Primarily because of the quickly expanding population of children with disabilities, special education spending has increased at a much faster rate than general elementary and secondary education spending. During the 1999-2000 school year, the United States spent $50 billion on special education "support" services and an additional $27.3 billion on regular education for disabled students ($77.3 billion in total).1 Special education support costs accounted for 12.4 percent of the $404.4 billion total spending on elementary and secondary education. With regular education expenses included, students with disabilities accounted for 19.1 percent of total national elementary and secondary education spending in 1999-2000, an increase of 13 percent from the 1977-78 school year.
Rising enrollment, not rising per pupil costs, has been the primary driver of special education spending. It is true that service costs associated with some high-need disabilities have increased. However, the main expansion of the children with disabilities population has been in the lower-cost developmental disability categories. The annualized growth rate of spending per pupil for children with disabilities between 1985-86 and 1999-2000 was 1.7 percent after inflation, lower than the 2 percent growth rate in spending per pupil for all students.
Under the Individuals with Disabilities Education Act (IDEA), federal special education funds are distributed through three state grant programs and several discretionary grant programs. Part B of the law, the main program, authorizes grants to state and local education agencies to offset part of the costs of the K-12 education needs of children with disabilities; it also authorizes preschool state grants. Part B, section 611 authorizes funding to students age 3-21, while section 619 is targeted specifically at children aged 3 to 5. The funding formulas to distribute to states are nearly identical, but Congress separately allocates total funds for each section separately.
Part C authorizes infant and toddler state grants for pre-kindergarten programs and early intervention services. Part D and Part E authorize discretionary grants to state and local education agencies for a variety of "national" special education activities, including research, evaluation, and the training and recruitment of personnel.
The greatest share of annual IDEA funding comes from Part B Section 611 grants to states. In fiscal year 2014, which covers the school year 2014-15, total IDEA funding was $12.50 billion, of which $11.47 billion is dedicated to IDEA Part B Section 611 state grants. When advocates say that IDEA programs are under-funded, they are most often referring to Part B Section 611 state and local grant aid.
Distribution of IDEA Part B Grants
Like many federal education program formulas, "new" and "old" IDEA Part B funding is distributed according to different formulas. The bifurcated mechanism reflects the policy desire to alter the distribution of funds and a political interest in maintaining past levels of support for specific local school districts.
Hence, IDEA Part B funding at present is distributed as follows: each state is guaranteed base funding equal to the amount it received in FY 1999.1 Of the remaining federal funds made available at a level above the previous fiscal year aggregate amount, 85 percent is allocated to the states based on their relative share of children within the age range served by IDEA and 15 percent is allocated to the states based on their relative share of children within that age range living in poverty. If the appropriation is not greater than the previous fiscal year's appropriation, each state's grant is equal to its FY 1999 allocation, plus a share of the additional funds proportionate to its share of total funds from the preceding fiscal year. There are also several minimum and maximum grant restrictions.2 Before distributing subgrants to local education agencies, states may reserve a portion of their Part B grants for state administrative costs and up to 10 percent of the grant for "other state-level activities," such as monitoring, professional development, and establishing risk pools.3
New money is distributed in this manner to avoid encouraging special education over-identification, that is, to prevent schools from wrongly identifying low-performing students as "disabled" in order to secure a greater share of federal funding. Setting a base and adjusting it according to population changes removed any incentive to over-identify students as disabled.
If aggregate IDEA Part B funding is cut below FY 1999 levels, individual state funding is ratably reduced.
States cannot receive less than: (1) the FY 1999 foundation grant plus 1/3 percent of the increase in funding from FY 1999; (2) an increase in funding less than the overall annual appropriations growth rate, minus 1.5 percentage points; or (3) 90 percent of the overall percentage increase in appropriations over the previous year. States also cannot receive more than: (1) the maximum, fully funded grant (40 percent of APPE, times an adjusted count of children with disabilities in the state); or (2) an increase in funding that is greater than the overall annual appropriations growth rate, plus 1.5 percentage points.
The maximum amount that a state can reserve for administrative costs is the state’s FY 2004 maximum administration set-aside, or $800,000, whichever is greater. These numbers are adjusted for inflation each year. For "other state-level activities," after FY 2006 the maximum set-aside will be the maximum FY 2006 amount (up to 10 percent of the FY 2006 grant), adjusted by inflation each year.