Report Finds Arizona School Spending Rises As Enrollment Falls

A new report from the Common Sense Institute (CSI) finds that while enrollment in district schools has declined more than 5% since the pandemic, taxpayer spending on school buildings, vehicles, and transportation has surged—leaving millions of square feet and thousands of bus seats empty across the state.

The analysis titled Echoes in the Halls: Arizona School Districts’ Growing Problem with Empty Buildings and Empty Buses, reveals widespread inefficiencies in Arizona’s public school system, driven by outdated funding formulas that reward asset accumulation even as student populations shift to charter, private, and home-school settings:

• Excess Facilities: Arizona’s district schools now operate with 78 million square feet of excess building space—enough room for 630,000 additional students. The market value of these unused assets is $12.2 billion, and taxpayers could potentially save $1 billion annually in maintenance and operation costs if divested or put to use.
• Enrollment Declines: Traditional district school enrollment has dropped by 47,500 students just since 2019, while nearly 40% of incoming kindergarteners are now choosing non-district schools. CSI estimates half of all Arizona K-12 students are in schools of choice.
• Rising Capital Spending: Despite fewer students, capital expenditures surged 67% to $8.9 billion over five years, adding 499 new buildings statewide.
• Transportation Inefficiencies: The number of eligible student bus riders has fallen 45%, yet districts purchased 3,098 new vehicles in the last five years and transportation spending rose to $561.2 million annually. Outdated formulas and priorities mean school transportation systems prioritize a rapidly shrinking demographic – urban students attending their assigned district school.
• Mismatch Between Performance and Resources: Low-performing schools operate at 19% of rated capacity, while high-performing schools are at 70%, highlighting systemic misalignment of resources and student needs.

“Arizona’s K-12 funding model was built for perpetual growth,” said Glenn Farley, CSI’s Director of Policy & Research. “But with declining enrollment and rising school choice, that model is leaving taxpayers with billions in underused assets and fewer dollars reaching students. Today, public district schools hold 148.6 million square feet of property—making them Arizona’s fifth-largest private landowner. That’s the equivalent of 2.6 NFL stadiums, or enough space for 2,246 homes. At the same time, many of the state’s high-performing district, charter, and private schools are starved for space. This misallocation represents not only a missed opportunity, but an urgent call to modernize how we allocate school facilities and transportation resources.”

CSI’s report recommends a statewide strategy to repurpose underused school assets, expand equitable access to transportation for all students, and update funding formulas to reflect today’s education landscape.

Policy Recommendations

Following the onset of the COVID-19 pandemic in 2020, Arizona’s school districts operated under unprecedented conditions:

• Enrollment sharply declined, with district schools losing 50,000 students (nearly 6% of total enrollment) between the 2019-20 and 2020-21 school years, and many remaining students learning remotely.
• Funding surged. Between 2020 and 2022, Arizona’s total K-12 funding increased by over $2.3 billion (a 20% rise), fueled by federal aid, which nearly doubled from $1.4 billion to $2.8 billion.

This disconnect between shrinking enrollment and increasing financial resources led to significant asset accumulation. Districts expanded their vehicle and building inventories, while the quality and cost of these assets rose sharply. However, this funding surge proved temporary, while enrollment losses have continued-and are projected to worsen.

Since 2022, district schools have lost an additional 2,000 students, and are projected to lose another 10,000 in the upcoming school year. Total K-12 funding peaked at $16.8 billion in 2024, a 40% increase relative to pre-pandemic levels. But growth is slowing, and one-time federal aid is receding. Meanwhile, expensive pandemic-era acquisitions now impose growing operational and maintenance burdens on districts, even as they go increasingly underused.

Local district governance has not effectively managed these challenges. Absent state-level intervention, there is a risk of growing inefficiencies, diminished service equity, and reduced flexibility for Arizona’s increasingly diverse and mobile student population.
To address these challenges, CSI Arizona recommends the following policy considerations:

• Establish and regularly update a public “Facilities Condition Index”, maintained by the School Facilities Division. The Index should objectively rate the quality of school buildings and other capital facilities and assets on a fixed scale, published by school site and school district and available over time. Policymakers have provided unprecedented levels of state and federal support for new capital assets and existing capital improvements over the past five years, but there is no publicly available, digestible data speaking to what taxpayers have bought with that investment.
• Require state oversight of severely underutilized facilities. While the average school district in Arizona has capacity for nearly 50% more students than are enrolled, many have capacity for four or five times as many students as are currently enrolled, according to building inventory data. Districts today spend $768 million annually on facilities and capital, up 67% in five years. A significant share of those costs are likely allocated to maintaining/improving unused and underused facilities. Lease agreements with growing schools, such as charter, private, micro-schools, or magnet-style schools operated by other districts, are a practical solution. But evidence suggests school districts are reluctant to support these kinds of relationships on their own. Childcare, early education centers, career and adult education programs, and similar are other logical uses of these facilities consistent with their design and purpose.
• Expand student eligibility for district transportation services. Right now, the state transportation funding formula only pays for eligible riders living and going to school within their assigned school district. As a result, districts grossly underutilize buses and vehicles – and costs continue to rise, since today’s buses are more efficient, higher quality, and significantly more expensive than before the pandemic. Nearly half and growing of students are ineligible bus riders today. This expanded definition would open up more transportation options to a complete unserved population of open-enrolled, Charter, and private school students, while significantly increasing the state transportation funding available to school districts. This model has been in place for decades in states like Pennsylvania.
• Modernize transportation and capital funding formulas to favor competition, innovation, and equity. While Arizona’s base per-pupil funding formula is equitable and competitive across all schools – district, charter, and private – this is not true of its capital or transportation funding systems. Capital and transportation funding is more-or-less exclusively available to district schools and district students (especially those attending at their assigned district school), and the allocation models are outdated, expensive, and inefficient. Smaller vehicles taking shorter routes are more efficient for smaller school sites (like charter and private schools), and come with much lower operating and acquisition costs.

Current law and process incentivizes districts to use resources – especially one-time federal and state resources – to acquire capital assets, including real estate and vehicles. Because of structural and political constraints, they then are reluctant to divest of these assets, even if enrollment realities make that optimal for taxpayers. The commonsense reforms proposed above would shift the responsibility from elected local school officials, and onto a state oversight body, while aligning incentives. Given the state designs funding formulas, oversees all publicly funded K-12 systems, and provides significant funding, it has the means to ensure responsible investment and stewardship of K-12 resources for long-term student benefit. Particularly in districts suffering from declining enrollment or low performance.

The Bottom Line

Arizona’s district school funding model, built for enrollment growth, is misaligned with the reality of declining enrollments and the post-pandemic popularity of school choice. Districts manage 12,439 buildings (78 million excess square feet, 67% capacity) and 7,660 vehicles, costing taxpayers $1.9 billion in capital and $561.2 million in transportation spending annually. Even between districts, resources are inefficiently allocated. Low-performing D/F-rated schools operate at 19% capacity, while A-rated schools reach 70%. Given 40% of incoming kindergarteners choosing charter or private schools (at 95% and 75% capacity), and half of all Arizona K-12 students are already in choice schools, the problem of district resource underutilization is going to keep getting worse.
The solution to-date has been more money, and more stuff. That isn’t working and it isn’t sustainable.