Arizona Educational Accountability and Standards Act
AN ACT
AMENDING TITLE 15, ARIZONA REVISED STATUTES, BY AMENDING CHAPTER 19; APPROPRIATING MONIES; RELATING TO EDUCATIONAL ACCOUNTABILITY AND STANDARDS.
Be it enacted by the Legislature of the State of Arizona:
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SECTION 1. SHORT TITLE
This Act shall be known and may be cited as the "Arizona Educational Accountability and Standards Act."
SECTION 2. LEGISLATIVE FINDINGS AND DECLARATIONS
The Legislature finds and declares that:
1. Public funds carry with them a public trust. Any institution that voluntarily chooses to accept public funds through ESA vouchers assumes certain public obligations to ensure those funds serve legitimate public purposes, including the education of Arizona's children.
2. The expenditure of public funds on education creates a compelling state interest in ensuring accountability, transparency, and educational quality, regardless of the type of institution a child attends.
3. The state has a legitimate and substantial interest in ensuring that all students receiving publicly funded education have access to safe, effective learning environments that provide a basic minimum of educational quality.
4. Reasonable, viewpoint-neutral regulations on institutions accepting public funds are necessary to protect students, ensure proper use of public resources, prevent fraud, and advance the state's interest in an educated citizenry.
5. Prevention of fraud, waste, and abuse in the expenditure of public funds constitutes a compelling state interest that justifies reasonable financial controls and oversight mechanisms.
6. Arizona's Empowerment Scholarship Account program has operated since 2011 and expanded to universal eligibility in 2022. After more than a decade of operation and experience with the program, the Legislature has identified specific areas where reasonable accountability measures are necessary to prevent fraud, waste, and abuse of public funds while preserving parental choice.
7. The accountability measures in this Act are based on observed challenges in the existing ESA program and represent targeted, reasonable responses to documented issues, not hypothetical concerns.
8. Instruction in mathematics and natural sciences requires adherence to verifiable evidence and reproducible methods to prepare students for higher education, employment, and civic participation. Public funds should not support instruction in these subjects that lacks verifiable evidentiary support or employs methods inconsistent with established scientific practice in a manner that would substantially impair a student's future opportunities.
9. Institutions accepting public funds through ESA vouchers participate in Arizona's educational system and contribute to the state's compelling interest of developing children's capabilities for meaningful civic participation, personal autonomy, economic self-sufficiency, healthy relationships, critical thinking, and effective communication. While respecting parental choice and religious liberty, ESA-accepting institutions share responsibility for this educational development.
10. Religious educational institutions make valuable contributions to Arizona's diverse educational landscape and must be accommodated in ways that respect their religious character while ensuring accountability for the expenditure of public funds.
11. Parents are the primary educators of their children and have the right to direct their education. This Act is designed to support parental choice by ensuring parents have transparent information about educational options while protecting the responsible use of public funds.
SECTION 3. EMPOWERMENT SCHOLARSHIP ACCOUNT INSTITUTION STANDARDS
Title 15, Chapter 19, Arizona Revised Statutes, is amended by adding §15-2402.01, to read:
§15-2402.01. EMPOWERMENT SCHOLARSHIP ACCOUNTS; REQUIREMENTS FOR PARTICIPATING INSTITUTIONS
A. VOLUNTARY PARTICIPATION AND PUBLIC TRUST OBLIGATIONS
1. VOLUNTARY PARTICIPATION: Acceptance of ESA funds by educational institutions is voluntary. By choosing to accept ESA funds, institutions voluntarily agree to comply with the minimum requirements of this section as a condition of receiving public funds.
2. PUBLIC TRUST DOCTRINE: Institutions that accept public funds assume a public trust obligation to use those funds responsibly and to provide educational services that serve the public purpose of educating Arizona children.
B. MINIMUM ACCOUNTABILITY REQUIREMENTS FOR ALL ESA-ACCEPTING INSTITUTIONS
All institutions that accept ESA funds, regardless of religious affiliation or educational philosophy, shall comply with the following minimum requirements:
1. FINANCIAL INTEGRITY AND TRANSPARENCY:
a. Maintain separate accounting for all ESA funds received.
b. Retain all financial records related to ESA expenditures for a minimum of five years.
c. Make financial records available for audit by the Department of Education or State Auditor General upon request.
d. Prohibit the use of ESA funds for purposes unrelated to the educational services of the enrolled student.
2. HEALTH AND SAFETY STANDARDS:
a. Comply with all applicable state and local building, fire, and health codes applicable to educational institutions.
b. Maintain liability insurance appropriate for an educational institution.
c. Report any serious health or safety incidents involving ESA students to the Department of Education within 48 hours.
