A Billion Dollars with No Watchdog: Arizona’s ESA Oversight Problem

By Tessa Judd. 

Arizona’s Empowerment Scholarship Account (ESA) program allows families to “utilize public monies to purchase educational services from private schools, education providers, and vendors.” The ESA program grew from a limited option for students with disabilities into a universal school-choice mechanism disbursing nearly one billion dollars of public funds each year. The program became controversial after its universal expansion in 2022.

Before the expansion, only students with documented disabilities, children of active-duty military members, students attending failing schools, and a few other limited exceptions were eligible to receive taxpayer funds. However, House Bill 2853 amended the original program, making any student eligible to enroll in an Arizona public school qualified for an ESA. 

Supporters of the expansion argue ESAs empower parents to “choose what’s best for their family and have their education tax dollars pay for the school that meets their child’s needs.” Critics counter that by redirecting state funds to families, the program drains public-school budgets and effectively subsidizes wealthier households. Accordingly, critics argue that it worsens Arizona’s longstanding education crisis—one that has left the state ranked 50th in the Nation for the past two years.

While debates over parental choice and the decline of public education programs remain important, they have been eclipsed by a more pressing concern—a breakdown in accountability.

Rapid Growth, Limited Guardrails

As of October 2025, roughly 94,600 students are enrolled in ESA, and about 73 percent qualify under universal eligibility. The program’s rapid expansion has made oversight far more difficult.

Recent reports confirm that over 400 ESA accounts have been suspended for improper spending. While that number may seem modest compared to total enrollment, the financial impact is substantial. One investigation reportedly uncovered more than $3 million in ESA funds spent at retailers such as Costco, Amazon, and Best Buy, with no additional explanation. Even when offenders are ordered to repay the money, there is no assurance that every violation is detected—or that each one involves only a small amount.

The Arizona Attorney General’s Office (AZAG) recently announced that two individuals in Colorado obtained more than $110,000 in ESA funds by applying for over forty fictitious children. Another recent AZAG press release alleged that a Florida man also fraudulently received ESA funds. Using similar tactics to the Colorado couple he collected up to $25,000. These incidents illustrate what happens when program size outpaces oversight capacity: abuse shifts from occasional to predictable. And these examples are from the last few weeks alone.

On top of this, students with disabilities—the very group the ESA program was originally created to serve—are now bearing the consequences. They face longer reimbursement backlogs, less administrative support, and growing stigma as the program’s public image declines. The result is a system that increasingly fails to meet the needs of the students it was meant to help. These challenges not only delay access to critical services but also signal that the program’s priorities have shifted away from its most vulnerable participants. What was once framed as a targeted support mechanism has become an administrative burden for those who need the funds to get an equal education, not just an education of their choosing. 

Statutory Oversight Ignored

Lawmakers recognized these risks a year ago. In 2024, the Legislature required the Arizona Department of Education (ADE) to work with the Auditor General to develop “risk-based auditing procedures” for ESA spending. The goal was simple—target high-risk transactions while keeping the program efficient.

By summer 2025, the ADE had ignored repeated requests from the Auditor General to collaborate. Instead of coordinating, ADE implemented its own “risk-based” review system. Facing a growing backlog, the department began automatically approving purchases under $2,000. Those approvals happen with no pre-audit review and minimal follow-up.

The scale of unexamined spending is staggering. In 2025, roughly $124 million ESA purchases fell under the $2,000 threshold and were cleared automatically. With only twelve auditors—the same staffing capacity that the agency had when ESA served a tenth of its current participants—most of those transactions will never be reviewed in detail. That mismatch between volume and capacity lies at the heart of Arizona’s oversight failure.

Finger-Pointing and the Cost of Inaction

ADE attributes the enforcement and staffing shortcomings to budget limits and blames Governor Hobbs for inadequate funding. The ADE maintains that its oversight mechanisms are comparable to those for private and charter schools. Attempting to normalize weak oversight by pointing to other sectors facing similar gaps is a failure of leadership. Regardless of politics, the result is the same: taxpayer money is slipping through cracks that responsible governance should have sealed long ago.

When taxpayers see widespread reports of unverified purchases and only a dozen auditors policing nearly a billion dollars, faith in the program inevitably erodes. That mistrust matters: if ESA funds are misused, it isn’t just individual families who lose. The money diverted through fraud and weak enforcement is money not reaching public classrooms. Classrooms that a  judge has recently declared underfunded to an unconstitutional level.

The Law Already Has Tools—They Need to Be Used

While the ESA program seems fraught with flaws, it seems unlikely that it will be dismantled anytime soon. Therefore, the answer may lie less in rewriting the ESA statute than in enforcing what already exists. Arizona law already mandates risk-based auditing, inter-agency cooperation, and the prudent expenditure of public funds. Optional compliance clearly doesn’t work. The ADE’s inaction is not merely inefficient, but potentially unlawful.

Unless ADE fully implements the oversight procedures required by statute—and the legislature funds the manpower to carry them out or comes up with harsher consequences for non-compliance (such as withholding ESA funds completely)—fraud will remain treated as collateral damage rather than a breach of public trust. For a program distributing a billion dollars a year, that is not just bad optics; it is an unsustainable governance model.

Conclusion

The ESA program was designed to give parents flexibility, not to test the limits of Arizona’s capacity to monitor itself. A decade ago, modest participation made light oversight tolerable. Today, with universal eligibility and exponential growth, that same laxity is untenable.

Arizona’s school-choice program is too large to run on trust alone. The next step isn’t ideological—it’s administrative. Arizona must enforce existing laws, increase the scale oversight to match spending, and restore credibility before the next generations of Arizona students are harmed.