Helping students succeed in school and life with education savings accounts

Editor’s note: Senior policy analyst Jonathan Butcher is co-editor and one of nearly two-dozen contributors to “The Not-So-Great-Society,” a new volume released today by The Heritage Foundation. Butcher’s chapter on education savings accounts, in which he explains the original Arizona model and describes how ESAs have evolved in large part due to upgrades in Florida and North Carolina, is reprinted here in its entirety.

Beta-propeller protein-associated neurodegeneration (BPAN) is a rare genetic disorder.[1] Caused by a mutation in a gene related to the body’s production of protein, researchers have documented less than 70 cases in medical research since it was first described in 2012.[2] The National Institutes of Health says that individuals with BPAN experience seizures and lose physical and intellectual functions over the years as the nervous system deteriorates.[3]

Libby Bradford, age 10, is one of these cases.

Libby is confined to a wheelchair. She cannot talk and must use a device that follows her eye movements in order to communicate. By her first birthday, Libby was visiting 11 therapists each week, says her mom, Liz.

As Libby grew and approached school age, Liz wanted to work with her own, traditional, school district. “We truly tried with a public school,” Liz says. “Toward the end of the time [she was in a district school], we did everything by the book,” she says. But it just was not working.[4]

Libby “is an extraordinarily complex kid,” Liz says. After trying different “workarounds,” as Liz describes them, and trying to talk with school staff about Libby’s needs, the situation had deteriorated too much for Liz. “I was in the classroom a fair amount and I found out more than I ever wanted to know about how it was run,” she says.

“It just got to the point that we had to get a lawyer because of safety and a complete lack of education,” Liz says. “By the end, she was throwing up on the way there. The anxiety was pretty intense. This was not a safe environment for her.” Fortunately, this story has a happy ending.

In North Carolina, students like Libby are eligible for education savings accounts, flexible spending accounts that allow parents to customize their child’s learning experience or choose a private school.[5] Liz applied for an account for Libby, and “she has done beautifully,” Liz says.

With an account, parents remove their child from the assigned government school, and the state deposits a portion of a child’s funds from the state education formula into a private account that parents use to buy education products and services for their child. Lawmakers in Arizona, Florida, Mississippi, Nevada, and Tennessee have enacted similar proposals.[6] Parents can buy textbooks and other learning materials, hire a personal tutor, find education therapies, pay private school tuition, and even pay for college classes or deposit account funds in college savings accounts—all with the taxpayer resources already designed for a child in state education budgets. Parents can save unused account funds from year to year.

Today, Libby attends a private school, and is the only student with BPAN there—or possibly anywhere, Liz says. Libby works with a speech therapist who modifies the curriculum so that Libby can keep up with her classmates, and this allows Libby to be in a mainstream classroom.

“The children have embraced her, the school has embraced her,” Liz says. “For the first time ever, she is being taught. She had been written off. She’s been given the opportunity to learn and absolutely embraced it.”

Education savings accounts and the reality of choice in education

Wealthy families have always had “school choice”—they can move to another school district or send their children to private schools. Over the past 30 years, some 7,000 public charter schools—schools with independent school boards that generally enroll any student who applies, subject to space—have opened around the country to give all students more choices in education, but especially those whose parents cannot find (read: afford) a new neighborhood in which to live.[7] More than half of all U.S. states have some form of K–12 private school voucher or other scholarship option—though these options are largely limited to children from low-income families or children with special needs.[8]

All of these learning opportunities bring hope to students who are struggling in an assigned district school. And, today, students have so many more learning opportunities than what they find in the four walls of a classroom. Education savings accounts create the possibility that a child could, for example, take classes at a local district school, visit a personal tutor, and enroll in online courses. Again, parents can even save money in their child’s account from one year to the next, helping to ease the pressure of saving for college.

The accounts are the nation’s newest form of parent choice in education. Yet in just the past eight years, even the ways families and students use the accounts to access education services has changed, as demonstrated by the experiences of students in Arizona and North Carolina.

