A r c h i v e d  I n f o r m a t i o n

To Assure the Free Appropriate Public Education of all Children with Disabilities - 1995

Special Education Funding in the States

IDEA mandates FAPE for all students with disabilities. The States are primarily responsible for providing special education programs and services, and provide 56 percent of the financial support for them.
"Although States continue to bear the fiscal burden of educating students with disabilities, there is a paucity of recent data on the levels of funding actually provided by States and local governments. The most recent data available (from the 1987-88 school year) show the States providing 56 percent of the funds expended for special education programming across the nation, as compared to 36 percent from local sources, and 8 percent from the Federal government" (Moore et al. , 1988).
States are struggling to provide FAPE to students with disabilities with limited public resources that are being strained by the growing demand for other types of social services. As a result, many States are actively changing or considering changes in the ways they finance special education programs. In fact, State efforts to reform special education finance appear to be at their highest level since the enactment of IDEA.

State Special Education Finance Reform Movement

In 1994, CSEF conducted a telephone survey of SEA personnel in all 50 States to learn of any efforts States may be making to reform their special education finance systems. The survey revealed that 18 States have implemented some type of finance reform in the past five years.

Twenty-eight States are currently considering major changes in special education fiscal policy. Nine of these States expect to implement some variation of their existing funding system, or have a clear idea for a new one. The other 20 States are as yet undecided about the specific changes they will make. Of these 29 States, seven implemented some type of finance reform in the past five years and are considering reforming their special education finance systems again.

Table 5.1 describes the special education finance reform movement by State and by type of funding formula, (column 2), as defined in the table key. In addition, the basis on which the funding allocation is made is provided (column 3). The basis on which the allocation is made is important for understanding the policy implications of funding alternatives. For example, allocations based on type of student placement tend to afford the least flexibility to local decision makers. Allocations based on less specific criteria, such as total district enrollment, are likely to allow them much more discretion when identifying and placing students.

Another important factor is whether State special education funds must be spent exclusively on special education students (column 4). Although such a restriction favors fiscal accountability, it tends to reduce local control. In fact, although this restriction is often presumed to exist, 33 of the States surveyed do not require that all special education funds be spent exclusively on special education services.

Table 5.1 Special Education Finance Reform in the States
State Current Funding Formula Basis of Allocation State Special Education Dollar for Target Population Only Implemented Reform
within
Last
5 Years		 Considering Major Reform
Alabama Pupil weights Placement and condition
X X
Alaska Pupil weights Type of placement

X
Arizona Pupil weights Disabling condition


Arkansas Pupil weights Type of placement
X X
California Resource-based Classroom unit

X
Colorado Percent reimbursement Allowable costs X
X
Connecticut Percent reimbursement Actual expenditures

X
Delaware Resource-based Classroom unit
X X
Florida Pupil weights Disabling condition

X
Georgia Pupil weights Disabling condition For 90% of funds

Hawaii Pupil weights Placement and condition X X
Idaho Percent reimbursement Actual expenditures
X
Illinois Resource-based Allowable costs X
X
Indiana Pupil weights Disabling condition


Iowa Pupil weights Type of placement

X
Kansas Resource-based Number of special education staff X
X
Kentucky Pupil weights Disabling condition
X X
Louisiana Percent reimbursement Actual expenditures X
X
Maine Percent reimbursement Allowable costs


Maryland Flat grant Total district enrollment X

Massachusetts Flat grant Total district enrollment
X
Michigan Percent reimbursement Allowable costs

X
Minnesota Percent reimbursement Actual expenditures X X
Mississippi Resource-based Number of special education staff

X
Missouri Resource-based Number of special education staff

X
Montana Flat grant Total district enrollment X X
Nebraska Percent reimbursement Allowable costs X
X
Nevada Resource-based Classroom unit X

New Hampshire Pupil weights Type of placement

X
New Jersey Pupil weights Placement and condition

X
New Mexico Pupil weights Type of placement

X
New York Pupil weights Type of placement

X
North Carolina Flat grant Special education enrollment X
X
North Dakota Actual expenditures Percent reimbursement
X X
Ohio Resource-based Classroom unit X
X
Oklahoma Pupil weights Disabling condition


