The Dissident Homeschoolers weren’t using ESA programs, but Welner worries the programs could be used that way without regulation. “That’s not a very pleasant thought in terms of how our tax money is being used.”

Marshall doesn’t see it that way. She likes that her kids aren’t required to take standardized tests or held to the performance standards determined by public schools.

“I’m not a big believer that a test is the best way to show that you’ve actually learned something or mastered a concept,” she said.

Marshall also pushes back against criticisms that the ESA program doesn’t hold parents accountable. She receives a debit card for each of her six children who use the program. That card has codes in it that prevent her from using the money to purchase expenses not related to education.

For example, the cards would be declined if Marshall tried to use them to pay for a family meal, but she is able to use them to pay for admission to the zoo since that is considered educational. She also has to provide receipts and bank statements to the state to ensure her family is using the money for educational purposes.

“We have to be able to justify the expense, what it’s for, what it’s tied to,” she said.

However, Arizona’s education department said in a February report that it was concerned parents had not uploaded receipts for more than 17,000 debit card transactions during the last quarter of 2022, meaning the department could not review those ESA transactions. The department said it had receipts for another 100,000 transactions during that period.

What does the future of ESAs look like?

While ESAs have caught on in a big way in conservative states, their ascendance hasn’t been uninterrupted. Idaho’s legislature recently voted down a proposal for a universal ESA program, and lawmakers are now considering a narrower alternative. Both houses of the Virginia legislature also rejected an ESA proposal.

The tension between funding ESAs and funding public schools is likely to persist, with roughly 20 states considering universal ESA programs in their current legislative sessions, according to FutureEd.

The recent surge in universal ESA programs could foreshadow a more dramatic exodus from public schools than what’s emerged from the decades-long push for vouchers and charter schools, said Samuel Abrams, director of the National Center for the Study of Privatization in Education at Teachers College, Columbia University. He envisions rural schools shutting down and the remaining ones having to serve entire regions, decimating small towns in the process.

“Schools perform far more than an academic function alone for many small towns,” he said. “They’re, in addition, hubs for much community activity, from football, basketball, volleyball, and baseball games to fall musicals and spring dramas.”

“The alternative to ESAs as well as all forms of school choice is to invest responsibly in public schools so that parents do not want to exit public schools in the first place,” Abrams said.

Meanwhile, even though the Nevada Supreme Court struck down an ESA program in 2019, few legal challenges to ESA programs have emerged, and judges in Arizona and Tennessee have ruled in favor of ESAs on constitutional grounds.

Supporters of ESAs see those legal victories as fuel for their mission to permanently reshape the education landscape.

“We are really trying to build a new system of how we fund education in a more parent-friendly way,” Enlow said.

A version of this article appeared in the April 26, 2023 edition of Education Week as Education Savings Accounts, Explained


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