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Journal Issue: Children with Disabilities Volume 22 Number 1 Spring 2012

Disability and the Education System
Laudan Aron Pamela Loprest

Funding

Special education programs are funded by a combination of federal, state, and local government programs. The most recent comprehensive estimates of total public expenditures on special education come from a special study for the 1999–2000 school year.28 Special study is required to gather this information because states are not obligated to give detailed state and local breakdowns of special education spending to the federal government. In the 1999–2000 school year, the United States spent an estimated $50 billion on special education services and an additional $27.3 billion in general education funds for those special education students who spent part of their time in general education classroom settings, for a total $77.3 billion.

This total represents about 21 percent of total U.S. spending on elementary and secondary education that year—a substantial increase from 1977–78, when total spending on students with disabilities was about 17 percent of total education spending. Most of this increase is attributable to an increase in the number of children in special education rather than to an increase in per-pupil costs.

Federal funding has always been a relatively small share of total expenditures on special education. In 2010 federal funding on special education through IDEA was $12.5 billion, most of it in the form of grants to help states pay the additional costs of providing early intervention, special education, and related services to children from birth through age twenty-one. The federal government also makes discretionary grants to states for personnel development and training, technology and technical assistance, and parent information centers.29 Federal funding levels for special education have been relatively flat since 2004, with the exception of a significant infusion of special funds under the American Recovery and Reinvestment Act of 2009.30

When IDEA was enacted, its intention was to help states provide special education by funding a portion of the additional, or "excess," cost of special education over general education. The original legislation set the maximum federal contribution at 40 percent of the estimated excess cost of educating children with disabilities, but federal funding has never come close to this "full funding" cap. In 2010, federal grants to the states under

IDEA, Part B, covered about 17 percent of the excess cost for special education students. In the 1999–2000 school year, schools spent 90 percent more on the average school-age special education student (including general and special education funding) than on the average general education student.31

As total special education spending has increased and federal spending has remained flat, state funding for special education has declined, leaving local school districts to cover the difference. In the 1987–88 school year, states funded 56 percent of special education expenditures, local school districts 36 percent, and the federal government 8 percent. In 1999–2000, the distribution was 45 percent from states, 46 percent from local school districts, and 9 percent from the federal government.32

Financing structures can provide incentives that influence the way children are identified for special education services, the services they receive, and the settings in which they receive them. For example, financing structures that provide additional state funding per special education student can encourage identification at the local level on the margin. Studies show that in states that switched from distributing their special education funding based on the number of children enrolled in special education, resources used, or past actual spending to a distribution based largely on the total number of children in the school, the number of students identified as having a disability and being eligible for special education fell.33 On the federal level as well, the formula for distributing state grant funds has been tweaked in an effort to limit overidentification of special needs children; a portion of the grant funds is now based on each state's share of school-age children and children in poverty.

At the same time, financing incentives also exist to underidentify students eligible for special education. The "excess" cost of education for a child in special education coupled with legal protections that mandate services (that might be provided for the rest of a student's education) and an increasing share of funding coming from local school districts provides incentives for school districts to limit identification of children for special education services. Which incentive effect predominates is unclear and likely differs by school district or state given different sets of incentives.

Variation in Spending across Disability Type
The range of educational needs among students served by the special education program leads to significant differences in expenditures. Children with specific learning disabilities and speech or language impairment made up the majority of children in special education and had the lowest per-pupil expenditures, $10,558 and $10,958, respectively, in 1999–2000.34 The highest expenditures were on children with multiple disabilities ($20,095) and on those who were placed in private settings after the public school has been found unable to provide an appropriate education ($25,580). These "high-cost" children are the focus of some efforts to reduce special education spending. The 2004 reauthorization of IDEA allowed states to put up to 10 percent of their federal grants into state risk pools to aid local districts with high-need, high-cost students. The growth in total special education expenditures is not caused by growth in the number of high-cost children, however, but primarily by the increase in numbers of children across all categories of disability.

Variation in Spending across States
Studies of special education spending across several states have uncovered dramatic differences in spending. Nationally, as noted, average spending on special education students is 90 percent higher than spending on general education students. But it is 57 percent higher in Alabama, for example, and 155 percent higher in Maryland.35 These ratios also reflect differences in general education spending: states that spend more on general education also tend to spend more on special education.