3. PERSONNEL STANDARDS:
a. Conduct criminal background checks on all instructional staff and employees with regular, unsupervised access to students.
b. Prohibit employment or retention of any person who has been convicted of a felony involving children, violence, sexual misconduct, or financial crimes against public funds.
c. Maintain records of background checks for all covered personnel.
4. NON-DISCRIMINATION IN ADMISSIONS: Not discriminate in admissions on the basis of race, color, or national origin, consistent with Title VI of the Civil Rights Act of 1964. This requirement does not apply to:
a. Single-gender institutions operating legally under existing law.
b. Institutions serving specific populations (such as students with disabilities) when such focus is part of their educational mission.
B-1. FINANCIAL INTEGRITY AND ANTI-FRAUD SPECIFICS
1. RESTRICTED EXPENDITURE CATEGORIES: ESA funds held by institutions or managed through institutional accounts may only be expended for the following categories:
a. TUITION AND FEES: Direct educational costs at approved institutions.
b. CURRICULUM MATERIALS: Textbooks, workbooks, and educational software from approved vendors.
c. EDUCATIONAL SERVICES: Tutoring, therapies, and specialized instruction from certified providers.
d. TECHNOLOGY: Computers, tablets, and educational technology (limited to one primary device every three years per student).
e. ASSESSMENTS: Standardized tests and educational evaluations.
f. SCHOOL SUPPLIES: Consumable educational materials.
2. PROHIBITED EXPENDITURES: ESA funds shall NOT be used for:
a. DISALLOWED ITEMS: Non-educational items including but not limited to: toys, gaming systems unrelated to education, entertainment subscriptions, clothing (except uniforms required by the institution), furniture, household items, or vehicles.
b. RELIGIOUS MATERIALS EXCLUSION: Religious materials, instruction, or artifacts, UNLESS such materials are integrated into a secular curriculum at a religious institution.
c. CASH EQUIVALENTS: Gift cards, prepaid cards, or any instrument convertible to cash without transaction-level reporting.
d. FUND TRANSFERS: Transfers to personal accounts, investment accounts, or other ESA accounts without Department approval.
e. ENTERTAINMENT AND TRAVEL: Entertainment, vacation travel, or non-educational recreation.
3. APPROVED VENDOR SYSTEM:
a. The Department of Education shall establish and maintain an approved vendor system.
b. AUTOMATIC APPROVAL: All businesses with appropriate occupational licenses are automatically approved upon registration with the Department.
c. EXPEDITED APPROVAL: Other vendors may apply for expedited approval through a simplified process completed within 30 days.
d. VENDOR RESPONSIBILITIES: Approved vendors must:
i. Maintain transaction records for five years.
ii. Report suspicious transactions to the Department.
iii. Refuse payment for clearly non-educational items.
iv. Provide itemized receipts for all ESA-funded purchases.
e. DUE PROCESS: Vendors denied approval or removed from the system have the right to an administrative hearing within 30 days.
4. TRANSACTION MONITORING AND REPORTING:
a. REAL-TIME MONITORING: The ESA management system shall include automated fraud detection monitoring for:
i. Unusual spending patterns
ii. Geographic anomalies (e.g., purchases far from student's residence or institution location)
iii. Velocity alerts (unusually rapid spending)
iv. Merchant category code violations
b. MANDATORY REPORTING: Institutions must retain receipts for all ESA expenditures for three years and provide them upon Department request.
c. RANDOM AUDITS: The Department shall conduct random audits of 5% of ESA-accepting institutions annually.
d. RISK-BASED AUDITS: Additional audits for institutions with:
i. Unusual spending patterns
ii. Previous compliance issues
iii. High-dollar expenditures
iv. Multiple related-party transactions
5. WHISTLEBLOWER PROTECTIONS AND INCENTIVES:
a. ANONYMOUS REPORTING: Establishment of a confidential fraud hotline and online reporting system.
b. EMPLOYEE PROTECTIONS: Strong anti-retaliation protections for employees of ESA schools who report suspected fraud, waste, or abuse in good faith.
c. BOUNTY PROVISION: Whistleblowers who provide specific, verifiable information leading to recovery of misused ESA funds may receive 10-20% of recovered amounts (capped at $50,000 per case).
d. GOOD FAITH PROTECTION: Reports made in good faith are protected even if no fraud is ultimately found.
B-2. PURCHASING CONTROLS AND TECHNOLOGY SAFEGUARDS
1. ESA PAYMENT SYSTEM:
a. All ESA funds disbursed to institutions shall be processed through a state-managed electronic payment system.
b. MERCHANT CATEGORY CODE BLOCKS: Automatic blocking of purchases at merchants with inappropriate category codes (e.g., liquor stores, casinos, jewelry stores, entertainment venues).
c. REAL-TIME NOTIFICATIONS: Institutions receive real-time notifications of all ESA-funded transactions.
d. SPENDING CONTROLS: Ability to set category-specific spending limits.
