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Testimony: Special Education Finance in California

Paul Warren March 28, 2019
photo - Student in Wheelchair Being Read a Book

Paul Warren, research associate at PPIC, testified today (March 28, 2019) before the Senate Education Budget Subcommittee, as part of a hearing on district financial conditions. Here are his prepared remarks.

The committee asked PPIC to help them understand why district special education costs are rising so quickly.

First, some background. The AB 602 formula provides about $500–600 in state special education funds per student in each district, based on average daily attendance (ADA). The number of students with disabilities in a district does not affect state funding amounts. Each year, that amount is increased by the change in ADA and by a cost-of-living adjustment.

In the PPIC report, Special Education Finance in California, my colleagues and I identified several reasons why AB 602 funding has not kept pace with district costs:

  • Changes in the rate and type of disabilities. We estimated that these changes increased annual district costs by around $1.1 billion. The state formula is currently based on average district costs from the late 1990s.
    • The share of students identified with disabilities increased by 5.7 percent from 2010–11 to 2015–16.
    • Disabilities that are, on average, expensive to address have increased. Autism, in particular, continues to increase as a share of students with disabilities.
  • Growth in preschool for children with disabilities under the age of 5. This population grew about 10 percent from 2005 to 2015. The AB 602 formula does not adjust district funding for changes in this group, as pre-school children with disabilities do not count toward ADA.
  • Higher district salaries since the Great Recession. The large LCFF increases during the economic recovery shaped salary negotiations. But AB 602 did not adjust to the higher costs for special education teachers and administrators.

In a report from last year, Revisiting Finance and Governance Issues in Special Education, we provide two options for modifying the AB 602 formula:

  • Increase AB 602 by the same percentage amount as LCFF funding. This makes sure that state funding for special education increases at the same rate as LCFF.
  • Increase AB 602 by the actual increase in special education costs. This would hold the state share of special education costs constant over time.

We also recommend caution when considering proposals to base state special education funding on counts of students with disabilities. Differences in district identification practices affect the share of students identified for special education services. We found that the county with the lowest rate of students with disabilities reported that about 8.8 percent of students were in special education. In contrast, the county with the highest rate reported that about 17.6 percent of students were in the program. This disparity strongly suggests that district practices affect district caseloads, and basing state funding on the number of students with disabilities could create financial incentives to identify more students.

Our two options would avoid this identification problem while better aligning state funding for special education with LCFF and district costs.

Thank you for the opportunity to discuss these important issues.

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