University of Arkansas Office for Education Policy

A Catastrophic Amount of Money

In The View from the OEP on October 5, 2016 at 12:57 pm

LakeView2House and Senate education committees recently recommended a $20 million increase in funding for special education.  The money would go to the “catastrophic” fund, which provides reimbursement to districts that are educating special needs students with extraordinarily high-cost services.  In Arkansas, after subtracting Medicaid, federal funding through the Individuals with Disabilities in Education (IDEA), and other 3rd party funds, districts can receive 100% reimbursement for up to $15,000, 80% for costs between $15,000 and $50,000, and 50% for costs between $50,000 and $100,000.  The number of students for whom districts request reimbursement has more than doubled in the past four years. Under 500 reimbursement requests were submitted in 2010-11, and over 1,100 were submitted in 2014-15. Districts are committing funds to educate their students, and increasingly requesting reimbursement from the state.  Although requests and expenditures have increased dramatically, state funding for reimbursement has remained stagnant, and only about a third of eligible expenses are currently reimbursed.  The recommendation by the House and Senate education committees provides additional funding to reimburse districts.

Special education advocates commonly call on the federal government to fully fund the program. The initial passage of special education legislation, The Education for All Handicapped Children Act, in 1975, stated that the federal government would fund 40% of the state’s “excess costs” for students with disabilities.  The Council for Exceptional Children estimates that, in 2008, the funded amount is closer to 17%.  The unfunded cost of special education does not disappear, but is instead borne by the state and local districts.  The reauthorization of IDEA, in 2004, allowed the use of federal IDEA funds to be allocated to state catastrophic or extraordinary aid pools, such as the one in Arkansas.

Here at OEP, we applaud the recommendation to increase funding for special education students in Arkansas. It is clear that providing necessary funds for students with disabilities is important. The students receiving “catastrophic” funds are those with the most severe disabilities who require the most intensive services.  For policy purposes, however, we suggest thinking more strategically about how the state’s funding mechanism for special education can more effectively allocate money to so fewer districts need to request reimbursement in the first place.

Funding for Arkansas’ special education students is currently embedded in the funding matrix, which assumes all schools have the same special education demands. Data show wide variation, however, between in the number and severity of special education students being served in Arkansas school districts.  Instead of providing funding through a model that assumes, incorrectly, all needs are the same, we suggest funding based on the needs of the students actually enrolled in the school.  Such a differentiated student-based allocation would ensure that special education funds are spent on the students for whom they were intended, and decrease the need for reimbursement though catastrophic funding.

Although additional money may soon be available if approved by the Legislature, the reimbursement-based nature of the catastrophic funding may work against small, rural, and poor schools. The financial burden of providing extensive resources (hoping they may be reimbursed) combined with the amount of time, effort, and expertise needed to submit the paperwork to receive the reimbursement may be more difficult for these schools.  Creating a funding model for special education based on the actual data about student needs would more effectively provide schools with the resources they need, and reduce the need for the state to further increase catastrophic funding.

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