UPDATE: Arizona lawmakers are in a heated debate over a new proposal that could provide substantial cash-back tax credits to families opting out of public education. Just filed by Rep. Michele Peña, the bill, known as HB 4037, aims to expand school choice and is already igniting budget disputes and educational concerns across the state.
This urgent legislative move comes as Arizona continues its push for educational alternatives, with a separate ballot initiative also underway to impose stricter regulations on the existing Empowerment Scholarship Account program. Lawmakers are expected to review HB 4037 this session, making it a critical issue for families and educators alike.
What HB 4037 Proposes: The bill seeks to create a refundable “education opportunity” tax credit based on the state’s K-12 funding formula. Families could claim 80% of the base support level for children not enrolled in public schools or ESAs, and 40% for those attending public schools or ESAs for part of the year. If the credit exceeds a family’s tax liability, the state will issue a check for the difference.
Critics are sounding alarms about potential misuse of funds. “The bill has no guardrails to ensure accountability,” warns Joseph Palomino from the Arizona Center for Economic Progress. He argues that this could lead to a significant outflow of public dollars and exacerbate funding challenges for public schools already facing enrollment declines.
Meanwhile, a separate initiative led by the Arizona Education Association and Save Our Schools Arizona is pushing for limits on the ESA program, proposing an income cap that would exclude families earning more than approximately $150,000 annually. This initiative requires nearly 256,000 valid signatures to appear on the ballot in November, setting the stage for a potential clash over educational funding and access.
Critics of HB 4037 point to the rapid growth of ESA expenditures as evidence that the proposed tax credit could further strain Arizona’s budget. Recent analyses from the Common Sense Institute highlight rising costs associated with ESAs and the challenges in long-term financial planning for schools due to unspent balances.
What’s Next? HB 4037 is currently under review in appropriations committees, with a hearing scheduled for mid-February 2025. It must clear additional committee votes before it can reach the House or Senate floor. Advocacy groups on both sides are mobilizing support, signaling that this issue is poised to take center stage in Arizona’s educational budget negotiations.
As discussions intensify, the outcome of HB 4037 and the ballot initiative may significantly impact educational opportunities for Arizona families, making it a critical moment for parents, students, and educators across the state. Stay tuned for further updates as this story develops.
