Arizona Lege is ‘Robin Hood in reverse’ on public education funding

At a time when Gov. Doug Ducey boasted more than $100 million in new investments for education in his budget plan, a Senate panel advanced a bill that could put roughly double that amount of school funding in jeopardy. The Arizona Capitol Times (subscription required) reports, Bill advances that could jeopardize more than $200 million in desegregation funds:

Over the objection of dozens of parents and local school officials, the Senate Appropriations Committee voted 6-3 for SB1174, which eliminates the automatic levy of property taxes in more than a dozen Arizona school districts for funding allotted for desegregation and student achievement efforts.

Instead, the funding mechanism would have to be prompted by voters, in what would essentially be an override vote.

SB1174, sponsored by Sen. Debbie Lesko and pushed by the [conservative] Arizona Tax Research Association, would allow a special vote for up to seven years of funding at the level at which desegregation dollars were set in 2009.

Nineteen Arizona school districts levy those extra taxes for desegregation funding. The Phoenix Union High School District alone raised roughly $55.8 million in fiscal year 2015 in additional property taxes thanks to the state- and court-authorized taxing method. In fiscal year 2015, the tax levy in that and the other districts provided more than $211 million in funding.

School officials have argued that they are under strict scrutiny from courts and the U.S. Office of Civil Rights, and would be thrown into legal trouble if they don’t continue to utilize the taxes.

ATRA has for years pushed efforts to eliminate those funds [and Debbie Lesko has been their dutiful water carrier]. They claim it’s unfair to Arizona’s other school districts — particular those that neighbor the 19 districts receiving desegregation funding — that some schools can draw in more funds than others. Sean McCarthy, a research analyst at ATRA, claimed it’s a program that voters are woefully unaware of, and those that know of it want it gone.

It’s not just property owners in those districts who are paying the price for those desegregation dollars, McCarthy said. Due to the 1 percent cap on residential property taxes, the state General Fund must pay out roughly $22 million to districts whose taxes would otherwise exceed the cap.

“Most voters have no idea that they’re living in a district that’s taxed for it,” McCarthy told the committee.

The committee’s Democratic senators and a parade of parents and school officials who testified before the committee took exception to that claim.

Sen. Steve Farley, D-Tucson, said when he hears from his constituents, they’re not asking for lawmakers to pass a bill that would decrease funding for education — they want more. His assertion drew applause from the committee’s audience. Many later echoed Farley, underscoring how the debate over the desegregation funds was impossible to separate from a larger conversation about how Arizona funds schools, and whether or not it does so adequately. Parents and school officials repeatedly told lawmakers they need more funding for education, and that less, no matter why, was not the answer.

* * *

For Lesko, the sponsor of SB1174 and bills in previous years that would have phased out desegregation funding, getting rid of the funds is simply a matter of equity.

“I have low income areas in my district and they get no desegregation funding,” the Peoria Republican told Walton. “That’s what’s so unfair about this.”

Lesko has no problem with Governor Ducey’s proposed $38 million for “results-based funding” that would primarily benefit wealthy school districts that already enjoy a tax base advantage over poor school districts. As David Safier observed, “The main educational beneficiaries will be the current winners in the state’s income inequality wars. To the victors go the ‘results-based funding’ spoils.” A Dollar a Day, and Other Observations About Ducey’s Education Funding Proposal. No hypocrisy there.

Lesko’s previous attempts to undo desegregation would have eliminated the dollars entirely. This year, the bill she and ATRA have proposed would leave it up to each district to hold a vote: Do voters want to continue providing the funds or not?

“If you’re confident that the voters support this, then you don’t have a problem,” Lesko said.

And then there is the school “vouchers for all” bill from Sen. Lesko that would redirect public tax dollars to private and parochial schools away from public schools in violation of two provisions of the Arizona Constitution, and despite fraud discovered by auditors in the current ESA program. Arizona school-voucher expansion afoot despite $102K of misspent funds in 6 months:

Republican lawmakers are renewing their efforts to expand a program that allows parents to use public money to pay the educational expenses of children who attend private schools or are homeschooled.

