Tom Melcher Education Finance Working Group August 20 2012 Leading for educational excellence and equity Every day for every one Topics for Discussion Trends in Special Education Enrollments Expenditures and Revenues ID: 560807
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Slide1
Special Education Funding
Tom MelcherEducation Finance Working GroupAugust 20, 2012
“Leading for educational excellence and equity. Every day for every one.”Slide2
Topics for Discussion
Trends in Special Education Enrollments, Expenditures and RevenuesNational Perspective on Special Education Funding
Changes Proposed in 2011 Working Group Report
Draft Proposal for Special Education Funding Reform
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December 1 Child Count Birth through 21Totalseducation.state.mn.us
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December 1 Child Count Birth through 21By Disability Typeeducation.state.mn.us
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Funding Formula TypesCriteria for Evaluating Funding FormulasSources: National Association of State Directors of Special Education (NASDSE), Financing Special Education: State Funding Formulas,
April 2012Center for Special Education Finance, State Special Education Finance Systems, 1999-2000National Perspective
Special Education Funding
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Multiple student weights:Funding (either a series of multiples of the general education amount or tiered dollar amounts) allocated per special education student that varies by disability, type of placement or student need.Single student weight:Funding (either a single multiple of the general education amount or a fixed dollar amount) allocated per special education student.
Census-based:A fixed dollar amount per total enrollment of average daily membership (ADM)
Funding Formula Types
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No separate special education funding:Funding to support special education is rolled into the overall funding levels.Resource-based:Funding based on payment for a certain number of specific education resources (e.g., teachers or classroom units), usually determined by prescribed staff/student ratios that may vary by disability, type of placement or student need.
Funding Formula Types(continued)
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Combination:Funding based on combination of formula types.Percentage reimbursement:Funding based on a percentage of allowable, actual expenditures.Block grant:
Funding based on base-year or prior year allocations, revenues and/or enrollment.Funding Formula Types(continued)
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Special Education Formula Types2000 vs. 2009education.state.mn.us
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# of States
Formula Type
2000 2009
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Student weights (both single and multiple) 18 19
Census-based
9 7
No separate special education funding 2 7
Resource-based 6 6
Combination 5 5
Percentage reimbursement 6 5
Block grant 4 1 Slide16
AdequateEquitableUnderstandablePredictableReasonable reporting burdenFlexible
Identification/placement neutralFiscal accountability/cost controlOutcome accountabilityConnection to regular education fundingPolitical acceptability
Criteria for Evaluating Funding Formulas
education.state.mn.us
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Education for All Handicapped Children Act of 1975 (P.L. 94-142)FAPE a legal right for all children with a disability.Authorized federal funding for up to 40% of national average excess cost of special education.Reauthorized in 1991, 1997 and 2004 as IDEAFFY 2011/SFY2012 Allocations to Minnesota:
Part B, Section 611 (age 3-21) $187.8 millionPart B, Section 619 (age 3-5) $ 7.3 millionPart C (birth-2) $ 7.1 millionFederal Special Education Funding
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Federal Special Educationeducation.state.mn.us
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Part B, Section 611 Funding to Minnesota in Relation to 40% “Full Funding” Level
FY $ (Millions) % of Excess Cost
1982
$ 19.6
11.7%
1990
27.0
8.2
2000
73.3
10.7
2009 180.4
15.8
2010 378.3 29.9
2011 188.5 14.4
2012 187.8 13.9Slide19
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Federal Special Education Fundingeducation.state.mn.us
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Part B, Section 611 Funding for
FFY 2011 (SFY 2012)
- Minnesota
Allocated to LEAs on formula - $
166.8
M
State Administration
3.7
M
State Set-Aside – Discretionary
17.3
M
Total
187.8
MSlide21
Base Funding (block grant):$55 million (FFY 1999 funding level)Allocated based on 1998 child countFor districts with newly opened, closed or significantly expanded charter schools, $ are reallocated within district based on current year child count
Increase Over Base (census-based formula):$133 million85% on total PK-12 enrollment 15% on poverty (free and reduced lunch count)(From current year October 1 MARSS data and enrollment reported by nonpublic schools)
Federal Special Education Funding
Part B, Section 611 (ages 3-21)
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Base Funding (block grant):Allocated based on 1996 child countFor districts with newly opened, closed or significantly expanded charter schools, $ are reallocated within district based on current year child countIncrease Over Base (census-based formula):85% allocated based on total PK-12 enrollment and
15% allocated based on free and reduced lunch counts(from current year, October 1 MARSS data and enrollment reported by nonpublic schools)Federal Special Education Funding
Part B, Section 619 (ages 3-5)
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Can only be used to pay the excess costs of providing special education.Must be used to supplement not supplant state and local funds.Before 1992, this was applied to specific line items.
