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In North Carolina, funding gaps are shortchanging students with special needs

Cleveland County Schools’ Exceptional Children Director Nellie Aspel, who is charged with managing all of the moving parts related to the education of her school district’s special needs students, has had to stretch a slim budget in ways that keep her up at night.

“We’ve really had to push the limits,” said Aspel. “We use outdated technology, we only replace our physical therapy equipment when it’s literally falling apart, and I frequently have to hire part-time staff with no benefits to care for and educate my students with special needs, something that I hate to do.”

But while those aspects of her job are challenging, they are not what’s standing between her and a good night’s sleep.

Aspel is wrestling with a special education budget that doesn’t cover the actual cost of services in her school district because the number of students in Cleveland County that are identified as having special needs exceeds the number for which the state provides funds—and that problem is compounded by a federal special needs budget that’s never been fully funded.

For the past few years, Aspel has been able to bridge these funding gaps with other savings that she’s carried over year to year—but beginning with the next school year, she says those funding streams will have dried up. And when that happens, the gap between available state and federal funds and actual the actual cost of services for all those who need them will be so severe, it will go well beyond a lack of ability to pay for better technology and equipment.

“How will we make payroll?” questioned Aspel. “That’s what keeps me up at night.”

Funding woes

In 1975, Congress passed the Individuals with Disabilities Education Act (IDEA), which was then called the Education for All Handicapped Children Act. The federal law guarantees a free appropriate public education to each child in the United States who has a disability. The specifications for what that looks like—and must be accommodated—vary considerably depending on what a child’s needs are as set out in their Individual Education Plan (IEP).

“The legislation also came with a promise from the federal government to fund roughly 40 percent of the extra cost of serving students with special needs,” said Kerry Crutchfield, a longtime finance director for Winston-Salem/Forsyth schools. “But they’re actually funding less than 20 percent of the cost now.”

That federal funding shortfall, which has persisted over the past forty years (last year, the federal government only funded 15.7 percent of the excess cost of educating students with special needs, far short of the promised 40 percent), has been passed down to states and local school districts that are required to comply with strict federal requirements related to serving students with special needs—and must shoulder more than 80 percent of the cost of doing so.

With this reality, North Carolina’s public schools, which have struggled to recover from the Great Recession as lawmakers have made spending decisions that have not kept pace with increasing enrollment and other rising costs, are having a difficult time meeting the needs of students with disabilities.

To better understand how school districts are handling this burden, it’s important to first understand how state funding is distributed to local education agencies for special needs students.

Disbursed through the “Children with Disabilities” allotment, state dollars for this student population (on top of a standard base allotment) are distributed in accordance with a funding formula that includes placing a cap on the number of special needs students who will be served in each district. That cap, which is currently at 12.75 percent, represents the estimated prevalence rate of how many students, on average, are those with special needs as a proportion of the entire student population.

The cap, which was devised back in 1993 along with a flat per capita funding rate, was put in place in part to deter districts from over identifying the number of students qualifying for special needs. But since that time, lawmakers have voted to increase the cap only slightly—it’s up to today’s 12.75 percent from 1993’s 12.5 percent—despite the fact that the state’s actual prevalence rate is estimated to be closer to 13.5 percent, according to Bill Hussey, director of the Exceptional Children division in the NC Department of Public Instruction. And the per capita funding amount? That has seen some very small increases since 1993, said Hussey, but nothing significant. It’s currently just over $4,000 per child.

As a result, today roughly 50 percent of the state’s 115 school districts are serving students in excess of this funding cap, which is forcing them to raid their local fund balances to cover the actual cost of services for all of their special needs students. Roughly ten percent of the special needs student population statewide isn’t covered by state funds, says DPI’s Hussey, placing a heavy burden on local districts to come up with the extra resources necessary to serve them at a time when locals also face increased costs in other areas of educational need that they are trying to cover thanks to decreased state investments.

Cleveland County’s Aspel says these funding shortfalls (her district’s prevalence rate is about 14 percent) have translated to a funding disparity of roughly $600,000 in terms of payroll costs alone—and each year as health insurance costs and teacher salaries go up, the resources distributed for special needs students don’t increase to compensate for those ever-increasing costs.

The scarcity of special needs funds means that in addition to the fact that her special needs students must cope with outdated technology and very old physical therapy equipment, other areas of instructional need suffer as well, Aspel said.

“I’ve had to cut back on staff professional development,” said Aspel. “There’s simply not enough resources to cover that, and it’s unfortunate, because that training is critical to ensuring that these educators remain highly qualified providers of special services.”

Aspel says she must also limit specialty programs, transition services and other things that could go a long way to increase the graduation rate for her special needs student population.

In western North Carolina’s Macon County, the school district is dealing with an even more dire situation, where they exceed the state’s funding cap on special needs by several percentage points.

“While we’re funded at 12.75 percent, our prevalence rate is actually 16.45 percent,” said Nancy Cantrell, director of the Exceptional Children Division for Macon County. “It’s a very significant funding gap, and the result is we’re just slicing our pie into thinner slices.”