2. RECEIPT VERIFICATION SYSTEM:
a. Institutions must maintain and submit receipts for all ESA expenditures over $250 upon Department request.
b. Automated receipt scanning and verification technology available for high-volume institutions.
c. Progressive enforcement: Warning → Temporary payment suspension → Full audit for receipt non-compliance.
3. EDUCATIONAL MATERIAL VERIFICATION:
a. For curriculum and material purchases over $500, vendor must provide documentation of educational alignment.
b. Simplified process for established educational publishers and vendors with proven track records.
B-3. INSTITUTIONAL FINANCIAL CONTROLS
1. TUITION AND FEE TRANSPARENCY:
a. ESA-accepting institutions must publish their complete tuition and fee schedules on their website and provide them to the Department.
b. PROHIBITED PRACTICES: "ESA-only" pricing higher than standard tuition is prohibited.
c. COST REPORTING: Institutions with more than 25 ESA students must submit annual cost reports to the Department.
2. RELATED-PARTY TRANSACTION DISCLOSURE:
a. Institutions must disclose any related-party transactions (e.g., renting from a board member's company, purchasing from an owner's other business) exceeding $5,000 annually.
b. Related-party transactions must be at fair market value as demonstrated by comparable market rates.
c. Substantial related-party transactions (exceeding $25,000 annually) require prior Department approval.
3. FINANCIAL VIABILITY STANDARDS:
a. Institutions with more than 50 ESA students must demonstrate basic financial viability.
b. MINIMUM STANDARDS: Current ratio of at least 1:1, positive net assets, or appropriate surety bond equivalent to three months of ESA funding.
c. ALTERNATIVE FOR RELIGIOUS SCHOOLS: Religious institutions may submit alternative indicators of sustainability approved by the Department, such as multi-year funding commitments from supporting organizations.
C. METHODOLOGICAL STANDARDS FOR EMPIRICAL SUBJECTS
1. PURPOSE AND SCOPE:
a. PURPOSE: To ensure that instruction in mathematics and natural sciences funded through ESA vouchers employs verifiable methods and evidentiary standards that prepare students for higher education, employment, and civic participation.
b. COVERED SUBJECTS: This section applies only to:
i. Mathematics, including arithmetic, algebra, geometry, statistics, and calculus;
ii. Natural sciences, including biology, chemistry, physics, earth science, and astronomy;
iii. Health education, including human biology, nutrition, disease prevention, and substance abuse education.
c. EXCLUDED SUBJECTS: This section does not apply to:
i. Religious instruction or theology;
ii. Ethics, philosophy, or moral education;
iii. Social sciences, history, economics (except statistical/mathematical components);
iv. Literature, arts, or humanities;
v. Physical education or practical arts.
2. METHODOLOGICAL REQUIREMENTS:
a. In covered subjects, instruction presented as factual or scientific shall:
i. Be based on verifiable, consistent, and relevant measurements, observations, or mathematical proofs;
ii. Employ reproducible methods that could be independently verified;
iii. Distinguish clearly between:
(1) Claims supported by empirical evidence and claims based on other grounds;
(2) Quantitative measurements and qualitative observations;
(3) Direct evidence and inference or interpretation;
iv. Teach and employ standard scientific and mathematical methods including:
(1) For sciences: observation, hypothesis formation, experimental design, data collection, statistical analysis, peer review;
(2) For mathematics: axiomatic reasoning, proof construction, algorithmic verification, error analysis.
b. SPECIFIC SUBJECT STANDARDS:
i. MATHEMATICS: Instruction shall:
(1) Use mathematically valid proofs and algorithms;
(2) Distinguish between proven theorems and conjectures or applications;
(3) Teach error analysis and verification methods;
(4) Employ standard mathematical notation and conventions that allow communication with the broader mathematical community.
ii. NATURAL SCIENCES: Instruction shall:
(1) Base claims on reproducible observations and measurements;
(2) Distinguish empirical findings from theoretical interpretations;
(3) When presenting competing explanations, evaluate them based on explanatory power, predictive accuracy, and consistency with available evidence;
(4) Teach measurement techniques, instrument calibration, and error margins.
iii. HEALTH EDUCATION: Instruction shall:
(1) Base health claims on epidemiological data, clinical trial results, or other verifiable medical evidence;
(2) Distinguish between evidence-based recommendations and anecdotal reports or preliminary findings;
(3) Present quantitative risk assessments where applicable;
(4) Teach how to evaluate health information sources for methodological rigor.
