Report: New Jersey Task Force on Improving Special Education for Public School Students

Excerpt: Recommendations Funding, Accountability, and Reducing Costs

In New Jersey, programs for students eligible for special education and related services are supported by state aid and local property tax revenue, with additional funding provided by the federal government. However, the shortfall in promised funding by the federal government appropriated for IDEA has imposed a heavy burden on local boards of education, as well as on New Jersey tax payers, and the State of New Jersey as a whole. For practicality, the Funding, Accountability, and Reducing Costs work group focused on state and local support for special education programs.

It is important to note that fiscal constraints at the state level, restrictive budget caps on special education services, and pressures on local property taxes compound not only special education funding, but regular education funding as well. The Funding, Accountability, and Reducing Costs work group is unanimous in the belief that school funding is the fundamental issue that impacts special education and service delivery in New Jersey. The work group recommends that the school funding formula be reevaluated with a particular eye on how state special education aid reaches and impacts all of New Jersey’s student’s eligible for special education and related services.

Context: Funding in New Jersey

Prior to the current school funding formula, state aid for special education was designed to fund those costs attributed to the individual students eligible for special education and related services, over and above the costs determined to be used for students in general education programs. Such additional “excess costs” became part of the aid formula that supported special education children and was calculated on a specific per pupil basis. This type of funding is known as “categorical special education aid” and flows to all school districts regardless of wealth. While the revenue comes from both state and local tax revenues, the spending for such programs is accounted for in the general fund portion of the budget, sometimes referred to as the operating budget. The significance of the general fund budget as a source of program funds is that special education spending must compete with all other spending in the Fund (Appendix D, Table 1).

In 2008-2009, a new school funding formula known as the School Funding Reform Act (SFRA) was enacted with bipartisan support, which changed the approach and calculation method of state special education categorical aid. Under SFRA, special education costs are calculated by averaging the statewide classification rate (set for the past several years at around 14.69 percent) and multiplying that rate times each local district’s total student enrollment. The result is then multiplied by the state-average “excess cost” factor (approximately fifteen thousand dollars). The average “excess cost” is derived by finding the average of all districts’ actual special education costs per pupil, less the “base” per pupil amount. This process is known as “census-based funding.”

Currently, special education students are the only specific group of students whose costs are not related to their specific enrollment count under SFRA. For example, the SFRA attaches funding “weights” to some students (i.e., Limited English Proficiency (LEP) students, at risk students who qualify for free and reduced lunches). One of the intents of the SFRA was to distribute aid to all school districts in an equitable and predictable basis that takes into account the needs of all students, including at-risk students, limited English proficient students, and students with special education needs.

At the present time under SFRA, categorical aid, including special education aid, security aid, and transportation aid are the only aid types allocated to all districts in the state, regardless of wealth. Nearly all districts receive at least some state aid for special education through categorical aid. However, the amount of categorical special education aid has been reduced under SFRA. While there
has been continued growth in special education costs to deliver appropriate programs, categorical special education aid, alone, is actually $161 million less today than it was in 2007-2008. (Appendix D, Table 1).

This is due primarily to the way the 2008-2009 SFRA formula calculates and distributes funding attributed to special education costs; specifically, that a portion of special education costs are now funded through equalization aid. (Appendix D, Table 2). Consequently, districts with higher local wealth factors that do not get any equalization aid are provided with state aid for only one-third of the special education cost estimate (through categorical aid). The SFRA legislation allows districts to appeal if they can demonstrate they have a disproportionately high rate of students with high-cost, low-incidence disabilities that is causing a financial burden. However, funds to support such appeals have never been appropriated nor have appeals been filed to date.

*Note: Districts that receive equalization aid do so based upon by their district wealth, so that the amount of equalization they do receive for special education support will vary, dependent on where districts fall on the Department’s wealth formula scale as it is currently designed.

(Lynne Strickland chaired the ‘Funding, Accountability and Reducing Costs’ Task Force work group)

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