Unused ESA Funds: Rollover, Forfeiture, and Clawback

Florida will refuse to put money into an account that already holds $24,000. Not as a penalty, and not after a hearing. The statute simply forbids the deposit: an eligible nonprofit scholarship-funding organization "may not transfer any funds to an account of a student determined eligible pursuant to paragraph (3)(a) which has a balance in excess of $24,000." A family that spends lightly for several years on a Family Empowerment Scholarship can underspend its way into a skipped transfer, and the notice it gets is a number on a dashboard that stopped moving. Spending nothing at all is a different and worse problem, covered further down: in Florida an account that goes fully unused can be closed outright rather than merely skipped.

That ceiling is one of four completely separate rules people reach for when they ask what happens to leftover ESA money. The four live in four different parts of a program's rulebook and they answer four different questions. Does the balance survive the end of the school year. Does a large balance block the next deposit. What clock closes an account that sits still. And can the program come back for money that already left the account.

Exiting the program is not a fifth rule. It is the event that fires three of the four at once, which is why the answers traded in parent groups contradict each other so often. Somebody left in March and kept spending for two months. Somebody left in October and the district got the balance. Both are true, in different states.

Rules below are the 2026-27 program year. Everything is read out of statutes, administrative rules and program handbooks as I opened them on September 29, 2026, with each document's own revision stamp printed where it carries one. Five programs are worked through here — Arizona, Florida, Iowa, Texas and West Virginia — because they answer the same question five incompatible ways; none of it transfers to a sixth state. Two gaps are flagged rather than papered over: the Arizona Department of Education's current parent handbook returned an access error to every method I tried, so the Arizona material comes from the statute and the State Board's administrative rules as approved January 23, 2023, and the West Virginia Code site redirected my requests to an unrelated page, so West Virginia comes from the program handbook and the statute sections that handbook cites by number. I hold no license and no standing with any of these offices, and this is not legal advice.

Rollover, caps, dormancy, clawback: four rules in four places

Before any state detail, it is worth separating the four, because families routinely get a correct answer to a question they were not asking.

A program can be generous on the first and severe on the fourth. Arizona is both. It puts no annual sweep in its statute at all, and it also runs the most detailed repayment machinery of the five.

Every program here lets a balance cross the year end, and every one attaches a string

The rollover question has the same answer in all five programs, which is what makes it the least useful thing to know.

Read the conditional clauses rather than the yes. Iowa's rollover runs only through fiscal years "during which the pupil participates." Texas carries money forward "unless another provision ... mandates the closure." West Virginia's survives "so long as the Student remains eligible for the Program for consecutive school years." None of the three promises the money is yours. They promise it is not swept on a calendar date, and then route every other way of losing it through a different sentence.

The practical version: your balance is not at risk from the end of the school year. It is at risk from the paperwork proving you are still in the program.

The deposit stops before the balance does

Florida is the only one of the five that caps a balance, and it caps it three times at two different numbers.

• $24,000 for a Family Empowerment Scholarship account funded under paragraph (3)(a), the general eligibility track, at § 1002.394(12)(a)4.
• $50,000 for an account funded under the students-with-disabilities paragraph, at § 1002.394(12)(b)11.
• $24,000 again in the Florida Tax Credit Scholarship program — the program that funds Personalized Education Program students — at § 1002.395(11)(e).

All three are written as a prohibition on the organization, not a penalty on the family. The organization may not transfer. Nothing in those sentences forfeits accumulated money, and nothing in them stops you from spending back down below the line and resuming deposits. But nothing requires anyone to tell you either, and the family that has been deliberately saving toward one large expense — a year of private high school tuition, an assistive-technology package — is exactly the family that hits a ceiling by doing what it planned.

Florida's payment cadence matters here too. Section 1002.395(11)(d) requires payment "no less frequently than on a quarterly basis," so a balance that crosses the line in February affects a spring transfer rather than an annual lump sum you could see coming in July.

Arizona, Iowa, Texas and West Virginia had no comparable transfer ceiling in the documents I read on the date above. That is a bounded statement about five documents, not a guarantee about the programs.

Dormancy clocks: two fiscal years in Florida, three academic years in Arizona

An account can close because nothing happened in it. This is the failure mode that catches families who enrolled defensively, took the award as insurance, and never actually spent it.

