ESAs; expenditures; enrollment; limitations

SB1306 - 572R - I Ver

REFERENCE TITLE:
ESAs; expenditures; enrollment; limitations

State of Arizona

Senate

Fifty-seventh Legislature

Second Regular Session

2026

SB 1306

Introduced by

Senators
Miranda: Alston, Diaz, Epstein, Gabald�n, Gonzales, Hatathlie, Kuby, Sears

AN
ACT

amending sections 15-2401.01, 15-2402
and 15-2403, Arizona Revised Statutes; appropriating monies; relating to
ARizona empowerment scholarship accounts.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 15-2401.01, Arizona Revised
Statutes, is amended to read:

START_STATUTE
15-2401.01.

Arizona empowerment scholarship accounts expansion; eligibility;
definitions

A.
Notwithstanding section 15-2401,

beginning in the 2022-2023 school year,
in this
chapter, unless the context otherwise requires, "qualified student"
includes a resident of this state who
both

meets all of the following requirements
:

1. Is eligible to enroll in a public school in this
state in any of the following:

(a) A preschool program for children with
disabilities.

(b) A kindergarten program.

(c) Any of grades one through twelve.

2. Does not otherwise qualify for an Arizona
empowerment scholarship account pursuant to this chapter.

3. Beginning July 1, 2027, either:

(
a
) Attended a
public school in this state as a full-time student as defined in section 15-901
for the majority of the current or immediately preceding school year and
transferred from the public school under a contract to participate in an
Arizona empowerment scholarship account.

(
b
) Provides
satisfactory evidence that the resident's family does not have a high annual
income.�

B. For the purposes of this section:

1. "High annual income"
means $200,000, adjusted for inflation each year after fiscal year 2027-2028.

2. "Satisfactory
evidence" means one of the following:

(
a
) A copy of
the most recent state or federal income tax return for each of the resident's
parents whose parental rights have not been terminated. If a parent
who submits a copy of an income tax return pursuant to this subdivision is a
married person and the married couple files separate tax returns, a copy of the
most recent state or federal income tax return for the parent's spouse is
required.

(
b
) A copy of
the most recent state or federal income tax return for the resident's custodial
parent and the custodial parent's spouse, if applicable, and documentation
showing that the noncustodial parent does not provide child support or other
financial assistance to the noncustodial parent's household.

(
c
) A copy of
official documentation that shows the resident or the resident's custodial
parent is enrolled in a program that is administered by this state and that
requires program participants to have an income that is less than a high annual
income.

END_STATUTE

Sec. 2. Section 15-2402, Arizona Revised Statutes, is amended to read:

START_STATUTE
15-2402.

Arizona empowerment scholarship accounts; funds; transfer

A. Arizona empowerment scholarship accounts are
established to provide options for the education of students in this state.

B. To enroll a qualified student for an Arizona
empowerment scholarship account, the parent of the qualified student must sign
an agreement to do all of the following:

1. Use a
portion

majority
of the Arizona empowerment scholarship account monies
that are
allocated annually to provide an education for the
qualified student in at least the subjects of reading, grammar, mathematics,
social studies and science
, unless the Arizona empowerment
scholarship account is allocated monies according to a transfer schedule other
than quarterly transfers pursuant to section 15-2403, subsection G
.
� Monies that are used for additional services described in paragraph
4, subdivision (
c
) of this subsection are considered
monies that are used to provide an education for the qualified student in the
subjects required by this paragraph.

2. Not enroll the qualified student in a school
district or charter school and release the school district from all obligations
to educate the qualified student.� This paragraph does not:

(a) Relieve the school district or charter school
that the qualified student previously attended from the obligation to conduct
an evaluation pursuant to section 15-766.

(b) Require the qualified student to withdraw from a
school district or charter school before enrolling for an Arizona empowerment
scholarship account if the qualified student withdraws from the school district
or charter school before receiving any monies in the qualified student's
Arizona empowerment scholarship account.

(c) Prevent the qualified student from applying in
advance for an Arizona empowerment scholarship account to be funded beginning
the following school year, subject to section 15-2403, subsection H.

3. Not accept a scholarship from a school tuition
organization pursuant to title 43 concurrently with an Arizona empowerment
scholarship account for the qualified student in the same year a parent signs
the agreement pursuant to this section.

4. Use monies deposited in the qualified student's
Arizona empowerment scholarship account only for the following expenses of the
qualified student:

(a) Tuition or fees at a qualified school that
requires all teaching staff and
school
personnel who have
unsupervised contact with students to be fingerprinted.

(b) Textbooks required by a qualified school.

