Case Study: Arizona
Arizona is one of only a few states with enough data to observe which students participate in a new universal school choice program with no caps on cost or participation. The Arizona Department of Education has published two years of data on the state’s universal ESA program. According to the latest quarterly report, about 75,000 students participate in the program. Of that number, about 56,000 students participate under the state’s new universal eligibility criteria, which began in the 2022–23 school year. The following analysis evaluates how much all participants in the ESA program cost the state on net based on the critical variables described earlier.
Determining average scholarship and portable funding amounts
Before examining student participation under Arizona’s ESA expansion, it’s first essential to estimate the funding variables that will impact the state budget. Traditional public and charter school students in Arizona are funded through a weighted student formula, which provides each student a base dollar amount and supplementary weights based on individual needs, grade levels, and other factors. Additionally, public schools receive some state funds outside the main formula that the state can recoup if they disenroll from public schools. Altogether, these sources averaged $8,725 per student in the 2022–23 school year.
The ESA scholarships are funded based on the same weighted formula used for public charter schools. This formula includes supplementary state funding that charters receive to account for the fact that they can’t access local property tax funding like school districts can. Charter formula calculations are then multiplied by a factor of 90 percent—a feature designed to guarantee some state savings for switcher students. Thus, multiplying the statewide average charter formula funding (which includes all formula weights) by 0.9 yields an estimated average ESA amount of $7,786 per student.
Incorporate state-reported participation and switcher data
Now that student-level funding variables have been estimated, actual student participation data reported by the Arizona Department of Education (ADE) can be incorporated. The most recent data published by ADE reports 48,618 new enrollees in grades 1 through 12 after the ESA program became universal and that 15,407 attended public schools in the immediate previous year (the best proxy available for ascertaining switchers). This results in a switcher rate for new ESA enrollees of 31.7 percent over the first two years of universal eligibility.
Additionally, the ADE reports that another 18,988 ESA students use the previous eligibility criteria for high-need students, such as adopted students or students with disabilities. Since most students in this latter group are required to have previously attended public schools, this analysis assumes 90 percent of them are switchers.
Finally, the department also reports another 6,600 kindergarten students for which switcher figures aren’t available since it was their first year of formal education. This analysis assumes that the switcher rate for those kindergarten students would be the same as that for grades 1 through 12 (31.7 percent).
After sorting all ESA participants into switcher and non-switcher categories based on the above assumptions, Arizona’s ESA program’s estimated overall switcher rate is 46.6 percent. Each switcher student generates a net state savings of $939 each, while each non-switcher costs the state $7,786. Multiplying each value by the corresponding number of students in each category yields the estimate that Arizona’s universal school choice program costs the state an estimated $276 million annually. The calculations are summarized in Table 1. Note that positive values connote state costs and negative values connote state savings.
