Archived Information

Charter Schools and Students with Disabilities: Review of Existing Data - November 1998

Financing Special Education

The impact of students with "special needs" on a budget is frequently raised as a barrier to the fiscal viability of charter schools, particularly for small, newly created schools (Bierlein & Fulton, 1996). Relatedly, lack of funding for start-up costs and facilities has been identified as a significant barrier to efficient operations, particularly those costs for bringing buildings up to code and removing physical barriers (Buechler, 1996). Additional start-up costs that are frequently not covered include curriculum development and staff development (McLaughlin, Henderson, & Ullah, 1996). But, despite concerns, no evidence has been reported to date of special education programs causing schools to reach fiscal instability.

In a study of Minnesota charter schools that were operating or preparing for operation in early 1994, Urahn and Stewart (1994) identified funding of special education services as a critical issue to charter school operators as they learned that not all special education service costs are reimbursed. Many operators were unfamiliar with the funding process and were not prepared to provide assessments or recommended services. Some did not have sufficient funds to secure expensive or scarce specialized services (such as vision therapists or occupational therapists). Charter school operators were frequently unprepared for the costs of providing special education services because they assumed the district would meet the need.

Some investigators (e.g., Buechler, 1996) have suggested that special education finance issues may become more important in charter schools because they do not have access to cost-controlling measures available to most districts, such as the use of general operating funds to support excess-cost special education services or the cooperative regionalization of special education services. To ameliorate this potential problem, several schools in Colorado use an approach that involves "risk pooling" or "banking" (McLaughlin, Henderson, & Ullah, 1996). Charter school operators and districts negotiate special education services to be provided by the district. Schools bank the funds with the district, which pays for all needed evaluation and instructional services. This program is highly beneficial to those schools with high-cost students, but may result in a net loss to individual charter schools in the years when they serve few high-cost special education students.

Funding allocation patterns for special education differ between independent charter schools (i.e., those treated as LEAs) and those considered part of a district, according to a Government Accounting Office (GAO) report to Congress (Charter schools: Issues affecting access to federal funds, 1997). Preliminary results of case studies and telephone surveys conducted with 32 charter school operators in seven states (Arizona, California, Colorado, Massachusetts, Michigan, Minnesota, and Texas) indicated that only half of the charter schools received IDEA funds or IDEA-funded services. Of those 16 schools that did not receive IDEA funds or services, 11 reported not applying for them. The reasons they cited were lack of time, self-determination of ineligibility, lack of knowledge of funding availability, or application costs exceeding potential funding award. The report does not explain why five schools applied for but did not receive IDEA funds or services. In general, charter school operators surveyed believed they were receiving an equitable share of Title I and IDEA funds, although differences existed between independent charter schools and those considered part of a district. Operators of independent schools were evenly divided as to whether they received what they considered their fair share of IDEA funds and services, while more than 80 percent of the district-affiliated school operators reported receiving their equitable share. The report concluded that a number of barriers impede access to funds and services, including (a) insufficient student enrollment and eligibility data available prior to state submission deadlines, (b)time required and costs involved in applying for funding, and (c)philosophical differences between IDEA requirements and school missions.
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