(c) If the qualified student meets any of the
criteria specified in section 15-2401, paragraph 7, subdivision (a), item
(i), (ii) or (iii) as determined by a school district or by an independent
third party pursuant to section 15-2403, subsection J, the qualified
student may use the following additional services:

(i) Educational therapies from a licensed or
accredited practitioner or provider, including and up to any amount not covered
by insurance if the expense is partially paid by a health insurance policy for
the qualified student.

(ii) A licensed or accredited paraprofessional or
educational aide.

(iii) Tuition for vocational and life skills
education approved by the department.

(iv) Associated goods and services that include
educational and psychological evaluations, assistive technology rentals and
braille translation goods and services approved by the department.

(d) Tutoring or teaching services provided by an
individual who is not subject to disciplinary action by the state board of
education for immoral or unprofessional conduct pursuant to section 15-505
or 15-534.04 or a facility that is accredited by a state, regional or
national accrediting organization. The department shall ensure
that
any individual who provides tutoring or teaching services
to one or more qualified students pursuant to this subdivision is not subject
to disciplinary action by the state board of education.� The department shall
also remove any individual who is subject to disciplinary action by the state
board of education from all platforms that the department provides to parents
and qualified students for the purchase of goods or educational services using
account monies.

(e) Curricula and supplementary materials.

(f) Tuition or fees for a nonpublic online learning
program.

(g) Fees for a nationally standardized norm-referenced
achievement test, an advanced placement examination or any exams related to
college or university admission.

(h) Tuition or fees at an eligible postsecondary
institution.

(i) Textbooks required by an eligible postsecondary
institution.

(j) Fees to manage the Arizona empowerment
scholarship account.

(k) Services provided by a public school, including
individual classes and extracurricular programs.

(l) Insurance or surety bond payments.

(m) Uniforms purchased from or through a qualified
school.

(n) If the qualified student meets the criteria
specified in section 15-2401, paragraph 7, subdivision (a), item (i),
(ii) or (iii) and if the qualified student is in the second year prior to the
final year of a contract executed pursuant to this article, costs associated
with an annual education plan conducted by an independent evaluation
team. The department shall prescribe minimum qualifications for
independent evaluation teams pursuant to this subdivision and factors that
teams must use to determine whether the qualified student shall be eligible to
continue to receive monies pursuant to this article through the school year in
which the qualified student reaches twenty-two years of
age. An independent evaluation team that provides an annual
education plan pursuant to this subdivision shall submit a written report that
summarizes the results of the evaluation to the parent of the qualified student
and to the department on or before July 31. The written report
submitted by the independent evaluation team is valid for one
year. If the department determines that the qualified student meets
the eligibility criteria prescribed in the annual education plan, the qualified
student is eligible to continue to receive monies pursuant to this article until
the qualified student reaches twenty-two years of age, subject to annual
review. A parent may appeal the department's decision pursuant to
title 41, chapter 6, article 10. As an addendum to a qualified
student's final-year contract, the department shall provide the following
written information to the parent of the qualified student:

(i) That the qualified student will not be eligible
to continue to receive monies pursuant to this article unless the results of an
annual education plan conducted pursuant to this subdivision demonstrate that
the qualified student meets the eligibility criteria prescribed in the annual
education plan.

(ii) That the parent is entitled to obtain an annual
education plan pursuant to this subdivision to determine whether the qualified
student meets the eligibility criteria prescribed in the annual education plan.

(iii) A list of independent evaluation teams that
meet the minimum qualifications prescribed by the department pursuant to this
subdivision.

(o) Public transportation services in this state,
including a commuter pass for the qualified student, or transportation network
services as defined in section 28-9551 between the qualified student's
residence and a qualified school in which the qualified student is enrolled.

(p) Computer hardware and technological devices
primarily used for an educational purpose. For the purposes of this
subdivision, "computer hardware and technological devices":

(i) Includes calculators, personal computers,
laptops, tablet devices, microscopes, telescopes and printers.

(ii) Does not include entertainment and other
primarily noneducational devices, including televisions, telephones, video game
consoles and accessories, and home theatre and audio equipment.

5. Not file an affidavit of intent to homeschool
pursuant to section 15-802, subsection B, paragraph 2 or 3.

6. Not use monies deposited in the qualified
student's account for any of the following:

(a) Computer hardware or other technological
devices, except as otherwise allowed under paragraph 4, subdivision (c) or (p)
of this subsection.

(b) Transportation of the pupil, except for
transportation services described in paragraph 4, subdivision (o) of this
subsection.