The push to expand Arizona’s Empowerment Scholarship Account program comes in the wake of a state audit that found officials had identified that more than $102,000 in ESA funds were misspent during a six-month period, from August 2015 to January 2016, in addition to other improper purchases, as well as spotty oversight.

The examples cited by auditors include parents who kept the state’s money after enrolling their children in public school, parents who bought items that are not allowed under the program, such as snow globes and sock monkeys, and parents who didn’t submit required expense reports to the Arizona Department of Education.

The state recovered less than 15 percent of the misspent funds, according to state auditors.

The review by the Office of the Auditor General came amid questions last year about oversight of the program. Auditors concluded the state Department of Education should strengthen its management of the program and its efforts to recover misspent money. Auditors also recommended lawmakers consider changing state laws to better ensure ESA money is properly spent.

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The Legislature created the program in 2011, limiting it to disabled children. Since then, lawmakers have expanded the program to children in failing schools, children living on tribal lands, siblings of children who have participated in the ESA program, and others. There are currently about 3,200 children in the program in 2017, said Ross Begnoche, the Department of Education’s chief financial officer. The program is currently capped at about 5,000 students. The budget is about $40 million this year.

Under legislation introduced by Republican Sen. Debbie Lesko of Peoria, all students would qualify for the ESA program by the 2020-2021 school year.

Senate Bill 1431 proposes phasing in eligibility, starting in the 2017-2018 school year with students in kindergarten, first grade, sixth grade and ninth grade. Within four years, all students would qualify. A separate bill, Senate Bill 1281, by Republican Sen. Steve Smith, would require the Department of Education to contract with a private firm to manage ESA accounts and require random, quarterly and annual audits of the program.

Lesko said in a prepared statement that SB 1431 would allow parents to tailor their children’s education to their needs. Traditional public district schools oppose the program, she said, because “they don’t want the competition.”

In an interview Monday, Lesko said she had not read the audit. Told of the misspent money, she added, “If it’s a mistake, that’s one thing. If it’s intentional, they need to be prosecuted and kicked off the program.”

Last year, Lesko also sponsored legislation to allow all 1.1 million public schoolchildren to qualify for the ESA program by 2020. That expansion effort came as Gov. Doug Ducey was campaigning for a ballot initiative to put more money into public schools — a message seemingly at odds with legislation that would divert taxpayer money away from public schools. The bill died after an Arizona Republic investigation showed most children using the program were leaving high-performing public schools in wealthy districts.

Some supportive lawmakers say an ESA expansion could have more momentum this year, given President Donald Trump’s nomination of school-choice advocate and billionaire Betsy DeVos for U.S. secretary of Education. A non-profit she chaired until recently, American Federation for Children, spent nearly $218,000 during the primary for legislative races last year, the most of any independent expenditure committee seeking to influence the outcome of such races.

The group advocates for school-choice measures across the country and at the Arizona Capitol, where those efforts have included pressing for ESA expansion. On Monday, the group touted Lesko’s legislation, saying it would mean “no Arizona child will be trapped in a school that isn’t working for them.”

Ducey, a supporter of school choice, evaded questions last week on whether he would sign legislation to expand the ESA program. He said parents should be able to send their children to the schools they desire and noted his budget proposes $114 million in additional K-12 school funding, aside from mandated inflation costs.

Senate President Steve Yarbrough, a Chandler Republican who promotes alternatives to public schooling and programs that benefit private schools and charities, told The Arizona Republic before the ESA expansion bill was introduced he hoped to see the program accessible to more kids.

“Expanding the ESA program will provide educational opportunity for kids in low-income schools as well as kids in higher-income neighborhoods,” he said on Jan. 18.

Yarbrough said he doesn’t like that ESA funds were misspent, but he was not troubled by it. He sidestepped a question about whether additional measures should be taken in light of the audit’s findings.

To us, $100,000 probably sounds like quite a bit of money, but in the whole scheme of things, that frankly may not be an awful lot of money,” he said. “It doesn’t make me feel good that anybody would misuse any government program.”

