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Legislative Update

Report: Unfunded special education costs burden Wisconsin school districts, divert funds from general education for all students

by | Oct 11, 2022 | Federal Issue, Legislative Update Blog, State Budget, State Issue

A new report from the Education Law Center finds Wisconsin school districts collectively faced a bill of $1.25 billion in unfunded special education costs in the 2019-2020 school year, even after accounting for state special education reimbursement and federal IDEA funds.

The report calls on the State to significantly boost the reimbursement rate for special education to enable districts to retain revenue in the general fund and increase spending on essential programs and services for all students.

Statewide, unfunded special education costs borne by Wisconsin school districts have grown from $1.03 billion in the 2015-16 school year, a figure reported by the nonpartisan Legislative Fiscal Bureau.

The increase in unfunded (or unreimbursed) costs continues despite modest increases in state special education categorical aid in the last two state budgets. 

However, for the preceding eleven years, from 2008-09 through 2018-19, the state’s special education aid appropriation was held flat at $369 million per year. With funding flat and special education costs rising, the imbursement rate fell below 25 percent in 2018-19.  It was less than 30 percent last year.

  • In the 2019-21 state budget, lawmakers increased the annual special education categorical aid appropriation from $369 million to $450 million in the 2019-21 State Budget.
  • In the 2021-23 state budget, lawmakers increased the annual special education categorical aid appropriation by about $18 million in 2021-22 and $68 million in FY23, bring the total annual appropriation to roughly $518 million, a long way from the $1-billion-plus in underfunding noted in the report. 

With the increases provided in the 2021-23 state budget, the reimbursement rate for the current school year is projected to reach about 31.7 percent.

Wisconsin is among a handful of states that use a cost reimbursement method for funding special education. In Wisconsin, those reimbursements are based on prior year allowable costs.

The report notes that, “Over the last decade, the State has reimbursed school districts for less than a third of their actual special education costs. Because these programs and services are mandated by the federal Individuals with Disabilities Education Act (IDEA), the state’s low reimbursement rate forces school districts to use funds slated for the education of all students to cover the shortfall in special education funding.”

The report, the full title of which is: Wisconsin’s Special Education Funding Crunch: How State Underfunding Disproportionately Harms Students in High-Poverty Districts, also finds that the burden of addressing the state’s low reimbursement rate falls disproportionately on districts with a higher proportion of low income students.  

According to the report, high-poverty districts were forced to divert $1,818 per pupil from their general fund to subsidize the State’s underfunding of special education, compared to $1,266 in the lowest-poverty districts. The reason for this, according to the report, is that high-poverty districts tend to have more students with disabilities, so the same reimbursement rate has a greater impact on overall funding in these districts. Low-poverty districts average
11 percent students with disabilities compared to 18 percent in high-poverty districts, according to the report. 

The report also includes a new interactive map with district-by-district information that you can use to find the special education funding gaps in your district and region to help tell your district’s story.

In its 2023-25 state budget request, the DPI has asked for funding to increase the reimbursement rate to 45 percent in 2023-24 and 60 percent in 2024-25 as the first steps toward achieving an eventual 90 percent reimbursement for special education costs.  That aligns with current WASB Resolution 2.31.

Bottom line: Wisconsin’s low reimbursement rate for special education leaves Wisconsin school districts on the hook for $1.25 billion, which in turn forces those districts to divert funds intended for general education for all students to cover the shortfall in funding for special education services to students with disabilities.  Keep that in mind as you prepare to speak with lawmakers.

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