IDEA Regulations changed in 1992: as long as an LEA meets Maintenance of Effort (MOE) requirements, it can replace state funding with federal funding for specific line items.Uses of Federal Funds
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Cannot be used to cover unreimbursed cost for expenditures partially funded with state categorical funds:e.g., staff salaries, contracts, supplies, equipmentusing federal funds to “backfill” costs partially funded with state aid would be “double dipping.” (Only the portion of an expenditure not funded with federal funds is eligible to be claimed for state aid.)
Uses of Federal Fundseducation.state.mn.us
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Maintenance of Effort (MOE)State-level, LEA levelSeparate MOE calculations for Birth – 2 and Part B Section 611 (3-12)(Feds not required to maintain effort – sequestration looms for FY 2014))
Requirement for Federal Fundseducation.state.mn.us
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LEA Maintenance of Effort Exceptions:Decrease in enrollment of children with disabilitiesChange in status of a high cost studentElimination of one-time expense (e.g., major equipment purchase)Voluntary departure or departure for just cause of staff while maintaining FAPE
Requirements for Federal Fundseducation.state.mn.us
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LEA Maintenance of Effort Exceptions:50% RuleLEAS may treat up to 50% of the increase in IDEA Part B funds over the previous year as local funds (shifts funding from state/local to federal)This lowers the LEA’s MOE requirement for subsequent years to the new reduced MOE amount, until the LEA increases the level of state/local special education expenditures
Local funds “freed up” must be used to carry out activities that could be supported with funds under ESEAInterconnected with 15% for EIS provisionRequirements for Federal Funds
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Coordinated Early Intervening Services (CEIS) 15% RuleLEAs may use up to 15% of IDEA Part B funds, less any amount used for 50% rule, for CEISFor students in K-12 not identified as needing special education services but who need additional academic and behavioral support to succeed in a general education environmentLEAS determined to have significant disproportionality based on race and ethnicity for three years must set aside the maximum 15% of CEIS (eight LEAs identified in FY 2012 are affected in FY 2013)
Requirement for Federal Funds
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Under the Tydings Amendment:Funds must be obligated within 27 months and expended within 30 monthsExample: funds becoming available in SFY 2012 must be obligated by September 20, 2013 and liquidated by December 31, 2013
Requirement for Federal Fundseducation.state.mn.us
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Federal payments are based on current year approved expendituresLocal education agencies (LEAs) submit reimbursement requests through SERVS FinancialMDE draws down federal funds when LEAs submit reimbursement requestsAny funds not obligated within Tydings period are reallocated with the written permission of the LEA to other LEAs, or returned to the federal government.
Federal Paymentseducation.state.mn.us
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General Education RevenueStudents with a disability receive the same general education revenue as other studentsCategorical RevenueRegular special education aidExcess cost aid
State Funding - Minnesotaeducation.state.mn.us
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Salaries of essential personnelContracted services (supplementary services) for studentsContracted services – student placementsTransition-disabled – contracted services – vocational evaluationInstructional supplies and equipmentSpecial transportation expenditures
Transition-disabled – teacher travelSpecial education bus depreciationTuition adjustmentsWhat is Eligible for Inclusion in State Special Education Funding Formulas
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Salaries of essential personnel – 68%Contracted services for students – 52% (supplementary services)Contracted services (student placements) – 52% of difference between:Cost of contractGeneral education revenue attributable to student for time in contract
Special Education – Regular AidComponents of Initial Aid
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Instructional supplies and equipment – 47%Up to a cap of $47 per studentTransportation Costs – 100%(Finance Codes 723 and 728)Special Education Bus
100% over eight years for regular and 100% over five years for Type IIIAdditionally, Transition-Disabled Initial AidEquipment 47% - no capTeacher travel 47%Instructional supplies 47%Up to cap of $47 per student
Contracted services for vocational evaluation 52%
Special Education – Regular Aid
Components of Initial Aid (continued)
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State total special education is capped in lawStatewide adjustment factor =State Aid Cap/State Total Initial AidFor FY 2012, statewide adjustment factor is 88.9%For FY 2013, statewide adjustment factor is 90.1%
Aid may be further limited by proration (e.g., if a portion of funds appropriated are needed for prior year corrections)Special Education – Regular AidStatewide Adjustment Factor
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Special Education Aid =Special Education Initial Aid XStatewide Adjustment Factor XProration, if any, + or –Tuition Adjustments
Example:Salary of $50,000 X .68 = $34,000$34,000 X .889 statewide adjustment factor = $30,226$30,226 X .99994 proration = $30,224
+ tuition adjustments
Special Education – Regular Aid
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Pays a portion of special education costs that are not reimbursed through special education – regular aid.State Total Excess Cost Aid is also capped in law.Statewide adjustment factor =State Aid Cap/State Total Initial Aid
For FY 2012, statewide adjustment factor is 63.9%For FY 2013, statewide adjustment factor is 64.9%Excess Cost Aid
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Special Education Excess Cost Aid =Unreimbursed Cost – 4.36% of general education revenue X 75% statewide adjustment factor X proration, if any.Excess Cost Aid
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For FY 2012 and later, growth factors are set at 4.6% for special education – regular and 2% for excess cost.Growth Factors for Statewide Caps
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The amount of additional state funding that would be required to fully fund the state’s special education – regular and excess cost aid formulas: FY 2011 $93 million FY 2012 93 million
FY 2013 89 million FY 2014 88 million FY 2015 92 millionCap Gap
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Minnesota state law makes the district of residence responsible for reimbursing the serving district for the unfunded cost of special education and related services.MDE calculates the tuition on behalf of the districts and adjusts aid payments.