Remember, this is Sen. Steve Yarbough, Arizona’s most corrupt state senator who uses his position to write charter school bills to steer state funding to his Arizona Christian School Tuition Organization in order to benefit himself financially. Outlook for the ‘next step’ in public education funding is not good. Some of this “misspent” ESA funds likely benefitted his business financially. No wonder he is “not troubled by it.”

Audit details misspending

The audit cited wide-ranging issues with the Empowerment Scholarship Account program, including inconsistently referring cases of misspending to the Attorney General’s Office for investigation.

In one case, parents with children enrolled in the program in 2011 bought more than $3,600 in educational materials using their ESA debit cards. They then returned their purchases for store gift cards, and used them to buy “non-educational items,” including a sock monkey, a snow globe, a “World of Warcraft” calendar and “The Walking Dead” board game.

State officials learned of the “suspicious purchasing behavior” from the the bookstore, the audit said. They eventually kicked the parents out of the program and the case was referred to the Attorney General’s Office for a fraud investigation. Education officials would not have been able to detect the misspending through their normal review of the parents’ expense reports, the audit said. It is unclear if the money has been recovered.

Auditors included examples of instances in which education officials had fended off attempts to make prohibited purchases. Between 2011 and 2015, for example, parents had tried to spend the funds on such things as a dating website, hotel stays, and fast food.

Among the other problems cited by auditors:

The Department of Education recovered just $14,500 of the $102,602 misspent between August 2015 and January 2016.

As of March 2015, the attorney general recorded $10,000 in referrals to its office for collections but those referrals have resulted in the repayment of just $230.

Thirty-five parents misspent more than $1,000 over a six-month period, but most have not repaid the money, and as of March 2016, the department had not referred them to law enforcement for fraud or collections.

The department took no action against parents who unsuccessfully tried to misspend ESA funds. Education officials believed attempted cash withdrawals using the ESA debit cards are a sign of future misspending; the department allowed 150 parents who tried to withdraw cash to remain in the program.

One-third of the $102,000 that had been misspent over the six-month period was a result of parents accepting the ESA money on their debit cards and then enrolling their children in public schools.

One parent spent money on a child who did not reside in Arizona.

The audit also found the department struggled to guard ESA funds that were spent via the online money-transfer system known as PayPal.

In August 2015, one parent tried to withdraw cash and make purchases at a grocery store and drugstore. They were denied. Six days later, the parent used the ESA debit card to pay $500 “to what appeared to be a tutor” through a PayPal account. Bank records indicate the PayPal account was located in California.

Later, in October 2015, the parent made another $700 payment to the same PayPal account. Education officials tried to get more information about the transactions from the parent, but as of March 2016 there was no response.

Another parent paid someone $3,500 through PayPal with no indication of what he or she was buying. That parent also has not responded to education officials’ request for more information about the purchases.

Department of Education officials could not say whether they have recovered anymore of the money that was misspent, but said they are continuing to try and collect the roughly $85,000 that has been misspent but not paid back.

Some of it has been referred to the attorney general but some of the amounts are small enough that the state isn’t trying to collect it, Begnoche said.

The department agreed to all the audits findings and recommendations to improve ESA oversight.

‘Very little oversight’

For years, the budget to oversee the program was $400,000, funding only three to four employees to root out fraudulent transactions by going through transactions on an individual level, Begnoche said. This year, the Legislature allowed the ESA program to spend $800,000, bumping the number of employees to eight, which will make it easier to audit and to identify misspending, he said.

Republican Sen. Kate Brophy McGee, of Phoenix, opposes further ESA expansion. She told The Republic she was disturbed by the audit’s findings, saying, “You would expect conservative supporters of ESAs to demand accountability and proven outcomes in return for taxpayer dollars, but that’s not what is occurring.”

Student achievement of ESA recipients is not tracked by the state.

Democratic Sen. Steve Farley, of Tucson, suggested the state would have trouble administering a larger program.

