What’s Fueling the Redirection of Special Education Funds

Last week, the Wall Street Journal published an article highlighting the large number of school districts that will opt to take advantage of an Individuals with Disabilities Education Act (IDEA) provision that allows them to reduce state and local special education spending when their federal funding under the law has increased from the year before. This provision is particularly relevant in 2010 because supplemental IDEA funding through the American Recovery and Reinvestment Act has dramatically increased the funding each district will receive. The article, unfortunately, does not fully discuss why so many districts are suddenly able to utilize this provision. It turns out that many states, in an attempt to make more districts eligible for the funding reduction provision, loosened the requirements districts must meet to qualify.

Essentially, the provision allows school districts that meet certain requirements – like those outlined in state academic performance plans – to reduce state and local spending on special education services by half of the district’s increase in federal IDEA funds. For example, if a district received $500,000 in federal funds under IDEA in 2009 and $700,000 in 2010, it could lower its state and local spending on special education by $100,000 (half of the difference between the 2010 and 2009 IDEA allocation) and use that money on general education purposes (i.e. non-special education purposes). For districts in great fiscal hardship, this provision could mean keeping a much needed math teacher or maintaining five day bus services.

In typical years, few school districts opt to take advantage of this IDEA provision for a couple of reasons. Primarily, only a small number of districts are eligible for the provision because few are able to meet the state-defined student achievement requirements. Even for districts that do qualify, the increase they receive in IDEA funds from year to year is rarely large enough to justify opting into the funding reduction provision. A doubling of IDEA funding under the American Recovery and Reinvestment Act in 2009, however, changes that calculation.

This year a significant number of districts reported their intent to use this IDEA provision – 44 percent of districts according to a report by the Government Accountability Office (GAO). The report finds that several states, including Arizona, Michigan, and Ohio lowered their eligibility requirements to allow more districts to take advantage of the IDEA provision. These states all saw dramatic increases in the percent of districts eligible for the provision. In fact, under the new criteria, 99 percent of Ohio districts are considered eligible for the provision in 2010, compared to only 8 percent in 2009.

Other states, including California and Illinois, increased the minimum number of special education students a district must have before it is required to report student achievement for that sub-group. As a result, districts with few special education students do not have to include them in accountability efforts at all, making it easier to qualify for the IDEA funding reduction provision. The number of districts eligible for the provision in both of these states increased by 38 percent or more from 2009 to 2010.

While IDEA funding provision may be a lifeline for school districts today, it could hurt the quality of special education services provided in these districts in the future. A separate IDEA rule called maintenance of effort requires districts to maintain the previous year’s level of local spending on special education to receive federal IDEA funds. Districts can legally skirt this rule when they opt into the IDEA provision and lower state and local spending by 50 percent of the increase in IDEA funding in 2010. These states will only be required to maintain the lowered level of local spending to receive their 2011 IDEA allocation.

In some districts, this means a difference of millions of dollars for special education services going forward, an issue many stakeholders are bemoaning. But these stakeholders should recognize that the districts are not the only ones to be held accountable for this potential permanent drop in state and local special education spending. The states, which have consciously lowered criteria for the provision or changed other requirements, are just as responsible.