Florida closes on inactivity, and the reversion is automatic. Both scholarship statutes list "two consecutive fiscal years in which an account has been inactive" as a trigger requiring that the account "must be closed and any remaining funds shall revert" — to the state under § 1002.394(5)(a)2.a(II) and (5)(b)3.c, and to the scholarship-funding organization under § 1002.395(11)(h)1.b. The tax-credit version then tells the organization what to do with the returned money: it "must be separately accounted for and used to fund scholarships in the fiscal year the reversion occurs," with anything left carried to the following year and fully expended there. By July 1 each year the organization has to report to the Department of Education how many accounts closed and how much reverted.

One definitional wrinkle sits underneath all of that, and it is the reason to ask rather than assume if an account of yours has gone quiet. Section 1002.394 defines the term it is using: "Inactive" means "that no eligible expenditures have been made from an account funded pursuant to paragraph (12)(b)" — and (12)(b) is the funding paragraph for disability accounts, the (3)(b) track. The inactivity trigger is nevertheless written into the closure list for the other track as well, at (5)(a)2.a(II). So the defined term is narrower than the place it gets applied. Read plainly, a fully unused account is at risk on either track; read strictly, the definition was drafted around one of them. That is a question for the scholarship-funding organization in writing, not one to settle from the statute alone.

Arizona runs a slower clock in two stages, and the first stage is gentler than families fear. Under A.A.C. R7-2-1506(D), if a parent does not submit the annual renewal contract the Department "shall temporarily close the account and cease funding" — and then, in the same sentence, "during the temporary closure, funding shall remain in the account until the parent signs the appropriate renewal contract." The money waits. Only after three academic years without a renewal contract does R7-2-1506(E) require notice by certified mail, email and telephone, a 60-day window to renew, and then closure with remaining monies returned to the state general fund. The statute says the same at § 15-2402(H).

Arizona also makes dormancy something you have to declare. R7-2-1508(K): "If a parent does not make any expenses in a quarter, the parent shall submit attest to that fact in a format provided by the Department." An empty quarter is not silence there. It is a filing.

West Virginia uses no inactivity clock. It uses a renewal window, and missing it costs the balance rather than only the next year. The handbook is blunt: a student who does not file an Annual Continued Participation Confirmation by the deadline "but later wishes to participate in the Program will lose any carryover funds remaining in their account and be required to apply for the Hope Scholarship Program as a new Student under the eligibility requirements for new students at the time of application." For 2026-27 that window ran January 5 through June 15, 2026, and confirmations for that year "will not be accepted after the June 15, 2026 deadline." The edition I read, dated June 25, 2026, does not publish the 2027-28 window; it does say new applications for 2027-28 open March 1, 2027.

Iowa and Texas have no dormancy trigger in the sections I read. Closure there is driven by ineligibility, not by an idle account.

West Virginia settles next year's balance in June, and pays the award in four pieces

Three West Virginia dates sit within nine days of each other and do different jobs, which is how one gets missed.

• June 8 is the deadline for the year-end academic or attendance reporting the county board of education must receive for the student to meet the continued-participation requirements in state law.
• June 15 was the last day, for 2026-27, to file the Annual Continued Participation Confirmation in the portal.
• June 16 is the date twelfth-grade accounts "will automatically be frozen and closed" every year, unless a continued participation confirmation is submitted indicating the student has not yet completed a secondary school program. Board staff may ask for documentation of why more time is needed, and the parent agreement adds that an account holder "may not unnecessarily delay awarding a Student a diploma for the purpose of utilizing Hope Scholarship funds to pay for the student's college-level education."

The 2026-27 full award is $5,435.62, set to the statewide average per-pupil public school funding from the prior year, with up to five percent retained by the Board to administer the program. Beginning with 2026-27 the handbook describes quarterly distribution on statutory dates of August 15, October 15, January 15 and April 15, conditioned on the application being in Approved status and a valid Notice of Intent being on file with the county by 4:00 pm on the funding cutoff date.