Arizona. To protect taxpayers and students, accounts such as these must be designed carefully to make sure that resources are being used for student learning and that fraud or unauthorized spending is contained. In Arizona, the first state in which lawmakers enacted education savings accounts in 2011, the state issues prepaid Visa cards to account holders.[9] The state education department places restrictions on the cards, so that they cannot be used to pay travel agents or restaurants, for example.

The state department of education makes quarterly deposits to the savings accounts, and families must complete an expense report at the end of each fiscal quarter before the department makes the next deposit. This method has served account holders well, though, like anything else, it is not infallible. The department might not discover a payment for an unauthorized item or service until after the purchase has been made, which requires the agency to try to recover the funds.

Still, initial audits indicated that Arizona’s payment system was limiting the number of times parents—intentionally or unintentionally—misused the cards. In 2016, a state auditor report on the accounts said the agency established various processes to help ensure that program monies are spent appropriately, including preventing transactions at merchants whose goods and services are not related to education, such as fast food restaurants and lodging, and has worked with the Treasurer’s Office and bank to automatically deny these transactions.[10] Research finds that approximately 1 percent of account monies had been misspent at the time of the audit.[11]

North Carolina. North Carolina legislators and agency personnel learned from the experiences of Arizona account holders. State lawmakers enacted the accounts in 2017 and contracted with a company that specializes in facilitating payments among teachers, schools, and merchants to monitor parent transactions.[12] Instead of giving parents Visa cards and checking expense reports or asking parents to seek reimbursement, North Carolina’s contract with ClassWallet tasks the payment-processing company with applying its system to the new accounts.

ClassWallet already works with schools around the country and provides payment platforms that allow teachers and parents to use school resources to buy materials, such as books, from local vendors and online retailers, such as Amazon.[13] Teachers initiate a transaction by using ClassWallet’s online tool to make a purchase. ClassWallet’s records allow the company to confirm that the teacher is authorized to make the purchase, and that the chosen vendor is part of the ClassWallet payment system. Then, the payment processor transfers the money from the school’s account to the vendor without the teacher even seeing the money.

Likewise, with North Carolina’s education savings accounts, parents visit the company’s online portal, choose an item or service, and ClassWallet confirms that the purchaser and the vendor are in the system before transmitting funds. This three-tiered system of oversight—where ClassWallet sees the beginning, middle, and end of each purchase—helps to ward off misuse.

District schools have struggled for years to have such effective oversight. It is not uncommon for city or state inspector generals to discover financial fraud in a school district after millions have been stolen over the course of five years or more.[14] But even with Arizona’s original education savings account model, the department of education could identify misuse at the end of one fiscal quarter and suspend or even close an account—preventing ongoing loss of taxpayer money. North Carolina and ClassWallet’s system give parents the flexibility to pay for multiple products and services simultaneously while limiting the potential for misuse.

As this book went to press, Arizona officials signed a contract with ClassWallet to operate the payment functions of the state’s savings accounts, similar to North Carolina’s system. Arizona Superintendent of Public Instruction Kathy Hoffman said the new services would be “phased-in over the next several months.”[15]

Helping students from all walks of life

People are already using financial technology for their personal banking needs. Surveys have found a marked increase in the number of adults who use online banking systems and make purchases online. Between 2011 and 2015, the percent of individuals ages 18 to 29 who used mobile banking increased from 45 percent to 67 percent.[16] For adults ages 30 to 44, the use of mobile banking went from 29 percent to 58 percent, a key indicator demonstrating that this generation of parents is uniquely prepared to adapt to an online Web portal, or even a smart device, to make purchases for their child’s education.

Parents’ access to a wide variety of learning options that fit their child’s needs is just as important as oversight mechanisms. The education savings account “gives me the ability to find someone who might not be in [our insurance] network but who understands my child and provides services that she couldn’t get previously,” Liz says. “We have an occupational therapist who ‘gets’ Libby. A huge part of it is just that they know her and she is not a textbook case.”