“If you see these kinds of problems from a small program and then you open it up to 1.1 million kids and put debit cards in the hands of parents with very little oversight, you’re creating a program that’s ripe for fraud,” he said.

You got that right!

The Arizona Republic’s E.J. Montini correctly observes that Expanding school vouchers is a rip-off and scam:

School “choice” is a scam.

It’s a con.

It’s a euphemism used by lawmakers who want to gut the state’s public school system and hand over taxpayer money to affluent families.

Leading the charge in this legislative session is Republican Sen. Debbie Lesko. She introduced Senate Bill 1431, which would make all Arizona families eligible for Empowerment Scholarship Accounts. Essentially, these are vouchers that for most families would amount to about $5,000.

Public education is not a monopoly. It’s a responsibility [see the Arizona Constitution]. One that the Republicans who control the Legislature, like Lesko, have failed to honor. For years the Legislature refused to fund public schools to the level voters demanded in a statewide vote. For years Arizona teachers have had to live on salaries well below what is received by peers in other states and well below their value to our state.

The Empowerment Scholarship Account (ESA) program began as a way to help children with disabilities, foster kids and some others. That’s a good thing.

Now, however, it’s being used as a ruse by lawmakers to siphon cash out of public schools by offering the money to all families.

Why is that a scam and a rip-off?

After all, Gov. Doug Ducey, a supporter of ESAs has said, “What I want a parent to be able to do is send a child to the school of their choice.”

But could you?

Really good private schools are expensive.

If Lesko’s bill passes I wouldn’t be surprised to see a raft of second-rate “private” schools pop up, hoping to cash in on the state giveaway while offering a less than stellar education.

As I said, the really good schools are expensive. For example, Gov. Ducey sent his boys to Brophy College Preparatory. If Lesko’s bill passes any parent can get $5,000 in taxpayer money to send a kid there. Except Brophy (like most really good private schools) will set you back $15,000 a year or more. So unless you can afford the extra ten grand per year the voucher is worthless.

However, if you are already wealthy enough to afford such a school the state will give you $5,000 that you don’t need.

That’s not choice.

It’s more like theft.

It’s the Legislature acting — again — like Robin Hood in reverse. Stealing from the poor to give to the rich.

UPDATE: The Republic’s Laurie Roberts has more on the forces behind the desegregation funding bill SB 1174. Legislators aiming to CUT $211 million from Arizona’s schools?:

The Arizona Tax Research Association (ATRA) represents corporations. Its board is jam packed with representatives of the state’s biggest property taxpayers and chaired by a guy employed by the biggest of them all, Arizona Public Service.

Lesko’s bill would essentially turn automatic desegregation funding into an override, requiring voters to approve the tax in order to continue it for the next seven years.

As Lesko said, “If you’re confident that the voters support this, then you don’t have a problem.”

At least, not until those corporations invest big bucks into “dark money” campaigns to defeat them and boost their bottom lines. But I digress.

Besides ATRA, those on record as supporting the bill include the Arizona Retailers Association, the Apollo Group, CenturyLink, the East Valley Chambers of Commerce Alliance, Americans for Prosperity and the Arizona Free Enterprise Club, which would be the perfect dark-money group to run the anti-override campaigns.


Take Action:

Contact lawmakers sponsoring the ESA bills:

Sen. Debbie Lesko, R-Glendale: 602-926-5413, or email her here.

Sen. Steve Smith, R-Maricopa: 602-926-5685, or email him here.

Senate President Steve Yarbrough, R-Chandler: 602 926-5863, or email him here.

Senate Bill 1281, sponsored by Smith, requires the Department of Education to contract with an outside firm to help administer the ESA program, and makes various changes to the program. Read the bill summary here.

Senate Bill 1431, sponsored by Lesko, would make all Arizona students eligible for the ESA program by the 2020-2021 school year. Read the bill as introduced here.

Senate Bill 1174, sponsored by Lesko, would eliminate the automatic levy of property taxes for desegregation funding and replace it with a special vote for up to seven years of funding at the level at which desegregation dollars were set in 2009. Read the bill as introduced here.

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