Diversity in Funding: Strategies Vary by State

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State strategies for financing special education are almost as diverse as the populations the programs are meant to serve. Moreover, the amount and sources of money provided for special education vary greatly from state to state.

In a study released by the Center for Special Education Finance in June 2003, of the 39 states that provided special education expenditures, the figures ranged from a low of $2,889 per special education student in Oklahoma to a high of $12,899 in New York for the 1998-99 school year.

The study, "State Special Education Finance Systems, 1999-2000, Part II," found that states also varied in the level of support they provided for special education. Of the 39 states, Oklahoma relied the most heavily on local and federal funding, with only 3 percent of all special education dollars coming from the state. On the other end, New Mexico and Wyoming provided 90 percent of special education money.

State systems for financing special education differ in the fine print as well as in their overall structures. To learn more about those policies, Education Week conducted a survey of state departments of education in the fall of 2003. The survey updates data collected by the finance center, which is part of the Washington-based American Institutes for Research, for the 1994-95 school year and again for 1999-2000.

According to the Education Week survey, in which all 50 states and the District of Columbia participated, 31 states adjust their special education funding on the basis of district wealth or student poverty. But most do so because their funding for special education, and their wealth and poverty adjustments, are included in the state general education finance formula. Only seven states that make such adjustments have a special education funding formula that is separate from the general operating aid provided to school districts.

In an effort to hold down costs, 16 states have caps or other limits on the number of students who can receive special education aid, or on the amount of revenue that can be allocated to districts for special education. North Carolina, for example, limits a district's special education population to 12.5 percent of the total enrollment for the purpose of calculating the state appropriation. Nebraska does not allow any year's special education appropriation to increase by more than 5 percent from the previous year.

Finance Formulas

Given the current push to link education spending to academic accountability, Education Week asked states if they make special education funding contingent on the academic progress of students with individualized education plans. No state currently takes the actual performance of students with disabilities into account when determining the allocation of special education funds.

In contrast, Education Week found, 23 states have provisions--above and beyond their special education finance formulas--for providing additional resources for the high cost of educating students with severe disabilities.

Alabama, for example, has a Catastrophic Trust Fund that permits districts to apply for extra financing for extremely expensive-to-serve students. Other states have provisions to help pay for the education of students placed in residential facilities, or will provide additional money if district-level expenditures exceed a certain amount.

State special education finance formulas fall into six broad categories:

  • The largest group of states uses a "weighted pupil" formula. In this model, funding is based on different weights for different disabilities, a single weight given to all students with disabilities, or tiered dollar amounts for students in different disability categories. All but three of the 17 states and the District that use a weighted-pupil formula incorporate weights for special education students as part of their regular school finance systems.
  • Six states use a "resource based" formula. Under such a plan, the state allocates money to districts based on the resources needed to educate special education students. The formulas assign weights to teacher or classroom units and can include different weights for different disability categories.
  • Nine states distribute special education dollars based on the total number of all students in a district, without regard to the enrollment of special education students.
    Some finance experts advocate this type of "census based" formula because it may discourage districts from overidentifying students with disabilities to generate more revenue.
  • Six states use a "percentage reimbursement" formula. Under such a system, states reimburse districts for their actual special education expenditures, based on rules for allowable costs. The percentage of expenditures states will reimburse, however, varies widely from state to state. For example, Wyoming reimburses 100 percent of a district's allowable costs, while Michigan reimburses just over 28 percent.
  • Only North Carolina uses a "flat grant" to allocate funding for special education. A flat grant provides a uniform amount of money to districts for each student with a disability.
  • Four more states use a "variable block grant," which is similar to a flat grant but includes adjustments. States using variable block grants start with a base amount for each district, and make adjustments to that amount to reflect enrollment changes or other factors.

Five states use a combination of methods. Hawaii and Rhode Island do not have a funding mechanism specifically for special education.

Vol. 23, Issue 17, Page 72-73

Published in Print: January 8, 2004, as Diversity in Funding: Strategies Vary by State
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