3. EDUCATIONAL HARM PREVENTION:
a. PROHIBITED INSTRUCTION: Institutions shall not provide instruction in covered subjects that:
i. Systematically employs unverifiable methods or ignores contradictory evidence in a manner that would prevent students from meeting admission requirements for Arizona's public universities or community colleges;
ii. Uses methodologies inconsistent with standard practice in fields requiring certification or licensure;
iii. Fails to teach standard measurement and verification techniques needed for civic engagement on technical matters;
iv. Presents health information without appropriate evidentiary support, creating unreasonable risks.
b. METHODOLOGICAL ASSESSMENT STANDARDS: In determining compliance, the Department shall consider whether instruction:
i. Teaches standard measurement and verification techniques;
ii. Provides access to primary data or reproducible methods;
iii. Acknowledges limitations and error margins;
iv. Distinguishes different types and strengths of evidence.
4. PROTECTED INSTRUCTION AND ACADEMIC FREEDOM:
a. RELIGIOUS AND PHILOSOPHICAL PROTECTIONS: Nothing in this section shall be construed to:
i. Require empirical verification of religious or metaphysical claims;
ii. Prohibit discussion of interpretations or implications of scientific findings;
iii. Prevent teaching about historical scientific errors or paradigm shifts;
iv. Require specific experimental outcomes or conclusions.
b. ACADEMIC FREEDOM: Institutions retain discretion to:
i. Select specific experiments or examples for teaching methods;
ii. Emphasize different applications of scientific principles;
iii. Include historical context about scientific development;
iv. Discuss limitations of scientific methods.
5. COMPLIANCE MECHANISMS:
a. FOCUS ON METHODOLOGICAL COMPETENCE: Compliance assessment shall emphasize whether students can:
i. Perform standard measurements and calculations;
ii. Design simple experiments or proofs;
iii. Evaluate evidence quality;
iv. Communicate using standard technical terminology.
b. ALTERNATIVE COMPLIANCE FOR RELIGIOUS INSTITUTIONS: Religious institutions may demonstrate compliance by showing they teach:
i. Standard scientific methods alongside religious perspectives;
ii. How to distinguish empirical claims from faith claims;
iii. Sufficient technical competence for educational and employment success.
6. ENFORCEMENT FOCUSED ON METHODOLOGY:
a. NON-COMPLIANCE DEFINITION: Non-compliance means systematic failure to teach verifiable methods or active obstruction of standard measurement techniques.
b. DEFENSES: Institutions may demonstrate compliance by showing:
i. They teach multiple perspectives with methodological evaluation;
ii. Students achieve competence in standard techniques;
iii. Instruction includes appropriate caveats and context.
7. DEFINITIONS:
a. "VERIFIABLE MEASUREMENTS" means observations, data, or calculations that can be independently reproduced using standard techniques and instruments.
b. "CONSISTENT MEASUREMENTS" means results that are reproducible across multiple trials, observers, or conditions, accounting for known error sources.
c. "RELEVANT MEASUREMENTS" means data that directly address the claim or hypothesis being evaluated.
d. "MATHEMATICAL PROOF" means a logically valid demonstration following accepted mathematical rules and axioms.
e. "STANDARD SCIENTIFIC PRACTICE" means methods commonly taught in undergraduate science programs and used in peer-reviewed research.
f. "EVIDENTIARY SUPPORT" means the availability of data, measurements, or proofs that could in principle be examined and evaluated by others trained in the field.
D. EDUCATIONAL QUALITY ASSURANCE PATHWAYS
In furtherance of the state's interest in developing children's capabilities as described in Section 2 of this Act, institutions accepting ESA funds shall demonstrate educational effectiveness through one of the following pathways (institutions may choose their preferred pathway):
1. PATHWAY 1 – ACCREDITATION: Maintain accreditation from a recognized accrediting agency approved by the Department of Education.
2. PATHWAY 2 – ASSESSMENT OF STUDENT PROGRESS: Administer a nationally norm-referenced standardized assessment or other assessment approved by the Department of Education to all ESA students annually, with results:
a. Provided to parents.
b. Reported in aggregate, non-identifiable form to the Department of Education for program evaluation purposes.
3. PATHWAY 3 – PORTFOLIO REVIEW: Maintain a portfolio of student work demonstrating academic progress, subject to annual review by either:
a. A certified teacher or qualified professional selected by the parents.
b. A review process established by the institution and approved by the Department of Education.
4. PATHWAY 4 – PERFORMANCE CONTRACT: Enter into a performance agreement with the Department of Education outlining expected educational outcomes and methods for demonstrating achievement of those outcomes.
E. RELIGIOUS INSTITUTION ACCOMMODATIONS AND ALTERNATIVE COMPLIANCE
1. PROTECTION OF RELIGIOUS CHARACTER AND MISSION: Nothing in this section shall be construed to require religious educational institutions to:
a. Abandon, alter, or modify their religious character, mission, values, or identity.
b. Modify their religious teachings, doctrine, practices, or curriculum.
c. Hire personnel who do not share their religious beliefs or adhere to their religious tenets.
d. Admit students who do not meet their religious criteria, provided such criteria are:
i. Sincerely held religious beliefs.
ii. Applied consistently.
iii. Not used as a pretext for prohibited discrimination under subsection B.4.