Students from all walks of life are using the accounts today. In Arizona, the state Department of Education reports that while children with special needs constitute more than half of account holders, 6 percent of participants are students previously assigned to a failing public school, 13 percent are children from active-duty military families, 5 percent were adopted from the state foster care system, 6 percent are Native American students, and 10 percent are siblings of existing account holders.[17]

In North Carolina, where adopted children and students in military families are eligible along with children with special needs, more than 1,400 families applied in the first year for just 350 available accounts.[18]

For Liz and Libby, the accounts mean more than an education. Their lives and the lives of those around them are being changed through Libby’s courageous example—and through the creative, groundbreaking innovations stemming from the connection between education savings accounts and financial technology. “They don’t see the bright orange wheelchair or the device in front of her or the braces she has,” Liz says. “They truly do adore her.”

“The parents have come to me to say how thankful they are that she is in their class. How the children talk to her and understand her, they whisper in her ear, tell her stories. It’s just amazing to see,” Liz says. “It gives you a lot of hope for our future.”

[1]National Institutes of Health, U.S. National Library of Medicine, Genetics Home Reference, “Beta-Propeller Protein-Associated Neurodegeneration,” (accessed June 3, 2019).

[2]Kjersti Eline Stige et al., “Beta-Propeller Protein-Associated Neurodegeneration: A Case Report and Review of the Literature,” National Institutes of Health Clinical Case Reports, Vol. 6, No. 2 (February 2018), pp. 353–362, (accessed June 13, 2019).

[3]National Institutes of Health, U.S. National Library of Medicine, Genetics Home Reference, “Beta-Propeller Protein-Associated Neurodegeneration.”

[4]This story about Libby as told to the author by Libby’s mother.

[5]General Assembly of North Carolina, Session 2017, Senate Bill 257, (accessed June 3, 2019).

[6]Jonathan Butcher, “A Primer on Education Savings Accounts: Giving Every Child the Chance to Succeed,” Heritage Foundation Backgrounder No. 3245, September 15, 2017,

[7]Rebecca David and Kevin Hesla, “Estimated Public Charter School Enrollment, 2017–2018,” National Alliance for Public Charter Schools, March 2018, (accessed June 3, 2019).

[8]EdChoice, “The ABCs of School Choice,” January 16, 2019, (accessed June 3, 2019).

[9]Arizona Department of Education, “Empowerment Scholarship Account—Parent Handbook: A Guide to Utilizing Your Empowerment Scholarship Account,” for school year 2018–2019, (accessed June 3, 2019).

[10]Arizona Auditor General, Performance Audit Division, “Arizona Department of Education: Department Oversees Empowerment Scholarship Accounts Program Spending, But Should Strengthen Its Oversight and Continue to Improve Other Aspects of Program Administration,” Report No. 16-107, June 2016, (accessed June 3, 2019).

[11]Author calculations. See Jonathan Butcher, “My Turn: Voucher Fraud Is Terrible, But Put It Into Perspective,” Arizona Republic, July 18, 2017, (accessed June 3, 2019).

[12]North Carolina State Education Assistance Authority, “Education Savings Account: Information for Parents and School Administrators,” (accessed June 3, 2019).

[13]ClassWallet, “How It Works: Spend Management 2.0,” (accessed June 3, 2019).

[14]See, for example, Arizona Auditor General, “Santa Cruz County Superintendent: Theft of Public Monies,” November 25, 2005, (accessed June 3, 2019), and Doug Donovan and Liz Bowie, “Former Baltimore County Schools Leader Dallas Dance Pleads Guilty to Perjury,” The Baltimore Sun, March 8, 2018, (accessed June 3, 2019). For more, see Jonathan Butcher, “The Scourge of School-District Fraud,” National Affairs, No. 39 (Spring 2019), (accessed June 3, 2019).

[15]Arizona Department of Education, Office of Superintendent Kathy Hoffman, letter to Empowerment Scholarship Account families, July 25, 2019, (accessed August 21, 2019).

[16]Board of Governors of the Federal Reserve System, “Consumers and Mobile Financial Services 2016,” March 2016, (accessed June 3, 2019).

[17]E-mail correspondence with Karla Escobar, Arizona Department of Education, and Sarah Raybon, Arizona School Tuition Organization Association, April 11, 2019.

[18]North Carolina State Education Assistance Authority, “Education Savings Account Summary of Data,” February 12, 2019, (accessed June 3, 2019).

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Helping students succeed in school and life with education savings accounts