Special Education Tuition Billingeducation.state.mn.us
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Adequacy : Reduce cross subsidies by increasing special education funding for all districts.Equity: Reduce
the variation in cross subsidies among districts and regions by better targeting of state aid to districts with the highest cross subsidies. Include all special education costs eligible for tuition billing (e.g., fringe benefits) in excess cost aid calculations
Special
Education Funding
Reform
Goals / Strategieseducation.state.mn.us42Slide43
Stability / Predictability: Calculate funding based on prior year data, instead of current year data.
Allocate a portion of funding based on student counts rather than expenditures. Roll a portion of voter-approved referendum levies into a new school board-approved special education cross subsidy levy.
Simplicity:
Use one common definition of special education expenditures for both excess cost calculations and tuition billing.
Pay aid directly to cooperatives and intermediates, to avoid the need for cost allocations and reduce reliance on tuition billing
.Use of prior year data simplifies budgetingSpecial Education Funding ReformGoals / Strategies (Continued)education.state.mn.us43Slide44
Efficiency: Require serving district or charter to share a portion of unreimbursed costs. Allocate a portion of aid based on total district enrollment and enrollment in high cost disability types rather than strictly on special education expenditures
Consistency: Allocating a portion of funding based on student counts rather than expenditures aligns special education funding with other components of Minnesota’s school finance system.
Special
Education Funding
Reform
Goals / Strategies (Continued)education.state.mn.us44Slide45
Time and funding constraints limited the scope of special education finance reform proposed in the 2011 Working Group report. Recommendations:Change tuition billing so that resident district is responsible for 90% of unfunded costs and serving district/charter is responsible for 10% for open-enrolled students.
Does not apply to students placed by the resident district (e.g., at an intermediate), or served at a charter school with very high special education concentration.
Special Education Funding Changes Proposed in 2011 Working Group Report
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Special education-regular aidCurrent percentage reimbursement model replaced with a new formula combining census-based funding for high incidence / lower cost programs and weighted student funding for low incidence / higher cost programs
Excess cost aid Continues to cover a portion of excess costs Tuition billingContinues but serving district/charter covers a portion of unfunded costs
Special education levy
Up to $400 / PU of referendum levy converted to board-approved special education levy to cover a portion of remaining cross subsidy
Special Education Funding
ReformMDE Draft Proposal -- Formula Structureeducation.state.mn.us46Slide47
Replace current percentage reimbursement formula with a combined formula using:census-based funding for higher incidence/lower cost programs; anda weighted student formula for lower incidence/higher cost programs.Use prior year data instead of current year data (except for 1
st year charter schools).Pay weighted student aid directly to coops and intermediatesSpecial
Education Funding
Reform
MDE Draft Proposal Special Education – Regular Aid
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Census-based funding is provided for the following disability types:These disability types account for 54% of special education child count and 34% of special education expenditures.
Special Education Funding ReformMDE Draft Proposal Census-Based Funding Component of Regular Aid
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Formula for census based funding was derived using regression analysis. Funding per ADM served equals:a basic rate per ADM, plus
an adjustment based on district poverty concentration (high poverty districts have higher incidence of special education students and higher average cost per ADM for special education), plusan adjustment based on district size
(large districts have higher average cost per ADM)
Special Education Funding Reform
MDE Draft Proposal
Census-Based Funding Component of Regular Aideducation.state.mn.us49Slide50
Special education serves a disproportionate number of students living in poverty:Statewide in 2011, 37% of all Minnesota students were eligible for free or reduced price lunches. 49% of special education students34% of non-special education students
Disability types with the highest percentages of students in poverty were:Emotional or Behavior Disorders 65%Specific Learning Disability 59%Developmental Cognitive Disabilities 57%
Relationship Between Poverty
and Special Education Incidence
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The federal census-based special education funding formula recognizes the relationship between special education incidence and poverty by allocating 15% of federal funds based on poverty.The census-based portion of the proposed Minnesota special education formula would have a similar adjustment for poverty, but the adjustment would be based on statistical analysis rather than using a flat 15% factor.