(
c
) Luxury
goods or noneducational goods or services, including household items, household
appliances, commercial appliances, machinery, household furniture, household
fixtures, home improvements, real estate improvements, jewelry, lingerie, admission
fees for water parks, admission fees for amusement parks, home swimming pools,
hot tubs, saunas, gift cards, gift certificates, goods or services that are
provided outside of this state, child care, dining, lodging, bounce houses,
water slides, motor vehicles or watercrafts.

(
d
) Goods or
services provided by a person who is a member of the family as defined in
section 15-1871 of the qualified student's parent.� For the purposes of
this subdivision, a good or service is provided by any person who either:

(
i
) Directly
sells the good or provides the service to the qualified student.

(
ii
) Owns or
controls the business that sells the good or provides the service to the
qualified student.

(
iii
) Employs a
member of the family as defined in section 15-1871 of the qualified
student's parent and the member of the family as defined in section 15-1871
sells the good or provides the service to the qualified student.

C. In exchange for the parent's agreement pursuant
to subsection B of this section, the department shall transfer from the monies
that would otherwise be allocated to a recipient's prior school district, or if
the child is currently eligible to attend a preschool program for children with
disabilities, a kindergarten program or any of grades one through twelve, the
monies that the department determines would otherwise be allocated to a
recipient's expected school district of attendance, to the treasurer for
deposit into an Arizona empowerment scholarship account an amount that is
equivalent to ninety percent of the sum of the base support level and
additional assistance prescribed in sections 15-185 and 15-943 for
that particular student if that student were attending a charter school.

D. The department of education empowerment
scholarship account fund is established consisting of monies appropriated by
the legislature. The department shall administer the
fund. Monies in the fund are subject to legislative
appropriation. Monies in the fund shall be used for the department's
costs in administering Arizona empowerment scholarship accounts under this
chapter. Monies in the fund are exempt from the provisions of
section 35-190 relating to lapsing of appropriations. If the
number of Arizona empowerment scholarship accounts significantly increases
after fiscal year 2020-2021, the department may request an increase in
the amount appropriated to the fund in any subsequent fiscal year in the budget
estimate submitted pursuant to section 35-113. The department
shall list monies in the fund as a separate line item in its budget estimate.

E. The state treasurer empowerment scholarship
account fund is established consisting of monies appropriated by the
legislature. The state treasurer shall administer the fund.� Monies
in the fund shall be used for the state treasurer's costs in administering the
Arizona empowerment scholarship accounts under this chapter. If the
number of Arizona empowerment scholarship accounts significantly increases
after fiscal year 2020-2021, the state treasurer may request an increase
in the amount appropriated to the fund in any subsequent fiscal year in the
budget estimate submitted pursuant to section 35-113. Monies
in the fund are subject to legislative appropriation.� Monies in the fund are
exempt from the provisions of section 35-190 relating to lapsing of
appropriations. The state treasurer shall list monies in the fund as
a separate line item in its budget estimate.

F. A parent must renew the qualified student's
Arizona empowerment scholarship account on an annual basis. The
department of education shall verify that the parent's child is a qualified
student as defined in section 15-2401 or 15-2401.01 in the year for
which the parent seeks to renew the Arizona empowerment scholarship account.� This
subsection does not require the department to annually verify the child's
disability for the purpose of section 15-2401, paragraph 7, subdivision (a),
item (i), (ii) or (iii), if applicable.

G. Notwithstanding any changes to the student's
multidisciplinary evaluation team plan, a student who has previously qualified
for an Arizona empowerment scholarship account remains eligible to apply for
renewal until the student finishes high school.

H. If a parent does not renew the qualified
student's Arizona empowerment scholarship account for a period of
three

one
academic
years
year
, the department shall notify the parent that the
qualified student's account will be closed in sixty calendar
days. The notification must be sent
through
by
certified mail, email and telephone, if applicable.� The
parent has sixty calendar days to renew the qualified student's Arizona
empowerment scholarship account. If the parent chooses not to renew
or does not respond
in
within
sixty
calendar days, the department shall close the account and any remaining monies
shall be returned to
the
this
state.

I. A signed agreement under this section constitutes
school attendance required by section 15-802.

J. A qualified school or a provider of services
purchased pursuant to subsection B, paragraph 4 of this section may not share,
refund or rebate any Arizona empowerment scholarship account monies with the
parent or qualified student in any manner.

K. Notwithstanding subsection H of this section, on
the qualified student's
graduation from a postsecondary
institution or after any period of four consecutive years after
high
school graduation
in which the student is not enrolled in an
eligible postsecondary institution, but not before this time as long as the
account holder continues using a portion of account monies for allowable
expenses each year and is in good standing
, the qualified student's
Arizona empowerment scholarship account shall be closed and any remaining
monies shall be returned to the state.