One inconsistency inside that same edition is worth knowing before you plan around a deposit: the proration discussion a few pages earlier still refers to "one of the two primary funding dates (August 15 and January 15)." Two passages, one handbook, two schedules. If a deposit date decides something for you — whether a tuition installment clears, whether you leave before or after a transfer — ask the Board in writing rather than picking the passage you prefer.

Graduation closes the account in Iowa and opens a college window in Arizona

This is where the five programs stop resembling each other, and it is the largest single source of advice that is correct in one state and wrong in the next.

Two consequences follow. The Arizona and Florida-UA postsecondary windows are conditional on annual use, so an account left untouched after graduation is running down its closure clock rather than banking money. And the Arizona condition — "continues using a portion of account monies for allowable expenses each year and is in good standing" — appears identically in the statute and in R7-2-1506(F), which ties the postsecondary window to the good-standing finding. A repayment dispute during senior year is therefore not only about the disputed receipt.

Leaving mid-year: the later tranches never arrive, and one state hands the balance to the district

Almost every program pays in pieces, so the first thing an exit does is cancel deposits that were never yours yet.

• Texas transfers at least one quarter of the annual amount by July 1, one half by October 1, and the remainder by April 1, under § 29.362(a). A child who leaves in November has had half the award transferred and will not see the April tranche.
• West Virginia funds on August 15, October 15, January 15 and April 15 for 2026-27.
• Arizona makes quarterly transfers under § 15-2403(G), with the Department allowed to use another schedule if it determines one is necessary.

Then the balance already sitting in the account gets routed, and the routing is not the same anywhere.

• West Virginia splits on a date. If an account closes because the student is returning to public school after October 1 of that academic year, then upon request of the county board of education the funds "will be transferred to the county where the public school is located in order to fund the Student's education for the rest of the school year." Before October 1 the general rule applies and remaining funds go back to the State. The asymmetry appears twice in the handbook, under Funds from Closed Accounts and again under Termination of Program Participation.
• Texas sends the money back to the program fund rather than to general revenue, under § 29.362(f), and separately pays the receiving district. Under § 29.3611 a district or charter that enrolls a child who ceases program participation mid-year is entitled to an extra allotment equal to the basic allotment multiplied by 0.1 for that child's average daily attendance at the district or school "for that school year."
• Florida closes an account after a student "remains unenrolled in an eligible private school for 30 days while receiving a scholarship that requires full-time enrollment," § 1002.394(5)(a)2.a(III), with the same clause at § 1002.395(11)(h)1.c. Enrolling full time in a public school ends the scholarship in its own right.

The wind-down clause is the part to read twice, because it is what lets a family finish spending after deciding to leave. Florida says reimbursements "may continue until the account balance is expended or remaining funds have reverted to the state." Texas closes the account only once the child is ineligible and payments for allowed expenses "have been completed." Both windows are measured by claims processing rather than by a date, which makes filing the last claims promptly the whole difference between spending a balance and donating it.

If the exit under discussion is a return to a zoned public school rather than a move out of state, the enrollment half of that decision has its own forms and its own timing traps: what an ESA does to a public school seat, and what it takes to get one back.

Clawback reaches money that already left the account

The three questions above are about a balance. This one is not. It is about a purchase you made, that the program paid for, that somebody later decides was not allowable.

Arizona has the most fully written procedure of the five, in A.A.C. R7-2-1509, and it is worth following in sequence because every step carries a number.

1. On a finding that a parent knowingly misused funds, the Department suspends the account and sends notice including "a detailed description of the disallowed expense."
2. The parent has 15 days, not including weekends, either to present documentation that the expense was allowable or that the parent was a victim of identity theft or fraud, or to agree to repay the amount.
3. The Department reviews that documentation within five days of receipt. If it holds up, the suspension lifts, the account is reinstated, and withheld disbursements are made.
4. If it does not hold up, the amount must be repaid and further disbursements are withheld until it is. The Department may agree to a gradual repayment plan and must reinstate funding once repayment has begun.
5. Reinstatement after payment runs on the payment instrument: within one day for a cashier's check or money order, within seven days for a personal check.
6. Then the part almost nobody expects. Under § 15-2403(M) and R7-2-1509(E), except where the attorney general finds fraud, a repaid ineligible expenditure "shall be credited back to the Arizona Empowerment Scholarship Account balance within thirty days after the receipt of payment." The money returns to the child's account. Arizona's clawback is a correction, not a confiscation.

