Critics warn of ‘money laundering’ as Iowa expands school voucher program

Iowans have a right to know how their taxpayer dollars are being used—but when it comes to the state’s private school voucher program, that’s not what’s happening. Iowa’s state auditor and others say the program has no oversight into how public funds are spent—and it was made that way on purpose.

Fun summer days in Iowa are just getting started for kids across the state, but the nights can be long—and not very restful—for the state auditor.

“I think one of the things that keeps me up at night is just the idea that they have literally written a law that says, ‘Hey, the auditor is not allowed to look here.’”

State Auditor Rob Sand is wide-eyed over legislation passed by Gov. Kim Reynolds and Republican lawmakers in 2023, having to do with “education savings accounts,” better known as school vouchers. Sand said the law allows other state agencies to deny the auditor’s office access to records.

“At the time, we called it the biggest pro-corruption law in the state of Iowa,” Sand recalled. “Nonpartisan, auditing-focused government watchdog entities around the country said that this was going to be something that could increase waste, fraud and abuse.”

“And here we are. Turns out they’re using the law exactly as we predicted.”

Sand said private schools receiving taxpayer funds through the voucher program are not subject to the same budgeting requirements, public meetings, or audit obligations as public schools. That means there’s no public tracking of how these dollars are spent once they reach private school coffers.

“Imagine if a law passed that said cops aren’t allowed to patrol on county roads in Iowa,” Sand said. “Where do you suppose people would go to do everything that they wanted to do that was illegal?”

Lack of transparency leads to fears of “money laundering”

In the state Senate, Sen. Sarah Trone Garriott (D-West Des Moines) hasn’t held back on her opposition to the governor’s creation of the voucher program to shift public funds to private schools.

She compares vouchers to a financial crime.

“I have referred to the private school voucher program in Iowa as money laundering,” she said. “Because what happens is, the money goes to the individual families—the parents of the students—and then they spend it on the private school tuition or a whole list of other kinds of programs and services that they could spend it on.”

“So that is why our state claims that we can’t hold them (the schools) accountable for standards—that we can’t require them to do any reporting to us—because the money’s actually going to the parents and not to the school.”

Iowa’s vouchers are parent-directed accounts. That means this fall, students going to private— usually religious—schools will each qualify for almost $8,000, to be spent on whatever the parent chooses.

“If they wanted to send their favorite teacher to Europe for the summer on an all-expenses-paid trip, that would be legal.” Sand added. “If a private school had a rule that every tax dollar they got went into their pocket as profit, that would be legal.”

“There’s no legal mechanism guaranteeing that we would find out.”

That money for each student still isn’t helping families who couldn’t afford private schools before the voucher program was implemented—and that was its supposed intent, Trone Garriott said.

The Iowa Department of Education hasn’t released any meaningful data on things like acceptance rates or student turnover. Without that information, people have no way of knowing if the program is actually providing new options for Iowa kids or if it’s just a giveaway for families who have already chosen private education and could afford it with or without the voucher.

Sen. Eric Giddens (D-Cedar Falls) said in response to the voucher law, Iowa’s private schools saw an opportunity and raised tuition to amounts exceeding the $7,638 per pupil tuition voucher allotment.

“In doing so, private schools largely priced out new families: according to Princeton University researchers, two-thirds of Iowa students receiving vouchers in 2023 were already attending private school and could afford tuition prior to receiving a voucher,” Giddens said in a statement.

The “jacked up” tuition prices, Trone Garriott said, aren’t helping families who couldn’t afford a private education before—“they still can’t afford it now.”

“So that’s a sign we’re just subsidizing private institutions—not offering new access to anybody, and not actually helping anybody who wanted that option to achieve it.”

Making sure taxpayer dollars are spent appropriately

In its first year, it cost Iowa taxpayers nearly $128 million to send a small percentage of the state’s students to private schools, Giddens said.

It’s expected that next school year, taxpayers will hand over more than $300 million directly to parents who choose to send their kids to private schools, the nonpartisan Legislative Services Agency estimates.

Giddens said the cost to Iowa’s taxpayers “will continue to balloon.” All Iowa families—regardless of how wealthy—will be eligible to receive vouchers to attend private schools that lack an obligation to admit students who want to enroll.

He and Trone Garriott said Iowa taxpayers have the right to judge if the voucher program is effectively serving the needs of Iowa children.

Related: Why the floodgates are open to help the wealthiest Iowans pay for their private education

“There are some in the Chamber and House who think private schools can take Iowa tax dollars and also say ‘no’ to some taxpayers,” Trone Garriott said. “When it comes to accountability, when it comes to transparency, when it comes to expectations—they can say ‘no, thanks.’”

“That’s true for private institutions, but institutions that take public money aren’t private anymore.”

Trone Garriott said taxpayer funding should never come without an expectation of accountability, but some of her colleagues think otherwise. “There’s this attitude I hear over and over again: ‘Well, private schools know what they’re doing so we’re just going to trust that they’re doing the right thing.’”

Sand said there are more than 100 people who work in his office and are focused on trying to be the taxpayers’ watchdogs.

“That’s our job and we want to do our job,” said Sand. ”I want to do the job that Iowans elected me to do.”