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Journal Issue: Special Education for Students with Disabilities Volume 6 Number 1 Spring 1996

Financing Special Education
Thomas B. Parrish Jay G. Chambers

Current Financing Structure for Special Education

Levels and Sources of Funding

Special education services are paid for with a combination of local, state, and federal funds. While expenditures for special education services in the United States are known to be considerable, exact current expenditures are unknown. One estimate is $31.8 billion, or 12% of 1995–96 expenditures for K–12 public education nationally.2 No more precise estimates of current national expenditures are available because the states were last required to report these amounts for the 1987–88 school year and because the last independent national special education cost study was based on 1985–86 data.

Table 1 shows the 1987–88 total special education expenditures by state and the percentage shares at the federal, state, and local levels. Based on these data, the United States in 1987–88 spent a total of $19.2 billion for special education and related services from federal, state, and local sources. Overall, federal aid comprised 8% of total expenditures for special education and related services, 56% was derived from state coffers, and 36% was derived from local sources. However, this ratio varied considerably from state to state.

Federal aid ranged from 65% of total special education expenditures in Kentucky3 to 3% of costs in Minnesota and New York. Eleven states received more than 12% of total support from federal sources, while seven states received less than 5%. State expenditures for special education varied even more widely, from approximately 90% (or more) of total expenditures (in the District of Columbia, Hawaii, Idaho, Missouri, New Mexico, and Rhode Island) to 17% (or less) of total costs (in Kentucky, New Hampshire, Oregon, and Virginia). Local revenues as a percentage of total special education expenditures ranged from 3% (or less) of total (in Alabama, New Mexico, and Oklahoma) to over 70% (in Michigan, New Hampshire, Oregon, and Virginia).

One reason the federal government stopped collecting these data may have been the difficulty many states had in obtaining information from school districts and the corresponding lack of reliability. In a recent survey conducted by the Center for Special Education Finance (CSEF), fewer than one-half of the states had in place fiscal reporting systems that break out separately all expenditures related to special education. A number of states do not require separate accounting for special education because of the complexity of this type of separation. For example, a resource teacher may work part time in the regular classroom, providing supplemental assistance to both special education and regular students. Some states would not require the district to divide that teacher's salary between special and regular budgets.

Thus, while it is often reported in the popular media that special education costs are rising ("rocketed" according to a recent U.S. News and World Report feature article)4 and that special education expenditures are rising at a rapid pace, in fact current data are not available to substantiate this claim.

How Funds Are Used

The most recent and reliable assessment of special education expenditures, with a nationally representative sample, used 1985–86 data. It showed that, on average, expenditures for students receiving special education services were 2.3 times as great as for general education students.1

However, expenditures vary considerably by type of disability and the nature of the services received. Table 2 shows the range of expenditure, for 1985–86, for differing types of students in varying settings. For example, while the average expenditure for a student with speech impairment in a self-contained setting was $7,140, the average expenditure for such students served in a resource room setting was only $647. The students with speech impairments served in the self-contained class undoubtedly had much more intensive needs and were served for the majority of the day in a small special education classroom. Perhaps the student-to-teacher ratio in this class was something like eight to one. The resource room configuration is generally a much less intensive service where the teacher case load will often exceed 30 students.

The largest variable affecting per pupil costs is the use of personnel. The 1985–86 study reported 62% of the special education dollar going to direct instruction, 13% to special education assessment involving special and general education students, 11% for such support services as program administration, 10% for related services such as physical therapy and social work services, and 4% for transportation.1

The Federal Share of Funding

Federal funding under Part B of the IDEA, the state grant-in-aid program, is based on each state's count of children receiving special education services. Federal funding is not affected by the disability categories of the children, their placement, or the services provided. Part B limits the number of children who may be counted for federal funding purposes to 12% of the general school-age population. However, a state must provide special education programs and services to all eligible children with disabilities.

The federal allocation for special education is based upon the national average per pupil expenditure (APPE) for all educational services. In 1978, the first year of federal funding, the federal allocation was set at 5% of APPE and was authorized to rise to a high of 40% of APPE by 1982. However, federal aid allocated to students with disabilities has never exceeded 12.5% of the national APPE and reached fully authorized levels only during the first two years that the program was effective.

State and Local Shares of Funding

All 50 states have provisions in their public education funding formulas that acknowledge the cost of educating special education students. In each instance, they are designed to provide for some share of the excess cost associated with special education. State categorical funding formulas for special education encompass a wide variety of approaches, including the following:

  • reimbursing a fixed percentage of actual special education expenditures (11 states),
  • pupil "weighting" systems in which special education students generate a fixed multiple of the general education pupil allocation, such as two times as much (18 states),
  • systems that fund specific special education resources such as teachers (11 states), and
  • fixed dollar grants per student (10 states).

A relatively new and important variation in funding formulas is census-based funding, which is based on a count of all students in a district rather than just the special education count. This approach to funding offers significantly more flexibility to local schools but has raised concerns among some about accountability.