Arizona also writes a limit on the reach. R7-2-1507(C): "The Department shall not request repayment for an expense it has approved for a specific ESA," alongside a requirement to treat similar expenditures by similarly situated account holders the same way. That sentence is the reason a pre-approval is worth its delay, and it is the sentence to quote if an approved category gets re-litigated a year later. If you are in that argument now, the resubmission mechanics are separate work: what to fix on a rejected reimbursement and how to resubmit.

Texas recovers to the fund instead of the account, and can reach past the parent. Section 29.364(d) lets the comptroller recover money used for expenses not allowed under § 29.359, money spent for a child who was not eligible at the time, or money that went to a provider or vendor not approved at the time — "from the participating parent or the education service provider or vendor of educational products that received the money," along with "any interest or other additions received related to the money." Recovered money is deposited into the program fund. The suspension track before that runs on a 30-day response window under § 29.364(b), after which the comptroller orders closure, temporary reinstatement conditioned on a specified action, or full reinstatement.

Iowa goes straight to the criminal frame. Under § 257.11B(7) a person who makes a false claim, or knowingly takes a payment without being legally entitled to it, "is guilty of a fraudulent practice under chapter 714"; the claim is disallowed, the account is closed, remaining money goes to the general fund, disbursed amounts are recovered from the parent "including by initiating legal proceedings to recover such amounts, if necessary," and the parent "is prohibited from participating in the education savings account program in the future." Iowa's state board also refers substantial misuse to the attorney general for collection or criminal investigation under § 257.11B(9)(b) — the same referral Arizona has at § 15-2403(F) and Texas makes to a county or district attorney at § 29.366.

Florida attaches forfeiture to a procedural duty rather than to the purchase. Under § 1002.394(10)(a)8 a parent must approve each payment before funds are transferred, and may not name anyone connected to the private school as attorney in fact to do it: "A participant who fails to comply with this paragraph forfeits the scholarship." Separately, accepting "any payment, refund, or rebate, in any manner" from a provider is listed as fraud or abuse that closes the account and reverts the balance.

West Virginia puts repayment exposure somewhere unexpected — quantity. The handbook's technology policy says attempts to buy multiples of headsets, stylus or pointer devices, or keyboards in a single order will be denied, and that "excessive quantities may be unallowable and subject to repayment." The parent agreement goes further on consequences: failure to comply with the Act, the Rules or the agreement, "or commission of any crime involving Hope Scholarship funds, may result in permanent disqualification from Program participation."

Where the line between allowable and not sits in the first place is its own long argument, and it moves between program years: where the approved-expense lists stop giving answers.

The Florida line that surprises people: money moved into a 529 can still revert

Florida lets a disability-account family park scholarship money in a college savings vehicle. Section 1002.394(4)(b)6 allows contributions to the Stanley G. Tate Florida Prepaid College Program or the Florida College Savings Program "for the benefit of the eligible student" as an authorized use of FES-UA funds.

Then § 1002.394(5)(b)3 closes the loop, and it reads very differently once the contribution has been made. On closure, the funds that revert to the state include "but not limited to, contributions made to the Stanley G. Tate Florida Prepaid College Program or earnings from or contributions made to the Florida College Savings Program using program funds pursuant to subparagraph (4)(b)6." Moving the money into a prepaid plan does not take it outside the reversion. The earnings are named as well.

The triggers are the ones listed earlier: a fraud or abuse revocation, three consecutive years after high school completion with no eligible postsecondary enrollment, or two consecutive fiscal years of an inactive account. A family that contributes to Prepaid and then lets the ESA go quiet for two years has not saved for college; it has scheduled a transfer back to the state. That is a different question from whether a privately funded 529 can pay K-12 bills, which changed at the federal level in 2025: what the K-12 expansion allows, and where state law has not followed.

A balance is not a refund, and losing it is not a deduction

Two rules explain why "just send me the leftover" is never on the table, and both appear in all five programs.

