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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

Census-Based Funding

One of the predominant proposals for special education fiscal reform is census-based funding.30 Over the past few years, at least six states have adopted state special education funding systems that are primarily, or exclusively, based on total district enrollments (that is, census based), rather than on special education child counts.31 The U.S. Department of Education also recommended a census-based approach to Part B funding to Congress in the current IDEA reauthorization proceedings.

The purported advantage of census-based funding is that it reduces the need for formal procedures for determining program eligibility. When appropriate, students can be served outside special education, thereby (1) saving the high costs of identification and assessment, (2) focusing the allocation of resources on instructional and related services, (3) increasing flexibility for local decision makers, and (4) avoiding the stigma to the student of being labeled as having a disability.

Opposing arguments include the following: (1) students with legitimate needs may not be identified or served if special education is de-emphasized, (2) current funding levels for special services may drop if they are integrated into regular education, and (3) jurisdictions with disproportionately large numbers of students with disabilities will lose the most funding.

Movements Toward Census-Based Funding

At the State Level

Greater emphasis on local flexibility is a common characteristic of state reform efforts. Census-based funding generally offers the most flexibility to local school districts in their use of special education funds.

In some states, reform has resulted in a reduction in the rate of identification of special education students.32 This has been accomplished through innovations in local practice such as allocating resources for prereferral services and utilizing special education resources in regular education classrooms.

Generally, reform states feel that this reduction in the count of special education students is a change for the better and express concern that current federal policies run counter to their efforts.5 Because the IDEA allocation is based on the number of students identified for special education services (up to 12%), states that are serving special needs students outside the special education system are losing federal funds as their counts of identified students drop.

At the Federal Level

Reformers argue that the federal government should also adopt a census-based approach to Part B funding. This proposal was included in the U.S. Department of Education's recommendations to Congress in relation to current IDEA reauthorization proceedings. However, although this proposal is strongly supported by some states and some professional organizations,23 other states and organizations have refused to embrace it.33

As there are important tradeoffs involved in this type of change, some major arguments for and against census-based funding are discussed below. In reviewing these arguments, it is important to note that they are meant to reflect sentiments often expressed in discussions on the potential merits and demerits of such a system. As such, they do not necessarily reflect the opinion of the authors, nor are they necessarily based on fact. Where research is available to support these assertions, citations are provided.

Arguments in Favor


  • Working outside special education is less costly. As suggested earlier, the special education assessment and referral process is costly, and studies show that, in many instances, the tests and methods for classifying students provide little information that is useful in planning instructional programs for these students.34-36
  • Some students may be better served outside special education. Special education programs as they have been traditionally designed tend to isolate students in more segregated placements (for example, pull-out programs or special classes). Labeling students tends to stigmatize them for the remainder of their schooling experiences and perhaps throughout their lives.5 Once students are placed in special education, they tend to stay in the program.24
  • Overidentification is now the major issue. Before the passage of Public Law 94-142, large segments of the special education population were being underidentified and/or underserved.5 Now, however, states are reporting that overidentification rather than underidentification is their major concern.37
  • Procedural safeguards would remain in place. Movement to a census-based funding system would not jeopardize any of the procedural safeguards under the IDEA. In addition, all students with disabilities would continue to be protected under Section 504 of the Rehabilitation Act and by the Americans with Disabilities Act (ADA) whether they are labeled as special education students or not. (See the article by Martin and Martin in this journal issue.)
Arguments Against


  • Census-based federal or state funding would not be equitable to states or school districts with higher identification rates. Identification rates of students eligible for special education vary widely across jurisdictions. (See the article by Lewit and Baker in this journal issue.) States and districts might exhibit higher percentages of special education students because of real differences in the characteristics of students that lead to disabilities.11-13 Even where student populations are comparable, states and districts may have been especially proactive in setting up programs for special needs students; a census-based funding system would penalize those very districts that have been most responsive to the call to identify and serve all special education students.
  • Procedural safeguards cannot be maintained if students are not identified as having special needs. Advocates argue that census-based funding would create fiscal incentives to under-identify students with disabilities or to provide few services, abridging their right to a free and appropriate education.
  • Students with disabilities would be underserved. Advocates for students with disabilities have long argued that, when categorical funding restrictions are removed, resources tend to be reallocated "to benefit the whole classroom" rather than to meet unusual individual needs. (See the article by Martin and Martin in this journal issue.)
  • A retreat from the traditional federal role of fostering and promoting special education services would occur. The federal role in special education has been one of leadership for, and protection of, students with disabilities. A census-based federal funding system would send a message to states and communities that the federal government is backing away from this position.
  • Fiscal accountability would be jeopardized. Because funds would not be earmarked for the exclusive use of disabled students, a census-based funding system would reduce assurances of fiscal accountability at a time when such controls are seen as increasingly important by taxpayers.
  • Current levels of special education funding would be threatened. Current levels of funding for special education services may well diminish when funds can no longer be attributed to specific special education students with legal entitlement.
"Hold Harmless" Funding Agreements for States or Schools with Approved Reform Plans

The arguments on both sides of the census-based funding issue are compelling. Concerns regarding loss of accountability and potential erosion of financial support for special education are real. In addition, if one were to redistribute existing federal special education dollars using a census-based formula, states currently identifying more special education students than the national or state average could lose substantial federal funding over time.5 For these reasons, federal or state reformers may prefer to proceed with reform on a case-by-case or trial basis.

Rather than moving to a census-based funding system nationwide, an alternative federal policy could be to maintain federal funding at some specified prereform levels in selected states or localities making specific reform efforts. Exactly such an experimental "hold harmless" funding agreement is an integral part of current proposals to reform special education in New York City schools.38

Poverty Adjustment

The census-based funding approach assumes equal incidence of students requiring special education services across jurisdictions. In contrast, the current IDEA funding formula (based on the number of identified students) and some state funding formulas are predicated on the notion that some jurisdictions serve greater numbers of special education students than others and, therefore, should receive larger allocations of federal special education aid.

It is clear that identification rates vary substantially (for example, Massachusetts has a rate more than twice that of Washington, D.C., or Hawaii); but it is unknown to what extent this reflects true differences in need, that is, there may be a marked difference between true need and the rate of identification. While the concept of allowing for varying needs in the funding formula is compelling, the number of students identified may be as much a matter of school officials' choice as of student need. If the number of identified special education students is a poor measure of true need and if such a system creates incentives for increased identification, what alternative measures might be adopted?

The most prominent suggestion heard is that special education funding should be adjusted to reflect variations in poverty rates across jurisdictions. As discussed earlier, substantial evidence suggests that sustained and intensive poverty results in conditions (for example, poor health and nutritional care, as well as high levels of drug and alcohol abuse for expectant mothers) that lead to larger proportions of the school-age population needing special education services. (This line of reasoning does not suggest that poverty equals disability for individual children. Indeed, a related equity issue may be the disproportionately low number of children in poverty receiving gifted and talented education services.)39 What has been suggested is that special education funding could be census-based with an adjustment for variations in poverty. Such an adjustment might be equally useful at the federal and at the state level.

While some form of poverty adjustment to special education funding is worthy of serious consideration, it brings into further question the most appropriate relationship between special education under the IDEA and compensatory education under the federal Title 1 program of the Elementary and Secondary Education Act. Title 1 is designed specifically to allocate supplemental federal funds to schools in poverty areas; a poverty adjustment under the IDEA may further confuse the unique roles of these two federal programs. However, a poverty adjustment under the IDEA may appeal most to those policymakers and scholars who have called for a more coherent education policy that provides an integrated approach across all programs and to those who find preventive services imperative if the growth in special education is to be curtailed.