Changing the Way Schools can Spend Special-Ed Funds
October 13, 2009
A report released yesterda y by the Kansas Legislative Division of the Post Audit investigated why so-called "catastrophic" funding for special-ed students in the state’s K-12 schools doubled between 2008 and 2009.
The auditors recommended that the formula for determining catastrophic aid be adjusted to give schools more flexibility in allocating financial resources. The Kansas State Department of Education agreed with the audit’s finding and its recommendations.
The formula would not result in decreased funding for schools. They would still receive the same amount of categorical aid but the amount they would have to earmark and use as catastrophic aid would be altered under the new plan.
In 1994, the Kansas Legislature altered the education funding formula to include what was then called "catastrophic funding." The funding was designed to ensure that schools that serve students with expensive needs received adequate resources to meet their needs.
Under the approved formula, the state pays 75 percent of special education costs for cases in which costs are greater than $25,000 per year. The audit pointed out that although the cost of providing services for special education students has increased greatly since the law was enacted in 1994, the threshold within the catastrophic aid formula remains at $25,000.
"After 15 years, it’s become apparent that there are problems with the original catastrophic aid formula,” the audit said.
Catastrophic aid only affects how special education funding is distributed, so regardless of any changes made to the law, schools will receive the same amount of state assistance. They will just have the ability to distribute it differently among special education needs.
For the 2008-2009 school year, the Legislature appropriated $436 million for special education categorical aid to 69 districts and cooperatives in the state that provide the special education services. However, the state could only release $367 million of the appropriated funds because of the economic crisis. Federal stimulus funds are being used to fill most of the shortfall.
A good deal of the problem is the sudden increase in the use of the funding by school districts in the last year. In 2008, schools submitted claims for catastrophic funding for 276 children, which resulted in the state’s paying out $6 million. In 2009, that number increased to 758 claims filed, and the state paid out twice as much, or $12 million in catastrophic aid to schools.
The audit identified the Shawnee Mission School District USD 512 as the reason for the sharp increase.
Shawnee Mission went from reporting zero catastrophic aid claims in 2006, 2007 and 2008 to reporting 333 claims in 2009. The auditors found that Shawnee Mission went from not submitting claims at all to deciding to “prorate costs for all its special education students, even its less expensive ones.” The result amounted to approximately $3.8 million.
If other school districts start to follow in Shawnee Mission’s footsteps, auditors estimated that claims would increase to 5,500 for the 2009-2010 school year, resulting in the need of $48 million in state aid to be allocated for catastrophic aid. However, the Legislature could alter the law to create guidelines to ensure this scenario doesn’t play out.
The Kansas Legislative Division of the Post Audit formally recommends that the Legislature increase the $25,000 threshold amount while adjusting for future inflation and for districts to deduct any other state special education financial assistance they may have already received for a student before the catastrophic aid is determined.
“When calculating catastrophic costs, districts and cooperatives can include all costs — even those costs already covered by special education transportation and teacher aid — which means they are paid twice for the same costs," the audit said.
The audit examined five different scenarios for the future of the state’s paying out catastrophic funds.
1. If no action is taken, the state can expect to pay out $47.7 million in catastrophic aid for the 2009-2010 school year.
2. If the Legislature passes a bill increasing the threshold to $36,000, then the state could expect to pay out $14.2 million for 1,270 claims.
3. Eliminating double-dipping while maintaining a threshold of $25,000 would result in the state’s paying out $3.8 million for the 2009-2010 school year.
4. Increasing the threshold to $56,400 while eliminating double dipping and accounting for inflation would result in only 10 claims, with the state’s owing just $410,000 in catastrophic funding.
5. Increasing threshold to $59,550, eliminating double dipping and accounting for inflation would result in the state’s paying out about $390,000 in 2009-2010.
The 2010 Commission, a group that studies education issues in Kansas, recommended the fourth scenario that would increase the threshold to $56,400 while the special education director rec ommended the fifth scenario of increasing the threshold to $59,550.
Dale Dennis, Deputy Education Commissioner said he thought it was time the 1994 law was updated and that the $25,000 threshold was too low. Dennis also supported the concept of eliminating potential double-dipping.
“I think it’s a good point. We should deduct state aid before you compute the amount,” Dennis told Kansas Liberty. “The more money you put in for catastrophic aid, the less you get for other special education kids.”
Dennis said the KDHE had brought the issue to the attention of legislators in previous years, but that the initiative failed to gain the necessary support. Dennis said he hoped the audit would spur some additional attention to be given to the issue this session.
“This problem has gotten worse in some people’s eyes,” Dennis said.
Rep. Clay Aurand, R-Courtland, chair of the House Education Committee, and vice chair of the Education Budget Committee, said he had supported legislation that was in his committee two years ago that would have raised the threshold to $36,000, but that the measure failed to get enough votes to get passed out of committee.
Aurand said he believed that many legislators did not fully understand the concept of altering the formula, which caused the bill to fail.
“Anytime you shift funding around it gets intense,” Aurand told Kansas Liberty. Aurand had not yet read the audit but said he was hopeful it would lead to more attention being given to the matter.
The Legislative Educational Planning Committee met in June 2009 an d discussed the possibility of altering the catastrophic aid formula. Though many school representatives provided testimony in support of changing the formula, some voiced their concerns with altering the formula.
“The consideration of any singular part of the formula without consideration of the whole has the potential to contribute further to inequities,” said Tom Trigg, superintendent of the Blue Valley School District, USD 229.
Gary George, assistant superintendent of the Olathe School District USD 233, and Tim Rooney, manager of budget and finance at Shawnee Mission School District USD 512, spoke in support of reviewing the entire formula for special education, instead of just focusing on one aspect.
“Shawnee Mission believes changes should not be made to the catastrophic aid portion of special education funding without addressing the equity issues on the categorical aid portion of the formula,” Rooney said in his testimony.