2. RELIGIOUS CURRICULUM AND PRACTICES: Religious institutions may:
a. Integrate religious teachings, values, and perspectives throughout their curriculum.
b. Require participation in religious activities, services, or instruction as a condition of enrollment.
c. Maintain religious requirements for staff, faculty, and students that are central to their religious mission.
d. Give admissions preference to members of their religious faith or denomination.
3. ALTERNATIVE COMPLIANCE MECHANISMS: The Department of Education shall establish alternative compliance mechanisms for religious institutions that have religious objections to specific requirements, provided the institution demonstrates through alternative means that it:
a. Achieves substantially equivalent educational outcomes.
b. Protects student health and safety.
c. Ensures proper use of public funds.
d. Maintains financial integrity and transparency.
Alternative compliance plans must be submitted to and approved by the Department of Education, which shall grant accommodations unless there is a compelling governmental interest that cannot be achieved through less restrictive means.
F. TRANSPARENCY AND PARENTAL INFORMATION REQUIREMENTS
1. MANDATORY DISCLOSURE TO PROSPECTIVE FAMILIES: Institutions accepting ESA funds shall provide prospective families with a clear, written disclosure statement that includes:
a. Curriculum overview and educational philosophy.
b. Religious affiliation and requirements (if applicable).
c. Staff qualifications and background check policies.
d. Services available for students with special needs or disabilities.
e. Any additional costs, fees, or required contributions beyond the ESA amount.
f. Graduation rates and post-graduation outcomes (if applicable).
g. Contact information for filing complaints or concerns.
h. Financial viability information as required in subsection B-3.
i. Approach to mathematics and science instruction, including whether instruction follows methodological standards in subsection C.
2. ANNUAL PARENT NOTIFICATION: Institutions shall provide parents of enrolled ESA students with an annual report including:
a. How ESA funds were expended for their child's education.
b. Their child's academic progress under the chosen educational quality pathway.
c. Any significant changes to the institution's programs, policies, or personnel.
d. Total tuition and fees charged versus ESA funds received.
3. PUBLIC INFORMATION PORTAL: The Department of Education shall maintain a public information portal with basic, non-identifiable information about all ESA-accepting institutions, including:
a. Institution name and contact information.
b. Educational approach or philosophy.
c. Religious affiliation (if any).
d. Services available for students with special needs.
e. Chosen educational quality pathway.
f. Years of operation and enrollment size.
g. Any sanctions or compliance issues (as public records).
h. Financial viability status.
i. Methodological approach to mathematics and sciences as described in subsection C.
G. SPECIAL EDUCATION AND STUDENT SUPPORTS
1. CAPACITY DISCLOSURE: Institutions shall clearly disclose their capacity and resources to serve students with:
a. Disabilities requiring special education services.
b. English language learning needs.
c. Other specialized educational or support requirements.
2. SERVICE PROVISION OPTIONS: Institutions may satisfy requirements for serving students with special needs through:
a. Direct provision of services by qualified staff.
b. Contracts with approved service providers.
c. Partnerships with public school districts or educational service agencies.
d. Clear referral processes to appropriate public school services, with transportation support if needed.
3. NO REQUIREMENT TO EXPAND SERVICES: Nothing in this section shall be construed to require institutions to expand their services or programs beyond their capacity or mission. Institutions may limit enrollment based on their capacity to serve particular student needs, provided such limitations are disclosed clearly and applied consistently.
H. ENFORCEMENT AND DUE PROCESS
1. GRADUATED ENFORCEMENT APPROACH: The Department of Education shall implement a graduated enforcement system that prioritizes compliance assistance over punitive measures:
a. TECHNICAL ASSISTANCE AND GUIDANCE: Provide support, resources, and guidance to help institutions understand and meet requirements.
b. CORRECTIVE ACTION PLANS: Allow reasonable time (typically 60-90 days) for institutions to address deficiencies through approved corrective action plans.
c. PROBATIONARY STATUS: Place institutions on probation for repeated or serious violations, with increased monitoring and reporting requirements.
d. SUSPENSION OF NEW ESA ENROLLMENTS: Temporarily suspend an institution's ability to accept new ESA students while addressing compliance issues.
e. TERMINATION OF ELIGIBILITY: Revoke eligibility for serious, repeated, willful, or fraudulent violations that threaten student safety or misuse public funds.
f. FINANCIAL RECOVERY: Mandatory efforts to recover misused funds, including:
i. Offsets against future ESA payments to the institution.
ii. Civil actions for recovery.
iii. Referral to the Attorney General for criminal prosecution when appropriate.
g. PUBLIC DISCLOSURE: Final determinations of fraud or misuse exceeding $10,000 shall be publicly disclosed on the Department's website (after appeals exhausted).
