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Coming off the 2012 election, lawmakers are looking to make good on campaign promises to improve education and lower property taxes. On the issue of special education, both of those concerns are at play on a large scale.

OLA report examines special ed challenges

Legislative Auditor Jim Nobles notes that significant costs often come with educating students with challenging cognitive and physical disabilities. “Sometimes the costs involved are minimal. Sometimes they are enormous,” he says. (Staff photo: Peter Bartz-Gallagher)

Costs help drive local education levies

Coming off the 2012 election, lawmakers are looking to make good on campaign promises to improve education and lower property taxes. On the issue of special education, both of those concerns are at play on a large scale.
Local school districts don’t receive the amount of special education funding that’s been promised to them by the federal government, resulting in a $571 million unfunded mandate that has caused school boards to seek local levy increases from property taxpayers. Denise Dittrich, a former DFL state representative who now lobbies for the Minnesota School Boards Association, said the “cross-subsidy” (the technical term for the unfunded costs that school districts bear) is a key pressure behind levy campaigns.

“When you have such a large cross-subsidy where you are using regular education funds to pay for special education, and then you need to go for a levy, the special education is what is driving the costs,” Dittrich said.

A report from the Minnesota Office of the Legislative Auditor released on Wednesday lays out some specifics that suggest a lack of funding from state and federal governments is causing school districts to go to local property tax payers as a last resort. In 2011 the St. Paul public schools had the largest cross-subsidy for special education in the state at $838 per student. The amount St. Paul levies is $647 per student. In suburban Lakeville, the school has an $880 per student levy and a $756 per student cross-subsidy for special education.
Rep. Will Morgan, DFL-Burnsville, a high school teacher whose district includes part of the Lakeville school system, noted that school board members don’t relish raising levies. But suburban districts are increasingly seeing sizeable cross-subsidies as a percentage of levy authority. Federal funding is well short of its financial obligation for special education, and state special education funding is capped.

“What’s happening is local taxpayers are paying for these levies, [and] that money is essentially paying the cross-subsidy,” Morgan said. “Not only is providing special education federal law and state law, it’s also the right thing to do. But we have to fund it the right way.”

Special education issues at the Capitol are complex and sensitive, as evidenced by the size of the Legislative Auditor’s book shelf devoted to the topic. This week’s 105-page report follows earlier studies in 1984 and 1997. The report charts several changes in the demands on special education over a 12-year period and makes recommendations for both the Legislature and the state Department of Education.

Committees to examine report

Legislative Auditor Jim Nobles noted that significant costs often come with educating students with challenging cognitive and physical disabilities. “Sometimes the costs involved are minimal. Sometimes they are enormous,” he said.

House K-12 Education Finance Chair Paul Marquart, DFL-Dilworth, said his committee has been waiting for the auditor’s report before mulling a path forward this session. Marquart noted that the report makes clear that special education has become a huge source of financial inequality among school districts.

“It’s a huge fairness issue when it comes to education finance,” Marquart said. “If you are a special ed student, you are entitled to an education and that’s the way it should be. But it varies school district to school district the number of special education kids you’re serving. You could have two school districts that both get $9,000 in revenue. But if I have $900 in cross subsidies and this one has $300, that means I’m spending $600 more outside the regular classroom.”

The special education funding problem is a highlight of Gov. Mark Dayton’s K-12 education budget proposal. He is proposing a $125 million increase in special education funding for the next biennium and $326 million in the out years.

But Senate Education Finance Chair Chuck Wiger, DFL-Maplewood, warned that the increased funding won’t be enough to bring the school districts completely in line with the cost of their special education programs.
“You can put more money on the formula,” Wiger said. “But that just lessens a bit the blow of the cross-subsidy.”

The federal government is a major reason why local districts are scrambling to pay for special education. Congress passed legislation in 1973 that promised to pay 40 percent of the cost of special education. It’s been no secret that the federal government has never come close to funding special education at that level.
The auditor’s report tabulates that between the 1999-2000 and 2010-2011 school years, the state has paid 56 percent of the cost of special education, school districts have chipped in 33 percent, and the federal government has paid 11 percent.

During the same period, the amount of special education students has increased 11 percent, while the overall student population decreased. The $571.5 million cross-subsidy is an increase from an inflation-adjusted $408.6 million in 2000.

In 2011, there were 103,700 independent school students in special education, according to the report. There were another 4,800 special education students in charter schools. When all of the various school organizations are taken together, the number of special education students in the state is nearly 112,000 out of 824,000 total students.

Other changes proposed

Aside from increasing state funding for special education in the 2014-2015 budget, Dayton’s budget also proposes to deal with the financial burden of open-enrollment students who go outside their local school districts to receive special education in another district. Currently, the district where the student lives pays the costs of educating the student. Dayton’s budget asks the district where the student is enrolled (the “serving district”) to pay 10 percent of the special education costs that aren’t reimbursed.

The open-enrollment issue was also a recommendation in the auditor’s report. It found that 19,000, or 17 percent, of K-12 special education students traveled outside their district to go to school.

Marquart supports the proposal as a way to push the district in which the student is enrolled to try to control costs.

“That seems to be good, because at least the serving district has some incentive to keep costs down and be more efficient,” Marquart said. “Where’s the breaking point from them saying: ‘We’re not going to take you because it’s too high of a cost?’ Ninety percent to 10 percent seems to be fair.”

The report noted, however, that the cost shift will receive opposition from some districts and from charter schools, which by law can’t levy property taxes.

“Sharing funding responsibility,” the report said, “is likely to be resisted by districts that would have to pick up part of the costs of serving nonresident students. For instance, charter school representatives told us such a proposal would ‘hamstring’ them because, unlike independent school districts that can turn to operating levy referenda, charter schools have no mechanism to levy additional funding.”

Not all of the cost burden associated with special education is a function of underfunded federal requirements. The auditor’s report combs through the state’s special education statutes and rules and finds that many of them exceed federal law. For example, there are Minnesota-specific staff requirements, such as one stipulating that each district must have a special education director. The state also requires local school staff to organize and form committees, such as parent advisory councils and early intervention committees, that aren’t called for in federal law. And there are eligibility requirements unique to Minnesota that affect the number of students in special education.

Marquart said the requirements in excess of federal law are complex and that proposals to eliminate particular ones often draw controversy. “You look at some [requirements] where there’s a good need for them and leave those. Then you have some requirements where there’s a certain group or two that benefits and when you try to take it out there is too much resistance and not enough political will to do it,” Marquart said. Thoroughly addressing them might be a task for next session, he noted.

Nobles said that some of the requirements have been put on the books in place of actually dealing with the root issue.

“On some of these questions, you will not be able to reach consensus,” Nobles said. “There will be strongly conflicting interests and opinions. And I think, frankly, that is what has allowed us to simply add things on. When we can’t reach consensus, we go ahead and add it [and] hope maybe it will be paid for whether we know what the benefit is or not.”

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