Arizona School Voucher Program Sparks Fraud Dispute As Transparency Bills Face Veto

Arizona Superintendent of Public Instruction Tom Horne and Democratic Governor Katie Hobbs are locked in a battle over how much fraud exists in the state's Empowerment Scholarship Account voucher program.

The dispute erupted after 12News Investigates reported that nearly 20 percent of ESA users spent funds on unallowable purchases, totaling more than $10.3 million.

Horne called that figure ridiculous and released a new study showing only 2 percent of purchases were unallowable, with just 0.3 percent considered fraudulent.

The controversy intensified when Governor Hobbs vetoed HB 2075, a bill that would have required school districts to post contracts for superintendents, assistant superintendents, and chief financial officers on their websites.

In her veto letter, Hobbs said the bill fails to ensure all options in the education marketplace are held to the same level of transparency.

State Superintendent Tom Horne blasted the veto as outrageous and a slap against accountability for tax dollars.

"We have a lot of great superintendents, but, as an example, there is one who makes $400,000 plus benefits and is allowed to run side businesses," Horne said.

"This had support of both Republicans and Democrats, but the governor used her veto pen to make sure taxpayers are kept in the dark."

The bill would have required public and charter school districts to submit contracts for their superintendent, assistant/associate superintendents, and chief financial officer to the Arizona Department of Education as public records.

ABC15 analysis found one Arizona school superintendent could earn about $475,000 this year in salary and other compensation.

Their investigation also found dozens of superintendents had bonuses, stipends, car allowances, and other perks that could increase annual pay by more than $50,000.

Many school districts approve their superintendent contracts in closed-door, executive sessions.

Arizona's ESA program serves more than 100,000 students and is projected to cost the state more than $1 billion annually.

The Moores of Sierra Vista use the program to homeschool their two sons.

Heidi Moore, a former Army captain, said she was horrified to learn that some recipients spent voucher funds on items like appliances, jewelry, and even vacations.

With a background as an accountant and auditor, she struggles to understand how anyone could justify that kind of spending.

"She said the Department of Education needs to install better internal controls to stop the misuse because it hurts families like hers."

The dispute over fraud rates highlights a larger battle over transparency and accountability for Arizona's universal voucher program.

A coalition of parents and educators filed the Protect Education Act ballot initiative that would add safety standards, spending restrictions, and transparency requirements to the ESA program.

The initiative would require voucher-funded schools to comply with basic safety standards, including fire codes, background checks for staff, and fingerprint clearance cards for employees with unsupervised contact with students.

It would also prohibit ESA funds from being used on non-educational luxury items such as jewelry, large electronics, travel, or gift cards.

The initiative would grant the Arizona Attorney General authority to investigate fraud or abuse involving ESA funds and pursue civil enforcement actions when violations occur.

Supporters say the change would prioritize students with the greatest financial need by limiting universal ESA eligibility to families earning $150,000 or less per year, with adjustments for inflation.

State Sen. Jake Hoffman, a supporter of school choice policies, has argued the initiative could restrict families' ability to choose private or alternative education options.

"Some school choice advocates have raised concerns that additional regulation could discourage private schools from participating in the ESA program," Horne said.

Horne also claimed that proponents offered to drop the initiative if their needs are met for increases in teacher salaries out of the land trust.

Geneva Fuentez, communications director for the Arizona Education Association, said there is not a shred of truth to that statement.

The Arizona Education Association has consistently opposed proposals that would require a specific allocation of Proposition 123 funding to teacher salaries for two reasons.

First, because such proposals do nothing to increase the salaries of education support professionals, librarians, social workers, school counselors, bus drivers, and other professionals.

Second, because such proposals would require voters to approve teacher salary increases before approving ESA accountability measures.

The Arizona Department of Education recently released a report showing more than $1.2 million has been recovered from ESA enrollees who misspent dollars.

The department began referring ESA fraud charges to the Maricopa County Attorney's Office and the Arizona Attorney General.

Last month, 12News reported that nearly 20 percent of ESA users spent funds on unallowable purchases, adding up to $10.3 million.

A Department of Education official who conducted a study explained they were drawing orders, not items.

Each order might have multiple items.

The study found that 6.2 percent were flagged as unallowable, which accounted for 1.9 percent of the actual spending.

Horne explained that the distinction between unallowable purchases and fraud makes a big difference in the data.

He said the other thing to know is they are not all fraud.

A lot of times it is innocent mistakes of a paper that needs to be resubmitted.

According to the state Department of Education, more than $1.2 million has been recovered from ESA enrollees who misspent dollars.

The department recently began referring ESA fraud charges to the Maricopa County Attorney's Office as well as the Arizona Attorney General.