2. IMMEDIATE SUSPENSION AUTHORITY: The Department may immediately suspend ESA payments to an institution upon finding credible evidence of:
a. CLEAR AND PRESENT DANGER: Immediate threats to student health or safety.
b. SUSPECTED SUBSTANTIAL FRAUD: Credible evidence of fraudulent use of ESA funds exceeding $25,000.
c. WILLFUL AND REPEATED VIOLATIONS: Pattern of willful or repeated violations of expenditure rules.
Due process hearing required within 14 days of suspension.
3. COLLABORATIVE ENFORCEMENT:
a. Memorandum of Understanding with Arizona Attorney General for fraud prosecution.
b. Data sharing agreements with financial institutions and vendors for fraud detection.
c. Cross-reporting with other state agencies (Department of Health Services, Department of Revenue, etc.) for multi-agency fraud schemes.
4. DUE PROCESS PROTECTIONS: Institutions shall have the right to:
a. Written notice of alleged violations with specific details.
b. Opportunity to respond and present evidence.
c. Informal resolution conference with Department officials.
d. Formal administrative hearing before significant sanctions (probation, suspension, or termination).
e. Judicial review of final decisions in accordance with Arizona administrative review procedures.
I. IMPLEMENTATION TIMELINE AND COMPLIANCE PERIODS
1. RULEMAKING DEADLINE: The Department of Education shall complete all rulemaking necessary to implement this section by December 31, 2028.
2. SYSTEM DEVELOPMENT: The Department shall develop and implement the approved vendor system, fraud detection technology, and payment systems by June 30, 2029.
3. COMPLIANCE TIMELINES:
a. IMMEDIATE UPON EFFECTIVE DATE (July 1, 2029):
i. Disclosure requirements (subsection F)
ii. Health and safety standards (B.2)
iii. Non-discrimination in admissions (B.4)
iv. Transaction monitoring requirements (B-1.4)
b. 90-DAY COMPLIANCE PERIOD (by September 30, 2029):
i. Financial integrity requirements (B-1)
ii. Personnel standards (B.3)
iii. Educational quality pathway selection (D)
iv. Special education disclosures (G)
v. Alternative compliance plan submissions for religious institutions
c. 180-DAY COMPLIANCE PERIOD (by December 31, 2029):
i. Financial viability standards (B-3.3)
ii. Full implementation of purchasing controls (B-2)
iii. Related-party transaction disclosures (B-3.2)
iv. Methodological standards implementation plans (subsection C)
4. TECHNICAL ASSISTANCE PRIORITY PERIOD: From July 1, 2029 through December 31, 2029, the Department shall prioritize compliance assistance over punitive enforcement, except in cases of:
a. Immediate threats to health or safety
b. Suspected fraud exceeding $25,000
c. Willful refusal to attempt compliance
5. FULL ENFORCEMENT COMMENCEMENT: Full enforcement of all requirements, including audits and sanctions, shall commence January 1, 2030.
J. RELATIONSHIP TO PARENTAL RIGHTS AND RELIGIOUS LIBERTY
1. PARENTAL RIGHTS PRESERVED: Nothing in this section shall be construed to diminish or interfere with the fundamental right of parents to direct the upbringing, education, and care of their children as recognized by Arizona law and the United States Constitution.
2. RELIGIOUS LIBERTY PROTECTED: The requirements of this section shall be implemented in a manner that respects the religious character and mission of religious educational institutions, consistent with the accommodations provided in subsection E.
3. BALANCING OF INTERESTS: This section reflects the Legislature's careful balancing of:
a. The state's compelling interest in ensuring public funds are used for genuine educational purposes;
b. The state's interest in developing children's capabilities for full participation in society as described in Section 2 of this Act;
c. Parents' fundamental right to direct their children's education;
d. Religious institutions' constitutional right to free exercise of religion;
e. Children's inherent dignity and potential as developing human beings.
4. LEAST RESTRICTIVE MEANS: The requirements of this section represent the least restrictive means of achieving the state's compelling interests in educational accountability and prevention of fraud, waste, and abuse in the expenditure of public funds.