Cantrell described how her district is also dealing with the high cost of serving students with profound needs. Rett Syndrome, a severe disability that impacts nearly every facet of a child’s ability to function, is a condition with which one of Cantrell’s students has been diagnosed. That student requires a private classroom that has a teacher and two assistants, as well as dedicated services from an administrator, and, occasionally a school resource officer. It’s a lot of personnel for one child, said Cantrell, and it impacts the district’s ability to serve other students with special needs. The state’s funding formula does not adjust for the severity of a disability; there is a flat rate provided for each child, in spite of the fact that the cost per year for a student with profound needs can skyrocket to as high as $100,000 or more.

Rural districts are not alone in struggling to meet the requirements of serving special needs students. In Winston-Salem/Forsyth Schools, an urban district that’s seeing a prevalence rate of about one percentage point over the state funded rate, it’s become increasingly difficult to recruit special education teachers, says finance director Kerry Crutchfield.

“Especially as the physical demands of special needs students are on the increase, some may balk at having to change a catheter, diapers and the like,” said Crutchfield. “And while our district happens to pay our special needs teachers a little more – only $50 extra per month – that’s not the standard. Most districts don’t provide any more in the form of extra wages for that level of work.”

New education savings account

Complicating matters for public school finance directors and special education providers is a new voucher program enacted by lawmakers last year that, beginning this fall, will funnel money out of public coffers into private educational settings.

Personal Education Savings Accounts, or PESAs, offer families that have children with disabilities the opportunity to receive up to $9,000 in public taxpayer dollars that are loaded onto debit cards intended for paying for private school tuition, tutoring, or other related expenses.

Proponents of the program say PESAs, along with publicly-funded private school vouchers and another disability voucher program, offer families the chance for their children to gain a superior educational experience in a private setting.

But public school educators who serve students with special needs have a number of concerns about the program.

“How can $9,000 be nearly enough to serve a child with special needs—especially those with profound needs—in a private setting?” questioned Macon County Schools Superintendent Chris Baldwin. And even if families took advantage of all three state-funded voucher programs – which the law allows them to do – in many cases $21,000 wouldn’t be enough, either, Baldwin said.

Another concern: students with special needs who leave public schools also leave behind critical federal protections provided by the Individuals with Disabilities Education Act (IDEA), which work to guarantee that disabled students receive the educational services to which they are entitled under federal law. In private school settings those protections are gone, leaving students vulnerable to the possibility that their educational experiences will be insufficient at best, and neglectful at worst.

“You’ll see a lot of families that don’t get what they ultimately need, and then come back to us in the public schools,” said Winston-Salem/Forsyth’s Crutchfield. “Meanwhile, we’re left to scramble for scarce funds that are being diverted to private schools.”

The fact that these voucher funds are likely insufficient to serve students with profound needs means that there’s an increased likelihood that students with milder disabilities will use PESAs and vouchers to leave the public schools for private settings that are better equipped to handle less costly and complex needs, said Cleveland County’s Aspel. Special needs students who are more expensive and challenging to serve will be left behind in the public schools, funded at rates that are far below the actual cost of services and without a larger and more diverse pool of disabled students who can float those higher cost expenses.

A new funding formula on the horizon?

Speaking to the Governor’s Commission on Access to Sound Basic Education in February, a panel of superintendents spoke about the struggles they face with increasing budget constraints and limited decision-making ability about how to divvy up those scarce resources across their schools.

Vance County Schools Superintendent Anthony Jackson, who took part in the panel at the Governor’s Commission meeting to explain how his district is struggling with high teacher turnover rates and unfunded mandates, said that when it comes to funding students with special needs, it’s time for the state to provide funding based on the needs of students.

“We need a more up-to-the-moment funding apparatus and funding based on actual needs of students,” said Jackson, who added that he’s had to dip into his local funds just to provide the very basic quality of services to which students with special needs are entitled.

DPI’s Exceptional Children Division Director Bill Hussey doesn’t disagree. He says he’s been working on a proposed alternative funding model for special education state dollars for the past couple of years, convening internal and external stakeholders statewide to develop a matrix that would determine state funding disbursements based on actual cost of services.

The matrix employs a multi-tiered funding system through which students with the most profound needs requiring very expensive services draw down significantly more state funds than those who are diagnosed with minor speech problems, for example. Built into the model is a formula to account for teacher raises and other extraneous costs that typically rise from year to year, as well.

Hussey also says he is advocating for the prevalence rate cap to be increased to be better aligned with the true prevalence rate across the state – that’s at least 13.5 percent versus the current cap of 12.75 percent.

As North Carolina lawmakers consider alternative ways to provide funding to the state’s 115 school districts, Hussey hopes that his group’s proposal will be considered by the legislative committee tasked with overhauling the state’s entire school funding model.

And, of course, if the federal government makes good on their 40+ year old promise to fund forty percent of the cost of serving students with special needs, that too would go a long way to help struggling states like North Carolina.

Cleveland County’s Aspel supports the funding model that’s been developed by the group convened by DPI’s Hussey, and she hopes to see much needed change soon as she looks to make cuts anywhere she can for the upcoming year.

“We have legal mandates under which we have to provide certain things for our children with special needs, said Aspel. “I’m in a great county because they do support me to the degree they can, but I just can’t do anything beyond the minimum.”

Editor’s note: This article was originally published by the Public School Forum of North Carolina. It has been posted with the author’s permission.

Lindsay Wagner

Lindsay Wagner is a contract reporter for EducationNC focused on child nutrition.