L. Monies received pursuant to this article do not
constitute taxable income to the parent of the qualified student.

M. If a qualified student meets any
criterion specified in section 15-2401, paragraph 7, subdivision (
a
), item (
i
), (
ii
) or (
iii
), All unexpended and unencumbered monies remaining in the qualified
student's Arizona empowerment scholarship account from the immediately
PRECEDING school year on September 30 are transferred to the classroom site
fund established by section 15-977 on October 1 of each year.� for all
other qualified students, All unexpended and unencumbered monies remaining in
the Arizona empowerment scholarship account from the immediately PRECEDING
school year on June 30 are transferred to the classroom site fund established
by section 15-977 on September 1 of each year.

END_STATUTE

Sec. 3. Section 15-2403, Arizona Revised
Statutes, is amended to read:

START_STATUTE
15-2403.

Arizona empowerment scholarship accounts; administration;
appeals; risk-based audits; rules; policy handbook

A. The treasurer may contract with private financial
management firms to manage Arizona empowerment scholarship accounts.

B. The department shall conduct or contract for
annual audits of Arizona empowerment scholarship accounts to ensure compliance
with section 15-2402, subsection B, paragraph 4. The
department shall also conduct or contract for random, quarterly and annual
audits of Arizona empowerment scholarship accounts as needed to ensure
compliance with section 15-2402, subsection B,
paragraph 4. The department, in consultation with the office of
the auditor general, shall develop risk-based auditing procedures for audits
conducted pursuant to this subsection.

C. The department shall annually review a sample of
Arizona empowerment scholarship accounts, selected at random, to determine
whether the parent or qualified student is in compliance with the terms of the
contract, applicable laws, rules and orders relating to the Arizona empowerment
scholarship accounts program. The Arizona empowerment scholarship
account of a parent or qualified student who is in good standing may be
randomly selected pursuant to this subsection only one time during any five-year
period. The department may remove any parent or qualified student
from eligibility for an Arizona empowerment scholarship account if the parent
or qualified student fails to comply with the terms of the contract or
applicable laws, rules or orders or knowingly misuses monies or knowingly fails
to comply with the terms of the contract with intent to defraud and shall
notify the treasurer. The department shall notify the treasurer to
suspend the account of a parent or qualified student and shall notify the parent
or qualified student in writing that the account has been suspended and that no
further transactions will be allowed or disbursements made. The
notification shall specify the reason for the suspension and state that the
parent or qualified student has fifteen days, not including weekends, to
respond and take corrective action. If the parent or qualified
student refuses or fails to contact the department, furnish any information or
make any report that may be required for reinstatement within the fifteen-day
period, the department may remove the parent or qualified student pursuant to
this subsection.

D. A parent may appeal to the state board of
education any administrative decision the department makes pursuant to this
article, including determinations of allowable expenses, removal from the
program or enrollment eligibility. The department shall notify the
parent in writing that the parent may appeal any administrative decision under
this article and the process by which the parent may appeal at the same time
the department notifies the parent of an administrative decision under this
article. The state board of education shall establish an appeals
process, and the department shall post this information on the department's
website in the same location as the policy handbook developed pursuant to
subsection K of this section.

E. A parent may represent himself or herself or
designate a representative, not necessarily an attorney, before any appeals
hearing held pursuant to this section. Any designated representative
who is not an attorney admitted to practice may not charge for any services
rendered in connection with the hearing. The fact that a
representative participated in the hearing or assisted the account holder is
not grounds for reversing any administrative decision or order if the evidence
supporting the decision or order is substantial, reliable and probative.

F. The state board of education may refer cases of
substantial misuse of monies to the attorney general for the purpose of
collection or for the purpose of a criminal investigation if the state board of
education obtains evidence of fraudulent use of an account.

G. The department shall make quarterly transfers of
the amount calculated pursuant to section 15-2402, subsection C to the
treasurer for deposit in the Arizona empowerment scholarship account of each
qualified student, except the department may make transfers according to
another transfer schedule if the department determines a transfer schedule other
than quarterly transfers is necessary to operate the Arizona empowerment
scholarship account.