K. ANNUAL REPORTING AND SUNSET PROVISION
1. ANNUAL REPORTING REQUIREMENT: Beginning December 31, 2030, and annually thereafter, the Department of Education shall submit a comprehensive report to the Legislature, the Governor, and the public that includes:
a. Compliance rates by requirement and institution type
b. Fraud prevention outcomes including:
i. Number of fraud cases detected and investigated
ii. Amount of misused funds identified and recovered
iii. Number of institutions sanctioned for fraud or misuse
c. Impact on program participation including:
i. Number of institutions accepting ESA funds
ii. Number of students served
iii. Parental satisfaction survey results
d. Educational quality assessment including:
i. Performance on chosen educational quality pathways
ii. Student progress data (in aggregate, non-identifiable form)
iii. Implementation of methodological standards in mathematics and sciences
e. Administrative costs and cost-effectiveness analysis
f. Recommendations for statutory or regulatory improvements
2. SUNSET PROVISION: The requirements of this section shall sunset on June 30, 2036, unless reauthorized by the Legislature. The sunset review shall be informed by the annual reports and shall specifically consider:
a. Effectiveness in preventing fraud, waste, and abuse of public funds
b. Impact on educational quality and student outcomes
c. Administrative burden on institutions and cost-effectiveness
d. Parental satisfaction and preservation of educational choice
e. Implementation and impact of methodological standards in mathematics and sciences
f. Whether modifications would better achieve the Act's purposes while reducing burden
3. EARLY SUNSET TRIGGER: If the Legislature fails to appropriate sufficient funds to implement this section in any fiscal year, the requirements shall be suspended until funding is restored.
SECTION 4. EDUCATIONAL ACCOUNTABILITY AND FRAUD PREVENTION FUNDS
Title 15, Chapter 19, Arizona Revised Statutes, is amended by adding §§15-2403 and 15-2404, to read:
§15-2403. EDUCATIONAL ACCOUNTABILITY LITIGATION DEFENSE FUND
A. FUND ESTABLISHMENT: The Educational Accountability Litigation Defense Fund is established consisting of legislative appropriations, federal funds, and private contributions.
B. PURPOSE: The fund shall be used exclusively to:
1. Defend the constitutionality of this Act and related educational accountability provisions.
2. Defend the state against challenges to reasonable regulations of institutions accepting public funds.
3. Conduct legal research and analysis on issues related to educational accountability and school choice.
C. FUND MANAGEMENT: The Attorney General shall administer the fund. The Attorney General may:
1. Contract with outside counsel with expertise in constitutional law, education law, and religious liberty issues.
2. Retain expert witnesses and consultants as needed for litigation defense.
3. Collaborate with other states facing similar legal challenges to share resources and strategies.
D. ANNUAL APPROPRIATION: The sum of $5,000,000 is appropriated annually from the state general fund to the Educational Accountability Litigation Defense Fund, beginning in fiscal year 2028-2029.
E. REPORTING REQUIREMENT: The Attorney General shall provide an annual report to the Legislature detailing:
1. Expenditures from the fund.
2. Status of any litigation involving this Act.
3. Legal strategies and outcomes.
§15-2404. ESA FRAUD PREVENTION AND COMPLIANCE FUND
A. FUND ESTABLISHMENT: The ESA Fraud Prevention and Compliance Fund is established as a separate fund within the state treasury.
B. FUNDING SOURCES: The fund consists of:
1. Annual legislative appropriation equal to 1% of total ESA funding appropriated each year.
2. Recovered misused ESA funds.
3. Federal grants for fraud prevention in educational programs.
4. Private contributions designated for fraud prevention.
5. Interest earned on fund balances.
C. ALLOWABLE EXPENDITURES: The fund shall be used exclusively for:
1. Development, implementation, and maintenance of fraud detection technology and monitoring systems.
2. Salaries, benefits, and training for audit and investigation personnel focused on ESA fraud prevention.
3. Parent and provider education on ESA compliance requirements and fraud prevention.
4. Whistleblower rewards as specified in §15-2402.01(B-1)(5)(c).
5. Legal expenses for civil actions to recover misused ESA funds.
6. Contracting with financial forensic experts for complex fraud investigations.
7. Development and maintenance of the approved vendor system.
D. FUND ADMINISTRATION: The Department of Education shall administer the fund in consultation with the Attorney General. The Department shall:
1. Develop annual spending plans for fund expenditures.
2. Ensure fund expenditures are prioritized based on risk assessment.
3. Maintain detailed records of all fund expenditures.
4. Coordinate with other state agencies to leverage existing fraud prevention resources.
E. ANNUAL REPORTING: The Department shall submit an annual report to the Legislature by December 31 of each year, beginning in 2030, detailing:
1. Total fund balance and sources of revenue.
2. Detailed expenditures by category.
3. Fraud prevention outcomes, including:
a. Number of fraud cases detected and investigated.
b. Amount of misused funds identified.
c. Amount of funds recovered.
d. Number of institutions sanctioned for fraud or misuse.
4. Cost-effectiveness analysis of fraud prevention measures.
5. Recommendations for improvements to fraud prevention systems.
F. FUND CARRYFORWARD: Unexpended fund balances shall carry forward from year to year and shall not revert to the general fund.
