Some states tighten ESA rules as others expand school choice

As some states expand educational freedom, others are adding new regulations to their education savings account programs, a recent analysis found.

A survey from school choice leader EdChoice found Arkansas, Utah and Oklahoma added restrictions to their ESAs in 2025, while Wyoming and South Carolina passed measures that increased education freedom.

Arkansas and Utah passed restrictions on how much of a student’s scholarship money can go to transportation and extracurricular activities. Arkansas set a 25% limit on extracurriculars and transportation, while Utah capped extracurriculars and “sharply limited the ability to pay for musical instruments and music education,” the analysis found.

Alex Wolf, policy analyst at EdChoice, said states may add limits because they are afraid of bad press.

“People have theories about tamping down any potential risk of the possibility of a bad news story about fraud by an ESA recipient,” Wolf told The Lion in an interview. “That’s what I was told by an Arkansas state legislator. That’s despite families who explained at the bill hearings how some of the unique uses benefited their children who had some special challenges.”

Bad press is part of what’s driving a current ballot petition in Arizona, where school choice opponents are seeking to cut the state’s ESA program, citing reports of fraud, including extravagant spending on travel and expensive clothing. Matt Beienburg, education policy director at the Goldwater Institute, said the fraud is already illegal, was caught by an audit and must be repaid by recipients.

A local news outlet “put out a story implying that there’s a 20% misspending rate in the state’s ESA program and trying to make this bombshell report,” he told The Lion. “They neglected to clarify they were looking only at purchases that were flagged through risk-based auditing.

“They want to paint this picture that there’s a vast and widespread problem here instead of saying if you make an inappropriate purchase you’re subject to an audit and enforcement.”

Wolf agreed that audits are designed to catch fraud, which is present in all government programs.

“If there’s a small handful of people who are truly abusing a program to enrich themselves, some people may need to be made an example of to deter others from committing fraud,” he said. “You can find pretty high-scale and widespread fraud in some government programs, but nothing close to that has been found in a state school choice program – and we certainly hope that it never does.”

Utah limited technology purchases such as computers to once every three years in its Utah Fits All program, which launched in 2024. Lawmakers also required the program’s financial administrator to submit monthly reports to the program’s manager.

Wolf said the reporting requirement came after the former program manager created a backlog of reimbursement requests, causing the Legislature to step in to demand faster reporting.

Oklahoma’s requirements included additional reporting by government agencies and private schools to provide student information to the state by mid-June.

Expanding access instead of restricting it

In states that expanded education freedom, South Carolina removed a 15,000-student cap on its ESA program and increased the income cap for families to participate.

Similarly, Wyoming expanded its program, renamed the Steamboat Legacy Scholarship Act, to be universally available – and raised the scholarship amount from $6,000 to $7,000. However, a legal challenge has prevented the program from launching. The case is currently being argued before the Wyoming Supreme Court.

Despite some states adding regulations, Wolf is hopeful school choice programs will remain free of unnecessary encumbrances. He said trusting parents is best, even when spending looks irregular.

“As long as whatever spending you were doing was still within the basic parameters of the ESA law, I don’t think it’s fraudulent conduct,” he said. “If 90% of the spending was on extracurriculars and things of that nature that were still allowable uses, you might have received a donated curriculum that enabled you to instruct your child in curricula basically for free, but you can still receive an education freedom account. We’re pretty skeptical of that type of approach, and that’s why we were pretty vocal about opposing” the Arkansas bill.

“From my experience advocating for and researching school choice, so many people are in it for the right reasons, and being able to administer a program effectively, being able to offer school choice options that can be paid for by an ESA, is beneficial,” he said.

Freedom can benefit more than just students and families.

“Sometimes it’s simply doing the same thing that they were doing before, but now families can pay for more music lessons because of the education savings account, so the music studio is making a little bit more money, and that’s been a positive for everybody involved,” Wolf added.