Oregon Pupil weights Special education enrollment
X
Pennsylvania Flat grant Total district enrollment X X
Rhode Island Percent reimbursement Actual expenditures

X
South Carolina Pupil weights Disabling condition X
X
South Dakota Percent reimbursement Actual expenditures X X
Tennessee Resource-based Classroom unit
X X
Texas Pupil weights Type of placement
X X
Utah Pupil weights Type of placement
X
Vermonta/ Flat grant Total district enrollment
X
Virginia Resource-based Classroom unit
X
Washington Resource-based Classroom unit X

West Virginia Flat grant Special education enrollment


Wisconsin Percent reimbursement Allowable costs X

Wyoming Percent reimbursement Actual expenditures X

a/ Vermont's special education funding formula also contains a substantial percent reimbursement component.

Table Key

Pupil weights - Two or more categories of student-based funding for special programs, expressed as a multiple of regular education aid.

Resource-based - Funding based on allocation of specific education resources (e.g., teachers or classroom units). Classroom units are derived from prescribed staff/student ratios by disabling condition or type of placement.

Percent reimbursement - Funding based on a percentage of allowable or actual expenditures

Flat grant - A fixed funding amount per student or per unit.

Source: Center for Special Education Finance (CSEF)

Issues Driving Reform. When respondents were asked to identify the issues driving reform, as a group they provided more than a dozen answers. However, the consensus was that (1) more flexible ways to provide special education services are needed, and (2) incentives that lead to restrictive placements need to be eliminated. Responses also indicated that reforms are also being driven by the more traditional goals of fiscal accountability, formula simplicity, ensuring adequate service, and equity. Two other important issues cited were rising special education costs and enrollments and the influence of widespread support for more inclusive educational practices on special education finance reform.

Nature of Reforms Underway

To address some of the issues discussed above, States have instituted a variety of fiscal and program reforms. Some States, like California and Oregon, have responded to growing fiscal pressures by capping the growth of special education aid by limiting the number of students eligible for reimbursement (Beales, 1993). To try and remove fiscal incentives for identifying special education students, Massachusetts, Montana, Pennsylvania, and Vermont have revised their State finance formulas to decouple funding from the special education student count. These States now primarily provide funds to districts based on some form of a census-based funding system. With this type of funding arrangement, the amount of State special education aid received by a district is determined by the overall count of students enrolled in the district, rather than the number of students specifically identified for special education services. Such a system breaks the link between funding and local policies that determine how students with disabilities are identified and placed in special education programs.

At the same time, while some States are moving away from the more traditional special education funding approaches, such as pupil weights (see definition and States using this approach in table 5.1), other States are considering adopting them. For example, Oregon educators wanted to design a system that could be easily understood, that was placement-neutral, and that would dramatically reduce documentation and paperwork requirements. To these ends, Oregon adopted a single funding weight for all special education students. The per pupil special education allocation is twice that of the per pupil general education allocation.

Interviews conducted by CSEF staff with a broad range of interested persons in Oregon constituents in 1994 indicated a general consensus that the objectives cited above were largely being met by the new formula. However, concerns that a financial incentive still existed to continue to identify special education students up to the State funding limit of 12 percent were sometimes expressed (Montgomery, 1995).

CSEF believes there are some important issues that a State should consider when making decisions about the retention or adoption of a pupil weight funding formula. First, should the amounts of these weights vary by type of placement (as in Iowa), by type of disabling condition (as in Arizona), or should there just be a single weight that applies to all special education students (as in Oregon)? It is the opinion of the CSEF that weights based on placement have the advantage of being more closely linked to actual program cost, but may a so create inappropriate financial incentives for more costly, and therefore sometimes more restrictive, placements. Weights based on disability type have the advantage of being placement-neutral (i. e., no financial incentives for one type of placement over another), but are generally not closely linked to variations in the actual costs districts face.

Any pupil weight system will create an incentive to identify students as needing special education services. Some consider this type of incentive to be appropriate, because it is thought to create a better link between State special education aid and the district cost of providing such aid. Others argue that this type of fiscal incentive for identifying additional special education students should be removed. States that agree with the latter argument have adopted the types of census-based funding systems described above. 2

2 For a more extensive discussion of the incentives and disincentives contained in alternative types of special education funding formulas, see Parrish (1994).
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