EdChoice ESA voucher study does not back up its claims about misspending

PHOENIX — An out-of-state group’s incomplete analysis of the Arizona private school voucher program is part of a paid advertising campaign to sway public opinion on a contentious debate.

The study, conducted by pro-voucher nonprofit EdChoice, contradicts itself and makes unsupported claims, 12 News found.

Most notably, EdChoice falsely declares that they had access to “all ESA transactions” for a given school year. EdChoice CEO Robert Enlow later clarified in an interview they had access to transaction data for only two of four categories of ESA spending.

Enlow further conceded transaction data they did get for one of those categories, Reimbursements, was insufficient for EdChoice to make an independent conclusion.

“We could not perform an analysis of reimbursement unallowable spending given the data they gave us,” Enlow wrote in an email.

EdChoice did not get access to “All ESA data” of transactions

A critic of the universal voucher program calls the study “misinformation.”

“A new audit should be mandated by the Legislature and Governor. The taxpayers of Arizona deserve answers and an independent audit is necessary,” said Nancy Gutierrez (D) of Tucson.

To date, there has not been an independent audit that aligns with audit standards.

EdChoice is a national think tank funded by donors seeking to expand tax-funded universal vouchers. Governor Doug Ducey and the Goldwater Institute are citing the EdChoice study as alleged proof that the state’s billion-dollar ESA program has misspending rates as low as 1%.  Over the past week paid advertisements on Twitter and Facebook promoted the EdChoice study.

EdChoice analyzed 1 of 4 categories of ESA spending

There are four ways parents spend ESA taxpayer dollars: Marketplace, Reimbursements, Direct Pay and Debit (Pre-Pay).

EdChoice obtained “line-item” transaction data for Marketplace only, amounting to about 12% of total ESA spending. EdChoice received a less-detailed version of transactions of Reimbursements, and no transaction data for the other two ESA spending categories, Direct Pay and Debit. They received cumulative totals for the Direct Pay category.

Regarding debit card spending, the EdChoice report ignores it altogether. According to available ADE records, it makes up at least $60 million in annual spending (6% of the total ESA program).

EdChoice falsely believed pre-pay was included in reimbursement category

The report names two authors: EdChoice research analyst John Kristof and Susan Pendergrass of the Show-Me Institute. During the Zoom interview with 12News, Enlow was talking with another person on a phone line while answering questions. Asked why EdChoice left out the Pre-Pay (Debit) category from its study, Enlow said, “Our researcher says the pre-pay is part of the reimbursement category.”

Enlow later wrote in an email: “We do not have prepaid debit card data.” 

EdChoice said debit spending is being “phased out” and is therefore less relevant to future policy. But the program is active and there has been no announcement to phase out the program. 12News interviewed a family who received debit cards for each of their children when they signed up last year. 

EdChoice says they “relied” on Department of Education

EdChoice misleadingly stated in its study, “We are accounting for all Direct Pay, Reimbursement, and Marketplace transactions.” 

The EdChioce study says only Marketplace needs scrutiny because “existing evidence” suggests there is “zero or relatively low unallowable spending” in other categories.  That evidence relies on what Superintendent Tom Horne and the Department of Education have reported.

Previous statements by Horne and his staff have proven to be contradicted by evidence.

Those statements involved ESA purchases of Legos, the department’s ability to recover misspent ESA funds, ESA payments for babysitting, and the merits of a technical analysis of ESA misspending rates. 12News found that the analysis included numerous banned and questionable purchases that were labeled as “Allowed.”

The lead author of the ADE study, Joseph Guzman of ADE, told 12News he did not know why banned and non-receipt expenses were categorized as approved.

12News pointed out these shortcomings to Enlow and asked why EdChoice gave the ADE the benefit of the doubt without seeing the raw data firsthand.

“ADE errors when it comes to categorization or allowing transactions without documentation is an ADE issue and not relevant to our report,” Enlow said.

EdChoice will not provide spreadsheets showing what they considered “unallowable”

EdChoice said they did a line-by-line analysis of all items purchased on Amazon (in the Marketplace category) that cost over $500, and conducted a second statistically relevant sample of all Marketplace purchases. Enlow said researchers used their best judgment to determine what items should be categorized as “allowable,” based on the ESA handbook. Given those findings and the size of the entire program, EdChoice concluded there is a potential of  “0.7% of total spending needing scrutiny” for all ESA categories.

The legitimacy of many purchases remains subjective. There are thousands of items that fall on the spectrum between IPhones and water bottles. As one ESA parent told 12News, “the handbook is as clear as mud.” 

For that reason, 12News asked Enlow to provide spreadsheets – in the spirit of transparency – to demonstrate their conclusions.

 “I will certainly share everything we are able to. We are a very transparent organization,” Enlow said.  In follow-up emails, Enlow said he did not have an answer yet.

“We are still confirming our ability to share data based on Arizona laws,” Enlow wrote. That email was sent on April 6th.

Lawsuit continues over public records

“We think you are missing that part of our report’s conclusion is not just that unallowable spending is lower than 12News headlines suggested, but also that a lot of unallowable spending is really not scandalous,” Enlow said. “When you cycle through transactions at random, you see many more water bottles and cleaning supplies than iPhones.”

For nearly a year, 12News has been attempting to obtain a complete picture of spending in all four categories. Since 12News filed a lawsuit a year ago to obtain the data, the Arizona Department of Education and State Treasurer have released portions of data, including transaction-level data of Marketplace purchases.

On Tuesday, the ADE released several years of Direct Payment transactions.

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