Welcome to the voucher war

After both sides of the aisle celebrated passing a bipartisan budget deal last week, the rare bout of Capitol kumbaya quickly soured Friday amid rumors of a backroom deal to handle school voucher reform.

Reining in school vouchers, or Empowerment Scholarship Accounts, was one of the Democratic priorities everyone seemed resigned to leave unfinished for another year.

Then, for a few strange hours, it looked like voucher reform might happen.

On Friday, rumors started swirling of a grand bargain on vouchers that was being cut behind the scenes between Republican legislative leadership and the state’s largest teachers union, the Arizona Education Association.

Under the agreement, the union would kill the Protect Education Act — the citizen initiative it plans to send to the general election ballot that proposes more sweeping ESA reforms, including an annual income cap of $150,000 per family, which is an unacceptable restriction for Republicans.

In exchange, Republicans would put up a last-minute bill with some guardrails they could tolerate — banning luxury purchases, capping some unused account balances and giving the Department of Education more employees to monitor the billion-dollar program.

To sweeten the deal, Republicans wouldn’t pass two ballot referrals restricting teachers unions and limiting school districts’ spending.

The deal had advanced far enough that as a show of faith, the union agreed to lock away about 70 boxes of voter signatures it had collected for the Protect Education Act “in escrow,” while Fortify Arizona, the group behind a competing, more voucher-friendly measure, did the same.

Under the agreement, if lawmakers passed the grand bargain bill, the signatures would not be released until July 5 — three days after the deadline to submit signatures for the November ballot.

But after the plan leaked, school-choice advocates and ESA reform groups rallied their troops and killed it.

And when the deal collapsed, Republicans struck back.

Behind-the-scenes negotiations started a week ago, according to Grant Hanna, the House chief of staff who oversaw negotiations.

Republican leaders came to the negotiating table out of fear that if they didn't do something, voters would approve the hard-line anti-voucher initiative in November.

Montenegro told House Republican staff to “do whatever it took, even if it meant a deal with the (union), just to prevent that from going to the ballot.”

Hanna said staff reached a deal with the teachers union on Thursday. In addition to dropping the two referrals and passing some ESA guardrails into state law, the union wanted assurances that Fortify Arizona — the group behind a competing ESA reform initiative — would also stand down.

Initially, the union also wanted an extension of Prop 123, the roughly $300 million state land trust-funded education stream that expired last year, Hanna said. Extending it was a major priority for Gov. Katie Hobbs this year, but Republicans wouldn’t budge in negotiations, and the state is continuing to backfill the money with general fund dollars.

But when Fortify Arizona agreed to drop its competing citizens initiative, that was enough to seal the deal.

The Fortify measure launched just days after the union-backed Protect Education Act, and presented itself as a reasonable alternative that wouldn’t pose an “existential threat” to Arizona’s voucher program. That meant two initiatives were competing for a limited group of signature gatherers, and if both made the ballot, Arizona would see two dueling reform proposals that could confuse voters.

The negotiated bill — modest ESA restrictions Republicans could live with, in exchange for taking the ballot initiative off the table — went up for a Senate vote Friday evening. It was added through an amendment to a stalled bill from Republican Rep. Matt Gress, who, according to Hanna, was central to getting other Republican lawmakers on board.

Every Democratic senator voted against it, objecting both to the shady nature of the deal and to the idea of lawmakers cutting off citizen initiatives before voters could decide the future of ESA reform.

But Republicans hold the majority and could pass the measure without a single Democratic vote. Or, at least they could until Republican Sens. Warren Petersen and Jake Hoffman joined Democrats in voting against it.

Ultimately, Hanna blamed two very different groups for sinking what might have been a historic compromise.

After the teachers union had locked down some Democrats’ votes, public school advocacy group Save Our Schools Arizona rallied opposition, he said.

On the Republican side, the deal ran into trouble with the Free Enterprise Club, a hard-line conservative group aligned with the Freedom Caucus. The group blasted out an emergency action alert on Friday night urging supporters to pressure lawmakers to vote no.

Petersen, the Senate president, listened to his caucus by putting the bill up for a vote, even if he didn't ultimately support it, Hanna said. Petersen said he appreciated the effort, but wanted full consensus from the school-choice crowd before he could vote for the measure.

Hoffman, leader of the Arizona Freedom Caucus, told us in a text message he voted against the bill because “It was a bad deal negotiated by people with insufficient skill to pull off a gambit of this magnitude without it hurting the educational opportunities of Arizona children, and ultimately blowing up in the face of Republicans.”

Hanna said while Hoffman is entitled to his opinion, for those who worked on the compromise, “It wasn't about us, or any one personality. It was about saving school choice in Arizona. Nothing else mattered.”

After the deal collapsed, Republicans had one more card to play.

Republican leaders called a last-minute Senate Appropriations Committee meeting to introduce a new ballot referral, HCR2048, which would ban the state from confiscating ESA account funds from the children of military families.

Carefully tucked into the referral, which is now headed to voters in November, is a provision that would void any future voter-approved measure restricting ESA funding for military families. The teacher union-backed measure, which implements a $150,000 household income cap, would do that.

Hanna said the teachers union knew Republicans would refer two education measures to the ballot as a result of the failed ESA reform negotiation. And lawmakers made good on the promise when they passed:

What the union did not know is that Republicans had a backup plan ready the whole time: a last-minute ESA referral that, under the banner of protecting military-family vouchers, would undermine the union-backed citizen initiative. That strategy was the brainchild of the Goldwater Institute and Republican Rep. Michael Way, Hanna said.

Now, if the referral survives legal challenges, voters could approve what looks like a simple protection for military families, then also approve broader ESA guardrails — without realizing one could cancel out the other.

Still, many Republicans defended the last-minute ballot referral, which skipped the standard vetting process for legislation, as an urgent fix to protect military families’ ESA funding. Republican Sen. Wendy Rogers even gave an impassioned speech in her vote explanation for the measure.

But Democrats were outraged at the last-minute attempt to undermine the Protect Education Act.

The Arizona Education Association referred us to the statement they released after the failed deal, where the union wrote Republicans “are welcome” to put the union-limiting referral on the ballot, because “polling shows that we will beat it.”

The American Federation for Children, a group financially backing Fortify Arizona on the competing ESA citizens initiative, released its own statement blaming “attention-seeking political figures and radical (Save Our Schools Arizona) activists” for sinking the deal.

The competing citizens ballot measures were central to the deal: Fortify presented a softer alternative to the union-backed initiative, and Hanna said the union would not have negotiated unless Fortify and its funders agreed to stand down.

The union’s boxes of signatures for the Protect Education Act are set to be released this morning. But Fortify might not need its signatures back.

The plan, Hanna said, is that Fortify will drop its citizens initiative and instead put its money behind the Legislature’s military ESA referral.