Home > Projects > Wisconsin Budget Project > Other Publications > Special Education Funding

Special Education Funding Debated in Budget Deliberations

Legislative budget writers are now considering the first change in five years in funding levels for special education services. Two versions of a funding increase plan are before the Conference Committee on the 1999-01 biennial budget bill. Neither version, however, would stop the downward slide in the state's earmarked funding for special education.

Although state statutes have required since 1983 that the state fund 63% of district costs, the actual reimbursement rate has fallen steadily for 15 years, and now stands at 34%. Under the Joint Finance Committee budget, the state contribution will fall to 33.0% of district costs under Department of Public Instruction projections for fiscal year 2000-01. The Senate budget would halt the fall at 33.2%.

The 1999-2001 Budget: Tightening the Squeeze on Special Education

Public schools achieved a small, but important victory in the Joint Finance Committee, when the Committee agreed to increase special education spending that has been frozen since 1994-95. Governor Thompson's budget had proposed keeping the freeze intact, but the Committee added $10 million in 1999-00 and $25 million in 2000-01 over the frozen level of $275 million. The Assembly's bill maintained the Finance Committee's increase, but the Senate added another $2.5 million each year over the Committee increase.

The Governor also proposed removing the state's 63% funding commitment, and the Joint Finance Committee and Assembly agreed. The Senate budget bill reinstates the 63% standard, although prospects of the legislature fully funding this commitment are remote--an additional $274 million annually would be required by 2001.

The Meaning of the 63% State Special Education Funding Commitment

In order to help schools with the cost of the special education mandate, the Legislature set up a categorical appropriation in the early 1970s and funded it for many years at 70% of districts’ "aidable" costs. This reimbursement rate was lowered to 63% in 1983, where it stands today.

The chart at left shows the gap between the 63% standard and actual appropriations from fiscal year 1991-92 through 1998-99, and projected to 2000-01 under the Finance Committee budget bill. Over this period, this gap will have grown from 10% to 30% of district special education spending. The special education appropriation has declined from 13.3% of state school aid in 1989-90 to 6.9% this year, and it would drop to 6.8% in FY 2000-01 under the Finance Committee's budget.

Growing Enrollment in Special Education Is Key to Spending Crisis

Special education programs have grown steadily nationwide since the creation of the 1975 Individuals with Disabilities Education Act. Enrollment has increased much faster in special education than in regular primary and secondary education, while special education costs per pupil have actually grown more slowly than for regular education. (Some have suggested that the rapid enrollment growth in special education is due to districts over-identifying such students in order to obtain more funding. The most recent national data, however, show the percentage of Wisconsin students in special education is identical to the national average at 13.0%.)

The May 1999 report "Special Education Funding" by the Legislative Audit Bureau identified the challenges that schools have faced since the spending constraints were imposed in 1993-94:

• Special education enrollment grew by 19%, triple the 6% overall school enrollment growth.
• Special education costs increased by 37%, compared to 26% for regular education, while the special education appropriation grew by just 7%.
• In FY 1997-98, school districts had to shift $59.9 million to special education from other parts of their budgets, such as regular education and building maintenance.

The Special Education Dilemma

Wisconsin school districts are caught in a double bind. The state-imposed aid freeze, combined with the cap on district revenue growth, has forced increases in special education spending to come at the expense of other important school needs. Although total school aids have increased significantly over the past five years, these general aid increases often do not help districts with above average growth in special education enrollment.

The chart at right reflects the additional burden on districts from special education. It shows the amount by which spending on special education has exceeded what districts would have spent if special education costs had grown at the same rate as regular education costs. This amount reached $68 million in 1998-99.

When a district’s special education expenses grow at a rate greater than its expenditure cap (currently about 3% for the typical district) it has to make cuts in other areas of its budget. This is especially true for the many districts with declining overall enrollment but increasing numbers in special education programs.

The inability of districts to raise their tax bases due to the state revenue cap, combined with the state categorical aid freeze, means a zero-sum tradeoff between special education and all other school programs. To address this dilemma, some districts have suggested amending the revenue caps to allow local funding to fill the gap between current funding and the 63% funding standard.

Conclusion

The current funding system and spending trends effectively pit special education needs against those of regular education. School districts must always face difficult spending choices because available funding will never meet everyone's "wish list." However, the hard choices forced on school districts by the zero sum game of spending caps, mean educational policy is driven by an arbitrary structure of funding, rather than a rational consideration of competing needs.