What should states prioritize when designing special education funding systems?
One special education expert says building systems that provide school districts with the resources for high-quality, evidence-based services that respond to students' individual needs — rather than focusing solely on funding formula elements — is the way to go.
While a state's special education funding formula is important, "it's the means, it's not the ends, for getting resources to districts," said Tammy Kolbe, managing researcher at American Institutes for Research, during an Aug. 19 webinar hosted by the Education Commission of the States.
Before states consider what funding mechanisms are best, they should start their conversations by conveying an understanding about what the funding will support, she said.
"At its core, the purpose of [a] state special education funding system is to ensure that districts have the resources they need to provide special education services that students with disabilities actually need," Kolbe said.
States routinely revisit their special education funding formulas, which are K-12 monies dedicated to services for students with disabilities that are in addition to basic state education funding programs. And as the number of students with disabilities has increased in recent years, many states are exploring ways to balance rising costs while providing high-quality special education services, according to a June ECS report.
Although there is no ideal universal state special education funding formula, states can use three essential elements to build strong special education funding systems, Kolbe said.
Ground funding in what appropriate services should cost
States should base their formulas on the resources required to provide effective, evidence-based special education services, Kolbe said. While current spending levels may reflect historical patterns, staffing shortages, local fiscal constraints or existing service demands, they might not reflect what appropriate services should cost.
To start, states need to know what evidence-based supports are needed to meet students' individual needs, as well as the costs for providing those resources. The resources could include staffing, instructional time, related services, specialized supports, materials and technology, along with transportation and equipment.
And while these calculations may differ from current spending, this research makes a good starting point for determining the funding needed, Kolbe said.
"Without a cost estimate or a cost-based foundation, states are largely guessing on whether funding is adequate," Kolbe said.
The ECS report points out that under the Individuals with Disabilities Education Act, states and districts may not reduce overall funding for special education and related services below the previous fiscal year's level, a provision known as maintenance of effort.
Adjust funding for differences in student needs
The next step for states is understanding how costs can vary depending on students' needs and reflecting that variation in the funding formula.
For instance, a 2021-22 Ohio study found that the average estimated additional cost per student with a specific learning disability to be $9,700, while the additional cost per student with a traumatic brain injury came to $60,400.
Costs can also vary within a given disability category. Among students with autism, lower costs were associated with students needing fewer services and less intensive support than those with higher needs and requiring more intensive supports.
To help better understand need-differentiated funding, states like Ohio, Maryland and Vermont have undertaken cost studies. These studies, Kolbe said, can help states estimate costs to provide appropriate special education services and identify the resources required for individualized student services consistent with best practice and within local context.
"Historically, states haven't always had a strong empirical basis for making these decisions. I'd like to think that that tide is turning," she said.
Additionally, the U.S. Department of Education is undertaking a national study of special education funding — its first in about 25 years. The Education Department has partnered with AIR, NORC at the University of Chicago, and Allovue, a PowerSchool company, to design the study.
The study is to be conducted this coming school year and will include all 50 states, 1,250 school districts, about 3,700 schools and nearly 12,000 students with disabilities, Kolbe said. The first report from the study is expected in 2028.
Protect districts from extraordinary costs
As much as states and districts try to plan fiscally, extraordinary circumstances can always drive unexpected costs.
One example is when students are enrolled who have intense needs requiring expensive services. Others can include district-supported expensive private school tuition and residential placements.
Some intensive services can cost as much as $100,000 annually, according to ECS. And schools are prohibited from denying or delaying special education services to students due to costs.
In addition to their regular special education formula fund, states can consider establishing a separate high-cost fund to cover unpredictable expenses, Kolbe said.
The ECS report said 36 states have something like this where, if a district's expenses surpass a certain threshold, the state then kicks in more funding through a reimbursement to the district. That threshold may be set as a dollar amount or be based on the average per student cost.
Wisconsin, for instance, has a high-cost special education aid program for school districts that have nonadministrative special education costs of more than $30,000 per student.
School districts can apply for state reimbursement for eligible costs, which include salaries and benefits of licensed staff who provide support or instruction, supplies, transportation and out-of-district placement costs. The state reimburses 90% of eligible costs for those high-cost services.
For FY 2026-27, Wisconsin allocated $54.5 million for this program.