SECTION 5. SEVERABILITY WITH FALLBACK PROVISIONS
A. EXPRESS SEVERABILITY: If any provision of this Act or its application to any person or circumstance is held invalid, the remainder of the Act shall continue in full force and effect to the maximum extent possible.
B. FALLBACK PROVISIONS: If any requirement for ESA-accepting institutions in §15-2402.01 is invalidated by a court, the following fallback provisions shall automatically take effect:
1. ENHANCED DISCLOSURE REQUIREMENTS: Increased transparency and parent information requirements, including mandatory disclosure of:
a. Any safety or compliance issues in the past five years.
b. Financial viability and stability indicators.
c. Student retention and attrition rates.
d. Parent satisfaction survey results (voluntary participation).
e. Related-party transactions exceeding $10,000 annually.
f. Approach to mathematics and science instruction.
2. TIERED REIMBURSEMENT SYSTEM: Establishment of a tiered reimbursement system where institutions that voluntarily meet higher standards of accountability and transparency receive higher per-student reimbursement rates.
3. PARENTAL RESOURCES PORTAL: Enhanced resources for parents to evaluate educational options, including:
a. Standardized parent satisfaction survey results.
b. Curriculum and program information in standardized format.
c. Financial transparency indicators.
d. Links to accreditation or quality review information.
e. Historical compliance record.
f. Methodological approach to mathematics and sciences.
C. MINIMUM CONSTITUTIONAL STANDARDS: If extensive regulation of religious institutions accepting ESA funds is invalidated, the state retains authority to enforce the following minimum standards under its spending clause authority:
1. Health and safety requirements applicable to all educational institutions.
2. Financial accountability and anti-fraud measures directly tied to preventing misuse of public funds.
3. Basic disclosure requirements to ensure parents have essential information about educational options.
4. Requirements related to the proper expenditure of public funds, including prohibitions on use for non-educational purposes.
D. NON-EXCLUSIVITY OF REMEDIES: The invalidation of any provision of this Act shall not affect the state's authority to enforce other applicable laws, regulations, or contractual requirements related to the expenditure of public funds, including general fraud statutes, consumer protection laws, and contract law.
SECTION 6. RULEMAKING AUTHORITY
The Department of Education, in consultation with the Attorney General, shall adopt rules necessary to implement this Act. The rulemaking process shall:
1. Begin no later than July 1, 2028.
2. Include opportunities for public comment, with specific outreach to:
a. Religious institutions and organizations.
b. Private schools and educational associations.
c. Parent organizations and advocacy groups.
d. Financial institutions and potential vendors.
e. Mathematics and science educational experts.
3. Be completed by December 31, 2028, to allow for implementation beginning July 1, 2029.
4. Prioritize clarity, practicality, and respect for institutional autonomy while ensuring accountability for public funds.
5. Include specific provisions for alternative compliance mechanisms for religious institutions.
6. Establish clear due process procedures for enforcement actions.
7. Develop specific guidance for implementing methodological standards in mathematics and sciences, including examples of compliant and non-compliant practices.
SECTION 7. APPROPRIATIONS
A. IMMEDIATE PLANNING AND DEVELOPMENT: The sum of $5,000,000 is appropriated from the state general fund in fiscal year 2027-2028 to the Arizona Department of Education for immediate planning, stakeholder engagement, and preliminary system design necessary to implement this Act upon passage.
B. SYSTEM DEVELOPMENT AND IMPLEMENTATION: The sum of $18,000,000 is appropriated from the state general fund in fiscal year 2028-2029 to the Arizona Department of Education for development and implementation of the systems required by this Act, including:
1. Development of the approved vendor system.
2. Implementation of fraud detection technology.
3. Hiring and training of compliance and audit staff.
4. Development of parent and provider education materials.
5. Rulemaking and stakeholder engagement processes.
6. Development of guidance and training materials for implementing methodological standards in mathematics and sciences.
C. ONGOING ADMINISTRATION: The sum of $10,000,000 is appropriated annually from the state general fund beginning in fiscal year 2029-2030 to the Arizona Department of Education for ongoing administration and enforcement of this Act, including monitoring of methodological standards implementation.
D. FUND TRANSFER: The sum of $5,000,000 is appropriated from the state general fund in fiscal year 2028-2029 to the Educational Accountability Litigation Defense Fund established in §15-2403.
E. ANNUAL ESA FRAUD PREVENTION FUNDING: Beginning in fiscal year 2029-2030, an amount equal to 1% of the total ESA appropriation for that fiscal year shall be transferred from the ESA program appropriation to the ESA Fraud Prevention and Compliance Fund established in §15-2404.
SECTION 8. EFFECTIVE DATE AND IMPLEMENTATION
This Act is effective July 1, 2029, with implementation timelines as specified in §15-2402.01(I). The provisions of this Act shall apply to all ESA funds distributed on or after July 1, 2029.
