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NCAC: Research & Solutions: Policy: Funding Mechanisms in Special Education

Funding Mechanisms in Special Education

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Despite Congress' original commitment to contribute forty percent of the funding for states' special education services under IDEA, the federal government historically has provided only eight percent of the funding,[1]  leaving state and local governments to fund the remainder of program costs, totaling approximately thirty-eight billion dollars nationally.[2]  In turn, states provide about fifty-six percent of special education program costs to local governments (leaving communities to fund the remaining thirty-six percent)[3]  under a variety of funding mechanisms. These include: pupil weights, resource-based funding, percent reimbursement, flat grants, and census-based funding.[4]  Of these, pupil weighting based upon disability type, instructional setting, or grade-level remains the dominant funding mechanism employed by the states[5]  despite concerns that funding structures linked to disability type or instructional setting create inappropriate fiscal incentives for local governments, leading to over-identification or unnecessarily restrictive placements.[6] These concerns are heightened by data that indicate that disability based funding may have a disproportionate impact on the identification of minority students.[7] 

In the face of a panoply of funding options and growing concerns about educationally detrimental fiscal incentives, many states are restructuring their fiscal policies. In a 1995 survey by Center for Special Education Finance (CSEF), twenty-eight states indicated their intent to reform funding mechanisms and, of those, seven states had revised state funding policies in the previous five years.[8]  In 1997, the federal government restructured its funding formula for special education under IDEA. The reform shifted from a system based on special education child count to a system based on total student population and poverty factors, which will be triggered once appropriations reach 4.9 billion dollars.[9]  Recent studies of this form of census-based funding, which bears no relationship to the identification of students or the provision of services but does account for funding equity, suggest that it is also the funding structure least likely to over-identify minority students and under-fund districts with high minority populations.[10] 

New York has become one of the first states to provide fiscal incentives for less restrictive placements.[11]  As a result of heightening concerns about inappropriate fiscal incentives, New York State revised its special education funding structure by implementing Integrated Settings Excess Cost Aid.[12]  Under Public Excess Cost Aid, districts receive aid based on the full-time enrollment of students weighted at 1.7 times for a student in a segregated special education placement (less than forty percent of student's school day spent with non-disabled peers), .9 times for a student who receives special services for twenty to fifty-nine percent of their day, and .9 times for students requiring consultant services at least two hours per week.[13]  Integrated Settings Excess Cost Aid generates an additional .5 weighting factor for students eligible for special education services for more than sixty percent of the day, but who remain in the general education classroom.[14]  Additionally, the state has also implemented a sunset provision for Public Excess Cost Aid, reducing the 1.7 weighting scale to 1.68 in 2000-2001 and then to 1.65 in 2001-2002,[15]  at which time the legislature will propose further modifications based upon the Commissioner of Education's report on the effects of the funding revisions.[16] 

The impact of New York's revised fiscal policy remains uncertain, and the federal government's new policy has yet to be triggered. Funding changes may contribute to improved services and more accurate identification and placement for special education students, but funding structures are only "one piece of a complex puzzle." Responses to over-identification and overly restrictive placements should include a study of teacher and staff training opportunities as well as consideration of the impact of geography and history.[17] 

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