The first is the anti-rebate rule. Arizona: a qualified school or provider "may not share, refund or rebate any Arizona empowerment scholarship account monies with the parent or qualified student in any manner," § 15-2402(J). Iowa: a nonpublic school or other provider "shall not refund, rebate, or share any portion of such payment with the parent, guardian, or pupil," § 257.11B(6)(b). Texas: a provider or vendor "may not in any manner rebate, refund, or credit to or share with a program participant," § 29.365(b), and the same section bars charging a program child more than the standard price. Florida treats a parent accepting a rebate as fraud or abuse that closes the account. The money is restricted to purchases from third parties, which is precisely why an unspent balance has nowhere to go but back.

The second is the tax rule, and it cuts the other way. All three of Arizona § 15-2402(L), Texas § 29.361(h) and Florida § 1002.395(11)(i) say program money is not taxable income, but they do not say it about the same people. Arizona names "the parent of the qualified student" and Texas names "a participating parent" with a carve-out, "unless otherwise provided by federal or another state's law." Only Florida's sentence names the student as well as the parent. West Virginia's handbook says the same with one carve-out worth noting: funds "other than those expended on fee-for-service transportation services" do not count as West Virginia taxable income. A reverted balance was never income to you, so losing it produces no deduction either.

An appeal can hold a closing account open in Arizona and cannot in Texas

If a closure or a repayment demand is wrong, the size of the door varies enormously.

Arizona defines a stay in its own rules. R7-2-1501(14): "Stay" means "a Parent may have access to a terminated ESA account pending the resolution of their appeal." The statute backs it — under § 15-2403(N), if the State Board issues a stay of a suspension, the Department "may not withhold funding or contract renewal for the account holder because of the appealed administrative decision during the stay unless directed by the board to do so." The appeal windows in the rules run 30 days from service of the notice, whether the notice is a disallowed expense, a non-renewal, or removal from the program.

Texas is the opposite. Section 29.373 lets a participant appeal an administrative decision to the comptroller, and then: an appeal "does not constitute a contested case for any purpose"; the subchapter "may not be construed to confer a property right" on a participant; and "a decision of the comptroller made under this subchapter is final and not subject to appeal." The appeal exists inside the agency and stops there. If Texas is your program, the award-cycle deadlines are the part not to miss in the first place: the Texas program's tiers, amounts and application window.

Iowa routes appeals to the state board of education under § 257.11B(9)(a), covering eligibility, allowable expenses and removal from the program, and requires the department to describe the appeal process in writing at the same time it delivers the decision.

West Virginia builds the response window into the closure itself. When participation terminates, the Board notifies the account holder that the account "will be closed in forty-five (45) calendar days," and it closes if the holder does not respond within 30 days of receiving the notice, or does not show within 45 days that the circumstances behind the decision "were factually incorrect." Denied reimbursements run on a separate 45-day clock, by Reimbursement Appeal Form emailed to the Board.

The four dates that actually decide what happens to your balance

Everything above collapses into a short list, and they are calendar items rather than research items.

1. Your program's renewal or continued-participation deadline, with the year written next to it. This is the largest cause of a lost balance among the five programs here, and the only one entirely inside your control. West Virginia's was June 15 for 2026-27 and missing it costs the carryover. Arizona's renewal contract is due June 30 with the Department issuing it by May 1, and a hardship extension of up to 30 days exists in R7-2-1506(H) if you ask in writing. Florida asks a renewing parent to notify the organization by May 31 whether the scholarship is being renewed or declined, under § 1002.394(10)(a)3.b.
2. The date your last deposit of the year lands. If leaving is on the table, the order of operations decides how much is in the account when it closes. Texas: at least a quarter by July 1, half by October 1, the rest by April 1. West Virginia for 2026-27: August 15, October 15, January 15, April 15.
3. October 1, if you are in West Virginia and considering public school. Before it, a closed account's funds go back to the State. After it, the county can request them for the rest of that year.
4. The day you decide to leave — then file every outstanding claim. Florida and Texas both keep the spending window open until claims are finished rather than until a date, so the balance you keep is the balance you documented before the account closed.

One thing to pull rather than wait for: your own program's closure language, in the section named term of scholarship, funding continuation, or administration of accounts. Not the FAQ. In four of these five programs the FAQ is shorter than the rule it summarizes, and in the one case where a handbook printed two different funding schedules in the same edition, the only safe move was to write and ask.