Relationship Between Poverty and Special Education Incidenceeducation.state.mn.us
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Weighted pupil funding is provided for the following disability types: Cost Level 2 (24% of child count, 24% of cost):Cost Level 3 (14% of child count, 23% of cost):
Special Education Funding ReformMDE Draft Proposal
Weighted Pupil Funding Component of Regular Aid
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Cost Level 4 (8% of child count, 20% of cost):
Special Education Funding ReformMDE Draft Proposal Weighted Pupil Funding Component of Regular Aid
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Census-based allowance per prior year ADM served =__% of the formula allowance (currently $____), plus__% of the formula allowance times prior year poverty concentration, plus
__% of the formula allowance times prior year total ADM served. Census-based aid = allowance times prior year ADM served.Weighted pupil aid =
__%
of the formula allowance
times cost level 2 prior year December 1 count served,
plus__% of the formula allowance times cost level 3 prior year December 1 count served, plus__% of the formula allowance times cost level 4 prior year December 1 count served.Special Education Funding ReformMDE Draft Proposal Special Education – Regular Aideducation.state.mn.us55Slide56
Total special education-regular aid =Lesser of (Census-based aid + weighted pupil aid) or ___% of prior year non-federal special education expenditure.
This aid could be paid as a component of general education revenue with a requirement that it be reserved for special education (similar to compensatory, English Learners (EL), and gifted & talented components of general education revenue), or continue to be paid as a separate categorical.
Aid
for first year charter schools will be based on current year
ADM, child count and expenditure data.
Special Education Funding ReformMDE Draft Proposal Special Education – Regular Aideducation.state.mn.us56Slide57
Similar to current excess cost formula, except:Use prior year data Use total
special ed cost as calculated for tuition billing including previously nonreimbursable portions(e.g., fringe benefits)Pay aid to coops and intermediates as well as districts and charter
schools
Calculate aid before
tuition billing; don’t recalculate based on tuition bills.
Special Education Funding ReformMDE Draft Proposal Excess Cost Aideducation.state.mn.us57Slide58
Similar to current excess cost formula, except:Include general ed revenue attributable to students educated 60% or more outside of the regular
classroom in calculation of excess costLarger general education aid deduction to target more aid to districts with large cross-subsidies
Special Education Funding Reform
MDE Draft
Proposal Excess Cost Aid (Continued)
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Resident district responsible for 90% of unfunded cost for open enrolled students; serving district or charter responsible for 10% of unfunded cost for open enrolled students.Exception provided for cooperatives / intermediates and charters with > 80% sp ed students
Special Education Funding ReformMDE Draft Proposal
Tuition Billing
(Same as 2011 Working Group Report)
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School districts are guaranteed to receive at least as much net special education aid in FY 2015 as they would have received under the old formula. For FY 2016 and later, districts receiving hold harmless funds in FY 2015 will receive a transition allowance equal to the FY 2015 hold harmless per AMCPU. This will be added to the district’s existing transition revenue, aid and levy.
Special Education Funding ReformMDE Draft Proposal
Transition
Revenue
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Beginning in FY 2016, create a new special education levy spread on referendum market value, equalized at same level as tier 1 of referendumRevenue equals least of $400 per RMCPU, cross subsidy for FY 2015 after sp ed-regular aid, excess cost aid and tuition adjustments,
or referendum revenue remaining for FY 2016 after any other referendum roll-ins, not to exceed $400 / RMCPU. Ongoing at fixed rate, no voter approval required. Districts where referendum is limiting factor allowed to make up the difference by board action with reverse referendum
.
Special Education Funding Reform
MDE Draft Proposal Special Education Levy (Roll-in of Referendum Revenue)education.state.mn.us61Slide62
Operating referendum revenue is reduced by an equal amount. Authority expiring first is converted first.Referendum cap reduced by state average amount of roll-in. Districts with a net loss of revenue in FY 2016 due to the cap reduction receive a grandfather cap to hold them harmless.
Special Education Funding ReformMDE Draft Proposal Special Education Levy
(Roll-in of Referendum Revenue)
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