H. The department
shall accept applications between July 1 and June 30 of each
year. The department shall issue an award letter to eligible
applicants within thirty days after receipt of a completed application and all
required documentation. If an eligible applicant completes an
application in advance for an Arizona empowerment scholarship account to be
funded beginning on a later date, the department may enroll the eligible
applicant on the later date, except that the department may not enroll the applicant
more than two fiscal quarters after the fiscal quarter in which the application
is completed or on a date that is after March 31 and before July
1. If an eligible applicant completes an application after March 31
and before July 1, the department shall enroll the applicant on or after July
1. The department shall enroll all other eligible applicants when
the department issues an award letter pursuant to this subsection. This
subsection does not allow a qualified student to receive monies in an Arizona
empowerment scholarship account while the qualified student is enrolled in a
school district or charter school.� On or before September 1 and November 1 of
each year, the department shall furnish to the joint legislative budget
committee and the governor's office of strategic planning and budgeting an
estimate of the amount required to fund Arizona empowerment scholarship
accounts for the following fiscal year. The department shall include
in its budget request for the following fiscal year the amount estimated
pursuant to section 15-2402, subsection C for each qualified student.

I. The state board of education may adopt rules and
policies necessary to administer Arizona empowerment scholarship accounts,
including rules and policies:

1. For establishing an appeals process pursuant to
subsection D of this section.

2. For conducting or contracting for examinations of
the use of account monies, consistent with subsection L of this section.

3. For conducting or contracting for random,
quarterly and annual reviews of accounts.

4. For establishing or contracting for the
establishment of an online anonymous fraud reporting service.

5. For establishing an anonymous telephone hotline
for fraud reporting.

6. That require a surety bond or insurance for
account holders.

J. The department shall contract with an independent
third party for the purposes of determining whether a qualified student is
eligible to receive educational therapies or services pursuant to section 15-2402,
subsection B, paragraph 4, subdivision (c).� If during any period on or after
January 1, 2023 the department fails to ensure that a contract with an
independent third party is in effect, during that period:

1. The county school superintendent of each county
may approve a list of independent third parties within the county whose
evaluation may be used to determine whether a qualified student who resides
within the county is eligible to receive educational therapies or services
pursuant to section 15-2402, subsection B, paragraph 4, subdivision (c).

2. If the county school superintendent of a county
does not provide a list of approved independent third parties within ninety
days after the beginning of any period during which the department does not
have a contract with an independent third party in effect as described in this
subsection, the parent of a qualified student who resides within the county has
the right to obtain an independent educational evaluation from a qualified
examiner to determine whether the qualified student is eligible to receive
educational therapies or services pursuant to section 15-2402,
subsection B, paragraph 4, subdivision (c). The expense for an
educational evaluation undertaken pursuant to this paragraph shall be provided
by the school district within which the qualified student resides and that
serves the grade level of the qualified student. For the purposes of
this paragraph, "qualified examiner" means a licensed physician,
psychiatrist or psychologist.

K. On or before July 1 of each year, the department
shall develop an applicant and participant handbook that includes information
relating to policies and processes of Arizona empowerment scholarship
accounts.� The policy handbook shall comply with the rules adopted by the state
board of education pursuant to this section. The department shall
post the handbook on the department's website.

L. The department shall:

1. Establish and maintain an online database of
allowable and disallowed categories of expenses and provide a link to the
database on the department's website.

2. Allow the use of account monies to reimburse the
parent of a qualified student or a qualified student for the purchase of a good
or educational service that is an allowable expense pursuant to section 15-2402,
subsection B.

3. Require the parent of each
qualified student to submit quarterly records of all expenditures of Arizona
empowerment scholarship account monies to the department in a form and manner
prescribed by the department.

4. Review the record for each
expenditure submitted pursuant to paragraph 3 of this subsection and determine
whether the expenditure is an allowable expense pursuant to section 15-2402.

M. Except for cases in which the attorney general
determines that a parent or account holder has committed fraud, any expenditure
from an Arizona empowerment scholarship account for a purchase that the
department determines is not an allowable expense pursuant to section 15-2402
and that is subsequently repaid by the parent or account holder shall be
credited back to the Arizona empowerment scholarship account balance within
thirty days after the receipt of payment.

N. If, in response to an appeal of an administrative
decision made by the department, the state board of education issues a stay of
an Arizona empowerment scholarship account suspension pursuant to rules adopted
by the board, the department may not withhold funding or contract renewal for
the account holder because of the appealed administrative decision during the
stay unless directed by the board to do so.
END_STATUTE

Sec. 4.
Transfer

On October 1, 2026 or the effective
date of this act, whichever occurs later, all unexpended and unencumbered
monies remaining in a qualified student's Arizona empowerment scholarship
account that were deposited by the office of the state treasurer pursuant to
section 15-2402, subsection C, Arizona Revised Statutes, before fiscal
year 2026-2027 are transferred to the classroom site fund established by
section 15-977, Arizona Revised Statutes.