Arizona’s school scholarship tax credit program saw its first decline in over a decade possibly due to competition from the more accessible and flexible Empowerment Scholarship Accounts (ESAs).
Arizona’s School Choice Programs Face New Dynamics
Arizona’s tax credit program for private school scholarships saw a decline last fiscal year, the first since the Great Recession, potentially due to the expansion of another school choice system, according to the report of Axios Pheonix.
This could signal a long-term trend that might reduce the scope of one of Arizona’s key school choice programs.
Arizona has been a leader in school choice, but new data suggests that the popular School Tuition Organizations (STO) and Empowerment Scholarship Accounts (ESA) are now competing for students, with ESAs gaining ground.
Contributions to STOs and scholarship awards dropped between fiscal years 2022 and 2023, according to the Arizona Department of Revenue. This marks the first decline in over a decade.
The drop happened as ESA usage surged after the program was expanded in 2022 to include all students, not just those in specific categories like disabled students or those attending failing schools.
Tuition tax credits allow donations to STOs to be offset by tax credits, which fund student scholarships. ESAs provide state funds for private school tuition, tutoring, and other educational expenses.
Steve Yarbrough of the Arizona Christian School Tuition Organization says ESAs are contributing to the reduction in STO donations.
While STOs can sometimes provide more money than ESAs, ESAs are easier to use and offer more flexible spending options.
State law prohibits students from using both STOs and ESAs.
Yarbrough believes the ESA expansion is positive as it enhances school choice in Arizona.
(photo: Cronkite News – Arizona PBS)
Arizona’s School Choice Programs: Decline in Tax Credit Scholarships, Low-Income Program Up
There are four types of tuition tax credit-based scholarships, some for all students and some for specific groups. Contributions to the low-income program rose, but two other types saw declines, leading to an overall decrease.
Furthermore, Yarbrough thinks it will take a year or two to fully understand the impact on STOs. Kirschner hopes the decline will stabilize, suggesting many families have already made the switch from STOs to ESAs. Yarbrough remains confident that tuition tax credits will still be a viable option for many students.
